OPTX 10-Q
Syntec Optics Holdings, Inc. (OPTX)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(MARK ONE)
For the quarter ended
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As of October 3, 2025, there were shares of Class A common stock, par value $ per share, issued and outstanding.
SYNTEC OPTICS HOLDINGS, INC.
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2025
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Interim Unaudited Condensed Consolidated Financial Statements
SYNTEC OPTICS HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 2025 AND DECEMBER 31, 2024
| 2025 (unaudited) | 2024 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts Receivable, Net | ||||||||
| Inventory | ||||||||
| Income Tax Receivable | ||||||||
| Prepaid Expenses and Other Assets | ||||||||
| Total Current Assets | ||||||||
| Property and Equipment, Net | ||||||||
| Deferred Tax Asset | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts Payable | $ | $ | ||||||
| Accrued Expenses | ||||||||
| Deferred Revenue | ||||||||
| Line of Credit | ||||||||
| Current Maturities of Debt Obligations | ||||||||
| Current Maturities of Finance Lease Obligations | ||||||||
| Total Current Liabilities | ||||||||
| Long-Term Liabilities | ||||||||
| Long-Term Debt Obligations | ||||||||
| Long-Term Finance Lease Obligations | ||||||||
| Total Long-Term Liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Stockholder’s Equity | ||||||||
| CL A Common Stock, Par value $ per share; authorized; issued and outstanding as of March 31, 2025; issued and outstanding as of December 31, 2024; | ||||||||
| Additional Paid-In Capital | ||||||||
| Retained Earnings | ||||||||
| Total Stockholder’s Equity | ||||||||
| Total Liabilities and Stockholder’s Equity | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| 1 |
SYNTEC OPTICS HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024
| 2025 | 2024 | |||||||
| Net Sales | $ | $ | ||||||
| Cost of Goods Sold | ||||||||
| Gross Profit | ||||||||
| General and Administrative Expenses | ||||||||
| Income (Loss) from Operations | ( | ) | ||||||
| Other Income (Expense) | ||||||||
| Interest Expense, Including Amortization of Debt Issuance Costs | ( | ) | ( | ) | ||||
| Other Income | ||||||||
| Total Other (Expense) | ( | ) | ( | ) | ||||
| Income (Loss) Before Provision (Benefit) for Income Taxes | ( | ) | ||||||
| Provision (Benefit) for Income Taxes | ( | ) | ||||||
| Net Income (Loss) | $ | $ | ( | ) | ||||
| Net Income (Loss) per Common Share | ||||||||
| Basic and diluted | $ | $ | ) | |||||
| Weighted Average Number of Common Shares Outstanding | ||||||||
| Basic and diluted | ||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| 2 |
SYNTEC OPTICS HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDING MARCH 31, 2025
| Additional | ||||||||||||||||||||
| Common Stock | Paid-In | Retained | ||||||||||||||||||
| Shares | Amount | Capital | Earnings | Total | ||||||||||||||||
| Balances, January 1, 2025 | $ | $ | $ | |||||||||||||||||
| Net Income | - | |||||||||||||||||||
| Stock-Based Compensation | ( | ) | ||||||||||||||||||
| Balances, March 31, 2025 | $ | $ | $ | $ | ||||||||||||||||
SYNTEC OPTICS HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDING MARCH 31, 2024
| Additional | ||||||||||||||||||||
| Common Stock | Paid-In | Retained | ||||||||||||||||||
| Shares | Amount | Capital | Earnings | Total | ||||||||||||||||
| Balances, January 1, 2024 | $ | $ | $ | |||||||||||||||||
| Net Income | - | ( | ) | ( | ) | |||||||||||||||
| Balances, March 31, 2024 | $ | $ | $ | $ | | |||||||||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| 3 |
SYNTEC OPTICS HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024
| 2025 | 2024 | |||||||
| Cash Flows From Operating Activities | ||||||||
| Net Income (Loss) | $ | $ | ( | ) | ||||
| Adjustments to Reconcile (Loss) Income to Net Cash (Used In) Provided By Operating Activities: | ||||||||
| Depreciation and Amortization | ||||||||
| Amortization of Debt Issuance Costs | ||||||||
| Change in Allowance for Expected Credit Losses | ( | ) | ( | ) | ||||
| Change in Reserve for Obsolescence | ||||||||
| Deferred Income Taxes | ( | ) | ||||||
| (Increase) Decrease in: | ||||||||
| Accounts Receivable | ( | ) | ||||||
| Inventory | ( | ) | ( | ) | ||||
| Decrease in Federal Income Tax Receivable | ||||||||
| Prepaid Expenses and Other Assets | ( | ) | ||||||
| Increase (Decrease) in: | - | |||||||
| Accounts Payables and Accrued Expenses | ( | ) | ||||||
| Federal Income Tax Payable | ( | ) | ||||||
| Deferred Revenue | ( | ) | ||||||
| Net Cash Provided By (Used In) Operating Activities | ( | ) | ||||||
| Cash Flows From Investing Activities | ||||||||
| Purchases of Property and Equipment | ( | ) | ( | ) | ||||
| Net Cash Used in Investing Activities | ( | ) | ( | ) | ||||
| Cash Flows From Financing Activities | ||||||||
| Borrowing on Debt Obligations | ||||||||
| Repayments on Debt Obligations | ( | ) | ( | ) | ||||
| Repayments on Finance Lease Obligations | ( | ) | ||||||
| Net Cash (Used In) Provided By Financing Activities | ( | ) | ||||||
| Net Decrease in Cash | ( | ) | ||||||
| Cash - Beginning | ||||||||
| Cash - Ending | $ | $ | ||||||
| Supplemental Cash Flow Disclosures: | ||||||||
| Cash Paid for Interest | $ | $ | ||||||
| Cash Paid for Taxes | $ | $ | ||||||
| Supplemental Disclosures of Non-Cash Investing Activities: | ||||||||
| Changes in Assets Acquired and Included in Accounts Payable and Accrued Expenses | $ | $ | ||||||
| Issuance of restricted common stock for stock-based compensation | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| 4 |
SYNTEC OPTICS HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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.
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 Segment reporting
The Company operates as
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.
| 5 |
SYNTEC OPTICS HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 4 — Disaggregated Revenues
The following table disaggregates revenue by revenue recognition methodologies as outlined above for the three months ended March 31:
| Three Months Ended March 31 | ||||||||
| 2025 | 2024 | |||||||
| Products | $ | $ | ||||||
| Custom Tooling | ||||||||
| Non-Recurring Engineering | ||||||||
| Total | $ | $ | ||||||
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 months ended March 31:
| Three Months Ended March 31 | ||||||||
| 2025 | 2024 | |||||||
| Communication | $ | $ | ||||||
| Consumer | ||||||||
| Defense | ||||||||
| Medical | ||||||||
| Total | $ | $ | ||||||
| 6 |
SYNTEC OPTICS HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 5 — Inventory
Inventory consists of the following at March 31, 2025 and December 31, 2024:
| 2025 | 2024 | |||||||
| Raw Materials | $ | $ | ||||||
| Work-in-Process | ||||||||
| Finished Goods | ||||||||
| Less: Reserve for Obsolescence | ||||||||
| Inventory | $ | $ | ||||||
Note 6 — Property and Equipment
Property and equipment consists of the following at March 31, 2025 and December 31, 2024:
| 2025 | 2024 | |||||||
| Machinery and Equipment | $ | $ | ||||||
| Building and Leasehold Improvements | ||||||||
| Land | ||||||||
| Office Furniture and Equipment | ||||||||
| Tooling | ||||||||
| Vehicles | ||||||||
| Less: Accumulated Depreciation | ||||||||
| Property and Equipment, Net | $ | $ | ||||||
Depreciation expenses were approximately $
| 7 |
SYNTEC OPTICS HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 7 — Line of Credit
The Company has a line of credit available in
the amount of $
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. At March 31, 2025, the Company was in compliance with the minimum fixed charge coverage ratio, maximum total leverage ratio, and the minimum EBITDA requirement as defined in the Credit Agreement.
Note 8 — Long-Term Debt
Long-term debt consists of the following at March 31, 2025 and December 31, 2024:
| 2025 | 2024 | |||||||
| The Company entered into a $ | $ | $ | ||||||
| The Company entered into a $ | ||||||||
| The Company entered into a $ | ||||||||
| The Company entered into a $ | ||||||||
| Total Long-Term Debt | ||||||||
| Less: Unamortized Debt Issuance Costs | ||||||||
| Long-Term Debt, Less Unamortized Debt Issuance Costs | ||||||||
| Less: Current Maturities | ||||||||
| Long-Term Debt | $ | $ | ||||||
At March 31, 2025, the future debt maturities are as follows:
| December 31, 2025 (remainder of year) | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total | $ |
| 8 |
SYNTEC OPTICS HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 9 — Retirement Plan
The Company maintains a 401(k) retirement plan
covering eligible employees of the Company and its affiliate.
Note 10 — 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
Note 11 — 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 months ended March 31:
| Three Months ended March 31 | ||||||||
| 2025 | 2024 | |||||||
| Operating lease cost | $ | $ | ||||||
| Finance Lease Cost: | ||||||||
| Amortization of assets | ||||||||
| Interest on liabilities | ||||||||
| Total lease cost | $ | $ | ||||||
Supplemental cash flow information related to leases are as follows for the three months ended March 31:
| Three Months ended March 31 | ||||||||
| 2025 | 2024 | |||||||
| Cash paid for amounts included in measurement of lease obligations: | ||||||||
| Operating cash flows from operating leases | $ | $ | ||||||
| Operating cash flows from finance leases | ||||||||
| Financing cash flows from finance leases | $ | $ | ||||||
The following table summarizes weighted average remaining lease term and discount rates as of March 31, 2025, and December 31, 2024:
| 2025 | 2024 | |||||||
| Weighted average remaining lease term (years) | ||||||||
| Operating leases | N/A | N/A | ||||||
| Finance leases | ||||||||
| Weighted average discount rate | ||||||||
| Operating leases | N/A | N/A | ||||||
| Finance leases | % | % | ||||||
| 9 |
SYNTEC OPTICS HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Future maturities of our lease liabilities are as follows as of March 31, 2025:
| 2025 remainder of year | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total Undiscounted Lease Obligations | ||||
| Less: Imputed Interests | ||||
| Present Value of Lease Obligations | $ |
Note 12 — Warrants
The following tables presents a roll-forward of the Company’s warrants from December 31, 2024 to March 31, 2025:
| Common Stock Warrants | ||||
| Warrants outstanding, December 31, 2024 | ||||
| Warrants exercised | ||||
| Warrants outstanding, March 31, 2025 | ||||
| 10 |
SYNTEC OPTICS HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| Three months ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Basic and diluted net income (loss) per share | ||||||||
| Numerator: | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Denominator | ||||||||
| Weighted-average shares outstanding | ||||||||
| Basic and diluted net income (loss) per share | $ | $ | ) | |||||
Note that there were potentially dilutive shares that were excluded from the weighted-average share calculation as of March 31, 2025 and 2024.
Note 14 — Significant Customers
For the three months ended March 31, 2025, the
Company generated
For the three months ended March 31, 2024, the Company generated
| 11 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The information in this Management’s Discussion and Analysis should be read in conjunction with the accompanying unaudited condensed financial statements and notes.
Cautionary Note Regarding Forward-Looking Statements
This report includes forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions are intended to identify forward-looking statements. All statements other than statements of historical facts contained in this report, including among others, our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth are forward-looking statements. Our actual results and financial condition may differ materially from those express or implied in such forward-looking statements. Therefore, you should not rely on any of these forward-looking statements.
For a further list and description of various risks, relevant factors and uncertainties that could cause future results or events to differ materially from those expressed or implied in our forward-looking statements, see the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections in this report, our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and our other filings with the Securities and Exchange Commission (the “SEC”). All forward-looking statements in this report are made only as of the date hereof or as indicated and represent our views as of the date of this report. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise, except as required by law.
Overview
Syntec Optics is vertically integrated from design and component manufacturing for lens system assembly to imaging module integration for system solutions. Making our own tools, molding, and nanomachining allows close interaction and recut ability, enabling special techniques to hold tolerances up to sub-micron level. Syntec has assembled a world class design for manufacturability team to augment its production team with deep expertise to fully leverage our vertical integration from component making to optics and electronics assembly. Syntec Optics has steadily developed variety of other complementary manufacturing techniques to provide a wide suite of horizontal capabilities including thin films deposition coatings, glass molding, polymer molding, tool-making, mechanicals manufacturing, and nanomachining.
Syntec became a leader in the industry by pioneering polymer-based optics and then subsequently adding glass optics and optics made from other materials including crystals and metals. Polymer-based optics provide numerous advantages compared to incumbent glass-based optics. Polymer-based optics are smaller, lower weight, lower cost, and offer very high-performance optical solutions. For all these reasons, Syntec is able to deliver products to our clients that are lighter, smaller, and suitable for cutting edge technology products, including the newly evolving silicon photonics industry.
Our designs and assembly processes are developed in-house in the United States. In 2016, Syntec Optics expanded its manufacturing facility to nearly 90,000 square-feet, allowing us to increase our production capacity and offer additional advanced manufacturing processes under one roof which provide us the ability to increase sales to existing customers and increase penetration of our end-markets. Our facility provides a streamlined, partially autonomous production process for our current customers, which comprises optical assembly, electro-optics assembly, polymer optics molding, glass optics molding, opto-mechanical assembly, nanomachining and thin films coating. Our facility also provides availability to expand the number of advanced manufacturing processes to handle increased volumes of existing and new customer orders.
Syntec Optics focuses on four end markets of defense, medical, consumer, and communications all with several mission-critical applications with strong tailwinds.
In 2023, Syntec Optics launched low weight night vision optics and further, announced hybrid light-weight magnifier and thermal clip on in the defense end market. Also, in 2023, Syntec Optics announced biomedical mirrors for sensing in the medical end market. Rounding out new product launches for 2023, in the communication end market, Syntec Optics launched microlens arrays and low earth satellite optics.
| 12 |
Key Factors Affecting Our Operating Results
Our financial position and results of operations depend to a significant extent on the following factors:
End Market Consumers
The demand for our products ultimately depends on demand from customers in our current end markets. We generate sales through (1) Tier 1 suppliers and (2) through OEMs.
An increasing proportion of our sales has been and is expected to continue to be derived from sales to defense. biomedical and industrial/consumer OEMs, driven by continued efforts to develop and expand sales to OEMs with whom we have longstanding relationships. Future OEM sales will be subject to risks and uncertainties, including the number of defense, biomedical and industrial/consumer products these OEMs manufacture and sell, which in turn may be driven by the expectations these OEMs have around end market demand.
Demand from end markets is impacted by a number of factors, including travel restrictions (global pandemics or geo-political conflicts), fuel costs and energy demands (including an increasing trend towards the use of green energy), as well as overall macro-economic conditions. Sales of our optics and photonics enabled components and sub-components have also benefited from the increased global conflict, the United States dynamic relationships with other world powers that may have a conflicting view with western-style democracy, the movement towards reshoring of advanced manufacturing, biomedical components and sub-components needed to support physicians in their battle against global pandemics, and the increased global demand for high-fidelity data communications on all corners of the globe.
Syntec Optics plans to further add bolt-on acquisitions for inorganic growth in the fragmented photonics industry by expanding our portfolio of our existing, U.S.-based, advanced manufacturing processes of making thin-film coated glass, crystal, or polymer components and their housings, which are ultimately assembled into high performance hybrid electro-optics sub-systems. By doing so, Syntec Optics plans to grow to the new end markets of communications and sensing. Syntec Optics entered the communications end market in 2023. Syntec Optics is currently engaged as a supplier for a U.S. Department of Commerce’s National Institute of Standards and Technology (NIST) funded research and development project for the sensing end market. The communication end market is characterized by the use of optics and photonics for data transmittal and reception of information, including, for example, satellite communications and other associated applications. The sensing end-market is characterized by the use of optics and photonics to detect scattered light or light with an altered refractive index due to the presence of a medium within a wide range of potential applications, including, for example, disease detection and other associated applications.
Supply
We currently rely on strategically selected electronics, highly engineered polymers and aluminum manufacturers located in the United States to manufacture our highly specialized optic and photonics enabled components and sub-components, and we intend to continue to rely on these suppliers going forward. Our close working relationships with our Unites States based suppliers, reflected in our ability to (x) increase our purchase order volumes (qualifying us for related volume-based discounts) and (y) order and receive delivery of raw materials in anticipation of required demand, has helped us moderate increased supply-related costs associated with inflation and to avoid potential shipment delays. To mitigate against potential adverse production events, we opted to build our inventory of key raw materials. In connection with these stockpiling activities, we experienced an increase in prepaid inventory compared to prior periods as suppliers required upfront deposits in response to supply chain disruptions.
As a result of the active steps we have taken to manage our inventory levels, we have not been subject to the shortages or price impacts that have been present for manufacturers of optic and photonic enabled components or sub-components.
Product and Customer Mix
Our sales consist of sales of highly specialized optic and photonic enabled components and sub-components. These products are sold to different customer types (e.g., OEMs and Tier 1 manufacturers) and at different prices and involve varying levels of costs. In any particular period, changes in the mix and volume of particular products sold and the prices of those products relative to other products will impact our average selling price and our cost of goods sold. The price of our products may also increase as a result of increases in the cost of components due to inflation, labor and raw materials. The Company generated 46% of revenues for the three months ended March 31, 2025 from three customers and 53% of revenues for the three months ended March 31, 2024 from three customers. These customers have a broad product purchase mix across various departments of Syntec Optics. Syntec Optics supplies several mission critical components and sub-components to these customers that are not tied to a single application, customer initiative, or purchase order. We expect sales to increase as we further advance our full-system design expertise and product offerings and customers increasingly demand more sophisticated systems, rather than drop-in replacements. In addition to the impacts attributable to the general sales mix across our products, our results of operations are impacted by the relative margins of products sold. As we continue to introduce new products at varying price points, our overall gross margin may vary from period to period as a result of changes in product and customer mix.
Production Capacity
All of our design, advanced manufacturing and assembly currently takes place at our nearly 90,000 square foot headquarters and manufacturing facility located in Rochester, New York. We currently operate optical, opto-mechanical and electro-optical assembly lines in addition to molding, nanomachining, testing and thin-film production lines. Consistent with our operating history, we plan to continue to automate additional aspects of our advanced manufacturing operations. Our existing facility has the capacity to add additional production lines and construct and operate pilot production lines for new components and sub-components, all designed to maximize the capacity of our manufacturing facility. Although our automation efforts are expected to reduce our costs of goods, we may not fully recognize the anticipated savings when planned and could experience additional costs or disruptions to our production activities.
| 13 |
Competition
We compete with traditional glass optic manufacturers and electro-optic manufacturers, who primarily either import their products or components or manufacture products under a private label. As we continue to expand into new markets, develop new products and move towards production of our polymer based and glass-polymer based optic hybrids and photonics enabled components and sub-components, we will experience competition with a wider range of companies. These competitors may have greater resources than we do and may be able to devote greater resources to the development of their current and future technologies. Our competitors may be able to source materials and components at lower costs, which may require us to evaluate measures to reduce our own costs, lower the price of our products or increase sales volumes in order to maintain our expected levels of profitability.
Research and Development
Our research and development are primarily focused on the advanced manufacturing of polymer and glass-polymer based optic and photonics enabled components and sub-components. The next stage in our technical development is to construct our products to optimize performance, lower weight and increase longevity to meet and exceed industry standards for our target end markets. Ongoing testing and optimizing of more complicated systems and sub-systems for our existing end markets will assist us in increasing penetration in our current end markets and expanding into targeted end markets.
Components of Results of Operations
Net Sales
Net sales are primarily generated from the sale of our optics and photonics enabled components and sub-components to OEMs.
Cost of Goods Sold
Cost of goods sold includes the cost of raw materials and other components of our optic and photonic enabled components and sub-components, labor, overhead, utilities, and depreciation and amortization.
Gross Profit
Gross profit, calculated as net sales less cost of goods sold, may vary between periods and is primarily affected by various factors including average selling prices, product costs, product mix, customer mix and production volumes.
Operating Expenses
General and Administrative
General and administrative costs include personnel-related expenses attributable to our executive, finance, human resources, and information technology organizations, certain facility costs, and fees for professional services.
Total Other Income (Expense)
Other income (expense) consists primarily of interest expense and debt issuance costs.
Results of Operations
Comparisons for the Three Months Ended March 31, 2025 and 2024
The following table sets forth our results of operations for the three months ended March 31, 2025 and 2024, respectively. This data should be read together with our financial statements and related notes included elsewhere in this Quarterly Report, and is qualified in its entirety by reference to such financial statements and related notes.
| Three Months ending | ||||||||||||||||
| March 31, 2025 | % Net Sales | March 31, 2024 | % Net Sales | |||||||||||||
| Net Sales | $ | 7,069,042 | 100 | % | $ | 6,255,908 | 100 | % | ||||||||
| Cost of Goods Sold | 4,760,424 | 67 | % | 5,548,465 | 89 | % | ||||||||||
| Gross Profit | 2,308,618 | 33 | % | 707,443 | 11 | % | ||||||||||
| General and Administrative Expenses | 1,780,166 | 25 | % | 2,114,543 | 34 | % | ||||||||||
| Income (Loss) from Operations | 528,452 | 7 | % | (1,407,100 | ) | -22 | % | |||||||||
| Other Income (Expense) | ||||||||||||||||
| Interest Expense, Including Amortization of Debt Issuance Costs | (200,896 | ) | -3 | % | (159,867 | ) | -3 | % | ||||||||
| Other Income | 5,697 | 0 | % | 19,349 | 0 | % | ||||||||||
| Total Other (Expense) | (195,199 | ) | -3 | % | (140,518 | ) | -2 | % | ||||||||
| Income (Loss) Before Provision (Benefit) for Income Taxes | 333,253 | 5 | % | (1,547,618 | ) | -25 | % | |||||||||
| Provision (Benefit) for Income Taxes | 9,588 | 0 | % | (338,475 | ) | -5 | % | |||||||||
| Net Income (Loss) | $ | 323,665 | 5 | % | $ | (1,209,143 | ) | -19 | % | |||||||
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Net Sales
Net sales increased by $0.8 million, or 13.0%, to $7.1 million for the three months ended March 31, 2025, as compared to $6.3 million for the three months ended March 31 2024. This increase was primarily due to an increase of $1.1 million spread across the medical and defense end markets offset by a decrease of $0.2 million in the communications end market.
Cost of Goods Sold
Cost of revenue decreased by $0.7 million, or 14.2%, to $4.8 million for the three months ended March 31, 2025, as compared to $5.5 million for the three months ended March 31 2024. This decrease was primarily due to an efficiency driven decrease of $0.3 million in direct payroll, and an efficiency driven decrease of $0.6 million in direct material costs.
Gross Profit
Gross profit increased by $1.6 million, or 226%, to $2.3 million for the three months ended March 31, 2025, as compared to $0.7 million for the three months ended March 31 2024. This increase was due to improvements across all cost of goods sold areas.
General and Administrative Expenses
General and administrative expenses decreased by $0.3 million, or 16%, to $1.8 million for the three months ended March 31, 2025, as compared to $2.1 million for the three months ended March 31 2024. This decrease was primarily due to reductions in costs for advertising and outside consultants.
Total Other Income (Loss)
Other income (expense) increased by $0.05 million, or 38.9%, to ($0.20) million for the three months ended March 31, 2025, as compared to other income (expense) of ($0.14) million for the three months ended March 31 2024. This increase was primarily due to an increase in interest expense driven by higher rates.
Income Tax Expense (Benefit)
Income tax expense increased by $0.35 million, or 103%, to $0.01 million for the three months ended March 31, 2025, as compared to ($0.34) million for the three months ended March 31, 2024. This increase was primarily due to the increase in net income.
Net Income (Loss)
Net income (loss) improved by $1.5 million, to $0.3 million for the three months ended March 31, 2025, as compared to a loss of $1.2 million for the three months ended March 31, 2024. This improvement was primarily due to the reasons discussed above in Net Sales, Cost of Goods Sold, and General and Administrative Expenses.
Critical Accounting Estimates
Our condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these condensed consolidated financial statements requires us to make judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions. On a recurring basis, we evaluate our judgments and estimates in light of changes in circumstances, facts, and experience. The effects of material revisions in an estimate, if any, will be reflected in the consolidated financial statements prospectively from the date of the change in the estimate.
We believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.
Inventory Valuation
We periodically review physical inventory for excess, obsolete, and potentially impaired items and reserves. Any such inventory is written down to net realizable value. The reserve estimate for excess and obsolete inventory is dependent on expected future use and requires management judgement.
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Income Taxes
We account for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities using enacted rates. The effect of a change in tax rates on deferred taxes is recognized in income in the period that includes the enactment date.
We recognize the financial statement effect of an uncertain income tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. Recognized income tax positions are measured at the largest amount that is greater than 50% likely to be realized. A valuation allowance is recorded to reduce deferred income tax assets to an amount, which in the opinion of management is more likely than not to be realized.
Management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities, and any valuation allowance recorded against our deferred tax assets. We consider factors such as the cumulative income or loss in recent years; reversal of deferred tax liabilities; projected future taxable income exclusive of temporary differences; the character of the income tax asset, including income tax positions; tax planning strategies and the period over which we expect the deferred tax assets to be recovered in the determination of the valuation allowance. In the event that actual results differ from these estimates, or we adjust our estimates in the future, we may need to adjust our valuation allowance, which could materially impact our financial position and results of operations.
Non-GAAP Financial Measures
This Quarterly Report includes a non-generally accepted account principles within the United States (“U.S. GAAP”) measure that we use to supplement our results presented in accordance with U.S. GAAP. EBITDA is defined as earnings before interest and other income, tax and depreciation and amortization. Adjusted EBITDA is calculated as EBITDA adjusted for non-recurring items, and business combination expenses. Adjusted EBITDA is a performance measure that we believe is useful to investors and analysts because it illustrates the underlying financial and business trends relating to our core, recurring results of operations and enhances comparability between periods.
Adjusted EBITDA is not a recognized measure under U.S. GAAP and is not intended to be a substitute for any U.S. GAAP financial measure and, as calculated, may not be comparable to other similarly titled measures of performance of other companies in other industries or within the same industry. Investors should exercise caution in comparing our non-GAAP measure to any similarly titled measure used by other companies. This non-GAAP measure excludes certain items required by U.S. GAAP and should not be considered as an alternative to information reported in accordance with U.S. GAAP.
Adjusted EBITDA
We define adjusted EBITDA, a non-GAAP financial measure, as net earnings (loss) before interest and other expenses, net, income tax expense, depreciation and amortization, as adjusted to exclude non-recurring items. We utilize adjusted EBITDA as an internal performance measure in the management of our operations because we believe the exclusion of these non-cash and non-recurring charges allow for a more relevant comparison of our results of operations to other companies in our industry and is in accordance with the Non-GAAP Financial Measures Compliance & Disclosure Interpretations (Reference Question 102.03).
The Company has identified several non-recurring items included in our non-GAAP adjusted EBITDA financial measure. These items encompass management fees, professional & transaction fees, technology start-up costs, optical molding evaluation expenses, glass molding evaluation expenses, and executive transition expenses
The table below presents our adjusted EBITDA, reconciled to net income for the three months ended March 31, 2025 and 2024.
NON-GAAP RECONCILIATION OF EBITDA
FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024
| 2025 | 2024 | |||||||
| Net (Loss) Income | $ | 323,665 | $ | (1,209,143 | ) | |||
| Depreciation & Amortization | 710,804 | 695,826 | ||||||
| Debt Issuance Costs | 2,416 | 1,973 | ||||||
| Interest Expenses | 201,956 | 157,895 | ||||||
| Taxes | 9,588 | (338,475 | ) | |||||
| Non-Recurring Items | ||||||||
| Executive Transition | 113,944 | |||||||
| One time Contract exit costs | 4,675 | |||||||
| Non-recurring property damage | 21,261 | |||||||
| Professional & Transaction Fees | 25,265 | |||||||
| Technology Start-up Costs | 165,034 | |||||||
| Optical Molding Evaluation Expenses | 38,104 | |||||||
| Glass Molding Evaluation Expenses | 68,392 | |||||||
| Adjusted EBITDA | $ | 1,388,309 | $ | (395,129 | ) | |||
| as percent of Revenue | 20 | % | -6 | % |
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Liquidity and Capital Resources
Liquidity describes the ability of a company to generate sufficient cash flows and operating profitability to meet the cash requirements of its business operations, including working capital needs, debt service, acquisitions, contractual obligations and other commitments. We assess liquidity in terms of our cash flows from operations and their sufficiency to fund our operating and investing activities. As of March 31, 2025, our principal sources of liquidity were cash totaling $0.5 million and a line of credit with $1.7 million available.
Significant factors affecting the management of our ongoing cash requirements are the adequacy of available bank lines of credit and our ability to attract long-term capital with satisfactory terms. The sources of our liquidity are subject to all of the risks of our business and could be adversely affected by, among other factors, risks associated with events outside of our control, monetary policy changes in the U.S. and other countries and their impact on the global financial markets, supply chain disruptions and electronics and other material shortages, a decrease in demand for our products, our ability to integrate current and future acquisitions, deterioration in certain financial ratios, availability of borrowings under our revolving credit facility, and other market changes in general. See “Risks Relating to Syntec Optics’ Financial Position and Capital Requirements” included in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
Cash Flow — Three Months Ended March 31, 2025 and 2024
| Three Months ending March 31 | ||||||||
| 2025 | 2024 | |||||||
| Net Cash Provided (Used) by Operating Activities | $ | 299,290 | $ | (289,841 | ) | |||
| Net Cash Used in Investing Activities | (214,731 | ) | (95,218 | ) | ||||
| Net Cash (Used) Provided in Financing Activities | $ | (142,442 | ) | $ | 1,011,510 | |||
Operating Activities
Net cash provided by operating activities was $0.3 million for the three months ended March 31, 2025. During the same period in the prior year, operating activities used net cash of $0.3 million.
Investing Activities
Net cash used in investing activities was $0.2 million for the three months ended March 31, 2025, as compared to net cash used in investing activities of $0.1 million for the three months ended March 31, 2024. The net cash used in investing activities increased primarily due to an increase in payment for capital expenditures.
Financing Activities
Net cash used in financing activities was $0.1 million for the three months ended March 31, 2025, as compared to net cash provided in financing activities of $1.0 million for the three months ended March 31, 2024. The primary drivers for the year-over-year change was a reduction in borrowing of $1.1 million.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
Our primary market risk exposure is interest rate sensitivity. During the three months ended March 31, 2025, there have been no material changes to the information included under Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15 under the Exchange Act, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Report. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Based on the evaluation of our disclosure controls and procedures as of March 31 2025, our Chief Executive Officer and our Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were not effective due to the following identified material weaknesses:
| 1. | We lack documentation of formal internal control process and controls including lack of review of journal entries. | |
| 2. | We lack necessary corporate accounting resources to maintain adequate segregation of duties. | |
| 3. | We lack timely reconciliation controls in the areas of classification of revenue, accounts payable, accrued legal expenses, provision for income taxes, and inventory. | |
| 4. | We lack controls related to proper cut-off of costs of goods sold and general and administrative expenses. | |
| 5. | We lack control related to identification and disclosure of related party transactions. | |
| 6. | We lack control related to proper fair value methodology utilized for valuation of complex financial instrument in connection with contingent earnout arrangement. | |
| 7. | We lack the necessary information technology (“IT”) general controls infrastructure in the areas of user access and program change-management due to insufficient documentation and training, and inadequate IT risk assessment process. Additionally, we lack controls around the review of SOC-1 reports and lack of cyber security related controls. | |
| 8. | We lack control related to the evaluation and calculation of finance leases in accordance with Accounting Standards Codification 842-20-25-1a. | |
| 9. | We lack control related to identification of stock-based compensation agreements and related accounting for and disclosure of such agreements. |
Remediation Plans and Status
As disclosed in the section titled “Evaluation of Internal Controls and Procedures,” we have identified certain control deficiencies. To address these issues, we have designed and are in the process of implementing the following remediation initiatives, which are aligned with the COSO framework:
| ● | Enhance corporate governance through increased oversight by the Audit Committee, including additional reviews of internal control improvements and financial statements prior to publication (Control Environment; Monitoring Activities). | |
| ● | Design and implement internal control flowcharts to strengthen segregation of duties (Control Activities; Risk Assessment). | |
| ● | Increase staffing levels and competencies to enable appropriate separation of duties (Control Environment; Control Activities). | |
| ● | Implement a formal checklist, review process, and controls over all journal entries and modifications to trial balances (Control Activities; Information & Communication). | |
| ● | Hire additional experienced accounting and reporting professionals to prepare and approve consolidated financial statements and footnote disclosures in accordance with U.S. GAAP (Control Environment; Control Activities). | |
| ● | Engage outside professional support to assist with SEC reporting requirements and special circumstances to ensure timely and accurate filings (Control Environment; Information & Communication). | |
| ● | Establish a formal quarterly attestation process for managers and accounting staff to reinforce and monitor the use of control processes and workflows (Monitoring Activities; Information & Communication). | |
| ● | Implement a formalized system for tracking control measures to reduce complexity and improve management’s review of control effectiveness (Monitoring Activities; Information & Communication). |
While the Company has initiated these remediation efforts, not all measures have been fully implemented as of the date of this filing. We will continue to enhance our internal control framework, employ additional procedures, and utilize appropriate tools and resources to ensure that our consolidated financial statements are presented fairly, in all material respects.
The Company believes these remediation measures will significantly strengthen its internal control environment and provide the foundation to remediate the identified material weaknesses in future reporting periods.
Management’s Report on Internal Control over Financial Reporting
This Report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of the Company’s registered public accounting firm due to a transition period established by rules of the SEC for newly public companies. Additionally, our auditors will not be required to formally opine on the effectiveness of our internal control over financial reporting pursuant to Section 404 until we are no longer an “emerging growth company” as defined in the JOBS Act.
Changes in Internal Control over Financial Reporting
Other than the material weaknesses and remediation efforts mentioned above, there were no changes in our internal controls over financial reporting that occurred during the quarter ended March 31, 2025 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We may be subject to legal proceedings, investigations and claims incidental to the conduct of our business from time to time. We are not currently a party to any material litigation or other legal proceedings brought against us. We are also not aware of any legal proceeding, investigation or claim, or other legal exposure that has a more than remote possibility of having a material adverse effect on our business, financial condition or results of operations.
Item 1A. Risk Factors
The Company’s risk factors are described in Part I, Item 1A, “Risk Factors”, of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024. The risks described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial position, or future results of operations. The risk factors should be read together with, the risk factors described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
Not Applicable
Item 5. Other Information
None
Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| * | Filed herewith. |
| ** | Furnished. |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| SYNTEC OPTICS HOLDINGS INC. | ||
| Date: October 3, 2025 | By: | /s/ Al Kapoor |
| Name: | Al Kapoor | |
| Title: | Chairman and Chief Executive Officer | |
| (Principal Executive Officer) | ||
| Date: October 3, 2025 | By: | /s/ Dean Rudy |
| Name: | Dean Rudy | |
| Title: | Chief Financial Officer | |
| (Principal Accounting Officer and Financial Officer) | ||
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