Note 2 — Summary of Significant Accounting Policies

The Company has provided a discussion of significant accounting policies, estimates and judgements in its 2025 Annual Report. Other than the Non-Recurring Engineering Services and Tooling topic reported below, there have been no changes to the Company’s significant accounting policies since December 31, 2025.

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 unaudited condensed 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, 2025. 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.

Non-Recurring Engineering Services and Tooling

The Company enters into contracts with customers to provide non-recurring engineering and tooling (“NRE”) services related to the design, development, qualification, and customization of optical and photonic products. NRE activities may represent a distinct performance obligation or may be combined with other promised goods and services depending on the facts and circumstances of the arrangement and the application of ASC 606.

Revenue from NRE arrangements is recognized either at a point in time or over time, depending on the nature of the performance obligation and the transfer of control to the customer. For certain NRE projects, revenue is recognized upon completion and delivery of the contracted deliverable, customer acceptance, or other transfer of control criteria. For other NRE projects, revenue is recognized over time when the applicable criteria under ASC 606 are met, including situations in which the Company’s performance does not create an asset with an alternative use to the Company and the Company has an enforceable right to payment for performance completed to date.

For NRE arrangements recognized over time, the Company measures progress toward satisfaction of the performance obligation using an input method based on costs incurred relative to total estimated costs expected to complete the project. Management believes this method faithfully depicts the transfer of control of services to the customer because costs incurred are directly correlated with the Company’s efforts in satisfying its contractual obligations and the value transferred to the customer. Estimated project costs are reassessed periodically, and changes in estimates are recognized on a cumulative catch-up basis in the period in which such changes are identified.

During the nine months ended September 30, 2026, a significant NRE program met the criteria for over-time revenue recognition, resulting in a greater proportion of NRE revenue being recognized using the cost-to-cost method than in prior periods.

Recent Accounting Pronouncements

Accounting Standard Adopted:

In July 2025, the FASB issued ASU 2025-05, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendments in this ASU provide that in developing reasonable and supportable forecasts as part of estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606, 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 the amendments applied on a prospective basis. The Company adopted ASU 2025-05 effective January 1, 2026, on a prospective basis and elected the practical expedient described above. Adoption did not have a material impact on the Company’s condensed consolidated financial statements.

Accounting Standards Not Yet Adopted:

The Company continues to evaluate the impact of adopting ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, issued November 2024, as clarified by ASU 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, issued January 2025, which will require additional footnote disclosures breaking down certain income statement expenses, including cost of goods sold and general and administrative expenses, into categories such as inventory purchases, employee compensation, depreciation, and intangible asset amortization, as applicable. The guidance also requires disclosure of total selling expenses. The Company anticipates adoption for the year ending December 31, 2027, and for quarterly reporting beginning in 2028. Adoption is expected to expand disclosures without changing the recognition or measurement of expenses.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. The guidance clarifies existing interim financial reporting requirements, consolidates required interim disclosures, and establishes a principle requiring disclosure of events since the most recent annual reporting period that have a material impact on the Company. The amendments are effective for public business entities for interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted, and the amendments may be applied prospectively or retrospectively. The Company continues to evaluate the impact on its quarterly financial statement disclosures and anticipates adoption when required under the transition provisions applicable to the Company.

In December 2025, the FASB issued ASU 2025-12, Codification Improvements, which clarifies existing accounting guidance, corrects errors, and makes minor improvements across various accounting topics. The amendments are effective for all entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual periods. Early adoption is permitted, and transition requirements vary by amendment. The Company anticipates adopting the guidance effective January 1, 2027, and continues to evaluate the applicable amendments. Consistent with its preliminary assessment, the Company does not expect adoption to have a material impact on its consolidated financial statements.

SYNTEC OPTICS HOLDINGS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS