UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended: September 30, 2023

or

For the transition period from __________________ to __________________

Commission File Number: 000-56166

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☒

As of November 10, 2023, the registrant had 8,253,419 shares of common stock, par value $.01 per share, issued and 9,253,419 shares of common stock, par value $.01 per share outstanding.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LASER PHOTONICS CORPORATION

CONDENSED BALANCE SHEETS

See accompanying notes to financial statements.

LASER PHOTONICS CORPORATION

STATEMENT OF PROFIT AND LOSS

(UNAUDITED)

See accompanying notes to financial statements.

LASER PHOTONICS CORPORATION

STATEMENTS OF CASH FLOWS

(UNAUDITED)

See accompanying notes to financial statements.

LASER PHOTONICS CORPORATION

STATEMENTS OF SHAREHOLDERS’ EQUITY

(UNAUDITED)

See accompanying notes to financial statements.

LASER PHOTONICS CORPORATION

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

The increase in Lease Expense from the 2022 to 2023 interim periods is related to the addition of a second leased facility for use by Sales and Marketing group as part of our strategic plan in an effort to improve market reach and growth.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and the notes to those financial statements appearing elsewhere in this report.

Certain statements in this Report constitute forward-looking statements. These forward-looking statements include statements, which involve risks and uncertainties, regarding, among other things, (a) our projected sales, profitability, and cash flows, (b) our growth strategy, (c) anticipated trends in our industry, (d) our future financing plans, and (e) our anticipated needs for, and use of, working capital. They are generally identifiable by use of the words “may,” “will,” “should,” “anticipate,” “estimate,” “plan,” “potential,” “project,” “continuing,” “ongoing,” “expects,” “management believes,” “we believe,” “we intend,” or the negative of these words or other variations on these words or comparable terminology. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur. You should not place undue reliance on these forward-looking statements.

The forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events.

The “Company,” “we,” “us,” or “our,” are references to the business of Laser Photonics Corporation, a Delaware corporation.

Business               

Laser Photonics Corporation is a vertically integrated manufacturing company for photonics based industrial products and solutions, primarily disruptive laser cleaning technologies. Our vertically integrated operations allow us to reduce development and advanced laser equipment manufacturing time, offer better prices, control quality and protect our proprietary knowhow and technology compared to other laser cleaning companies and companies with competing technologies.

Our principal executive offices are located at 1101 N Keller Rd, Orlando FL, 32810, and our telephone number is (407) 804 1000. Our website address is www.laserphotonics.com. The Company’s annual reports, quarterly reports, current reports on Form 8-K and amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”), and other information related to the Company, are available, free of charge, on that website as soon as we electronically file those documents with, or otherwise furnish them to, the SEC. The Company’s website and the information contained therein, or connected thereto, are not and are not intended to be incorporated into this Quarterly Report on Form 10-Q.

We intend to continue to stay ahead of the technology curve by researching and developing cutting edge products and technologies for both large and small businesses. We view the small companies as an attractive market opportunity since they were previously unable to take advantage of laser processing equipment due to high prices, significant operating costs and the technical complexities of the laser equipment. As a result, we are developing an array of laser cleaning equipment that we have named the CleanTech™ product line, which we believe represents a new generation of high-power laser cleaning systems applicable to numerous material processing operations.

Factors and Trends That Affect Our Operations and Financial Results 

In reading our financial statements, you should be aware of the following factors and trends that our management believes are important in understanding our financial performance.

Supply Chain.

We are experiencing increased lead times for certain parts and components purchased from third party suppliers, particularly electronic components. We, our customers and our suppliers continue to face constraints related to supply chain and logistics, including availability of capacity, materials, air cargo space, sea containers and higher freight rates and import duties. Supply chain and logistics constraints are expected to continue for the foreseeable future and could impact our ability to supply products and our customers' demand for our product or readiness to accept deliveries.

Foreign Exchange Exposure

We conduct the majority of our business within the United States and North America. However, even if we are not directly exposed to foreign currencies, the result of our operations is heavily dependent on the local currency conditions in relation to U.S. dollar. The value loss of local currency in the countries where our distributors are located may result in slow sales or “washing out” distributor discounts in entirety. Fluctuation in the exchange rate also impacts the purchase price of components and may substantially affect our Cost of Goods Sold, further reducing our profitability. Our most significant exposures are to the Japanese Yen, Australian Dollar and Chinese Yuan. Even if we are not collecting the revenue in foreign currencies, the effect of the foreign currencies fluctuation results on the cost of goods sold through increased supply chain expenses, and accounts receivable collection from foreign distributors experiencing sharp increases in the exchange rates to the U.S. Dollar, resulting in washing out the distributors’ profits and slowing their sales process. To the extent that the percentage of revenues derived from international sales increases in the future, our exposure to risks associated with fluctuations in foreign exchange rates may increase.

Interest Rate Exposure

The Federal Reserve has raised the target range for the federal funds rates five times during 2022, and continuously through 2023, from 0.25% as of March 2022 to 5.0% through March 2023, bringing borrowing costs to the highest level since January 2001. These increased rates have resulted in many customers delaying capital equipment spending. We believe that the dramatic increases in interest rates will have an adverse short-term effect on our business but within six to nine months industry will re-adjust to the current financial conditions and our operation will continue without any material downwards effect.

Global Inflation Exposure

General inflation in the United States, Europe and other locations has risen to levels not experienced in recent decades. General inflation, including rising prices for our raw materials and other inputs as well as rising salaries, negatively impacted our business by increasing our cost of sales and operating expenses. A period of rising rates of inflation also negatively impacted our business by decreasing the capital for our customers to deploy to purchase our products and services. Inflation may cause our customers to reduce or delay orders for our goods and services thereby causing a decrease in sales of our products and services. We cannot accurately predict what the impact of future inflation fluctuations will have on the results of our operations. 

Revenue

Our revenue has historically fluctuated from quarter to quarter. The increase or decrease in revenue from a prior quarter can be affected by the timing of orders received from customers as well as the shipment, installation, and acceptance of laser cleaning products at our customers' facilities. Our revenue can be affected by the time taken to qualify our laser cleaning products for use in new applications in the end markets that we serve. Our sales cycle varies substantially, ranging from a period of a few weeks to as long as one year or more, but is typically several months. The adoption of our laser cleaning products by a new customer or qualification in a new application can lead to an increase in net sales for a period, which may then slow until we penetrate new markets or obtain new customers.

Our business depends substantially upon capital expenditures by end users, particularly by manufacturers using our products for laser blasting materials processing, which include general manufacturing, automotive including electric vehicles (EV), other transportation, aerospace, heavy industry, consumer, semiconductor, and electronics. Although applications within materials processing are broad, the capital equipment market in general is cyclical and historically has experienced sudden and severe downturns. For the foreseeable future, our operations will continue to depend upon capital expenditures by end users of laser blasting materials processing equipment and will be subject to the broader fluctuations of capital equipment spending.  The significant increases in the interest rate have adversely affected our sales.

Although all of our sales contracts are to be executed in the U.S. dollars, the foreign exchange rates may impact our sales from our customers overseas. The recent increased value of the U.S. dollar against most foreign currencies has also adversely affected sales during the first nine months of 2023.

Gross Margin. Our total gross margin in any period can be significantly affected by a number of factors, including net sales, production volumes, competitive factors, product mix, and by other factors such as changes in foreign exchange rates relative to the U.S. Dollar. Many of these factors are not under our control. The following are examples of factors affecting gross margin:

Selling, General and Administrative Expenses. In the fourth quarter of 2022 and the year of 2023, we invested in selling, general and administrative (“SG&A”) costs in order to support our continued growth. As the secular shift to laser blasting technology matures, our sales growth becomes more susceptible to the cyclical trends typical of capital equipment manufacturers. Accordingly, our future management of and investments in SG&A expenses will also be influenced by these trends, although we may still invest in sales and marketing functions to support sales sustainability even in economic down cycles.

Research and Development Expenses. We plan to continue to invest in research and development to improve our existing laser blasting technology and equipment and develop new products, systems and applications. We believe that these investments will sustain our position as a leader in the laser blasting industry and will support the development of new products that can address new markets and growth opportunities. The amount of research and development expenses we incur may vary from period to period.

Results of Operations

Revenue of $1,239,554 and $3,444,649 in the three and nine months ended September 30, 2023, respectively, increased 1.2% and decreased 9.1% compared to $1,224,450 and $3,790,176 in the three and nine months ended September 30, 2022, respectively. The decrease year-over-year during the three quarters is from the revenue shortfall during the second quarter. As noted in 10-Q of last quarter, one of the primary reasons for the lower revenue was a major delay in supply chain for critical components of our main laser blasting model LPC2000CTH. Although we received the components and sold a couple of units of LPC2000CTH, we are experiencing continuous delay in supply chain as well as delay of capital expenditure spending by major customers due to unprecedent increases in the Federal interest rate.

Gross profit for the three and nine months ended September 30, 2023 was $906,228 and $2,586,332 respectively, increased 64% and 13% compared to $553,355 and $2,286,096 in the three and nine months ended September 30, 2022, respectively. The increase is primarily due to favorable product mix sales in the third quarter with lower cost of goods sold and the effective utilization of our production facilities. As a result, gross margin as a percentage of revenue for the three and nine months ended September 30, 2023 was improved to 73% and 75%, compared to 45% and 60% for the same periods ended September 30, 2022.

Selling, general, and administrative (“SG&A”) expenses consist primarily of salaries and other personnel-related costs; professional fees; insurance costs; SEC filing, compliance, and other public Company costs; travel expenses; and other sales and marketing expenses; and excludes depreciation & amortization expenses. In the near term, we expect SG&A expenses to increase as we expand our sales and marketing efforts to support the planned growth of our business. In the long run, we expect SG&A expenses as a percent of sales to decline as our business grows.

For the three months ended September 30, 2023 and 2022, we recorded total expenses of $1,850,414 and $253,412 respectively. SG&A expenses for the nine months ended September 30, 2023 and 2022, are $4,749,448 and $1,104,818, respectively. The significant increase in SG&A is primarily driven by our strategic plan to increase market reach and sales force as part of our Sales & Marketing Development and Investment plan as noted in our previous   10-Q’s in accordance with “Use of Proceeds” as stated in our Form S-1 Registration Statement, coupled with higher personnel costs resulting from additional headcount, professional service fees, SEC compliance costs, bad debt expenses, etc.  

Our net loss, for the three months ended September 30, 2023, was $1,096,396 as compared to net income of $205,090 in the same period of 2022. The decrease in Net Income is primarily due to higher SG&A expenses.

Liquidity and Capital Resources

At September 30, 2023, we had cash and cash equivalents of $8,310,519, compared to $12,181,799 at December 31, 2022.

The following is a summary of our cash flows provided by (used in) each type of business activity in the periods presented:

As of September 30, 2023, the Company had $8,310,519 in cash, $4,333,453 in current assets (without cash and cash equivalents) and $585,665 in current liabilities.

As a result, on September 30, 2023, the Company had $12,058,306 in total working capital, compared to $13,579,732 of total working capital at December 31, 2022.

Off-Balance Sheet Arrangements

During the nine months ended September 30, 2023, the Company did not engage in any off-balance sheet arrangements as defined in item 303(a)(4) of the SEC’s Regulation S-K.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

ITEM 4. CONTROLS AND PROCEDURES

Disclosures Control and Procedures

Under the supervision of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), our management has evaluated the effectiveness of the design and operation of our "disclosure controls and procedures" (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of the end of the period covered by this Quarterly Report on Form 10-Q (the "Evaluation Date"). Based upon that evaluation, our CEO and CFO have concluded that, as of the filing date, our disclosure controls and procedures are effective.

Changes in Internal Controls over Financial Reporting

As part of the previous audit for the year ended December 31, 2022, a material weakness in internal controls was identified and the Company has taken, continued to work with, and plans to implement the following to improve its internal control over financial reporting. During the three months ended September 30, 2023, we hired for the first time a Chief Financial Officer, with an active Certified Public Accountant credential, who has extensive experience in financial consolidation, planning, and reporting and served as Sarbanes-Oxley Officer in large manufacturing companies. Subsequently, we also engaged the third-party company for accounting staff and added more segregation of duties in accounting closing and review processes.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

We are not involved in any legal proceedings, including routine litigation arising in the normal course of business, that we believe will have a material adverse effect on our business, financial condition or results of operations.

ITEM 1A. RISK FACTORS

Not applicable to a smaller reporting company.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There were no sales of unregistered securities during the reported period.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.

* In accordance with Regulation S-T, the Interactive Data Files in Exhibit 101 to the Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed.”

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.