UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: September 30, 2021

OR

☐     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File No. ___________

1101 N. Keller Road, Suite G

Orlando, FL 32810

(Address of principal executive offices)

(407) 804-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

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 past 12 months, 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 9, 2021, there were 29,270,502 shares outstanding of the registrant’s common stock, par value $0.01 per share, issued and outstanding.

TABLE OF CONTENTS

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

AND OTHER INFORMATION CONTAINED IN THIS REPORT

This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. You can find many (but not all) of these statements by looking for words such as “approximates,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “would,” “should,” “could,” “may” or other similar expressions in this Form 10-Q. In particular, these include statements relating to future actions; prospective products, applications, customers and technologies; future performance or results of anticipated products; anticipated expenses; and projected financial results. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Form 10-Q, particularly in the “Risk Factors” section, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make or collaborations or strategic partnerships we may enter into.

You should read this Form 10-Q and the documents that we have filed as exhibits to this Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Unless otherwise stated or the context otherwise requires, the terms “Laser Photonics,” “we,” “us,” “our” and the “Company” refer collectively to Laser Photonics Corporation and its subsidiaries.

PART I – FINANCIAL INFORMATION

Item 1. Condensed Financial Statements

Laser Photonics Corporation

September 30, 2021

Index to the Condensed Financial Statements

Laser Photonics Corporation

Condensed Balance Sheets

The accompanying notes are an integral part of these condensed financial statements.

Laser Photonics Corporation

Condensed Statements of Comprehensive Income (Loss) (Unaudited)

The accompanying notes are an integral part of these condensed financial statements.

Laser Photonics Corporation

Condensed Consolidated Statement of Changes in Stockholders’ Equity

For the Three and Nine Months Ended September 30, 2021 (Restated)  and 2020 (Restated) (Unaudited)

The accompanying notes are an integral part of these condensed financial statements.

Laser Photonics Corporation

Condensed Statements of Cash Flows (Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Laser Photonics Corporation

Notes to the Condensed Financial Statements

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 Wyoming corporation.

Corporation Information

Laser Photonics Corporation was formed under the laws of Wyoming on November 8, 2019. We changed our domicile to Delaware on March 5, 2021. We are 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.

The Company’s accounting year end is December 31.

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 a group of standardized laser cutting equipment that we have named the Laser Tower™ material processing family of equipment that we believe represents a new generation of high power laser cutting systems that will be affordable to more than a million small and mid- size companies.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts in the accompanying consolidated financial statements and related notes. These estimates and assumptions have a significant impact on our financial statements. Actual results could differ materially from those estimates.

Critical accounting policies are those that require the most subjective and complex judgments, often employing the use of estimates about the effect of matters that are inherently uncertain. Our significant accounting policies are disclosed in Note 1 to the Financial Statements included in this Quarterly Report on Form 10-Q. However, we do not believe that there are any alternative methods of accounting for our operations that would have a material effect on our financial statements.

CORONAVIRUS AID, RELIEF AND ECONOMIC SECURITY ACT

On March 27, 2020, the U.S. Government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act includes various income and payroll tax provisions. The Company has analyzed the tax provisions of the CARES Act and determined they could have a significant financial impact on our financial statements.

On April 27, 2020, the Company received a First Draw loan in the amount of $198,750 pursuant to the Paycheck Protection Program (the “PPP”) under the CARES Act, and on March 26, 2021, the Company received a Second Draw loan from Axiom Bank, N.A., headquartered in Central Florida, in the amount of $198,750 pursuant to the Paycheck Protection Program (the “PPP”) under the CARES Act. The total aggregate amount of PPP Loans received by the company by March 31, 2021 was $397,500. Under the terms of the PPP, PPP loans and accrued interest are forgivable after eight weeks as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the eight-week period. The Company intends to use the loan proceeds for purposes consistent with the PPP and anticipates that a majority of the loan amount will be forgiven, but no assurance can be given that the Company will not take actions that could cause the Company to be ineligible for forgiveness of some portion of the loan. The unforgiven portion of the loan is payable over two years at an interest rate of 1%, with a deferral of payments for the first six months.

Results of Operations

Liquidity and Capital Resources

The following table summarizes total current assets, liabilities and working capital at September 30, 2021 (unaudited) compared to December 31, 2020:

At September 30, 2021, we had a working capital of $3,138,588 as compared to working capital of $2,226,388 at December 31, 2020, an increase in working capital of $911,980. The increase is primarily attributable to an increase in accounts receivable, and a decrease in deferred revenue and current portion of operating lease payable..

Net Cash

Net cash provided by (used in) operating activities for the nine months ended September 30, 2021 and 2020, was $331,365 and $(223,169), respectively. This change is primarily attributable to the net income of 543,697 for the current period compared to a net loss of $(543) for the comparable period in 2020

Net cash used in investing activities for the nine months ended September 30, 2021 and 2020 was $9,669 and $30,080, respectively. This change is attributable to the cash used to purchase property and equipment, and intangible assets.

Net cash provided by (used in) financing activities for the nine months ended September 30, 2021 and 2020 was $(52,819) and $503,017, respectively. During the nine months ended September 30, 2020, the Company was predominantly financed by related party loans of $334,457 and PPP loan proceeds of $198,750 to fund operations. During the nine months ended September 30, 2021, the Company received additional PPP loan proceeds of $198,750 to fund operations and repaid related party loans by $251,569.

Summary of Statements of Operations for the Three Months Ended September 30, 2021 and 2020:

Revenue

We generate revenues through sales of our laser blasting and laser cleaning products, particularly with introduction of new models covering the whole range of roughing, conditioning and finishing laser systems, including laser blasting systems cabinets and the development of new applications for our products. We develop our products to standard specifications and use a common set of components within our product architectures. Our major products are based upon a common technology platform. We continually enhance these and other products by improving their components and developing new product designs.

Our contracts contain a single performance obligation and the entire transaction price is allocated to the single performance obligation. We recognize as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. Accordingly, we recognize revenues (net) when the customer obtains control of the Company’s product, which typically occurs upon shipment of the product.

Revenue was $1,098,591 for the three months ended September 30, 2021, as compared to $607,687 for the comparable three months ended September 30, 2020, an increase of $354,641. The increase in revenue is primarily due to an increase of sales of our roughing high power 2000CTH model unit in the first quarter of 2021 and increased industry recognition and approval of laser blasting compared to sandblasting and abrasives blasting.

Cost of goods sold

Our cost of goods sold includes the cost of raw materials and components for manufacturing laser systems, OEM laser modules, consists of different electronic and optical components such as optical generators, scan heads, tempered glass, protective back sheet, semiconductor laser cells, connector assemblies and wires, edge seal and adhesives, junction boxes, and other items, such as raw aluminum and aluminum extrusions, steel for tilt brackets and frames. Our cost of goods sold does not includes direct labor for the manufacturing and manufacturing overhead such as engineering, equipment maintenance, quality and production control, and procurement costs. Cost of goods sold does not includes depreciation of manufacturing plant and equipment and facility-related expenses. In addition, we accrue estimated warranty costs, as applicable, to our cost of sales.

Overall, we expect our cost of sales to continue to decrease over the next several years due to an increase in worldwide capacity in fiber laser parts and components, and availability of optical generators, an increase in unit output per production line, and more efficient absorption of fixed costs driven by economies of scale. This expected decrease in cost for laser technology would be partially offset during periods in which we underutilize manufacturing capacity.

For the three months ended September 30, 2021, we recognized cost of goods sold of $324,462 as compared to $264,577 for the three-month period ended September 30, 2020. The increase in cost of goods sold is primarily due to an increase of sales volume,..

Gross margin

Gross profit is affected by numerous factors, including our module average selling prices, foreign exchange rates, the existence and effectiveness of subsidies and other economic incentives, competitive pressures, market demand, market mix, our manufacturing costs, product development costs, the effective utilization of our production facilities, and the ramp-up of production on new products.

For the three months ending September 30, 2021 and 2020, we recorded gross profit of $774,129 and $343,110, respectively. The increase in gross profit was due to the increased revenue generated coupled with the decline in cost of goods sold noted above.

Operating Expenses

For the three months ending September 30, 2021 and 2020, we recorded operating expenses of $637,155 and $320,734 respectively. The increase of $201,422 in operating expenses is mainly related to selling and marking expenses, payroll-related costs and depreciation. Our operating expenses consisted primarily of payroll-related costs, insurance premiums and fees, allocated facilities costs, and outside legal and professional fees. The following table summarizes the significant changes in operating expenses for the three months ended September 30, 2021 and 2020:

We expect selling expenses to increase in the near term to support the planned growth of our business as we expand our sales and marketing efforts. Over time, we expect selling, general and administrative expense to decline as a percentage of net sales as our net sales increase.

Income from Operations

Income from operations for the three months ended September 30, 2021 was $136,974 as compared to $22,376 for the three months ended September 30, 2020. The increase in the income from operations is primarily due to the increased gross margin offset by the noted increases in operating expenses.

Other Income (Expense)

Other income for the three months ended September 30, 2021, includes interest expense of $10,847 and a one-time gain from the termination of a lease 28,755. For the three months ended September 30, 2020, other expense included interest expense of $5,907 The increase interest expense over the comparative three-month period is due to the net increase in loans from ICT Investments.

Net Income

Net income for the three months ended September 30, 2021, was $154,882, or earnings per share of $0.01, as compared to net income of $16,469, or earnings per share of $0.00, for the three months ended September 30, 2020.

Summary of Statements of Operations for the Nine Months Ended September 30, 2021 and 2020:

Revenue

Revenue was $2,989,108 for the nine months ended September 30, 2021, as compared to $1345,463 for the comparable nine months ended September 30, 2020, an increase of $1,345,463. The increase is primarily due to increased industry recognition and approval of laser blasting compared to sandblasting and abrasives blasting.

Cost of goods sold

For the nine months ended September 30, 2021, we recognized cost of goods sold of $840,254 as compared to $534,206 for the nine-month period ended September 30, 2020. The increase in cost of goods sold is primarily due to due to increase of sales volume, leading to the increase of the Cost of Goods Sold.

Gross margin

Gross profit is affected by numerous factors, including our module average selling prices, foreign exchange rates, the existence and effectiveness of subsidies and other economic incentives, competitive pressures, market demand, market mix, our manufacturing costs, product development costs, the effective utilization of our production facilities, and the ramp-up of production on new products.

For the nine months ended September 30, 2021 and 2020, we recorded gross profit of $2,148,854 and $811,257, respectively. The increase in gross profit was due to the increased revenue generated coupled with the relative decline in cost of goods sold noted above.

Operating Expenses

For the nine months ending September 30, 2021 and 2020, we recorded operating expenses of $1,590,544 and $805,903 respectively. The increase of $784,461 in operating expenses is mainly related to selling and marking expenses, payroll-related costs, professional fees and depreciation. Our operating expenses consisted primarily of payroll-related costs, insurance premiums and fees, allocated facilities costs, and outside legal and professional fees.

The following table summarizes the significant changes in operating expenses for the Nine months ended 30, 2021 and 2020:

We expect selling expenses to increase in the near term to support the planned growth of our business as we expand our sales and marketing efforts. Over time, we expect selling, general and administrative expense to decline as a percentage of net sales as our net sales increase.

Income) from operations

Income from operations for the nine months ended September 30, 2021 was $538,310 as compared to $5,354 for the nine months ended September 30, 2020. The increase in the income from operations is primarily due to the increased gross margin offset by the noted increases in operating expenses.

Other Income (Expense)

Other income for the nine months ended Sept 30, 2021 consists of a one-time gain from the termination of a lease of $28,755 and interest expense of $43,300. Other expense for the nine months ended September 30, 2020 consists of interest expense of $5,907 The increase interest expense for the nine months ended September 30, 2021 over the comparative nine-month period is mainly due to the net increase in loans from ICT Investments.

Net Income (Loss)

Net income (loss) for the nine months ended September 30, 2021, was $543,833, or earnings per share of $0.02, as compared to net loss of $(553), or loss per share of $(0.00), for the nine months ended September 30, 2020.

Off-Balance Sheet Arrangements

As of September 30, 2021, we had no off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined in Rule 229.10(f)(1).

Item 4. Controls and Procedures Limitations on Effectiveness of Controls and Procedures

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits 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, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact there are resource constraints and management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, evaluated, as of the end of the period covered by this Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our Principal Executive Officer and Principal Financial Officer concluded our disclosure controls and procedures were not effective at the reasonable assurance level as of September 30, 2021.

Changes in Internal Control Over Financial Reporting

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) has occurred during the three and nine months ended September 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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.

On January 1, 2020, the Company purchased from ICT Investments certain capital manufacturing equipment valued at $158,456 which the Company will use in its business in exchange for 900,000 shares of its common stock.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

There is no other information required to be disclosed under this item which was not previously disclosed.

Item 6. Exhibits.

SIGNATURES

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