Laser Photonics Corp. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. The unaudited interim statements are prepared under U.S. GAAP. Laser Photonics describes itself as a vertically integrated manufacturer of photonics-based industrial products, primarily laser-cleaning systems. It changed its domicile from Wyoming to Delaware in March 2021.
Financial results
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $914,492 | $559,851 | $1,890,517 | $737,776 |
| Gross profit | $750,737 | $347,016 | $1,374,725 | $468,147 |
| Gross margin | 82.1% | 62.0% | 72.7% | 63.5% |
| Operating expenses | $410,334 | $208,912 | $835,970 | $485,169 |
| Operating income (loss) | $340,403 | $138,104 | $538,755 | $(17,022) |
| Net income (loss) | $324,191 | $138,104 | $506,234 | $(17,022) |
| Basic and diluted EPS | $0.01 | $0.04 | $0.02 | $(0.01) |
- Revenue and profitability: Q2 revenue increased 63% year over year; six-month revenue increased approximately 156%. Management attributed growth to increased sales, industry acceptance of laser blasting, and sales of its high-power 2000CTH model. Gross profit rose in both comparisons, while operating expenses also increased. Q2 expenses included $119,150 in selling, marketing and trade-show costs; six-month expenses included $192,286 in that category.
- Cash flow: Six-month operating cash flow was $200,783, versus cash used of $223,169 in 2020. Investing used $5,745; financing used $18,281. Cash increased by $176,757 to $503,470.
- Liquidity: Current assets were $3.44 million and current liabilities $604,844, yielding reported working capital of $2.83 million, up $604,478 from December 31, 2020. Accounts receivable was $891,388, net of a stated $386,385 allowance; inventory was $2.04 million.
- Debt and liabilities: The debt note reports $1.25 million of total debt, including $709,737 owed to related party ICT Investments, $397,500 in PPP loans and $138,788 of current lease liability. Total liabilities were $1.71 million. The company repaid $217,031 of related-party borrowings and received a second $198,750 PPP loan during the six months.
Changes, outlook and risks
- Compared with the first half of 2020, the company moved from a $17,022 net loss to $506,234 net income, and from negative to positive operating cash flow. Revenue rose substantially, alongside higher operating expenses and cost of goods sold.
- Management expects near-term selling expenses to rise as it expands sales and marketing, and expects SG&A to fall as a percentage of sales over time. It also expects manufacturing cost reductions from greater component availability, output and scale, but notes that underused capacity could offset savings. No quantified revenue or earnings guidance is provided.
- The company anticipates that a majority of its PPP loans will be forgiven, but gives no assurance; any unforgiven balance is payable over two years at 1% interest. Its ability to obtain capital and continue as a going concern, competition, economic conditions and COVID-19 impacts are identified risks. The filing says the pandemic could adversely affect future operations, financial position and liquidity.
- Management concluded disclosure controls and procedures were not effective at the reasonable-assurance level as of June 30, 2021. No material change in internal control over financial reporting was reported during the period.
- The manufacturing-space commitment is described as expiring October 20, 2021, while the lease note gives an original expiration date of November 1, 2021. The filing reports no material legal proceedings and no off-balance-sheet arrangements.
Important facts for investors to verify
- The MD&A states six-month revenue increased by $1,535,876, but the reported revenue figures imply an increase of $1,152,741.
- The Q2 MD&A cites gross profit of $750,757 in one passage; the financial statements report $750,737.
- The cover identifies common-stock par value as $0.001 per share, while the balance sheet states $0.01. Confirm the correct par value.
- Clarify the manufacturing-space lease and sublease end dates, and monitor PPP forgiveness status and related-party debt.
- Assess remediation of the reported ineffective disclosure controls and the collectability of receivables, including the stated $386,385 allowance.