Annual Report for Fiscal Year Ending DECEMBER 31, 2025 (Form 10-K)

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. Considering 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.

Overview

We are a vertically integrated manufacturing Company for photonics based industrial products and solutions, primarily disruptive laser cleaning technologies and applications for the pharmaceutical industry. 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.

In 2024, we acquired CMS, a laser company located in Orlando, Florida, that designs and builds turnkey laser material processing systems for marking, cutting, drilling and welding. CMS allows us to expand into the pharmaceutical market for controlled-release medications that is expanding rapidly, driven by the growing need for more effective and patient-friendly drug delivery systems. Controlled-release tablets, which gradually release medication over time, require precision manufacturing techniques to ensure the proper dosage and timing of active ingredient release. Laser technology plays a critical role in creating micro-drilled apertures in these tablets, ensuring accurate and consistent drug release. We believe that there is a significant opportunity to unlock CMS's growth potential by integrating it into our existing sales and marketing infrastructure, enhancing customer engagement and expanding our market reach to maximize wallet share from current customers and bring new clients on board.

In 2025, we expanded our product portfolio through the acquisition of Beamer Laser Marking Systems, formerly the laser capital equipment division of ARCH Cutting Tools. Beamer's IR fiber and CO₂ laser marking systems significantly expand our product offering into high-value industrial marking applications such as serialization, UID marking, medical devices, aerospace traceability, automotive components, and firearms compliance. The Beamer acquisition also provides an established customer base and IP portfolio and is expected to enhance our revenue mix in 2026.

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 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.

Beamer integration and expected synergies. With the Beamer acquisition, the Company expects near-term integration costs related to engineering alignment, supply chain consolidation, and facility relocation. Management anticipates long-term synergies through shared manufacturing resources, cross-selling opportunities, and expanded participation in regulated industries requiring permanent laser marking solutions.

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 on our ability to supply products and our customers' demand for our product or readiness to accept deliveries. Notwithstanding these effects, we believe we can meet the near-term demand for our products, but the situation is fluid and subject to change.

Net sales. Our net sales have historically fluctuated from year to year. The increase or decrease in sales from a prior year can be affected by the timing of orders received from customers, the shipment, installation and acceptance of products at our customers' facilities. Net sales can be affected by the time taken to qualify our 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 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 materials processing, which includes general manufacturing, automotive including electric vehicles (EV), other transportation, aerospace, heavy industry, consumer, semiconductor, pharmaceutical, 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 materials processing equipment and will be subject to the broader fluctuations of capital equipment spending.

Gross margin. Our total gross margin in any period can be significantly affected by several 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:

● As our products mature, we can experience additional competition which tends to decrease average selling prices and affects gross margin.

● Our gross margin can be significantly affected by product mix. Within each of our product categories, the gross margin is generally higher for devices with greater average power. These higher power products often have better performance, more difficult specifications to attain and fewer competing products in the marketplace.

Selling and Marketing expenses. In the first quarter of 2025, we invested in Selling and Marketing costs to support continued growth in the Company. 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 selling and marketing expenses will also be influenced by these trends, although we may still invest in selling 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 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

LASER PHOTONICS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended December 31, 2025 and 2024

		Year Ending December 31,
		2025				2024
Net sales		$	7,921,919			$	3,367,681
Net sales - related party			420,089				47,515
Total Net Sales			8,342,008				3,415,196
Cost of Sales			7,139,754				3,013,063
Gross Profit			1,202,254				402,133
Operating expenses:
Sales and marketing			1,784,659				1,779,966
General and administrative			8,057,013				3,573,955
Research and development			513,563				578,886
Impairment of property, plant and equipment			236,717				-
Impairment of intangible assets			3,902,378				932,669
Total Operating Expenses			14,494,330				6,865,476
Operating Loss			(13,292,076	)			(6,463,343	)
Other income (expenses):
Financing costs - additional notes principal added on default			(738,889	)			-
Interest expense, net			(3,649,808	)			-
Change in fair value of derivative liability			313,892				-
Bargain purchase of acquisition			-				3,857,999
Other income (expense), net			(89,165	)			86,517
Total other income (expenses), net			(4,163,970	)			3,944,516
Net Loss		$	(17,456,046	)		$	(2,518,827	)
Deemed dividend from software acquisition			-				(6,615,000	)
Deemed dividend on common control acquisitions			(8,789,754	)
Deemed dividend on cashless exercise of warrant			(6,312,970	)
Net Comprehensive Loss Attributed to Common Shareholders		$	(32,558,770	)		$	(9,133,827	)

Net sales

Net sales for the year ended December 31, 2025 and 2024 was $8.3 million and $3.4 million, respectively. The increase in revenue was due to the recording of a full year of revenue for CMS in 2025, which we acquired on October 30, 2024.

Cost of sales

Cost of sales for the year ended December 31, 2025 and 2024, was $7.1 million and $3.0 million, respectively. The increase in cost of sales was due to the increase in our net sales.

Gross profit

Gross profit for the year ended December 31, 2025 and 2024 was $1.2 million and $0.4 million, respectively. The increase in gross profit was due to our increase in net sales. Our gross margin for the year ended December 31, 2025 and 2024 was 14% and 12%, respectively.

Operating expenses

Operating expenses consist of sales and marketing expense, general and administrative expense, research and development expense, and impairment charges. Operating expenses for the year ended December 31, 2025 and 2024 were $14.5 million and $6.9 million accordingly. The increase of $7.6 million was due to the recording of $1.6 million of non-cash stock-based compensation expense, $0.8 million of non-cash stock-based payment for services, and $0.2 million on the impairment of property and equipment, all of which did not occur in the prior year period. Additionally, we recorded an increase of $3.0 million for the impairment of intangible assets over the prior year period. The remaining increase in operating expenses over the prior year period was from a full year of CMS operating expenses in 2025, which we acquired on October 30, 2024, and normal changes in our operating expenses to support our growth.

Operating loss

Operating loss for the year ended December 31, 2025 and 2024 was $13.3 million and $6.5 million, respectively. The increase in operating loss was from increased operating expenses, which was offset by increased gross profit, as discussed above.

Other income (expenses)

Other expenses was $4.2 million for the year ended December 31, 2025, compared to other income of $3.9 million for the prior year period. In the current period, we realized financing costs of $0.7 million related to our notes payable, $3.7 million of interest, offset by the change in fair value of derivative liability of $0.3 million, all of which did not occur in the prior year period. In the prior year period, we recorded a $3.9 million gain on bargain purchase of our acquisition of CMS, and other income of $0.1 million, both of which did not occur in the current year period.

Net loss

Net loss for the year ended December 31, 2025 and 2024 was $17.4 million and $2.5 million, respectively. The increase in net loss was from the change in other income (expenses), increased operating expenses, offset by increased gross profit, as discussed above.

Liquidity and Capital Resources

The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of the uncertainty concerning our ability to continue as a going concern.

As reflected in the accompanying financial statements, for the year ended December 31, 2025, the Company recorded a net loss of $17.5 million and used cash in operations of $6.4 million. Cash used in operations was primarily for working capital. As of December 31, 2025, we had a cash balance of $0.7 million.

On February 9, 2026, we conducted a public offering of an aggregate of (i) 7,142,858 shares (the "Shares") of the Company's common shares, par value $0.001 per share (the "Common Stock"), at an offering price per Share and associated Warrants of $0.70, (ii) five year Series A-1 Common Stock purchase warrants (the "Series A-1 Warrants") to purchase up to 7,142,858 shares of Common Stock at an exercise price of $0.70 per share, and (iii) twenty-four month Series A-2 Common Stock purchase warrants (the "Series A-2 Warrants", and, collectively with the Series A-1 Warrants, the "Warrants") to purchase up to 7,142,858 shares of Common Stock at an exercise price of $0.70 per share, for aggregate gross proceeds of $5,000,001. In connection with the closing, the Company will issue to H.C. Wainwright & Co., LLC ("Wainwright") or its designees warrants to purchase up to an aggregate of 500,000 shares of Common Stock at an exercise price of $0.875 per share, which are exercisable immediately upon issuance and have a termination date of February 6, 2031. Additionally, in connection with a note financing conducted by the Company in September 2025, the Company will pay Wainwright a cash fee equal to $147,777.78 and issue to Wainwright or its designees unregistered warrants to purchase up to an aggregate of 57,058 shares of Common Stock at an exercise price of $3.2375 per share, which are exercisable immediately upon issuance and have a termination date of February 6, 2031. The net proceeds received by the Company after commissions, fees, legal expenses, and payment of the cash fee to Wainwright, was $4.1 million.

In February 2026, we made notes payable principal and interest payments of $4.2 million.

During February and March 2026, we issued 2,449,474 common shares and received proceeds of $0.8 million on the exercise of 2,449,474 warrants.

Historically, we have financed our operations through existing cash balances, public and private issuance of common stock, term loans, and credit lines from financial institutions.

As of the issuance date of the financial statements included in this Annual Report on Form 10-K, management expects that the Company's existing cash of $1.4 million will last until approximately August 2026.

To address funding considerations, management periodically evaluates funding alternatives and may raise additional funds through equity issuances, debt securities, strategic partner arrangements, strategic transactions, or credit from financial institutions. As we seek additional financing, there is no assurance that such financing will be available to us on favorable terms, or at all. Our ability to obtain additional financing in the debt and equity capital markets is subject to several factors, including market and economic conditions, our performance, and investor sentiment regarding us and our industry.

We are also continuing to take actions to improve the Company's operating performance and cash generated from operations, including product optimization, sales growth strategies, operational streamlining, negotiating equitable vendor contracts, and managing product pricing. However, we may be unable to execute these actions in a timely manner, or at all.

If the Company is unable to raise additional capital whenever necessary or otherwise improve its operating performance or generation of cash from operations, it may be forced to decelerate or curtail certain of its operations until such time as additional capital becomes available.

Our consolidated statements of cash flows as discussed herein are presented below.

		Year Ended December 31,
		2025				2024
Net cash used in operating activities		$	(6,390,628	)		$	(9,138,555	)
Net cash used in investing activities			(19,477	)			(977,821	)
Net cash provided by financing activities			6,526,573				4,449,110
Net cash increase (decrease) for period			116,468				(5,667,266	)
Cash at the beginning of period			533,871				6,201,137
Cash at end of period		$	650,339			$	533,871

Operating Activities

Cash provided by or used in operating activities primarily consists of net loss, distributions to affiliates, adjustments for certain non-cash items, including amortization of intangible assets, impairment of intangible assets, the fair value of common stock issued for directors, employees, and service providers, and the effect of changes in working capital and other activities.

Cash used in operating activities for the year ended December 31, 2025 was $6.4 million and consisted of our net loss, distributions to affiliates of $3.6 million, and adjusted for non-cash items, including impairment of property, plant and equipment, impairment of intangible assets of $3.9 million, the fair value of common stock issued to executives, directors and consultants, depreciation and amortization, financing costs related to notes issued during the year, amortization of debt discount also related to notes issued, and routine changes in working capital and other activities.

Cash used in operating activities for the year ended December 31, 2024 was approximately $9.1 million and consisted of our net loss, distributions to affiliates of $5.8 million, adjusted for non-cash items, including amortization of intangible assets, bargain purchase of an acquisition, depreciation and amortization, and routine changes in working capital and other activities.

Investing Activities

Cash provided by investing activities for the year ended December 31, 2025 was insignificant, which was cash used to purchase equipment.

Cash provided by investing activities for the year ended December 31, 2024 was $1.0 million, which was comprised of $0.4 million to purchase property and equipment, and $0.6 million cash paid for an acquisition, net of cash received.

Financing Activities

Cash provided by financing activities for the year ended December 31, 2025 was $6.5 million, which was from aggregate proceeds of $3.5 million on the sale of common stock, net proceeds of $7.5 million from notes payable, and offset by repayment of our notes payable of $4.5 million.

Cash provided by financing activities for the year ended December 31, 2024 was $4.4 million, which was from aggregate proceeds of $4.4 million on the sale of common stock.

Going Concern

Our consolidated financial statements have been presented on the basis that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We experienced operating losses and negative operating cash flows during 2025 and 2024. We have financed our working capital requirements through borrowings from various sources and the sale of equity securities.

We have a history of reporting net losses. As of the issuance date of the financial statements included in this Annual Report on Form 10-K, management expects that the Company's existing cash of $1.4 million will last until August 2026. As a result, management has concluded, and our independent registered public accounting firm has agreed with our conclusion that there is a substantial doubt regarding our ability to continue as a going concern for a period of at least 12 months beyond the filing of this Annual Report on Form 10-K. The report of our independent registered public accounting firm on our financial statements for the year ended December 31, 2025, includes an explanatory paragraph regarding the existence of substantial doubt about our ability to continue as a going concern. Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Our ability to continue as a going concern depends on our ability to raise additional debt or equity capital to fund our business activities and ultimately achieve sustainable operating revenues and profitability.

As market conditions present uncertainty as to our ability to secure additional funds, there can be no assurances that we will be able to secure additional financing on acceptable terms, as and when necessary, to continue to conduct operations. There is also significant uncertainty as to the amount and type of financing available to us in the future.

If we are unable to secure the cash resources necessary to meet our ongoing cash requirements, we may be required to scale back our business activities or discontinue operations entirely.

Critical Accounting Policies and Estimates

The following discussion and analysis of financial condition and results of operations is based upon the Company's consolidated financial statements for the years ended December 31, 2025 and 2024 presented elsewhere in this report, which have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). Certain accounting policies and estimates are particularly important to the understanding of the Company's financial position and results of operations and require the application of significant judgment by management or can be materially affected by changes from period to period in economic factors or conditions that are outside of the Company's control. As a result, these issues are inherently uncertain. In applying these policies, management uses its judgment to select the appropriate assumptions for certain estimates. Those estimates are based on the Company's historical operations, the future business plans and the projected financial results, the terms of existing contracts, trends in the industry, and information available from other outside sources.

Revenue Recognition

Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, we assess the goods or services promised within each contract and determine those that are performance obligations and assess whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

The Company also earns revenue through affiliate arrangements. These contracts are evaluated under ASC 606 using the same five-step model. Affiliate revenue is recognized when the Company satisfies its performance obligations under the affiliate agreement, which typically occurs when the affiliate completes a qualifying transaction or when the Company provides agreed-upon services. The transaction price is determined based on the contractual terms with the affiliate, and revenue is recorded in the amount the Company expects to receive.

Revenue is then recognized for the transaction price allocated to each respective performance obligation when (or as) the performance obligation is satisfied. For our products, revenue is generally recognized upon shipment or pickup by the customer. At this stage, the title on the manufactured equipment is transferred to the customer, and the customer is responsible for transportation expenses, insurance, and any transport-related damage to the equipment in transit. We do not have any obligation to deliver beyond the collection warehouse, and it is the customers' contractual responsibility to ensure their goods reach their destination.

In CMS for projects that are considered custom in nature and determined the obligation will be six months to a year or more, the company will recognize revenue as a percentage of completion basis. The percentage of completion method recognizes income as work on a project progresses. The recognition of revenues and profits is generally related to costs incurred in providing the services required under the project.

Refunds and returns, which are minimal, are recorded as a reduction of revenue. Payments received from customers before satisfying the above criteria are recorded as unearned income on the combined balance sheets.

Payments received as deposits for specific purchase orders or future laser equipment sales to customers are recognized as customer deposits and included in liabilities on the balance sheet. Customer deposits are recognized as revenue when control over the ordered equipment is transferred to the customer.

All revenues are reported net of any sales discounts or taxes.

Other Revenue Recognition Matters related to Distributors

Distributors generally have no right to return unsold equipment. However, in limited circumstances, if the Company determines that distributor stock is aging beyond the Company's new model releases, it may accept returns and provide the distributor with credit against their trading account at the Company's discretion under its warranty policy. This revenue is recognized on a consignment basis and transfer of control is when an item is sold to end customer at which time the Company recognizes revenue.

Share-Based Compensation

The Company periodically issues share-based awards to employees, non-employees, and consultants for services rendered. Stock options vest and expire according to the terms established at the grant's issuance date. Stock grants are measured at the grant date fair value. Stock-based compensation cost is measured at fair value on the grant date and is generally recognized as an expense in the statement of operations ratably over the requisite service period or vesting period. Recognition of compensation expense for non-employees occurs in the same period and in the same manner as if the Company had paid cash for the services.

Recent Accounting Pronouncements

See discussion of recent accounting pronouncements in Note 1 to the accompanying financial statements.