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Greetings and welcome to the Laser Photonics 3rd Quarter 2024 Call and Webcast. At this time, all participants are in a listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Brian Siegel with Hayden Investor Relations. Please go ahead.

Thank you, Operator. With me today are Wayne Tupuola, Laser Photonics CEO, and Carlos Sardinas, the company's VP of Finance. Any forward-looking statements made during this conference call, whether general or specific in nature, are subject to risks and uncertainties that may cause the actual results to differ materially from those that the company anticipates. These risks and uncertainties include, but are not limited to, the specific risks and uncertainties discussed in the reports the company periodically files with the SEC. Laser Photonics assumes no obligation to either update any forward-looking statements that it has made or may make, or to update the factors that may cause actual results to differ materially from those they forecast. I will now turn the call over to Wayne, Laser Photonics' Chief Executive Officer.

Good morning, everyone, and thank you for joining us today to review Laser Photonics' third quarter results. Before I get into the third quarter, I'm excited to share details about our recent acquisition of Control Micro Systems CMS, which was finalized shortly after the close of the quarter. We used a portion of the $3 million in funds we raised in August to make this acquisition, which represents a transformative opportunity for an LPC by expanding our footprint into the healthcare and pharmaceutical industries, particularly in controlled-release drug delivery and counterfeit-proofing pills, while also providing incremental synergies in industry markets. CMS specializes in custom precision laser systems. Their key products for life sciences are laser drilling systems that create microscopic apertures in tablets for controlled-release drug delivery, and systems that mark pills to prevent counterfeiting.

They also make custom laser solutions for industrial and other markets, which we believe present some interesting opportunities that were previously not exploited. These capabilities align well with LPC's vision of innovating solutions that impact critical industries. The pharmaceutical market, especially in the drug delivery technologies, is expected to grow at nearly 11% annually through 2030. This acquisition diversifies LPC into a high-growth recession-resistant sector, giving us a buffer against economic cyclicality and providing stability to our cleantech revenue stream as we work to expand penetration rates for this technology. CMS already serves several of the world's largest pharmaceutical companies, providing a platform for us to deepen relationships with major industry players and expand our client base in this sector. Due to underinvestment from its previous owner, we believe CMS products were not fully monetized in both the pharma and custom laser side.

With LPC's robust sales and marketing infrastructure, we see significant potential to unlock value. CMS also brings over $2 million in unbilled contracted revenue, which we can convert to immediate cash flow this and next quarter. Additionally, we retained most of CMS's engineering and support staff, adding their expertise to our existing teams. Our immediate focus will be on integrating the CMS team and products into LPC's operations while driving forward with our ongoing initiatives. We remain committed to innovating in our core industrial laser markets, particularly in surface treatment anti-drone systems, and expanding our reach globally. In summary, the CMS acquisition aligns with LPC's growth strategy, diversifying our portfolio and setting the foundation for scalability and sustained revenue growth in new verticals. Now I'll review our results.

This quarter, we navigated a challenging period with a decrease in sales and increased costs driven by our strategic investments in expanding human resource sales and administrative functions. These decisions, while impacting our short-term performance, are integral to supporting our future growth and setting the stage for long-term success. Laser Photonics Corp is steadfast in its mission to establish itself as a leader in laser technology solutions for industrial applications, even considering recent temporary financial setbacks. Our commitment to investing in groundbreaking technologies aligns with our vision of expansion, positioning us to leverage emergency opportunities and enhance operational efficiency moving forward. The recent acquisition of CMS, along with its intellectual property and patents related to software and optical mechanical capabilities, positions Laser Photonics Corp to advance the development of Class I products and AI robotic cells. These developments will pave the way for future innovations stemming from this foundational research.

In the spirit of innovation, we have made significant strides in the research and development of our advanced products, including the BlackStar Laser Wafer Dicing System and our BautaShape 3D Metal Additive Manufacturing Technology. With higher precision and efficiency, these systems will be essential in meeting growing demands in both the defense and industrial markets. We look forward to bringing more information on these technologies in future investor updates. Additionally, our focus during the quarter has been on advancing two pivotal product concepts: the Laser Shield Anti-Drone System, LSAD, and the next-gen CleanTech robotic cell. The LSAD represents our proactive approach to addressing security challenges, while the CleanTech robotic cell reflects our commitment to innovation in automated manufacturing solutions. Together, these initiatives not only highlight our dedication to advancing laser technology, but also reinforce our strategy of continuous development as we work towards commercialization.

By nurturing these technologies through rigorous research and development, Laser Photonics Corp is well positioned to capitalize on future laser solutions in a rapidly evolving market. Although sales were down for the quarter, we closed several key deals that are strategically significant for LPC's growth and marketing position. We secured a sale of our CleanTech Industrial Roughening Laser 3050, or CTIR-3050, to Acuren, a global leader in non-destructive testing, or NDT, services. This sale marks the beginning of a promising relationship with Acuren, which is exploring LPC's laser technology to enhance their asset protection service across industries, including chemical, power generation, and aerospace. The partnership positions LPC as a preferred provider for Acuren's ongoing purchasing program, allowing us to expand our footprint in the NDT market. We also achieved a sale to the U.S. Navy at Pearl Harbor, further establishing LPC's footprint in the defense sector.

This sale underscores the reliability and performance of our laser system in demanding environments. The Navy's decision to use our CleanTech laser technology aligns with their need for safe, efficient, and environmental-compliant maintenance solutions for their fleet, a need increasingly echoed across other military branches. We expect our existing partnership with Brokk now to bring in our laser-powered robotic and handheld systems to the Asia-Pacific region. By joining forces with Brokk Australia, LPC's advanced laser technology will now serve industries such as mining, construction, and defense across Australia, New Zealand, and neighboring markets. This partnership uniquely addresses operational challenges in hazardous environments by pairing LPC's laser system with Brokk's remote-controlled robotic solutions, enhancing both safety and productivity for operators in the field.

We also had a significant sale in the renewable energy technology market, where our CleanTech product will be used to enhance the manufacturing process for hyper-pure polysilicon solar cells. Each of these sales highlights how LPC has cultivated relationships that position us for sustained growth in strategic verticals, including defense, Non-destructive testing, and heavy industrial applications. These customers and partnerships provide a foundation for future sales, upsell opportunities, and expansion into markets. Thank you to our shareholders and employees for their unwavering support and dedication. We look forward to delivering on our strategic initiatives and building on our recent achievements to drive long-term value. I will now turn it over to Carlos to review our financials.

Thank you, Wayne. Revenue is down 22% from last year at $800,000, although it is up sequentially by 21% from the second quarter. Encouragingly, our mix continues to be dominated by CleanTech, leading to a 1,140 basis point improvement in gross margin to 85.8%. Operating expenses increased by 25% due to our investment in resources to manage our anticipated growth, including the addition of HR, sales, and administrative personnel. The combination of these items led to higher operating losses of $1.4 million and a net loss of $1.6 million. Loss per share expanded to $0.13 from previous $0.11 per share, while our share count increased to 13.3 million from 8.3 million due to the acquisition of licenses from Fonon and our August capital raise, which netted a total of $2.6 million. As we look forward, we are excited to combine CMS and LPC.

CMS brings with it over $2 million in existing orders, which we expect to ship over the next few months, and they continue to add new orders to their backlog for 2025 as well. We are also optimistic that momentum for CleanTech will pick up over the next few quarters as we continue to grow our pipeline and convert a portion of it to orders. With that, Operator, we can close out the call.

Thank you. This concludes today's teleconference. We thank you for your participation. You may disconnect your lines at this time.

Thank you, operator. With me today are Wayne Tupuola, Laser Photonics' CEO; and Carlos Sardinas, the Company's VP of Finance. Any forward-looking statements made during this conference call, whether general or specific in nature, are subject to risks and uncertainties that may cause actual results to differ materially from those that the company anticipates. These risks and uncertainties include, but are not limited to, specific risks and uncertainties discussed in the reports the company periodically files with the SEC. Laser Photonics assumes no obligation to either update any forward-looking statements that is made or may make or to update the factors that may cause actual results to differ materially from those they forecast. I will now turn the call over to Wayne, Laser Photonics' Chief Executive Officer.

Good morning, ladies and gentlemen. Thank you for joining us. This morning, we reported second quarter 2024 results. Regarding the lower revenue, we believe approximately $1 million was deferred into the second half of the year. This deferral was simply a timing issue with several customers whose capital expenditure review and approval processes were delayed. While this was disappointing, we haven't seen any evidence that this is more than a delay in the future quarter. Moving to our growth and operational excellence initiatives, as we mentioned each quarter sales and marketing remain key areas of focus and investment for us. To this end, we recently announced a partnership with Echelon 1 to further our efforts to bring CleanTech systems to the Department of Defense. More recently, we announced the addition of four new roles to help grow our sales in laser systems, all licensed from Fonon. We believe we'll help drive sales across our various verticals and product lines over time. As an innovation-driven company, we've also continued to invest in R&D and product development to stay ahead of the competition. We believe that the new features and industry-specific products we are developing and commercializing will help accelerate sales growth and continue to provide us with a technological advantage over the competition. As I mentioned on previous calls, our plan was to introduce several new product lines this year and the next generation of our CleanTech line. On that note, we announced our SaberTech line of laser cutting tools based on our Turbo Piercing technology. We also introduced our Laser Shield Anti-Drone or LSAD concept for laser-based defense against drone swarms and upgraded CleanTech products. To increase awareness of this concept, we initiated a successful ad campaign with a 30-second commercial on Fox Business and CNBC during key programs including Squawk Box, Mad Money, Opening and Closing Bells, Mornings with Maria and more. If you didn't catch it on these shows, you can find it on our YouTube channels as well. Given our commitment to R&D, product development and expanding sales and marketing capabilities, we're looking for opportunities to reduce costs to help offset or optimize these investments. For example, as part of our ongoing commitment to operational excellence, we have plans to continuously enhance our manufacturing operations to reduce COGS as we scale through process refinement and identify opportunities for cost efficiencies. In addition, we are focused on optimizing our marketing strategies, forming a task force comprised of key members from various departments to ensure a comprehensive and effective approach. This cross functional group will bring together expertise from finance, engineering, research and development and operations. The goal is to leverage diverse perspectives in developing a robust marketing plan aligned with our business goals and current market conditions. The task force will have specific objectives, analyzing existing marketing strategies, identifying areas for improvement and creating a comprehensive marketing plan that is innovative and targeted. By utilizing a cause and effect framework, we'll assess past challenges and their impacts addressing vulnerabilities proactively while capitalizing on opportunities for growth and success. In summary, with our new products, distribution and technology partnerships and increased sales and marketing efforts, we have built an estimated pipeline of over $70 million. While this won't all close this year, we believe it prepares us for improved results in 2024 and it bodes well for our medium to long-term growth prospects. I will now turn it over to Carlos to review our financials.

Thank you, Wayne. Revenue was down 35.5% to $0.6 million. CleanTech made up over 80% of our mix. Our gross profit was 51% compared to 71% last year. A change in accounting opinion from our new auditor resulted in us reporting previously disclosed distributions to Fonon in the cash flow statement, which will now be recognized as G&A expense in 2024 and moving forward. These higher operating expenses will result in larger losses now and moving forward compared to prior years. Overall, health of the company viewed through cash flow does not change. This change led to an operating loss year-over-year of negative $2.1 million in Q2, 2024 versus $0.7 million last year. Net loss decreased by 67% to $2.1 million again due to this change in accounting treatment and loss per share decreased by 122% to negative $0.20 per share. Our share count also increased significantly versus last year due to acquisitions of various licenses from Fonon. Finally, as you saw, we recently completed a private placement raising a net total of $2.6 million to increase our ability to invest in key areas including sales and marketing and new product development, which will increase our future shares outstanding. That concludes our remarks.

Greetings, and welcome to the Laser Photonics First Quarter 2024 Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brian Siegel, Investor Relations. Thank you, sir. You may begin.

Thank you, operator. With me today are Wayne Tupuola, Laser Photonics CEO; and Carlos Sardinas, the company's VP of Finance. Any forward-looking statements made during this conference call, whether general or specific in nature, are subject to risks and uncertainties that may cause actual results to differ materially from those that the company anticipates. These risks and uncertainties include, but are not limited to, specific risks and uncertainties discussed in the reports the company periodically files with the SEC. Laser Photonics assumes no obligation to either update any forward-looking statements that are made or may make or update the factors that may cause actual results to differ materially from those that they forecast. I will now turn the conference over to Wayne, Laser Photonics Chief Executive Officer.

Good morning, ladies and gentlemen. Thank you for joining us. This morning, we reported First Quarter 2024 results. Revenue grew by double digits. Our operating losses improved by 39% and our net loss and loss per share improved by 57%. Our CleanTech line represented over 80% of units shipped. Over the past year, we've invested in sales and marketing resources to spread awareness and educate a broader set of potential customers on the numerous applications for CleanTech. In addition, as an innovation-driven company, we've continued to invest in R&D and product development to remain ahead of the competition. As I mentioned on our last call, we plan to introduce several new product lines this year as well as the next-generation clean tech line. We believe that new features we've announced and industry-specific products will help accelerate sales growth and continue to provide us with a technological advanced over competition. Additionally, we plan to focus on operational excellence, specifically in our manufacturing operations. Throughout the year, we plan to refine our manufacturing processes and identify cost efficiencies in order to reduce our cost of goods sold as we scale. From a distribution partner standpoint, we announced distribution partnerships with Fastenal for the industrial market and ISL for defense applications. We have high hopes for these channels and expect to see the benefits of these relationships play out over the next 12 to 18 months. Additionally, we announced our partnership with Brokk, a leader in providing robots for the demolition market. We will be integrating our CleanTech technology into the robots, and we see significant opportunities in their end markets, especially nuclear decommissioning, where robots become contaminated and have to be replaced on a semi-regular basis. In summary, with our new products, distribution and technology partnerships and increased sales and marketing efforts, we have built an estimated pipeline of over $70 million. While this won't all close this year, we believe it sets us up for improved results in 2024 and beyond and bodes well for our medium- to long-term growth prospects. That concludes my prepared remarks for today. Now we turn to our VP of Finance, Carlos Sardinas for Q1 financials.

Thank you, Wayne. Moving to our financials. Revenue grew 9.9% to $0.7 million. While CleanTech made up over 80% of our mix, our gross margin declined by 810 basis points to 52% due to more CleanTech sales coming in at the lower end of the power spectrum. As Wayne mentioned, we are prioritizing improving our manufacturing and procurement processes to enhance our gross margin profile. The good news is that our GAAP operating loss decreased 39% to $0.5 million, mainly due to lower expenses related to being a public company. The improved operating margins helped drive a 57% improvement in net income and loss per share, which came in at $0.5 million and $0.05, respectively. Our share count also increased significantly versus last year due to acquisitions of various licenses from Fonon. With that, operator, we can now close the call.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Greetings, and welcome to Laser Photonics Fourth Quarter 2023 Call and Webcast. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Brian Siegel from Hayden IR. Thank you. You may begin.

Thank you, Doug. With me today are Wayne Tupuola, Laser Photonics CEO; and Carlos Sardinas, the company's VP of Finance. Any forward-looking statements made during this conference call, whether general or specific in nature, are subject to risks and uncertainties that may cause actual results to differ materially from those that the company anticipates. These risks and uncertainties include, but are not limited to, specific risks and uncertainties discussed in the reports the company periodically files with the SEC. Laser Photonics assumes no obligation to either update any forward-looking statements that are made or may make or update the factors that may cause actual results to differ materially from those that they forecast. I will now turn the conference over to Wayne. Wayne, take it away.

Good morning, ladies and gentlemen. Thank you for joining us. This morning, we reported fourth quarter and full year 2023 results. As part of our press release, I wrote a letter to investors reviewing our 2023 highlights and provide a detailed commentary on what to expect for 2024. On today's call, I will review the quarter, our highlights from 2023 and then outline some of the exciting plans we have for 2024. Before I do this, however, I wanted to introduce Carlos Sardinas, who joined us as VP, Finance at the beginning of April. Carlos brings a wealth of relevant finance and accounting experience, having served in these roles at L3 Harris Technologies and its predecessors. Welcome, Carlos. We're excited to have you join us. Before reviewing our quarter, I wanted to address our late filings and impending restatement for 2022. As you know, we are a young public company. And since coming public, we had some turnover in our finance leadership and made an auditor change. These moves came from the lessons we gained throughout the year, concerning the auditor change as part of stating -- starting of engagement. Our new auditor did a thorough 2-year review of our financial reporting and asked us to make some changes. Upon reviewing and auditing our 2022 financial statements, our new auditors determined certain previously reported items required statement. Specifically, revenue and AR were not recognized in accordance with ASC 606, and there was a liability related to stock that we issued post-IPO, which was incorrectly recorded under cost of goods sold and needed to be reclassified. These classifications drove the restatement of our 2022 results and the delay in filing our 2023 10-K as we corrected these items as well as early quarters. We are working to hopefully file our 10-K today. Now that we're addressing these audit concerns and have brought on Carlos to oversee our finance and accounting, we hope to improve our transparency and financial reporting. We had a strong fourth quarter and revenue growing 673% to $0.8 million versus the restated $0.1 million last year. We saw strength in our CleanTech product lines, which made up 80% of the unit sales during the quarter. We also made significant progress on the customer front by adding 10 customers. These customers came from industrial aviation, energy, maritime and educational industries. Next, I'd like to remind you about the seasoning behind -- reasoning behind the noticeable shift in our operating expenses compared to last year. As we said at our IPO and repeated throughout the year, we expected to make significant strategic investments in sales and marketing activities to penetrate existing customers, further identify new potential customers and educate the market about the benefits of our CleanTech product line. One of these investments was participating in a major trade show that attracted more attention than we initially anticipated, the fact that the show helped us win several new orders while building a $70 million-plus pipeline of opportunities for us to pursue over the next 12 months. Based on these early returns, we are confident that the positive impact of these strategic investments will [Indiscernible] throughout the remainder of 2024, setting a strong foundation for sustainable growth and profitability in the near future. On the cost side, the higher revenue and improved gross margin helped reduce operating losses from $3 million last year to $1.9 million this year. While net losses decreased from $3 million to $0.4 million, our loss per share improved from $0.38 to $0.05. During 2023, we had numerous milestones, I believe, will set us up for future success. With respect to our CleanTech products, we introduced a 3,000-watt system, which will help further differentiate LPC from expanding our cleaning capabilities at the high end of the market. We also developed the CleanTech Robotic Cell Enclosures to reduce safety risk significantly. This programmable enclosure will have the ability to leverage AI to handle several important tasks simultaneously, providing significant efficiencies and reducing [Indiscernible] risk. We also launched two industry-specific product lines, DefenseTech and MARLIN. DefenseTech addresses laser cleaning and ingrained applications for the military and Department of Defense. It leverages both CleanTech and MarkStar products that has seen early success in the Army, Navy and Air Force. And we'll talk more in a little bit about our sales and marketing efforts for this market in conjunction with Fonon Technologies. MARLIN is targeted at the maritime industry, specifically smaller crowd vessels. We see this opportunity as having $0.5 million total addressable market, and our portable handheld system is ideal for the smaller cleaning surface treatment areas. Next, I'm going to discuss our relationship with Fonon Corporation. In 2023, ICT transferred the bulk of its LPC stock to Fonon, making the company our largest shareholder. Fonon has a portfolio of exciting IP for laser, semiconductor and additive manufacturing technologies, including CleanTech, that it plans to monetize to Laser Photonics Corp and its other subsidiaries. In the coming months, we expect to restructure both organizations with LPC becoming a publicly traded majority owned subsidiary of Fonon Corporation. Once the reorganization occurs, LPC will focus on sales, marketing and product development for industrial markets while also serving as Fonon's manufacturing arm. At the same time, our sister subsidiary Fonon Technologies, which is set up as a government military contractor, will continue to focus on sales and marketing of our DefenseTech line and those customers. An example of why we are doing this happened last October when we expanded our market opportunity into laser cutting with -- by licensing Fonon's high-power turbo piercing technology, which enables cold cutting of materials that would otherwise warp under the heat of a laser. This technology will serve as the basis for our SaberTech product line and as other -- another way for us to expand our total addressable market. In summary, we see our relationship with Fonon as a very synergistic relationship for the companies and shareholders, and we plan to keep you appraised of any developments as things move forward. As we look to 2024, I foresee an exciting year ahead. So far, we announced a significant expansion in our distribution and technology partnerships. During the first quarter, we linked the distribution agreement with Fastenal, a large industrial distributor, for our laser cleaning and protective -- personal protective equipment products for the industrial market. More recently, we announced a technology partnership with Brokk, the leading manufacturer of advanced remote-controlled demolition machines, where we will integrate our technology into the robots. This is a great deal for us as Brokk is one of two companies that provides these machines for nuclear decommissioning, which brings a large pipeline for repeated sales, as these robots become contaminated and need to be replaced frequently. On the government and military side, Fonon and LPC signed a sales and distribution agreement with Incredible Supply and Logistics, or ISL, a leading marketer and distributor to these bodies. We believe this will help expand and accelerate our sales of the DefenseTech product lines going forward. Moving to our product roadmap, we expect to release several exciting new products and next-generation upgrades this year. Starting with the latter, we plan to introduce the next-generation CleanTech systems. Some of the key new features include the ability to customize the power and frequency setting of the system, enable a wider range of materials that can be cleaned. Certain models will be also a reduction in form factor, lower power requirements and other upgrades. Higher-power systems will be IoT-ready and come with Ethernet and WiFi support. We believe this next-generation system will enhance the user experience while expanding our sales funnel. Returning to SaberTech. We will revamp the Titan FX, our large-format cutting system. The new system will come with automatic sheet metal loading and unloading systems that will load metal sheets into Titan, cut them and unload the pieces to a rack system. With this automation, customers can run the Titan 24/7 to have plenty of material ready for their production shifts. Finally, we will reinvigorate sales of our legacy laser engraving systems by introducing the MarkStar VIN. This initiated -- initiative directly responds to the recently passed California Senate Bill 55, which requires all motor vehicle catalytic converters to be marked with a VIN. This system will have specific capabilities and features targeted at complying with this new legislation, ensuring that automotive manufacturers and repair shops can easily adhere to the law. By incorporating this legal requirement into our product's capability, we aim to explore and capitalize on untapped potential within the automotive market. In summary, with our new products, distribution and technology partnerships and increased sales and marketing efforts, we have built an estimated pipeline of over $70 million. While this won't all close this year, we believe it sets us up for improved results in 2024 and beyond and bodes well for our medium- to long-term growth prospects. That concludes my prepared remarks for today. We can now move to questions.

[Operator Instructions] There are no questions in the queue at this time.

Okay. I've got an online question. Wayne, with sales to such key customers as GE, Emerson, the U.S. military, when might we begin to see some repeat orders? It appears many of these sales are one and done test orders, and they haven't led to anything more substantial.

Yes. Thanks for the question, Brian. So these opportunities are developed in our pipeline as we acquire these interest levels from high-profile customers, and these customers are inquisitive of the technology and how to incorporate it into an environment. And these are sometimes long and drawn-out processes because, as you know, laser cleaning is a new technology to disrupt sand blasting, abrasive sand blasting. And therefore, there's a monumental task of developing standard operating procedures to replace the old and introduce the new. So with that being said, once we inquire interest from these high-profile customers, such as GE or Emerson, they basically decide at the high level to make these changes within their companies. Because it's just a monumental change throughout the entire organization, procedures need to be developed, and therefore, it takes time for the change to happen. But nonetheless, these changes happen rapidly. Once these systems are in place, procedures are drawn, and they can proceed with the purchase.

I've got one -- another question. This one is about Fonon. Fonon has existed for more than a decade under the control of ICT and its controlling shareholder. If Fonon has strategic advantages that Laser Photonics does not have, why was not -- why was Fonon not taken public in the first place rather than Laser?

What we've seen was a development of behind-the-scenes work that Fonon has done with Laser Photonics, and obviously, it was a success story with Laser Photonics going to market, which is the ultimate goal. When you're developing technology and you're commercializing it, it took a while for Fonon to position itself for entrance into the public market. So at the time, it wasn't ready. So now we're ready.

Okay. That appears to be all the questions we have today. Operator, you can close the call.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.

Greetings, and welcome to the Laser Photonics Third Quarter Financial Results and Webcast. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brian Siegel, Senior Manager Director Hayden Investor Relations. Thank you, sir. You may begin.

Thank you. With me today are Wayne Tupuola, Laser Photonics CEO; and Jade Barnwell, the company's CFO. Any forward-looking statements made during this conference call and webcast, whether general or specific in nature, are subject to risks and uncertainties that may cause actual results to differ materially from those which the company anticipates. These risks and uncertainties include, but are not limited to, the specific risks and uncertainties discussed in the reports that we filed periodically with the SEC. Laser Photonics assumes no obligation to either update any forward-looking statements that we have made or may make or to update the factors that may cause actual results to differ materially from those that are forecast. I will now turn the call over to Wayne. Take it away, Wayne.

Good morning, ladies and gentlemen. Thank you for joining us today for Laser Photonics Corp's Q3 2023 Earnings Call. I'm Wayne Tupuola, CEO of Photonics Corp here to provide an overview of our financial performance and discuss our future outlook. Let's start by addressing our operating loss for the quarter, which was under $1 million. While we encountered this loss, it's essential to provide context and note our Q3 year-over-year increase of 1.4%. This increase reflects our efforts to improve our financial standing, quite challenges faced throughout the year. Looking at the year-to-date figures for Q3, we experienced a decrease of 9.1%. As we've stated on the past few calls of the old economic environment, including the substantial increase in interest rates has taken some time for our potential customers to get used to. I want to assure you that our company has a robust pipeline of opportunities that we expect to positively impact our fourth quarter and allow us to finish the year on a positive note. One of our strengths lies in our high-power laser products, which have consistently led the pack in revenue generation. This success played a significant role in the increase from Q2 to Q3 and we expect this trend to continue in the coming months and years. The outlook remains positive for Laser Photonics Corp despite geopolitical and economic disruptions. We remain dedicated to serving the global community. Our company's diligence has allowed us to navigate these challenges and sustain our growth plans which we anticipate will yield promising results in 2024 as we are seeing an uptick in interest from major distributors who possess substantial sales forces. We are optimistic that these new distributions can leverage their unique market exposure to enable us to sell more laser blasted units. This development positions us well for the future success, and we expect these relationships to ramp in 2024. We also have some exciting news of our MARLIN line of laser cleaning products for the maritime industry as we are putting together a commercial target potential buyers of this product. To the best of our knowledge, this will be the first laser cleaning commercial of its kind to be aired to the public and we can't wait to see the results. Additionally, we have experienced growing interest from international markets as a part of our expansion strategy, we have increased our internal sales force to take advantage of these opportunities. We're already experiencing orders from the Department of Defense, which represents over 35% of this quarter's revenue with our service partner network program also receiving orders from Hawaii and abroad. In spite of a strike-driven downtick in the automotive industry, Laser Photonics Corp. is still receiving orders from Tier 2 customers while the oil and gas industry should start to see sales in 2024. As I had mentioned in our last earnings call, the company has announced plans to expand its product offerings by enhancing the clean tech laser cleaning product line with what we believe to be a revolutionary change by using a larger format Class 1 product enclosure that enables end users, laser safety product protocols for most industrial manufacturing environments. To that effect, in October, we acquired a new license or ICT Investments that will allow the company to pursue opportunities with major aerospace companies, which are struggling to apply fiber laser cutting material process prone to heat-affected zones that are critical to stress tracks. We plan to introduce a line of products called SabreTech, cold cutting and TurboPiercing technology to address this problem. Marketing efforts have begun, and we are excited about this new addition to the Laser Photonics product lineup. In conclusion, we remain focused in our growth plan and future opportunities with a healthy pipeline leading high-power laser products and increasing interest from major distributors and international markets, we are well positioned to achieve positive outcomes in 2024. Thank you for all your continued trust and support. Now I will turn this call over to Jade to explain the financials.

Thank you, Wayne. Good morning, and thank you, everyone, for joining us on the call. Our third quarter revenue increased from the same period last year by 1.2% to $1.2 million. Our gross margin on those Q3 revenue increased by nearly 2,800 basis points year-over-year to approximately 73% as our mix was more heavily weighted towards our higher-margin CleanTech systems. Operating loss was $1.1 million, down from operating income of $0.2 million last year. The most significant change in our operating cost structure was the increase in sales and marketing resources, NASDAQ and SEC compliance costs and rent for our new facility. This increase in our SG&A is mainly due to our strategic plan to increase market reach and sales force, as noted previously. GAAP net loss and loss per share were $1.1 million and $0.13, respectively, down from last year's net income and EPS of $0.2 million and $0.04, respectively. From balance sheet and cash flow perspective, we finished the quarter with $8.3 million in cash and no debt. This balance represents a $1.6 million cash outflow during the third quarter, mainly resulting from $1.4 million cash used for our operating activities during the period. Turning to our outlook for the fourth quarter of '23, we expect to see double-digit growth in our revenue sequentially and also year-over-year based on the current orders in pipeline. Looking at our operating expenses, given our continued growth investments in R&D, sales and marketing and expanding our anticipation channel. We expect that these costs will also rise further in the fourth quarter. That concludes my prepared remarks for today. We can now move to questions.

[Operator Instructions].

Operator, there's no webcast questions either, so we can just close out the call.

We have reached the end of our question-and-answer session, which concludes today's conference. Thank you for your participation. You may disconnect your lines at this time.

Greetings, and welcome to the Laser Photonics Corp.'s Second Quarter Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brian Siegel, Investor Relations. Thank you, sir. You may begin.

Thank you, Maria. With me today are Wayne Tupuola, Laser Photonics CEO; and Jade Barnwell, who just joined the company as CFO. Any forward-looking statements made during this conference call, whether general or specific in nature, are subject to risks and uncertainties that may cause actual results to differ materially from those which the company anticipates. These risks and uncertainties include, but are not limited to, the specific risks and uncertainties discussed in the reports that we filed periodically with the SEC. Laser Photonics assumes no obligation to either update any forward-looking statements that we have made or may make or to update the factors that may cause actual results to differ materially from those that they forecast. I will now turn the conference call over to Wayne. Take it away, Wayne.

Thank you, Brian, and good morning, everyone. Thank you for joining Laser Photonics Corp.'s quarterly earnings call. I'm going to [indiscernible] CEO of Laser Photonics Corp., and I'm thrilled to share some exciting updates with you today. We reported a soft quarter in Q2 reporting revenue of $1 million as compared to $1.35 million for the same period in 2022. The decrease was primarily related to delayed CapEx spending by customers. While this impacted our second quarter results, I'm encouraged by the progress in our sales and marketing efforts in expanding our pipeline, which are expected to drive long-term positive sales trends. Given that in our target markets of materials [facing] automotive, aerospace and semiconductor, laser cleaning products fall under CapEx spending. Sales cycles can take 6 to 12 months and often fluctuate quarter-to-quarter. In recent quarters, economic conditions, including interest rate increases, have been putting pressure on sales with respect to interest rates -- higher rates have caused customers to delay capital equipment spending as many customers, large and small [indiscernible] companies, to purchase our equipment. In Q1, we began increasing R&D investments to maintain our technological superiority. We equipped our application center with state-of-the-art robotic laser blasters and developed new complementary technologies. Moving forward, we intend to make further investments in R&D to innovate and guarantee the company's long-term future, and I will touch on one of these platforms in a minute. Before I go into some of our exciting product innovations that are coming from our R&D investments, I'd like to welcome Jade Barnwell to the team as our newly appointed CFO. Jade has proven success in managing financial growth at larger companies, and we look forward to leveraging the experience she brings. Now I'd like to introduce our latest product developments, the Titan FX platform, for the aerospace industry. This new large platform was designed for laser cutting applications, but we also integrated it into our CleanTech product line to enhance that offering. The platform is designed to provide increased safety as it has fully enclosed frame that meets Class 1 product enclosure standards for the laser industry. The significance of this is twofold. First, we developed this new platform in response to conversations with an existing large aerospace customer. The aerospace industry has held off using laser cutting capabilities for decades due to safety concerns related to creating stress cracks caused by the heat generated from laser applications. To this day, laser cutting is limited to rough cutting and later defers to downstream CNC machining capabilities. The Titan FX platform revolutionizes laser-cutting applications with our unique laser cold-cutting feature that enables the platform to work with heat sensitive materials without compromising quality or precision. This capability opens up new possibilities for various industries, including aerospace, automotive and electronics, where materials such as composites and plastics require delicate treatment. Moreover, our TurboPiercing technology enables rapid advanced perforations, enhancing production efficiencies and reducing cycle times for our customers. By streamlining their operations, we are helping customers achieve greater productivity that meet strict deadlines. Second, the newly developed Titan FX large format design can also be used for CleanTech Class 1 product enclosures, therefore, integrating cutting-edge laser safety features with our renowned laser blasting capabilities. The Titan FX platform will combine 2 essential elements for our CleanTech products, unmatched laser blasting power and enhanced laser safety. With our advanced laser technology, we already offer precision and efficiency that sets us apart from the competition. Now by incorporating laser safety into our product enclosure, we provide our customers with a comprehensive solution that addresses their needs for both performance and safety. In today's manufacturing work environment, most of our customers are safety conscious. Therefore, Laser Photonics is stepping up to the plate and providing solutions to modern day problems for the modern day workforce. Automation is also key to running a smooth and efficient manufacturing facility. The Laser Photonics focuses on helping its customers achieve this. Looking ahead, we are confident that the Titan FX platform will further strengthen our position as a leader in laser technologies. We anticipate strong demand from industry seeking advanced laser solutions that combine performance, precision and safety. By expanding our product offering to cater to the needs of CleanTech and other sectors, we are well positioned for growth and new market opportunities. In conclusion, Laser Photonics Corp.'s Titan FX platform for CleanTech Class 1 product enclosures represents a groundbreaking development as we continue to push the boundaries of innovation in the industry. And we are excited about the prospects and the positive impact this new development will have on our customers' operations and overall safety. Thank you for your continued support, and we remain committed to delivering cutting-edge solutions that will drive success and growth for Laser Photonics Corp. I will now turn the call over to Jade for a detailed financial update.

Thank you, Wayne, and welcome, everyone. As Wayne mentioned, our second quarter revenue decreased from the same period last year by 28% to $1 million. Our gross margin on those second quarter revenue increased by 600 basis points year-over-year to approximately 71% as our mix was more heavily weighted towards our higher-margin CleanTech systems. Operating income was breakeven this quarter, but benefited from a $700,000 mark-to-market from noncash stock issuance costs related to our IPO, which as mentioned on last quarter's call, [was Saturday] in April and therefore, needed to be mark-to-market upon delivery. Beyond this noncash cost, the most significant change in our operating cost structure was the increase in sales and marketing resources, R&D investments, NASDAQ and SEC compliance costs and went for our new facility. GAAP net income and earnings per share were breakeven, down from last year's $0.3 million and $0.07, respectively. Excluding the previous mark-to-market gains, net loss and loss per share would have been $0.7 million and $0.08, respectively. From a balance sheet and cash flow perspective, we finished the quarter with $9.9 million in cash and no debt. This balance represents a $0.9 million decline during second quarter resulting from our operating activities. Now I'd like to provide some commentary about the full year 2023. Looking at our operating expenses and given our continued growth investments in R&D, sales and marketing and expanding our distribution channel, we expect these costs to rise further throughout the rest of the calendar year. That concludes my prepared remarks for today. We can now move to questions.

[Operator Instructions] Our first question comes from Chuck Lipson with CSL Associates.

Wayne, we have a pretty demoralized shareholder base. There's been a lot of management changes, projections haven't been made. And we keep hearing about all the opportunities that we have. Why have sales declined? When we've been going to the trade shows, we haven't heard -- we keep hearing this remarkable amount of opportunities for our lasers and yet the sales aren't there at all. When and how are we going to turn the ship around? When do we start seeing some sales? We just got some projections that marketing costs are going to increase, but why is sales fail to materialize? Fortunately, we still have some cash, but it's -- we used to hear about new customers almost weekly. And now we haven't heard of a new customer in months. Could you give us why we should have a lot of hope going forward [indiscernible] pessimistic?

Yes. Thanks for your question, Chuck. And I think if we reviewed from the starting of the company, back in 2020, where we showed the initial start and a lot of R&D went into the products and an aggressive move to try to gain confidence in adapting this particular technology because that's the first phase of our gain in scale model, which is for the customers to adapt the technology and adopt. Many of these organizations have received the beta units, and they formed protocols and procedures into the manufacturing process would take some time. Now we've gained some tractions in the initial start with the first 3 years the company has been in business. And we put a lot of investments from our parent founder, ICT Investments, which have put a lot of investments. And unfortunately, we could take the company as far as we could then decided to take it to market. And once that happened, we spent quite some time doing so, and it sort of delayed the momentum that we had going. So with this being said, most of the growth that you've been seeing from the end of -- or mid-stage of 2022 into the first quarter of 2023 was a result of prior to investments into the company moving forward. So now that we're fully funded, we need to continue the progress, continue getting the good news out through a strategic marketing plan, which we've incorporated. We've grown the marketing department, and we have a phenomenal group down there that's going to basically get the news out. And this being said, it takes about 6 months to get the message out and then you have the sales cycle that will take another 6 months. So this is an investment year, obviously, after the fund are raising, and we expect to see good results in the near future. I hope that this has answered your question as far as what we experienced, and we see a lot of positive traction. We have a very good sales group that's making monumental leaps and growth in acquiring the new interest in this disruptive technology. We took it to market, addressing a $46 billion opportunity, and I think it's greater than that globally because most people are trying to transition out of the hazardous abrasive sandblasting. And I think it takes time for them to exit that particular type of process and develop new protocols and procedures. Most of the characteristics of this technology has just been sanctioned by most coating companies that were giving directions on how abrasive blasting works. And now they need to develop laser blasting criteria for government agencies and the private sector as well. So my -- yes, go ahead.

So it's all well and good. But last year, we had like -- I think it was the Navy, we had the Emerson, we had GE. I take it, they all had beta platforms for our product, have we heard back from them? Are we making any progress in getting real orders?

Yes, absolutely. There again, -- the one unit is being infectious to the entire organization, but internal protocols and procedures take time. And this turns into multiple units. And that's our goal, is to try to get the first unit in the door, let them write the protocols and procedures. And from there, it just takes off. And again, as I've mentioned earlier in the call, the -- some of these obstacles are derived from things that are out of our control. And every company has to face this in these turbulent times. And we need to respect that and try to create new opportunities, new verticals that we've already familiar with and trying to address those types of situations that they're facing.

Your projections that you made on the last conference call, do they still hold any water? Or are they under review? Because we've always -- we lowered them once and now it seems that for this quarter, we thought probably were a little too optimistic last quarter.

Well, I think from quarter-to-quarter, again, the Feds have been raising the interest rates, making it unbearable, inflation has gone up. A lot of the customers are having difficult times trying to make decisions on CapEx, as I mentioned earlier in the call, and these are some of the things that we need to deal with. It's pretty straightforward. But I have hope in the economy turning around. And there's still a corrosion problem all that needs to be resolved. So as there is a shortage of wheat worldwide, there's going to be a turmoil in these types of situations.

All right. Well, hopefully, we can turn it around a little quicker [indiscernible] as a shareholder.

Absolutely. Thank you for your question.

[Operator Instructions]

Okay. We've got some questions through the webcast. The first is -- the company has made comments in its SEC filings regarding actions to improve control weaknesses. Can you provide updates on the control environment?

Yes, Jade, I think you can take that one.

Can you repeat that question one more time, please?

Yes. The company in its SEC filings has identified weaknesses in controls. And as said it's taking actions, can you talk about the actions that the company has taken to improve its controls?

Well, first of all, the obvious control we placed is having the CFO. So I joined just 15 days ago. So that is my to-do list on my to-do list. I can't provide you details at this moment, but I am reviewing the procedures and process that we have in place. And at the same time, we strengthened our Board of Directors to go over our procedures as well.

Okay. Next question is, are your products truly 100% American made as you advertise?

Yes, Brian, thanks for that question. So I think what needs to be understood in America is that things have changed throughout the last 4 decades who manufactures what in our society today. And America is not capable of producing 100% of all the components known to man. Even our latest fighter jets, some of the components are not 100% made here in the United States for defense of our country. So -- and as you know, the semiconductor chip alone is not made 100% in our country. And this is why we have a semiconductor chip shortage. We rely on outside sources. So certain components are required to be made by other countries. Nonetheless, we manufacture major components here in the United States. And we are responsible for the design and the functionality of our product, and it's 100% manufactured and assembled here once components are available in the open market. Now if our third tier of vendors are supplying it from other countries, we have no control of that. But it's what's available with American customers, our vendors, solid to American customers. The availability of the supply chain is a trying task for any company that's manufacturing today. Nonetheless, 100% assembled here, components are received, we're not in the business to make a major manufacturing products that is not our expertise. So we'll have to pull from United States companies or global companies to the degree that whatever is available for us to use, that's what we use. But we've definitely pressed the components threshold to what's ever available, the latest technology that's in our products, and we have this capability. And I don't think anyone else competing with us does the same thing. So hopefully, that answers your question.

Okay. Great. Next question. You've been issuing press releases at the rate of 3 per week plus or minus, most of which are simply reviewing use cases for CleanTech. What is the annual cost of this program? Does management actually conclude these releases are meaningful and worthwhile? And if so, why? And then how do you measure this? What are the metrics you use?

Yes. So in creating the marketing strategy, it's important for us to penetrate certain verticals and reach certain audience. And at the cost of doing so, I think we've got a phenomenal deal from our avenues of helping us with the press release is quite cost effective and quite affordable for us to release press releases on a daily basis. And I think the bombardment of messaging is quite important so that they can see that a thriving company that has an awesome message to deliver that just allows people to understand that there's a lot of exciting things going on in our company, and we're just excited to share that. I think the matrix on this we've been getting some phenomenal feedback on the open rates and people have given us great response on this. On the other hand, some may view it as mundane and not effective. But again, we're the company that's running the marketing strategy, and I think it's working. It's doing its job. And hopefully, it will gain traction in the near term to come.

Okay. Great. Second is related to SEC filings. There's been no disclosure of executive comp since you've gone public. What are key insiders and directors being compensated right now?

Yes. I think that emerging growth company exercise that right, as mentioned, to be transparent in that area. And we have mentioned as executives are hired through the 8-K what the compensation is. So I think we're already doing that, Brian.

Great. Thank you. A couple of business questions here. Are you seeing an increase in competition and in general, who are the competitors? And what is the competitive environment like currently?

Yes. I think it's quite the opposite. We're not seeing a competition of relevance to the technology that we have pressing the components threshold, exceeding customers' expectations. So I think we've done enough to set ourselves apart from the competition that it exceeds the marketing expectations of getting the message out there, making sure that there's really a hands down effort on our part to make sure that we're offering something that anyone that wants to occupy this space will not be able to achieve. And that's our goal is to try to provide a solution to our customers that no one else in the world can. And I think we've pressed this technology to the height of expectation that our companies are starting to see. They're writing procedures around our product, and that says a lot about what we do.

Okay. And then this question is more technical in nature. What are the main items that make up the manufacturing process?

Yes. When you look at some of our product lines, they're quite strategic and customized to fit our customers' needs from the Class IV open beam system that is strategic and also helps them to transition from the open process of sandblasting, it could mimic that. But eventually, we want to transition the customers from the open beam system to the Class I enclosing, which is why we took the Titan FX large format design to market so that it can offer upbuild those safety features. Nonetheless, the platform open beam system does have its space in some environments, such as nuclear decommissioning of the nuclear facilities because it does require open beam systems to decontaminate some of the materials that they're trying to clean out there. But the major manufacturing processes involve the assembly, the calibration of the optics on the delivery systems, strategically replacing the optics and assemblies and also software implementation. We also have communications between hardware and software that needs to be dialed in as well. So -- and a host of other processes that they're kind of help bring the CleanTech product line to fruition.

Okay. Great. Jade, can you help explain again exactly what the nonrecurring items were in Q1 and Q2 related to the stock issuance? And explain why -- what exactly happened there?

Sure. So during IPO process, we provided stock awards to one of the external party, the marketing form. The name is TraDigital Marketing Group. We provided the stock awards to be exercised. So at the end of '22, so December 31, we reevaluated them based on the market price. And then March 31, we did it again because it was not issued and actually, it was issued on April 17. So when we evaluated in March, the stock price was higher than what we had in -- on December 31 as our accrued expense in balance sheet. And then -- and we actually issued on April, the price went down, so we had to revaluate and that gave us gain of $700,000. Does that answer your question?

Yes, I think so. And then what I believe is the last question. What are sales looking like for third quarter? What should we be expecting the company to report when it does third quarter earnings?

Yes. We have a $4.7 million pipeline for the third quarter. But again, trying to last all those purchase orders off the desk of the procurement department becomes challenging because they're prioritizing according to how they see global trends and economic conditions. So that's the frustration right there, Brian, is we're taking it all the way as far as we can as a company. But again, it's stuck in the hands off of the decision-makers releasing the purchase orders, but we do have a positive feedback from our customers saying that there's a possibility that these purchase orders will be released soon, procedures are being written and completed. Other departments within these organizations are starting to inquire about new systems. And all of these take time. So I think the third quarter looks bright for us. And hopefully, we'll be able to surpass first and second quarter results.

Okay. And then one more question just came in. How many people have you added to the company so far this year?

We've added 21 employees. So last year, we had -- we ended 2022 with 19 employees. So now we've added 21 and still looking to fill positions as well. It's quite challenging for us at the executive out to find people that are strategic and understand how to move the company forward. So this becomes a challenge for us in finding the executives that can help us grow the company as well.

Okay. I think that's it.

Okay. Thank you, Brian.

Okay. We've reached the end of our question-and-answer session, and this concludes today's conference. Thank you for your participation. You may disconnect your lines at this time.