LASE Corp.: $8.57M nine-month loss, going-concern doubt
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
LASE Corp. reported third-quarter net sales of $1,145,676, compared with $919,284 a year earlier; gross loss was $449,247 and net loss was $2,516,509. For the nine months ended September 30, 2026, net sales were $3,867,534, versus $5,808,541 a year earlier, and gross results shifted from $1,569,566 profit to a $685,225 loss; net loss was $8,565,051 versus $8,110,233.
Operating cash use was $7,435,784 for the nine-month period. At September 30, 2026, LASE held $1,638,650 cash and $6,000,000 in short-term investments, and working capital was approximately $3.7 million. Its September public offering of 10,500,000 shares with warrants generated $7,875,000 gross and $7,168,536 net proceeds; the company also repaid substantially all outstanding note obligations. Common shares outstanding were 60,679,288 at September 30, 2026, compared with 22,845,345 at December 31, 2025. Management expects additional financing will be needed over the next twelve months and states that substantial doubt about LASE’s ability to continue as a going concern remains.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointThird-quarter net sales rose to $1,145,676 from $919,284.
Negative
- Major pointGoing-concern substantial doubt remains within one year after issuance.
- Moderate pointNine-month net sales fell to $3,867,534 from $5,808,541.
- Moderate pointNine-month net loss widened to $8,565,051 from $8,110,233.
Filing Explained
At September 30, 2026, 36,655,969 warrants remained potential share issuance—not issued shares—and exercise could dilute existing holders.
This Form 10-Q is the unaudited quarterly report covering the period ended
The filing revises the first- and second-quarter 2026 figures for previously omitted shared costs allocated to affiliates, reducing each quarter’s net loss by
Separately, the filing reclassifies the
Key Figures
Key Terms
going concern financial
contract liabilities financial
warrant inducement transactions financial
Level 3 financial
percentage-of-completion method financial
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
What were LASE's third-quarter and nine-month net sales?
What was LASE's net loss?
Why does LASE say substantial doubt exists about its ability to continue as a going concern?
What were the terms of LASE's September 2026 public offering?
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended:
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________________ to __________________
Commission
File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| (Address of Principal Executive Offices) | Zip Code |
(
Registrant’s Telephone Number, Including Area Code
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Common Stock | The
|
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting Company, or an emerging growth Company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting Company,” and “emerging growth Company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting Company | ||
| Emerging growth company |
If
an emerging growth Company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell Company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No
As
of November 12, 2026, the registrant had
TABLE OF CONTENTS
| Page No. | ||
| PART I – FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements | 3 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 29 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 36 |
| Item 4. | Controls and Procedures | 37 |
| PART II – OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 39 |
| Item 1A | Risk Factors | 39 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 40 |
| Item 3. | Defaults Upon Senior Securities | 41 |
| Item 4. | Mine Safety Disclosures | 41 |
| Item 5. | Other Information | 41 |
| Item 6. | Exhibits | 42 |
| Signatures | 43 | |
| Certifications | ||
| 2 |
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LASE CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
As of September 30, 2026 (Unaudited) | As of December 31, 2025 (Audited) | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts
receivable, net of allowance for expected credit losses of $ | ||||||||
| Short-Term Investments | - | |||||||
| Contract assets | ||||||||
| Inventories,
net of reserves of $ | ||||||||
| Deferred financing costs | - | |||||||
| Prepaid and other current assets | ||||||||
| Total Current Assets | ||||||||
| Property, plant, and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Operating lease right-of-use asset | ||||||||
| Other long-term assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accounts payable – related parties | ||||||||
| Accounts payable | ||||||||
| Accrued expenses | ||||||||
| Deferred revenue | ||||||||
| Contract liabilities | ||||||||
| Notes
payable – ($ | - | |||||||
| Notes payable – related party | - | |||||||
| Notes payable | - | |||||||
| Lease liability, current | ||||||||
| Derivative liability | ||||||||
| Total Current Liabilities | ||||||||
| Lease liability – non-current | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | - | - | ||||||
| Stockholders’ Equity (Deficit) | ||||||||
| Preferred
shares par value $ | - | - | ||||||
| Common
shares par Value $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Treasury
shares ( | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity (Deficit) | ( | ) | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
| 3 |
LASE CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
September 30, 2026 (Unaudited) | September 30, 2025 (Unaudited) | September 30, 2026 (Unaudited) | September 30, 2025 (Unaudited) | |||||||||||||
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, 2026 (Unaudited) | September 30, 2025 (Unaudited) | September 30, 2026 (Unaudited) | September 30, 2025 (Unaudited) | |||||||||||||
| Net sales | $ | $ | $ | $ | ||||||||||||
| Cost of sales | ||||||||||||||||
| Gross (Loss) Profit | ( | ) | ( | ) | ( | ) | ||||||||||
| Operating expenses: | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Research and development costs | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Operating Loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expenses): | ||||||||||||||||
| Interest expenses, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Change in fair value of derivative liability | - | - | ||||||||||||||
| Registration payment arrangement expense | ( | ) | - | ( | ) | - | ||||||||||
| Total Other Expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Deemed dividend for common control acquisition | - | ( | ) | - | ( | ) | ||||||||||
| Deemed dividend for cashless exercise of warrants | - | ( | ) | - | ( | ) | ||||||||||
| Net Loss Attributable to Common Stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Loss per share - basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Loss per share attributable to common stockholders – basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average shares outstanding – basic and diluted | ||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
| 4 |
LASE CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
September 30, 2026 (Unaudited) | September 30, 2025 (Unaudited) | |||||||
| For the Nine Months Ended | ||||||||
September 30, 2026 (Unaudited) | September 30, 2025 (Unaudited) | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to Reconcile Net Loss to Net Cash Flow from Operating Activities: | ||||||||
| Change in allowance for credit losses | ( | ) | ||||||
| Shares issued for directors’ compensation | - | |||||||
| Shares issued for services | ||||||||
| Depreciation and amortization | ||||||||
| Debt discount amortization | ||||||||
| Impairment | - | |||||||
| Financing costs as additional note principal on default | - | |||||||
| Change in fair value of derivative liability | ( | ) | - | |||||
| Right-of-use assets | ||||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Contract assets | ||||||||
| Inventories | ||||||||
| Prepaids and other current assets | ( | ) | ( | ) | ||||
| Deferred financing costs | - | |||||||
| Lease liability | ( | ) | - | |||||
| Accounts payable | ( | ) | ||||||
| Contract liabilities | ||||||||
| Accrued expenses | ( | ) | ||||||
| Deferred revenue | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| INVESTING ACTIVITIES | ||||||||
| Purchases of short-term investments | ( | ) | - | |||||
| Purchase of property, plant, and equipment | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Proceeds from issuance of common stock and warrants, net of offering costs | ||||||||
| Proceeds from warrant exercises | - | |||||||
| Proceeds from warrant inducement exercise, net of offering costs | - | |||||||
| Repayment of notes payable | ( | ) | ( | ) | ||||
| Repayment of notes payable – related party | ( | ) | - | |||||
| Distribution to affiliate | ( | ) | ( | ) | ||||
| Treasury stock | - | |||||||
| Proceeds of notes payable- related party | - | |||||||
| Proceeds from notes payable, net | ||||||||
| Net cash provided by financing activities | ||||||||
| Increase in cash | ||||||||
| Cash - Beginning of Period | ||||||||
| Cash - End of Period | $ | $ | ||||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Shares issued for investment | $ | - | $ | |||||
| Inventory transferred to property, plant, and equipment | $ | - | $ | |||||
| Warrants settled by the issuance of common stock | $ | $ | - | |||||
| Promissory note issued to extinguish warrants | $ | - | $ | |||||
| Fair value of common stock issued upon acquisition of entity under common control | $ | - | $ | |||||
| Stock and Warrants for loan issuance | $ | - | $ | |||||
| Exchange of warrants | $ | - | $ | |||||
| SUPPLEMENTARY CASH FLOW INFORMATION | ||||||||
| Cash Paid During the Period for: | ||||||||
| Income taxes | $ | - | $ | - | ||||
| Interest | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
| 5 |
LASE CORP.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
Nine months ended September 30, 2026:
| Shares | Amount |
Shares | Amount |
(Deficit) |
Capital |
Deficit |
Equity | |||||||||||||||||||||||||
| Common Stock | Shares to be issued | Treasury Stock | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount |
Shares | Amount |
(Deficit) |
Capital |
Deficit |
Equity | |||||||||||||||||||||||||
| Balance, December 31, 2025 (Audited) | $ | - | $ | - | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| Net loss for the three months ended March 31, 2026 | - | - | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Public offering of common stock and issuance of equity-classified warrants, net – February 2026 | - | - | - | - | ||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of warrants – March 2026 | - | - | - | - | ||||||||||||||||||||||||||||
| Issuance of common stock and warrants from warrant inducement offering, net of issuance costs – March 2026 | - | - | - | - | ||||||||||||||||||||||||||||
| Common shares issued for services – February and March 2026 | - | - | - | - | ||||||||||||||||||||||||||||
| Common shares issued for directors’ compensation – March 2026 | - | - | - | - | ||||||||||||||||||||||||||||
| Distributions to affiliate – three months ended March 31, 2026 | - | - | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||
| Balance, March 31, 2026 (Unaudited) | $ | - | $ | - | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| Net loss for the three months ended June 30, 2026 | - | - | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Issuance of common stock and warrants from warrant inducement offering, net of issuance costs – April 2026 | - | - | - | - | ||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of warrants – April 2026 | - | - | - | - | ||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of warrants | - | - | - | - | ||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of warrants – June 2026 | - | - | - | - | ||||||||||||||||||||||||||||
| Distributions to affiliate – three months ended June 30, 2026 | - | - | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||
| Balance, June 30, 2026 (Unaudited) | $ | - | $ | - | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| Net loss for the three months ended September 30, 2026 | - | - | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Issuance of common stock and warrants from warrant inducement offering, net of issuance costs – July 2026 | - | - | - | - | ||||||||||||||||||||||||||||
| Issuance of common stock and warrants from warrant inducement offering, net of issuance costs | - | - | - | - | ||||||||||||||||||||||||||||
| Public offering of common stock and issuance of equity-classified warrants, net – September 2026 | - | - | - | - | ||||||||||||||||||||||||||||
| Public offering of common stock and issuance of equity-classified warrants, net | - | - | - | - | ||||||||||||||||||||||||||||
| Issuance of common stock upon cashless exercise of warrants – September 2026 | - | - | - | ( | ) | - | - | |||||||||||||||||||||||||
| Distributions to affiliate – three months ended September 30, 2026 | - | - | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||
| Offering costs of the February 2026 public offering and the April 2026 warrant inducement reclassified from expense | - | - | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||
| Balance, September 30, 2026 (Unaudited) | $ | - | $ | - | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||
Nine months ended September 30, 2025:
| Common Stock | Shares to be issued | Treasury Stock | Additional Paid-in | Accumulated | Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | (Deficit) | Capital | Deficit | Equity | |||||||||||||||||||||||||
| Balance, December 31, 2024 (Audited) | $ | - | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Net loss for the three months ended March 31, 2025 | - | - | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Shares issued for investment | - | ( | ) | - | - | - | ||||||||||||||||||||||||||
| Distributions to affiliate | - | - | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||
| Balance, March 31, 2025 (Unaudited) | $ | - | $ | - | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||
| Net loss for the three months ended June 30, 2025 | - | - | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Distributions to affiliate | - | - | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||
| Balance, June 30, 2025 (Unaudited) | $ | - | $ | - | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||
| Balance | $ | - | $ | - | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||
| Net loss for the three months ended September 30, 2025 | - | - | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Distributions to affiliate | - | - | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||
| Stock issued under PIPE | - | - | - | - | ||||||||||||||||||||||||||||
| Stock issued for common control acquisition | - | - | - | - | ||||||||||||||||||||||||||||
| Stock issued for consideration of promissory note | - | - | - | - | ||||||||||||||||||||||||||||
| Adjustment to common stock | - | - | - | - | ( | ) | - | - | ||||||||||||||||||||||||
| Warrant redemption | - | - | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||
| Sale of treasury stock | - | - | - | - | ||||||||||||||||||||||||||||
| Deemed dividend | - | - | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||
| Exchange of warrants | - | - | - | - | ||||||||||||||||||||||||||||
| Stock issued for consulting services | - | - | - | - | ||||||||||||||||||||||||||||
| Compensation for service agreement (FMW) | - | - | - | - | - | |||||||||||||||||||||||||||
| Balance, September 30, 2025 (Unaudited) | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Balance | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
| 6 |
LASE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 – ORGANIZATION
LASE Corp. (NASDAQ: LASE), formerly Laser Photonics Corporation, is an emerging laser technology company developing laser and directed-energy solutions for the defense, pharmaceutical, semiconductor and industrial markets. Through internal development, strategic acquisitions and partnerships, LASE intends to expand its technology portfolio, strengthen its advanced manufacturing capabilities and scale the enterprise profitably.
The Company was formed under the laws of Wyoming on November 8, 2019, and changed its domicile to Delaware on March 5, 2021. Effective November 4, 2026, the Company changed its name from Laser Photonics Corporation to LASE Corp. The Company’s global headquarters is located in Lake Mary, Florida.
Going Concern
The accompanying condensed consolidated financial statements have been prepared under the assumption that the Company will continue as a going concern. In accordance with FASB Accounting Standards Codification (“ASC”) 205-40, Going Concern, the Company’s management has evaluated whether there are conditions or events that raise substantial doubt about its ability to continue as a going concern within one year after the date these financial statements are issued. In addition, the Company’s independent registered public accounting firm, in its report on the Company’s consolidated financial statements for the year ended December 31, 2025, included an explanatory paragraph regarding there being substantial doubt about the Company’s ability to continue as a going concern. These condensed consolidated financial statements do not include any adjustments that might result from this uncertainty.
The
Company has incurred recurring operating losses and experienced negative operating cash flows. For the nine months ended September 30,
2026, the Company reported a net loss of $
As
of September 30, 2026, the Company had working capital of approximately $
Working
capital during the nine months ended September 30, 2026, was significantly impacted by financing activities, including public offerings
completed in February and September 2026, of which the September offering generated gross proceeds of approximately $
Management’s plans to address these conditions include continued capital-raising initiatives, including equity offerings and warrant exercises; active management of working capital; reduction of discretionary expenditures; and initiatives intended to increase equipment sales and improve operating cash flows. While management believes these actions may improve liquidity and support ongoing operations, there can be no assurance that such plans will be successfully implemented or that sufficient financing will be available on acceptable terms.
| 7 |
Accordingly, management concluded that substantial doubt regarding the Company’s ability to continue as a going concern continues to exist.
The accompanying condensed consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty.
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements and accompanying notes of LASE Corp. (the “Company”) have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and include the financial statements of the Company’s wholly owned operating subsidiary, Control Micro Systems, Inc. (“CMS”). Intercompany balances and transactions have been eliminated in consolidation. The unaudited condensed consolidated financial statements and accompanying notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the Company’s financial position as of September 30, 2026 and its results of operations and cash flows for the periods presented. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the full year ending December 31, 2026. These financial statements should be read in conjunction with the financial statements, notes and significant accounting policies included in our Annual Report on Form 10-K for the year ended December 31, 2025.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES & USE OF ESTIMATES.
ASC-280 Segment Reporting
The
Company operates as a
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at dates of the financial statements and the reported amounts of revenue and expenses during the periods. Estimates and assumptions include valuation of financial instruments, valuation of intangibles, stock-based compensation, revenue recognition, inventory valuation, depreciable lives, and deferred tax valuation allowances. Actual results could differ from these estimates.
| 8 |
Cash
Cash
consists of demand deposits held at financial institutions. The Company had
Short-Term Investments
Short-term investments consist of a certificate of deposit with an original maturity of twelve months. The certificate of deposit is a non-negotiable time deposit with a financial institution and is therefore not within the scope of ASC 320, Investments — Debt Securities. It is carried at cost, which approximates fair value. Interest is recognized as earned and is included in interest expense, net.
On
September 17, 2026, the Company placed $
Concentrations
Credit
Risk. The Company maintains its cash and short-term investments at a single financial institution. At September 30, 2026, cash of
$
Net
revenue. During the nine months ended September 30, 2026, two customers accounted for
Accounts
receivable. As of September 30, 2026, the Company had accounts receivable from one customer which comprised
Accounts Receivable
Trade
accounts receivable are recorded net of allowance for expected credit losses. The Company extends credit to its customers in the normal
course of business and performs on-going credit evaluations of its customers. The allowance is based upon an estimate of expected credit
losses over the life of outstanding receivables and involves an assessment of customer creditworthiness, historical payment experience,
an assumption of future expected credit losses, and the age of outstanding receivables. As of September 30, 2026, and December 31, 2025,
the Company’s allowance for expected credit losses was $
| 9 |
Inventories
Inventories are stated at the lower of cost or net realizable value using the first-in-first-out (FIFO) method. The Company has four principal categories of inventory:
Equipment parts inventory - This inventory represents components and raw materials that are currently in the process of being converted to a certifiable lot of saleable products through the manufacturing and/or equipment assembly process. Inventories include parts and components that may be specialized in nature and subject to rapid obsolescence. The Company periodically reviews the quantities and carrying values of inventories to assess whether the inventories are recoverable. Because of the Company’s vertical integration, a significant or sudden decrease in sales activity could result in a significant change in the estimates of excess or obsolete inventory valuation. The costs associated with provisions for excess quantities, technological obsolescence, or component rejections are charged to the cost of sales as incurred.
Work in process inventory - Work in process inventory consists of inventory that is partially manufactured or not fully assembled as of the date of these financial statements. This equipment, machines, parts, frames, lasers, and assemblies are items not ready for use or resale. Costs are accumulated in work in process until the items are complete and ready for sale, at which time they are transferred to finished goods inventory. Amounts in this account represent items at various stages of completion at the date of these financial statements.
Finished goods inventory - Finished goods inventory consists of inventory that is complete and ready for commercial application without further cost other than delivery and setup. Finished goods inventory includes items that have been purchased in finished form as well as units that have been fully manufactured or assembled by the Company through its production process. Finished goods inventory includes equipment, lasers, software, machines, parts, or assemblies.
Consignment inventory – Consignment inventory held at third-party locations is included in inventories on the accompanying balance sheets and is stated at the lower of cost or net realizable value. The Company retains title to consignment inventory until the inventory is sold to an end customer.
On September 30, 2026, and December 31, 2025, respectively, our inventories consisted of the following:
SCHEDULE OF INVENTORY
As of | As of | |||||||
| September 30, 2026 | December 31, 2025 | |||||||
| (Unaudited) | (Audited) | |||||||
| Equipment parts | $ | $ | ||||||
| Finished goods | ||||||||
| Work in process | ||||||||
| Consignment inventory | ||||||||
| Inventory reserve | ( | ) | ( | ) | ||||
| Total inventory, net | $ | $ | ||||||
Property, Plant, and Equipment
Property and equipment are recorded at cost less accumulated depreciation. Expenditures for major additions and improvements are capitalized, and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gain or loss is included in the results of operations for the respective period.
Depreciation
is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The
Company uses other depreciation methods (generally accelerated) for tax purposes where appropriate. Depreciation expense for the periods
ended September 30, 2026 and 2025 was $
SCHEDULE OF ESTIMATED USEFUL LIVES FOR SIGNIFICANT PROPERTY AND EQUIPMENT
| Category | Economic Useful Life | |
| Machinery and equipment | ||
| Sales demonstration units | ||
| Office furniture and computer equipment | ||
| Vehicles | ||
| Leasehold improvements | Shorter of the estimated useful life or the lease term |
Property, plant, and equipment are comprised of the following:
SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT
September 30, 2026 | December 31, 2025 | |||||||
| (Unaudited) | (Audited) | |||||||
| Machinery and equipment | $ | $ | ||||||
| Sales demonstration units | ||||||||
| Office furniture and computer equipment | ||||||||
| Vehicles | ||||||||
| Leasehold improvements | ||||||||
| Total cost | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Property, plant and equipment, net | $ | $ | ||||||
| 10 |
Long-Lived Assets
Long-lived assets, other than goodwill and indefinite-lived assets, are reviewed for impairment whenever events or changes in circumstances (“triggering events”) indicate that their carrying value may not be recoverable. Impairment is measured by comparing the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to result from use of the assets and their ultimate disposition. An impairment loss, equal to the difference between the asset’s fair value and its carrying value, is recognized when the estimated future undiscounted cash flows are less than its carrying amount. No impairment indicators were identified as of September 30, 2026.
Intangible Assets
The
Company has certain intangible assets that were initially recorded at their fair value at the time of acquisition. The finite-lived intangible
assets consist of trademarks and operational software and website. Intangible assets with finite useful lives are amortized using the
straight-line method over their estimated useful life of
The
Company reviews all finite-lived intangible assets for impairment when circumstances indicate that their carrying values may not be recoverable.
If the carrying value of an asset group is not recoverable, the Company recognizes an impairment loss for the excess carrying value over
the fair value in our consolidated statements of operations. During the nine months ended September 30, 2026, no indicators of impairment
were identified and no impairment was recorded related to the Company’s intangible assets. Amortization expenses for the nine-month
period ended September 30, 2026 and 2025 amounted to $
Warrants
The Company issues warrants in conjunction with its capital raise activities. The fair value of a warrant is calculated on the grant date using the Black-Scholes option-pricing model. The risk-free interest rate is based on the U.S. Treasury yield curve in effect as of the grant date. The expected dividend yield assumption is based on the Company’s expectation of dividend payouts and is assumed to be zero. The expected volatility is based on the historical volatility of the Company’s common stock, calculated utilizing a look-back period approximately equal to the contractual life of the stock option being granted. The expected life of the stock option is calculated as the mid-point between the vesting period and the contractual term (the “simplified method”). The fair market value of the common stock is determined by reference to the quoted market price of the common stock on the grant date. The expected term represents the weighted-average period of time that warrants are expected to be outstanding giving consideration to vesting schedules and historical participant exercise behavior; the expected volatility is based upon historical volatility of the Company’s common stock; the expected dividend yield is based on the fact that the Company has not paid dividends in the past and does not expect to pay dividends in the future; and the risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of measurement corresponding with the expected term of the share option award.
Management evaluates warrants under ASC 815, Derivatives and Hedging, including ASC 815-40 applicable to contracts in an entity’s own equity.
Warrant Inducement Transactions
The Company periodically offers holders of its outstanding equity-classified warrants the opportunity to exercise those warrants for cash in exchange for consideration consisting of a reduction in the exercise price of the existing warrants, the issuance of new warrants, or both. Where the terms of the existing warrants are modified and the warrants remain equity-classified both immediately before and immediately after the modification, the Company applies ASC 815-40-35-14 through 35-18 and measures the effect of the modification as the excess of the fair value of the modified warrants over the fair value of those warrants immediately before the modification. Because such modifications are executed to induce the imminent exercise of the outstanding warrants and to raise equity capital, the effect is recognized as an equity issuance cost charged against the proceeds of the related offering in accordance with ASC 815-40-35-17(a). Where the existing warrants are exercised at their stated exercise price and new warrants are issued as consideration for the exercise, the fair value of the new warrants is likewise treated as a cost of the related offering under SEC Staff Accounting Bulletin Topic 5.A. Under either approach the amount is recorded as a reduction of additional paid-in capital, is offset by the fair value of the warrants issued, and has no effect on net loss, net loss per share, total stockholders’ equity or cash flows.
| 11 |
Revenue Recognition
Under ASC Topic 606, Revenue from Contracts with Customers, 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 sells products and services to entities affiliated with ICT Investments, LLC, a holder of the Company’s common stock. These arrangements are evaluated under ASC 606 using the same five-step model applied to the Company’s other contracts with customers. The Company has concluded that it acts as principal rather than agent in these transactions under ASC 606-10-55-36 through 55-40, because it controls each product before transfer to the affiliate, is primarily responsible for fulfilling the promise to deliver the product, bears inventory risk prior to transfer, and has discretion in establishing the price. Accordingly, affiliate revenue is recognized on a gross basis at the transaction price specified in the contract, net of discounts, when control transfers to the affiliate. See Note 7.
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. Revenue is recognized when control transfers in accordance with contractual terms.
Certain CMS contracts include multiple promised goods and services, such as the manufacture, delivery, and installation of laser marking and related systems. For these contracts, the Company evaluates whether the promised goods and services are distinct performance obligations, allocates the transaction price to each, and recognizes revenue for equipment upon transfer of control and revenue for delivery and installation services as those services are performed. For certain CMS projects that are customized in nature and expected to extend beyond six months, the Company recognizes revenue over time using a percentage-of-completion method. Under this method, revenue is recognized based on progress toward completion, which is generally measured based on costs incurred relative to total estimated project costs.
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 consolidated 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.
| 12 |
Deferred revenue primarily consists of customer deposits received for orders not yet initiated or for advance billing arrangements not yet recognized under ASC 606. Contract liabilities primarily represent billings and cash collections related to performance obligations for which revenue recognition criteria have not yet been satisfied. Management evaluates balances each reporting period to ensure classification remains appropriate.
The
balance of deferred revenue as of September 30, 2026 and December 31, 2025 was $
The following table presents the change in deferred revenue:
SCHEDULE OF CHANGES IN DEFERRED REVENUE
| Nine Months Ended | Nine Months Ended | |||||||
| September 30, 2026 | September 30, 2025 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Deferred revenue, beginning of period | $ | $ | ||||||
| Customer deposits received | ||||||||
| Revenue recognized | ( | ) | ( | ) | ||||
| Reclassifications | ( | ) | ( | ) | ||||
| Deferred revenue, end of period | $ | $ | ||||||
Contract Assets and Liabilities
Given
the nature of the revenue recognition process, the Company generates contract liabilities (to the extent that a customer pays on project
progress before the Company fulfils its performance obligations under a contract) or contract assets (to the extent that the Company
has earned by satisfying performance obligations but has not yet billed the customer). Contract assets represent a right to receive payment
in the future once certain conditions are met per the terms of the contract. The balance of contract assets and liabilities as of September
30, 2026, were $
The following table presents the change in the Company’s net contract liability position:
SCHEDULE OF CHANGE IN COMPANY’S NET CONTRACT LIABILITY
| Nine Months Ended | Year Ended | |||||||
| September 30, 2026 | December 31, 2025 | |||||||
| (Unaudited) | (Audited) | |||||||
| Net contract liability, beginning of period | $ | $ | ||||||
| Amounts invoiced | ||||||||
| Revenue recognized | ( | ) | ( | ) | ||||
| Net contract liability, end of period | $ | $ | ||||||
The net contract liability consists of the following:
SCHEDULE OF NET CONTRACT LIABILITY
As of | As of | |||||||
| September 30, 2026 | December 31, 2025 | |||||||
| (Unaudited) | (Audited) | |||||||
| Contract assets | $ | $ | ||||||
| Contract liabilities | ( | ) | ( | ) | ||||
| Net contract liability | $ | ( | ) | $ | ( | ) | ||
| 13 |
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 commercially obsolete 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, except where contractual terms require transfer upon end-customer sale.
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.
The Company values its equity awards using the Black-Scholes option-pricing model, and accounts for forfeitures when they occur. Use of the Black-Scholes option pricing model requires the input of subjective assumptions, including expected volatility, expected term, and a risk-free interest rate. The expected volatility is based on the historical volatility of the Company’s common stock, calculated utilizing a look-back period approximately equal to the contractual life of the stock option being granted. The expected life of the stock option is calculated as the mid-point between the vesting period and the contractual term (the “simplified method”). The risk-free interest rate is estimated using comparable published federal funds rates.
Derivatives and Liability-Classified Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Equity-classified warrants are recorded within additional paid-in capital and are not subsequently remeasured. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.
The Company uses Level 3 inputs for its valuation methodology for the derivative liabilities as their fair values are determined using a Black-Scholes option pricing model that incorporates significant unobservable inputs, principally expected volatility and expected life. The Company’s derivative liabilities are adjusted to reflect fair value at each reporting date, with any increase or decrease in the fair value being recorded in the statement of operations.
To determine the number of authorized but unissued shares available to satisfy outstanding convertible securities, the Company uses a sequencing method to prioritize its convertible securities as prescribed by ASC 815-40-35, Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40-35). At each reporting date, the Company reviews its convertible securities to determine their classification is appropriate.
| 14 |
Lease
The Company leases certain corporate office space under lease agreements. The Company determines whether a contract contains a lease at contract inception. A contract is a lease if it conveys the right to control the use of the identified asset for a period in exchange for consideration. Control is determined based on the right to obtain all of the economic benefits from use of the identified asset and the right to direct the use of the identified asset. Operating lease right-of-use assets (“ROU”) represent the right to use an underlying asset for the lease term, and operating lease liabilities represent the obligation to make lease payments. Lease liabilities are recognized at the present value of the future minimum lease payments over the lease term at the commencement date. Operating lease expense is recognized on a straight-line basis over the lease term and is included in the general and administrative line in the Company’s consolidated statements of operations. The Company’s operating lease arrangements did not materially change during the nine months ended September 30, 2026. Accordingly, the disclosures required under ASC 842 should be read in conjunction with the lease disclosures included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.
Income Taxes
The
Company accounts for income taxes using the asset and liability method and establishes a valuation allowance when it is more likely than
not that deferred tax assets will not be realized. The Company did not recognize an income tax benefit for the three and nine months
ended September 30, 2026 and 2025. Net operating losses generated during the nine months ended September 30, 2026, resulted in a material
increase in the gross deferred tax asset and corresponding valuation allowance from December 31, 2025. Following reassessment of all
available evidence, management concluded that a full valuation allowance remains appropriate as of September 30, 2026. The Company computes
its interim provision by applying an estimated annual effective tax rate to year-to-date pre-tax loss, adjusted for discrete items, in
accordance with ASC 740-270. The effective tax rate was
Earnings (Loss) Per Share
Basic net loss per share is calculated by dividing net loss by the weighted-average number of shares outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that shared in the earnings (loss) of the Company. Diluted earnings (loss) per share is computed by dividing the earnings (loss) available to stockholders by the weighted-average number of shares outstanding for the period and dilutive potential shares outstanding, unless such dilutive potential shares would result in anti-dilution.
The following table presents the computation of basic and diluted net loss per share:
SCHEDULE OF COMPUTATION OF BASIC AND DILUTED
September 30, 2026 (Unaudited) | September 30, 2025 (Unaudited) | September 30, 2026 (Unaudited) | September 30, 2025 (Unaudited) | |||||||||||||
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, 2026 (Unaudited) | September 30, 2025 (Unaudited) | September 30, 2026 (Unaudited) | September 30, 2025 (Unaudited) | |||||||||||||
| Numerator: | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Deemed dividend for common control acquisition | - | ( | ) | - | ( | ) | ||||||||||
| Deemed dividend for cashless exercise of warrants | - | ( | ) | - | ( | ) | ||||||||||
| Net loss attributable to common stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Denominator: | ||||||||||||||||
| Weighted average shares outstanding – basic and diluted | ||||||||||||||||
| Loss per share – basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Loss per share attributable to common stockholders – basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
The
following potentially dilutive securities were excluded from the computation of diluted net loss per share because their effect would
have been anti-dilutive:
| 15 |
Reclassifications
Certain prior period amounts have been reclassified to align with the current-period presentation.
Reclassification.
The Company has reclassified $
Correction of Previously Reported Amounts
Warrant Inducement
In
its Quarterly Report on Form 10-Q for the three months ended March 31, 2026, the Company reported the consideration transferred to holders
in connection with its March 2026 warrant inducement transaction as a deemed dividend of $
Management has subsequently determined that, under ASC 815-40-35-17(a), the consideration transferred in that transaction is properly recognized as a cost of the related equity offering and charged against the proceeds of that offering as a reduction of additional paid-in capital, rather than as a deemed dividend. Accordingly, the amounts presented in these condensed consolidated financial statements for the nine months ended September 30, 2026 reflect that treatment, and the Company has applied the same treatment to its April and July 2026 warrant inducement transactions.
The
correction has no effect on net loss, net loss per share, total assets, total liabilities, total stockholders’ equity or any category
of cash flows for any period presented. Its only effects on amounts previously reported for the three months ended March 31, 2026 are
the elimination of the $
Distribution to Affiliates
In
its Quarterly Reports on Form 10-Q for the three months ended March 31, 2026 and the three and six months ended June 30, 2026, the Company
did not record certain shared operating costs attributable to affiliated entities under the Company’s historical cost-allocation
methodology. These costs primarily consisted of payroll, rent, utilities and related overhead incurred by the Company for the benefit
of affiliated entities. The omitted allocations were $
Under
the Company’s established policy, the portion of shared operating costs attributable to affiliated entities is recognized as a
reduction of general and administrative expenses, with a corresponding distribution to affiliates recorded as a reduction of additional
paid-in capital. The omission described above resulted from the failure to apply that policy in the first and second quarters of 2026
and was not a change in accounting policy. Accordingly, the condensed consolidated financial statements included herein reflect an allocation
of $
| 16 |
The
revision reduced general and administrative expenses and net loss by $
Recent Accounting Pronouncements
In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides an optional practical expedient permitting an entity, when estimating expected credit losses on current accounts receivable and current contract assets arising from transactions accounted for under ASC 606, to assume that conditions as of the balance sheet date remain unchanged over the remaining life of the assets. ASU 2025-05 is effective for interim and annual periods beginning after December 15, 2025 and is applied prospectively. The Company elected the practical expedient effective January 1, 2026. Its adoption did not have a material impact on the Company’s condensed consolidated financial statements.
In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses which includes amendments that require disclosure in the notes to financial statements of specified information about certain costs and expenses, including purchases of inventory; employee compensation; and depreciation, amortization and depletion expenses for each caption on the income statement where such expenses are included. The amendments are effective for the Company’s annual periods beginning January 1, 2027, with early adoption permitted, and should be applied either prospectively or retrospectively. The Company is evaluating this ASU to determine its impact on the Company’s disclosures.
Other recent accounting pronouncements issued by the FASB, its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future financial statements.
NOTE 3 – ASSET ACQUISITION FROM ENTITY UNDER COMMON CONTROL
On
March 31, 2025, ICT Investments, LLC (“ICT”), an affiliated company under common control, acquired inventories and machinery
and equipment from ARCH Cutting Tools – Flushing, LLC (“ARCH”), related to their Beamer Laser Marking Systems (“Beamer”)
product line, for total cash consideration of $
The purchased assets were subsequently transferred to Fonon Quantum Technologies, Inc. (“FQTI”), an affiliate of both ICT and the Company.
On August 5, 2025, the Company acquired inventories and machinery and equipment associated with the Beamer Laser Marking Systems product line from FQTI.
Because the transaction was between entities under common control, the acquisition was accounted for in accordance with ASC 805-50, Transactions Between Entities Under Common Control. The acquired assets are recognized at their historical carrying amounts rather than at fair value, and no goodwill was recorded. The Beamer assets came under common control on March 31, 2025, when they were acquired by ICT. Under ASC 805-50, the Company’s financial statements for periods beginning on that date would reflect the transferred assets and their results of operations retrospectively. The Company has included those results from the date of the transfer to the Company and has determined that retrospective adjustment of the comparative period from April 1, 2025 would not have a material effect on the condensed consolidated financial statements for the nine months ended September 30, 2025. Periods prior to March 31, 2025 are not adjusted, as the assets were not then under common control.
| 17 |
NOTE 4 – NOTES PAYABLE
Notes payable consist of the following at September 30, 2026, and December 31, 2025:
SCHEDULE OF NOTES PAYABLE
September 30, 2026 | December 31, 2025 | |||||||
| (Unaudited) | (Audited) | |||||||
| District 2 Capital Fundor (past due at 12/31/25) | $ | - | $ | |||||
| Agile Capital Funding and Agile Lending | - | |||||||
| NPA Note Holders (in default at 12/31/25) | - | |||||||
| Debt discount | - | ( | ) | |||||
| Total notes payable, net of debt discount | $ | - | $ | |||||
Agile Capital Funding and Agile Lending
During
the year ended December 31, 2025, the Company entered into three separate business loan and security agreements (the “2025 Term
Loans”) with a lender for short-term loans provided by the lender or the lender’s assignees (collectively, the “Lenders”),
each maturing seven months from the date the amounts were borrowed. The 2025 Term Loans were secured by a blanket lien on the Company’s
assets and could be prepaid, subject to a prepayment fee equal to the aggregate amount of interest (at the contractual interest rate)
that would have been payable through the maturity date. During the year ended December 31, 2025, the Company borrowed an aggregate gross
amount of $
On
February 22, 2026, the Company entered into a separate business loan and security agreement with the same lender for an additional short-term
borrowing (the “2026 Term Loan”). The 2026 Term Loan, together with any assignments thereof, was provided by the Lenders,
matured thirty-two weeks from the date the amounts were borrowed, and was secured by a blanket lien on the Company’s assets. The
2026 Term Loan could be prepaid, subject to a prepayment fee equal to the aggregate amount of interest that would have been payable through
the maturity date at the contractual interest rate. The Company borrowed an aggregate gross amount of $
District 2 Capital Fundor
On
May 6, 2025, the Company issued a Promissory Note (the “District 2 Note”) in favor of District 2 Capital Fundor. The Company
promised to pay to the order of District 2 Capital Fundor not later than six months from date of the Note, the principal amount of $
NPA Note Holders
On
September 12, 2025, the Company entered into a Note Purchase Agreement (the “NPA”) with four holders (the “NPA Note
Holders”) pursuant to which it issued to such holders certain unsecured promissory notes (the “Notes”). The Notes are
(i) in the total principal amount of $
| 18 |
During
the nine months ended September 30, 2026, the Company satisfied and extinguished the NPA obligations in full. Settlement payments included
repayment of outstanding principal of $
Notes payable – related party
On
April 3, 2025, April 16, 2025, June 20, 2025, July 8, 2025, and July 12, 2025, the Company received from ICT Investments, the owner of
the majority of outstanding shares of the Company’s common stock, unsecured loans in the principal amount of $
Insurance Premium Financing
The
Company finances a portion of its annual insurance premiums through short-term installment arrangements with third-party premium finance
companies. The arrangements are repaid in monthly installments over the policy period and bear interest at rates specified in the related
agreements. Amounts outstanding under these arrangements were $
NOTE 5 – DERIVATIVE LIABILITY
On
August 27, 2025, pursuant to a Securities Purchase Agreement with Hudson Global Ventures, LLC (see Note 4), the Company issued a warrant
to purchase
During
the three and nine months ended September 30, 2026, the Company recognized gains from changes in fair value of derivative liabilities
of $
| 19 |
The following tables summarize the derivative liability:
SCHEDULE OF DERIVATIVE LIABILITY
September 30, 2026 | December 31, 2025 | |||||||
| Stock price | $ | $ | ||||||
| Risk free interest rate | % | % | ||||||
| Expected volatility | % | % | ||||||
| Expected life in years | ||||||||
| Expected dividend yield | % | % | ||||||
| Derivative liability, measurement input | % | % | ||||||
| Number of warrants | ||||||||
| Fair value of derivative liability | $ | $ | ||||||
The following table summarizes activity related to derivative liabilities for the nine months ended September 30, 2026:
SCHEDULE OF DERIVATIVE LIABILITY MEASURED AT FAIR VALUE ON A RECURRING BASIS
| Description | Amount | |||
| (Unaudited) | ||||
| Fair value of derivative liabilities at December 31, 2025 | $ | |||
| Change in fair value of derivative liabilities | ( | ) | ||
| Fair value of derivative liabilities at September 30, 2026 | $ | |||
The derivative liability is classified within Level 3 of the fair value hierarchy because the valuation model incorporates significant unobservable inputs, principally expected volatility and expected life. The table below sets out those inputs. There were no transfers into or out of Level 3 during the three and nine months ended September 30, 2026, or 2025.
The following table presents the Company’s liabilities measured at fair value on a recurring basis by level within the fair value hierarchy:
SCHEDULE OF LIABILITIES MEASURED AT FAIR VALUE ON RECURRING BASIS
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| September 30, 2026 | ||||||||||||||||
| Derivative liability | $ | — | $ | — | $ | $ | ||||||||||
| December 31, 2025 | ||||||||||||||||
| Derivative liability | $ | — | $ | — | $ | $ | ||||||||||
There were no transfers between levels of the fair value hierarchy during the three and nine months ended September 30, 2026 and 2025.
The fair value of the derivative liability is measured using unobservable inputs and is most sensitive to the Company’s common stock price and expected volatility. A significant increase in either input, in isolation, would result in a significantly higher fair value measurement, and a significant decrease in either input would result in a significantly lower fair value measurement.
The carrying amounts of cash and cash equivalents, short-term investments, accounts receivable, accounts payable and accrued expenses approximate fair value because of the short maturities of those instruments. The carrying amount of notes payable approximates fair value because the stated interest rates approximate current market rates for instruments with similar terms.
| 20 |
NOTE 6 – STOCKHOLDERS’ EQUITY
General
The following description of the Company’s capital stock and certain provisions of its amended and restated certificate of incorporation and amended and restated bylaws are summaries and are qualified in their entirety by reference to such documents, copies of which have been previously filed with the Securities and Exchange Commission. The summary below should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.
Preferred Stock
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value: $ | |
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| ● | Issued:
There were |
Common Stock
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value: $ | |
| ● | Authorized:
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| ● | Issued:
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| ● | Outstanding:
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Common shares transactions
February 2026 public offering
On
February 9, 2026, the Company completed a public offering of
The Company evaluated the Series A-1, A-2, and placement agent warrants under ASC 815, Derivatives and Hedging, including ASC 815-40 related to contracts in an entity’s own equity, and concluded that such warrants qualify for equity classification. Accordingly, the fair value assigned to the warrants was recorded within stockholders’ equity at issuance and is not subsequently remeasured through earnings. Offering costs and selling concessions associated with the offering were recorded as reductions of additional paid-in capital.
September 2026 public offering
On
September 14, 2026, the Company completed a public offering of
The Company evaluated the Series B-1, B-2 and placement agent warrants under ASC 815, Derivatives and Hedging, including ASC 815-40 related to contracts in an entity’s own equity, and concluded that such warrants qualify for equity classification. Accordingly, the fair value assigned to the warrants was recorded within stockholders’ equity at issuance and is not subsequently remeasured through earnings. Offering costs and selling concessions associated with the offering were recorded as reductions of additional paid-in capital.
Common stock issued upon exercise of warrants associated with February 2026 public offering
During
the three months ended March 31, 2026, holders exercised an aggregate of
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Warrant Inducement Offering
March Inducement Agreements
On
March 15, 2026, the Company entered into inducement agreements with certain holders of existing warrants originally issued in September
2025 at an exercise price of $
In
connection with the inducement transactions, the Company issued to the exercising holders (i) Series A-3 Common Stock purchase warrants
to purchase an aggregate of
The
fair value of the Series A-3 and Series A-4 warrants issued to the exercising holders was $
The
March inducement agreements required the Company to file a registration statement covering the resale of the shares underlying the Series
A-3 and Series A-4 warrants by April 14, 2026, and to use commercially reasonable efforts to cause it to be declared effective by May
14, 2026. A failure to meet either deadline obligates the Company to pay partial liquidated damages of
April Inducement Agreements
On
April 26, 2026, the Company entered into a warrant inducement agreement with certain holders of the Series A-1 and Series A-2 warrants
issued in its February 2026 public offering (the “Existing Warrants”). The holders exercised for cash an aggregate of
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As
consideration for the exercises, the Company issued unregistered Series A-5 warrants to purchase up to
The
Existing Warrants were exercised at their stated exercise price, and no term of the Existing Warrants was modified. The April New Warrants
were issued solely as consideration for the exercises. Their aggregate fair value of $
In
June 2026, holders exercised
The
inducement agreement required the Company to file a resale registration statement covering the shares issuable upon exercise of the April
New Warrants by May 26, 2026, and to have it declared effective by June 25, 2026. The Company filed the registration statement on July
10, 2026, and it was declared effective on July 16, 2026. Under the agreement, the Company is obligated to pay the holders partial liquidated
damages in cash equal to
July Inducement Agreements
On
July 16, 2026, the Company entered into inducement agreements with certain holders of its April New Warrants, under which the holders
agreed to exercise for cash an aggregate of
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As
consideration for the exercises, the Company issued unregistered Series A-7 warrants to purchase up to
The
April New Warrants were exercised at their stated exercise price, and no term of those warrants was modified. The July New Warrants were
issued solely as consideration for the exercises. Their aggregate fair value of $
Under
the inducement agreements the Company was required to file a registration statement covering the resale of the shares issuable upon exercise
of the July New Warrants within 30 calendar days of July 16, 2026 (August 15, 2026), and to use commercially reasonable efforts to cause
that registration statement to be declared effective within 60 calendar days of that date (September 14, 2026), or within 90 calendar
days in the case of a full review by the Securities and Exchange Commission. Upon a failure to meet either deadline, and on each monthly
anniversary thereof until cured, the Company would have been obligated to pay each holder cash partial liquidated damages equal to
Stockholder Approval
On
June 26, 2026, at a special meeting of stockholders, the Company’s stockholders approved the warrant inducement agreements dated
March 15, 2026 and April 26, 2026. As of the May 13, 2026 record date,
June Exercises of Series A-1, A-2, A-4, A-5 and A-6 Warrants
During
June 2026, holders exercised an aggregate of
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The
exercises of warrants issued under the March 15 and April 26, 2026 warrant inducement agreements consisted of exercises of Series A-4
warrants by one holder on June 3 and June 8, 2026, and cashless exercises of
During
the three months ended September 30, 2026, holders exercised an additional
Under their terms and the related warrant inducement agreements, the Series A-4, A-5 and A-6 warrants were not exercisable until the Company obtained stockholder approval, which it obtained on June 26, 2026 (see “Stockholder Approval” below). The exercises described above therefore occurred before the date on which those warrants became exercisable. In addition, the shares issued upon the cashless exercises of the Series A-5 and A-6 warrants were not covered by an effective registration statement and did not qualify for resale under Rule 144. The shares issued upon exercise of the Series A-4 warrants were issued while the related resale prospectus was unavailable, because of the delayed filing of the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2026. All of these shares were issued without restrictive legends. The Company’s resale registration statement covering the shares issuable upon exercise of the Series A-5 and A-6 warrants was subsequently declared effective on July 16, 2026.
The Company, with the assistance of counsel, is evaluating the validity of these issuances, the effect of the June 26, 2026 stockholder approval on exercises that occurred before that date, and whether any of the shares are subject to recall, rescission, or repurchase and cancellation. As of the date of this report, no holder has asserted a claim, and the Company has not sought to recall or rescind any of the shares. As of September 30, 2026, the Company was unable to estimate the amount or range of any reasonably possible loss with respect to this matter, and no liability has been recorded. Based on the information currently available, the Company has concluded that classification of the shares within permanent stockholders’ equity is appropriate as of September 30, 2026.
Shares issued for services
On
February 24, 2026,
On
March 13, 2026, the Company issued
Shares issued for directors’ compensation
On
March 26, 2026, the Company granted
Summary of equity-classified warrants
A summary of equity-classified warrants activity for the nine months ended September 30, 2026, is presented below:
SCHEDULE OF WARRANTS ACTIVITY
| Number of Warrants | Exercise Price Range | |||||||
| Warrants outstanding at December 31, 2025 (1) | $ | |||||||
| Granted | $ | |||||||
| Exercised | ( | ) | $ | |||||
| Expired or forfeited | - | - | ||||||
| Warrants outstanding at September 30, 2026 (1) | $ | |||||||
| (1) |
The
outstanding equity-classified warrants had intrinsic value of approximately $
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NOTE 7 – RELATED PARTY TRANSACTIONS
At
September 30, 2026, ICT Investments (“ICT”), its Managing Partner Dmitriy Nikitin, and its affiliates Fonon Corporation and
Fonon Technologies, Inc. owned
The related party transactions between and among the Company and the affiliated entities described above are as follows.
a. Expenses
ICT
provides the Company accounting and various management services on an as-needed basis. During the nine months ended September 30, 2026
and 2025, the Company incurred approximately $
Dmitriy
Nikitin has personally guaranteed certain corporate credit card obligations of the Company. During the nine months ended September 30,
2026 and 2025, the Company paid him guaranty fees of approximately $
b. Distribution to Affiliates
During
the nine months ended September 30, 2026 and 2025, the Company made distributions to Fonon Corporation, an affiliate of ICT, totaling
$
c. Related-Party Revenue
For
the nine months ended September 30, 2026 and 2025, revenue from sales to Fonon Technologies, Inc., an affiliate of ICT, totaled $
d. Outstanding Liabilities
Accounts
payable due to ICT and its affiliates as of September 30, 2026 and December 31, 2025 were $
During
the nine months ended September 30, 2026, the Company repaid in full the outstanding principal of $
e. Royalties and Licensing Arrangements
The Company has entered into four technology licensing and service arrangements with the entities affiliated with ICT and Dmitriy Nikitin over the previous six years: the ICT Investments CleanTech License in January 2020, the Fonon Technologies Transition Services Agreement in November 16, 2022, the Fonon Technologies Cold Cutting License in October 18, 2023, and the Fonon Corporation Technology License in May 2024. To date, the Company has not paid and does not owe these entities any royalties resulting from those agreements.
f. Former Principal Financial Officer
On
May 7, 2026, the Company entered into a Master Services Agreement (the “MSA”) with The CFO Portal, LLC (“CFO Portal”),
the principal of which, Roman Franklin, served as the Company’s Principal Financial Officer, providing for a monthly retainer of $
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NOTE 8 – COMMITMENTS AND CONTINGENCIES
Registration Payment Obligations
At
September 30, 2026, the Company had accrued $
Settlement Agreements
In
January 2025, Aegis Capital Corp. filed suit against the Company in the U.S. District Court for the Southern District of New York (Case
No. 1:25-cv-00080-PKC), asserting breach of a 2024 placement agent agreement. On May 14, 2026, the parties entered into a settlement
agreement under which the Company agreed to pay $
In
April 2026, the Company settled counterclaims in a Florida contract action (Laser Photonics, LLC v. Photon Technologies, LLC) for $
NOTE 9 – SUBSEQUENT EVENTS
Management evaluated subsequent events through November 12, 2026, the date these condensed consolidated financial statements were issued, and determined that there were no subsequent events requiring recognition or disclosure in the condensed consolidated financial statements, other than as described below and elsewhere in these notes.
1. Changes in executive officers and directors
On
October 6, 2026, Timothy A. Peterman became the Company’s permanent Chief Financial Officer and Secretary, continuing as principal
financial officer and principal accounting officer. His employment agreement provides for a
On
October 12, 2026, Dmitriy Nikitin joined the Board as Executive Chairman and assumed principal executive officer responsibilities. His
employment agreement provides for a three-year term, annual base salary of $
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On October 13, 2026, Wayne Tupuola, who had been on a leave of absence since June 2026, resigned as Chief Executive Officer and as a director. On that same date, Ann Tewari ceased serving as Interim President and returned to her prior position as Global Vice President of Operations and Strategy.
On
October 26, 2026, the Company entered into a consulting and release agreement with Mr. Tupuola effective October 14 2026. The agreement
provides for consulting services as an independent contractor at an annualized fee of $
On November 3, 2026, the Board of Directors appointed Sanjay Adhav and Timothy A. Peterman, the Company’s Chief Financial Officer, as directors to fill two existing vacancies on the Board, effective immediately. Each will hold office in accordance with the Company’s Certificate of Incorporation and Bylaws. There are no arrangements or understandings between either Mr. Adhav or Mr. Peterman and any other person pursuant to which either was appointed as a director, and neither is a party to any transaction with a related person required to be disclosed under Item 404(a) of Regulation S-K. The appointments were reported in the Company’s Current Report on Form 8-K filed November 9, 2026.
2. Lease amendment
On
October 15, 2026, the Company and the lessor executed an amendment to the lease of the Company’s Metric Drive facility in Winter
Park, Florida, consisting of approximately
3. Letter of intent
On October 19, 2026, the Company entered into a letter of intent with ICT Investments, LLC concerning the Company’s potential acquisition of Fonon Technologies, Inc. and related businesses affiliated with Executive Chairman Dmitriy Nikitin. The proposed transaction is intended to consolidate certain technology rights and related operations within the Company. The acquisition terms are non-binding and remain subject to due diligence, negotiation of definitive agreements and applicable approvals. Certain provisions of the letter of intent concerning exclusivity, confidentiality, expenses and governing law are binding. Execution of the letter of intent does not commit the Company to complete an acquisition, and completion is uncertain.
4. Nasdaq listing notice
On October 20, 2026, the Company received a Nasdaq minimum bid-price deficiency notice. The initial compliance period expires April 19, 2027. See “Nasdaq listing compliance” in Management’s Discussion and Analysis.
5. Name change and amended bylaws
Effective November 4, 2026, the Company filed a Certificate of Amendment to its Certificate of Incorporation changing its corporate name from Laser Photonics Corporation to LASE Corp., and adopted amended and restated bylaws. The Company’s common stock continues to trade on the Nasdaq Capital Market under the symbol “LASE.”
In addition to reflecting the corporate name and Delaware law, the bylaws address advance notice and procedural requirements for stockholder proposals and director nominations, special meetings, director vacancies and removal, board and committee procedures, and indemnification and advancement of expenses. The bylaws retain the one-third stockholder quorum requirement and provide that a majority of the authorized number of directors constitutes a board quorum.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and the notes to those financial statements appearing elsewhere in this Report.
Certain statements in this Report constitute forward-looking statements. These forward-looking statements include statements which involve risks and uncertainties, regarding, among other things, (a) our projected sales, profitability, and cash flows, (b) our growth strategy, (c) anticipated trends in our industry, (d) our future financing plans, and (e) our anticipated needs for, and use of, working capital. They are generally identifiable by use of the words “may,” “will,” “should,” “anticipate,” “estimate,” “plan,” “potential,” “project,” “continuing,” “ongoing,” “expects,” “management believes,” “we believe,” “we intend,” or the negative of these words or other variations on these words or comparable terminology. 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 LASE Corp., a Delaware corporation.
Overview
We are an emerging laser technology company developing laser and directed-energy solutions for the defense, pharmaceutical, semiconductor and industrial markets. Through internal development, strategic acquisitions and partnerships, we intend to expand our technology portfolio, strengthen our advanced manufacturing capabilities and scale the enterprise profitably.
We were formed under the laws of Wyoming on November 8, 2019, and changed our domicile to Delaware on March 5, 2021. Effective November 4, 2026, we changed our name from Laser Photonics Corporation to LASE Corp.
Our principal executive offices are located at 250 Technology Park, Lake Mary FL, 32746, and our telephone number is (407) 804-1000. Our website address is www.lase.com. Our annual reports, quarterly reports, current reports on Form 8-K and amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”), and other information related to us, are available, free of charge, on that website as soon as we electronically file those documents with, or otherwise furnish them to, the SEC. Our website and the information contained therein, or connected thereto, are not and are not intended to be incorporated into this Quarterly Report on Form 10-Q.
Recent Developments
During and following the third quarter of 2026, we took steps to strengthen our balance sheet, expand our financial leadership and external securities law and financial reporting support, and focus our growth strategy on defense applications while continuing to serve our industrial, pharmaceutical and semiconductor markets.
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Strengthening Executive Leadership and Board Governance
Effective August 20, 2026, Carlos Gonzalez resigned from the Board, including his positions on the Audit, Compensation, and Nominating and Corporate Governance Committees. His resignation did not result from a disagreement concerning our operations, policies or practices.
On September 8, 2026, Timothy A. Peterman became Acting Chief Financial Officer and was subsequently appointed permanent Chief Financial Officer and Secretary, effective October 6, 2026. He continues as principal financial officer and principal accounting officer.
On October 12, 2026, Dmitriy Nikitin joined the Board as Executive Chairman and assumed principal executive officer responsibilities. Effective October 13, 2026, Wayne Tupuola resigned as Chief Executive Officer and director, and Ann Tewari returned from Interim President to Global Vice President of Operations and Strategy. We do not presently plan to appoint a separate Chief Executive Officer.
On November 3, 2026, the Board appointed Sanjay Adhav and Timothy A. Peterman, our Chief Financial Officer, as directors to fill two existing vacancies.
Note 9 to our accompanying condensed consolidated financial statements describes the subsequent appointments and employment arrangements.
Strengthening Our Balance Sheet and Financial Governance
On July 16, 2026, we entered into warrant exercise inducement agreements with certain holders of outstanding warrants. The transaction closed on July 20, 2026, generating gross proceeds of $2,465,358 and net proceeds of $2,183,333. The related warrant issuances and transaction terms are described in Note 6 to our accompanying condensed consolidated financial statements.
On July 20, 2026, following the Audit Committee’s review and recommendation, we appointed Rosenfield & Company, PLLC as our independent registered public accounting firm for 2026, replacing Weinberg & Company, P.A. We reported no disagreements with Weinberg or reportable events in the periods addressed by our July 24, 2026 Form 8-K.
On September 14, 2026, we completed a public offering of 10,500,000 shares of common stock and accompanying Series B-1 and Series B-2 warrants, generating aggregate gross proceeds of $7,875,000 and net proceeds of approximately $7,168,536. As of September 30, 2026, $6,000,000 of the net proceeds was held in a certificate of deposit maturing September 17, 2027. See Note 6 to our accompanying condensed consolidated financial statements.
On October 20, 2026, we announced the engagements of Sheppard, Mullin, Richter & Hampton LLP as outside securities counsel and CBIZ, Inc. as a financial reporting consultant. Sheppard Mullin advises on securities compliance, public-company reporting, governance and financing matters. CBIZ assists management with reporting procedures, accounting documentation and internal control practices. These engagements supplement management’s efforts to improve the reliability and consistency of our financial reporting.
Nasdaq listing notice. On October 20, 2026, we received a notice from Nasdaq that our common stock had not satisfied the minimum bid-price requirement. See Note 9 to our accompanying condensed consolidated financial statements.
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Focusing on Development of Defense Applications
We continued developing our directed-energy platform, Quantum Bullet, and its first application, the Laser Shield Anti-Drone System, or LSAD, with Fonon Technologies, an affiliated company.
In July, Fonon Technologies was selected to proceed to the second phase of the Shaw Air Force Base Battle Lab Commercial Solutions Opening evaluation under the rapid point-defense and multi-threat and swarm-defeat areas of interest. That phase contemplated a presentation addressing technical design, readiness, deployment timing, preliminary pricing and intellectual-property matters. Advancement in the evaluation process did not constitute a procurement award.
In August, we and Fonon Technologies reported discussions with U.S. Special Operations Command concerning LSAD’s potential operational applications. We also reported a controlled test at our Lake Mary facility in which the system detected, tracked and engaged a simulated drone target in under three seconds. The test used a decoy under controlled conditions; performance in operational environments remains subject to further testing and evaluation.
In October, we announced plans to present our Quantum Bullet platform at the I/ITSEC conference. Our development efforts include optical sensor disruption and additional directed-energy capabilities, with commercialization subject to further development, testing and customer acceptance.
Factors and Trends That Affect Our Operations and Financial Results
In reading our financial statements, you should be aware of the following factors and trends that our management believes are important in understanding our financial performance.
Supply Chain. We are experiencing increased lead times for certain parts and components purchased from third party suppliers; particularly electronic components. We, our customers and our suppliers, continue to face constraints related to supply chain and logistics, including availability of capacity, materials, air cargo space, sea containers and higher freight rates and import duties. Supply chain and logistics constraints are expected to continue for the foreseeable future and could affect 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.
On October 20, 2026, we received a notice from the Listing Qualifications Department of The Nasdaq Stock Market LLC advising that, based on the closing bid price of our common stock for the preceding 30 consecutive business days, we were not in compliance with the minimum bid price requirement of $1.00 per share under Nasdaq Listing Rule 5550(a)(2). The notice has no immediate effect on the listing or trading of our common stock. We have 180 calendar days, or until April 19, 2027, to regain compliance, which requires that the closing bid price of our common stock be at least $1.00 per share for a minimum of 10 consecutive business days, unless Nasdaq exercises its discretion to require a longer period. We may be eligible for an additional 180-day period if it satisfies the conditions in Listing Rule 5810(c)(3)(A), which may include effecting a reverse stock split. There can be no assurance that we will regain compliance or that our common stock will remain listed on The Nasdaq Capital Market. Receipt of the notice was reported on a Current Report on Form 8-K filed October 23, 2026.
Net sales. Our net sales have historically fluctuated from quarter to quarter. The increase or decrease in sales from a prior quarter 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.
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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.
General and administrative expenses. General and administrative expenses consist primarily of salaries and personnel-related costs, professional fees, insurance, SEC filing and compliance costs, public company expenses, and corporate overhead.
Sales and Marketing Expenses. Sales and marketing expenses consist primarily of personnel-related costs, advertising and promotional activities, customer acquisition efforts, travel, and commercial support functions.
Research and development expenses. We plan to continue to invest in research and development.. 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
Correction of Previously Reported Amounts.
Affiliate cost allocations under our historical cost-allocation methodology were omitted from the first and second quarters of 2026 and have been recorded in the quarters to which they relate. Results for the nine months ended September 30, 2026 include total affiliate cost allocations of $264,270, consisting of $88,090 attributable to each quarter. The previously reported first- and second-quarter amounts have been revised accordingly. The change affects the quarterly timing of expense recognition but does not change the $264,270 reflected in the nine-month results. This matter is described in Note 2 to the condensed consolidated financial statements.
As first disclosed in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2026, we corrected the accounting for consideration transferred in our March 2026 warrant inducement transaction. The $1,512,480 previously presented as a deemed dividend was reclassified as a cost of the related equity offering within additional paid-in capital. The correction did not affect net loss, total assets, total liabilities, total stockholders’ equity or cash flows, but reduced the previously reported loss attributable to common stockholders and the related basic and diluted loss per share. This matter is described in Note 2 to the condensed consolidated financial statements.
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Financial Results For The Three Months Ended September 30, 2026
Net Sales increased $226,392, or 24.6%, to $1,145,676 for the three months ended September 30, 2026, compared with $919,284 in the same prior-year period. Management attributes the increase in part to improved production discipline and execution. This represents our first quarter of year-over-year net sales growth in 2026 and our first since the fourth quarter of 2025.
Cost of Sales and Gross Loss. Cost of sales increased $242,043, or 17.9%, to $1,594,923, compared with $1,352,880 in the same prior-year period. Net sales increased at a faster rate than cost of sales, improving gross margin by approximately 800 basis points to negative 39.2%, compared with negative 47.2%. Gross loss was $449,247, compared with $433,596. Manufacturing costs remained above net sales despite the improvement in gross margin.
Operating Expenses. Total operating expenses decreased $943,125, or 33.9%, to $1,840,594, compared with $2,783,719 in the same prior-year period. General and administrative expenses decreased $1,171,271 to $1,092,112, partially offset by increases in sales and marketing expenses of $153,067 to $495,259 and research and development expenses of $75,079 to $253,223. Our development priorities increasingly emphasize defense applications and advancement toward commercialization. The reported expense reduction includes $88,090 of shared costs allocated to affiliates for the quarter, as described in Note 2 of our accompanying condensed consolidated financial statements.
Operating Loss and Other Expense. Operating loss decreased $927,474, or 28.8%, to $2,289,841, compared with $3,217,315 in the same prior-year period, reflecting lower operating expenses, partially offset by a modest increase in gross loss. Other expense decreased $1,211,625, or 84.2%, to $226,668, primarily reflecting an 86.4% reduction in net interest expense to $196,291 following debt repayments during 2026. Other expense also reflected $148,855 of registration payment arrangement expense, partially offset by a $118,478 noncash gain from remeasurement of the derivative liability.
Net Loss. Net loss decreased $2,139,099, or 46.0%, to $2,516,509 for the three months ended September 30, 2026, compared with $4,655,608 in the same prior-year period. This represents our first year-over-year improvement in quarterly net results since the fourth quarter of 2024. The improvement reflects a $927,474 reduction in operating loss and a $1,211,625 reduction in other expense, primarily driven by lower operating expenses and net interest expense.
Basic and diluted loss per share attributable to common stockholders was $0.05, compared with $1.09 in the same prior-year period. The prior-year calculation includes $14,079,821 of deemed dividends, which increased loss attributable to common stockholders but did not affect net loss.
Financial Results For The Nine Months Ended September 30, 2026
Net Sales. Third-quarter net sales growth of $226,392, or 24.6%, was outweighed by year-over-year declines of $1,374,729, or 60.0%, in the first quarter and $792,670, or 30.5%, in the second quarter. Consequently, net sales for the nine months ended September 30, 2026 decreased $1,941,007, or 33.4%, to $3,867,534, compared with $5,808,541 in the same prior-year period. The decline reflects a $1,149,684 decrease in laser-cleaning systems and related service revenue and the absence of affiliate revenue, which totaled $791,992 in 2025.
Cost of Sales and Gross Loss. Cost of sales increased $313,784, or 7.4%, to $4,552,759, while net sales declined 33.4%, resulting in a gross loss of $685,225 compared with gross profit of $1,569,566. The approximately 800-basis-point year-over-year improvement in third-quarter gross margin was outweighed by declines of approximately 3,400 basis points in the second quarter and 8,170 basis points in the first quarter. Consequently, nine-month gross margin declined approximately 4,470 basis points to negative 17.7%, compared with positive 27.0% in the same prior-year period. The deterioration reflects lower laser-cleaning and affiliate revenue without a corresponding reduction in the supporting cost base, and includes inventory reserve charges of $225,924.
Operating Expenses. Total operating expenses for the nine months ended September 30, 2026 decreased $729,543, or 10.0%, to $6,592,551, compared with $7,322,094 in the same prior-year period. The third-quarter reduction in operating expenses of $943,125, or 33.9%, together with a first-quarter reduction of $173,738, or 7.0%, more than offset the second-quarter increase of $387,320, or 18.8%. General and administrative expenses decreased $1,382,270, partially offset by increases in sales and marketing expenses of $579,524 and research and development expenses of $73,203. The expense mix reflects greater emphasis on commercial activities and defense-related product development. The reported reduction includes $264,270 of shared costs allocated to affiliates, consisting of $88,090 in each quarter, as described in Note 2.
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Operating Loss and Other Expense. Our nine-month operating loss increased $1,525,248, or 26.5%, to $7,277,776, compared with $5,752,528 in the same prior-year period. The third-quarter improvement in operating loss of $927,474, or 28.8%, was outweighed by year-over-year increases in operating loss of $1,115,204 in the first quarter and $1,337,518 in the second quarter. The first-half increases reflected lower net sales and gross margin, while the third-quarter improvement primarily reflected lower operating expenses.
The third-quarter reduction in other expense of $1,211,625 more than offset increases of $62,267 in the first quarter and $78,928 in the second quarter. Nine-month other expense therefore decreased $1,070,430, or 45.4%, to $1,287,275, primarily reflecting lower net interest expense following debt repayments. The nine-month period also included $506,015 of registration payment arrangement expense, partially offset by a $234,671 noncash gain from remeasurement of the derivative liability.
Net Loss. The third-quarter reduction in net loss of $2,139,099, or 46.0%, was outweighed by year-over-year increases of $1,177,471 in the first quarter and $1,416,446 in the second quarter. Consequently, net loss for the nine months ended September 30, 2026 increased $454,818, or 5.6%, to $8,565,051, compared with $8,110,233 in the same prior-year period. The third-quarter improvement reflects lower operating expenses and net interest expense, which substantially offset the first-half increases in net loss.
Basic and diluted loss per share attributable to common stockholders was $0.22, compared with $1.46 in the same prior-year period. The prior-year calculation includes $14,079,821 of deemed dividends, which increased loss attributable to common stockholders but did not affect net loss.
Liquidity and Capital Resources
Cash and Liquidity Overview. At September 30, 2026, we held cash and an unrestricted certificate of deposit totaling $7,638,650, an increase of $4,014,121, or 110.7%, compared with $3,624,529 at September 30, 2025. The balance includes $6,000,000 in a certificate of deposit that may be withdrawn prior to maturity without penalty and is not pledged or otherwise restricted. The improvement reflects proceeds from public offerings and warrant exercises, partially offset by operating cash requirements, debt repayments and other expenditures. The September public offering generated net proceeds of approximately $7.2 million, materially strengthening our liquidity. Working capital improved to $3,743,895 from a deficit of $7,344,637 at December 31, 2025.
The following is a summary of our cash flows provided by (and used in) operating, investing, and financing activities for the nine-month periods ended September 30, 2026, and September 30, 2025.
| Nine Months Ended September 30 | ||||||||
| 2026 | 2025 | |||||||
| Net cash used in operating activities | $ | (7,435,784 | ) | $ | (1,429,652 | ) | ||
| Net cash used in investing activities | (6,098,474 | ) | (22,560 | ) | ||||
| Net cash provided by financing activities | 14,522,569 | 4,542,870 | ||||||
| Net cash increase for period | 988,311 | 3,090,658 | ||||||
| Cash at the beginning of period | 650,339 | 533,871 | ||||||
| Cash at end of period | $ | 1,638,650 | $ | 3,624,529 | ||||
As of September 30, 2026, we had cash of $1,638,650, short-term investments of $6,000,000, total current assets of $10,011,601, and total current liabilities of $6,267,706. We had working capital of $3,743,895, compared with a working capital deficit of $7,344,637 as of December 31, 2025. The improvement in working capital was primarily attributable to our February and September 2026 public offerings, proceeds received from warrant exercises and the March, April and July 2026 warrant inducement transactions, and the repayment of substantially all outstanding debt obligations during the period.
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Operating Activities
Net cash used in operating activities was $7,435,784 for the nine months ended September 30, 2026, compared with $1,429,652 for the nine months ended September 30, 2025. Operating cash outflows during the current period were primarily driven by our net loss of $8,565,051, partially offset by non-cash items including depreciation and amortization of $349,397, amortization of the right-of-use asset of $415,151, stock issued for services and directors’ compensation of $134,460, amortization of debt discount, and financing costs recognized as additional note principal on default, less the gain of $234,671 on the change in fair value of the derivative liability. Working capital changes provided $244,150 in aggregate, with an increase in contract liabilities of $1,555,240 and decreases in inventories of $175,623, contract assets of $169,998 and deferred financing costs of $125,000, largely offset by decreases in accounts payable of $547,968, lease liabilities of $394,961, deferred revenue of $273,144 and accrued expenses of $56,160, and increases in accounts receivable of $343,044 and prepaid and other current assets of $166,434.
Investing Activities
Net cash used in investing activities was $6,098,474 for the nine months ended September 30, 2026, compared with $22,560 for the nine months ended September 30, 2025. Investing activity during the current period consisted of $6,000,000 placed in short-term investments from the proceeds of our September 2026 public offering, together with $98,474 of purchases of property and equipment and intangible assets.
Financing Activities
Net cash provided by financing activities increased to $14,522,569 for the nine months ended September 30, 2026, compared with $4,542,870 in the same prior-year period. We generated $19,558,485 of net proceeds from common stock and warrant issuances and exercises and received $1,591,750 of net borrowing proceeds. These inflows were partially offset by $6,363,396 of repayments of third-party and related-party notes and $264,270 classified as distributions to an affiliate. The capital-raising transactions strengthened liquidity while enabling the Company to repay our outstanding note obligations. Our ongoing funding requirements are discussed under “Going Concern.”
Going Concern
Our liquidity improved materially during 2026 following our capital-raising transactions. During the period, we also repaid substantially all outstanding note obligations. During and following the third quarter, management strengthened our financial leadership and engaged additional professional legal and accounting resources to help us improve our financial reporting, governance and internal control processes.
Nevertheless, we continue to incur operating losses and negative operating cash flows. Our ability to meet obligations as they become due depends on available liquidity, operating performance and our ability to obtain additional financing when needed.
For the nine months ended September 30, 2026, we incurred a net loss of $8,565,051 and used $7,435,784 of cash in operating activities, or approximately $0.8 million per month.
At September 30, 2026, we held cash of $1,638,650 and short-term investments of $6,000,000, consisting of a certificate of deposit, providing $7,638,650 of liquid resources in the aggregate. Those resources represented approximately nine months of operating cash requirements at the historical average monthly usage rate. This historical comparison is not a forecast of future cash requirements; management’s going-concern assessment covers the one-year period following issuance of these financial statements.
Management expects that we will require additional financing to fund operations and planned expenditures over the next twelve months. We have historically financed our operations through borrowings and sales of equity securities, including the February and September 2026 public offerings and the March, April and July 2026 warrant inducement transactions described above.
There can be no assurance that additional financing will be available when needed or on acceptable terms. Management’s plans do not presently alleviate substantial doubt about our ability to continue as a going concern for one year after issuance of these financial statements. See Note 1 to the condensed consolidated financial statements.
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Off-Balance Sheet Arrangements
As of September 30, 2026, we did not maintain any material off-balance sheet arrangements, including obligations under guaranteed contracts, retained or contingent interests in transferred assets, obligations under certain derivative instruments, or obligations arising from variable interest entities.
Critical Accounting Estimates
The preparation of our condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Management bases its estimates on historical experience and on other assumptions believed to be reasonable under the circumstances, and actual results may differ from those estimates.
Our critical accounting estimates are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2025. There have been no material changes to those critical accounting estimates during the nine months ended September 30, 2026. The estimates most significant to the condensed consolidated financial statements for the period were the valuation of equity-classified and liability-classified warrants issued in connection with our public offerings and warrant inducement transactions, the measurement of revenue recognized over time and the related contract assets and contract liabilities, the evaluation of our ability to continue as a going concern, and the valuation allowance recorded against deferred tax assets.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are a smaller reporting company as defined in Rule 12b-2 under the Securities Exchange Act of 1934 and is not required to provide the information required by this Item. Notwithstanding this exemption, we provide the following disclosure.
Interest Rate Risk
Our debt obligations primarily bear fixed interest rates and management does not believe changes in market interest rates had a material impact on our financial position, results of operations, or cash flows during the three and nine months ended September 30, 2026. At September 30, 2026, we held $6,000,000 in a fixed-rate certificate of deposit maturing September 17, 2027. Because the instrument bears a fixed rate, changes in market interest rates would not affect the interest income we earn on it prior to maturity; a decline in prevailing rates would, however, reduce the yield available on reinvestment. A hypothetical 100 basis point change in interest rates would change annual interest income on an equivalent reinvested balance by approximately $60,000.
Derivative Instruments and Foreign Currency Risk
Our outstanding warrants were evaluated under ASC 815-40. The warrant issued to Hudson Global Ventures, LLC is classified as a derivative liability and was carried at a fair value of $104,231 as of September 30, 2026. All other outstanding warrants are classified as equity instruments and are not accounted for as derivative liabilities. These include the Series A-1 through Series A-8 warrants, the Series B-1 and B-2 warrants and the placement agent warrants issued during 2026. The fair value of the derivative liability is measured using Level 3 inputs and is sensitive to changes in our common stock price and expected volatility. Changes in fair value resulted in gains of $118,478 and $234,671 for the three and nine months ended September 30, 2026, respectively.
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We do not currently have any sales, own any assets or operate any facilities outside the United States and, consequently, we are not affected by foreign currency fluctuations or exchange rate changes. As of September 30, 2026, we had no outstanding notes payable, following repayment in full of the Agile 2026 Term Loan in September 2026. Our remaining third-party financing obligation was an insurance premium financing arrangement of approximately $39,461, which is included in accrued expenses in the condensed consolidated balance sheet. Overall, we believe that our exposure to interest rate risk and foreign currency exchange rate changes was not material to our financial condition or results of operations as of September 30, 2026.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
During the quarter ended September 30, 2026, we added financial leadership through the appointment of a new Acting Chief Financial Officer and expanded technical accounting and executive-level review of significant financing and equity transactions. These changes were intended to strengthen oversight of financial reporting and the identification and accounting assessment of non-routine transactions.
These changes are reasonably likely to materially affect our internal control over financial reporting as the related review procedures are implemented and become established. They did not remediate the material weaknesses existing at September 30, 2026, which require further implementation and testing of controls.
Other than the changes described above and the remediation activities discussed in this Item, there were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of disclosure controls and procedures as of September 30, 2026. Based on that evaluation, management concluded that disclosure controls and procedures were not effective because of the material weaknesses described below.
The material weaknesses concern the financial close and review process; identification, approval and disclosure of related-party transactions; segregation of duties and monitoring; documentation of accounting policies and controls; authorization and issuance of equity securities; and accounting for complex financing and warrant transactions, including registration payment obligations and valuation assumptions.
Material Weaknesses in Internal Control Over Financial Reporting
As previously disclosed in our Annual Reports on Form 10-K for the years ended December 31, 2025 and 2024, management identified the following material weaknesses in internal control over financial reporting, each of which remained unremediated as of September 30, 2026:
| ● | Continuing Weakness: The system of internal controls failed to identify multiple journal entries that were identified by the external auditor. | |
| ● | Continuing Weakness: Lack of a formal control process related to the identification and approval of related party transactions. | |
| ● | Continuing Weakness: We are not able to fully maintain segregation of duties within our financial operations due to our reliance on limited personnel in the finance function. | |
| ● | Continuing Weakness: As a smaller company, we lack sufficient resources to perform the internal audit function. | |
| ● | Continuing Weakness: Documentation of all proper accounting procedures is not yet complete. |
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As previously disclosed in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2026, management identified the following additional material weaknesses, each of which remained unremediated as of September 30, 2026:
| ● | Continuing Weakness: We did not maintain effective controls over the authorization and issuance of our equity securities in connection with warrant and other complex financing transactions. During the quarter ended June 30, 2026, shares of common stock were issued upon the exercise of Series A-4, Series A-5, and Series A-6 warrants before those warrants had become exercisable — exercisability being conditioned on receipt of the stockholder approval required under applicable Nasdaq Listing Rules, which was obtained on June 26, 2026 — and certain of those shares were issued without registration under the Securities Act of 1933, as amended, or an appropriate restrictive legend. As a result, we did not have effective controls to ensure that our equity securities were issued only after the underlying instruments had become exercisable in accordance with their terms and in compliance with applicable securities laws, the governing warrant agreements, and applicable stock exchange listing requirements. The occurrence created a reasonable possibility that a material misstatement of our financial statements would not be prevented or detected on a timely basis, and could expose us to noncompliance with securities laws and Nasdaq listing requirements in the future. | |
| ● | Continuing Weakness: We did not maintain effective controls over the identification and application of the accounting guidance applicable to non-routine equity and warrant transactions. Management’s initial application of the accounting for our March 2026 warrant inducement transaction did not reflect the guidance in ASC 815-40-35-14 through 35-18 applicable to modifications of equity-classified warrants, and the resulting presentation of a deemed dividend and of loss per share attributable to common stockholders in the our Quarterly Report on Form 10-Q for the three months ended March 31, 2026 required correction. During the quarter ended September 30, 2026, management further identified that (i) the registration payment arrangement arising under our March 2026 warrant inducement agreements had not been identified or recorded, and the related partial liquidated damages were recorded in the current period; and (ii) the expected term used to measure the warrants issued in the July 2026 warrant inducement transaction did not reflect the effective date of the related resale registration statement, and the measurement was corrected in the current period. These control deficiencies created a reasonable possibility that a material misstatement of our financial statements would not be prevented or detected on a timely basis. |
Remediation Activities
During the third quarter, we added financial leadership and undertook additional review of significant financing and equity transactions. Following quarter-end, we made additional leadership changes and engaged CBIZ and Sheppard Mullin to support financial reporting, internal control and legal initiatives.
Management’s remediation priorities include documented account reconciliations and journal-entry review; a complete related-party transaction register and approval process; pre-issuance verification of equity authorization and contractual conditions; and written technical accounting and independently reviewed valuation analyses for significant financing transactions. These measures remain subject to implementation and testing. The material weaknesses had not been remediated as of September 30, 2026.
Notwithstanding the material weaknesses described above, management performed additional review and validation procedures, including expanded technical accounting review and executive-level review of significant financing and equity transactions, and concluded that the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial condition, results of operations, and cash flows in conformity with U.S. GAAP.
Changes in Internal Controls over Financial Reporting
Other than the ongoing remediation activities associated with the previously identified material weaknesses described above, there were no changes in our internal control over financial reporting during the quarter ended September 30, 2026, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
From time to time, we are involved in legal proceedings, claims, and other disputes arising in the normal course of our business, including commercial, contractual, employment, and collection matters. We are currently party to certain such proceedings. While the outcome of any litigation is inherently uncertain and cannot be predicted with assurance, based on information currently available, management does not believe that the ultimate resolution of these matters, individually or in the aggregate, will have a material adverse effect on our business, financial condition, results of operations, or cash flows. Regardless of outcome, litigation can be costly and time-consuming and can divert the attention of management and other personnel from the operation of our business.
ITEM 1A. RISK FACTORS.
There have been no material changes to the risk factors disclosed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025, except as set forth below.
Additional equity financings and exercises of outstanding warrants may substantially dilute existing stockholders.
Although our 2026 financings materially improved liquidity, we continue to incur operating losses and use cash in operations. We may require additional capital to fund operations, product development and commercialization. Financing may not be available when needed or on acceptable terms.
Additional equity financings and exercises of outstanding warrants may substantially dilute existing stockholders. At September 30, 2026, warrants to purchase 36,655,969 common shares were outstanding, compared with warrants to purchase 2,487,985 shares at December 31, 2025. Exercise proceeds depend on holder decisions, market conditions and contractual terms; certain warrants permit cashless exercise. Accordingly, outstanding warrants do not represent committed future financing.
Our common stock does not currently satisfy the Nasdaq minimum bid-price requirement, and we may be delisted.
On October 20, 2026, Nasdaq notified us that our common stock had failed its $1.00 minimum bid-price requirement for thirty consecutive business days. The notice did not immediately affect trading. Our initial compliance period ends April 19, 2027; compliance generally requires a closing bid of at least $1.00 for ten consecutive business days, or longer if Nasdaq requires.
We cannot assure that we will regain compliance or qualify for additional time. Delisting could reduce trading liquidity, impair capital raising and adversely affect the market for our common stock.
Our common stock does not currently satisfy the Nasdaq minimum bid price requirement, and we may be delisted. On October 20, 2026, Nasdaq notified us that our common stock had not satisfied the $1.00 minimum bid price requirement for 30 consecutive business days. The notice had no immediate effect on trading. Our initial compliance period ends April 19, 2027, and compliance generally requires a closing bid price of at least $1.00 for 10 consecutive business days, or longer if Nasdaq requires. We may be eligible for an additional 180-day period if we satisfy the conditions in Listing Rule 5810(c)(3)(A), which may include effecting a reverse stock split. We cannot assure you that we will regain compliance or qualify for additional time. Delisting could reduce trading liquidity, impair our ability to raise capital and adversely affect the market for our common stock.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Recent Sales of Unregistered Securities
February 2026 public offering — placement agent warrants. In connection with our February 9, 2026 public offering, we issued to the placement agent warrants to purchase an aggregate of 557,058 shares of common stock, with a five-year term and exercise prices of $0.875 and $3.2375 per share, having an aggregate fair value of $381,374. The placement agent warrants were issued in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and/or Rule 506(b) of Regulation D promulgated thereunder.
March 2026 warrant inducement. On March 15, 2026, in connection with inducement agreements pursuant to which certain holders exercised an aggregate of 1,373,630 existing warrants at a reduced exercise price of $1.08 per share, we issued to the exercising holders (i) Series A-3 warrants to purchase an aggregate of 1,373,630 shares of common stock at an exercise price of $1.08 per share, with a term of five years, and (ii) Series A-4 warrants to purchase an aggregate of 1,373,630 shares of common stock at an exercise price of $1.08 per share, with a term of eighteen months. We also issued to the placement agent warrants to purchase an aggregate of 96,154 shares of common stock at an exercise price of $1.35 per share, with a five-year term. These warrants were issued in reliance upon the exemptions from registration provided by Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D.
April 2026 warrant inducement. On April 26, 2026, we entered into additional warrant exercise inducement agreements with certain holders of warrants originally issued in connection with the February 2026 public offering. In connection with the exercise of those warrants, we issued unregistered Series A-5 warrants to purchase up to 4,742,860 shares of common stock and unregistered Series A-6 warrants to purchase up to 6,687,310 shares of common stock, each with an exercise price of $0.975 per share. We also issued to the placement agent warrants to purchase up to 400,056 shares of common stock at an exercise price of $0.875 per share. These warrants were issued in reliance upon the exemptions from registration provided by Section 4(a)(2) of the Securities Act and/or Rule 506(b) of Regulation D, to holders that represented they were “accredited investors” as defined in Rule 501(a). No general solicitation or advertising was used in connection with the issuances.
July 2026 warrant inducement. On July 16, 2026, we entered into warrant exercise inducement agreements with certain holders of outstanding warrants. In connection with the exercise of those warrants for aggregate gross proceeds of $2,465,358, we issued unregistered Series A-7 warrants to purchase up to 800,000 shares of common stock and unregistered Series A-8 warrants to purchase up to 4,257,144 shares of common stock, each with an exercise price of $0.975 per share. We also issued to the placement agent warrants to purchase up to 177,000 shares of common stock at an exercise price of $1.2188 per share. These warrants were issued in reliance upon the exemptions from registration provided by Section 4(a)(2) of the Securities Act and/or Rule 506(b) of Regulation D, to holders that represented they were “accredited investors” as defined in Rule 501(a). No general solicitation or advertising was used in connection with the issuances.
September 2026 offering — placement agent warrants. In connection with our September 2026 offering described below, we issued to the placement agent warrants to purchase an aggregate of 735,000 shares of common stock at an exercise price of $0.9375 per share, with a five-year term. The placement agent warrants were issued in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act and/or Rule 506(b) of Regulation D. The shares of common stock and the Series B-1 and Series B-2 warrants sold in that offering, and the shares issuable upon exercise of those warrants, were registered on Form S-1 (File No. 333-298783).
Cashless warrant exercises. During the nine months ended September 30, 2026, we issued an aggregate of 8,790,105 shares of common stock upon the cashless exercise of 11,076,242 previously issued warrants. No cash proceeds were received by us in connection with these cashless exercises. The shares were issued in reliance upon the exemption from registration provided by Section 3(a)(9) of the Securities Act, as the securities were exchanged by us with our existing security holders exclusively and no commission or other remuneration was paid or given directly or indirectly for soliciting the exchange. Shares issued upon the cashless exercise of the Series A-5 and Series A-6 Warrants would take the character of the unregistered warrants surrendered and accordingly would be restricted securities; as described in Note 6 and Note 8 to the condensed consolidated financial statements, certain of those shares were issued without a restrictive legend. We, with the assistance of counsel, are evaluating the availability of the exemptions claimed above and the consequences of the issuances described in Note 6.
Exercises prior to effectiveness of stockholder approval. As described in Note 6 to the condensed consolidated financial statements, during June 2026 we issued 3,741,407 shares of common stock upon exercises of Series A-4, Series A-5, and Series A-6 Warrants that occurred prior to the date those warrants became exercisable, and shares issued upon exercise of the Series A-4 Warrants were issued at a time when the related resale prospectus was unavailable. We, with the assistance of counsel, are evaluating the validity of these issuances and whether any of the shares are subject to recall, rescission, or repurchase and cancellation.
Shares issued for services and compensation. On February 24, 2026, we issued 88,235 shares of common stock with an aggregate fair value of $75,000 to iHub Inc. d/b/a The Market Link under an investor relations services agreement. On March 13, 2026, we issued 11,413 shares of common stock to Hudson Global Ventures LLC pursuant to anti-dilution provisions contained in a consulting agreement dated July 8, 2025. On March 26, 2026, we granted 60,000 shares of restricted common stock to our directors with an aggregate grant-date fair value of $59,460, or $0.99 per share, as compensation for services. These shares were issued in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act.
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Use of Proceeds from Registered Securities
February 2026 offering. On February 9, 2026, we completed our public offering of 7,142,858 shares of common stock and accompanying Series A-1 and Series A-2 warrants pursuant to a registration statement on Form S-1 (File No. 333-292932), which was declared effective by the Securities and Exchange Commission on February 6, 2026. The aggregate gross proceeds were $5,000,001, and offering expenses, including placement agent fees and commissions, were approximately $878,729, resulting in net proceeds of approximately $4,121,272. Through September 30, 2026, we applied approximately $3.2 million of the net proceeds to the repayment in full of the notes issued under our September 12, 2025 Note Purchase Agreement, approximately $751,000 to the repayment of principal owed to ICT Investments, LLC, a holder of more than 10% of our common stock and an affiliate of us, and the balance to the repayment of other indebtedness and to working capital and general corporate purposes. There has been no material change in the use of proceeds from that described in the final prospectus.
September 2026 offering. On September 14, 2026, we completed an offering of 10,500,000 shares of common stock and accompanying Series B-1 and Series B-2 warrants pursuant to a registration statement on Form S-1 (File No. 333-298783), which was filed on September 4, 2026 and declared effective by the Securities and Exchange Commission on September 10, 2026, and a related prospectus filed pursuant to Rule 424(b)(4) on September 14, 2026. The aggregate gross proceeds were $7,875,000, and offering expenses, including placement agent fees and commissions, were approximately $706,464, resulting in net proceeds of approximately $7,168,536. As of September 30, 2026, $6,000,000 of the net proceeds was held in short-term investments consisting of a certificate of deposit, and the balance was held in cash or applied to working capital and general corporate purposes. We have not yet applied the net proceeds to the purposes described in the final prospectus and currently intends to apply them as described therein. There has been no material change in the planned use of proceeds.
Other than the items described above, none of the net proceeds were paid, directly or indirectly, to directors or officers of ours, to persons owning 10% or more of any class of our equity securities, or to affiliates of us.
Issuer Purchases of Equity Securities
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
During
the three months ended September 30, 2026, no director or officer of ours
On November 11, 2026, the Company adopted an amendment (the "Amendment") to its 2019 Stock Incentive Plan to reflect certain administrative changes, including the Company's previously announced name change to LASE Corp. and the conforming of references in the plan to the Company's state of incorporation. The Amendment does not change the number of shares available under the plan or the terms of any outstanding award. The foregoing description of the Amendment is qualified in its entirety by reference to the complete text of the Amendment, a copy of which is filed as Exhibit 10.6 hereto and is incorporated herein by reference.
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ITEM 6. EXHIBITS.
| 3.1 | Certificate of Amendment to the Certificate of Incorporation, effective November 4, 2026 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Commission on November 4, 2026) | |
| 3.2 | Second Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the Commission on November 4, 2026) | |
| 4.1 | Form of Series A-7 Common Stock Purchase Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the Commission on July 20, 2026) | |
| 4.2 | Form of Series A-8 Common Stock Purchase Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the Commission on July 20, 2026) | |
| 4.3 | Form of Series B-1 Common Stock Purchase Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-1 (File No. 333-298783) filed with the Commission on September 4, 2026) | |
| 4.4 | Form of Series B-2 Common Stock Purchase Warrant (incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-1 (File No. 333-298783) filed with the Commission on September 4, 2026) | |
| 10.1 | Form of Warrant Inducement Agreement, dated July 16, 2026 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on July 20, 2026) | |
| 10.2 | Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.26 to the Company’s Registration Statement on Form S-1 (File No. 333-298783) filed with the Commission on September 4, 2026) | |
| 10.3 | Form of Lock-Up Agreement (incorporated by reference to Exhibit 10.27 to the Company’s Registration Statement on Form S-1 (File No. 333-298783) filed with the Commission on September 4, 2026) | |
| 10.4 | Employment Agreement, dated October 16, 2026, between the Company and Dmitriy Nikitin (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on October 16, 2026) | |
| 10.5 | Employment Agreement, dated October 15, 2026, between the Company and Timothy A. Peterman (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on October 20, 2026) | |
| 10.6 | Amendment to the 2019 Stock Incentive Plan, dated November 11, 2026 | filed herewith | |
| 31.1 | Rule 13a-14(a)/15d-14(a) Certification of principal executive officer | |
| 31.2 | Rule 13a-14(a)/15d-14(a) Certification of principal financial and accounting officer | |
| 32.1 | Section 1350 Certification of principal executive officer | |
| 32.2 | Section 1350 Certification of principal financial and accounting officer | |
| 101* | Inline XBRL data files of Financial Statements and Notes contained in this Quarterly Report on Form 10-Q | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* In accordance with Regulation S-T, the Interactive Data Files in Exhibit 101 to the Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed.”
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| LASE Corp. | ||
| Date: November 12, 2026 | By: | /s/ Dmitriy Nikitin |
Executive Chairman (Principal Executive Officer) | ||
| Date: November 12, 2026 | By | /s/ Timothy Peterman |
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) |
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