UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For
the quarterly period ended
OR
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) | (IRS Employer Identification Number) | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s
telephone number, including area code
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), (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 and posted 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 and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or 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. (Check one):
| 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
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||
As of May 13, 2025, there were
APPLIED
ENERGETICS, INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
i
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APPLIED
ENERGETICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Other assets | ||||||||
| Total current assets | ||||||||
| Long-term assets | ||||||||
| Property and equipment - net | ||||||||
| Right of use asset – operating lease | ||||||||
| Security deposit | ||||||||
| Total long-term assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Notes payable | ||||||||
| Due to related parties | ||||||||
| Operating lease liability - current | ||||||||
| Accrued expenses | ||||||||
| Accrued dividends | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities | ||||||||
| Operating lease liability - non-current | ||||||||
| Total long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Stockholders’ Equity | ||||||||
| Series A convertible preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements (unaudited).
1
APPLIED ENERGETICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| FOR THE THREE MONTHS ENDED MARCH 31, | ||||||||
| 2025 | 2024 | |||||||
| Revenue | $ | $ | ||||||
| Cost of revenue | ||||||||
| Gross profit | ( | ) | ||||||
| Operating expenses | ||||||||
| General and administrative | ||||||||
| Selling and marketing | ||||||||
| Research and development | ||||||||
| Total operating expenses | ||||||||
| Operating loss | ( | ) | ( | ) | ||||
| Other income/(expense) | ||||||||
| Other income | ||||||||
| Interest expense | ||||||||
| Total other income/(expense) | ||||||||
| Loss before provision for income taxes | ( | ) | ( | ) | ||||
| Provision for income taxes | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Preferred stock dividends | ( | ) | ( | ) | ||||
| Net loss attributable to common stockholders | $ | ( | ) | $ | ( | ) | ||
| Net loss attributable to common stockholders per common share - basic and diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted average number of common shares outstanding | ||||||||
See accompanying notes to condensed consolidated financial statements (unaudited).
2
APPLIED
ENERGETICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ (DEFICIT) EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024
(Unaudited)
| Preferred Stock | Common Stock | Additional Paid-In | Accumulated | Total Stockholders’ (Deficit) | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||
| Common stock issued on exercise of options | - | |||||||||||||||||||||||||||
| Issuance of common stock under the market offering | - | |||||||||||||||||||||||||||
| Common stock issued for settlement of restricted stock units | - | ( | ) | |||||||||||||||||||||||||
| Common stock withheld to cover income tax withholding obligations | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
| Common stock issued for consulting services | - | |||||||||||||||||||||||||||
| Net loss for the period ended March 31, 2025 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance at March 31, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Preferred Stock | Common Stock | Additional Paid-In | Accumulated | Total | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||
| Common stock issued on exercise of options | - | |||||||||||||||||||||||||||
| Common stock issued on exercise of warrants | - | |||||||||||||||||||||||||||
| Common stock issued for settlement of restricted stock units | - | ( | ) | |||||||||||||||||||||||||
| Common stock withheld to cover income tax withholding obligations | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
| Net loss for the period ended March 31, 2024 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
See accompanying notes to condensed consolidated financial statements (unaudited).
3
APPLIED ENERGETICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| FOR THE THREE MONTHS ENDED MARCH 31, | ||||||||
| 2025 | 2024 | |||||||
| Cash Flows From Operating Activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Noncash stock based compensation expense | ||||||||
| Amortization of ROU assets | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of prepaid assets | ||||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Prepaid and deposits | ( | ) | ( | ) | ||||
| ROU liabilities | ( | ) | ( | ) | ||||
| Deferred Revenue | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses and compensation | ||||||||
| Net cash used in operating activates | ( | ) | ( | ) | ||||
| Cash Flows From Investing Activities | ||||||||
| Purchase of equipment | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash Flows From Financing Activities | ||||||||
| Proceeds from issuance of common stock under the market offering | ||||||||
| Repayment of insurance premium loan | ( | ) | ||||||
| Tax withholdings related to net share settlement of RSU’s | ( | ) | ( | ) | ||||
| Proceeds from the exercise of stock options and warrants | ||||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents, beginning of year | ||||||||
| Cash and cash equivalents, at end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for taxes | $ | $ | ||||||
| Non-cash investing and financing activities | ||||||||
| Insurance financing for prepaid insurance | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements (unaudited).
4
APPLIED ENERGETICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
(Unaudited)
NOTE 1 – ORGANIZATION OF BUSINESS, GOING CONCERN AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The unaudited condensed consolidated financial statements include the accounts of Applied Energetics, Inc. and its wholly owned subsidiary North Star Power Engineering, Inc. (“North Star”) (collectively, “company,” “Applied Energetics,” “we,” “our” or “us”). All intercompany balances and transactions have been eliminated.
The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information, the instructions for Form 10-Q and the rules and regulations of the SEC. Accordingly, since they are interim statements, the accompanying unaudited condensed consolidated financial statements do not include all of the information and notes required by GAAP for annual financial statements, but reflect all adjustments consisting of normal, recurring adjustments, that are necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. Interim results are not necessarily indicative of the results that may be expected for any future periods. The December 31, 2024, balance sheet information was derived from the audited financial statements as of that date. The interim unaudited condensed consolidated financial statements should be read in conjunction with the company’s audited consolidated financial statements contained in our Annual Report on Form 10-K.
Going Concern
The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
For
the three months ended March 31, 2025, the company incurred a net loss of $
Based on the company’s current business plan, it believes its cash balance as of the date of this filing, together with anticipated revenues from government contracts, will be sufficient to meet its anticipated cash requirements for the near term. However, there can be no assurance that the current business plan will be achievable. Such conditions raise substantial doubts about the company’s ability to continue as a going concern for one year from the date the financial statements are issued.
The company’s existence depends upon management’s ability to develop profitable operations. Management is devoting substantially all of its efforts to developing its business and raising capital and there can be no assurance that management’s efforts will result in profitable operations or enable it to overcome future liquidity concerns. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability of assets, the amount or classification of liabilities or otherwise that might be necessary should the company be unable to continue as a going concern.
5
APPLIED ENERGETICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
(Unaudited)
Trade conditions, such as unusually high and fluctuating tariffs, exacerbated supply chain shutdowns and delays, contribute to this uncertainty. Additionally, Russia’s military action in Ukraine, war in the Middle East, and related economic sanctions around the globe, could impact the company’s ability to source necessary supplies and equipment which could materially and adversely affect its ability to continue as a going concern. In addition, the company’s ability to continue as a going concern may depend on its ability to raise capital, which may be impacted by these events, including as a result of increased market volatility, or decreased market liquidity. This may result in third-party financing being unavailable on terms acceptable to the company or at all. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
To further improve its liquidity position, the company’s management continues to explore additional equity financing through discussions with investment bankers and private investors. The company may be unsuccessful in its effort to secure additional equity financing. The financial statements do not include any adjustments relating to the recoverability of assets and the amount or classification of liabilities that might be necessary should the company be unable to continue as a going concern.
Applied Energetics, Inc. is a corporation organized and existing under the laws of the State of Delaware. Our headquarters are located at 9070 S. Rita Road Suite 1500, Tucson, Arizona, 85747, including office and laboratory space, and our telephone number is (520) 628-7415.
Use of Estimates
The preparation of unaudited condensed financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and accompanying notes. Management bases its assumptions on historical experiences and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. In addition, management considers the basis and methodology used in developing and selecting these estimates, the trends in and amounts of these estimates, specific matters affecting the amount of and changes in these estimates, and any other matters related to these estimates, including significant issues concerning accounting principles and financial statement presentation. Such estimates and assumptions could change in the future as more information becomes known which could impact the amounts reported and disclosed herein. Significant estimates include revenue recognition, carrying amounts of long-lived assets, valuation assumptions for share-based payments, evaluation of debt modification accounting, effective borrowing rate determinations, analysis of fair value transferred upon debt extinguishment, valuation and calculation of measurements of income tax assets and liabilities.
Net Loss Attributable to Common Stockholders
Basic
loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares
outstanding for the period before giving effect to stock options, stock warrants, restricted stock units and convertible securities outstanding,
which are considered to be dilutive common stock equivalents. Diluted net loss per common share is calculated based on the weighted average
number of common and potentially dilutive shares outstanding during the period after giving effect to dilutive common stock equivalents.
Contingently issuable shares are included in the computation of basic loss per share when issuance of the shares is no longer contingent.
The number of shares underlying warrants, options, restricted stock units and our Series A Convertible Preferred Stock, which were not
included in the computation of earnings per share because the effect was antidilutive, was
6
APPLIED ENERGETICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
(Unaudited)
Significant Concentrations and Risks
We
maintain cash balances at a commercial bank, and, at times, balances exceed FDIC limits. As of March 31, 2025, $
NOTE 2 – NEW ACCOUNTING STANDARDS
The company has reviewed all issued accounting pronouncements. The company does not expect the adoption of any pronouncements to have an impact on its results of operations or financial position.
NOTE 3 – OTHER ASSETS
Other assets consisted of the following as of March 31, 2025 and December 31, 2024:
| As of March 31, | As of December 31, | |||||||
| 2025 | 2024 | |||||||
| Prepaid Expenses | $ | $ | ||||||
| Prepaid Consumables | ||||||||
| Prepaid Insurance | ||||||||
| Total other assets | $ | $ | ||||||
NOTE 4 – PROPERTY AND EQUIPMENT – NET
Property and equipment – net consisted of the following as of March 31, 2025 and December 31, 2024:
| As of March 31, | As of December 31, | |||||||
| 2025 | 2024 | |||||||
| Lab equipment | $ | $ | ||||||
| Software | ||||||||
| Furniture and fixtures | ||||||||
| Computer equipment | ||||||||
| Equipment in process | ||||||||
| Total property and equipment | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation expense for the
three months ended March 31, 2025 and 2024, were $
7
APPLIED ENERGETICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
(Unaudited)
NOTE 5 – SECURITY DEPOSIT
As of March 31, 2025 and December
31, 2024, the Company had security deposit totaling $
NOTE 6 – ACCRUED EXPENSES
Accrued expenses consisted of the following as of March 31, 2025 and December 31, 2024:
| As of March 31, | As of December 31, | |||||||
| 2025 | 2024 | |||||||
| Accrued payroll | ||||||||
| Accrued taxes | $ | $ | ||||||
| Accrued 401k | ||||||||
| Total accrued expenses | $ | $ | ||||||
NOTE 7 – NOTES PAYABLE
Premium Financing
On March 12, 2024, the company entered into an agreement with Oakwood
D&O Insurance to provide financing in the amount of $
Notes Payable Reconciliation
The following reconciles notes payable as of March 31, 2025, and December 31, 2024:
| March 31, 2025 | December 31, 2024 | |||||||
| Beginning balance | $ | $ | ||||||
| Notes payable | ||||||||
| Payments on notes payable | ( | ) | ( | ) | ||||
| Total | ||||||||
| Less-Notes payable – current | ||||||||
| Notes payable – non-current | $ | $ | ||||||
8
APPLIED ENERGETICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
(Unaudited)
NOTE 8 – DUE TO RELATED PARTIES
On July 31, 2018,
our now deceased CEO deposited $
NOTE 9 – STOCKHOLDERS’ EQUITY
Authorized Capital Stock
During
the three months ended March 31, 2024, the company issued
During
the three months ended March 31, 2024, the company issued
During
the three months ended March 31, 2024, the company issued
During
the three months ended March 31, 2024, restricted stock units covering
During
the three months ended March 31, 2025, the company completed the placement of
During
the three months ended March 31, 2025, the company issued
9
APPLIED ENERGETICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
(Unaudited)
During
the three months ended March 31, 2025, restricted stock units covering
During
the three months ended March 31, 2025, the Company issued
Preferred Stock
As
of March 31, 2025, and December 31, 2024, there were
Our
Series A Preferred Stock has a liquidation preference of $
Each
share of Series A Preferred Stock is convertible at any time at the option of the holder into a number of shares of common stock equal
to the liquidation preference (plus any unpaid dividends for periods prior to the dividend payment date immediately preceding the date
of conversion by the holder) divided by the conversion price (initially $
If
a change of control occurs, each holder of shares of Series A Convertible Preferred Stock that are outstanding immediately prior to the
change of control shall have the right to require the corporation to purchase, out of legally available funds, any outstanding shares
of Series A Convertible Preferred Stock at the defined purchase price. The purchase price is defined as: per share of Preferred Stock,
10
APPLIED ENERGETICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
(Unaudited)
If the Corporation pays all or a portion of the Purchase Price in Common Stock, no fractional shares of Common Stock will be issued; instead, the company will round the applicable number of shares of Common Stock up to the nearest whole number of shares; provided that the Corporation may pay the Purchase Price (or a portion thereof), whether in cash or in shares of Common Stock, only if the Corporation has funds legally available for such payment and may pay the Purchase Price (or a portion thereof) in shares of its Common Stock only if (i) the Common Stock is listed on a U.S. national securities exchange or the Nasdaq Stock Market at the time of issuance and (ii) a shelf registration statement covering the issuance by the Corporation and/or resales of the Common Stock issuable as payment of the Purchase Price is effective on the Payment Date unless such shares are eligible for immediate resale in the public market by non-affiliates of the Corporation.
Share-Based Payments
Effective
November 12, 2018, the Board of Directors of Applied Energetics, Inc. adopted the 2018 Incentive Stock Plan. The plan provides for the
allocation and issuance of stock, restricted stock purchase offers and options (both incentive stock options and non-qualified stock
options) to officers, directors, employees and consultants of the company. The board reserved a total of
We
have, from time to time, also granted non-plan options and restricted stock units to certain officers, directors, employees and
consultants. Total stock-based compensation expense for grants to officers, employees and consultants was $
The
$
During
the three months ended March 31, 2025, the company issued a non-qualified stock option to purchase up to
The company recognized no related income tax benefit because our deferred tax assets are fully offset by a valuation allowance.
As
of March 31, 2025, the company has $
11
APPLIED ENERGETICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
(Unaudited)
The following table summarizes the activity of our stock options for the three months ended March 31, 2025:
| Shares | Weighted Average Exercise Price | Weighted Average Contractual Term Outstanding | Intrinsic Value | |||||||||||||
| Outstanding at December 31, 2024 | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ( | ) | ( | ) | ( | ) | ||||||||||
| Forfeited or expired | - | - | ||||||||||||||
| Outstanding at March 31, 2025 | ||||||||||||||||
| Outstanding and exercisable at March 31, 2025 | ||||||||||||||||
We determine the fair value of option grant share-based awards at their grant date, using a Black-Scholes- Merton Option- Pricing Model applying the assumptions in the following table:
| Three Months Ended March 31, | ||||
| 2025 | ||||
| Assumptions: | ||||
| Risk-free interest rate | % | |||
| Expected dividend yield | % | |||
| Expected volatility | % | |||
| Expected life (in years) | ||||
The
fair value of restricted stock and restricted stock units was estimated using the closing price of our common stock on the date of award
and fully recognized upon vesting.
| Restricted Stock Outstanding | ||||||||
| Shares | Weighted Average Fair Value per Share at Grant Date | |||||||
| Nonvested at December 31, 2024 | ||||||||
| Granted – restricted stock units and awards | ||||||||
| Granted – performance-based stock units | ||||||||
| Canceled | ||||||||
| Vested | ( | ) | ( | ) | ||||
| Nonvested at March 31, 2025 | $ | |||||||
12
APPLIED ENERGETICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
(Unaudited)
As
of March 31, 2025, and December 31, 2024, there was $
As
of March 31, 2025 and December 31, 2024, the company recorded $
| Warrant Activity | ||||||||||||
| Weighted Average Exercise | Weighted Average remaining Contractual Term | |||||||||||
| Shares | Price | (years) | ||||||||||
| Outstanding at December 31, 2024 | $ | |||||||||||
| Granted | - | |||||||||||
| Exercised | ||||||||||||
| Forfeited | - | |||||||||||
| Outstanding and exercisable at March 31, 2024 | $ | |||||||||||
| Warrants Outstanding | Warrants Exercisable | |||||||||||||||||||
| Weighted Avg. Remaining | Weighted | Weighted | ||||||||||||||||||
| Shares | Contractual Life in | Avg. Exercise | Shares | Avg. Exercise | ||||||||||||||||
| Range of Exercise Prices | Outstanding | Years | Price | Exercisable | Price | |||||||||||||||
| $ | $ | $ | ||||||||||||||||||
| $ | $ | |||||||||||||||||||
13
APPLIED ENERGETICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
(Unaudited)
NOTE 10 – REVENUE RECOGNITION
The company derives revenue from technical research detailing the findings of its investigations to its customers under contract for specific projects. Under Topic 606, revenue is recognized when control of promised goods and services is transferred to customers, and the amount of revenue recognized reflects the consideration to which an entity expects to be entitled in exchange for the goods and services transferred. A performance obligation is a contractual promise to transfer a distinct good or service to the customer and is the unit of account under Topic 606. The transaction price of a contract is allocated to distinct performance obligations and recognized as revenue when or as the performance obligations are satisfied. The company’s contracts require significant integrated services and are accounted for as a single performance obligation, and revenue is recognized by the company over the contract term at a fixed contract price.
Contract modifications are routine in the performance of our contracts. Contracts are often modified to account for changes in the contract specifications or requirements. In most instances, contract modifications are for goods or services that are not distinct, and, therefore, are accounted for as part of the existing contract.
The following table summarizes the company’s accounts receivable, net,
| March 31, 2025 | December 31, 2024 | |||||||
| Accounts receivable | $ | $ | ||||||
| Unbilled receivable | ||||||||
| Total | $ | $ | ||||||
Concentrations
During the three months ended
March 31, 2025, two customers accounted for a total of $
During the three months ended March 31, 2024, two customers accounted
for a total of $
14
APPLIED ENERGETICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
(Unaudited)
NOTE 11– COMMITMENTS AND CONTINGENCIES
Operating Leases
In
March 2021, the company signed a five-year lease for a
On
June 7, 2023, the company entered into an amendment to extend the term of the original lease from April 26, 2026 to July31, 2028. Included
in the lease amendment is extension space commencing on August 1, 2023. As of August 1, 2023 the Company has secured additional square
footage in the amount of
On
July 3, 2024, Applied Energetics, Inc. exercised its option to lease more than
The
company incurred lease expense for its operating leases of $
At
March 31, 2025, we had approximately $
| Operating Lease | ||||
| For the three months ended March 31, 2025 | ||||
| 2025, nine months ended | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total undiscounted lease payments | ||||
| Present value discount, less interest | ||||
| Lease Liability | $ | |||
15
APPLIED ENERGETICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
(Unaudited)
Guarantees
The company agrees to indemnify its officers and directors for certain events or occurrences arising as a result of the officers or directors serving in such capacity. The maximum amount of future payments that the company could be required to make under these indemnification agreements is unlimited. However, the company maintains a director’s and officer’s liability insurance policy that limits its exposure and enables it to recover a portion of any future amounts paid. As a result, it believes the estimated fair value of these indemnification agreements is minimal because of its insurance coverage, and it has not recognized any liabilities for these agreements as of March 31, 2025 and 2024.
Litigation
On January 15, 2021, the company filed a complaint in the United States District Court, Southern District of New York, against Gusrae, Kaplan & Nusbaum and Ryan Whalen for malpractice and breach of New York Rules of Professional Conduct by both parties as former counsel to the company. On May 28, 2021, Gusrae, Kaplan & Nusbaum and Mr. Whalen filed a motion to dismiss the complaint. On June 25, 2021, the company filed an opposition to the motion. On July 13, 2021, Gusrae Kaplan & Nusbaum and Mr. Whalen filed their reply brief. On March 30, 2022, United States Magistrate Judge Debra Freeman signed an order denying the motion of GKN and Mr. Whalen to dismiss the company’s claim for malpractice and for rescission of the shares-for-fees agreement under which GKN and Whalen received 1,242,710 shares of the company’s common stock. The motion was partially granted as to the separate claim for violation of NYRPC 1.7 and 1.8 because the court found that it was duplicative of the malpractice claim. Motions for summary judgment in the case are fully briefed, and the judge has scheduled an oral argument date for August 7, 2025 at 11:00 a.m.
As with any litigation, the company cannot predict the outcome with certainty, but the company expects to provide further updates on the status of the litigation as circumstances warrant.
The company may, from time to time, be involved in legal proceedings arising from the normal course of business.
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APPLIED ENERGETICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
(Unaudited)
NOTE 12 – SEGMENT INFORMATION
The
Company is currently deemed to be comprised of only
| FOR THE THREE MONTHS ENDED MARCH 31, | ||||||||
| 2025 | 2024 | |||||||
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| Software and communications | ||||||||
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| Operating loss | $ | ( | ) | $ | ( | ) | ||
NOTE 13 – SUBSEQUENT EVENTS
The company’s management has evaluated subsequent events occurring after March 31, 2025, the date of our most recent balance sheet, through the date our financial statements were issued.
Subsequent
to the period ended March 31, 2025, the company issued
Subsequent to the
period ended March 31, 2025, the company issued
Subsequent
to the period ending March 31, 2025, the company issued an incentive stock option to purchase up to
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our discussion and analysis of the financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the related disclosures included elsewhere herein and in the Management’s Discussion and Analysis of Financial Condition and Results of Operations included as part of our Annual Report on Form 10-K for the year ended December 31, 2024.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the securities laws. Forward-looking statements include all statements that do not relate solely to the historical or current facts and can be identified by the use of forward-looking words such as “may,” “believe,” “will,” “would,” “could,” “should,” “expect,” “project,” “anticipate,” “estimates,” “possible,” “plan,” “strategy,” “target,” “prospect,” or “continue,” and other similar terms and phrases. These forward-looking statements are based on the current plans and expectations of our management and are subject to a number of uncertainties and risks that could significantly affect our current plans and expectations, as well as future results of operations and financial condition and may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Important factors that could cause our actual results to differ materially from our expectations are described in Item 1A (Risk Factors) of our Annual Report on Form 10-K, for the year ended December 31, 2024. Although we believe that the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to have been correct. We do not assume any obligation to update these forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting such forward-looking statements.
Applied Energetics, Inc., (sometimes referred to as the “company”) is a corporation organized and existing under the laws of the State of Delaware. Our executive office is located at 9070 S. Rita Road, Suite 1500, Tucson, Arizona 85747, (520) 628-7415. www. appliedenergetics.com
Applied Energetics, Inc., specializes in the development and manufacture of advanced high-performance lasers and optical systems and integrated guided energy systems for prospective defense, national security, industrial, biomedical, and scientific customers worldwide.
Technology, Capabilities, and Patents
Applied Energetics, Inc. is recognized as a global leader in developing the next generation optical sources exhibiting ever-increasing output energy, peak power and frequency agility while also providing decreased size, weight, and cost of these systems for customers. Applied Energetics utilizes patented, dual-use technologies to advance critical industries. Leveraging our proprietary fiber-based architecture and wavelength- and pulse-agility capability, our Ultrashort Pulse (USP) technology can enable users to achieve specific effects across different use cases with an unmatched blend of size, weight, and power attributes. While initially designed to meet the emerging needs and priorities for the national security community, our directed energy technology also has commercial applications in both the biomedical and advanced manufacturing industries.
Our UltraShort Pulse Lasers (USP) are designed to provide:
| ● | Frequency Agile Optical Sources from Ultraviolet (UV) to Far Infrared (IR) |
| ● | Pulse Duration Agility |
| ● | Size, Weight, and Power Optimization |
| ● | Advanced Fiber Applications |
| ● | Laser Guided Energy (LGE®) |
| ● | Laser Induced Plasma Channel (LIPC®) |
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The Applied Energetics scientific team is continuously innovating and expanding our patent portfolio to cover these technological breakthroughs and further enhance our suite of solutions for threat disruption for the Department of Defense, the intelligence community, and for commercial, biomedical and space applications with optical sources operating from the deep ultraviolet to the far infrared portions of the electromagnetic spectrum.
Applied Energetics has developed, successfully demonstrated and holds all crucial intellectual property rights to a dynamic directed energy technology called Laser Guided Energy (LGE®) and Laser Induced Plasma Channel (LIPC®). LGE and LIPC are technologies that can be used in a new generation of high-tech directed energy systems. Applied Energetics’ LGE and LIPC technologies are wholly owned by Applied Energetics and protected by one or more of Applied Energetics’ 25 issued patents and 11 Government Sensitive Patent Applications (GSPA). These GSPA’s are held under secrecy orders of the US government, providing the company with extended protection rights. The company also has nine pending patent applications. We continue to file patent applications as we deem appropriate to protect our intellectual property and enhance our competitive advantage.
Applied Energetics’ directed energy technologies are vastly different from conventional directed energy systems, i.e. Applied Energetics’ proprietary fiber-based architecture is a key differentiator for our most recent technology demonstrators. Compared with traditional continuous wave laser technologies with their larger footprints, AE’s architecture enables orders of magnitude size-weight-power reductions on all deliverables, creating powerful, dual-use and agile systems that can fit a host of platforms while delivering very high-intensity, ultrashort pulses of light to the required target. This unique directed energy solution allows extremely high peak power and energy, with target and effects tunability, and is effective against a wide variety of potential targets.
Applied Energetics’ unique optical fiber-based laser architectures also enable unmatched wavelength agility as well as pulse duration agility. Using innovative and highly specialized frequency shifting techniques, wavelengths can be custom tuned from the deep ultraviolet to the far infrared. In addition, temporal outputs can be adjusted from continuous wave to sub-picoseconds. The technology enables the customer to adjust the lasers’ operating parameters, ultimately creating more flexibility to change wavelength and pulse width. This feature allows for optimization of laser performance for defense or commercial applications.
Our proprietary USP laser technology provides a significantly more compact solution than current continuous wave laser platforms while still delivering high peak power. Continuous wave laser systems are typically used to heat a target and, during continuous illumination, this heat transfer leads to melting or charring of the material. Using continuous wave output powers that now exceed 100 kilowatts (1kW = 1000 watts), it can take anywhere from seconds to minutes to impact a target. By contrast, Applied Energetics has delivered USP lasers to national security users that exceed five terawatts (1 TW = 1 trillion watts) in peak power, with the difference being that this peak power from a USP laser is delivered in a pulse that is less than a trillionth of a second. During this short pulse duration, and having such a high peak intensity, near-instantaneous ablation of the surface of the threat takes place. The net results of our innovative USP approaches are highly effective lasers with mountable footprints that require only a fraction of the size and weight of other-directed energy technologies.
As Applied Energetics looks toward the future, our corporate strategic roadmap builds upon the significant value of the company’s USP laser capabilities and key intellectual property, including LGE and LIPC, to offer our prospective partners, co-developers and system integrators a variety of next-generation ultrashort pulse and frequency-agile optical sources, from the ultraviolet to the far infrared portion of the electromagnetic spectrum, to address numerous challenges within the national security, biomedical, and advanced manufacturing market sectors.
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Recent Developments
In March 2025, the company moved to the next phase of its strategic collaboration with Kord Technologies, Inc., a wholly owned subsidiary of KBR, to explore the potential development and integration of an advanced pulsed laser system with Kord’s FIREFLYTM High Energy Laser Weapon System (HELWS). This phase is to begin with the purchase of a specially modified Firefly HELWS unit from Kord which the company can use to work on the development and integration of its proprietary Ultrashort Pulse technology in its newly opened Battle Lab, with the assistance of Kord personnel under a related services agreement.
This teaming effort is intended to advance innovative directed energy capabilities that may create future opportunities in defense and security markets. The development and integration activities will focus on refining system performance, optimizing integration, and validating operational effectiveness, by striving to achieve key technical milestones that could lead to additional customer interest, contract opportunities, and expanded applications.
Applied Energetics had previously entered into a Memorandum of Understand (MOU) with Kord, effective October 28, 2024, to further the development and deployment of Applied Energetics’ ultrashort pulsed laser (USPL) technology for defense and national security applications. The MOU outlines key areas of cooperation, including joint research and development, integration of Applied Energetics’ USPL technologies into an existing high-energy laser directed energy platform, and the exploration of new opportunities to enhance both companies’ product portfolios.
On February 10, 2025, Applied Energetics announced the opening of its new Battle Lab, a world-class facility designed to test, demonstrate, and advance emerging laser technologies in dynamic environments. The facility, as planned, is also expected to provide the capacity to manufacture and integrate advanced lasers as Applied Energetics makes the anticipated technology transition to the next stage of its lifecycle. Over the coming months, the company intends to install and demonstrate multiple ultrashort pulse lasers with varying wavelengths against relevant target packages. This announcement follows the July 3, 2024 announcement that Applied Energetics, Inc. had exercised its option to lease more than 5,000 square feet of additional space at the University of Arizona Tech Park to support the company’s investment in a new Battle Lab, with laser manufacturing capacity to ensure it has the critical infrastructure in place to fulfill both current, and possible future, priority U.S. military programs. The company took the option to lease this additional space under the June 7, 2023, amendment (the “2023 Amendment”) to its Lease Agreement with Campus Research Corporation, as Landlord. With this expansion, the company now occupies, in the aggregate, approximately 26,000 sq. ft. of space at the Arizona Tech Park. The Battle Lab is intended to support laser system testing against relevant targets and emerging threats. The Battle Lab is expected to enable technology maturation and be the venue for customer and partner demonstrations under realistic and controlled conditions. The facility, as planned, will also provide the capability to manufacture, integrate, and test advanced lasers as Applied Energetics makes its anticipated transition of its technology to the next stage of its lifecycle.
Ongoing Business Operations
Effective August 23, 2023, Applied Energetics executed a contract with the Department of the Navy, Office of Naval Research with an aggregate contract price of $1.99 million payable over two years as the company performs its obligations under the contract. The objective of the contract is to develop a high-peak and high-average power USP optical system. The system is expected to demonstrate effects compatible with multiple Navy platforms and missions with an attractive size, weight, and power-cooling footprint. The company’s continuing development efforts in collaboration with ONR signify the importance of sustained development and maturation of USP-based directed energy systems to support the Navy’s technological priorities. In late April 2025, our customer notified us that no funds are currently available for this contract and advised us to discontinue work on it. The contract was still in effect during the March 31, 2025 quarter as no formal stop-work order was received. As a result, collection of amounts due under this contract, including any work performed or to be performed, is in doubt, and the company has ceased recording revenue for it. At this point, the contract remains open, and the company would resume recording revenue if funding resumes, and collection is reasonably assured. The company intends to continue working in parallel on this technology as part of its ongoing internal research and development program. In addition, the company continues to work with the customer to find additional funds within the contracting agency or with other DOD departments which could be applied to the current open contracts.
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Effective May 15, 2023, Applied Energetics executed a Phase II Small Business Technology Transfer (STTR) contract with the U.S. Army at an aggregate contract price of $1.148 million payable over two years as the company performs its obligations thereunder, with the first year currently funded. The objective of this Phase II award is to further the development and testing of an IR laser system utilizing technologies that were investigated under the US Army Phase I STTR contract which the company was awarded in May 2022. This Phase II contract award follows a successful Phase I which established a computational concept with physical modeling and simulation to establish the feasibility of an IR laser system. Phase I was performed in collaboration with the James C. Wyant College of Optical Sciences at the University of Arizona. The company has continued its work under the contract, and provided all required reports, since its execution.
Effective March 12, 2024, a grant previously awarded to the company from the Department of the Navy, Office of Naval Research, was transitioned into a contract. The original grant from May 2022 had a two-year period of performance. The new contract supersedes the grant and carries a ceiling value of $1,217,535 under a base period of performance through November 11, 2024 and a 12-month unfunded option period that ends November 11, 2025. On September 4, 2024, the company received a funding increase on this contract of $237,647 bringing the total funding on the contract to $1,455,182. The purpose of this research is to accelerate the development and testing of Infrared (IR) optical technology with an ultrashort pulse laser (USPL) system. The overall objective is to advance and ruggedize optical technologies that can be fielded on a variety of USMC platforms and are able to operate in harsh conditions. Research under the grant was completed and all progress reported to the program manager. In late April 2025, our customer notified us that no funds are currently available for this contract and advised us to discontinue work on it. The contract was still in effect during the March 31, 2025 quarter as no formal stop-work order was received. As a result, collection of amounts due under this contract, including any work performed or to be performed, is in doubt, and the company has ceased recording revenue for it. At this point, the contract remains open, and the company would resume recording revenue if funding resumes, and collection is reasonably assured. The company intends to continue working in parallel on this technology as part of its ongoing internal research and development program. In addition, the company continues to work with the customer to find additional funds within the contracting agency or with other DOD departments which could be applied to the current open contracts.
Business Development Activities
We continue to submit proposals to, and attended briefings with, various defense and other government agencies who have expressed an interest in our technology and applications. Our efforts in this area of development have produced some results. In addition to the contracts which we have been awarded, our team has been invited to, and completed, multiple briefings focused on our capabilities and submissions. We intend to continue developing and submitting proposals and to be available to attend on-site briefings. We have also engaged in discussions with private entities and academic institutions with the objective of possibly collaborating on one or more projects. Some of these could result in further customer agreements or other opportunities to grow our business.
For fiscal year 2025, which started on October 1, 2024, the National Defense Authorization Act (NDAA) was delayed, but on December 23, 2024, then-President Biden signed the 2025 NDAA into law. The NDAA sets defense spending policies, while the separate appropriations bills comprising the federal budget fund government spending, including spending on defense and homeland security. This impacts all proposals under review by the Department of Defense. On September 26, 2024, in the absence of an enacted federal budget, then-President Biden signed a Continuing Resolution (CR), HR 9747, which extended government operations through December 20, 2024. He then signed a second CR for FY25 on December 21, 2024, extending funding for the federal government through March 14, 2025. A full year Continuing Resolution, H.H. 1968, was passed and signed into law by President Trump on March 15, 2025, and extends through September 30, 2025.
In addition, the newly elected administration has established the Department of Government Efficiency (DOGE) whose mission is to sharply reduce federal spending. In February 2025, President Trump stated that he has directed DOGE to review defense spending for possible waste, fraud and abuse. The administration has also indicated that it may pursue significant reductions to the U.S. defense budget, if both Russia and China would agree to similar cuts in their respective national security spending. The potential impact on the company of DOGE and possible cuts to the defense and national security industries, if any, is uncertain. Notwithstanding these budgetary concerns, the administration and Pentagon have indicated an interest in continuing to fund innovative defense related technologies, including in the area of directed energy.
The current budgetary and deficit funding environment, continuing inflation, tariffs and other ongoing supply chain disruptions, the appropriations process, and DOGE, among other items, all continue to create significant short and long-term challenges and risks to the company and its business development endeavors. However, we remain optimistic that the innovative nature of our technology and its novel approach to addressable threats position the company for development, growth, and market opportunities.
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Strategic Plan and Analysis
The core of our strategy has been to continue growing our management and science teams with highly qualified individuals. This has driven our recruitment efforts in the areas of R&D, science, modeling and simulation, marketing and finance. We are also contemplating adding members to our Board of Directors and our Board of Advisors. Our board and leadership team have worked to align key innovations with our roadmap to encourage and enable internal filing for a broad, strategic, and robust intellectual property portfolio and continue surveying the literature for acquisitions of parallel intellectual property to that end. We also intend to pursue strategic corporate acquisitions in related fields and technology. The company’s management continues to explore any favorable equity financing opportunities.
Our goal with the Applied Energetics Strategic Plan is to increase the energy, peak power and frequency agility of USP optical sources while decreasing the size, weight, and cost of these systems. We are in the process of developing this breadth of very high peak power USP lasers and additional optical sources that have a broad range of applicability for threat disruption for the Department of Defense, commercial, and biomedical applications, such as biophotonic illumination and imaging. Although the historical market for Applied Energetics’ LGE and USP technology is the U.S. Government, the USP technologies are expected to provide numerous platforms for commercial additive and subtractive manufacturing and biomedical and imaging markets, creating a substantially larger market for our products to address. Since 2020, the Applied Energetics team has been able to develop partnership and teaming arrangements with the three leading laser and optics institutes in the United States, namely, the University of Arizona, the University of Central Florida, and the University of Rochester Laboratory for Laser Energetics.
As with many government contractors, we have experienced recent challenges with funding of our contracts by the DoD and, in particular, with funding cutbacks at the Office of Naval Research (ONR). We recently learned that funding has been discontinued on two of our ONR contracts which affects our cash position and our strategic plan. Although the contracts have not been cancelled, their funding remains in doubt so that we cannot rely on receipt of funds from them, including for work already performed. These contracts were awarded under the DoD’s Research, Development, Test & Evaluation 6.2 Applied Research program which has been targeted by DoD for a 23.7% budget cut in FY2025. We believe that the technology underlying these contracts is considered “novel” and therefore, of continued interest to the DoD in its stated areas of ongoing focus. Accordingly, we plan to continue research and development of this technology, on an internal basis, and to focus on strategic partnerships with other entities as well as seeking additional prime government contracts. Our goal is to continue to accelerate the technology readiness level of our solutions to be able to submit more proposals and be prepared to conduct more customer and partner demonstrations of our technology in our recently opened Battle Lab. Under the current state of cutbacks in government funding both by individual agencies and DOGE, we cannot be certain that any such contracts will be forthcoming.
Subject to the foregoing, we continue to execute our business development plans, further our research and development program and submit filings for intellectual property and proposals for grants and contracts. During the past several years, we continued to submit proposals and have been engaged in meetings on a continuous basis with various agencies and departments both remotely and in person in Washington, DC and at various other government facilities. Having received a significant research grant and several contracts as well as other indications in recent years, we believe the interest in our technology and applications remains high, and we continue to submit proposals for all appropriate opportunities and share our vision of the disruptive capabilities of USP optical sources for both near- and far-term threats and dual-use commercial applications.
Through our analysis of the market, and in discussions with potential customers, we remain convinced that customers are becoming more receptive and interested in directed energy technologies. According to the US Department of Defense fiscal budgets from 2017 through 2023, its directed energy spending grew from approximately $500 million in 2017 to over $1.695 billion in 2023, an increase of nearly 240%. Market analysis and projections have estimated that this directed energy sector is anticipated to reach $32.1 billion globally by 2033. We continue to be optimistic about our future and the growing opportunities in directed energy applications, especially since this growth to nearly $1.7 B annually is being accomplished without a recognized Program of Record (POR) for directed energy platforms. We believe that once these technologies are funded in production for a POR, or are approved to be integrated on fielded platforms in volumes to effect threat reduction, these DOD budgets for directed energy will grow exponentially larger to support the technology insertion. Notwithstanding the funding cuts at the ONR as described above, the Applied Energetics team anticipates a continuation of strong funding for the directed energy community. With our existing patent portfolio, and through further advancements of our technologies, we believe we have the substantial building blocks needed to become a significant and successful developer in the USP marketplace. These innovations could play a significant role in the efforts from the new administration to implement the Golden Dome for America program by advancing directed energy and other integrated technological solutions for missile and other threat protection for the country. Estimated budget requirements would exceed $50B annually.
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Our research and development programs depend on our ability to procure the necessary optical and fabricated materials, components, electronics and other supplies. A significant, prolonged increase in inflation could negatively impact the cost of materials and components, which could be a particular problem with respect to our fixed fee contracts. Within the current geopolitical context, there are ongoing embargos of exports from some global suppliers of various materials that are used in electronics and some diode and laser materials, which can have negative effects on technology supply chains. This, coupled with tariffs and other trade disruptions, could significantly impair our ability to source necessary supplies and equipment when and in quantities needed. We continuously monitor potential supply chain issues and supplier liquidity and work with our supply base to ensure adequate sources of materials at reasonable costs. In some instances, we depend upon a single source of supply, but we are developing multiple sources, both internal to AE and externally where possible to mitigate the risk. In some cases, we must comply with specific procurement requirements, which can limit the suppliers and subcontractors we may utilize.
Results of Operations
Comparison of Operations for the Three Months Ended March 31, 2025 and 2024:
| 2025 | 2024 | $ Change | % Change | |||||||||||||
| Revenue | $ | 209,753 | $ | 134,235 | 75,518 | 56.26 | % | |||||||||
| Cost of revenue | (63,914 | ) | (274,432 | ) | 210,518 | -76.71 | % | |||||||||
| General and administrative | (2,609,688 | ) | (2,316,899 | ) | (292,789 | ) | 12.64 | % | ||||||||
| Selling and marketing | (318,784 | ) | (75,559 | ) | (243,225 | ) | 321.90 | % | ||||||||
| Research and development | (323,047 | ) | (80,780 | ) | (242,267 | ) | 299.91 | % | ||||||||
| Other income | 14 | 2,057 | (2,043 | ) | -99.32 | % | ||||||||||
| Net loss | $ | (3,105,666 | ) | $ | (2,611,378 | ) | (494,288 | ) | 18.93 | % | ||||||
Revenue
Revenue increased by $75,518 to approximately $209,753 for the three months ended March 31, 2025 from $134,235 for the three months ended March 31, 2024. The increase in revenue represents an additional contract that we received and commenced performing in June 2024. Offsetting this, in late April 2025, we were informed by our customer that two of our contracts are unfunded and remain unfunded at this time. The contracts would remain open, but we should stop work until and if funding is determined in the future. The company continues to work on the technology underlying the contracts as part of its internal research and development program, and the customer and the company continue to look for new funding sources within the contracting agency or within other departments of the DOD.
Cost of Revenue
Cost of revenue decreased by $210,518 to approximately $63,914 for the three months ended March 31, 2025 from $274,432 for the three months ended March 31, 2024. This decrease was primarily attributable to the unavailability of federal funds. The cost of material, supplies and direct labor incurred were expensed to R&D while our programs and work remain active and in place.
General and Administrative
General and administrative expenses increased by $292,789 to approximately $2,609,688 for the three months ended March 31, 2025, compared to approximately $2,316,899 for the three months ended March 31, 2024, primarily due to an increase in salaries and employee benefits and consulting of approximately $150,500 mainly due to non-cash compensation, an increase in travel and meals of approximately $22,742 an increase in software and licenses of approximately $16,300 an increase in depreciation expense of approximately $4,000 and increased capacity to include space, supplies, legal and insurance of $99,700.
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Selling and Marketing
Selling and marketing expenses decreased by $243,225 to approximately $318,784 for the three months ended March 31, 2025, compared to approximately $75,559 for the three months ended March 31, 2024, primarily due to the development and installation of the Battle Lab for $182,000 with $60,000 for labor and the continuation of business development activities through our Master Services Agreement with Westpark Advisors as well as other consultants in this field.
Research and Development
Research and development expenses increased by $242,267 to approximately $323,047 for the three months ended March 31, 2025, compared to approximately $80,780 for the three months ended March 31, 2024, primarily due to an increase in labor cost of $148,000 labor and material cost of $94,250 associated with continued development of our USP laser technologies and programs which remain in place as we continue to work on them.
Net Loss
Our operations for the three months ended March 31, 2025, resulted in a net loss of approximately $3,105,666 an increase of approximately $494,288 compared to the approximately $2,611,378 net loss for the three months ended March 31, 2024, primarily due an increase in general and administrative expense and research and development expense partially offset by a decrease in selling and marketing expenses.
Liquidity and Capital Resources
The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. For the three months ended March 31, 2025, the company incurred a net loss of approximately $3,106,000, had negative cash flows from operations of approximately $1,732,000 and may incur additional future losses due to the possible reduction in government contract activity and the expenses discussed under Results of Operations. In their report accompanying our financial statements for the year ended December 31, 2024, our independent auditors stated that our financial statements were prepared assuming that we would continue as a going concern and that they have substantial doubt as to our ability to do so for one year from the date the financial statements are issued based on our recurring losses from operations and need to raise additional capital. The financial statements do not include any adjustments relating to the recoverability of assets and the amount or classification of liabilities that might be necessary should the company be unable to continue as a going concern.
At March 31, 2025, the company had total current assets of $4,529,504 and total current liabilities of $766,108 resulting in working capital of $3,763,396 At March 31, 2024, we had $4,285,276 of cash and cash equivalents, an increase of $4,120,464 from $164,812 at December 31, 2024.
During the first three months of 2025, the net cash outflow from operating activities was $1,731,610. This amount was comprised primarily of our net loss of $3,105,666, offset by non-cash stock-based compensation expense of $991,793, depreciation and amortization of $56,151, amortization of ROU assets of $63,762 and amortization of prepaid assets of $38,393, and cash used from changes in assets and liabilities of $223,956 from the increase in accounts receivable of $245,505, increase in accounts payable of $35,152 and accrued expenses and compensation of $30,166 off set by the net decrease in prepaids and deposits of $28,159 and operating lease liabilities of $58,708.
During the first three months of 2025, the net cash outflow from investing activities was $114,118. This was for the purchase of equipment.
During the first three months of 2025, the net cash inflow from financing activities was $5,966,193. This amount consisted of $6,004,250 in proceeds from stock subscriptions and $12,000 from the exercise of options and warrants, which were offset by $2,733 tax withholdings related to the share settlement of RSUs and $47,325 of Repayment of insurance premium loan.
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Based on the company’s current business plan, we believe our cash balance as of the date of this report, along with revenue from our government contracts, will be sufficient to meet the company’s anticipated cash requirements for the near term. However, we cannot be certain that the current business plan will be achievable. In addition, we recently received verbal notice that funding under two of the company’s contracts has been discontinued, as described under Results of Operations and Ongoing Business Activities. Although these contracts are still in effect, receipt of any additional funds under them is highly uncertain, which negatively affects our anticipated cash flows from operating activities.
The company’s existence depends upon management’s ability to develop profitable operations. Management is devoting substantially all of its efforts to developing its business and raising capital, as needed, and cannot be certain that these efforts will be successful. Management’s business development efforts may not result in profitable operations. To fund its research and development and marketing efforts, the company’s management continues to explore possible financing opportunities through discussions with investment bankers and private investors. The company may not be successful in its effort to secure additional financing on terms it considers favorable. The accompanying consolidated financial statements do not include any adjustments that might result should the company be unable to continue as a going concern.
ITEM 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2025 Based on that evaluation, our Principal Executive Officer has concluded that our disclosure controls and procedures as of March 31, 2025 are not effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.
Changes in Internal Controls Over Financial Reporting
There was no change in our internal controls over financial reporting that occurred during the period covered by this report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
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PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On January 15, 2021, the company filed a complaint in the United States District Court, Southern District of New York, against Gusrae, Kaplan & Nusbaum and Ryan Whalen for malpractice and breach of New York Rules of Professional Conduct by both parties as former counsel to the company. On May 28, 2021, Gusrae, Kaplan & Nusbaum and Mr. Whalen filed a motion to dismiss the complaint. On June 25, 2021, the company filed an opposition to the motion. On July 13, 2021, Gusrae Kaplan & Nusbaum and Mr.Whalen filed their reply brief. On March 30, 2022, United States Magistrate Judge Debra Freeman signed an order denying the motion of GKN and Mr. Whalen to dismiss the company’s claim for malpractice and for rescission of the shares-for-fees agreement under which GKN and Whalen received 1,242,710 shares of the company’s common stock. The motion was partially granted as to the separate claim for violation of NYRPC 1.7 and 1.8 because the court found that it was duplicative of the malpractice claim. Motions for summary judgment in the case are fully briefed, and the judge has scheduled an oral argument date for August 7, 2025 at 11:00 a.m.
As with any litigation, the company cannot predict the outcome with certainty, but the company expects to provide further updates on the status of the litigation as circumstances warrant.
The company may, from time to time, be involved in legal proceedings arising from the normal course of business.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The company has reported all information pertaining to issuances of equity securities sold during the period covered by this Quarterly Report on Form 10-Q in previously filed report on Forms 10-K, 10-Q and 8-K.
ITEM
5.
Rule 10b5-1 Trading Arrangements
No new 10b5-1 Trading Plans were established by officers or directors during the three months ended March 31, 2025.
ITEM 6. EXHIBITS
| EXHIBIT
NUMBER |
DESCRIPTION | |
| 23 | Consent of RBSM LLP * | |
| 31.1 | Certification of Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a). | |
| 32.1 | Principal Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 101.INS | Inline XBRL Instance Document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
| * | Incorporated by reference to Exhibit 23.1 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 |
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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.
| APPLIED ENERGETICS, INC. | ||
| By: | /s/ Christopher Donaghey | |
| Christopher
Donaghey, President and Chief Executive Officer and Principal Financial Officer | ||
| Date: May 14, 2025 | ||
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