10-Q 1 f10q0923_appliedenerg.htm QUARTERLY REPORT

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

 Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended September 30, 2023

 

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 001-14015

 

APPLIED ENERGETICS, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware   77-0262908
(State or Other Jurisdiction of
Incorporation or Organization)
  (IRS Employer
Identification Number)
     
9070 S. Rita RoadSuite 1500
TucsonArizona
  85747
(Address of Principal Executive Offices)   (Zip Code)

 

Registrant’s telephone number, including area code (520) 628-7415

 

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. Yes ☒   No ☐

 

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). Yes ☒   No ☐

 

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:
Non-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
Common Stock, par value $0.001 per share   AERG   OTCQB

 

As of November 13, 2023, there were 211,176,688 shares of the issuer’s common stock, par value $0.001 per share, outstanding.

 

 

 

 

 

APPLIED ENERGETICS, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION
   
ITEM 1. Condensed Consolidated Unaudited Financial Statements 1
     
  Condensed Consolidated Balance Sheets as of September 30, 2023 (Unaudited) and December 31, 2022 1
     
  Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022 (Unaudited) 2
     
  Condensed Consolidated Statements of Stockholders’ Equity for the nine months ended September 30, 2023 and 2022 (Unaudited) 3
     
  Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022 (Unaudited) 4
     
  Notes to Condensed Consolidated Unaudited Financial Statements 5
     
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 15
     
ITEM 4. Controls and Procedures 22
     
PART II. OTHER INFORMATION
   
ITEM 1. Legal Proceedings 23
     
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 23
     
ITEM 6. Exhibits 24
     
SIGNATURES 25

 

i

 

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

APPLIED ENERGETICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS 

 

   September 30,   December 31, 
   2023   2022 
   (unaudited)     
Assets        
Current assets        
Cash and cash equivalents  $2,418,714   $5,640,308 
Receivables, net   404,051    353,149 
Other assets   193,887    92,774 
Total current assets   3,016,652    6,086,231 
           
Long-term assets          
Property and equipment - net   280,275    192,935 
Right of use asset - operating   1,101,093    432,057 
Security deposit   17,004    17,004 
Total long-term assets   1,398,372    641,996 
Total assets  $4,415,024   $6,728,227 
           
Liabilities and Stockholders’ Equity          
Current liabilities          
Accounts payable  $232,101   $116,971 
Notes payable   51,847    400,000 
Due to related parties   50,000    50,000 
Operating lease liability - current   155,093    113,478 
Deferred revenue   366,006    - 
Accrued expenses   49,875    28,007 
Accrued dividends   48,079    48,079 
Total current liabilities   953,001    756,535 
           
Long-term liabilities          
Operating lease liability - non-current   1,041,089    393,709 
Total long-term liabilities   1,041,089    393,709 
Total liabilities   1,994,090    1,150,244 
           
Stockholders’ Equity          
Series A convertible preferred stock, $.001 par value, 2,000,000 shares authorized and 13,602 shares issued and outstanding at September 30, 2023 and December 31, 2022 (Liquidation preference $340,050 and $340,050, respectively)   14    14 
Common stock, $.001 par value, 500,000,000 shares authorized; 211,146,688 and 210,848,671 shares issued and outstanding at September 30, 2023 and at December 31, 2022, respectively   211,141    210,843 
Additional paid-in capital   111,241,064    108,830,989 
Accumulated deficit   (109,031,285)   (103,463,863)
Total stockholders’ equity   2,420,934    5,577,983 
           
Total Liabilities and Stockholders’ Equity  $4,415,024   $6,728,227 

 

See accompanying notes to condensed consolidated financial statements (unaudited).  

 

1

 

  

APPLIED ENERGETICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

   For The Three Months Ended
September 30,
   For The Nine Months Ended
September 30,
 
   2023   2022   2023   2022 
                 
Revenue  $712,810   $572,766   $1,759,433   $763,688 
Cost of revenue   174,412    127,668    492,852    142,835 
                     
Gross profit   538,398    445,098    1,266,581    620,853 
                     
Operating expenses                    
General and administrative   2,219,641    1,249,132    6,401,550    4,365,823 
Selling and marketing   94,092    56,416    297,447    231,528 
Research and development   54,222    65,364    166,958    286,365 
Total operating expenses   2,367,955    1,370,912    6,865,955    4,883,716 
                     
Operating loss   (1,829,557)   (925,814)   (5,599,374)   (4,262,863)
                     
Other income/(expense)                    
Other income   20,287    637    35,769    637 
Interest expense   (1,908)   (1,227)   (3,817)   (2,910)
Total other income/(expense)   18,379    (590)   31,952    (2,273)
                     
Loss before provision for income taxes   (1,811,178)   (926,404)   (5,567,422)   (4,265,136)
                     
Provision for income taxes   
-
    
-
    
-
    
-
 
                     
Net loss   (1,811,178)   (926,404)   (5,567,422)   (4,265,136)
                     
Preferred stock dividends   (8,501)   (8,501)   (25,504)   (25,504)
                     
Net loss attributable to common stockholders  $(1,819,679)  $(934,905)  $(5,592,926)  $(4,290,640)
                     
Net loss attributable to common stockholders per common share - basic and diluted
  $(0.01)  $(0.00)  $(0.03)  $(0.02)
                     
Weighted average number of common shares outstanding   211,133,165    207,794,526    211,046,786    207,726,711 

 

See accompanying notes to condensed consolidated financial statements (unaudited).

 

2

 

 

APPLIED ENERGETICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

(Unaudited)

 

   Preferred Stock   Common Stock   Additional
Paid-In
   Accumulated    Total
Stockholders’
(Deficit)
 
 
   Shares   Amount   Shares   Amount   Capital   Deficit     Equity   
Balance at December 31, 2022   13,602   $14    210,848,671   $210,843   $108,830,989   $ (103,463,863)  $5,577,983 
Stock-based compensation   -    
-
    -    
-
    758,187    
-
    758,187 
RSU Restricted Stock   
-
    
-
    9,584    10    21,075    
-
    21,085 
Common stock issued on exercise of options   
-
    
-
    175,000    175    16,575    
-
    16,750 
Net loss for the quarter ended March 31, 2023   -    
-
    -    
-
    
-
    (1,938,020)   (1,938,020)
Balance at March 31, 2023   13,602    14    211,033,255   $211,028   $109,626,826   $(105,401,883)  $4,435,985 
Stock-based compensation   -    
-
    -    
-
    845,678    
-
    845,678 
Net loss for the quarter ended June 30, 2023   -    
-
    -    
-
    
-
    (1,818,224)   (1,818,224)
Balance at June 30, 2023   13,602   $14    211,033,255   $211,028   $110,472,504   $(107,220,107)  $3,463,439 
Stock-based compensation   -    
-
    -    
-
    903,343    
-
    903,343 
Common stock issued for settlement of restricted stock units   
-
    
-
    150,000    150    (150)   
-
    
-
 
Common stock withheld to cover income tax withholding obligations   
-
    
-
    (56,567)   (57)   (136,614)   
-
    (136,671)
Common stock issued on exercise of option   
-
    
-
    20,000    20    1,981    
-
    2,000 
Net loss for the quarter ended September 30, 2023   -    
-
    -    
-
    
-
    (1,811,178)   (1,811,178)
Balance at September 30, 2023   13,602    14    211,146,688    211,141    111,241,064    (109,031,285)   2,420,934 

 

   Preferred Stock   Common Stock   Additional
Paid-In
   Accumulated   Total
Stockholders’
(Deficit)
 
   Shares   Amount   Shares   Amount   Capital   Deficit   Equity 
Balance at December 31, 2021   13,602   $14    207,562,461   $207,562   $100,452,862   $(97,692,217)  $2,968,221 
RSU restricted Stock   
-
    
-
    130,417    130    (130)   
-
    
-
 
Stock-based compensation   -    
-
    -    
-
    554,877    
-
    554,877 
Net loss for the quarter ended March 31, 2022   -    
-
    -    
-
    
-
    (1,781,190)   (1,781,190)
Balance at March 31, 2022   13,602    14    207,692,878    207,692    101,007,609    (99,473,407)   1,741,908 
Stock-based compensation   -    
-
    -    
-
    449,508    
-
    449,508 
Common stock issued on exercise of option   
-
    
-
    100,000    100    12,900    
-
    13,000 
Net loss for the quarter ended June 30, 2022   -    
-
    -    
-
    
-
    (1,557,542)   (1,557,542)
Balance at June 30, 2022   13,602   $14    207,792,878   $207,792   $101,470,017   $(101,030,949)  $646,874 
Stock-based compensation   -    
-
    -    
-
    257,241    
-
    257,241 
Common stock issued on cashless exercise of options and warrant   
-
    
-
    25,000    25    1,225    
-
    1,250 
Net loss for the three months ended September 30, 2022   -    
-
    -    
-
    
-
    (926,404)   (926,404)
Balance at September 30, 2022   13,602    14    207,817,878    207,817    101,728,483    (101,957,353)   (21,039)

  

See accompanying notes to condensed consolidated financial statements (unaudited).

 

3

 

 

APPLIED ENERGETICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)  

 

   For the Nine Months Ended
September 30,
 
   2023   2022 
Cash Flows from Operating Activities        
Net loss  $(5,567,422)  $(4,265,136)
Adjustments to reconcile net loss to net cash used in operating activities:          
Noncash stock-based compensation expense   2,528,293    1,261,626 
Amortization of ROU assets   97,245    83,965 
Loss on disposal of asset   
-
    14,540 
Depreciation and amortization   90,564    50,499 
Amortization of future compensation payable   
-
    416,666 
Amortization of prepaid assets   153,366    162,760 
Changes in assets and liabilities:          
Accounts receivable   (50,902)   (219,618)
Prepaid and deposits   (254,479)   (237,097)
ROU liabilities   (77,286)   (53,959)
Deferred revenue   366,006    
-
 
Accounts payable   115,130    53,863 
Accrued expenses and compensation   21,869    (11,063)
Net cash used in operating activities   (2,577,616)   (2,742,954)
           
Cash Flows from Investing Activities          
Purchase of equipment   (177,904)   (78,996)
Net cash used in investing activities   (177,904)   (78,996)
           
Cash Flows from Financing Activities          
Repayment on note payable   (503,694)   (460,002)
Proceeds from note payable   155,541    175,435 
Tax withholdings related to net share settlement of RSU’s   (136,671)   
-
 
Proceeds from subscription payable   
-
    585,000 
Proceeds from the exercise of stock option   18,750    14,250 
Net cash (used in) provided by financing activities   (466,074)   314,683 
           
Net change in cash and cash equivalents   (3,221,594)   (2,507,267)
           
Cash and cash equivalents, beginning of period   5,640,308    3,662,615 
Cash and cash equivalents, end of period  $2,418,714   $1,155,348 
           
Supplemental disclosure of cash flow information          
Cash paid for interest  $3,817   $1,683 
Cash paid for taxes  $
-
   $
-
 
           
Non-cash investing and financing activities          
Insurance financing for prepaid insurance  $155,541   $175,435 
Implementation of ASC 842  $766,281   $
-
 

 

See accompanying notes to condensed consolidated financial statements (unaudited).

 

4

 

 

APPLIED ENERGETICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(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, 2022, 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 nine months ended September 30, 2023, the company incurred a net loss of $5,567,422, had negative cash flows from operations of $2,577,616 and may incur additional future losses due to limited contract activity. At September 30, 2023, the company had total current assets of $3,016,652 and total current liabilities of $953,001, resulting in working capital surplus of $2,063,651. At September 30, 2023, the company had cash of $2,418,714.

 

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 a government grant and contracts, will be sufficient to meet its anticipated cash requirements for the near term. However, the current business plan may prove unachievable. 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 which may not 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

SEPTEMBER 30, 2023

(Unaudited)

 

Trade conditions, such as exacerbated supplier 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 31,623,768 and 24,424,550 as of September 30, 2023 and 2022, respectively. 

 

6

 

 

APPLIED ENERGETICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(Unaudited)

 

Significant Concentrations and Risks

 

The company maintains cash balances at one or more financial institutions, and, at times, balances exceed FDIC limits. As of September 30, 2023, $1,914,439 was uninsured.

 

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 – NOTES PAYABLE

 

On May 24, 2019, the company entered into an Asset Purchase Agreement (the “APA”) with Applied Optical Sciences, LLC (“AOS”) to acquire certain assets. As consideration for the APA, the company entered into a promissory note issued to the shareholders of AOS for $2,500,000. The note was non-interest bearing and payable in equal installments. The company made the first three payments of $500,000 on February 10, 2021, May 24, 2021, and November 19, 2021, respectively. The Promissory Note was amended on May 23, 2022, as modification of debt, to extend the maturity date by one year to May 24, 2023 and restructure the payment to time up to the adjusted maturity date. The remaining balance of $1,000,000 as of June 30, 2022 was to be paid in ten equal installments of $100,000 over a period of ten months with the final installment to be paid on April 24, 2023. In accordance with the amended terms of the promissory note, the company made six payments of $100,000 each, for an aggregate repayment of $600,000. As of September 30, 2023, the company had repaid the note in full. $0 in principle was outstanding on this loan.

 

Premium Financing

 

On March 16, 2023, the company entered into an agreement with Oakwood D&O Insurance to provide financing in the amount of $155,541 for the insurance premium associated with two D&O policies. Both policies commenced March 12, 2023, and provided coverage for the next 12 months, expiring March 12, 2024. The loan bears interest at a fixed rate of 8.75% per annum, required the company to prepay $40,410 and appears on the balance sheet as a current asset. On April 12, 2023, the company commenced monthly principal and interest payments of $17,282, which was the first payment of nine remaining months due of $155,541, the last payment of which is scheduled to be made on December 31, 2023. As of September 30, 2023, the outstanding balance on the note was $51,847 and was recorded as notes payable, a currently liability, in the company’s unaudited condensed consolidated balance sheet.

 

Notes Payable Reconciliation

 

The following reconciles notes payable as of September 30, 2023, and December 31, 2022:

 

   September 30,
2023
   December 31,
2022
 
Beginning balance  $400,000   $1,024,190 
Notes payable   155,541    175,435 
Accrued interest   
-
    (636)
Payments on notes payable   (503,694)   (798,988)
Total   51,847    400,000 
Less-Notes payable – current   51,847    400,000 
Notes payable – non-current  $
-
   $
-
 

 

Future principal payments for the company’s notes as of September 30, 2023, are as follows:

 

2023   $51,847 
Thereafter    
-
 
Total   $51,847 

 

The company’s note payable balance of $51,847 is due within the next twelve months, in accordance with the terms of note payable.

 

7

 

 

APPLIED ENERGETICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(Unaudited)

 

NOTE 4 – DEFERRED COMPENSATION

 

On May 24, 2019, the company entered into the APA with AOS to acquire certain assets. As consideration for the APA, the company entered into a promissory note issued to the shareholders of AOS for $2,500,000. The company also recorded a debt discount, which is reported on the balance sheet as deferred compensation, in the amount of $2,500,000, in relation to the transaction which is being amortized over the life of the loan as compensation expense. The amortization of deferred compensation for the nine months ended September 30, 2023, and 2022 was $0 and $416,666, respectively.

 

NOTE 5 – DUE TO RELATED PARTIES

 

On July 31, 2018, the company’s now deceased CEO deposited $50,000 into the company’s account. Although it has been suggested that the funds may have been intended for use toward this CEO’s healthcare, the company does not know for certain what the purpose of the funds were or the nature of any intended investment. Accordingly, the company is investigating the appropriate disposition of the funds which will likely be to the estate of the former CEO. Until such a determination is made, the company does not intend to use these funds for any corporate purpose. For reporting purposes, the company has treated the deposit as a due to related party.

 

NOTE 6 – STOCKHOLDERS’ EQUITY

 

Authorized Capital Stock

 

During the nine months ended September 30, 2022, the company issued 130,417 shares of common stock for previously vested and expensed shares in relation to a restricted stock agreement. For the nine months ended September 30, 2022, the company recorded $0 in relation to these shares.

 

During the nine months ended September 30, 2022, the company issued 100,000 shares of common stock upon the exercise of 100,000 options at an exercise price of $0.13 a share. As a result, the company received $13,000 in cash proceeds.as part of the transaction. 

 

During the nine months ended September 30, 2022, the company issued 25,000 shares of common stock upon the exercise of two warrants of 12,500 shares each, or 25,000 shares of common stock in the aggregate, at an exercise price of $0.05 a share. The company received $1,250 in cash proceeds as part of the transaction.

 

Effective August 1, 2022, the company entered into an Executive Employment Agreement with its Chief Financial and Operating Officer. As part of this agreement, the company granted 1,000,000 options to purchase shares of common stock at an exercise price of $2.36 per share. The options vest over a period of four years and expire ten years from the date of the grant. Under the agreement, this officer also received restricted stock units covering 400,000 shares (see “Share-Based Payments” below). The officer forfeited unvested options to purchase 950,000 shares of common stock which he had previously received for his service on the company’s Board of Advisors. The forfeiture of the unvested options resulted in the reversal of the previously recorded stock-based compensation expense in the amount of approximately $176,000.

 

As of nine months ended, September 30, 2022, the company recognized a subscription payable for $585,000 from the sale of common stock as a current liability on its balance sheet, reflecting the receipt of $585,000 in cash proceeds as part of a pending private equity placement transaction.

 

During the nine months ended September 30, 2023, the company issued the remaining 9,584 shares of common stock with a grant date fair value of $21,085, pursuant to a restricted stock agreement dated May 2021.

 

During the nine months ended September 30, 2023, the company issued 100,000 shares of common stock upon the exercise of 100,000 options at an exercise price of $0.07 a share. As a result, the company received $7,000 in cash proceeds as part of the transaction.

 

During the nine months ended September 30, 2023, the company issued 75,000 shares of common stock upon the exercise of 75,000 options at an exercise price of $0.13 a share. As a result, the company received $9,750 in cash proceeds as part of the transaction.

 

During the nine months ended September 30, 2023, the company issued 10,000 shares of common stock upon the exercise of 10,000 options at an exercise price of $0.13 a share. As a result, the company received $1,300 in cash proceeds as part of the transaction.

 

During the nine months ended September 30, 2023, the company issued 10,000 shares of common stock upon the exercise of 10,000 options at an exercise price of $0.07 a share. As a result, the company received $700 in cash proceeds as part of the transaction.

 

During the nine months ended September 30, 2023, the restricted stock units covering 150,000 shares of the company’s common stock vested. The company withheld 56,567 of these shares of common stock from the holders pursuant to their restricted stock unit agreements to cover its tax withholding obligation of $136,671.

 

8

 

 

APPLIED ENERGETICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(Unaudited)

 

Preferred Stock

 

As of September 30, 2023, and December 31, 2022, there were 13,602 shares of Series A Redeemable Convertible Preferred Stock (the “Series A Preferred Stock”) issued and outstanding, respectively. The company has not paid the dividends commencing with the quarterly dividend due August 1, 2013. Dividend arrearages as of September 30, 2023, including previously accrued dividends of $48,079 included in our balance sheet total approximately $348,929. Our Board of Directors suspended the declaration of the dividend, commencing with the dividend payable as of February 1, 2015, since we did not have a surplus (as such term is defined in the Delaware general corporation Law) as of December 31, 2014, until such time as we have a surplus or net profits for a fiscal year.

 

Our Series A Preferred Stock has a liquidation preference of $25.00 per Share. The Series A Preferred Stock bears dividends at the rate of 6.5% of the liquidation preference per share per annum, which accrues from the date of issuance, and is payable quarterly. Dividends may be paid in: (i) cash, (ii) shares of our common stock (valued for such purpose at 95% of the weighted average of the last sales prices of our common stock for each of the trading days in the ten trading day period ending on the third trading day prior to the applicable dividend payment date), provided that the issuance and/or resale of all such shares of our common stock are then covered by an effective registration statement and the company’s common stock is listed on a U.S. national securities exchange or the Nasdaq Stock Market at the time of issuance or (iii) any combination of the foregoing. If the company fails to make a dividend payment within five business days following a dividend payment date, the dividend rate shall immediately and automatically increase by 1% from 6.5% of the liquidation preference per offered share of Series A preferred stock to 7.5% of such liquidation preference. If a payment default shall occur on two consecutive dividend payment dates, the dividend rate shall immediately and automatically increase to 10% of the liquidation preference for as long as such payment default continues and shall immediately and automatically return to the Initial dividend rate at such time as the payment default is no longer continuing.

 

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 $12.00 per share, subject to adjustment in the event of a stock dividend or split, reorganization, recapitalization or similar event). If the closing sale price of the common stock is greater than 140% of the conversion price on 20 out of 30 trading days, the company may redeem the Series A Preferred Stock in whole or in part at any time through October 31, 2010, upon at least 30 days’ notice, at a redemption price, payable in cash, equal to 100% of the liquidation preference of the shares to be redeemed, plus unpaid dividends thereon to, but excluding, the redemption date, subject to certain conditions. In addition, beginning November 1, 2010, the company may redeem the Series A Preferred Stock in whole or in part, upon at least 30 days’ notice, at a redemption price, payable in cash, equal to 100% of the liquidation preference of the Series A Preferred Stock to be redeemed, plus unpaid dividends thereon to, but excluding, the redemption date, under certain conditions.

 

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, 101% of the liquidation preference thereof, plus all unpaid and accumulated dividends, if any, to the date of purchase thereof. The purchase price is payable, at the corporation’s option, (x) in cash, (y) in shares of the common stock at a discount of 5% from the fair market value of Common Stock on the Purchase Date (i.e. valued at a 95% discount of the Common Stock on the Purchase Date), or (z) any combination thereof.

 

9

 

 

APPLIED ENERGETICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(Unaudited)

 

If the company 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 company may pay the Purchase Price (or a portion thereof), whether in cash or in shares of Common Stock, only if the company 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 company.

 

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 50,000,000 shares for possible issuance under the plan.

 

We have, from time to time, also granted non-plan options to certain officers, directors, employees and consultants. Total stock-based compensation expense for grants to officers, employees and consultants was $2,528,293 and $1,261,626 for the nine months ended September 30, 2023, and 2022, respectively, which was charged to general and administrative expense.

 

During the nine months ended September 30, 2023, the company issued restricted stock units covering 940,909 shares for services rendered pursuant to an amendment to a master services agreement with a consultant.

 

During the nine months ended September 30, 2023, the company issued incentive stock options to purchase up to 312,500 shares of common stock, at an exercise price of $2.05, to one employee.

 

During the nine months ended September 30, 2023, the company issued incentive stock options to purchase up to 50,000 shares of common stock, at an exercise price of $2.20, to two employees.

 

During the nine months ended September 30, 2023, the company issued incentive stock options to purchase up to 100,000 shares of common stock, at an exercise price of $2.25, to one new employee. In addition, the company issued restricted stock units covering 35,000 shares for services rendered pursuant to an employment agreement.

 

 During the nine months ended September 30, 2023, the company issued a non-qualified stock options to purchase up to 100,000 shares of common stock, at an exercise price of $2.51, to one consultant. In addition, the company issued incentive stock options to purchase up to 100,000 shares of common stock, at an exercise price of $2.35, to one new employee.

 

During the nine months ended September 30, 2023, the company issued incentive stock options to purchase up to 150,000 shares of common stock, at an exercise price of $2.41, to one employee.

 

During the nine months ended September 30, 2023, the company issued incentive stock options to purchase up to 2,800,000 shares of common stock, at an exercise price of $2.35, to eleven employees.

 

During the nine months ended September 30, 2023, the company issued restricted stock units covering 100,000 shares for services rendered pursuant to an employment agreement.

 

See Note 6 – Stockholders’ Equity – Authorized Capital Stock for details related to the exercise of an aggregate of 195,000 options during the nine months ended September 30, 2023.

 

The $2,528,293 stock-based compensation for the nine months ended September 30, 2023, was comprised of $1,182,972 option expense, $1,324,236 expense from the vesting of the restricted stock and $21,085 expense related to shares of common stock for services rendered pursuant to a board of advisor’s agreement.

 

The company recognized no related income tax benefit because our deferred tax assets are fully offset by a valuation allowance.

 

As of September 30, 2023, the company has $9,445,984 of unrecognized compensation cost related to unvested stock options granted and outstanding, net of estimated forfeitures. The cost is expected to be recognized on a weighted average basis over a period of approximately six years.

 

10

 

 

APPLIED ENERGETICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(Unaudited)

 

The following table summarizes the activity of our stock options for the nine months ended September 30, 2023:

 

   Shares   Weighted
Average
Exercise Price
   Weighted
Average
Contractual Term
Outstanding
   Intrinsic
Value
 
Outstanding at December 31, 2022   22,848,385   $0.37    6.42   $203,236,473 
Granted   3,662,500    2.32    9.83    
27,94,546
 
Exercised   (195,000)   0.09    5.11    (1,898,382)
Forfeited or expired   (30,451)   
-
    
-
    (299,377)
Outstanding at September 30, 2023   26,285,434    0.64    9.78    241,614,370 
                     
Outstanding and exercisable at September 30, 2023   21,004,321    0.24    7.83    201,553,841 

 

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:

 

   Nine Months Ended
September 30,
 
   2023   2022 
Assumptions:        
Risk-free interest rate   1.264.24%   1.261.30%
Expected dividend yield   0%   0%
Expected volatility   109.48130.00%   126%
Expected life (in years)   6    5 

 

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 activity for the nine months ended September 30, 2023, was as follows:

 

   Restricted Stock Outstanding 
   Shares   Weighted
Average
Fair Value
per Share
at Grant Date
 
         
Nonvested at December 31, 2022   2,819,545   $1.93 
Granted – restricted stock units and awards   1,075,909    1.86 
Granted – performance-based stock units   
          -
    
-
 
Canceled   (50,000)   
-
 
Vested   (365,000)   0.30 
Nonvested at September 30, 2023   3,480,454   $2.12 

 

11

 

 

APPLIED ENERGETICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(Unaudited)

 

As of September 30, 2023, and December 31, 2022, there was $5,648,651 and $5,071,427, respectively, in unrecognized stock-based compensation related to unvested restricted stock agreements, net of estimated forfeitures.

 

As of September 30, 2023 and December 31, 2022, the company recorded $0 and $223,000, respectively, in unrecognized stock-based compensation related to a lockup agreement on 5,000,000 shares of common stock in the acquisition of assets of AOS valued at $0.4014 per share, representing the closing price on the date of the contract which is amortized over 36 months, of which, $0 and $223,000 was amortized for the nine months ended September 30, 2023 and 2022, respectively.

 

Warrant stock activity for the nine months ended September 30, 2023, was as follows:

 

   Warrant Activity 
   Shares   Weighted
Average
Exercise
Price
   Weighted
Average
remaining
Contractual
Term (years)
 
Outstanding at December 31, 2022   1,750,000   $0.0600    6.53 
Granted   
-
    
-
    
-
 
Exercised   
-
    
-
    
-
 
Forfeited   
-
    
-
    
-
 
Outstanding and exercisable at September 30, 2023   1,750,000   $0.0600    5.78 

 

   Warrants Outstanding   Warrants Exercisable 
Range of Exercise Prices  Shares
Outstanding
   Weighted
Avg.
Remaining
Contractual
Life in Years
   Weighted
Avg.
Exercise
Price
   Shares
Exercisable
   Weighted
Avg.
Exercise
Price
 
$0.05 – $0.07   1,750,000    5.78   $0.0600    1,750,000   $0.0600 
    1,750,000    5.78   $0.0600    1,750,000   $0.0600 

 

NOTE 7 – 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 the company recognizes revenue over the contract term at a fixed contract price.

 

The following table summarizes the Company’s accounts receivable, net,

 

   September 30,
2023
   December 31,
2022
 
         
Accounts receivable  $162,226   $353,149 
Unbilled receivable   241,825    
-
 
Total  $404,051   $353,149 

 

12

 

 

APPLIED ENERGETICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(Unaudited)

 

Concentrations

 

During the three and nine months ended September 30, 2023, the company earned revenue from two contracts with two separate customers. One customer accounted for $1,539,636 or 88% of revenue recognized during the nine-month period. As of September 30, 2023, the company has $404,051 or 100% of accounts receivable recorded as current assets on the balance sheet related to this customer. During the three and nine months ended September 30, 2022, the company earned revenue from two separate customers. One customer accounted for $648,905 or 85% of revenue recognized during the period. As of September 30, 2022, the company has $219,618 of accounts receivable recorded as current assets on the balance sheet related to this customer.

 

NOTE 8 – COMMITMENTS AND CONTINGENCIES

 

Operating Leases

 

In March 2021, the company signed a five-year lease for a 13,000 square foot laboratory/office space in Tucson. The initial base rent was $6.7626 per rentable square foot for year one, and escalated to $9.2009 in year two, $11.4806 in year three, $13.1740 in year four and $14.9306 in year five, plus certain operating expenses and taxes.

 

On June 7, 2023, the company entered into an amendment to extend the term of the original lease from April 26, 2026 to July 31, 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 9,805 square feet. The initial base rent for the expansion space was $9.10 per rentable square foot for year one, and escalated to $10.20 in year two, $11.30 in year three, $12.40 in year four and $13.50 in year five, plus certain operating expenses and taxes.

 

The company incurred lease expenses for its operating leases of $121,316 which was included in general and administrative expenses in the statements of operation as of September 30, 2023. During the nine months ended September 30, 2023, the company made cash lease payments in the amount of $119,825.

 

At September 30, 2023, we had approximately $60,677 in future minimum lease payments due in less than a year. The below table presents the future minimum lease payments due reconciled to lease liabilities.

 

   Operating
Lease
 
For the nine months ended September 30, 2023    
2023  $60,677 
2024   262,296 
2025   296,284 
2026   324,427 
2027   343,545 
Thereafter   205,111 
Total undiscounted lease payments   1,492,341 
Present value discount, less interest   296,161 
Lease Liability  $1,196,180 

 

13

 

 

APPLIED ENERGETICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(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 September 30, 2023 and 2022.

 

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 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. The parties are currently engaged in discovery. No trial date has been set.

 

On July 26, 2023, the company filed a complaint in the Superior Court of the State of Delaware against Gusrae Kaplan Nusbaum PLLC and Ryan Whalen, for malicious prosecution of a federal securities fraud lawsuit which was filed by these defendants against the company and certain of its directors, attorneys and their law firms and an outside consultant, in July 2019 in the United States District Court for the Southern District of New York. The complaint filed by the company alleges that the claims by these defendants against it were frivolous and prosecuted for the improper purpose of hindering the company’s prosecution of a then pending case against George Farley, the company’s former CEO, which was later settled. The complaint further alleges that the defendants prosecuted their claim with malice causing the company damages valued in excess of $40 million. On September 11, 2023, Gusrae, Kaplan & Nusbaum and Mr. Whalen filed a motion to dismiss the complaint. On October 25, 2023, the company filed an opposition to the motion. No hearing date has been set for the motion.

 

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.

 

We may, from time to time, be involved in legal proceedings arising from the normal course of business.

 

Related Party

 

In January 2023, the company made a $25,000 tax-deductible donation to Silicon Valley Defense Group (SVDG), a 501(c)(3) organization of which Christopher Donaghey, our Chief Financial and Operating Officer, is a founder and member of the Board of Directors. As its objective, SVDG “seeks to align and connect the people, capital, and ideas that will ensure allied democracies retain a durable techno-security advantage.”

 

Employment Agreement

 

Effective May 1, 2023, the board of directors of the company appointed Stephen W. McCahon, age 63, to serve as Chief Science Officer. The company and Dr. McCahon entered into an Executive Employment Agreement, pursuant to which he is to serve for an initial term through December 2025, with automatic renewal for additional one-year periods thereafter unless either party terminates the agreement. The agreement calls for a salary of $300,000 annualized for 2023, $325,000 for 2024 and $350,000 for 2025, plus standard benefits.

 

NOTE 9 – SUBSEQUENT EVENTS

 

The company’s management has evaluated subsequent events occurring after September 30, 2023, the date of our most recent balance sheet, through the date our financial statements were issued.

 

Subsequent to the nine months ended September 30, 2023, the company issued an aggregate of 30,000 shares of common stock upon the exercise of 10,000 options at an exercise price of $0.07 a share and 20,000 options at an exercise price of $0.35 a share.

 

14

 

 

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, 2022.

 

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, 2022. 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. Our website is at 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.

 

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.

 

15

 

 

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’ 26 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. HEL, and HPM. LGE uses Ultrashort Pulse (USP) laser technology to combine the speed and precision of lasers with the overwhelming impact on targeted threats with high-voltage electricity. A key element of our approach is its novel ability to offer selectable and tunable properties that can help protect non-combatants and combat zone infrastructure. 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 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

 

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.

 

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 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 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.

 

In May 2022, the Department of the Navy, Office of Naval Research (ONR) awarded Applied Energetics a $3.89 million, two-year grant, to develop an optical system capable of defeating customer-specified threats for integration onto U.S. Marine Corps (USMC) platforms. We were awarded this grant 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. The research on this grant continues with all progress reported to the program manager as on-time and on-budget. The AE team is actively engaged with the customer and providing regular briefings.

 

Effective June 7, 2023, the company entered into the First Amendment to Lease Agreement, which amended its existing Lease Agreement over its headquarters at the University of Arizona Tech Park. The amendment has expanded the Lease to add new 8,374 usable square-foot suite of offices, conference rooms and cubicle areas directly across an atrium from the company’s current headquarters so that the company will occupy the entire first floor of the building. This has enabled the company to separate its public-facing facilities from its restricted access space easily. The amendment also extended the Lease over the company’s existing headquarters through July 31, 2028 and grants the company an option over 5,520 usable square feet of manufacturing space. The company moved its administrative offices into the new space in August 2023.

 

During the first nine months of 2023, Applied Energetics has continued to add new members to our scientific and engineering team, including two Laser and Optics Research and Development Technicians and an Engineering Project Manager. We also retained a Senior Growth and Product Development Advisor, and in the summer of 2023, added a new Senior Scientist with more than ten years’ experience in high-power and high-energy lasers. We have worked to integrate these new members into our team and optimize the contribution that each brings to our research and development efforts.

 

Effective May 1, 2023, Stephen W. McCahon entered into an Executive Employment Agreement with the company to serve as Chief Science Officer (CSO). Dr. McCahon was an original co-founder of Applied Energetics, and in May of 2019, he returned to the company to serve as its Chief Scientist in a consulting role. Since that time, he has provided strategic direction to the company’s research and development activities in the areas of advanced optical technologies and USPL Directed Energy solutions. His salary as CSO is commensurate with his compensation under his Consulting Agreement for service as Chief Scientist.

 

Dr. McCahon was a Member of the Research Staff in the Optical Physics Department at the Hughes Research Laboratory in Malibu, California from 1986 to 1996 performing basic research in the area of optical physics and non-linear optical materials. In 1996, Dr. McCahon moved to Raytheon (Hughes) Missile Systems Co, in Tucson, AZ, during which time he was significantly responsible for the successful creation and development of the Directed Energy Weapons Product Line and served as its Chief Scientist. He left Raytheon in 2002 to co-found Applied Energetics Inc. in Tucson, AZ to develop Directed Energy Weapons for the Defense Department including very high energy and average power ultrashort pulse laser sources and Laser Guided Energy (LGE®) technologies. In April 2010, Dr. McCahon left Applied Energetics to form Applied Optical Sciences where he developed technologies related to the application of optical physics to a broad range of areas, including photonics and ultrashort pulse laser development. Dr. McCahon is a graduate of the University of Southern California (BSEE, MSEE), holds a Ph.D., Photonics, Inter-disciplinary Physics and Electrical Engineering from the University of Iowa.

 

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Dr. McCahon beneficially owns approximately 4% of the company’s issued and outstanding shares of common stock.

 

Applied Energetics has nine pending patent applications. We expect to continue to file patent applications as we deem appropriate to protect our intellectual property and enhance our competitive advantage.

 

Ongoing Business Development Activities

 

Over the past few years, we have submitted multiple proposals to, and attended briefings with, various defense and other government agencies who have expressed an interest in our technology and applications. We believe that our efforts in this area of development have begun to produce results. In addition to the grant and 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.

 

Applied Energetics has recently been involved with the Tulsa Innovation Labs (TIL) and Oklahoma State University (OSU) in defining opportunities to participate in the US Department of Commerce, Economic Development Administration (EDA) Tech Hubs program request for proposals.  Tech Hubs was authorized by the bipartisan CHIPS and Science Act, a key part of President Biden’s Investing in America agenda, which he signed into law in August 2022.  In August of 2023, Applied Energetics was a founding consortium member of the Tech Hub proposal submitted under the title of Tulsa Hub for Equitable and Trustworthy Autonomy (THETA). On October 23, 2023, the US EDA named the THETA Tech Hub as part of the historic $500 million investment in economic competitiveness and national security. This designation makes the THETA consortium eligible for $75 million or more in federal funding to accelerate the advanced development of autonomous technologies. In the submitted papers, it specifically calls out that THETA will emphasize the development of UAS and counter-UAS (CUAS), artificial intelligence (AI), and cybersecurity technologies. As such, Applied Energetics will be working closely with the Unmanned Systems Research Institute (USRI) and the Oklahoma Aerospace Institute for Research and Education (OAIRE), both at Oklahoma State University to partner on the UAS and counter-UAS technology research supporting the THETA TechHub. Through February 2024, the Tech Hubs designees will now compete for Phase 2 of the funding for implementation projects to help propel the region into a self-sustaining, globally competitive Tech Hub.  

 

Two significant pieces of legislation impacted Applied Energetics that were signed by the President on September 30, 2022. The first piece, bill S. 4900, the “SBIR and STTR Extension Act of 2022,” authorizes the Small Business Innovation Research (SBIR), Small Business Technology Transfer (STTR), and six related pilot programs through Fiscal Year 2025; requires agencies with an SBIR or STTR program to establish a due diligence program to assess the potential risk posed by program applicants’ foreign ties; requires certain departments and agencies to report on national security risks within their SBIR/STTR programs; and establishes increased minimum performance standards for firms that have won a certain number of awards during a specified period of time.

 

The other piece of legislation that we have seen multiple times in the past decade is the Continuing Resolution (CR). For fiscal year 2024, which started on October 1, 2023, neither the National Defense Authorization Act (NDAA) nor the Defense Appropriations bill have been approved. On September 30, 2023, President Biden signed a CR, HR 5860, which extends the government operations through November 17, 2023. If the appropriation budgets are not passed, or if another CR is not implemented prior to November 17th, a partial government shutdown will commence. The NDAA sets defense spending policies and is typically passed prior to the appropriations bills. Since neither has passed, all new starts on funding of government contracts in the defense sector are on hold. This impacts any and all proposals under review by the Department of Defense.

 

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.

 

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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 very 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 was 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. Our desire is to work on programs jointly where the strengths of each organization can assist in escalating knowledge and delivery of systems to the government sponsors, and to train the next generation of scientists and engineers to work in the directed energy fields.

 

We have continued 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 three 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 since the second quarter of 2022, 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 $17.8 billion globally by 2028. 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. Once these technologies are funded in production for a POR, these DOD budgets for DE will grow exponentially larger to support the technology insertion. 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. 

 

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. 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 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 September 30, 2023 and 2022:

 

   2023   2022 
Revenue  $712,810   $572,766 
Cost of Revenue   (174,412)   (127,668)
General and administrative   (2,219,641)   (1,249,132)
Selling and marketing   (94,092)   (56,416)
Research and development   (54,222)   (65,364)
Other income   20,287    637 
Interest (expense)   (1,908)   (1,227)
Net loss  $(1,811,178)  $(926,404)

 

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Revenue

 

Revenue increased by approximately $140,000 to approximately $713,000, for the three months ended September 30, 2023, from approximately $573,000 for the three months ended September 30, 2022. Revenues for the 2022 period were from a contract and a grant that we received and commenced performing in June 2022. Revenues for the 2023 period were from continued work under the grant as well as two new contracts which the company signed in May 2023and August 2023.

 

Cost of Revenue

 

Cost of revenue increased by approximately $47,000, or 37%, to approximately $174,000, for the three months ended September 30, 2023, from approximately $128,000 for the three months ended September 30, 2022. This increase was primarily attributable to an increase in the cost of materials, supplies and direct labor cost incurred in connection with the increased revenues.

 

General and Administrative

 

General and administrative expenses increased approximately $970,000, or 78%, to approximately $2,220,000 for the three months ended September 30, 2023, compared to approximately $1,249,000 for the three months ended September 30, 2022, primarily attributable to increased employee labor expenses due to an increased company headcount to support growth. Additionally, an increase in rent expense in the quarter due to the company expanding its current lease agreement, effective August 1, 2023, an increase in stock-based compensation expense of approximately $646,000 due to an increase in equity activity in the quarter, and an increase in depreciation expense of approximately $14,000 due to $178,000 of lab and computer equipment, software, and furniture and fixtures being purchased and placed into service during the year all attributed to the overall growth in general and administrative expenses in the quarter.

 

Selling and Marketing

 

Selling and marketing expenses increased approximately $38,000, or 67%, to approximately $94,000 for the three months ended September 30, 2023, compared to approximately $56,000 for the three months ended September 30, 2022, primarily due to an increase in consulting and travel expense to support the growth in revenue.

 

Research and Development

 

Research and development expenses decreased approximately $11,000, or 17%, to approximately $54,000 for the three months ended September 30, 2023, compared to approximately $65,000 for the three months ended September 30, 2022, primarily due to a decrease in labor cost incurred during R&D activities which shifted to direct labor charges as part of the Cost of Revenue.

 

Net Loss

 

As a result of the foregoing factors, our operations for the three months ended September 30, 2023, resulted in a net loss of approximately $1,811,000, an increase of approximately $885,000, or 96%, compared to the net loss of approximately $926,000 for the three months ended September 30, 2022.

 

Comparison of Operations for the nine months ended September 30, 2023 and 2022:

 

   2023   2022 
Revenue  $1,759,433   $763,688 
Cost of revenue   (492,852)   (142,835)
General and administrative   (6,401,550)   (4,365,823)
Selling and marketing   (297,447)   (231,528)
Research and development   (166,958)   (286,365)
Other income   35,769    637 
Interest (expense)   (3,817)   (2,910)
Net loss  $(5,567,422)  $(4,265,136)

 

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Revenue

 

Revenues increased by approximately $996,000, or 130%, to approximately $1,759,000 for the nine months ended September 30, 2023, compared to approximately $764,000 for the nine months ended September 30, 2022. Revenues for the 2022 period were from a contract and a grant that we received and commenced performing in June 2022. Revenues for the 2023 period were from continued work under the grants as well as two contracts which the company signed in May and August 2023.

 

Cost of Revenue

 

Cost of revenue increased by approximately $350,000, or 245%, to approximately $493,000, for the nine months ended September 30, 2023, from approximately $143,000 for the nine months ended September 30, 2022. This increase was primarily attributable to an increase in the cost of materials, supplies and direct labor cost incurred in connection with the increase revenues.

 

General and Administrative

 

General and administrative expenses increased approximately $2,036,000, or 47%, to approximately $6,402,000 for the nine months ended September 30, 2023, compared to approximately $4,366,000 for the nine months ended September 30, 2022, primarily attributable to increased employee labor expenses due to an increased company headcount to support growth. Additionally, an increase in rent expense in the year due to the company expanding its current lease agreement, effective August 1, 2023, an increase in stock-based compensation expense of approximately $1,267,000 due to an increase in equity activity in the quarter, and an increase in depreciation expense of approximately $40,000 due to $178,000 of lab and computer equipment, software, and furniture and fixtures being purchased and placed into service during the year all attributed to the overall growth in general and administrative expenses in the quarter.

 

 Selling and Marketing

 

Selling and marketing expenses increased approximately $66,000, or 28%, to approximately $297,000 for the nine months ended September 30, 2023, compared to approximately $232,000 for the nine months ended September 30, 2022, primarily due to the continuation of business development activities as well as other consultants in this field.

 

Research and Development

 

Research and development expenses decreased approximately $119,000, or 42%, to approximately $167,000 for the nine months ended September 30, 2023, compared to approximately $286,000 for the nine months ended September 30, 2022, primarily due to a decrease in labor cost incurred during R&D activities which shifted to direct labor charges as part of the Cost of Revenue.

 

Net Loss

 

As a result of the foregoing, our operations for the nine months ended September 30, 2023, resulted in a net loss of approximately $5,567,000 an increase of approximately $1,302,000 compared to the net loss of approximately $4,265,000 for the nine months ended September 30, 2022.

 

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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 nine months ended September 30, 2023, the company incurred a net loss of approximately $5,567,000, had negative cash flows from operations of approximately $2,578,000 and may incur additional future losses as it works to secure government contracts and continues to incur the expenses discussed under Results of Operations. In their report accompanying our financial statements for the year ended December 31, 2022, 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 possible 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 September 30, 2023, the company had total current assets of $3,016,652 and total current liabilities of $953,001, resulting in working capital of $2,063,651. At September 30, 2023, we had $2,418,714 of cash and cash equivalents, a decrease of $3,221,594 from $5,640,308 at December 31, 2022.

 

During the first nine months of 2023, the net cash outflow from operating activities was $2,577,616. This amount was comprised primarily of our net loss of $5,567,422, offset by non-cash stock-based compensation expense of $2,528,293, depreciation and amortization of $90,564, amortization of ROU assets of $97,245, amortization of prepaid assets of $153,366, and cash used from changes in assets and liabilities of $120,338. The changes in assets and liabilities included an increase in accounts receivable of $50,902, a decrease in prepaid and deposits of $254,479, a decrease in ROU liabilities of $77,286, an increase in deferred revenue of $366,006, an increase in accounts payable of $115,130, and an increase in accrued expenses and compensation of $21,869.

 

During the first nine months of 2023, the investing activities reflected $177,904 for the acquisition of equipment.

 

During the first nine months of 2023, the net cash outflow from financing activities was $466,075. This amount consisted of $136,672 of tax withholdings related to the share settlement of RSUs, $503,694 in repayment of notes related to the asset purchase agreement and the directors and officer insurance financing, offset by proceeds related to a note in the amount of $155,541 in connection with renewal of the directors and officer insurance and proceeds from the exercise of stock options in the amount of $18,750.

 

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 ONR grant and existing contract, will be sufficient to meet the company’s anticipated cash requirements for the near term. However, there can be no assurance that the current business plan will be achievable.

 

The company’s existence is dependent 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 unaudited 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 September 30, 2023. Based on that evaluation, our Principal Executive Officer has concluded that our disclosure controls and procedures as of September 30, 2023, 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. The parties are currently engaged in discovery. No trial date has been set.

 

On July 26, 2023, the company filed a complaint in the Superior Court of the State of Delaware against Gusrae Kaplan Nusbaum PLLC and Ryan Whalen, for malicious prosecution of a federal securities fraud lawsuit which was filed by these defendants against the company and certain of its directors, attorneys and their law firms and an outside consultant, in July 2019 in the United States District Court for the Southern District of New York. The complaint filed by the company alleges that the claims by these defendants against it were frivolous and prosecuted for the improper purpose of hindering the company’s prosecution of a then pending case against George Farley, the company’s former CEO, which was later settled. The complaint further alleges that the defendants prosecuted their claim with malice causing the company damages valued in excess of $40 million. On September 11, 2023, Gusrae, Kaplan & Nusbaum and Mr. Whalen filed a motion to dismiss the complaint. On October 25, 2023, the company filed an opposition to the motion. No hearing date has been set for the motion.

 

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.

 

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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).
31.2   Certification of Chief Financial 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.
32.2   Principal Financial 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, 2022.

 

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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/ Gregory J. Quarles
    Gregory J. Quarles, President and
    Chief Executive Officer

  

  By: /s/ Christopher Donaghey
    Christopher Donaghey, Chief Financial
Officer and Chief Operating Officer

 

Date: November 13, 2023

 

 

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