AERG 10-K & 10-Q changes, risk factors and insider trading
Applied Energetics, Inc. (also AERGP) · OTC · Search, Detection, Navigation, Guidance, Aeronautical Sys · CIK 879911 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “We may face liability for injury to persons within or outside of the company, or damage to property, and incur obligations, liabilities and costs under environmental, health and safety (EHS) laws, if we fail to adhere to laser safety standards or broader EHS requirements.”
New heading “As we progress from primarily conducting research to outdoor demonstration and product development, we could become subject to product liability claims which could be expensive, divert management’s attention and harm our business. If we ultimately undertake to manufacture our own laser products, we could face costly product recalls or warranty claims.”
New heading “Our reliance for our business on a single facility subjects us to concentration risks.”
New heading “We are subject to certain regulations and requirements for our facility and personnel security clearances, which are prerequisites to our ability to perform on classified contracts for the U.S. Government.”
Largest changes
“Moreover, if a product we designed or manufactured is defective, whether due to design or manufacturing defects, improper use of the product or other reasons, we may be required to notify regulatory authorities and/or to recall the product. A required notification to a regulatory authority or recall could result in an investigation by regulatory authorities of our products, which could in turn result in required recalls, restrictions on the sale of the products or other penalties. …”see in full comparison
“We have appointed a Laser Safety Officer (LSO) who works with senior members of our scientific and engineering staff to ensure that our employees understand and follow relevant regulations and standards. However, these regulations and standards can be complex, may require specialized facilities, equipment and training, vary significantly with different laser products, processes and materials, and are subject to change from time to time (including through the adoption of more stringent EHS requirements). …”see in full comparison
“As we progress from primarily conducting research to outdoor demonstration and product development, we could become subject to product liability claims which could be expensive, divert management’s attention and harm our business. If we ultimately undertake to manufacture our own laser products, we could face costly product recalls or warranty claims.”see in full comparison
“We are subject to certain regulations and requirements for our facility and personnel security clearances, which are prerequisites to our ability to perform on classified contracts for the U.S. Government.”see in full comparison
“We require certain facility and personnel security clearances to perform any anticipated classified U.S. government related business. As such, we must comply with the requirements of the NISPOM and any other applicable U.S. Government industrial security regulations. If we were to violate the terms and requirements of the NISPOM or any other applicable U.S. Government industrial security regulations (which apply to us under the terms of classified contracts), any of our cleared facilities could lose its facility security clearance. …”see in full comparison
“We may face liability for injury to persons within or outside of the company, or damage to property, and incur obligations, liabilities and costs under environmental, health and safety (EHS) laws, if we fail to adhere to laser safety standards or broader EHS requirements.”see in full comparison
Full comparison: every changed paragraph (31)
In
their report accompanying our financial statements, our independent registered public accounting firm stated that our financial statements
for the year ended December 31, 20242025, were prepared assuming that we would continue as a going concern, and that they have substantial
doubt as to our ability to continue as a going concern. Our auditors have noted that our recurring losses and negative cash flow from
operations and the concern that we may incur additional losses due to the reduction in government contract activity raiseraises substantial
doubt about our ability to continue as a going concern.
As
of December 31, 2024,2025, we had $164,812$6,436,082 in available cash and cash equivalents and working deficitcapital of $67,639.$6,129,118. We periodically conduct
private private
bridge financings to cover certain short-term expenses, including raising approximately $6$10.8 million, in the aggregate, between
the January
second and Februarythird quarters of 2025. We believe our cash position is sufficient for the next several months, but we will likely need
to raise additional
capital in order to fund our operations beyond that. We must allocate funds toward SEC compliance as well as Defense
Contract Audit Agency
(DCAA), International Traffic in Arms Regulations (ITAR) and other federal regulatory compliance. We also need funds
for general and administrative
expenses, including salaries, benefits, supplies and equipment, lease expense on our headquarters, accounting,
legal, and other professional
fees and other miscellaneous expenses. Failure to secure sufficient financing could render us unable to
fund these necessary costs and
expenses. We also maywill require additional funding for research and development before we are able to commercialize
our technology. We may
secure additional government contracts or sub-contracts with larger contractors to fund additional research and
development. However,
we may need to raise additional capital to supplement these contracts even if we are able to secure them.
Our
business, operating results, financial condition and liquidity may be adversely affected by changes in global economic conditions and
geopolitical risks, including the ongoing military action in Iran, the inflationary environment in the United States and internationally,
oil and other commodity prices, supply chain challenges,
exchange rates, potential changes in policy positions or priorities, levels of
government spending and deficits, the availability and
cost of labor, the threat environment, trade policies, political conditions, national
or international crises, including recurring global
health emergencies, tariffs, trade embargoes, and other challenges that could affect
the global economy, the demand for our technology
and our ability to source materials and equipment. In recent years, inflationary pressures
have increased labor and material costs at
a higher rate higher than in prior years. Due to the nature of our government business, and the customer
and supplier contracts within
those businesses,that business, we may not be able to increase our contract value or pricing to offset these cost increases,
particularly with grants
or fixed price contracts. This could adversely affect our operating profits and margins particularly if the increased
inflation continues.
Similarly, increases in interest rates from recent historical lows in the U.S. and internationally could negatively
impact financial
markets and tighten the availability of, and increase our cost of, capital, which could have an adverse effect on our
operating results,
financial condition and liquidity. Tightening credit in financial markets also could adversely affect the ability of
our customers and
suppliers to obtain financing for significant purchases and operations. Similarly, such tightening credit may adversely
affect our supplier
base and increase the potential for one or more of our suppliers to experience financial distress or bankruptcy. In
addition, geopolitical
and security risks could affect government priorities, budgets and policies, which could impact sales of defense
and other products and
services.
Substantially
all of our current and planned near-term revenues are or may be from US government contracts and grants awarded under various programs,
primarily with the DepartmentDoW, ofprime Defensecontractors (DoD),to the U.S. government, and, possibly, with intelligence, national security and other departments
and agencies.
Changes in US government spending for various reasons, including as a result of potential changes in policy positions or
priorities, priorities,
could negatively impact our results of operations, financial condition and liquidity. Our programs are subject to US government
policies, policies,
budget decisions and appropriation processes which are driven by macroeconomic and geopolitical factors as well as Congress’s
ability ability
to enact, and the administration’s willingness to execute, appropriations bills and other legislation. In recent years,
the US
government has been unable to complete its budget process before the end of its fiscal year, resulting in government shutdowns
and Continuing
Resolutions emergency funding only at prior-year levels. In addition, failure to raise the debt ceiling could cause the
U.S. government
to default on debts which it has already incurred. U.S. government spending levels and available program funding are
thus hard to estimate
in the medium- and long-term. Significant changes in U.S. government spending or changes in U.S. government priorities,
policies and
requirements could have a material adverse effect on our results of operations, financial condition and liquidity.
The
establishment of the Department of Government Efficiency (DOGE) whose mission iswas to sharply reduce federal spending, including to reviewreviewing
defense spending for possible waste, fraud and abuse couldhas makemade securing funding for existing and new government contracts challenging.
Although TheDOGE administrationwas has also
indicated an interestdisbanded in reducingNovember 2025, many of its functions and personnel were absorbed into various federal agencies, including
the DoW, and its principles and agenda to cut spending onmay defensecontinue in generalother if Russia and China make similar commitments.forms. The termination of government
employees responsible
for payment of invoices can slow down payments under our contracts and disrupt our cash flows from operating activities
which, if prolonged,
could cause the loss of our business. The current budgetary and deficit funding environment, continuing inflation,
tariffs and other
ongoing supply chain disruptions, and DOGE, among other items, pose significant risks to the company.
During the quarter ended June 30, 2025, the company received notifications regarding loss of funding on two contracts. Funding ceased for one of these contracts although it is still in effect, and no stop-work order was received. With respect to the second of these contracts, the company was notified that no further funds are available and advised to stop work on it. Receipt of additional amounts under this contract, including for any work to be performed, is in doubt. The company has ceased working under and recording revenue for each of these contracts, and receipt of additional amounts under them is in doubt. The company intends to continue working in parallel on this technology as part of its ongoing internal research and development program.
During the quarter ended June 30, 2025, the company received notifications regarding loss of funding on two contracts. Funding ceased for one of these contracts although it is still in effect, and no stop-work order was received. With respect to the second of these contracts, the company was notified that no further funds are available and advised to stop work on it. The company intends to continue working in parallel on this technology as part of its ongoing internal research and development program, but the company ceased recording revenue for each of these contracts, and receipt of additional amounts under them is in doubt.
Protecting our intellectual property rights is critical to our ability to maintain and protect the value of our intellectual property portfolio. We hold a number of United States patents and patent applications, as well as trademarks, and registrations which are necessary and contribute significantly to the preservation of our competitive position in the market. Any of these patents or future patent applications and other intellectual property could be challenged, invalidated or circumvented by third parties. In some instances, we may seek to augment our technology base by licensing the proprietary intellectual property of others, but we may be unable to obtain necessary licenses or to secure them on commercially reasonable terms. We have entered into confidentiality and invention assignment agreements with employees and consultants and nondisclosure agreements with suppliers, potential job candidates, and appropriate customers so as to limit access to and disclosure of our proprietary information. These measures may not suffice to deter misappropriation or independent third-party development of similar technologies. Based on our current financial condition, we may not have the funds available to enforce and protect our intellectual properties. Certain of our patents are Government Sensitive Patent Applications, meaning they are held under secrecy orders of the US government which limits our ability to develop technology under them although their expiration date is extended until such time as they are no longer classified. We also hold many of our intellectual property in the form of trade secrets, which may be difficult or impossible to protect in certain circumstances. In order to manufacture products, we may need to contract with third parties who have manufacturing capabilities which we do not have. In such instances, we may face the risk of our intellectual property being misappropriated.
We may face liability for injury to persons within or outside of the company, or damage to property, and incur obligations, liabilities and costs under environmental, health and safety (EHS) laws, if we fail to adhere to laser safety standards or broader EHS requirements.
As we test and develop laser products, we are subject to laser safety regulations and industry standards. We are also subject to workplace regulations and safety standards for employees working with and around laser products and technology. These regulations and standards may include, among others, regulations promulgated by the US Federal Aviation Administration, the US Food and Drug Administration, the Occupational Safety and Health Administration, the Arizona Radiation and Regulatory Agency, and standards set forth by the Laser Institute of America and approved by the American National Standards Institute, Inc. (ANSI). We are also subject to various state and local safety regulations. We currently use, handle, store, and periodically dispose of relatively small quantities of chemicals used in our development process, such as acetone and isopropyl alcohol. We are subject to regulations regarding their disposal. Any increase in the type or use of such chemicals could subject us to increased regulation.
We have appointed a Laser Safety Officer (LSO) who works with senior members of our scientific and engineering staff to ensure that our employees understand and follow relevant regulations and standards. However, these regulations and standards can be complex, may require specialized facilities, equipment and training, vary significantly with different laser products, processes and materials, and are subject to change from time to time (including through the adoption of more stringent EHS requirements). Our failure to comply with one or more of these regulations or standards could result in civil or criminal penalties, including significant fines or bans, liability for injury to persons or damage to property, some of which could be severe, or loss of business. In addition, future developments, such as more aggressive enforcement policies from the U.S. federal government, or the discovery of presently unknown environmental conditions, may require expenditures that could have a material adverse effect on our business, financial condition and results of operations. We may also face more stringent regulations if our operations require the use, handling, storage, transportation and disposal of hazardous materials.
As we progress from primarily conducting research to outdoor demonstration and product development, we could become subject to product liability claims which could be expensive, divert management’s attention and harm our business. If we ultimately undertake to manufacture our own laser products, we could face costly product recalls or warranty claims.
As we work to develop and demonstrate prototypes and eventually produce and sell products to customers, our business exposes us to potential liability risks that are inherent in the production, demonstration, manufacturing, marketing and sale of laser products to customers. We may be held liable if any of our products under development or other future products cause injury or death or are otherwise malfunction during demonstration or usage.
Our products under development are expected to incorporate sophisticated laser components and computer software. Complex software can contain errors, particularly when first introduced. In addition, new products or enhancements may contain undetected errors or performance problems that, despite testing, are discovered only after delivery and use by customers. While we believe our technology will be safe, users may allege or possibly prove defects, some of which could be alleged or proved to cause harm to users or others. While most of our laser technology is considered “eye-safe,” certain of our products under development are designed to operate in bands that could cause harm to vision or even total blindness. These products will require safety precautions and procedures, both by our internal team during product development and demonstrations and by prospective customers during demonstrations or customers using these products.
In addition to the foregoing, we have begun testing our prototypes at testing ranges outside of our laboratory facilities. These facilities are general in remote areas and configured so as to make testing relatively safe if certain protocols identified by our LSO are followed. While we endeavor to comply with all applicable safety regulations promulgated by the relevant agencies, including without limitation, the Occupational Health and Safety Administration (OSHA), the Federal Aviation Administration and the Food and Drug Administration, as well as any applicable requirements under state law, we cannot be certain that testing of our lasers will not cause serious harm or injury either to personnel involved with the testing or third parties.
A product liability claim, regardless of its merit or eventual outcome, could result in significant legal defense costs. We cannot guarantee that we will be able to obtain products liability insurance; if we do, however, the coverage limits of any insurance policies that we may choose to purchase to cover related risks may not be adequate to cover future claims, and the cost of insurance, if obtainable, could be prohibitive. If sales of our products increase or we suffer future product liability claims, we may be unable to maintain product liability insurance in the future at satisfactory rates or with adequate amounts. Similarly, the potential risks associated with some of our lasers could result in substantial premiums for workers compensation insurance.
We intend to advance our products to manufacture, whether in contract with one or more third parties or in our own facilities, we could also face product recalls or warranty claims. A product liability claim, any product recalls or excessive warranty claims, whether arising from defects in design or manufacture or otherwise, could negatively affect our sales or require a change in the design or manufacturing process, any of which could harm our reputation and result in a decline in revenue, each of which would harm our business.
Moreover, if a product we designed or manufactured is defective, whether due to design or manufacturing defects, improper use of the product or other reasons, we may be required to notify regulatory authorities and/or to recall the product. A required notification to a regulatory authority or recall could result in an investigation by regulatory authorities of our products, which could in turn result in required recalls, restrictions on the sale of the products or other penalties. The adverse publicity resulting from any of these actions could adversely affect the perception of customers and potential customers. These investigations or recalls, especially if accompanied by unfavorable publicity, could result in our incurring substantial costs, losing revenues and damaging our reputation, each of which would harm our business.
In addition, the market for our technologies and products may not develop or expand as we currently anticipate. The failure of our technology to gain market acceptance could significantly reduce any ability to generate revenue and harm our business. Furthermore, we cannot be sure that our competitors will not develop competing or differing technologies which gain market acceptance in advance of our products. The possibility that our competitors might develop new technology or products might cause our existing technology and products to become obsolete or create significant price competition. If we fail in our new product development and commercialization efforts, or our products fail to achieve market acceptance more rapidly than our competitors, our revenue will decline and our business, financial condition and results of operations will be negatively affected. We rely on testing ranges owned and operated by third parties for outdoor testing of our technology. These outdoor testing facilities can be shut down, expensive, or offer only limited time slots for their use.
We
heavily depend on key personnel,personnel for the successful execution of our business plan. The loss of one or more key members of our management
team could have a material adverse effect on our business prospects.
We
are highly dependent upon Christopher Donaghey, our President and Chief Executive Officer (and Principal Accounting and Financial Officer)
and Stephen McCahon, our Chief Science Officer.
We depend on Dr. McCahon’s decades of expertise for the marketing and development
of our technology. We also depend upon their
global visibility and outreach as well as Mr. Donaghey’s and our directors’
networks of contacts and experience to recruit
key talent to the company. We do not have key-person insurance on any of these individuals.
Loss of the services of any of these key
members of our management team, or of our Board of Directors’ ability to identify and
hire key talent, could have a material adverse
effect on our business prospects, financial condition and results of operations. Although
a key component of our growth strategy is succession
planning and hiring additional key personnel, we may be unable to achieve this in
the near term given constraints in the labor market
and our interest in recruiting highly qualified professionals.
Given
the highly specialized nature of our technology, the potential market for our products is limited to a relative few potential customers
who tend to allocate significant budgeted amounts to selected projects. Currently, we are marketing our technology and focusing our research
and development on the defense sector, in which demand is ultimately determined primarily by the US federal defense budget and the needs
and priorities of the Department of DefenseDoW and its various agencies. The potential customers in this area are defense agencies for direct
contracts and
major defense contractors for subcontracts. Thus, the demand for our products depends on their needs for our technology
and selecting
us for research and development. Although we intend to diversify into other applications for our technology and markets,
we cannot be
certain that opportunities in those markets will present themselves when we are ready, or that we will otherwise be able,
to do so.
Our reliance for our business on a single facility subjects us to concentration risks.
We currently operate our business from a single location in Tucson, Arizona. Due to the lack of diversification in our assets and geographic location, an adverse development at or impacting our facility or in local or regional economic or political conditions could have a significantly greater impact on our results of operations and financial condition than if we maintained more diverse assets and locations. While we implement preventative and proactive maintenance at our facility, it is possible that we could experience prolonged periods of reduced production and increased maintenance and repair costs due to equipment failures. In addition, because of our single facility and location, in certain cases we rely on limited or single suppliers for significant inputs, such as electricity. We are also reliant on the adequacy of the local skilled labor force to support our operations. Supply interruptions to or labor shortages or stoppages at our facility could be caused by any of the aforementioned factors, many of which are beyond our control, and would adversely affect our operations and we would not have any ability to offset this concentrated impact with activities at any alternative facilities or locations.
We are subject to certain regulations and requirements for our facility and personnel security clearances, which are prerequisites to our ability to perform on classified contracts for the U.S. Government.
A facility security clearance is required for a company to perform on classified contracts for the DoW and certain other agencies of the U.S. Government. Security clearances are subject to regulations and requirements including the National Industrial Security Program Operating Manual (“NISPOM”), which specifies the requirements for the protection of classified information released or disclosed in connection with classified U.S. Government contracts.
We require certain facility and personnel security clearances to perform any anticipated classified U.S. government related business. As such, we must comply with the requirements of the NISPOM and any other applicable U.S. Government industrial security regulations. If we were to violate the terms and requirements of the NISPOM or any other applicable U.S. Government industrial security regulations (which apply to us under the terms of classified contracts), any of our cleared facilities could lose its facility security clearance. We cannot be certain that we will be able to maintain our facility security clearance. If for some reason our facility security clearance is invalidated or terminated, we would not be able to continue to perform on classified contracts and would not be able to enter into new classified contracts, which could adversely affect our ability to generate revenues. Failure to comply with the NISPOM or other security requirements may subject us to civil or criminal penalties, loss of access to classified information, inability to obtain further U.S. government contract, or potentially debarment as a government contractor
We
maintain a large percentage of our cash balances with Western Alliance Bank. At times, our bank balances exceed FDIC limits. As of December
31, 2024,2025, $0$6,180,178 of our cash balance was uninsured. SignificantFrom time to time, significant portions of our cash balance earn little, if any,
interest. We continue to
monitor our banking arrangement and have taken measures to diversify our cash holdings into interest bearing interest-bearing
cash equivalents and auxiliary
cash accounts to maximize our insurance coverage. We continue to monitor our banking arrangement and have
taken measures to diversify our cash holdings into interest bearing cash equivalents and auxiliary cash accounts to maximize our insurance
coverage.
Rule
3a51-1 of the Securities Exchange Act of 1934 establishes the definition of a “penny stock,” for purposes relevant to us,
as any equity security
that has a minimum bid price of less than $5.00 per share or with an exercise price of less than $5.00 per share,
subject to a limited
number of exceptions which are not available to us. This classification would severely and adversely affect any
market liquidity for
our common stock.
Historically, the SEC staff has taken the position that Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”) is not available for the resale of securities initially issued by companies that are, or previously were, shell companies, like AE. The SEC has codified and expanded this position in certain amendments to Rule 144 by prohibiting the use of Rule 144 for resale of securities issued by any shell companies (other than business combination related shell companies) or any issuer that has been at any time previously a shell company. The SEC has provided an important exception to this prohibition, however, if the following conditions are met:
As of
of March 25,27, 2025,2026, we had outstanding 218,242,805223,836,331 shares of common stock. Approximately 100 million of our shares are currently freely
trading without restriction under the Securities Act of 1933, as amended.Act. Most of the remaining shares have been held by their holders
for over one year and
are thus eligible for sale under Rule 144(k) of the Securities Act. Sale of these shares into the market could depress
our stock price.
This is particularly true in an illiquid market characterized by limited trading volume. The market for shares of our
common stock is
subject to a limited trading volume and at times is volatile. The thinly traded nature of our common stock could make
it difficult to
sell shares at or near ask prices, if at all, particularly as additional shares enter the market for sale.
Management's Discussion & Analysis (MD&A)
New heading “Recent Developments and Trends”
Removed heading “Strategic Plan and Analysis”
Removed heading “Trend Discussion”
Largest changes
“Additionally, international, macroeconomic events, including the military action in the Middle East and South America, the Russian military action in Ukraine 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 our ability to continue as a going concern. These events may also impair our ability to raise capital, including as a result of increased market volatility, or decreased market liquidity, which also affects the company’s ability to continue as a going concern. …”see in full comparison
The company’s existence depends upon management’s ability to develop profitable operations. Management is devoting a significant portion of its efforts to developing additional business and raising capital, as needed, but 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 investmentsee in full comparisoninvestmentbankers and private investors. The company may not be successful in its effort to secure additional financing on terms it considers favorable. The accompanying consolidated financial statements do not include any adjustments that might result should the company be unableto continue as a going concern. In January and February 2025, the company raised approximately $6 million through the private placement of shares of its common stock, par value, $0.001 per share, some of which were underlying pre-funded common stock purchase warrants, in a private sale to individual purchasers at a price of $0.75 per share (or $0.749 per underlying share for pre-funded warrants), all to accredited, sophisticated investors Additionally, international, macroeconomic events, including the Russian military action in Ukraine 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 our ability to continue as a going concern. These events may also impair our ability to raise capital, including as a result of increased market volatility, or decreased market liquidity, which also affects the company’s abilityto continue as a going concern.Third-party financing may become unavailable on terms acceptable to the company or at all. The impact of such events on the world economy and the specific impact on the company’s financial position and results of operations are difficult to predict. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
“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. …”see in full comparison
“The current budgetary and deficit funding environment, continuing inflation, tariffs and other ongoing supply chain disruptions, the appropriations process, federal government shutdowns, and budget cuts, among other items, all continue to create significant short and long-term challenges and risks to the company and its business development endeavors. …”see in full comparison
“Geo-political events continue to affect our business. In particular, the ongoing military action in the Middle East has restricted the flow of oil and liquid natural gas worldwide and is driving up the price of goods and services which include supplies, materials and equipment which we need for our business. Also, certain economic events and policies, such as tariffs and embargoes, tend to be inflationary and contribute to drive up costs.”see in full comparison
“The accompanying 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. …”see in full comparison
Full comparison: every changed paragraph (63)
Christopher
Donaghey serves as our President and Chief Executive Officer (and as our Principal Accounting and Financial Officer), and Dr.
Stephen W. McCahon serves as our Chief Science Officer. AE has continued to expand its technical capabilities with the addition of
employees, consultants and contractors, and agreements with several of the leading laser and optics universities in the country. AE
also works with a team of world-class contractors to strengthen our compliance, IT, technical staff, human resources and public
relations, supporting the research and development in the laboratory.
AE
owns and protects intellectual property that is integral and necessary for the development of Ultrashort Pulse (“USP™”)
Lasers, Laser Guided Energy (“LGE®”) and Direct Discharge Electrical products for military and commercial applications.
applications. AE currently owns 2625 patents and an additional 11nine Government Sensitive Patent Applications (“GSPA”). These GSPA’s
GSPA’s are held under secrecy orders of the US government and allow the company greatly extended protection rights, including having
no expiration
date until such time as they are no longer classified after which they will have the normal 20-year patent protection.
The company also
has eightthree pending patent applications and one provisional patent application which is undergoing conversion to its non-provisional form.
form. We continue to file patent applications as we deem appropriate to protect our intellectual property and enhance our competitive advantage.
advantage.We conduct research and development efforts under contracts and on an internal basis as we move toward product development and testing.
During the past several years, substantially all of our operating revenues have derived from contracts with DoW agencies and a major research university. Along with the performance of these contracts, we have conducted internal research and development efforts, building a team of scientists and engineers and establishing our testing facilities in the Battle Lab. We have also begun testing products in remote testing field locations, some of them private and some of them run by government agencies or universities. During the past year, our efforts in this area have been focused on preparing for and conducting these tests and preparing product demonstrations.
AE continues to expand its technical capabilities and administrative capacity with the addition of employees, consultants and contractors, and agreements with leading laser and optics universities in the country. AE also works with a team of contractors to strengthen our compliance, IT, technical staff, human resources and public relations.
Recent Developments and Trends
Effective May 17, 2025, the company received a requisition from the University of Rochester in the amount of $181,639. This is part of a contractual arrangement with the university in the approximate amount of $250,000 to support its Laboratory for Laser Energetics (LLE) for ongoing efforts to explore pulsed laser technologies. Work on the contract commenced on July 10, 2025 with a meeting at Applied Energetics headquarters in Tucson, AZ with Dr. Jon Zuegel, Laser Development and Engineering Division Director and a Senior Scientist at the LLE to discuss the research to be provided by the company. We completed work under the requisition and have worked with the University of Rochester to plan and commence work on the next phase. We have submitted our portion of the proposal for the next phase and are awaiting receipt of the formal contract revision.
During 2024 and through mid-2025, we continued work on our 2023 contract with the Office of Naval Research (ONR) to develop a high-peak and high-average power USP optical system which had an aggregate contract price of $1.99 million payable over two years as the company delivered its work. In the second quarter of 2025, the company was notified that no further funds were available for this contract and advised to stop work on it. The contract is now closed, and receipt of additional amounts under it, including for any work to be performed, is in doubt. The company has continued working in parallel on this technology as part of its ongoing internal research and development program.
During 2024 and through mid-2025, we continued work on our other contract with the ONR to accelerate the development and testing of Infrared (IR) optical technology with an ultrashort pulse laser (USPL) system, under a base period of performance through November 11, 2024 and a 12-month unfunded option period that was to end November 11, 2025, which had transitioned from a grant in March of 2024, with a ceiling value of $1,217,535. On September 4, 2024, the company received a funding increase of $237,647 which brought the total funding on the contract to $1,455,182. During the quarter ended June 30, 2025, the company was notified that funding had ceased for this contract. In the fourth quarter of 2025, the Company received notice that the contract was closed. The company has ceased recording revenue for this contract, and receipt of additional amounts under it is in doubt. The company has continued working in parallel on this technology as part of its ongoing internal research and development program.
In
March 2025, the company moved to the next phase of its strategic collaboration with Kord Technologies, Inc., a wholly owned subsidiary
of KBR, to explore the potential development and integration of an advanced pulsed laser system with Kord’s FIREFLYTM High Energy
Laser Weapon System (HELWS). This phase is to begin with the purchase of a specially modified Firefly HELWS unit from Kord which the company
can use to work on the development and integration of its proprietary Ultrashort Pulse technology in its newly opened Battle Lab, with
the assistance of Kord personnel under a related services agreement.
Applied
Energetics had previously entered into a Memorandum of Understand (MOU) with Kord, effective October 28, 2024, to further the development
and deployment of Applied Energetics’ ultrashort pulsed laser (USPL) technology for defense and national security applications.
The MOU outlines key areas of cooperation, including joint research and development, integration of Applied Energetics’ USPL technologies
into an existing high-energy laser directed energy platform, and the exploration of new opportunities to enhance both companies’
product portfolios.
In
February 2025, we announced the opening of our new Battle Lab, which is also expected to provide the capacity to manufacture and integrate
advanced lasers as Applied Energetics makes the anticipated technology transition to the next stage of its lifecycle. Over the coming
months, the company intends to install and demonstrate multiple ultrashort pulse lasers with varying wavelengths against relevant target
packages. In July 2024, the company exercised its option to lease more than 5,000 square feet of additional space at the University of
Arizona Tech Park to create the Battle Lab. The company took the option to lease this additional space under the June 7, 2023, amendment
(the “2023 Amendment”) to its Lease Agreement with Campus Research Corporation, as Landlord. With this expansion, the company
now occupies, in the aggregate, approximately 26,000 sq. ft. of space at the Arizona Tech Park.
Effective
March 12, 2024, a grant previously awarded to Applied Energetics, Inc. from the Department of the Navy, Office of Naval Research was transitioned
into a contract. The original grant from May 2022 had a two-year period of performance. The new contract supersedes the grant and carries
a ceiling value of $1,217,535 under a base period of performance through November 11, 2024 and a 12-month unfunded option period that
ends November 11, 2025. On September 4, 2024, the company received a funding increase on this contract of $237,647 bringing the total
funding on the contract to $1,455,182.
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. Work on this contract is ongoing.
EffectiveDuring
Maythe 15,second quarter of 2023, Applied Energeticswe 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 iswas to further the development and testing of an IR laser system utilizing technologies
that were
investigated under the US Army Phase I STTR contract which the company was awarded in May 2022. This Phase II contract award followed
a successful Phase I which established a computational concept with physical modeling and simulation to establish the feasibility of
an an
IR laser system. Phase I was performed in collaboration with the James C. Wyant College of Optical Sciences at the University of Arizona.
On May 9, 2025, the company entered into a no-cost modification to continue work on the contract through November 14, 2025. The company
companyalso has continuedamended its workrelated underagreement with the contract,University of Arizona consistent with this extension. In the fourth quarter of 2025, we completed
work on this contract and providedreceived allfull requiredpayment reports,from sincethe its execution.customer.
Throughout 2024 and the first half of 2025, as we continued work on each of these contracts, we recognized revenues as we performed these services and recorded related costs. Costs under these firm fixed fee contracts were affected by supply chain disruptions, and shortages of items like semiconductor chips, and related systemic issues, and general inflation although to a lesser extent than in the preceding years. Micro-electronic and semiconductor chip shortages are still impacting supply chains, and as such, can impact our ability to execute and deliver technology to meet demands of our customers. Certain optical transmitting components are also in short supply. These costs and supply issues also may affect any internal research and development programs, and we anticipate that they will continue for at least the near term.
During the year ended December 31, 2025, as the next phase of its collaboration with Kord Technologies, Inc.(“Kord”), the company purchased from Kord a specially modified FIREFLYTM High Energy Laser Weapon System (HELWS) unit which the company has used to work on the development and integration of its proprietary Ultrashort Pulse technology in its Battle Lab, with the assistance of Kord personnel under a related services agreement. Throughout 2025 and into 2026, the company is working on the design and integration of USP technologies onto the Kord Firefly platform. With recent upgrades and advances to the FIREFLYTM system, the company looks to continue integration onto the updated platform.
In July 2024, the company exercised an option to lease more than 5,000 square feet of additional space at the University of Arizona Tech Park to create our Battle Lab. The company exercised the option to lease this additional space under the June 7, 2023, amendment to its Lease Agreement with Campus Research Corporation, as Landlord. In February 2025, we announced the opening of the Battle Lab, which is initially being used as a testing and demonstration space for the company’s lasers and prototypes. The Battle Lab is also expected to provide the capacity to manufacture and integrate advanced lasers as Applied Energetics makes the anticipated technology transition to the next stage of its lifecycle. The company has installed equipment to test and demonstrate multiple ultrashort pulse lasers with varying wavelengths against relevant target packages in the Battle Lab and has performed such testing and demonstrations.
During the fourth quarter of 2025 and the first quarter of 2026, the company began conducting field tests of certain of its lasers. To do so, it has made arrangements to use existing testing facilities maintained by third parties, including a private entity and a research university. The costs and availability of these testing facilities vary, depending on prior reservations and the minimum length of time needed for each field test. To facilitate these testing outings and make the time spent in the field more efficient, the company has also purchased an ATC Command/Response Trailer which is outfitted with a ramp door for access to the laser being tested, air conditioning for climate control, a generator, and workstations to enable the team to make adjustments to the lasers being tested in real time in the field. To date, our team has conducted four such field tests, and in the fourth of these, we completely disabled the sensor on a drone at a range that meets specifications provided to us by prospective customers.
The current budgetary and deficit funding environment, continuing inflation, tariffs and other ongoing supply chain disruptions, the appropriations process, federal government shutdowns, and budget cuts, among other items, all continue to create significant short and long-term challenges and risks to the company and its business development endeavors. It is difficult to forecast the effect that any future tariffs will have on our ability to source raw materials, supplies, and equipment needed to continue our operations both for the performance of our ongoing contractual obligations and our internal research and development efforts. Moreover, the cuts to funding and reductions in federal government personnel can impact our cash flows and ability to continue operating. Many of these cuts are proposed to the Departments of War and Homeland Security budgets which are the focus of much of our business development efforts. However, we remain optimistic that the innovative nature of our technology and its novel approach to addressable threats position the company for development, growth, and market opportunities.
Certain mitigating factors could blunt any potential impact of these changes on our industry. The DoW and others in the administration have indicated that funding for innovation and novel technologies will continue to be a priority, and directed energy has been discussed as part of this trend. Also, many of the cuts are being challenged in court and, in some cases, reversed either because of judicial rulings or policy reversals. However, it is difficult to predict precisely where funds will be cut or allocated, and even a general reduction in force can make administrative functions, such as finalizing contracts and government payment processing, challenging. These factors could severely impact our cash flows and our ability to continue operating.
Geo-political events continue to affect our business. In particular, the ongoing military action in the Middle East has restricted the flow of oil and liquid natural gas worldwide and is driving up the price of goods and services which include supplies, materials and equipment which we need for our business. Also, certain economic events and policies, such as tariffs and embargoes, tend to be inflationary and contribute to drive up costs.
AE’s
team continues to be invited to, and complete, multiple briefings focused on our capabilities and our submissions and to submit contract
proposals.
Neither
of the US federal budgets for fiscal 20242025 or 20232024 were approved by Congress by the start of the corresponding U.S. federal government
fiscal year, which is October 1 of the preceding year. In both 20242025 and 2023,2024, Congress passed, and the president signed, continuing resolutions
(“CRs”), to extend federal government funding.funding through specified dates. The final Defense Appropriations Bill for fiscal 20232024
was was
signed into law on December 29,23, 20222023 and included increases in areas of particular interest to the company. A full year Continuing
Resolution, H.H. 1968, was passed and signed into law on March 15, 2025, and extended through September 30, 2025.
For
fiscal year 2025,2026, which started on October 1, 2024,2025, the National Defense Authorization Act (NDAA) was delayed, but on December 23,18, 2025,
2024, then-President Bidenthe-president signed the 20252026 NDAA into law.law (P.L.-119-60). The NDAA sets defense spending policies, while the separate appropriations
bills comprising the federal budget fund government spending, including spending on defense and homeland security. This impacts all proposals
proposals under review by the DepartmentDoW. of Defense. On September 26, 2024, in the absence of an enacted federal budget,
then-President Biden signed a Continuing Resolution (CR), HR 9747, which extended government operations through December 20, 2024.
He then signed a second CR for FY25 on December 21, 2024, extending funding for theThe federal government throughexperienced Marcha 14,funding 2025.gap Abeginning on October 1, 2025—the start of FY2026—and
fullending yearwhen the Continuing Resolution,Appropriations, H.H.Agriculture, 1968,Legislative Branch, Military Construction and Veterans Affairs, and Extensions
Act, 2026 (P.L. 119-37), was passed and signed into law by President Trump on MarchNovember 15,12, 2025,2025. On February 3, 2026, the president signed the Consolidated Appropriations
Act, 2026 (P.L. 119-75). This bill included Defense Appropriations, and extendsall through
Septemberpreviously 30,unfunded 2025.agencies except for Homeland Security.
Strategic Plan and
Analysis
The
core of our strategy has been to continue growing our management and science teams with highly qualified individuals. This has driven
our recruitment efforts in the areas of R&D, science, modeling and simulation, marketing and finance. We are also contemplating adding
members to our Board of Directors and our Board of Advisors. Our board and leadership team have worked to align key innovations with
our roadmap to encourage and enable internal filing for a broad, strategic, and robust intellectual property portfolio and continue surveying
the literature for acquisitions of parallel intellectual property to that end. We also intend to pursue strategic corporate acquisitions
in related fields and technology. The company’s management continues to explore any favorable equity financing opportunities.
Our
goal with the Applied Energetics Strategic Plan is to increase the energy, peak power and frequency agility of USP optical sources while
decreasing the size, weight, and cost of these systems. We are in the process of developing this breadth of very high peak power USP
lasers and additional optical sources that have a 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 has been able to develop partnership and teaming arrangements with the three leading laser and
optics institutes in the United States, namely, the University of Arizona, the University of Central Florida, and the University of Rochester
Laboratory for Laser Energetics. 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 several years, we continued to submit proposals and have been engaged
in meetings on a continuous basis with various agencies and departments both remotely and in person in Washington, DC and at various
other government facilities. Having received a significant research grant and several contracts 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. We believe that once
these technologies are funded in production for a POR, these DOD budgets for directed energy 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.
The
fair value of each option grant is estimated at the date of grant using the Black-Scholes-Merton option valuation model. We make the
following assumptions relative to this model: (i) the annual dividend yield is zero as we do not pay dividends on our common stock, (ii)
the weighted-average expected life is based on a midpoint scenario, where the expected life is determined to be half of the time from
grant to expiration, regardlessafter oftaking vesting,into account the vesting period, (iii) the risk free interest rate is based on the U.S. Treasury security
rate for the expected
life, and (iv) the volatility is based on the level of fluctuations in our historical share price for a period
approximately equal to
the weighted-average expected life. We estimate forfeitures when recognizing compensation expense and adjust this
estimate over the requisite
service period should actual forfeitures differ from such estimates. Changes in estimated forfeitures are
recognized through a cumulative
adjustment, which is recognized in the period of change and which impacts the amount of unamortized compensation
expense to be recognized
in future periods.
Revenue decreased by approximately $1,965,000, or 81%, to approximately $462,000 for the year ended December 31, 2025, from approximately $2,427,000 for the year ended December 31, 2024. The decrease in revenue was primarily the result of the suspension of work on two active customer contracts. In April 2025, we were notified by a customer that no further funds were available for two of our contracts, resulting in a decrease in revenue for the period. Although the contracts remain open, the Company was advised to stop work and has accordingly suspended all activities under those contracts. Despite the suspension, the Company continues to advance the underlying technology through its internal research and development efforts. Both the customer and the Company are actively seeking alternative sources of funding, including from within the original contracting agency and other departments of the DoW.
Revenue
decreased by approximately $205,000, or 7.8%, to approximately $2,427,000 for the year ended December 31, 2024, from $2,631,000 for the
year ended December 31, 2023. The decrease in revenue was primarily the result of a contract modification which resulted in a decrease
in a contract’s price and an increase in a contract’s term, offset by an additional one-year continuation for an existing
contract and a new contract during 2024.
Cost
of revenue increaseddecreased by approximately $842,000,$1,267,000, or 132.10%,86%, to approximately $1,480,000$213,000 for year ended December 31, 2024,2025, from
$1,480,000 $638,000
during the year ended December 31, 2023.2024. ThisThe increasedecrease was primarily attributable to anthe increasesuspension inof two active customer
contracts during the costsecond quarter of materials,2025 suppliesafter andthe Company was notified that the contracts were unfunded. As a result, work under
directthose contracts was suspended, which reduced contract labor costand incurredmaterials incosts. connectionAdditionally, withduring recentthe contractperiod modifications.the Company shifted
a portion of its operational focus toward internal research and development activities.
General and administrative expenses increased approximately $2,649,000, or 28%, to $12,159,000 for the year ended December 31, 2025, compared to approximately $9,510,000 for the year ended December 31, 2024. The increase primarily relates to higher payroll and related costs of approximately $584,000, increased professional fees of approximately $258,000, and $1,400,000 of stock-based compensation expense. The increase also includes materials and supplies of approximately $215,000 and other general and administrative expenses of approximately $170,000.
General
and administrative expenses increased approximately $738,000, or 8.4%, to $9,510,00 for the year ended December 31, 2024, compared to
approximately $8,772,000 for the year ended December 31, 2023, primarily due to an increase in salaries and employee benefits of approximately
$720,000 mainly due to non-cash compensation, an increase in software and licenses of approximately $40,000, an increase in depreciation
expense of approximately $70,000 and increase of rent of $204,000, partially offset by a decrease of approximately $377,000 in professional
and consulting expenses.
Selling and Marketing expenses increased approximately $975,000, or 260%, to $1,350,000 for the year ended December 31, 2025, compared to approximately $375,000 for the year ended December 31, 2024, primarily due to an increase of approximately $758,000 related to the development and installation of the Battle Lab and related demonstrations of our technology as well as an increase of approximately $205,000 for labor and the increase in business development activities.
Selling
and Marketing expenses decreased approximately $9,500, or 2.5%, to $375,000 for the year ended December 31, 2024, compared to approximately
$384,000 for the year ended December 31, 2023, primarily due to the continuation of business development activities through our Master
Services Agreement with Westpark Advisors as well as other consultants in this field.
Research
and development expenses increased approximately $5,300,$1,431,000, or 2.3%,599%, to $1,670,000 for the year ended December 31, 2025, compared to
approximately $239,000 for the year ended December 31, 2024, compared to approximately
$234,000 for the year ended December 31, 2023, primarily due to an increase in labor costs of approximately $844,000 and
material costcosts of approximately $587,000 associated with continued development.development of our USP laser technologies and programs which remain
in place as we continue to work on them.
Other income increased approximately $55,000, or 2568%, to $57,000 for the year ended December 31, 2025, compared to other expenses of $2,000 for the year ended December 31, 2024. The change was primarily attributable to the write-off of an obligation of approximately $50,000, as management concluded that the obligation was no longer probable of settlement and the balance was derecognized from the Company’s balance sheet. In addition, the period-over-period fluctuation was impacted by higher average cash balances, which resulted in an increase in interest income earned during the year.
Other
income decreased approximately $44,000, or 95.3%, to $2,000 for the year ended December 31, 2024, compared to other expenses of $46,000
for the year ended December 31, 2023, primarily due to unused funds in cash equivalents reclassed for development purposes.
Our
operations in 20242025 resulted in a net loss of approximately $9,174,000,$14,873,000, an increase of approximately $1,824,000,$5,698,000, or 24.8%,62%, compared to
the approximately $7,350,000$9,175,000 net loss for the year ended 2023,2024, primarily due to increases in general and administrativeadministrative, selling and
marketing, and research
and development expense, partiallyas offsetwell byas lower revenue and a decrease in selling and marketing expenses.revenue.
Trend Discussion
During
the year ended December 31, 2023, as we received our ONR contract and a Phase II STTR contract with the Army, we recognized revenues
as we performed these services and also recorded related costs. Costs under these contracts continue to be affected by ongoing supply
chain disruptions, and shortages of items like semiconductor chips, and related systemic issues, and general inflation although to a
lesser extent than in 2022. In particular, micro-electronic and semiconductor chip shortages are still impacting supply chains, and as
such, can impact our ability to execute and deliver technology to meet demands of our customers. Certain optical transmitting components
are also in short supply. These costs and supply issues also may affect any internal research and development programs, and we anticipate
that they will continue for at least the near term.
Our
costs and the timing of our performance under grants and contracts continue to be affected by trends in the US labor market, particularly,
recruiting of scientists and technicians. We had observed some limited availability in this market in 2022 with some improvement in 2023,
and we anticipate being able to locate and retain the necessary personnel for the foreseeable future.
The
new administration and related changes in the structure and operations of the federal government are introducing new challenges for our
operations and financial projections. It is difficult to forecast the effect that recently introduced tariffs will have on our ability
to source raw materials, supplies, and equipment needed to continue our operations both for the performance of our ongoing contractual
obligations and our internal research and development efforts. Moreover, the cut to funding and reductions in federal government personnel
can have a significant impact on our cash flows and ability to continue operating. Many of these cuts are proposed to the Departments
of Defense and Homeland Security budgets which are the focus of much of our business development efforts.
Certain
mitigating factors could blunt any potential impact of these changes on our industry. The DOD and others in the administration have indicated
that funding for innovation and novel technologies will continue to be a priority, and directed energy has been discussed as part of
this trend. Also, many of the cuts are being challenged in court and, in some cases, reversed either because of judicial rulings or policy
reversals. However, it is difficult to predict precisely where funds will be cut or allocated, and even a general reduction in force
can make administrative functions, such as finalizing contracts and government payment processing, challenging. These factors could severely
impact our cash flows and our ability to continue operating.
The accompanying 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. In their report accompanying our financial statements for the year ended December 31, 2025, our independent auditors stated that our financial statements were prepared assuming that we would continue as a going concern and that they have substantial doubt as to our ability to do so for one year from the date the financial statements are issued based on our recurring losses from operations and need to raise additional capital. The financial statements do not include any adjustments relating to the recoverability of assets and the amount or classification of liabilities that might be necessary should the company be unable to continue as a going concern.
TheAt
accompanying 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. At December 31, 2024,2025, the company had total current assets of $664,779$6,969,464 and total current
liabilities of $732,418,$840,346 resulting in a working
capital deficit of $67,639.$6,129,118. At December 31, 2024,2025, we had $164,812$6,436,082 cash and cash equivalents,
a decreasean increase of $1,154,714$6,271,270 from $1,319,526$164,812 at
December 31, 2023.2024.
During
the year ended December 31, 2024,2025, the net cash outflow from operating activities was $5,092,690.$9,237,951 This amount was comprised primarily
of our
net loss of $9,174,958.$14,872,730. This was offset by non-cash stock-based compensation expense of $3,768,819,$5,136,473, amortization of prepaid
assets of $224,625,
$140,893, depreciation and amortization expense of $ 218,907,$282,200, and the amortization of right of use assets of $214,690.
$263,430. Additionally, net
cash used from changes in assets and liabilities totaled $344,773.$188,217. This included a decrease in accounts
receivable of $231,953$335,839, and and,
accrued expenses and compensation of $22,643.$179,044. This was offset by aan decreaseincrease in deferred revenue of
$308,908, prepaidprepaids and deposits of $51,113,$350,147, and a decrease in operating lease liabilitiesright of $184,871use andliabilities
of a decrease in$265,380, accounts
payable of $54,477.$37,573, and due to related parties of $50,000.
During the year ended December 31, 2025, net cash provided by financing activities was $16,743,956. This amount consisted of $16,794,248 in proceeds from sale of common stock and $126,467 from the exercise of options and warrants, which were offset by $17,434 tax withholdings related to the share settlement of RSUs and $159,325 of repayment of an insurance premium loan.
During
the year ended December 31, 2024, net cash provided by financing activities was $4,036,823, which consisted mainly of repayment of
our note payable of $141,977, payment of $82,300 to the IRS for tax withholding related to the share settlement of RSUs issued to
employees, offset by $4,171,601 in proceeds from sale of common stock and $89,499 in proceeds from the exercise of options.
Based
on the company’s current business plan, we believe our cash balance as of the date of this report, along with anticipated revenuescontract
from our contract anticipated contract revenue, will be sufficient to meet the company’s anticipated cash requirements for the
near term. However, we cannot be certain
that the current business plan will be achievable. In addition, we recently received verbal notice that funding under two of the company’s
contracts has been discontinued, as described under Results of Operations and Ongoing Business Activities. Although these contracts are
still in effect, receipt of any additional funds under them is highly uncertain, which negatively affects our anticipated cash flows
from operating activities.
The
company’s existence depends upon management’s ability to develop profitable operations. Management is devoting a significant
portion of its efforts to developing additional business and raising capital, as needed, but 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 investment
bankers and private investors. The company may not be successful in its effort to secure additional financing on terms it
considers favorable.
The accompanying consolidated financial statements do not include any adjustments that might result should the company
be unable to continue
as a going concern. In January and February 2025, the
company raised approximately $6 million through the private placement of shares of its common stock, par value, $0.001 per share, some
of which were underlying pre-funded common stock purchase warrants, in a private sale to individual purchasers at a price of $0.75 per
share (or $0.749 per underlying share for pre-funded warrants), all to accredited, sophisticated investors Additionally,
international, macroeconomic events, including the Russian military action in Ukraine 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 our ability
to continue as a going concern. These events may also impair our ability to raise capital, including as a result of increased market
volatility, or decreased market liquidity, which also affects the company’s ability to continue as a going concern. Third-party
financing may become unavailable on terms acceptable to the company or at all. The impact of such events on the world economy and the
specific impact on the company’s financial position and results of operations are difficult to predict. The financial statements
do not include any adjustments that might result from the outcome of this uncertainty.
In January and February 2025, the company raised approximately $6 million through the private placement of shares of its common stock, par value, $0.001 per share, some of which were underlying pre-funded common stock purchase warrants, in a private sale to individual purchasers at a price of $0.75 per share (or $0.749 per underlying share for pre-funded warrants), all to accredited, sophisticated investors.
In October 2025, the company raised approximately $11 million through the private placement of shares of its common stock, par value, $0.001 per share, some of which were underlying pre-funded common stock purchase warrants, in a private sale to individual purchasers at a price of $1.80 per share (or $1.799 per underlying share for pre-funded warrants), all to accredited, sophisticated investors.
Additionally, international, macroeconomic events, including the military action in the Middle East and South America, the Russian military action in Ukraine 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 our ability to continue as a going concern. These events may also impair our ability to raise capital, including as a result of increased market volatility, or decreased market liquidity, which also affects the company’s ability to continue as a going concern. Third-party financing may become unavailable on terms acceptable to the company or at all. The impact of such events on the world economy and the specific impact on the company’s financial position and results of operations are difficult to predict. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Budgeting
for upcoming expenses and costs of supplies and equipment needed to perform our existing, and any future, grants or contracts requires
that we estimate factors such as inflation and geo-political events that affect such expenses and costs. Although inflation generally
moderated in 2023,2024 and 2025, recent events in the Middle East are driving it back up. In addition, the cost of labor continues to increase
across certain sectors of the US and global economy which may drive up our
general and administrative expenses as well as the cost of
personnel working directly and indirectly on our grants and contracts, particularly
given the highly skilled nature of this work. Inflation
has also impacted the price of supplies and materials we must purchase in order
to perform grants and contracts, some of which may have
been bid on based on cost structures which were submitted during periods of lower
inflation. In addition, geo-political events have further
limited the number of countries from which we can source certain supplies and
equipment. These limitations can range from outright prohibitions
to strong discouragement based on potentially sensitive information.
We continually monitor these events and the markets for needed supplies
in order to make the best estimates possible, both in our internal
budgeting and in any bids or proposals we submit.
The following table
summarizes summarize
our contractual obligations and other commercial commitments as of December 31, 20242025:
In
March 2021, the company signed a five-year lease for an 11,000 usable square foot (13,000 rentable square foot) laboratory/office space
in Tucson. The lease term commences May 1, 2021 and ends on April 30, 2026. The base rent is $6.7626 per rentable square foot for year
one, and escalatesescalated 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.
What changed in the latest 10-Q
Risk Factors
We could not find a separate Risk Factors item in the latest 10-Q. Some companies leave it out of quarterly reports; see the annual 10-K risk factors and the original filing. Open the filing on SEC.gov.
Management's Discussion & Analysis (MD&A)
New heading “Results of Operations”
New heading “Comparison of Operations for the Six Months Ended June 30, 2026 and 2025:”
New heading “Cost of Revenue”
New heading “General and Administrative”
New heading “Selling and Marketing”
New heading “Research and Development”
Largest changes
“Comparison of Operations for the Six Months Ended June 30, 2026 and 2025:”see in full comparison
Full comparison: every changed paragraph (43)
Applied Energetics, Inc. is
a 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.
attributes. While initially designed to meet the emerging needs and priorities for the national security community, our directed energy technology
technology also has potential commercial applications in both the biomedical and advanced manufacturing industries.
Applied Energetics’
directed energy technologies
are vastly different from conventional directed energy systems. Our 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 reductionsoptimization on all deliverables, for
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’ optical fiber-based laser
architectures also
enable unmatched wavelength agility as well as pulse duration agility. Using innovative and highly specialized frequency
shifting techniques,
wavelengths can be custom tuned from the deep ultraviolet to the far infrared. In addition, temporal outputs can
be adjusted from continuous
wave to sub-picoseconds. The technology enables the customer to adjust the lasers’ operating parameters,
ultimately creating more
flexibility to change wavelength and pulse width. This feature allows for optimization of laser performance for
defense or commercial
applications. applications.For defense, in particular, our USPL technology has demonstrated effects we believe are well suited to counter Group 1 and
Group 2 small unmanned aerial systems.
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 take
anywhere from seconds to tens of seconds to impact a target. By contrast, Applied Energetics has delivered USP lasers to national
security 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 lessmeasured thanin a trillionthtrillionths of a second.second or shorter. 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 result of our innovative USP
approaches is highly effective
lasers capable of jamming, damaging, and destroying certain surveillance and reconnaissance sensors with
mountable footprints that require
only a fraction of the size, weight, and power requirements of other-directed energy technologies.
We believe the combination of both
low sizesize, weight, and weight,power, along with power characteristics of wavelength and pulse duration agility will help us achieve our
vision statement
of “Directed Energy, Anywhere.”
AE owns and protects intellectual
property that is integral and necessary
for the development of Ultrashort Pulse (“USP™”) Lasers, Laser Guided Energy
(“LGE®”) and Direct Discharge
Electrical products for military and commercial applications. AE currently owns 2625 patents
and an additional nine Government Sensitive
Patent Applications (“GSPA”). These GSPA’s are held under secrecy orders
of the US government and allow the company
greatly extended protection rights, including having no expiration date until such time as
they are no longer classified after which they
will have the normal 20-year patent protection. The company also has two pending patent
applications and one provisional patent application
which is undergoing conversion to its non-provisional form. We continue to file patent
applications as we deem appropriate to protect
our intellectual property and enhance our competitive advantage. WeIn conductaddition to research we have performed under contracts, we have continued our internal research and development
(IRAD) efforts under contracts and on an
internal basis as we movetransition towardto product development and testing.
AE continues to expand its technical capabilities and administrative capacity with the addition of employees, consultants and contractors, and agreements with leading laser and optics universities in the country. AE also works with a team of contractors to strengthen our compliance, IT, technical staff, human resources and public relations. During the quarter, AE added two new business developments contractors as well as a business development marketing agency to assist the company in raising awareness about the state and uniqueness of its technology in the market and among targeted customers.
In accordance with our 2026 Priorities, we continue to focus our efforts on (i) prioritizing laser productization; increasing staff for systems integration, software development, and beam director design; (ii) increasing market awareness and credibility; converting business development pipeline into active contracts; and (iii) cultivating ongoing partner conversations into active teaming agreements for specific programs, layered systems integration architectures, direct investment and co-development agreements.
The company, with its USPL technology, is uniquely positioned with its SWAP profile and specialized applications for counter UAS, counter ISR, Golden Dome and other applications requiring scaled directed energy effects.
Effective May 17, 2025, the
company received a requisition from the
University of Rochester in the amount of $181,639. This is part of a contractual arrangement with
the university in the approximate amount
of $250,000 to support its Laboratory for Laser Energetics (LLE) for ongoing efforts to explore
pulsed laser technologies. Work on the
contract commenced on July 10, 2025 with a meeting at Applied Energetics headquarters in Tucson, AZ with Dr. Jon Zuegel, Laser Development
and Engineering Division Director and a Senior Scientist at the LLE to discuss the research to be provided by the company. We completed
work under the requisitionrequisition, and then worked with the University of Rochester to plan and commence work on the next phase. Inin April 2026,
2026 we were awarded a follow-on contract in excess of
$240,000 to support Phase 1 of the program. We have performed a significant amount of the work under Phase 1, and planning has begun for
the next phase of the program.
During the threesix months
ended ended
MarchJune 31,30, 2025, we recognized revenues as we performed services under these contracts and recorded related costs under cost of
revenues. revenues.
During the threesix months ended MarchJune 31,30, 2026, on the other hand, the company was no longer performing services under these contracts
contracts, so
it recorded no revenues or costs with respect to them. However, the company has continued working on related
technologies as part of its
ongoing internal research and development program.
Effective April 17, 2026, the company received a requisition from the University of Rochester in the amount of $243,000 for the next phase of an arrangement with the university to support its Laboratory for Laser Energetics (LLE) for ongoing efforts to develop pulsed laser technologies. The work is expected to be completed by September 30, 2026. Planning has also begun for the next phase of the program.
During the quarter ended
June March 31,30, 2026, the company has continued
its work on the design and integration of USP technologies ontoto be tested on the Kord Firefly
platform and has extended this work into the secondthird quarter.
With recent upgrades and advances to the FIREFLYTM system,
the company looks to continue integration into the updated platform.
During the fourth quarter
of 2025 and the first quarterhalf of 2026, the company began conductingconducted field tests of certain of its lasers. To do so, it has made arrangements to
to use existing testing facilities maintained by third parties, including a private entity and a research university. The costs and availability
of these testing facilities vary, depending on prior reservations and the minimum length of time needed for each field test. To facilitate
these testing outings and make the time spent in the field more efficient, the company purchased an ATC Command/Response Trailer which
is outfitted with a ramp door for access to the laser being tested, air conditioning for climate control, a generator, and workstations
to enable the team to make adjustments to the lasers being tested in real time in the field. Our team has conducted several such field
tests, in one of which, we completely disabled the sensor on a drone at a range that meets specifications provided to us by prospective
customers. During this period our team has also deployed a significant amount of the company’s R&D budget toward the purchase
of supplies and equipment for the development and testing of prototypes.
The current budgetary and
deficit funding environment, continuing inflation,
tariffs tariffs, and other ongoing supply chain disruptions, the appropriations process, federal
government shutdowns, and budget cuts, among other
items, all continue to create significant short and long-term challenges and risks
to the company and its business development endeavors.
It is difficult to forecast the effect that any future tariffs will have on our
ability to source raw materials, supplies, and equipment
needed to continue our operations both for the performance of our ongoing contractual
obligations and our internal research and development
efforts. Moreover, the cuts to funding and reductions in federal government personnel
can impact our cash flowsflows, contract award timing, and ability to continue
operating. Many of these cuts are proposed to the Departments of War and Homeland Security budgets which are the focus of much of our
business development efforts. However, we remain optimistic that the innovative
nature of our technology and its novel approach to addressable
threats position the company for development, growth, and market opportunities.
Certain mitigating factors could blunt any potential impact of these changes on our industry. The DoW and others in the administration have indicated that funding for innovation and novel technologies will continue to be a priority, and scaling directed energy has been discussed as part of this trend. Also, many of the cuts are being challenged in court and, in some cases, reversed either because of judicial rulings or policy reversals. However, it is difficult to predict precisely where funds will be cut or allocated, and even a general reduction in force can make administrative functions, such as finalizing contracts and government payment processing, challenging. These factors could severely impact our cash flows and our ability to continue operating.
Comparison of Operations for the Three Months
Ended MarchJune 31,30, 2026 and 2025:
Revenue decreased by approximately$8,335
$210,000 to $0$62,000 for the three months ended MarchJune 31,30, 2026.from2026 from $70,335 for the three months ended MarchJune 31,30, 2025. In April 2025, the company
was notified
by a customer that two of its active contracts were currently unfunded and remain unfunded, resulting in a decrease in revenue
for the
period. Although the contracts remain open, the company suspended all work until funding is secured in the future. Despite the
suspension, suspension,
the company continues to advance the underlying technology through its internal research and development efforts. Both the
customer and
the company are actively seeking alternative sources of funding, including from within the original contracting agency and
other departments
of the U.S. Department of War.
Cost of revenue decreased
by approximately $64,000$25,920 to $0$21,570 for the three months ended MarchJune 31,30, 2026 from $47,490 for the three months ended MarchJune 31,30, 2025. This decrease was
primarily attributable to the unavailabilitycorresponding of federal funds. The cost of material, supplies and direct labor incurred were expensed to R&D
while our programs and work remain active anddecrease in place.revenue for the three months ended June 30, 2026.
General and administrative
expenses increased by approximately $673,000$594,348 to approximately $3,283,000$3,417,507 for the three months ended MarchJune 31,30, 2026, compared to approximately
$2,610,000$2,823,159 for the three months ended
June March 31,30, 2025, primarily due to an increase in salariesemployees and a resulting increase in salaries, employee benefitsbenefits, and consultants of approximately
$320,000, as well as$328,000, an increase in stock based compensation of approximately$171,000, $356,000.and an increase in recruiting expenses of $80,000.
Selling and marketing expenses
decreased by approximately $147,000$425,930 to approximately $172,000$223,330 for the three months ended MarchJune 31,30, 2026, compared to approximately $319,000
$649,260 for the three months ended
June March 31,30, 2025, primarily due to a decrease of approximately $122,000 in professional fees and a decrease in payroll
and related expenses of approximately $36,000$450,000 offsetto byset anup increasethe inBattle marketingLab expensesthat ofwere approximatelyincurred $12,000.during the three months
ended June 30, 2025.
Research and development expenses
increased by approximately $52,000$363,056 to approximately $375,000$699,234 for the three months ended MarchJune 31,30, 2026, compared to approximately$336,178 $323,000
for the three months ended MarchJune 31,30, 2025, 2025
primarily due to an increase in labor costs of $135,000$134,735, offsetincluding bythe ahiring decreaseof new engineering staff as well as an increase in materialmaterials costsand
supplies of approximately$262,000, $83,000including associatedhighly withspecialized components and optical fibers for the design of prototypes for demonstrations as well
as continued development of our USP laser technologies.technologies and programs.
Our operations for the three
months ended MarchJune 31,30, 2026, resulted in a
net loss of approximately $3,808,000$4,278,762, an increase of approximately $702,000$493,013 compared to a net loss of approximately $3,106,000 $3,785,749
for the
three months ended MarchJune 31,30, 2025, primarily due to an increase in general and administrative expenseexpenses and research and development
expenses expenses
partially offset by a decrease in selling and marketing expenses.
Results of Operations
Comparison of Operations for the Six Months Ended June 30, 2026 and 2025:
Revenue
Revenue decreased by $218,088 to $62,000 for the six months ended June 30, 2026 from $280,088 for the six months ended June 30, 2025. In April 2025, the company was notified by a customer that two of its active contracts were currently unfunded and remain unfunded, resulting in a decrease in revenue for the period. Although the contracts remain open, the company suspended all work until funding is secured in the future. Despite the suspension, the company continues to advance the underlying technology through its internal research and development efforts. Both the customer and the company are actively seeking alternative sources of funding, including from within the original contracting agency and other departments of the U.S. Department of War.
Cost of Revenue
Cost of revenue decreased by $89,834 to $21,570 for the six months ended June 30, 2026 from $111,404 for the six months ended June 30, 2025. This decrease was primarily attributable to the corresponding decrease in Revenue for the six months ended June 30, 2025.
General and Administrative
General and administrative expenses increased by $1,267,448 to $6,700,295 for the six months ended June 30, 2026, compared to approximately $5,432,847 for the six months ended June 30, 2025, primarily due to an increase in employees and a resulting increase in salaries, employee benefits, and consultants of approximately $725,000 and an increase in stock based compensation of $528,000.
Selling and Marketing
Selling and marketing expenses decreased by $572,435 to approximately $395,609 for the six months ended June 30, 2026, compared to $968,044 for the six months ended June 30, 2025, primarily due to a decrease in expenses of $628,000 to set up the Battle Lab that were incurred for the 6 months ended June 30, 2025.
Research and Development
Research and development expenses increased by $415,050 to approximately $1,074,275 for the six months ended June 30, 2026, compared to $659,225 for the six months ended June 30, 2025, primarily due to an increase in labor costs of $236,000 as well as an increase in materials and supplies of $179,000 in connection with the design of prototypes for demonstrations as well as continued development of our USP laser technologies and programs.
Net Loss
Our operations for the six months ended June 30, 2026, resulted in a net loss of $8,086,485 an increase of $1,195,070 compared to a net loss of $6,891,415 for the six months ended June 30, 2025, primarily due an increase in general and administrative expenses and research and development expenses partially offset by a decrease in selling and marketing expenses.
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 threesix months ended MarchJune 31,30, 2026, the company incurred a net
loss of approximately $3,808,000,$8,086,000, had negative cash flows from operations of approximately $2,296,000$5,124,000 and may incur additional future
losses due to the possible reduction in government contract activity and the expenses discussed under Results of Operations. In their
report accompanying our financial statements for the year ended December 31, 2025, our independent auditors stated that our financial
statements were prepared assuming that we would continue as a going concern and that they have substantial doubt as to our ability to
do so for one year from the date the financial statements are issued based on our recurring losses from operations and need to raise
additional additional
capital. The financial statements do not include any adjustments relating to the recoverability of assets and the amount or
classification classification
of liabilities that might be necessary should the company be unable to continue as a going concern.
At MarchJune 31,30, 2026, the company
had total current assets of approximately $4,649,000$2,210,000 and total current liabilities of approximately $937,000$1,398,000 resulting in working capital
of approximately $3,712,000.$812,000. At MarchJune 31,30, 2026, we had approximately $4,064,000$1,117,000 of cash and cash equivalents, a decrease of approximately
$2,372,000$5,319,000 from approximately $6,436,000 at December 31, 2025.
During the first threesix months
of 2026, the net cash outflow from operating activities was approximately $2,296,000.$5,124,000. This amount was comprised primarily of our net loss
of approximately $3,808,000,$8,086,000, offset by non-cash stock-based compensation expense of approximately $1,348,000,$2,682,000, depreciation and amortization
of approximately $175,000, amortization of ROU assets
of approximately $70,000, depreciation and amortization of approximately $88,000,$141,000 and amortization of prepaid assets of approximately $103,000
$51,000 as well as cash used from changes in assets and liabilities of approximately $46,000$363,000 duewhich towas comprised of an increase in Other Assets
of $282,000, a decrease in other assets of approximately
$102,000, a decrease in the ROU liabilityliabilities of approximately $75,000$153,000, andan increase in Accounts Receivable of approximately $81,000, a decrease
in in Accrued Expenses of $42,000 offset by an increase in accountsAccounts payablePayable of $319,000 and accruedan liabilities
increase in Deferred Revenue of approximately $131,000.$100,000.
During the first threesix months
of 2026, the net cash outflow from investing activities was approximately $43,000.$80,000. This was for the purchase of equipment.equipment including a
trailer for transporting equipment for testing.
During the first threesix months
of 2026, the net cash outflow from financing activities was approximately $32,000.$40,000. This amount consisted of approximately $20,000 received
from the exercise$69,000 of optionspayments
made andon warrantsloans offsetas bywell approximatelyas $4,700$5,000 tax withholdings related to the share settlement of RSUs andoffset by $34,000 received from the exercise
approximately $48,000 of repayment of an insurance premium loan.options.
The company’s existence
depends upon management’s ability to develop profitable operations. Management is devoting significantsubstantially all of its time and effort
to developing
its business and raising capital, as needed, and cannot be certain that these efforts will be successful. Management’s
business business
development efforts may not result in profitable operations. To fund its research and development and marketing efforts, the
company’s company’s
management continues to explore possible financing opportunities through discussions with investment bankers and private
investors. The
company may not be successful in its effort to secure additional financing on terms it considers favorable. The accompanying
consolidated consolidated
financial statements do not include any adjustments that might result should the company be unable to continue as a going
concern.
Additionally, international,
macroeconomic events, including the military action in the Middle East,East and South America, the Russian military action in Ukraine 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 our ability to continue as a going concern. These events may also impair our ability to raise capital,
including as a result of
increased market volatility, or decreased market liquidity, which also affects the company’s ability to
continue as a going concern.
Third-party financing may become unavailable on terms acceptable to the company or at all. The impact of
such events on the world economy
and the specific impact on the company’s financial position and results of operations are difficult
to predict. The financial statements
do not include any adjustments that might result from the outcome of this uncertainty.
AERG insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 4 filings (2 insiders, 3 trade dates, 40,000 shares, about $60.0K; 4 of these filings say the sales were made under a Rule 10b5-1 trading plan). Net open-market shares: -40,000 (purchases minus sales); net value about -$60.0K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-07-13 | Donaghey Christopher Wayne |
Option exercise |
100,000 | — | — |
| 2026-07-13 | Donaghey Christopher Wayne |
Shares withheld for tax |
39,850 | — | — |
| 2026-06-08 | Adamczyk Bradford Thomas |
Option exercise |
10,000 | $0.07 | $700 |
| 2026-06-08 | Adamczyk Bradford Thomas |
Open-market sale |
10,000 | $1.50 | $15.0K |
| 2026-06-01 | Donaghey Christopher Wayne |
Open-market sale |
10,000 | $1.50 | $15.0K |
| 2026-05-11 | Adamczyk Bradford Thomas |
Open-market sale |
10,000 | $1.50 | $15.0K |
| 2026-05-11 | Adamczyk Bradford Thomas |
Option exercise |
10,000 | $0.07 | $700 |
| 2026-05-11 | Donaghey Christopher Wayne |
Open-market sale |
10,000 | $1.50 | $15.0K |
Well-known investors holding AERG (13F)
None of the 59 investors we track reported a position in their latest 13F.