UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from _________ to ________
Commission File Number
(Exact Name of Registrant as Specified in Its Charter)
| (State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification Number) | |
| (Address of Principal Executive Offices) | (Zip Code) |
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Indicate by check mark
whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), (2) has been
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Indicate by check mark whether the
registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer: | ☐ | Accelerated filer: | ☐ |
| ☐ | Smaller reporting company: | ||
| Emerging growth company |
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No
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||
As of May 13, 2024, there were
APPLIED
ENERGETICS, INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
i
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APPLIED ENERGETICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| March 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Other assets | ||||||||
| Total current assets | ||||||||
| Long-term assets | ||||||||
| Property and equipment - net | ||||||||
| Right of use asset - operating | ||||||||
| Security deposit | ||||||||
| Total long-term assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ (Deficit) Equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Subscription payable | - | |||||||
| Notes payable | - | |||||||
| Due to related parties | ||||||||
| Operating lease liability - current | ||||||||
| Deferred revenue | ||||||||
| Accrued expenses | ||||||||
| Accrued dividends | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities | ||||||||
| Operating lease liability - non-current | ||||||||
| Total long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Stockholders’ (Deficit) Equity | ||||||||
| Series A convertible preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ (deficit) equity | ( | ) | ||||||
| Total Liabilities and Stockholders’ (Deficit) Equity | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements (unaudited).
1
APPLIED ENERGETICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| FOR THE THREE MONTHS ENDED MARCH 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenue | $ | $ | ||||||
| Cost of revenue | ||||||||
| Gross profit | ( | ) | ||||||
| Operating expenses | ||||||||
| General and administrative | ||||||||
| Selling and marketing | ||||||||
| Research and development | ||||||||
| Total operating expenses | ||||||||
| Operating loss | ( | ) | ( | ) | ||||
| Other income/(expense) | ||||||||
| Other income | ||||||||
| Total other income/(expense) | ||||||||
| Loss before provision for income taxes | ( | ) | ( | ) | ||||
| Provision for income taxes | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Preferred stock dividends | ( | ) | ( | ) | ||||
| Net loss attributable to common stockholders | $ | ( | ) | $ | ( | ) | ||
| $ | ( | ) | $ | ( | ) | |||
See accompanying notes to condensed consolidated financial statements (unaudited).
2
APPLIED ENERGETICS, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF CHANGES IN STOCKHOLDERS’ (DEFICIT) EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(Unaudited)
| Preferred Stock | Common Stock | Additional Paid-In | Accumulated | Total Stockholders’ (Deficit) | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||
| Common stock issued on exercise of options | - | |||||||||||||||||||||||||||
| Common stock issued on exercise of warrants | - | |||||||||||||||||||||||||||
| Common stock issued for settlement of restricted stock units | - | ( | ) | |||||||||||||||||||||||||
| Common stock withheld to cover income tax withholding obligations | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
| Net loss for the period ended March 31, 2024 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Preferred Stock | Common Stock | Additional Paid-In | Accumulated | Total Stockholders’ (Deficit) | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||
| RSU restricted stock | - | |||||||||||||||||||||||||||
| Common stock issued on exercise of options | - | |||||||||||||||||||||||||||
| Net loss for the period ended March 31, 2023 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements (unaudited).
3
APPLIED ENERGETICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| FOR THE THREE MONTHS ENDED MARCH 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash Flows From Operating Activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Noncash stock based compensation expense | ||||||||
| Amortization of ROU assets | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of prepaid assets | ||||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Prepaid and deposits | ( | ) | ( | ) | ||||
| ROU liabilities | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ||||||
| Deferred revenue | ( | ) | ||||||
| Accrued expenses and compensation | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows From Investing Activities | ||||||||
| Purchase of equipment | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash Flows From Financing Activities | ||||||||
| Repayment on note payable | ( | ) | ||||||
Proceeds from note payable | ||||||||
Proceeds from stock subscription payable | ||||||||
Proceeds from the exercise of stock option and warrants | ||||||||
| Tax withholdings related to net share settlement of RSU’s | ( | ) | ||||||
| Net cash provided (used in) by financing activities | ( | ) | ||||||
| Net change in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents, beginning of year | ||||||||
| Cash and cash equivalents, at end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for taxes | $ | $ | ||||||
| Non-cash investing and financing activities | ||||||||
| Insurance financing for prepaid insurance | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements (unaudited).
4
APPLIED ENERGETICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2024
(Unaudited)
NOTE 1 – ORGANIZATION OF BUSINESS, GOING CONCERN AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The unaudited condensed consolidated financial statements include the accounts of Applied Energetics, Inc. and its wholly owned subsidiary North Star Power Engineering, Inc. (“North Star”) (collectively, “company,” “Applied Energetics,” “we,” “our” or “us”). All intercompany balances and transactions have been eliminated.
The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information, the instructions for Form 10-Q and the rules and regulations of the SEC. Accordingly, since they are interim statements, the accompanying unaudited condensed consolidated financial statements do not include all of the information and notes required by GAAP for annual financial statements, but reflect all adjustments consisting of normal, recurring adjustments, that are necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. Interim results are not necessarily indicative of the results that may be expected for any future periods. The December 31, 2023, balance sheet information was derived from the audited financial statements as of that date. The interim unaudited condensed consolidated financial statements should be read in conjunction with the company’s audited consolidated financial statements contained in our Annual Report on Form 10-K.
Going Concern
The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
For the three months ended March 31, 2024, the company incurred
a net loss of $
Based on the company’s current business plan, it believes its cash balance as of the date of this filing, together with anticipated revenues from government contracts, will be sufficient to meet its anticipated cash requirements for the near term. However, there can be no assurance that the current business plan will be achievable. Such conditions raise substantial doubts about the company’s ability to continue as a going concern for one year from the date the financial statements are issued.
The company’s existence depends upon management’s ability to develop profitable operations. Management is devoting substantially all of its efforts to developing its business and raising capital and there can be no assurance that management’s efforts will result in profitable operations or enable it to overcome future liquidity concerns. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability of assets, the amount or classification of liabilities or otherwise that might be necessary should the company be unable to continue as a going concern.
5
APPLIED ENERGETICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2024
(Unaudited)
Trade conditions, such as exacerbated supplier shutdowns and delays, contribute to this uncertainty. Additionally, Russia’s military action in Ukraine, war in the Middle East, and related economic sanctions around the globe, could impact the company’s ability to source necessary supplies and equipment which could materially and adversely affect its ability to continue as a going concern. In addition, the company’s ability to continue as a going concern may depend on its ability to raise capital, which may be impacted by these events, including as a result of increased market volatility, or decreased market liquidity. This may result in third-party financing being unavailable on terms acceptable to the company or at all. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
To further improve its liquidity position, the company’s management continues to explore additional equity financing through discussions with investment bankers and private investors. The company may be unsuccessful in its effort to secure additional equity financing. The financial statements do not include any adjustments relating to the recoverability of assets and the amount or classification of liabilities that might be necessary should the company be unable to continue as a going concern.
Applied Energetics, Inc. is a corporation organized and existing under the laws of the State of Delaware. Our headquarters are located at 9070 S. Rita Road Suite 1500, Tucson, Arizona, 85747, including office and laboratory space, and our telephone number is (520) 628-7415.
Use of Estimates
The preparation of unaudited condensed financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and accompanying notes. Management bases its assumptions on historical experiences and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. In addition, management considers the basis and methodology used in developing and selecting these estimates, the trends in and amounts of these estimates, specific matters affecting the amount of and changes in these estimates, and any other matters related to these estimates, including significant issues concerning accounting principles and financial statement presentation. Such estimates and assumptions could change in the future as more information becomes known which could impact the amounts reported and disclosed herein. Significant estimates include revenue recognition, carrying amounts of long-lived assets, valuation assumptions for share-based payments, evaluation of debt modification accounting, effective borrowing rate determinations, analysis of fair value transferred upon debt extinguishment, valuation and calculation of measurements of income tax assets and liabilities.
Net Loss Attributable to Common Stockholders
Basic
loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares
outstanding for the period before giving effect to stock options, stock warrants, restricted stock units and convertible securities outstanding,
which are considered to be dilutive common stock equivalents. Diluted net loss per common share is calculated based on the weighted average
number of common and potentially dilutive shares outstanding during the period after giving effect to dilutive common stock equivalents.
Contingently issuable shares are included in the computation of basic loss per share when issuance of the shares is no longer contingent.
The number of shares underlying warrants, options, restricted stock units and our Series A Convertible Preferred Stock, which were not
included in the computation of earnings per share because the effect was antidilutive, was
6
APPLIED ENERGETICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2024
(Unaudited)
Significant Concentrations and Risks
We
maintain cash balances at a commercial bank, and, at times, balances exceed FDIC limits. As of March 31, 2024, $
NOTE 2 – NEW ACCOUNTING STANDARDS
The company has reviewed all issued accounting pronouncements. The company does not expect the adoption of any pronouncements to have an impact on its results of operations or financial position.
NOTE 3 – NOTES PAYABLE
Premium Financing
On March 12, 2024, the company entered into an agreement with
Oakwood D&O Insurance to provide financing in the amount of $
Notes Payable Reconciliation
| March
31, 2024 | December 31,
2023 | |||||||
| Beginning balance | $ | $ | ||||||
| Notes payable | ||||||||
| Payments on notes payable | ( | ) | ||||||
| Total | ||||||||
| Less-Notes payable – current | ||||||||
| Notes payable – non-current | $ | $ | ||||||
7
APPLIED ENERGETICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2024
(Unaudited)
| 2024, nine months ended | $ | |||
| 2025 | ||||
| Thereafter | ||||
| Total | $ |
The
company’s note payable balance of $
NOTE 4 – DUE TO RELATED PARTIES
It
has come to the board’s attention that on July 31, 2018, our now deceased CEO deposited $
NOTE 5 – STOCKHOLDERS’ EQUITY
Authorized Capital Stock
During
the three months ended March 31, 2023, the company issued
During
the three months ended March 31, 2023, the company issued
During
the three months ended March 31, 2023, the company issued the remaining
During
the three months ended March 31, 2024, the company issued
During
the three months ended March 31, 2024, the company issued
During
the three months ended March 31, 2024, the company issued
During the three months ended March 31, 2024, restricted stock units
covering
Commencing January 29, 2024, the company is conducting an offering
of up to
8
APPLIED ENERGETICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2024
(Unaudited)
Preferred Stock
As of March 31, 2024, and December 31, 2023, there were
Our
Series A Preferred Stock has a liquidation preference of $
Each
share of Series A Preferred Stock is convertible at any time at the option of the holder into a number of shares of common stock equal
to the liquidation preference (plus any unpaid dividends for periods prior to the dividend payment date immediately preceding the date
of conversion by the holder) divided by the conversion price (initially $
If
a change of control occurs, each holder of shares of Series A Convertible Preferred Stock that are outstanding immediately prior to the
change of control shall have the right to require the corporation to purchase, out of legally available funds, any outstanding shares
of Series A Convertible Preferred Stock at the defined purchase price. The purchase price is defined as: per share of Preferred Stock,
9
APPLIED ENERGETICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2024
(Unaudited)
If the Corporation pays all or a portion of the Purchase Price in Common Stock, no fractional shares of Common Stock will be issued; instead, the company will round the applicable number of shares of Common Stock up to the nearest whole number of shares; provided that the Corporation may pay the Purchase Price (or a portion thereof), whether in cash or in shares of Common Stock, only if the Corporation has funds legally available for such payment and may pay the Purchase Price (or a portion thereof) in shares of its Common Stock only if (i) the Common Stock is listed on a U.S. national securities exchange or the Nasdaq Stock Market at the time of issuance and (ii) a shelf registration statement covering the issuance by the Corporation and/or resales of the Common Stock issuable as payment of the Purchase Price is effective on the Payment Date unless such shares are eligible for immediate resale in the public market by non-affiliates of the Corporation.
Share-Based Payments
Effective
November 12, 2018, the Board of Directors of Applied Energetics, Inc. adopted the 2018 Incentive Stock Plan. The plan provides for the
allocation and issuance of stock, restricted stock purchase offers and options (both incentive stock options and non-qualified stock
options) to officers, directors, employees and consultants of the company. The board reserved a total of
We
have, from time to time, also granted non-plan options and restricted stock units to certain officers, directors, employees and consultants.
Total stock-based compensation expense for grants to officers, employees and consultants was $
The
$
The company recognized no related income tax benefit because our deferred tax assets are fully offset by a valuation allowance.
As
of March 31, 2024, the company has $
10
APPLIED ENERGETICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2024
(Unaudited)
| Shares | Weighted Average Exercise Price |
Weighted Average Contractual Term Outstanding |
Intrinsic Value |
|||||||||||||
| Outstanding at December 31, 2023 | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ( |
) | ( |
) | ( |
) | ||||||||||
| Forfeited or expired | ||||||||||||||||
| Outstanding at March 31, 2024 | ||||||||||||||||
| Outstanding and exercisable at March 31, 2024 | ||||||||||||||||
| Three Months Ended March 31, | ||
| 2023 | ||
| Assumptions: | ||
| Risk-free interest rate | ||
| Expected dividend yield | ||
| Expected volatility | ||
| Expected life (in years) |
| Restricted Stock Outstanding | ||||||||
| Shares | Weighted Average Fair Value per Share at Grant Date | |||||||
| Nonvested at December 31, 2023 | ||||||||
| Granted – restricted stock units and awards | ||||||||
| Granted – performance-based stock units | ||||||||
| Canceled | ||||||||
| Vested | ( | |||||||
| Nonvested at March 31, 2024 | $ | |||||||
11
APPLIED ENERGETICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2024
(Unaudited)
As
of March 31, 2024, and December 31, 2023, there was $
As
of March 31, 2024 and December 31, 2023, the company recorded $
Warrant Activity | ||||||||||||
| Weighted Average Exercise | Weighted Average remaining Contractual Term | |||||||||||
| Shares | Price | (years) | ||||||||||
| Outstanding at December 31, 2023 | $ | |||||||||||
| Granted | - | |||||||||||
| Exercised | ( | ) | ||||||||||
| Forfeited | - | |||||||||||
| Outstanding and exercisable at March 31, 2024 | $ | |||||||||||
| Warrants Outstanding | Warrants Exercisable | |||||||||||||||||||
| Weighted Avg. Remaining |
Weighted | Weighted | ||||||||||||||||||
| Shares | Contractual Life in |
Avg. Exercise |
Shares | Avg. Exercise |
||||||||||||||||
| Range of Exercise Prices | Outstanding | Years | Price | Exercisable | Price | |||||||||||||||
| $ |
$ | $ | ||||||||||||||||||
| $ | $ | |||||||||||||||||||
12
APPLIED ENERGETICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2024
(Unaudited)
NOTE 6 – REVENUE RECOGNITION
The company derives revenue from technical research detailing the findings of its investigations to its customers under contract for specific projects. Under Topic 606, revenue is recognized when control of promised goods and services is transferred to customers, and the amount of revenue recognized reflects the consideration to which an entity expects to be entitled in exchange for the goods and services transferred. A performance obligation is a contractual promise to transfer a distinct good or service to the customer and is the unit of account under Topic 606. The transaction price of a contract is allocated to distinct performance obligations and recognized as revenue when or as the performance obligations are satisfied. The company’s contracts require significant integrated services and are accounted for as a single performance obligation, and revenue is recognized by the company over the contract term at a fixed contract price.
During the three months ended March 31, 2024, the Company modified its contract with a customer for changes in the contract specifications and requirements. The modification was for services that are not distinct from the existing contract due to the significant integration of services performed. The modification was accounted for as if it was part of the existing contract and a cumulative catch-up adjustment was recorded for the three months ended March 31, 2024.
Contract modifications are routine in the performance of our contracts. Contracts are often modified to account for changes in the contract specifications or requirements. In most instances, contract modifications are for goods or services that are not distinct, and, therefore, are accounted for as part of the existing contract.
| March
31, 2024 |
December 31,
2023 |
|||||||
| Accounts receivable | $ | $ | ||||||
| Unbilled receivable | ||||||||
| Total | $ | $ | ||||||
Concentrations
During the three months ended
March 31, 2024, the company earned revenue from three contracts with three separate customers. The three customers accounted for a total
of $
13
APPLIED ENERGETICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2024
(Unaudited)
NOTE 7– COMMITMENTS AND CONTINGENCIES
Operating Leases
In
March 2021, the company signed a five-year lease for a
On
June 7, 2023, the company entered into an amendment to extend the term of the original lease from April 26, 2026 to July31, 2028. Included
in the lease amendment is extension space commencing on August 1, 2023. As of August 1, 2023 the Company has secured additional square
footage in the amount of
The
company incurred lease expense for its operating leases of $
| Operating Lease |
||||
| For the three months ended March 31, 2024 | ||||
| 2024, nine months ended | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total undiscounted lease payments | ||||
| Present value discount, less interest | ||||
| Lease Liability | $ | |||
14
APPLIED ENERGETICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2024
(Unaudited)
Guarantees
The company agrees to indemnify its officers and directors for certain events or occurrences arising as a result of the officers or directors serving in such capacity. The maximum amount of future payments that the company could be required to make under these indemnification agreements is unlimited. However, the company maintains a director’s and officer’s liability insurance policy that limits its exposure and enables it to recover a portion of any future amounts paid. As a result, it believes the estimated fair value of these indemnification agreements is minimal because of its insurance coverage, and it has not recognized any liabilities for these agreements as of March 31, 2024 and 2023.
Litigation
On
January 15, 2021, the company filed a complaint in the United States District Court, Southern District of New York, against Gusrae, Kaplan
& Nusbaum and Ryan Whalen for malpractice and breach of New York Rules of Professional Conduct by both parties as former counsel
to the company. On May 28, 2021, Gusrae, Kaplan & Nusbaum and Mr. Whalen filed a motion to dismiss the complaint. On June 25, 2021,
the company filed an opposition to the motion. On July 13, 2021, Gusrae Kaplan & Nusbaum and Mr.Whalen filed their reply brief. On
March 30, 2022, United States Magistrate Judge Debra Freeman signed an order denying the motion of GKN and Mr. Whalen to dismiss the
company’s claim for malpractice and for rescission of the shares-for-fees agreement under which GKN and Whalen received
On July 26, 2023, the company filed a complaint in the Superior Court
of the State of Delaware against Gusrae Kaplan Nusbaum PLLC and Ryan Whalen, for malicious prosecution of a federal securities fraud lawsuit
which was filed by these defendants against the company and certain of its directors, attorneys and their law firms and an outside consultant,
in July 2019 in the United States District Court for the Southern District of New York. The complaint filed by the company alleges that
the claims by these defendants against it were frivolous and prosecuted for the improper purpose of hindering the company’s prosecution
of a then pending case against George Farley, the company’s former CEO, which was later settled. The complaint further alleges that
the defendants prosecuted their claim with malice causing the company damages valued in excess of $
As with any litigation, the company cannot predict the outcome with certainty, but the company expects to provide further updates on the status of the litigation as circumstances warrant.
The company may, from time to time, be involved in legal proceedings arising from the normal course of business.
Related Party
In
January 2023, the company made a $
NOTE 8 – SUBSEQUENT EVENTS
The company’s management has evaluated subsequent events occurring after March 31, 2024, the date of our most recent balance sheet, through the date our financial statements were issued.
Subsequent to the year period
ended March 31, 2024, the company issued
Subsequent to the year period
ended March 31, 2024, the company issued
Subsequent to the year period
ended March 31, 2024, the company issued
On May 10, 2024, the company
completed the placement of
15
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our discussion and analysis of the financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the related disclosures included elsewhere herein and in the Management’s Discussion and Analysis of Financial Condition and Results of Operations included as part of our Annual Report on Form 10-K for the year ended December 31, 2023.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the securities laws. Forward-looking statements include all statements that do not relate solely to the historical or current facts and can be identified by the use of forward-looking words such as “may,” “believe,” “will,” “would,” “could,” “should,” “expect,” “project,” “anticipate,” “estimates,” “possible,” “plan,” “strategy,” “target,” “prospect,” or “continue,” and other similar terms and phrases. These forward-looking statements are based on the current plans and expectations of our management and are subject to a number of uncertainties and risks that could significantly affect our current plans and expectations, as well as future results of operations and financial condition and may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Important factors that could cause our actual results to differ materially from our expectations are described in Item 1A (Risk Factors) of our Annual Report on Form 10-K, for the year ended December 31, 2023. Although we believe that the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to have been correct. We do not assume any obligation to update these forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting such forward-looking statements.
Applied Energetics, Inc., (sometimes referred to as the “company”) is a corporation organized and existing under the laws of the State of Delaware. Our executive office is located at 9070 S. Rita Road, Suite 1500, Tucson, Arizona 85747, (520) 628-7415. www. appliedenergetics.com
Applied Energetics, Inc., specializes in the development and manufacture of advanced high-performance lasers and optical systems and integrated guided energy systems for prospective defense, national security, industrial, biomedical, and scientific customers worldwide.
Technology, Capabilities, and Patents
Applied Energetics, Inc. is recognized as a global leader in developing the next generation optical sources exhibiting ever-increasing output energy, peak power and frequency agility while also providing decreased size, weight, and cost of these systems for customers. Applied Energetics utilizes patented, dual-use technologies to advance critical industries. Leveraging our proprietary fiber-based architecture and wavelength- and pulse-agility capability, our Ultrashort Pulse (USP) technology can enable users to achieve specific effects across different use cases with an unmatched blend of size, weight, and power attributes. While initially designed to meet the emerging needs and priorities for the national security community, our directed energy technology also has commercial applications in both the biomedical and advanced manufacturing industries.
The Applied Energetics scientific team is continuously innovating and expanding our patent portfolio to cover these technological breakthroughs and further enhance our suite of solutions for threat disruption for the Department of Defense, the intelligence community, and for commercial, biomedical and space applications with optical sources operating from the deep ultraviolet to the far infrared portions of the electromagnetic spectrum.
Applied Energetics has developed, successfully demonstrated and holds all crucial intellectual property rights to a dynamic directed energy technology called Laser Guided Energy (LGE®) and Laser Induced Plasma Channel (LIPC®). LGE and LIPC are technologies that can be used in a new generation of high-tech directed energy systems. Applied Energetics’ LGE and LIPC technologies are wholly owned by Applied Energetics and protected by one or more of Applied Energetics’ 25 issued patents and 11 Government Sensitive Patent Applications (GSPA). These GSPA’s are held under secrecy orders of the US government, providing the company with extended protection rights. The company also has nine pending patent applications. We continue to file patent applications as we deem appropriate to protect our intellectual property and enhance our competitive advantage.
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Applied Energetics’ directed energy technologies are vastly different from conventional directed energy systems, i.e. Applied Energetics’ proprietary fiber-based architecture is a key differentiator for our most recent technology demonstrators. Compared with traditional continuous wave laser technologies with their larger footprints, AE’s architecture enables orders of magnitude size-weight-power reductions on all deliverables, creating powerful, dual-use and agile systems that can fit a host of platforms while delivering very high-intensity, ultrashort pulses of light to the required target. This unique directed energy solution allows extremely high peak power and energy, with target and effects tunability, and is effective against a wide variety of potential targets.
Applied Energetics’ unique optical fiber-based laser architectures also enable unmatched wavelength agility as well as pulse duration agility. Using innovative and highly specialized frequency shifting techniques, wavelengths can be custom tuned from the deep ultraviolet to the far infrared. In addition, temporal outputs can be adjusted from continuous wave to sub-picoseconds. The technology enables the customer to adjust the lasers’ operating parameters, ultimately creating more flexibility to change wavelength and pulse width. This feature allows for optimization of laser performance for defense or commercial applications.
Our proprietary USP laser technology provides a significantly more compact solution than current continuous wave laser platforms while still delivering high peak power. Continuous wave laser systems are typically used to heat a target and, during continuous illumination, this heat transfer leads to melting or charring of the material. Using continuous wave output powers that now exceed 100 kilowatts (1kW = 1000 watts), it can take anywhere from seconds to minutes to impact a target. By contrast, Applied Energetics has delivered USP lasers to national security users that exceed five terawatts (1 TW = 1 trillion watts) in peak power, with the difference being that this peak power from a USP laser is delivered in a pulse that is less than a trillionth of a second. During this short pulse duration, and having such a high peak intensity, near-instantaneous ablation of the surface of the threat takes place. The net results of our innovative USP approaches are highly effective lasers with mountable footprints that require only a fraction of the size and weight of other-directed energy technologies.
As Applied Energetics looks toward the future, our corporate strategic roadmap builds upon the significant value of the company’s USP laser capabilities and key intellectual property, including LGE and LIPC, to offer our prospective partners, co-developers and system integrators a variety of next-generation ultrashort pulse and frequency-agile optical sources, from the ultraviolet to the far infrared portion of the electromagnetic spectrum, to address numerous challenges within the national security, biomedical, and advanced manufacturing market sectors.
Recent Developments
Effective March 12, 2024, the grant previously awarded to Applied Energetics, Inc. from a U.S. Department of Defense customer has been transitioned into a contract. The original grant had a two-year period of performance. The new contract supersedes the May 2022 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. The company intends to provide additional information in a Current Report on Form 8-K upon approval from the government agency.
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On March 5, 2024, Applied Energetics entered into an Employment Agreement with James Harrison, PhD, pursuant to which Dr. Harrison is to serve as Director of New Product Innovation, commencing on April 3, 2024. In this new role, Dr. Harrison’s responsibilities are to include setting a vision and strategy that supports and accelerates the entire development lifecycle of optical and laser products, from conceptualization to commercialization. His work is to involve collaboration with leaders across business development, operations, and scientific to drive the company’s strategic goal of providing cutting-edge laser and optical products to national security and commercial customers. For his services, the company has agreed to pay Dr. Harrison a cash salary of $200,000 per year.
Dr. Harrison is an experienced professional in the area of laser sources including design, manufacturing, program management and business development, with an emphasis on semiconductor and solid-state lasers. With more than 30 years of experience in opto-electronic sources, Dr. Harrison has demonstrated experience designing, building and scaling products that drive business growth and deliver customers innovative new technologies. He has held global leadership positions in engineering and research and development with tier-1 suppliers of photonics devices, where his responsibilities included providing substantial support for volume manufacturing of semiconductor lasers and packaged sources.
Effective February 11, 2024, Applied Energetics entered into a Memorandum of Understanding (MOU) with BluGlass Limited, a global supplier of gallium nitride (GaN) lasers to the national security, quantum and manufacturing industries, to collaborate and explore joint business opportunities that advance Applied Energetics’ laser and optical systems innovations and BluGlass’s expertise in GaN-based laser diode technologies.
Any resultant new laser capabilities and optical systems will be based on existing and emerging technologies currently under development within the companies. Under the MoU, the companies intend to collaborate to develop innovative solutions in technology areas critical to emerging national security and commercial markets, including new laser wavelengths and higher performance, yielding more efficient and cost-effective products. The MOU sets out the framework for collaboration, however, it is not a definitive agreement with commercial terms and timelines.
Effective August 23, 2023, Applied Energetics executed a contract with the Department of the Navy, Office of Naval Research with an aggregate contract price of $1.99 million payable over two years as the company performs its obligations under the contract. The objective of the contract is to develop a high-peak and high-average power USP optical system. The system is expected to demonstrate effects compatible with multiple Navy platforms and missions with an attractive size, weight, and power-cooling footprint. The company’s continuing development efforts in collaboration with ONR signify the importance of sustained development and maturation of USP-based directed energy systems to support the Navy’s technological priorities.
Effective May 15, 2023, Applied Energetics executed a Phase II Small Business Technology Transfer (STTR) contract with the U.S. Army at an aggregate contract price of $1.148 million payable over two years as the company performs its obligations thereunder, with the first year currently funded. The objective of this Phase II award is to further the development and testing of an IR laser system utilizing technologies that were investigated under the US Army Phase I STTR contract which the company was awarded in May 2022. This Phase II contract award follows a successful Phase I which established a computational concept with physical modeling and simulation to establish the feasibility of an IR laser system. Phase I was performed in collaboration with the James C. Wyant College of Optical Sciences at the University of Arizona. The company has continued its work under the contract, and provided all required reports, since its execution.
In May 2022, the Department of the Navy, Office of Naval Research (ONR) awarded Applied Energetics a $3.89 million, two-year grant, to develop an optical system capable of defeating customer-specified threats for integration onto U.S. Marine Corps(USMC) platforms. We were awarded this grant to accelerate the development and testing of Infrared (IR) optical technology with an ultrashort pulse laser (USPL) system. The overall objective is to advance and ruggedize optical technologies that can be fielded on a variety of USMC platforms and are able to operate in harsh conditions. Research under this grant has been completed and all progress reported to the program manager.
Effective June 7, 2023, the company entered into the First Amendment to Lease Agreement, which amended its existing Lease Agreement over its headquarters at the University of Arizona Tech Park. The amendment has expanded the Lease to add new 8,374usable square-foot suite of offices, conference rooms and cubicle areas directly across an atrium from the company’s current headquarters so that the company will occupy the entire first floor of the building. This has enabled the company to separate its public-facing facilities from its restricted access space easily. The amendment also extended the Lease over the company’s existing headquarters through July 31, 2028, and grants the company an option over 5,520 usable square feet of manufacturing space. The company moved its administrative offices into the new space in August 2023.
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Ongoing Business Development Activities
Over the past few years, we have submitted multiple proposals to, and attended briefings with, various defense and other government agencies who have expressed an interest in our technology and applications. We believe that our efforts in this area of development have begun to produce results. In addition to the contracts which we have been awarded, our team has been invited to, and completed, multiple briefings focused on our capabilities and submissions. We intend to continue developing and submitting proposals and to be available to attend on-site briefings. We have also engaged in discussions with private entities and academic institutions with the objective of possibly collaborating on one or more projects. Some of these could result in further customer agreements or other opportunities to grow our business.
Applied Energetics has recently been involved with the Tulsa Innovation Labs (TIL) and Oklahoma State University (OSU) in defining opportunities to participate in the US Department of Commerce, Economic Development Administration (EDA) Tech Hubs program request for proposals. Tech Hubs was authorized by the bipartisan CHIPS and Science Act, a key part of President Biden’s Investing in America agenda, which he signed into law in August 2022. In August of 2023, Applied Energetics was a founding consortium member of the Tech Hub proposal submitted under the title of Tulsa Hub for Equitable and Trustworthy Autonomy (THETA). On October 23, 2023, the US EDA named the THETA Tech Hub as part of the historic $500 million investment in economic competitiveness and national security. This designation makes the THETA consortium eligible for $70 million or more in federal funding to accelerate the advanced development of autonomous technologies. The submitted papers specify that THETA will emphasize the development of UAS and counter-UAS (CUAS), artificial intelligence (AI), and cybersecurity technologies. As such, Applied Energetics anticipates working closely with the Unmanned Systems Research Institute (USRI) and the Oklahoma Aerospace Institute for Research and Education (OAIRE), both at Oklahoma State University, to partner on the UAS and counter-UAS technology research supporting the THETA TechHub. The completed Phase 2 proposal was submitted to the EDA on February 29, 2024 requesting funding for implementation projects to help propel the region into a self-sustaining, globally competitive TechHub.
For fiscal year 2024, which started on October 1, 2023, the National Defense Authorization Act (NDAA) was delayed and finally approved on December 22, 2023 (HR 2670), but the Defense Appropriations bill was not approved at that time. The NDAA sets defense spending policies, and the appropriations bills fund government spending. This impacts all proposals under review by the Department of Defense. On September 30, 2023, President Biden signed a Continuing Resolution (CR), HR 5860, which extended the government operations through November 17, 2023, and he then signed three further CRs, including HR 6363 on November 11, 2023extending through January 19, 2024, HR 2872 extending through March 1, 2024, and HR 7463, extending through March 8, 2024, as to four of the 12 annual budget bills, and through March 22, 2024 for the remaining eight. On March 23, 2024, the Defense Appropriations Bill was passed and signed by President Biden which will ensure the US government is funded through September 30, 2024 and that new government contracts can be funded during the 2024 fiscal year.
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.
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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 during the past two fiscal years, we believe the interest in our technology and applications remains high, and we continue to submit proposals for all appropriate opportunities and share our vision of the disruptive capabilities of USP optical sources for both near- and far-term threats and dual-use commercial applications.
Through our analysis of the market, and in discussions with potential customers, we remain convinced that customers are becoming more receptive and interested in directed energy technologies. According to the US Department of Defense fiscal budgets from 2017 through 2023, its directed energy spending grew from approximately $500 million in 2017 to over $1.695 billion in 2023, an increase of nearly 240%. Market analysis and projections have estimated that this directed energy sector is anticipated to reach $17.8billion 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 or are approved to be integrated on fielded platforms in volumes to effect threat reduction, these DOD budgets for directed energy will grow exponentially larger to support the technology insertion. 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 on 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, both internal to AE and externally where possible to mitigate the risk. In some cases, we must comply with specific procurement requirements, which can limit the suppliers and subcontractors we may utilize.
Results of Operations
Comparison of Operations for the Three Months Ended March 31, 2024 and 2023:
| 2024 | 2023 | |||||||
| Revenue | $ | 134,235 | $ | 486,678 | ||||
| Cost of revenue | 274,432 | 141,272 | ||||||
| General and administrative | (2,316,899 | ) | (2,115,267 | ) | ||||
| Selling and marketing | (75,559 | ) | (108,890 | ) | ||||
| Research and development | (80,780 | ) | (59,980 | ) | ||||
| Interest income (expense) | 2,057 | (711 | ) | |||||
| Net loss | $ | (2,611,379 | ) | $ | (1,938,020 | ) | ||
Revenue
Revenue decreased by $352,443 to approximately $134,235 for the three months ended March 31, 2024 from $486,678 for the three months ended March 31, 2023. The decrease in revenue was primarily the result of a contract modification which resulted in a decrease in the contract’s price and an increase in the contract’s term. At the time of modification, the company recorded a catch-up adjustment as a reduction in revenue of approximately $700,000 during the three months ended March 31, 2024.
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Cost of Revenue
Cost of revenue increased by $133,160 to approximately $274,432 for the three months ended March 31, 2024 from $141,272 for the three months ended March 31, 2023. This increase was primarily attributable to an increase in the cost of materials, supplies and direct labor cost incurred in connection with the increased revenues.
General and Administrative
General and administrative expenses increased by $201,632 to approximately $2,316,899 for the three months ended March 31, 2024, compared to approximately $2,115,267 for the three months ended March 31, 2023, primarily due to an increase in salaries and employee benefits of approximately $650,000 mainly due to non-cash compensation, an increase in travel and meals of approximately $47,000, an increase in software and licenses of approximately $25,000, an increase in depreciation expense of approximately $19,000, partially offset by a decrease of approximately $252,000 in professional and consulting expenses and a change in other expense of $2,000.
Selling and Marketing
Selling and marketing expenses decreased by $33,331 to approximately $75,559 for the three months ended March 31, 2024, compared to approximately $108,890 for the three months ended March 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
Research and development expenses increased by $20,800 to approximately $80,780 for the three months ended March 31, 2024, compared to approximately $59,980 for the three months ended March 31, 2023, primarily due to an increase in labor cost associated with continued development of our USP laser technologies.
Net Loss
Our operations for the three months ended March 31, 2024, resulted in a net loss of approximately $2,611,379 an increase of approximately $673,359 compared to the approximately $1,938,020 net loss for the three months ended March 31, 2023, primarily due an increase in general and administrative expense and research and development expense partially offset by a decrease in selling and marketing expenses.
Liquidity and Capital Resources
The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. For the three months ended March 31, 2024, the company incurred a net loss of approximately $2,611,000, had negative cash flows from operations of approximately $1,542,000 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, 2023, our independent auditors stated that our financial statements were prepared assuming that we would continue as a going concern and that they have substantial doubt as to our ability to do so for one year from the date the financial statements are issued based on our recurring losses from operations and need to raise additional capital. The financial statements do not include any adjustments relating to the recoverability of assets and the amount or classification of liabilities that might be necessary should the company be unable to continue as a going concern.
At March 31, 2024, the company had total current assets of $1,667,661 and total current liabilities of $2,154,058 resulting in working capital of ($486,396). At March 31, 2024, we had $1,007,840 of cash and cash equivalents, a decrease of $311,686 from $1,319,526 at December 31, 2023.
During the first three months of 2024, the net cash outflow from operating activities was $1,542,327. This amount was comprised primarily of our net loss of $2,611,379, offset by non-cash stock-based compensation expense of $955,730, depreciation and amortization of $52,439, amortization of ROU assets of $47,124 and amortization of prepaid assets of $51,855, and cash used from changes in assets and liabilities of $38,096 from the increase in accounts receivable of $251,095 and accrued expenses and compensation of $36,607 off set by the net decrease in prepaids and deposits of $57,339 operating lease liabilities of $35,529, deferred revenue of $169,582 and a decrease in accounts payable of $63,348.
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During the first three months of 2024, the net cash inflow from financing activities was $1,230,641. This amount consisted of $1,221,600 in proceeds from stock subscriptions and $16,560 from the exercise of options and warrants, which were offset by $7,519 of tax withholdings related to the share settlement of RSUs.
Based on the company’s current business plan, we believe our cash balance as of the date of this report, along with revenue from our government contracts, will be sufficient to meet the company’s anticipated cash requirements for the near term. However, we cannot be certain that the current business plan will be achievable.
The company’s existence depends upon management’s ability to develop profitable operations. Management is devoting substantially all of its efforts to developing its business and raising capital, as needed, and cannot be certain that these efforts will be successful. Management’s business development efforts may not result in profitable operations. To fund its research and development and marketing efforts, the company’s management continues to explore possible financing opportunities through discussions with investment bankers and private investors. The company may not be successful in its effort to secure additional financing on terms it considers favorable. The accompanying consolidated financial statements do not include any adjustments that might result should the company be unable to continue as a going concern.
On May 10, 2024, the company completed the placement of 1,896,182 shares of its common stock, par value, $0.001 per share, in a private sale to individual purchasers at a price of $2.20 per share, for aggregate proceeds in the amount of $4,171,600. All of the purchasers are accredited, sophisticated investors, and the issuance of the shares was not in connection with any public offering in accordance with Section 4(a)(2) of the Securities Act of 1933.
ITEM 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2024. Based on that evaluation, our Principal Executive Officer has concluded that our disclosure controls and procedures as of March 31, 2024, are not effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.
Changes in Internal Controls Over Financial Reporting
There was no change in our internal controls over financial reporting that occurred during the period covered by this report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
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PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On January 15, 2021, the company filed a complaint in the United States District Court, Southern District of New York, against Gusrae, Kaplan & Nusbaum and Ryan Whalen for malpractice and breach of New York Rules of Professional Conduct by both parties as former counsel to the company. On May 28, 2021, Gusrae, Kaplan & Nusbaum and Mr. Whalen filed a motion to dismiss the complaint. On June 25, 2021, the company filed an opposition to the motion. On July 13, 2021, Gusrae Kaplan & Nusbaum and Mr.Whalen filed their reply brief. On March 30, 2022, United States Magistrate Judge Debra Freeman signed an order denying the motion of GKN and Mr. Whalen to dismiss the company’s claim for malpractice and for rescission of the shares-for-fees agreement under which GKN and Whalen received 1,242,710 shares of the company’s common stock. The motion was partially granted as to the separate claim for violation of NYRPC 1.7 and 1.8 because the court found that it was duplicative of the malpractice claim. The parties have completed discovery, and the court has approved a summary judgment briefing schedule proposed by the parties. No trial date has been set.
On July 26, 2023, the company filed a complaint in the Superior Court of the State of Delaware against Gusrae Kaplan Nusbaum PLLC and Ryan Whalen, for malicious prosecution of a federal securities fraud lawsuit which was filed by these defendants against the company and certain of its directors, attorneys and their law firms and an outside consultant, in July 2019 in the United States District Court for the Southern District of New York. The complaint filed by the company alleges that the claims by these defendants against it were frivolous and prosecuted for the improper purpose of hindering the company’s prosecution of a then pending case against George Farley, the company’s former CEO, which was later settled. The complaint further alleges that the defendants prosecuted their claim with malice causing the company damages valued in excess of $40 million. On September 11, 2023, Gusrae, Kaplan & Nusbaum and Mr. Whalen filed a motion to dismiss the complaint. On October 25, 2023, the company filed an opposition to the motion. The court heard oral argument on the motion on January 19, 2024, and took the motion under submission. On April 16, 2024, the court granted the motion on the grounds of lack of personal jurisdiction over the defendants. The company filed a Notice of Appeal with the Supreme Court of the State of Delaware on May 2, 2024.
As with any litigation, the company cannot predict the outcome with certainty, but the company expects to provide further updates on the status of the litigation as circumstances warrant.
The company may, from time to time, be involved in legal proceedings arising from the normal course of business.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The company has reported all information pertaining to issuances of equity securities sold during the period covered by this Quarterly Report on Form 10-Q in previously filed report on Forms 10-K, 10-Q and 8-K.
ITEM 5. OTHER INFORMATION
The
Rule 10b5-1 Plan previously established by
ITEM 6. EXHIBITS
| EXHIBIT NUMBER |
DESCRIPTION | |
| 23 | Consent of RBSM LLP * | |
| 31.1 | Certification of Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a). | |
| 31.2 | Certification of Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a). | |
| 32.1 | Principal Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 32.2 | Principal Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 101.INS | Inline XBRL Instance Document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
| * | Incorporated by reference to Exhibit 23.1 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| APPLIED ENERGETICS, INC. | ||
| By: | /s/ Gregory J. Quarles | |
| Gregory J. Quarles, President and Chief Executive Officer | ||
| By: | /s/ Christopher Donaghey | |
| Christopher Donaghey, Chief Financial Officer and Chief Operating Officer | ||
| Date: May 13, 2024 | ||
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Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE
PURSUANT TO RULE 15d-14
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Gregory J Quarles, the President and Chief Executive Officer of Applied Energetics, Inc., certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Applied Energetics Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| /s/ Gregory J. Quarles | |
| Gregory J. Quarles | |
| President and Chief Executive Officer |
Date: May 13, 2024
Exhibit 31.2
CERTIFICATION OF PRINCIPAL
ACCOUNTING OFFICER
PURSUANT TO RULE 15d-14
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Christopher Donaghey, the Chief Financial Officer of Applied Energetics, Inc., certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Applied Energetics Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| /s/ Christopher Donaghey | |
| Christopher Donaghey | |
| Chief Financial Officer |
Date: May 13, 2024
Exhibit 32.1
CERTIFICATION OF
PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the filing by Applied Energetics, Inc. (the “company”) of its Quarterly Report on Form 10-Q for the three months ended March 31, 2024 (the “Report”) I, Gregory J Quarles, President and Chief Executive Officer of the company, certify pursuant to 18 U.S.C. Section. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:
| (i) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (ii) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the company. |
This certificate is being made for the exclusive purpose of compliance by the chief executive officer of Applied Energetics, Inc. with the requirements of Section 906 of the Sarbanes-Oxley Act of 2002 and may not be used for any other purposes. A signed original of this written statement required by Section 906 has been provided to Applied Energetics, Inc. and will be retained by Applied Energetics, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
| /s/ Gregory J. Quarles | |
| Gregory J. Quarles | |
| President and Chief Executive Officer |
Date: May 13, 2024
Exhibit 32.2
CERTIFICATION OF PRINCIPAL
ACCOUNTING OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the filing by Applied Energetics, Inc. (the “company”) of its Quarterly Report on Form 10-Q for the three months ended March 31, 2024 (the “Report”) I, Christopher Donaghey, Chief Financial Officer of the company, certify pursuant to 18 U.S.C. Section. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:
| (i) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (ii) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the company. |
This certificate is being made for the exclusive purpose of compliance by the chief executive officer of Applied Energetics, Inc. with the requirements of Section 906 of the Sarbanes-Oxley Act of 2002 and may not be used for any other purposes. A signed original of this written statement required by Section 906 has been provided to Applied Energetics, Inc. and will be retained by Applied Energetics, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
| /s/ Christopher Donaghey | |
| Christopher Donaghey | |
| Chief Financial Officer |
Date: May 13, 2024
Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) - USD ($) |
Mar. 31, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Common stock, par value (in Dollars per share) | $ 0.001 | $ 0.001 |
| Common stock, shares authorized | 500,000,000 | 500,000,000 |
| Common stock, shares issued | 211,370,639 | 211,236,688 |
| Common stock, shares outstanding | 211,370,639 | 211,236,688 |
| Series A convertible preferred stock | ||
| Series A convertible preferred stock, par value (in Dollars per share) | $ 0.001 | $ 0.001 |
| Series A convertible preferred stock, shares authorized | 2,000,000 | 2,000,000 |
| Series A convertible preferred stock, shares issued | 13,602 | 13,602 |
| Series A convertible preferred stock, shares outstanding | 13,602 | 13,602 |
| Series A convertible preferred stock, liquidation preference (in Dollars) | $ 340,050 | $ 340,050 |
Condensed Consolidated Statements Of Operations (Unaudited) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
| Income Statement [Abstract] | ||
| Revenue | $ 134,235 | $ 486,678 |
| Cost of revenue | 274,432 | 141,272 |
| Gross profit | (140,197) | 345,406 |
| Operating expenses | ||
| General and administrative | 2,316,899 | 2,115,267 |
| Selling and marketing | 75,559 | 108,890 |
| Research and development | 80,780 | 59,980 |
| Total operating expenses | 2,473,239 | 2,284,137 |
| Operating loss | (2,613,436) | (1,938,731) |
| Other income/(expense) | ||
| Other income | 2,057 | 711 |
| Total other income/(expense) | 2,057 | 711 |
| Loss before provision for income taxes | (2,611,379) | (1,938,020) |
| Provision for income taxes | ||
| Net loss | (2,611,379) | (1,938,020) |
| Preferred stock dividends | (8,501) | (8,501) |
| Net loss attributable to common stockholders | $ (2,619,880) | $ (1,946,521) |
| Net loss attributable to common stockholders per common share - basic (in Dollars per share) | $ (0.01) | $ (0.01) |
| Weighted average number of common shares outstanding, basic (in Shares) | 211,323,085 | 210,976,434 |
Condensed Consolidated Statements Of Operations (Unaudited) (Parentheticals) - $ / shares |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
| Income Statement [Abstract] | ||
| Net loss attributable to common stockholders per common share - diluted | $ (0.01) | $ (0.01) |
| Weighted average number of common shares outstanding, diluted | 211,323,085 | 210,976,434 |
Organization of Business, Going Concern and Summary of Significant Accounting Policies |
3 Months Ended |
|---|---|
Mar. 31, 2024 | |
| Organization of Business, Going Concern and Summary of Significant Accounting Policies [Abstract] | |
| ORGANIZATION OF BUSINESS, GOING CONCERN AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 – ORGANIZATION OF BUSINESS, GOING CONCERN AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The unaudited condensed consolidated financial statements include the accounts of Applied Energetics, Inc. and its wholly owned subsidiary North Star Power Engineering, Inc. (“North Star”) (collectively, “company,” “Applied Energetics,” “we,” “our” or “us”). All intercompany balances and transactions have been eliminated.
The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information, the instructions for Form 10-Q and the rules and regulations of the SEC. Accordingly, since they are interim statements, the accompanying unaudited condensed consolidated financial statements do not include all of the information and notes required by GAAP for annual financial statements, but reflect all adjustments consisting of normal, recurring adjustments, that are necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. Interim results are not necessarily indicative of the results that may be expected for any future periods. The December 31, 2023, balance sheet information was derived from the audited financial statements as of that date. The interim unaudited condensed consolidated financial statements should be read in conjunction with the company’s audited consolidated financial statements contained in our Annual Report on Form 10-K.
Going Concern
The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
For the three months ended March 31, 2024, the company incurred a net loss of $2,611,379, had negative cash flows from operations of $1,542,327 and may incur additional future losses due to limited contract activity. At March 31, 2024, the company had total current assets of $1,667,661 and total current liabilities of $2,154,058, resulting in working capital deficit of $486,397. At March 31, 2024, the company had cash of $1,007,840.
Based on the company’s current business plan, it believes its cash balance as of the date of this filing, together with anticipated revenues from government contracts, will be sufficient to meet its anticipated cash requirements for the near term. However, there can be no assurance that the current business plan will be achievable. Such conditions raise substantial doubts about the company’s ability to continue as a going concern for one year from the date the financial statements are issued.
The company’s existence depends upon management’s ability to develop profitable operations. Management is devoting substantially all of its efforts to developing its business and raising capital and there can be no assurance that management’s efforts will result in profitable operations or enable it to overcome future liquidity concerns. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability of assets, the amount or classification of liabilities or otherwise that might be necessary should the company be unable to continue as a going concern.
Trade conditions, such as exacerbated supplier shutdowns and delays, contribute to this uncertainty. Additionally, Russia’s military action in Ukraine, war in the Middle East, and related economic sanctions around the globe, could impact the company’s ability to source necessary supplies and equipment which could materially and adversely affect its ability to continue as a going concern. In addition, the company’s ability to continue as a going concern may depend on its ability to raise capital, which may be impacted by these events, including as a result of increased market volatility, or decreased market liquidity. This may result in third-party financing being unavailable on terms acceptable to the company or at all. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
To further improve its liquidity position, the company’s management continues to explore additional equity financing through discussions with investment bankers and private investors. The company may be unsuccessful in its effort to secure additional equity financing. The financial statements do not include any adjustments relating to the recoverability of assets and the amount or classification of liabilities that might be necessary should the company be unable to continue as a going concern.
Applied Energetics, Inc. is a corporation organized and existing under the laws of the State of Delaware. Our headquarters are located at 9070 S. Rita Road Suite 1500, Tucson, Arizona, 85747, including office and laboratory space, and our telephone number is (520) 628-7415.
Use of Estimates
The preparation of unaudited condensed financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and accompanying notes. Management bases its assumptions on historical experiences and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. In addition, management considers the basis and methodology used in developing and selecting these estimates, the trends in and amounts of these estimates, specific matters affecting the amount of and changes in these estimates, and any other matters related to these estimates, including significant issues concerning accounting principles and financial statement presentation. Such estimates and assumptions could change in the future as more information becomes known which could impact the amounts reported and disclosed herein. Significant estimates include revenue recognition, carrying amounts of long-lived assets, valuation assumptions for share-based payments, evaluation of debt modification accounting, effective borrowing rate determinations, analysis of fair value transferred upon debt extinguishment, valuation and calculation of measurements of income tax assets and liabilities.
Net Loss Attributable to Common Stockholders
Basic loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period before giving effect to stock options, stock warrants, restricted stock units and convertible securities outstanding, which are considered to be dilutive common stock equivalents. Diluted net loss per common share is calculated based on the weighted average number of common and potentially dilutive shares outstanding during the period after giving effect to dilutive common stock equivalents. Contingently issuable shares are included in the computation of basic loss per share when issuance of the shares is no longer contingent. The number of shares underlying warrants, options, restricted stock units and our Series A Convertible Preferred Stock, which were not included in the computation of earnings per share because the effect was antidilutive, was 31,347,519 and 28,757,351 for the three months ended March 31, 2024 and 2023, respectively.
Significant Concentrations and Risks
We maintain cash balances at a commercial bank, and, at times, balances exceed FDIC limits. As of March 31, 2024, $505,111 was uninsured. |
New Accounting Standards |
3 Months Ended |
|---|---|
Mar. 31, 2024 | |
| New Accounting Standards [Abstract] | |
| NEW ACCOUNTING STANDARDS | NOTE 2 – NEW ACCOUNTING STANDARDS
The company has reviewed all issued accounting pronouncements. The company does not expect the adoption of any pronouncements to have an impact on its results of operations or financial position. |
Notes Payable |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Payable [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NOTES PAYABLE | NOTE 3 – NOTES PAYABLE
Premium Financing
On March 12, 2024, the company entered into an agreement with Oakwood D&O Insurance to provide financing in the amount of $189,302 for the insurance premium associated with two D&O policies. Both policies commenced March 12, 2024, and provided coverage for the next 15 months, expiring June 11, 2025. The loan bears interest at a fixed rate of 9.50% per annum and required the company to prepay $41,057 and appears on the balance sheet as a current asset. On April 12, 2024, the company commenced monthly principal and interest payments of $15,775 which was the first payment of twelve remaining months due of $189,302, the last payment of which is scheduled to be made on March 12, 2025. As of March 31, 2024, the outstanding balance on the note was $189,302 and was recorded as notes payable, a currently liability, in the company’s unaudited condensed consolidated balance sheet.
Notes Payable Reconciliation
The following reconciles notes payable as of March 31, 2024, and December 31, 2023:
Future principal payments for the company’s Notes as of March 31, 2024, are as follows:
The company’s note payable balance of $189,302 is due within the next twelve months, in accordance with the terms of note payable. |
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Due to Related Parties |
3 Months Ended |
|---|---|
Mar. 31, 2024 | |
| Due to Related Parties [Abstract] | |
| DUE TO RELATED PARTIES | NOTE 4 – DUE TO RELATED PARTIES
It has come to the board’s attention that on July 31, 2018, our now deceased CEO deposited $50,000 into the company’s account. Although it has been suggested that the funds may have been intended for use toward Mr. Dearmin’s healthcare, the board does not know for certain what the purpose of the funds were or the nature of any intended investment. Accordingly, the board is investigating the appropriate disposition of the funds which will likely be to the estate of Mr. Dearmin. Until such a determination is made, the board does not intend to use these funds for any corporate purpose. For reporting purposes, the company has treated the deposit as a due to related party. |
Stockholders’ Equity |
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| Stockholders’ Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| STOCKHOLDERS’ EQUITY | NOTE 5 – STOCKHOLDERS’ EQUITY
Authorized Capital Stock
During the three months ended March 31, 2023, the company issued 100,000 shares of common stock upon the exercise of 100,000 options at an exercise price of $0.07 a share. As a result, the company received $7,000 in cash proceeds as part of the transaction.
During the three months ended March 31, 2023, the company issued 75,000 shares of common stock upon the exercise of 75,000 options at an exercise price of $0.13 a share. As a result, the company received $9,750 in cash proceeds as part of the transaction.
During the three months ended March 31, 2023, the company issued the remaining 9,584 shares of common stock pursuant to a restricted stock agreement dated May 2021.
During the three months ended March 31, 2024, the company issued 30,000 shares of common stock upon the exercise of 30,000 options at an exercise price of $0.07 a share. As a result, the company received $2,100 in cash proceeds as part of the transaction.
During the three months ended March 31, 2024, the company issued 30,000 shares of common stock upon the exercise of 30,000 options at an exercise price of $0.35 a share. As a result, the company received $10,500 in cash proceeds as part of the transaction.
During the three months ended March 31, 2024, the company issued 66,000 shares of common stock upon exercise of warrants at an exercise price of $ 0.06 per share. The company received $3,960 in proceeds from the exercise of such options.
During the three months ended March 31, 2024, restricted stock units covering 11,666 shares of the company’s common stock vested. The company issued 11,666 and withheld 3,715 shares of common stock from the holder pursuant to their restricted stock unit agreements to cover its tax withholding obligation of $7,519.
Commencing January 29, 2024, the company is conducting an offering of up to one million shares of its common stock, par value, $0.001 per share. To date, the company has received subscriptions in the amount of $1,221,600 but has not yet conducted a closing of the offering.
Preferred Stock
As of March 31, 2024, and December 31, 2023, there were 13,602 shares of Series A Redeemable Convertible Preferred Stock (the “Series A Preferred Stock”) issued and outstanding, respectively. The company has not paid the dividends commencing with the quarterly dividend due August 1, 2013. Dividend arrearages as of March 31, 2024, including previously accrued dividends of $48,079 included in our balance sheet total approximately $371,127. Our Board of Directors suspended the declaration of the dividend, commencing with the dividend payable as of February 1, 2015, since we did not have a surplus (as such term is defined in the Delaware general corporation Law) as of December 31, 2014, until such time as we have a surplus or net profits for a fiscal year.
Our Series A Preferred Stock has a liquidation preference of $25.00 per Share. The Series A Preferred Stock bears dividends at the rate of 6.5% of the liquidation preference per share per annum, which accrues from the date of issuance, and is payable quarterly. Dividends may be paid in: (i) cash, (ii) shares of our common stock (valued for such purpose at 95% of the weighted average of the last sales prices of our common stock for each of the trading days in the ten trading day period ending on the third trading day prior to the applicable dividend payment date), provided that the issuance and/or resale of all such shares of our common stock are then covered by an effective registration statement and the company’s common stock is listed on a U.S. national securities exchange or the Nasdaq Stock Market at the time of issuance or (iii) any combination of the foregoing. If the company fails to make a dividend payment within five business days following a dividend payment date, the dividend rate shall immediately and automatically increase by 1% from 6.5% of the liquidation preference per offered share of Series A preferred stock to 7.5% of such liquidation preference. If a payment default shall occur on two consecutive dividend payment dates, the dividend rate shall immediately and automatically increase to 10% of the liquidation preference for as long as such payment default continues and shall immediately and automatically return to the Initial dividend rate at such time as the payment default is no longer continuing.
Each share of Series A Preferred Stock is convertible at any time at the option of the holder into a number of shares of common stock equal to the liquidation preference (plus any unpaid dividends for periods prior to the dividend payment date immediately preceding the date of conversion by the holder) divided by the conversion price (initially $12.00 per share, subject to adjustment in the event of a stock dividend or split, reorganization, recapitalization or similar event). If the closing sale price of the common stock is greater than 140% of the conversion price on 20 out of 30 trading days, the company may redeem the Series A Preferred Stock in whole or in part at any time through October 31, 2010, upon at least 30 days’ notice, at a redemption price, payable in cash, equal to 100% of the liquidation preference of the shares to be redeemed, plus unpaid dividends thereon to, but excluding, the redemption date, subject to certain conditions. In addition, beginning November 1, 2010, the company may redeem the Series A Preferred Stock in whole or in part, upon at least 30 days’ notice, at a redemption price, payable in cash, equal to 100% of the liquidation preference of the Series A Preferred Stock to be redeemed, plus unpaid dividends thereon to, but excluding, the redemption date, under certain conditions.
If a change of control occurs, each holder of shares of Series A Convertible Preferred Stock that are outstanding immediately prior to the change of control shall have the right to require the corporation to purchase, out of legally available funds, any outstanding shares of Series A Convertible Preferred Stock at the defined purchase price. The purchase price is defined as: per share of Preferred Stock, 101% of the liquidation preference thereof, plus all unpaid and accumulated dividends, if any, to the date of purchase thereof. The purchase price is payable, at the corporation’s option, (x) in cash, (y) in shares of the common stock at a discount of 5% from the fair market value of Common Stock on the Purchase Date (i.e. valued at a 95% discount of the Common Stock on the Purchase Date), or (z) any combination thereof.
If the Corporation pays all or a portion of the Purchase Price in Common Stock, no fractional shares of Common Stock will be issued; instead, the company will round the applicable number of shares of Common Stock up to the nearest whole number of shares; provided that the Corporation may pay the Purchase Price (or a portion thereof), whether in cash or in shares of Common Stock, only if the Corporation has funds legally available for such payment and may pay the Purchase Price (or a portion thereof) in shares of its Common Stock only if (i) the Common Stock is listed on a U.S. national securities exchange or the Nasdaq Stock Market at the time of issuance and (ii) a shelf registration statement covering the issuance by the Corporation and/or resales of the Common Stock issuable as payment of the Purchase Price is effective on the Payment Date unless such shares are eligible for immediate resale in the public market by non-affiliates of the Corporation.
Share-Based Payments
Effective November 12, 2018, the Board of Directors of Applied Energetics, Inc. adopted the 2018 Incentive Stock Plan. The plan provides for the allocation and issuance of stock, restricted stock purchase offers and options (both incentive stock options and non-qualified stock options) to officers, directors, employees and consultants of the company. The board reserved a total of 50,000,000 shares for possible issuance under the plan.
We have, from time to time, also granted non-plan options and restricted stock units to certain officers, directors, employees and consultants. Total stock-based compensation expense for grants to officers, employees and consultants was $955,730 and $779,272 for the three months ended March 31, 2024, and 2023, respectively, which was charged to general and administrative expense.
The $955,730 stock-based compensation for the three months ended March 31, 2024, was comprised of $493,740 option expense, $461,990 expense from the vesting of the restricted stock.
The company recognized no related income tax benefit because our deferred tax assets are fully offset by a valuation allowance.
As of March 31, 2024, the company has $8,454,252 of unrecognized compensation cost related to unvested stock options granted and outstanding, net of estimated forfeitures. The cost is expected to be recognized on a weighted average basis over a period of approximately six years.
The following table summarizes the activity of our stock options for the three months ended March 31, 2024:
We determine the fair value of option grant share-based awards at their grant date, using a Black-Scholes- Merton Option- Pricing Model applying the assumptions in the following table:
The fair value of restricted stock and restricted stock units was estimated using the closing price of our common stock on the date of award and fully recognized upon vesting. Restricted stock activity for the three months ended March 31, 2024, was as follows:
As of March 31, 2024, and December 31, 2023, there was $4,719,593 and $5,181,584, respectively in unrecognized stock- based compensation related to unvested restricted stock agreements, net of estimated forfeitures.
As of March 31, 2024 and December 31, 2023, the company recorded $0 and $0, respectively, in unrecognized stock- based compensation related to a lockup agreement on 5,000,000 shares of common stock in the acquisition of assets of AOS valued at $0.4014 per share, representing the closing price on the date of the contract which is amortized over 36 months, of which, $0 and $0 was amortized for the three months ended March 31, 2024 and 2023, respectively. Warrant stock activity for the three months ended March 31, 2024, was as follows:
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Revenue Recognition |
3 Months Ended | ||||||||||||||||||||||||||||||||||||
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Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||
| Revenue Recognition [Abstract] | |||||||||||||||||||||||||||||||||||||
| REVENUE RECOGNITION | NOTE 6 – REVENUE RECOGNITION
The company derives revenue from technical research detailing the findings of its investigations to its customers under contract for specific projects. Under Topic 606, revenue is recognized when control of promised goods and services is transferred to customers, and the amount of revenue recognized reflects the consideration to which an entity expects to be entitled in exchange for the goods and services transferred. A performance obligation is a contractual promise to transfer a distinct good or service to the customer and is the unit of account under Topic 606. The transaction price of a contract is allocated to distinct performance obligations and recognized as revenue when or as the performance obligations are satisfied. The company’s contracts require significant integrated services and are accounted for as a single performance obligation, and revenue is recognized by the company over the contract term at a fixed contract price.
During the three months ended March 31, 2024, the Company modified its contract with a customer for changes in the contract specifications and requirements. The modification was for services that are not distinct from the existing contract due to the significant integration of services performed. The modification was accounted for as if it was part of the existing contract and a cumulative catch-up adjustment was recorded for the three months ended March 31, 2024.
Contract modifications are routine in the performance of our contracts. Contracts are often modified to account for changes in the contract specifications or requirements. In most instances, contract modifications are for goods or services that are not distinct, and, therefore, are accounted for as part of the existing contract.
The following table summarizes the company’s accounts receivable, net,
Concentrations
During the three months ended March 31, 2024, the company earned revenue from three contracts with three separate customers. The three customers accounted for a total of $134,235 in revenue or 100% of revenue recognized during the period. As of March 31, 2024, the company has $316,697 or 100% of accounts receivable recorded as current assets on the balance sheet related to these customers. During the three months ended March 31, 2023, the company earned revenue from one contract with one customer. The customer accounted for $486,678 or 100% of revenue recognized during the period. As of March 31, 2023, the company had $324,452 of accounts receivable recorded as current assets on the balance sheet related to this customer. |
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Commitments and Contingencies |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| COMMITMENTS AND CONTINGENCIES | NOTE 7– COMMITMENTS AND CONTINGENCIES
Operating Leases
In March 2021, the company signed a five-year lease for a 13,000 square foot laboratory/office space in Tucson. The initial base rent was $6.7626 per rentable square foot for year one and escalated to $ 9.2009 per rentable square foot in year two. It is to further escalate to $11.4806 per rentable square foot in year three, $13.1740 per rentable square foot in year four and $14.9306 per rentable square foot in year five, in addition to certain operating expenses and taxes.
On June 7, 2023, the company entered into an amendment to extend the term of the original lease from April 26, 2026 to July31, 2028. Included in the lease amendment is extension space commencing on August 1, 2023. As of August 1, 2023 the Company has secured additional square footage in the amount of 9,805 rentable square feet (8,375 usable square feet). The initial base rent for expansion space was $9.10 per rentable square foot for year one, and escalated to $10.20 in year two, $11.30 in year three, $12.40 in year four and $13.50 in year five, plus certain operating expenses and taxes.
The company incurred lease expense for its operating leases of $72,272 which was included in general and administrative expenses in the statements of operation for the period ended March 31, 2024. During the three months ended March 31, 2024, the company made cash lease payments in the amount of $60,677.
At March 31, 2024, we had approximately $130,206 in future minimum lease payments due for the nine months ended. The below table presents the future minimum lease payments due reconciled to lease liabilities.
Guarantees
The company agrees to indemnify its officers and directors for certain events or occurrences arising as a result of the officers or directors serving in such capacity. The maximum amount of future payments that the company could be required to make under these indemnification agreements is unlimited. However, the company maintains a director’s and officer’s liability insurance policy that limits its exposure and enables it to recover a portion of any future amounts paid. As a result, it believes the estimated fair value of these indemnification agreements is minimal because of its insurance coverage, and it has not recognized any liabilities for these agreements as of March 31, 2024 and 2023.
Litigation
On January 15, 2021, the company filed a complaint in the United States District Court, Southern District of New York, against Gusrae, Kaplan & Nusbaum and Ryan Whalen for malpractice and breach of New York Rules of Professional Conduct by both parties as former counsel to the company. On May 28, 2021, Gusrae, Kaplan & Nusbaum and Mr. Whalen filed a motion to dismiss the complaint. On June 25, 2021, the company filed an opposition to the motion. On July 13, 2021, Gusrae Kaplan & Nusbaum and Mr.Whalen filed their reply brief. On March 30, 2022, United States Magistrate Judge Debra Freeman signed an order denying the motion of GKN and Mr. Whalen to dismiss the company’s claim for malpractice and for rescission of the shares-for-fees agreement under which GKN and Whalen received 1,242,710 shares of the company’s common stock. The motion was partially granted as to the separate claim for violation of NYRPC 1.7 and 1.8 because the court found that it was duplicative of the malpractice claim. The parties have completed discovery, and the court has approved a summary judgment briefing schedule proposed by the parties. No trial date has been set.
On July 26, 2023, the company filed a complaint in the Superior Court of the State of Delaware against Gusrae Kaplan Nusbaum PLLC and Ryan Whalen, for malicious prosecution of a federal securities fraud lawsuit which was filed by these defendants against the company and certain of its directors, attorneys and their law firms and an outside consultant, in July 2019 in the United States District Court for the Southern District of New York. The complaint filed by the company alleges that the claims by these defendants against it were frivolous and prosecuted for the improper purpose of hindering the company’s prosecution of a then pending case against George Farley, the company’s former CEO, which was later settled. The complaint further alleges that the defendants prosecuted their claim with malice causing the company damages valued in excess of $40 million. On September 11, 2023, Gusrae, Kaplan & Nusbaum and Mr. Whalen filed a motion to dismiss the complaint. On October 25, 2023, the company filed an opposition to the motion. The court heard oral argument on the motion on January 19, 2024, and took the motion under submission. On April 16, 2024, the court granted the motion on the grounds of lack of personal jurisdiction over the defendants. The company filed a Notice of Appeal with the Supreme Court of the State of Delaware on May 2, 2024.
As with any litigation, the company cannot predict the outcome with certainty, but the company expects to provide further updates on the status of the litigation as circumstances warrant.
The company may, from time to time, be involved in legal proceedings arising from the normal course of business.
Related Party
In January 2023, the company made a $25,000 tax-deductible donation to Silicon Valley Defense Group (SVDG), a 501(c)(3) organization of which Christopher Donaghey, our Chief Financial and Operating Officer, is a founder and member of the Board of Directors. As its objective, SVDG “seeks to align and connect the people, capital, and ideas that will ensure allied democracies retain a durable techno-security advantage.” |
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Subsequent Events |
3 Months Ended |
|---|---|
Mar. 31, 2024 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | NOTE 8 – SUBSEQUENT EVENTS
The company’s management has evaluated subsequent events occurring after March 31, 2024, the date of our most recent balance sheet, through the date our financial statements were issued.
Subsequent to the year period ended March 31, 2024, the company issued 10,000 shares of common stock upon the exercise of options at an exercise price of $0.07 per share. The company received $700 in cash proceeds, minus required withholding, from the exercise of such options.
Subsequent to the year period ended March 31, 2024, the company issued 10,000 shares of common stock upon the exercise of options at an exercise price of $0.35 per share. The company received $3,500 in cash proceeds, minus required withholding, from the exercise of such options.
Subsequent to the year period ended March 31, 2024, the company issued 16,500 shares of common stock upon exercise of warrants at an exercise price of $0.06 per share. The company received $990 in proceeds from the exercise of such options.
On May 10, 2024, the company completed the placement of 1,896,182 shares of its common stock, par value, $0.001 per share, in a private sale to individual purchasers at a price of $2.20 per share, for aggregate proceeds in the amount of $4,171,600. All of the purchasers are accredited, sophisticated investors, and the issuance of the shares was not in connection with any public offering in accordance with Section 4(a)(2) of the Securities Act of 1933. |
Pay vs Performance Disclosure - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
| Pay vs Performance Disclosure | ||
| Net Income (Loss) | $ (2,611,379) | $ (1,938,020) |
Insider Trading Arrangements |
3 Months Ended |
|---|---|
Mar. 31, 2024 | |
| Trading Arrangements, by Individual | |
| Rule 10b5-1 Arrangement Adopted | false |
| Non-Rule 10b5-1 Arrangement Adopted | false |
| Rule 10b5-1 Arrangement Terminated | false |
| Non-Rule 10b5-1 Arrangement Terminated | false |
| Adamczyk Family 2021 LLC [Member] | |
| Trading Arrangements, by Individual | |
| Material Terms of Trading Arrangement | The Rule 10b5-1 Plan previously established by Stephen McCahon, our Chief Science Officer, expired in accordance with its own terms as of March 14, 2024. No trades were executed under this plan. |
| Name | Stephen McCahon |
| Title | Chief Science Officer |
| Stephen McCahon [Member] | |
| Trading Arrangements, by Individual | |
| Expiration Date | March 14, 2024 |
Accounting Policies, by Policy (Policies) |
3 Months Ended |
|---|---|
Mar. 31, 2024 | |
| Organization of Business, Going Concern and Summary of Significant Accounting Policies [Abstract] | |
| Basis of Presentation | Basis of Presentation The unaudited condensed consolidated financial statements include the accounts of Applied Energetics, Inc. and its wholly owned subsidiary North Star Power Engineering, Inc. (“North Star”) (collectively, “company,” “Applied Energetics,” “we,” “our” or “us”). All intercompany balances and transactions have been eliminated. The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information, the instructions for Form 10-Q and the rules and regulations of the SEC. Accordingly, since they are interim statements, the accompanying unaudited condensed consolidated financial statements do not include all of the information and notes required by GAAP for annual financial statements, but reflect all adjustments consisting of normal, recurring adjustments, that are necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. Interim results are not necessarily indicative of the results that may be expected for any future periods. The December 31, 2023, balance sheet information was derived from the audited financial statements as of that date. The interim unaudited condensed consolidated financial statements should be read in conjunction with the company’s audited consolidated financial statements contained in our Annual Report on Form 10-K. |
| Going Concern | Going Concern The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. For the three months ended March 31, 2024, the company incurred a net loss of $2,611,379, had negative cash flows from operations of $1,542,327 and may incur additional future losses due to limited contract activity. At March 31, 2024, the company had total current assets of $1,667,661 and total current liabilities of $2,154,058, resulting in working capital deficit of $486,397. At March 31, 2024, the company had cash of $1,007,840. Based on the company’s current business plan, it believes its cash balance as of the date of this filing, together with anticipated revenues from government contracts, will be sufficient to meet its anticipated cash requirements for the near term. However, there can be no assurance that the current business plan will be achievable. Such conditions raise substantial doubts about the company’s ability to continue as a going concern for one year from the date the financial statements are issued. The company’s existence depends upon management’s ability to develop profitable operations. Management is devoting substantially all of its efforts to developing its business and raising capital and there can be no assurance that management’s efforts will result in profitable operations or enable it to overcome future liquidity concerns. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability of assets, the amount or classification of liabilities or otherwise that might be necessary should the company be unable to continue as a going concern.
Trade conditions, such as exacerbated supplier shutdowns and delays, contribute to this uncertainty. Additionally, Russia’s military action in Ukraine, war in the Middle East, and related economic sanctions around the globe, could impact the company’s ability to source necessary supplies and equipment which could materially and adversely affect its ability to continue as a going concern. In addition, the company’s ability to continue as a going concern may depend on its ability to raise capital, which may be impacted by these events, including as a result of increased market volatility, or decreased market liquidity. This may result in third-party financing being unavailable on terms acceptable to the company or at all. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. To further improve its liquidity position, the company’s management continues to explore additional equity financing through discussions with investment bankers and private investors. The company may be unsuccessful in its effort to secure additional equity financing. The financial statements do not include any adjustments relating to the recoverability of assets and the amount or classification of liabilities that might be necessary should the company be unable to continue as a going concern. Applied Energetics, Inc. is a corporation organized and existing under the laws of the State of Delaware. Our headquarters are located at 9070 S. Rita Road Suite 1500, Tucson, Arizona, 85747, including office and laboratory space, and our telephone number is (520) 628-7415. |
| Use of Estimates | Use of Estimates The preparation of unaudited condensed financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and accompanying notes. Management bases its assumptions on historical experiences and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. In addition, management considers the basis and methodology used in developing and selecting these estimates, the trends in and amounts of these estimates, specific matters affecting the amount of and changes in these estimates, and any other matters related to these estimates, including significant issues concerning accounting principles and financial statement presentation. Such estimates and assumptions could change in the future as more information becomes known which could impact the amounts reported and disclosed herein. Significant estimates include revenue recognition, carrying amounts of long-lived assets, valuation assumptions for share-based payments, evaluation of debt modification accounting, effective borrowing rate determinations, analysis of fair value transferred upon debt extinguishment, valuation and calculation of measurements of income tax assets and liabilities. |
| Net Loss Attributable to Common Stockholders | Net Loss Attributable to Common Stockholders Basic loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period before giving effect to stock options, stock warrants, restricted stock units and convertible securities outstanding, which are considered to be dilutive common stock equivalents. Diluted net loss per common share is calculated based on the weighted average number of common and potentially dilutive shares outstanding during the period after giving effect to dilutive common stock equivalents. Contingently issuable shares are included in the computation of basic loss per share when issuance of the shares is no longer contingent. The number of shares underlying warrants, options, restricted stock units and our Series A Convertible Preferred Stock, which were not included in the computation of earnings per share because the effect was antidilutive, was 31,347,519 and 28,757,351 for the three months ended March 31, 2024 and 2023, respectively.
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| Significant Concentrations and Risks | Significant Concentrations and Risks We maintain cash balances at a commercial bank, and, at times, balances exceed FDIC limits. As of March 31, 2024, $505,111 was uninsured. |
Notes Payable (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Payable [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Reconciles Notes Payable | The
following reconciles notes payable as of March 31, 2024, and December 31, 2023:
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| Schedule of Future Principal Payments | Future
principal payments for the company’s Notes as of March 31, 2024, are as follows:
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Stockholders’ Equity (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders’ Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Stock Option Activity | The
following table summarizes the activity of our stock options for the three months ended March 31, 2024:
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| Schedule of Black-Scholes- Merton Option-Pricing Model Applying the Assumptions | We
determine the fair value of option grant share-based awards at their grant date, using a Black-Scholes- Merton Option- Pricing Model
applying the assumptions in the following table:
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| Schedule of Fair Value of Restricted Stock and Restricted Stock Units | The
fair value of restricted stock and restricted stock units was estimated using the closing price of our common stock on the date of award
and fully recognized upon vesting. Restricted stock activity for the three months ended March 31, 2024, was as follows:
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| Schedule of Warrant Stock Activity | Warrant stock activity for the three months ended March 31, 2024, was as follows:
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| Schedule of Range Exercise Prices Warrants Outstanding and Exercisable |
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Revenue Recognition (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||
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Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||
| Revenue Recognition [Abstract] | |||||||||||||||||||||||||||||||||||||
| Schedule of Accounts Receivable, Net | The
following table summarizes the company’s accounts receivable, net,
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Commitments and Contingencies (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Future Minimum Lease Payments | At March 31, 2024, we had approximately $130,206 in future minimum
lease payments due for the nine months ended. The below table presents the future minimum lease payments due reconciled to lease liabilities.
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Organization of Business, Going Concern and Summary of Significant Accounting Policies (Details) - USD ($) |
3 Months Ended | |||
|---|---|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
Dec. 31, 2023 |
Dec. 31, 2022 |
|
| Organization of Business, Going Concern and Summary of Significant Accounting Policies [Line Items] | ||||
| Net loss | $ (2,611,379) | $ (1,938,020) | ||
| Cash flows from operations | (1,542,327) | (1,152,575) | ||
| Current assets | 1,667,661 | $ 2,035,656 | ||
| Current liabilities | 2,154,058 | 927,382 | ||
| Working capital | 486,397 | |||
| Cash | $ 1,007,840 | $ 4,327,928 | $ 1,319,526 | $ 5,640,308 |
| Earning per share antidilutive (in Shares) | 31,347,519 | 28,757,351 | ||
| Cash Equivalents [Member] | ||||
| Organization of Business, Going Concern and Summary of Significant Accounting Policies [Line Items] | ||||
| Cash balance was uninsured | $ 505,111 | |||
Notes Payable (Details) - USD ($) |
Apr. 12, 2024 |
Mar. 12, 2024 |
Mar. 31, 2024 |
Dec. 31, 2023 |
|---|---|---|---|---|
| Notes Payable [Line Items] | ||||
| Current asset | $ 343,124 | $ 148,338 | ||
| Notes payable | $ 189,302 | |||
| Oakwood D&O Insurance [Member] | ||||
| Notes Payable [Line Items] | ||||
| Financing amount | $ 189,302 | |||
| Fixed rate | 9.50% | |||
| Current asset | $ 41,057 | |||
| Principal and interest payments | $15,775 | |||
| Payment of principle interest | $ 189,302 | |||
| Notes payable | $ 189,302 |
Notes Payable (Details) - Schedule of Reconciles Notes Payable - USD ($) |
3 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2024 |
Dec. 31, 2023 |
|
| Schedule of Reconciles Notes Payable [Abstract] | ||
| Beginning balance | $ 400,000 | |
| Notes payable | 189,302 | 155,541 |
| Payments on notes payable | (555,541) | |
| Total | 189,302 | |
| Less-Notes payable – current | 189,302 | |
| Notes payable – non-current |
Notes Payable (Details) - Schedule of Future Principal Payments |
Mar. 31, 2024
USD ($)
|
|---|---|
| Schedule of Future Principal Payments [Abstract] | |
| 2024, nine months ended | $ 141,977 |
| 2025 | 47,325 |
| Thereafter | |
| Total | $ 189,302 |
Due to Related Parties (Details) |
Jul. 31, 2018
USD ($)
|
|---|---|
| CEO [Member] | |
| Due to Related Parties [Line Items] | |
| Deposited | $ 50,000 |
Stockholders’ Equity (Details) - Schedule of Black-Scholes- Merton Option-Pricing Model Applying the Assumptions - Fair Value of Option [Member] |
3 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Assumptions: | |
| Expected dividend yield | 0.00% |
| Expected life (in years) | 6 years |
| Minimum [Member] | |
| Assumptions: | |
| Risk-free interest rate | 1.26% |
| Expected volatility | 112.60% |
| Maximum [Member] | |
| Assumptions: | |
| Risk-free interest rate | 1.30% |
| Expected volatility | 111.62% |
Stockholders’ Equity (Details) - Schedule of Fair Value of Restricted Stock and Restricted Stock Units - Restricted Stock [Member] |
3 Months Ended |
|---|---|
|
Mar. 31, 2024
$ / shares
shares
| |
| Schedule of Fair Value of Restricted Stock and Restricted Stock Units [Line Items] | |
| Shares Outstanding, Balance ending | shares | 3,480,454 |
| Weighted Average Exercise Price, Balance ending | $ / shares | $ 2.15 |
| Shares, Vested and converted to shares | shares | 3,468,788 |
| Weighted Average Fair Value per Share at Grant Date, Vested and converted to shares | $ / shares | $ 2.15 |
| Shares, Granted | shares | |
| Weighted Average Exercise Price, Granted | $ / shares | |
| Shares, Canceled | shares | |
| Weighted Average Exercise Price, Canceled | $ / shares | |
| Shares, Vested and converted to shares | shares | (11,666) |
| Weighted Average Fair Value per Share at Grant Date, Vested and converted to shares | $ / shares | $ 6.75 |
Stockholders’ Equity (Details) - Schedule of Warrant Stock Activity - Warrant [Member] - $ / shares |
3 Months Ended | |
|---|---|---|
Dec. 31, 2023 |
Mar. 31, 2024 |
|
| Stockholders’ Equity (Details) - Schedule of Warrant Stock Activity [Line Items] | ||
| Shares Granted | ||
| Weighted Average Exercise Price Granted | ||
| Shares Exercised | (66,000) | |
| Weighted Average Exercise Price Exercised | $ 0.06 | |
| Weighted Average remaining Contractual Term Exercised | 5 years 3 months 10 days | |
| Shares Forfeited | ||
| Weighted Average Exercise Price Forfeited | ||
| Shares, Outstanding | 1,750,000 | 1,684,000 |
| Weighted Average Exercise Price, Outstanding | $ 0.06 | $ 0.06 |
| Weighted Average Contractual Term Outstanding, Outstanding | 5 years 6 months 10 days | 5 years 3 months 10 days |
Revenue Recognition (Details) - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
Dec. 31, 2023 |
|
| Revenue Recognition [Line Items] | |||
| Earned revenue | $ 316,697 | $ 486,678 | |
| Earned revenue, percentage | 100.00% | ||
| Accounts receivable | $ 316,697 | $ 567,792 | |
| One Customer [Member] | |||
| Revenue Recognition [Line Items] | |||
| Earned revenue | $ 134,235 | ||
| Earned revenue, percentage | 100.00% | 100.00% | |
| Accounts receivable | $ 324,452 | ||
Revenue Recognition (Details) - Schedule of Accounts Receivable, Net - USD ($) |
Mar. 31, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Schedule of Accounts Receivable, Net [Abstract] | ||
| Accounts receivable | $ 316,697 | $ 153,029 |
| Unbilled receivable | 414,763 | |
| Total | $ 316,697 | $ 567,792 |
Commitments and Contingencies (Details) |
3 Months Ended | ||||
|---|---|---|---|---|---|
|
Jul. 26, 2023
USD ($)
|
Jan. 31, 2023
USD ($)
|
Mar. 31, 2024
USD ($)
shares
|
Jun. 07, 2023
USD ($)
m²
|
Mar. 31, 2021
USD ($)
ft²
|
|
| Commitments and Contingencies [Line Items] | |||||
| Lease area | m² | 8,375 | ||||
| Lease expense | $ 72,272 | ||||
| Cash lease payments amount | 60,677 | ||||
| Future minimum lease payments | $ 130,206 | ||||
| Common stock shares (in Shares) | shares | 10,000 | ||||
| Excess of damages value | $ 40,000,000 | ||||
| Tax deductible | $ 25,000 | ||||
| GKN and Whalen [Member] | |||||
| Commitments and Contingencies [Line Items] | |||||
| Common stock shares (in Shares) | shares | 1,242,710 | ||||
| Square Foot Laboratory/Office Space [Member] | |||||
| Commitments and Contingencies [Line Items] | |||||
| Lease area | 9,805 | 13,000 | |||
| Rentable square foot for year one | $ 9.1 | $ 6.7626 | |||
| Rentable square foot for year two | 10.2 | 9.2009 | |||
| Rentable square foot for year three | 11.3 | 11.4806 | |||
| Rentable square foot for year four | 12.4 | 13.174 | |||
| Rentable square foot for year five | $ 13.5 | $ 14.9306 |
Commitments and Contingencies (Details) - Schedule of Future Minimum Lease Payments |
Mar. 31, 2024
USD ($)
|
|---|---|
| Schedule of Future Minimum Lease Payments [Abstract] | |
| 2024, nine months ended | $ 130,206 |
| 2025 | 296,284 |
| 2026 | 324,429 |
| 2027 | 343,544 |
| 2028 | 205,111 |
| Thereafter | |
| Total undiscounted lease payments | 1,370,987 |
| Present value discount, less interest | 245,099 |
| Lease Liability | $ 1,125,889 |
Subsequent Events (Details) - USD ($) |
3 Months Ended | ||
|---|---|---|---|
May 10, 2024 |
Mar. 31, 2024 |
Dec. 31, 2023 |
|
| Subsequent Events [Line Items] | |||
| Shares issued (in Shares) | 10,000 | ||
| Exercise price per share | $ 0.07 | ||
| Cash proceeds (in Dollars) | $ 700 | ||
| Common stock shares (in Shares) | 211,370,639 | 211,236,688 | |
| Exercise price per share | $ 0.35 | ||
| Cash proceeds (in Dollars) | $ 3,500 | ||
| Common stock exercise share (in Shares) | 16,500 | ||
| Exercise price per share | $ 0.06 | ||
| Exercise price (in Dollars) | $ 990 | ||
| Common stock, par value | $ 0.001 | $ 0.001 | |
| Common Stock [Member] | |||
| Subsequent Events [Line Items] | |||
| Common stock shares (in Shares) | 10,000 | ||
| Subsequent Event [Member] | |||
| Subsequent Events [Line Items] | |||
| Common stock shares (in Shares) | 1,896,182 | ||
| Common stock, par value | $ 0.001 | ||
| Price, per share | $ 2.2 | ||
| Aggregate proceeds (in Dollars) | $ 4,171,600 |