Stockholders’ Equity

3 Months Ended

Mar. 31, 2024

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:

	Shares			Weighted Average Exercise Price			Weighted Average Contractual Term Outstanding		Intrinsic Value
Outstanding at December 31, 2023		26,195,434		$	0.64			9.37	$	226,821,848
Granted		-			-			-		-
Exercised		(60,000	)		(0.21	)		4.84		(290,219	)
Forfeited or expired		-			-			-		-
Outstanding at March 31, 2024		26,135,434			0.64			5.76		227,112,067
Outstanding and exercisable at March 31, 2024		21,379,320			0.28			5.03		107,630,786

We determine the fair value of option grant share-based awards at their grant date, using a Black-Scholes- Merton Option- Pricing Model applying the assumptions in the following table:

	Three Months Ended March 31,
	2023
Assumptions:
Risk-free interest rate	1.26 – 1.30%
Expected dividend yield	0%
Expected volatility	112.6 –111.62%
Expected life (in years)	6

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:

	Restricted Stock Outstanding
	Shares		Weighted Average Fair Value per Share at Grant Date
Nonvested at December 31, 2023		3,480,454		2.15
Granted – restricted stock units and awards		-		-
Granted – performance-based stock units		-		-
Canceled		-		-
Vested		(11,666)		6.75
Nonvested at March 31, 2024		3,468,788	$	2.15

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:

	Warrant Activity
				Weighted Average Exercise		Weighted Average remaining Contractual Term
	Shares			Price		(years)
Outstanding at December 31, 2023		1,750,000		$	0.0600		5.53
Granted		-			-		-
Exercised		(66,000	)		0.0600		5.28
Forfeited		-			-		-
Outstanding and exercisable at March 31, 2024		1,684,000		$	0.0600		5.28

	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
$0.05 – $0.07		1,684,000		5.28	$	0.0600		1,684,000	$	0.0600
		1,684,000		5.28	$	0.0600		1,684,000	$	0.0600