APPLIED ENERGETICS, INC.

Previous wording

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.

Current wording

Applied Energetics has developed, successfully demonstrated and holds all crucial intellectual property rights to a dynamic directed energy technology called Laser Guided Energy (LGE®) and Laser Induced Plasma Channel (LIPC®). LGE and LIPC are technologies that can be used in a new generation of high-tech directed energy systems. Applied Energetics’ LGE and LIPC technologies are wholly owned by Applied Energetics and protected by one or more of Applied Energetics’ 26 issued patents and 11 Government Sensitive Patent Applications (GSPA). These GSPA’s are held under secrecy orders of the US government, providing the company with extended protection rights. The company also has six pending patent applications, one of which has been allowed. We continue to file patent applications as we deem appropriate to protect our intellectual property and enhance our competitive advantage.

Previous wording

On February 10, 2025, Applied Energetics announced the opening of its new Battle Lab, a world-class facility designed to test, demonstrate, and advance emerging laser technologies in dynamic environments. The facility, as planned, is also expected to provide the capacity to manufacture and integrate advanced lasers as Applied Energetics makes the anticipated technology transition to the next stage of its lifecycle. Over the coming months, the company intends to install and demonstrate multiple ultrashort pulse lasers with varying wavelengths against relevant target packages. This announcement follows the July 3, 2024 announcement that Applied Energetics, Inc. had exercised its option to lease more than 5,000 square feet of additional space at the University of Arizona Tech Park to support the company’s investment in a new Battle Lab, with laser manufacturing capacity to ensure it has the critical infrastructure in place to fulfill both current, and possible future, priority U.S. military programs. The company took the option to lease this additional space under the June 7, 2023, amendment (the “2023 Amendment”) to its Lease Agreement with Campus Research Corporation, as Landlord. With this expansion, the company now occupies, in the aggregate, approximately 26,000 sq. ft. of space at the Arizona Tech Park. The Battle Lab is intended to support laser system testing against relevant targets and emerging threats. The Battle Lab is expected to enable technology maturation and be the venue for customer and partner demonstrations under realistic and controlled conditions. The facility, as planned, will also provide the capability to manufacture, integrate, and test advanced lasers as Applied Energetics makes its anticipated transition of its technology to the next stage of its lifecycle.

Current wording

On February 10, 2025, Applied Energetics announced the opening of its new Battle Lab, a world-class facility designed to test, demonstrate, and advance emerging laser technologies in dynamic environments. The facility, as planned, is also expected to provide the capacity to manufacture and integrate advanced lasers as Applied Energetics makes the anticipated technology transition to the next stage of its lifecycle. The company has installed multiple laser systems in the Battle Lab since opening and conducted demonstrations of these lasers. Over the coming months, the company intends to install and demonstrate additional ultrashort pulse lasers with varying wavelengths against relevant target packages. Ultimately, the Battle Lab is intended to support laser system testing against relevant targets and emerging threats. It is expected to enable technology maturation and be the venue for customer and partner demonstrations under realistic and controlled conditions.

Previous wording

In March 2025, the company moved to the next phase of its strategic collaboration with Kord Technologies, Inc., a wholly owned subsidiary of KBR, to explore the potential development and integration of an advanced pulsed laser system with Kord’s FIREFLYTM High Energy Laser Weapon System (HELWS). This phase is to begin with the purchase of a specially modified Firefly HELWS unit from Kord which the company can use to work on the development and integration of its proprietary Ultrashort Pulse technology in its newly opened Battle Lab, with the assistance of Kord personnel under a related services agreement.

Current wording

In the three months ended June 30, 2025, the company continued work relating to its strategic collaboration with Kord Technologies, Inc., a wholly owned subsidiary of KBR, to explore the potential development and integration of an advanced pulsed laser system with Kord’s FIREFLYTM High Energy Laser Weapon System (HELWS). The current phase of the project began in the prior quarter with the purchase of a specially modified Firefly HELWS unit from Kord which the company is using to work on the development and integration of its proprietary Ultrashort Pulse technology in its newly opened Battle Lab, with the assistance of Kord personnel under a related services agreement.

Previous wording

This teaming effort is intended to advance innovative directed energy capabilities that may create future opportunities in defense and security markets. The development and integration activities will focus on refining system performance, optimizing integration, and validating operational effectiveness, by striving to achieve key technical milestones that could lead to additional customer interest, contract opportunities, and expanded applications.

Current wording

This teaming effort is intended to advance innovative directed energy capabilities that may create future opportunities in defense and security markets. The development and integration activities focus on refining system performance, optimizing integration, and validating operational effectiveness, by striving to achieve key technical milestones that could lead to additional customer interest, contract opportunities, and expanded applications.

Previous wording

Applied Energetics had previously entered into a Memorandum of Understand (MOU) with Kord, effective October 28, 2024, to further the development and deployment of Applied Energetics’ ultrashort pulsed laser (USPL) technology for defense and national security applications. The MOU outlines key areas of cooperation, including joint research and development, integration of Applied Energetics’ USPL technologies into an existing high-energy laser directed energy platform, and the exploration of new opportunities to enhance both companies’ product portfolios.

Current wording

Applied Energetics previously entered into a Memorandum of Understand (MOU) with Kord, effective October 28, 2024, to further the development and deployment of Applied Energetics’ ultrashort pulsed laser (USPL) technology for defense and national security applications. The MOU outlines key areas of cooperation, including joint research and development, integration of Applied Energetics’ USPL technologies into an existing high-energy laser directed energy platform, and the exploration of new opportunities to enhance both companies’ product portfolios.

Previous wording

Effective August 23, 2023, Applied Energetics executed a contract with the Department of the Navy, Office of Naval Research with an aggregate contract price of $1.99 million payable over two years as the company performs its obligations under the contract. The objective of the contract is to develop a high-peak and high-average power USP optical system. The system is expected to demonstrate effects compatible with multiple Navy platforms and missions with an attractive size, weight, and power-cooling footprint. The company’s continuing development efforts in collaboration with ONR signify the importance of sustained development and maturation of USP-based directed energy systems to support the Navy’s technological priorities. In late April 2025, our customer notified us that no funds are currently available for this contract and advised us to discontinue work on it. The contract was still in effect during the March 31, 2025 quarter as no formal stop-work order was received. As a result, collection of amounts due under this contract, including any work performed or to be performed, is in doubt, and the company has ceased recording revenue for it. At this point, the contract remains open, and the company would resume recording revenue if funding resumes, and collection is reasonably assured. The company intends to continue working in parallel on this technology as part of its ongoing internal research and development program. In addition, the company continues to work with the customer to find additional funds within the contracting agency or with other DOD departments which could be applied to the current open contracts.

Current wording

Effective August 23, 2023, Applied Energetics executed a contract with the Department of the Navy, Office of Naval Research (ONR) with an aggregate contract price of $1.99 million payable over two years as the company performs its obligations under the contract. Under this contract, we have worked 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. During the quarter ended June 30, 2025, the company was notified that no further funds are available for this contract and advised to stop work on it. Receipt of additional amounts under the contract, including for any work to be performed, is in doubt. The company intends to continue working in parallel on this technology as part of its ongoing internal research and development program.

Previous wording

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.

Current wording

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. On May 9, 2025, the company entered into a no-cost modification to continue work on the contract through November 14, 2025. The company also amended its related agreement with the University of Arizona consistent with this extension.

Previous wording

Effective March 12, 2024, a grant previously awarded to the company from the Department of the Navy, Office of Naval Research, was transitioned into a contract. The original grant from May 2022 had a two-year period of performance. The new contract supersedes the grant and carries a ceiling value of $1,217,535 under a base period of performance through November 11, 2024 and a 12-month unfunded option period that ends November 11, 2025. On September 4, 2024, the company received a funding increase on this contract of $237,647 bringing the total funding on the contract to $1,455,182. The purpose of this research is to accelerate the development and testing of Infrared (IR) optical technology with an ultrashort pulse laser (USPL) system. The overall objective is to advance and ruggedize optical technologies that can be fielded on a variety of USMC platforms and are able to operate in harsh conditions. Research under the grant was completed and all progress reported to the program manager. In late April 2025, our customer notified us that no funds are currently available for this contract and advised us to discontinue work on it. The contract was still in effect during the March 31, 2025 quarter as no formal stop-work order was received. As a result, collection of amounts due under this contract, including any work performed or to be performed, is in doubt, and the company has ceased recording revenue for it. At this point, the contract remains open, and the company would resume recording revenue if funding resumes, and collection is reasonably assured. The company intends to continue working in parallel on this technology as part of its ongoing internal research and development program. In addition, the company continues to work with the customer to find additional funds within the contracting agency or with other DOD departments which could be applied to the current open contracts.

Current wording

Effective March 12, 2024, a grant previously awarded to the company from the Department of the Navy, Office of Naval Research, was transitioned into a contract. The original grant from May 2022 had a two-year period of performance. The new contract superseded the grant with 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 was to end November 11, 2025. On September 4, 2024, the company received a funding increase on this contract of $237,647 which brought the total funding on the contract to $1,455,182. Under this contract, we have worked 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. During the quarter ended June 30, 2025, the company was notified that funding has ceased for this contract. The contract is still in effect, and no stop-work order was received. The company has ceased recording revenue for this contract, and receipt of additional amounts under it is in doubt. The company intends to continue working in parallel on this technology as part of its ongoing internal research and development program.

Previous wording

Our goal with the Applied Energetics Strategic Plan is to increase the energy, peak power and frequency agility of USP optical sources while decreasing the size, weight, and cost of these systems. We are in the process of developing this breadth of very high peak power USP lasers and additional optical sources that have a broad range of applicability for threat disruption for the Department of Defense, commercial, and biomedical applications, such as biophotonic illumination and imaging. Although the historical market for Applied Energetics’ LGE and USP technology is the U.S. Government, the USP technologies are expected to provide numerous platforms for commercial additive and subtractive manufacturing and biomedical and imaging markets, creating a substantially larger market for our products to address. Since 2020, the Applied Energetics team has been able to develop partnership and teaming arrangements with the three leading laser and optics institutes in the United States, namely, the University of Arizona, the University of Central Florida, and the University of Rochester Laboratory for Laser Energetics.

Current wording

Our goal with the Applied Energetics Strategic Plan is to increase the energy, peak power and frequency agility of USP optical sources while decreasing the size, weight, and cost of these systems. We are in the process of developing this breadth of very high peak power USP lasers and additional optical sources that have a broad range of applicability for threat disruption for the Department of Defense, commercial, and biomedical applications, such as biophotonic illumination and imaging. Although the historical market for Applied Energetics’ LGE and USP technology is the U.S. Government, the USP technologies are expected to provide numerous platforms for commercial additive and subtractive manufacturing and biomedical and imaging markets, creating a substantially larger market for our products to address. Since 2020, the Applied Energetics team has been able to develop partnerships 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.

Previous wording

Subject to the foregoing, we continue to execute our business development plans, further our research and development program and submit filings for intellectual property and proposals for grants and contracts. During the past several years, we continued to submit proposals and have been engaged in meetings on a continuous basis with various agencies and departments both remotely and in person in Washington, DC and at various other government facilities. Having received a significant research grant and several contracts as well as other indications in recent years, we believe the interest in our technology and applications remains high, and we continue to submit proposals for all appropriate opportunities and share our vision of the disruptive capabilities of USP optical sources for both near- and far-term threats and dual-use commercial applications.

Current wording

Subject to the foregoing, we continue to execute our business development plan, further our research and development program and submit filings for intellectual property and proposals for grants and contracts. During the past several years, we continued to submit proposals and have been engaged in meetings on a continuous basis with various agencies and departments both remotely and in person in Washington, DC and at various other government facilities. Having received a significant research grant and several contracts as well as other indications in recent years, we believe the interest in our technology and applications remains high, and we continue to submit proposals for all appropriate opportunities and share our vision of the disruptive capabilities of USP optical sources for both near- and far-term threats and dual-use commercial applications.

Previous wording

Cost of revenue decreased by $210,518 to approximately $63,914 for the three months ended March 31, 2025 from $274,432 for the three months ended March 31, 2024. This decrease was primarily attributable to the unavailability of federal funds. The cost of material, supplies and direct labor incurred were expensed to R&D while our programs and work remain active and in place.

Current wording

Cost of revenue decreased by $336,718 to approximately $47,490 for the three months ended June 30, 2025 from $384,208 for the three months ended June 30, 2024. This decrease was primarily attributable to the unavailability of federal funds. The cost of material, supplies and direct labor incurred were expensed to R&D while our programs and work remain active and in place.

Previous wording

Selling and marketing expenses decreased by $243,225 to approximately $318,784 for the three months ended March 31, 2025, compared to approximately $75,559 for the three months ended March 31, 2024, primarily due to the development and installation of the Battle Lab for $182,000 with $60,000 for labor and the continuation of business development activities through our Master Services Agreement with Westpark Advisors as well as other consultants in this field.

Current wording

Selling and marketing expenses increased by $576,044 to $649,260 for the three months ended June 30, 2025, compared to approximately $76,216 for the three months ended June 30, 2024, primarily due to the development and installation of the Battle Lab for $380,000 as well as $148,000 for labor and the continuation of business development activities through our Master Services Agreement with Westpark Advisors as well as other consultants in this field.

Previous wording

Our operations for the three months ended March 31, 2025, resulted in a net loss of approximately $3,105,666 an increase of approximately $494,288 compared to the approximately $2,611,378 net loss for the three months ended March 31, 2024, primarily due an increase in general and administrative expense and research and development expense partially offset by a decrease in selling and marketing expenses.

Current wording

Our operations for the three months ended June 30, 2025, resulted in a net loss of $3,785,749 an increase of approximately $1,724,799 compared to the $2,060,950 net loss for the three months ended June 30, 2024, primarily due an increase in general and administrative expenses, selling and marketing and research and development expenses.

Previous wording

Research and development expenses increased by $242,267 to approximately $323,047 for the three months ended March 31, 2025, compared to approximately $80,780 for the three months ended March 31, 2024, primarily due to an increase in labor cost of $148,000 labor and material cost of $94,250 associated with continued development of our USP laser technologies and programs which remain in place as we continue to work on them.

Current wording

Research and development expenses increased by $540,522 to approximately $659,225 for the six months ended June 30, 2025, compared to approximately $118,703 for the six months ended June 30, 2024, primarily due to an increase in labor cost of $354,765 and material cost of $186,000 associated with continued development of our USP laser technologies and programs which remain in place as we continue to work on them.

Previous wording

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. For the three months ended March 31, 2025, the company incurred a net loss of approximately $3,106,000, had negative cash flows from operations of approximately $1,732,000 and may incur additional future losses due to the possible reduction in government contract activity and the expenses discussed under Results of Operations. In their report accompanying our financial statements for the year ended December 31, 2024, our independent auditors stated that our financial statements were prepared assuming that we would continue as a going concern and that they have substantial doubt as to our ability to do so for one year from the date the financial statements are issued based on our recurring losses from operations and need to raise additional capital. The financial statements do not include any adjustments relating to the recoverability of assets and the amount or classification of liabilities that might be necessary should the company be unable to continue as a going concern.

Current wording

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 six months ended June 30, 2025, the company incurred a net loss of approximately $6,891,000, had negative cash flows from operations of approximately $4,128,000 and may incur additional future losses due to the possible reduction in government contract activity and the expenses discussed under Results of Operations. In their report accompanying our financial statements for the year ended December 31, 2024, our independent auditors stated that our financial statements were prepared assuming that we would continue as a going concern and that they have substantial doubt as to our ability to do so for one year from the date the financial statements are issued based on our recurring losses from operations and need to raise additional capital. The financial statements do not include any adjustments relating to the recoverability of assets and the amount or classification of liabilities that might be necessary should the company be unable to continue as a going concern.

Previous wording

At March 31, 2025, the company had total current assets of $4,529,504 and total current liabilities of $766,108 resulting in working capital of $3,763,396 At March 31, 2024, we had $4,285,276 of cash and cash equivalents, an increase of $4,120,464 from $164,812 at December 31, 2024.

Current wording

On June 30, 2025, the company had total current assets of $1,216,555 and total current liabilities of $994,659 resulting in working capital surplus of $221,896. At June 30, 2024, the company had total current assets of $3,301,638 and total current liabilities of $698,232 resulting in a working capital surplus of $2,603,406.

Previous wording

During the first three months of 2025, the net cash outflow from operating activities was $1,731,610. This amount was comprised primarily of our net loss of $3,105,666, offset by non-cash stock-based compensation expense of $991,793, depreciation and amortization of $56,151, amortization of ROU assets of $63,762 and amortization of prepaid assets of $38,393, and cash used from changes in assets and liabilities of $223,956 from the increase in accounts receivable of $245,505, increase in accounts payable of $35,152 and accrued expenses and compensation of $30,166 off set by the net decrease in prepaids and deposits of $28,159 and operating lease liabilities of $58,708.

Current wording

During the first six months of 2025, the net cash outflow from operating activities was $4,127,663. This amount was comprised primarily of our net loss of $6,891,415, offset by non-cash stock-based compensation expense of $2,154,764, depreciation and amortization of $114,203, amortization of ROU assets of $128,834, amortization of prepaid assets of $38,393, and cash used from changes in assets and liabilities of $327,558 from the increase in accounts receivable of $335,839, increase in accounts payable of $124,568 and accrued expenses and compensation of $54,931 off set by the net decrease in prepaids and deposits of $65,141 and operating lease liabilities of $122,639.

Previous wording

During the first three months of 2025, the net cash outflow from investing activities was $114,118. This was for the purchase of equipment.

Current wording

During the first six months of 2025, the net cash outflow from investing activities was $1,151,563. This was for the purchase of equipment.

Previous wording

During the first three months of 2025, the net cash inflow from financing activities was $5,966,193. This amount consisted of $6,004,250 in proceeds from stock subscriptions and $12,000 from the exercise of options and warrants, which were offset by $2,733 tax withholdings related to the share settlement of RSUs and $47,325 of Repayment of insurance premium loan.

Current wording

During the first six months of 2025, the net cash inflow from financing activities was $5,980,093. This amount consisted of $6,004,250 in proceeds from stock subscriptions and $41,900 from the exercise of options and warrants, which were offset by $2,733 tax withholdings related to the share settlement of RSUs and $63,325 of Repayment of insurance premium loan.

Previous wording

Based on the company’s current business plan, we believe our cash balance as of the date of this report, along with revenue from our government contracts, will be sufficient to meet the company’s anticipated cash requirements for the near term. However, we cannot be certain that the current business plan will be achievable. In addition, we recently received verbal notice that funding under two of the company’s contracts has been discontinued, as described under Results of Operations and Ongoing Business Activities. Although these contracts are still in effect, receipt of any additional funds under them is highly uncertain, which negatively affects our anticipated cash flows from operating activities.

Current wording

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 current contracts, will be sufficient to meet the company’s anticipated cash requirements for the near term. However, we cannot be certain that the current business plan will be achievable. In addition, we recently received verbal notice that funding under two of the company’s contracts has been discontinued, as described under Results of Operations and Ongoing Business Activities. Although these contracts are still in effect, receipt of any additional funds under them is highly uncertain, which negatively affects our anticipated cash flows from operating activities.