APPLIED ENERGETICS, INC.
For the period ended Sep 30, 2025. Filed Nov 12, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2025 · Filed Nov 12, 2025
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What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-06-30; filed 2025-08-13.
0001213900-25-075742
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-09-30; filed 2025-11-12.
0001213900-25-109366
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 73 previous paragraphs and 76 current paragraphs.
38 unchanged; 28 reworded; 9 added; 7 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 8 previous and 8 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (9)
Current report
Effective October 3, 2025, Applied Energetics has appointed Dr. David Spence to serve as its Chief Product Officer. Dr. Spence, has more than 25 years of experience in the conception, design, and commercialization of advanced laser technologies across industrial, scientific, and defense markets. He has held leadership roles at Spectra-Physics, Newport Corporation, and most recently, was Senior Engineering Manager, Advanced Technology Development Group for MKS Instruments, where he directed cross-functional teams developing next-generation ultrashort pulse laser systems, nonlinear optical solutions, and diode-pumped solid-state amplifiers. Dr. Spence is also an Optica Fellow, holds over a dozen issued patents, and has authored numerous scientific publications. Dr. Spence holds a Ph.D. in Laser Physics from the University of St. Andrews in Scotland and a B.Sc. in Physics with First Class Honors from the University of Stirling.
Current report
We have entered into an Executive Employment Agreement with Dr. Spence for a term of three years, renewable thereafter for sequential one-year periods. The agreement calls for (i) a cash salary of $250,000 per annum, payable monthly, and eligibility for a discretionary bonus, and (ii) incentive stock options to purchase up to 500,000 shares of our common stock at an exercise price of $1.71 per share which vest in four equal annual installments commencing on the first anniversary of the grant date.
Current report
Effective October 1, 2025, we appointed two new members to serve on our Board of Advisors. For their services they are to receive compensation including a monthly cash stipend and/or stock options which are subject to vesting.
Current report
On June 3, 2025, our Board of Directors expanded its number to seven members and appointed Christopher Donaghey, its President and CEO, and Scott Andrews to serve as new directors, effective immediately.
Current report
On September 25, 2025, our board established an Audit Committee and a Compensation Committee. Members of both committees include Bradford Adamczyk, Michael Alber and Scott Andrews, with Mr. Andrews serving as Chairman of the Compensation Committee and Mr. Alber as Chairman of the Audit Committee.
Current report
The National Defense Authorization Act (NDAA), which sets defense spending policies, is currently delayed for the federal government fiscal year 2026, which started on October 1, 2025. Moreover, the appropriations bills comprising the federal budget, which fund government spending, have not yet been passed by Congress. This impacts all proposals under review by the Department of Defense (DoD) as parts of the U.S. government are “unfunded” and operating under a government shutdown. Although certain mandatory programs and “excepted” activities continue to be funded, none of the programs for which we might submit proposals would fall under these exceptions.
Current report
The House and Senate reached a potential deal, on November 9, 2025, for a Continuing Resolution (CR) that would extend government funding through a specified date, which itself is being negotiated. The House initially passed a CR to keep the government funded until November 21. However, the Senate advanced a new agreement that includes a CR to fund the government through January 30, 2026, with the addition of three full-year appropriations bills (appropriations for the Veterans Affairs Department, Agriculture Department and the legislative branch). All other agencies would operate at their fiscal 2025 levels under the CR. Until a Continuing Resolution is adopted by both houses, many programs for which we or our prospective strategic partners have submitted proposals will remain unfunded and be unable to move forward.
Current report
Selling and marketing expenses increased by approximately $110,000 to approximately $196,000 for the three months ended September 30, 2025, compared to approximately $86,000 for the three months ended September 30, 2024, primarily due to an increase in business development costs as well as costs related to demonstrations of our technology to potential customers and joint venture partners.
Current report
On October 8, 2025, the company completed the placement of 5,995,675 shares of its common stock, par value $0.001 per share, some of which were underlying pre-funded common stock purchase warrants, in a private sale to individual purchasers at a price of $1.80 per share (or $1.799 per underlying share for pre-funded warrants), for aggregate proceeds in the amount of $10,789,999. The pre-funded warrants are exercisable immediately at a price of $0.001 per share but may not be executed in any amount which would cause the holder thereof to beneficially own in excess of 4.99% of the company’s common stock. The company has agreed to use its best efforts to include the shares for registration with the Securities and Exchange Commission in the registration statement it files. 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.
Removed paragraphs (7)
Previous report
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 report
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 report
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 report
For fiscal year 2025, which started on October 1, 2024, the National Defense Authorization Act (NDAA) was delayed, but on December 23, 2024, then-President Biden signed the 2025 NDAA into law. The NDAA sets defense spending policies, while the separate appropriations bills comprising the federal budget fund government spending, including spending on defense and homeland security. This impacts all proposals under review by the Department of Defense. On September 26, 2024, in the absence of an enacted federal budget, then-President Biden signed a Continuing Resolution (CR), HR 9747, which extended government operations through December 20, 2024. He then signed a second CR for FY25 on December 21, 2024, extending funding for the federal government through March 14, 2025. A full year Continuing Resolution, H.H. 1968, was passed and signed into law by President Trump on March 15, 2025, and extends through September 30, 2025.
Previous report
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 report
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 report
As of the reporting date, the company has received cash proceeds in the amount of $2,999,997 from investors pursuant to an equity offering. The company has not yet delivered countersigned subscription agreements or conducted a closing of the financing, and the final terms remain subject to change while the financing is open. Accordingly, the company has classified the proceeds as a liability. The company will reclassify the liability to equity upon delivery of countersigned agreements and finalization of the terms.
Reworded paragraphs (28)
Previous wording
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.
Current wording
Applied Energetics, Inc., (sometimes referred to as the “company”) is a corporation organized and existing under the laws of the State of Delaware. Our executive office is located at 9070 S. Rita Road, Suite 1500, Tucson, Arizona 85747, (520) 628-7415. Our website is www. appliedenergetics.com.
Previous wording
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.
Current wording
Applied Energetics, Inc. is a global leader in developing ultrashort pulse lasers as 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.
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’ 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.
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’ 27 issued patents and 9 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.
Previous wording
Effective May 17, 2025, the company received a Requisition from the University of Rochester in the amount of $181,639. This is part of a contractual arrangement with the university in the amount of approximately $250,000 to support its Laboratory for Laser Energetics (LLE) for ongoing efforts to explore pulsed laser technologies. Work on the contract commenced on July 10, 2025 with a meeting at Applied Energetics headquarters in Tucson, AZ with Dr. Jon Zuegel, Laser Development and Engineering Division Director and a Senior Scientist at the Laboratory for Laser Energetics (LLE) at the University of Rochester to discuss the research to be provided by the company.
Current wording
Effective May 17, 2025, the company received a Requisition from the University of Rochester in the amount of $181,639. This is part of a contractual arrangement with the university in the approximate amount of $250,000 to support its Laboratory for Laser Energetics (LLE) for ongoing efforts to explore pulsed laser technologies. Work on the contract commenced on July 10, 2025 with a meeting at Applied Energetics headquarters in Tucson, AZ with Dr. Jon Zuegel, Laser Development and Engineering Division Director and a Senior Scientist at the LLE to discuss the research to be provided by the company. We have completed work under the Requisition and are working with the university to plan and commence work on the next phase.
Previous 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.
Current wording
In the three months ended September 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 first quarter of 2025 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
We continue to submit proposals to, and attended briefings with, various defense and other government agencies who have expressed an interest in our technology and applications. Our efforts in this area of development have produced some 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.
Current wording
We continue to submit proposals to, and attend briefings with, various defense and other government agencies who have expressed an interest in our technology and applications. Our efforts in this area of development have produced some 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.
Previous wording
In addition, the newly elected administration has established the Department of Government Efficiency (DOGE) whose mission is to sharply reduce federal spending. In February 2025, President Trump stated that he has directed DOGE to review defense spending for possible waste, fraud and abuse. The administration has also indicated that it may pursue significant reductions to the U.S. defense budget, if both Russia and China would agree to similar cuts in their respective national security spending. The potential impact on the company of DOGE and possible cuts to the defense and national security industries, if any, is uncertain. Notwithstanding these budgetary concerns, the administration and Pentagon have indicated an interest in continuing to fund innovative defense related technologies, including in the area of directed energy.
Current wording
In addition, the current administration has established the Department of Government Efficiency (DOGE) whose mission is to sharply reduce federal spending. In February 2025, President Trump stated that he has directed DOGE to review defense spending for possible waste, fraud and abuse. The administration has also indicated that it may pursue significant reductions to the U.S. defense budget, if both Russia and China would agree to similar cuts in their respective national security spending. The potential impact on the company of DOGE and possible cuts to the defense and national security industries, if any, is uncertain. Notwithstanding these budgetary concerns, the administration and Pentagon have indicated an interest in continuing to fund innovative defense related technologies, including in the area of directed energy.
Previous wording
The current budgetary and deficit funding environment, continuing inflation, tariffs and other ongoing supply chain disruptions, the appropriations process, and DOGE, among other items, all continue to create significant short and long-term challenges and risks to the company and its business development endeavors. However, we remain optimistic that the innovative nature of our technology and its novel approach to addressable threats position the company for development, growth, and market opportunities.
Current wording
The current budgetary and deficit funding environment, continuing inflation, tariffs and other ongoing supply chain disruptions, the appropriations process, federal government shutdown, and DOGE, among other items, all continue to create significant short and long-term challenges and risks to the company and its business development endeavors. However, we remain optimistic that the innovative nature of our technology and its novel approach to addressable threats position the company for development, growth, and market opportunities.
Previous wording
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.
Current wording
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 have recently added, and are also contemplating adding additional, 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.
Previous wording
As with many government contractors, we have experienced recent challenges with funding of our contracts by the DoD and, in particular, with funding cutbacks at the Office of Naval Research (ONR). We recently learned that funding has been discontinued on two of our ONR contracts which affects our cash position and our strategic plan. Although the contracts have not been cancelled, their funding remains in doubt so that we cannot rely on receipt of funds from them, including for work already performed. These contracts were awarded under the DoD’s Research, Development, Test & Evaluation 6.2 Applied Research program which has been targeted by DoD for a 23.7% budget cut in FY2025. We believe that the technology underlying these contracts is considered “novel” and therefore, of continued interest to the DoD in its stated areas of ongoing focus. Accordingly, we plan to continue research and development of this technology, on an internal basis, and to focus on strategic partnerships with other entities as well as seeking additional prime government contracts. Our goal is to continue to accelerate the technology readiness level of our solutions to be able to submit more proposals and be prepared to conduct more customer and partner demonstrations of our technology in our recently opened Battle Lab. Under the current state of cutbacks in government funding both by individual agencies and DOGE, we cannot be certain that any such contracts will be forthcoming.
Current wording
As with many government contractors, we have experienced recent challenges with funding of our contracts by the DoD. While we continue to pursue contracts with DoD and other government agencies, we simultaneously conduct research and development of our technology on an internal basis and focus on strategic partnerships with other entities. Our goal is to continue to accelerate the technology readiness level of our solutions to be able to submit more proposals and be prepared to conduct more customer and partner demonstrations of our technology in our recently opened Battle Lab. Under the current state of cutbacks in government funding both by individual agencies and DOGE, we cannot be certain that any such contracts will be forthcoming.
Previous wording
Revenue decreased by $710,308 to $70,335 for the three months ended June 30, 2025 from $780,643 for the three months ended June 30, 2024. In April 2025, the Company was notified by its customer that two of its active contracts were currently unfunded and remain unfunded as of the date, resulting in a decrease in revenue for the period. Although the contracts remain open, the Company suspended all work until funding is secured in the future. Despite the suspension, the Company continues to advance the underlying technology through its internal research and development efforts. Both the customer and the Company are actively seeking alternative sources of funding, including from within the original contracting agency and other departments of the U.S. Department of Defense.
Current wording
Revenue decreased by approximately $639,000 to approximately $109,000 for the three months ended September 30, 2025 from approximately $748,000 for the three months ended September 30, 2024. In April 2025, the company was notified by a customer that two of its active contracts were currently unfunded and remain unfunded, resulting in a decrease in revenue for the period. Although the contracts remain open, the company suspended all work until funding is secured in the future. Despite the suspension, the company continues to advance the underlying technology through its internal research and development efforts. Both the customer and the company are actively seeking alternative sources of funding, including from within the original contracting agency and other departments of the U.S. Department of Defense.
Previous 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.
Current wording
Cost of revenue decreased by approximately $455,000 to approximately $53,000 for the three months ended September 30, 2025 from approximately $509,000 for the three months ended September 30, 2024. This decrease was primarily attributable to the suspension of funding of two contracts by a federal government customer . 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
General and administrative expenses increased by $479,648 to approximately $2,823,159 for the three months ended June 30, 2025, compared to approximately $2,343,511 for the three months ended June 30, 2024. The increase was primarily driven by higher professional fees of $507,253, an increase in non-cash compensation of $242,125, and higher rent of $56,198, partially offset by a decrease in payroll salaries and related expenses of $352,880 and a reduction in insurance costs of $50,951.
Current wording
General and administrative expenses increased by approximately $917,000 to approximately $3,375,000 for the three months ended September 30, 2025, compared to approximately $2,457,000 for the three months ended September 30, 2024. The increase was primarily driven by an increase in payroll and related fees of approximately $257,000, and an increase in non-cash compensation of approximately $528,000.
Previous wording
Research and development expenses increased by $298,255 to $336,178 for the three months ended June 30, 2025, compared to approximately $37,923 for the three months ended June 30, 2024, primarily due to an increase in labor costs of $206,700 material costs of $91,500 associated with continued development of our USP laser technologies.
Current wording
Research and development expenses increased by approximately $386,000 to approximately $456,000 for the three months ended September 30, 2025, compared to approximately $70,000 for the three months ended September 30, 2024, primarily due to an increase in labor costs of approximately $247,000 and an increase in material costs of approximately $139,000 associated with continued development of our USP laser technologies.
Previous 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.
Current wording
Our operations for the three months ended September 30, 2025, resulted in a net loss of approximately $3,971,000 an increase of approximately $1,596,000 compared to a net loss of approximately $2,375,000 for the three months ended September 30, 2024, primarily due to a decrease in revenue as well as an increase in general and administrative expenses, selling and marketing and research and development expenses.
Previous wording
Comparison of Operations for the Six Months Ended June 30, 2025 and 2024:
Current wording
Comparison of Operations for the Nine months ended September 30, 2025 and 2024:
Previous wording
Revenue decreased by $634,790 to $280,088 for the six months ended June 30, 2025 from $914,878 for the six months ended June 30, 2024. In April 2025, the Company was notified by its customer that two of its active contracts were currently unfunded and remain unfunded as of the date, resulting in a decrease in revenue for the period. Although the contracts remain open, the Company suspended all work until funding is secured in the future. Despite the suspension, the Company continues to advance the underlying technology through its internal research and development efforts. Both the customer and the Company are actively seeking alternative sources of funding, including from within the original contracting agency and other departments of the U.S. Department of Defense.
Current wording
Revenue decreased by approximately $1,274,000 to approximately $389,000 for the nine months ended September 30, 2025 from approximately $1,663,000 for the nine months ended September 30, 2024. In April 2025, we were notified by a customer that no further funds were available for two of our contracts , resulting in a decrease in revenue for the period. Although the contracts remain open, the we have been advised to stop work and accordingly have suspended all work under the contracts themselves. Despite the suspension, the company continues to advance the underlying technology through its internal research and development efforts. Both the customer and the company are actively seeking alternative sources of funding, including from within the original contracting agency and other departments of the U.S. Department of Defense.
Previous wording
Cost of revenue decreased by $547,236 to $111,404 for the six months ended June 30, 2025 from $658,640 for the six 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.
Current wording
Cost of revenue decreased by approximately $1,002,536 to approximately $164,813 for the nine months ended September 30, 2025 from approximately $1,167,349 for the nine months ended September 30, 2024. This decrease was primarily attributable to the suspension of funding of two contracts by a federal government customer. 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
General and administrative expenses increased by $772,437 to $5,432,847 for the six months ended June 30, 2025, compared to approximately $4,660,410 for the six months ended June 30, 2024. The increase was primarily driven by higher professional fees of $929,003, an increase in non-cash compensation of $278,190, higher rent of $108,588, and an increase in other general and administrative expenses of $153,700. These increases were partially offset by a decrease in payroll salaries and related expenses of $659,511 and a reduction in insurance costs of $108,588.
Current wording
General and administrative expenses increased by approximately $1,690,000 to approximately $8,807,000 for the nine months ended September 30, 2025, compared to approximately $7,118,000 for the nine months ended September 30, 2024. The increase was primarily driven by an increase in non-cash compensation of approximately $806,000, an increase in payroll and related costs of approximately $372,000, an increase in professional fees of approximately $213,000, and an increase in materials and supplies of approximately $193,000.
Previous wording
Selling and marketing expenses increased by $816,268 to approximately $968,044 for the six months ended June 30, 2025, compared to approximately $151,776 for the six months ended June 30, 2024, primarily due to the development and installation of the Battle Lab for $494,000 as well as $289,000 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 approximately $926,000 to approximately $1,164,000 for the nine months ended September 30, 2025, compared to approximately $238,000 for the nine months ended September 30, 2024, primarily due to an increase of approximately $663,000 related to the development and installation of the Battle Lab and related demonstrations of our technology as well as an increase of approximately $189,000 for labor and the increase in business development activities.
Previous 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.
Current wording
Research and development expenses increased by approximately $926,000 to approximately $1,115,000 for the nine months ended September 30, 2025, compared to approximately $189,000 for the nine months ended September 30, 2024, primarily due to an increase in labor costs of approximately $602,000 and material cost of approximately $324,000 associated with continued development of our USP laser technologies and programs which remain in place as we continue to work on them.
Previous wording
Our operations for the six months ended June 30, 2025, resulted in a net loss of approximately $6,891,415 an increase of approximately $2,219,000 compared to the approximately $4,672,329 net loss for the six months ended June 30, 2024, primarily due an increase in general and administrative expenses, research and development expenses and in selling and marketing expenses.
Current wording
Our operations for the nine months ended September 30, 2025, resulted in a net loss of approximately $10,862,000 an increase of approximately $3,816,000 compared to the approximately $7,047,000 net loss for the nine months ended September 30, 2024, primarily due to a decrease in revenue as well as an increase in general and administrative expenses, research and development expenses and selling and marketing expenses.
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 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.
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 nine months ended September 30, 2025, the company incurred a net loss of approximately $10,863,000, had negative cash flows from operations of approximately $6,617,654 and will likely incur additional future losses due to 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
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.
Current wording
On September 30, 2025, the company had total current assets of $1,819,197 and total current liabilities of $3,923,969 resulting in working capital surplus of $895,225. Approximately $3,000,000 of current liabilities was attributable to deferred equity financing. At September 30, 2024, the company had total current assets of $2,025,823 and total current liabilities of $888,684 resulting in a working capital surplus of $1,137,139.
Previous 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.
Current wording
During the first nine months of 2025, the net cash outflow from operating activities was $6,617,654. This amount was comprised primarily of our net loss of $10,862,572, offset by non-cash stock-based compensation expense of $3,661,622, depreciation and amortization of $195,539, amortization of ROU assets of $195,352, amortization of prepaid assets of $51,250, and cash used from changes in assets and liabilities of $141,155 from the increase in accounts receivable of $226,855, increase in accounts payable of $15,659 and accrued expenses and compensation of $196,329 off set by the net decrease in prepaids and deposits of $105,110 and operating lease liabilities of $192,578.
Previous 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.
Current wording
During the nine months ended September 30, 2025, the net cash outflow from investing activities was $1,181,630. This was for the purchase of equipment.
Previous 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.
Current wording
During the first nine months of 2025, the net cash inflow from financing activities was $8,966,697. This amount consisted of $9,004,247 in proceeds from stock subscriptions and $91,210 from the exercise of options and warrants, which were offset by $17,435 tax withholdings related to the share settlement of RSUs and $111,325 of repayment of an 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 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.
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 and proceeds from the recently completed sale of common stock, 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.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS