APPLIED ENERGETICS, INC.

Previous wording

AE owns and protects intellectual property that is integral and necessary for the development of Ultrashort Pulse (“USP™”) Lasers, Laser Guided Energy (“LGE®”) and Direct Discharge Electrical products for military and commercial applications. AE currently owns 26 patents and an additional 11 Government Sensitive Patent Applications (“GSPA”). These GSPA’s are held under secrecy orders of the US government and allow the company greatly extended protection rights, including having no expiration date until such time as they are no longer classified after which they will have the normal 20-year patent protection. The company also has eight pending patent applications and one provisional patent application which is undergoing conversion to its non-provisional form. We continue to file patent applications as we deem appropriate to protect our intellectual property and enhance our competitive advantage.

Current wording

AE owns and protects intellectual property that is integral and necessary for the development of Ultrashort Pulse (“USP™”) Lasers, Laser Guided Energy (“LGE®”) and Direct Discharge Electrical products for military and commercial applications. AE currently owns 25 patents and an additional nine Government Sensitive Patent Applications (“GSPA”). These GSPA’s are held under secrecy orders of the US government and allow the company greatly extended protection rights, including having no expiration date until such time as they are no longer classified after which they will have the normal 20-year patent protection. The company also has three pending patent applications and one provisional patent application which is undergoing conversion to its non-provisional form. We continue to file patent applications as we deem appropriate to protect our intellectual property and enhance our competitive advantage. We conduct research and development efforts under contracts and on an internal basis as we move toward product development and testing.

Previous wording

Christopher Donaghey serves as our President and Chief Executive Officer (and as our Principal Accounting and Financial Officer), and Dr. Stephen W. McCahon serves as our Chief Science Officer. AE has continued to expand its technical capabilities with the addition of employees, consultants and contractors, and agreements with several of the leading laser and optics universities in the country. AE also works with a team of world-class contractors to strengthen our compliance, IT, technical staff, human resources and public relations, supporting the research and development in the laboratory.

Current wording

AE continues to expand its technical capabilities and administrative capacity with the addition of employees, consultants and contractors, and agreements with leading laser and optics universities in the country. AE also works with a team of contractors to strengthen our compliance, IT, technical staff, human resources and public relations.

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 system utilizing technologies that were investigated under the US Army Phase I STTR contract which the company was awarded in May 2022. This Phase II contract award followed a successful Phase I which established a computational concept with physical modeling and simulation to establish the feasibility of an IR 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

During the second quarter of 2023, we 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 was 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 followed 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. 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. In the fourth quarter of 2025, we completed work on this contract and received full payment from the customer.

Previous wording

During the year ended December 31, 2023, as we received our ONR contract and a Phase II STTR contract with the Army, we recognized revenues as we performed these services and also recorded related costs. Costs under these contracts continue to be affected by ongoing supply chain disruptions, and shortages of items like semiconductor chips, and related systemic issues, and general inflation although to a lesser extent than in 2022. In particular, micro-electronic and semiconductor chip shortages are still impacting supply chains, and as such, can impact our ability to execute and deliver technology to meet demands of our customers. Certain optical transmitting components are also in short supply. These costs and supply issues also may affect any internal research and development programs, and we anticipate that they will continue for at least the near term.

Current wording

Throughout 2024 and the first half of 2025, as we continued work on each of these contracts, we recognized revenues as we performed these services and recorded related costs. Costs under these firm fixed fee contracts were affected by supply chain disruptions, and shortages of items like semiconductor chips, and related systemic issues, and general inflation although to a lesser extent than in the preceding years. Micro-electronic and semiconductor chip shortages are still impacting supply chains, and as such, can impact our ability to execute and deliver technology to meet demands of our customers. Certain optical transmitting components are also in short supply. These costs and supply issues also may affect any internal research and development programs, and we anticipate that they will continue for at least the near term.

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

During the year ended December 31, 2025, as the next phase of its collaboration with Kord Technologies, Inc.(“Kord”), the company purchased from Kord a specially modified FIREFLYTM High Energy Laser Weapon System (HELWS) unit which the company has used to work on the development and integration of its proprietary Ultrashort Pulse technology in its Battle Lab, with the assistance of Kord personnel under a related services agreement. Throughout 2025 and into 2026, the company is working on the design and integration of USP technologies onto the Kord Firefly platform. With recent upgrades and advances to the FIREFLYTM system, the company looks to continue integration onto the updated platform.

Previous wording

In February 2025, we announced the opening of our new Battle Lab, which is also expected to provide the capacity to manufacture and integrate advanced lasers as Applied Energetics makes the anticipated technology transition to the next stage of its lifecycle. Over the coming months, the company intends to install and demonstrate multiple ultrashort pulse lasers with varying wavelengths against relevant target packages. In July 2024, the company exercised its option to lease more than 5,000 square feet of additional space at the University of Arizona Tech Park to create the Battle Lab. The company took the option to lease this additional space under the June 7, 2023, amendment (the “2023 Amendment”) to its Lease Agreement with Campus Research Corporation, as Landlord. With this expansion, the company now occupies, in the aggregate, approximately 26,000 sq. ft. of space at the Arizona Tech Park.

Current wording

In July 2024, the company exercised an option to lease more than 5,000 square feet of additional space at the University of Arizona Tech Park to create our Battle Lab. The company exercised the option to lease this additional space under the June 7, 2023, amendment to its Lease Agreement with Campus Research Corporation, as Landlord. In February 2025, we announced the opening of the Battle Lab, which is initially being used as a testing and demonstration space for the company’s lasers and prototypes. The Battle Lab is also expected to provide the capacity to manufacture and integrate advanced lasers as Applied Energetics makes the anticipated technology transition to the next stage of its lifecycle. The company has installed equipment to test and demonstrate multiple ultrashort pulse lasers with varying wavelengths against relevant target packages in the Battle Lab and has performed such testing and demonstrations.

Previous wording

The new administration and related changes in the structure and operations of the federal government are introducing new challenges for our operations and financial projections. It is difficult to forecast the effect that recently introduced tariffs will have on our ability to source raw materials, supplies, and equipment needed to continue our operations both for the performance of our ongoing contractual obligations and our internal research and development efforts. Moreover, the cut to funding and reductions in federal government personnel can have a significant impact on our cash flows and ability to continue operating. Many of these cuts are proposed to the Departments of Defense and Homeland Security budgets which are the focus of much of our business development efforts.

Current wording

The current budgetary and deficit funding environment, continuing inflation, tariffs and other ongoing supply chain disruptions, the appropriations process, federal government shutdowns, and budget cuts, among other items, all continue to create significant short and long-term challenges and risks to the company and its business development endeavors. It is difficult to forecast the effect that any future tariffs will have on our ability to source raw materials, supplies, and equipment needed to continue our operations both for the performance of our ongoing contractual obligations and our internal research and development efforts. Moreover, the cuts to funding and reductions in federal government personnel can impact our cash flows and ability to continue operating. Many of these cuts are proposed to the Departments of War and Homeland Security budgets which are the focus of much of our business development efforts. However, we remain optimistic that the innovative nature of our technology and its novel approach to addressable threats position the company for development, growth, and market opportunities.

Previous wording

Certain mitigating factors could blunt any potential impact of these changes on our industry. The DOD and others in the administration have indicated that funding for innovation and novel technologies will continue to be a priority, and directed energy has been discussed as part of this trend. Also, many of the cuts are being challenged in court and, in some cases, reversed either because of judicial rulings or policy reversals. However, it is difficult to predict precisely where funds will be cut or allocated, and even a general reduction in force can make administrative functions, such as finalizing contracts and government payment processing, challenging. These factors could severely impact our cash flows and our ability to continue operating.

Current wording

Certain mitigating factors could blunt any potential impact of these changes on our industry. The DoW and others in the administration have indicated that funding for innovation and novel technologies will continue to be a priority, and directed energy has been discussed as part of this trend. Also, many of the cuts are being challenged in court and, in some cases, reversed either because of judicial rulings or policy reversals. However, it is difficult to predict precisely where funds will be cut or allocated, and even a general reduction in force can make administrative functions, such as finalizing contracts and government payment processing, challenging. These factors could severely impact our cash flows and our ability to continue operating.

Previous wording

Neither of the US federal budgets for fiscal 2024 or 2023 were approved by Congress by the start of the corresponding U.S. federal government fiscal year, which is October 1 of the preceding year. In both 2024 and 2023, Congress passed, and the president signed, continuing resolutions (“CRs”), to extend federal government funding. specified dates. The final Defense Appropriations Bill for fiscal 2023 was signed into law on December 29, 2022 and included increases in areas of particular interest to the company.

Current wording

Neither of the US federal budgets for fiscal 2025 or 2024 were approved by Congress by the start of the corresponding U.S. federal government fiscal year, which is October 1 of the preceding year. In both 2025 and 2024, Congress passed, and the president signed, continuing resolutions (“CRs”), to extend federal government funding through specified dates. The final Defense Appropriations Bill for fiscal 2024 was signed into law on December 23, 2023 and included increases in areas of particular interest to the company. A full year Continuing Resolution, H.H. 1968, was passed and signed into law on March 15, 2025, and extended through September 30, 2025.

Previous wording

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.

Current wording

For fiscal year 2026, which started on October 1, 2025, the National Defense Authorization Act (NDAA) was delayed, but on December 18, 2025, the-president signed the 2026 NDAA into law (P.L.-119-60). The NDAA sets defense spending policies, while the separate appropriations bills comprising the federal budget fund government spending, including spending on defense and homeland security. This impacts all proposals under review by the DoW. The federal government experienced a funding gap beginning on October 1, 2025—the start of FY2026—and ending when the Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act, 2026 (P.L. 119-37), was signed into law on November 12, 2025. On February 3, 2026, the president signed the Consolidated Appropriations Act, 2026 (P.L. 119-75). This bill included Defense Appropriations, and all previously unfunded agencies except for Homeland Security.

Previous wording

The fair value of each option grant is estimated at the date of grant using the Black-Scholes-Merton option valuation model. We make the following assumptions relative to this model: (i) the annual dividend yield is zero as we do not pay dividends on our common stock, (ii) the weighted-average expected life is based on a midpoint scenario, where the expected life is determined to be half of the time from grant to expiration, regardless of vesting, (iii) the risk free interest rate is based on the U.S. Treasury security rate for the expected life, and (iv) the volatility is based on the level of fluctuations in our historical share price for a period approximately equal to the weighted-average expected life. We estimate forfeitures when recognizing compensation expense and adjust this estimate over the requisite service period should actual forfeitures differ from such estimates. Changes in estimated forfeitures are recognized through a cumulative adjustment, which is recognized in the period of change and which impacts the amount of unamortized compensation expense to be recognized in future periods.

Current wording

The fair value of each option grant is estimated at the date of grant using the Black-Scholes-Merton option valuation model. We make the following assumptions relative to this model: (i) the annual dividend yield is zero as we do not pay dividends on our common stock, (ii) the weighted-average expected life is based on a midpoint scenario, where the expected life is determined to be half of the time from grant to expiration, after taking into account the vesting period, (iii) the risk free interest rate is based on the U.S. Treasury security rate for the expected life, and (iv) the volatility is based on the level of fluctuations in our historical share price for a period approximately equal to the weighted-average expected life. We estimate forfeitures when recognizing compensation expense and adjust this estimate over the requisite service period should actual forfeitures differ from such estimates. Changes in estimated forfeitures are recognized through a cumulative adjustment, which is recognized in the period of change and which impacts the amount of unamortized compensation expense to be recognized in future periods.

Previous wording

Research and development expenses increased approximately $5,300, or 2.3%, to $239,000 for the year ended December 31, 2024, compared to approximately $234,000 for the year ended December 31, 2023, primarily due to an increase in labor and material cost associated with continued development.

Current wording

Research and development expenses increased approximately $1,431,000, or 599%, to $1,670,000 for the year ended December 31, 2025, compared to approximately $239,000 for the year ended December 31, 2024, primarily due to an increase in labor costs of approximately $844,000 and material costs of approximately $587,000 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 in 2024 resulted in a net loss of approximately $9,174,000, an increase of approximately $1,824,000, or 24.8%, compared to the approximately $7,350,000 net loss for the year ended 2023, primarily due to increases in general and administrative and research and development expense, partially offset by lower revenue and a decrease in selling and marketing expenses.

Current wording

Our operations in 2025 resulted in a net loss of approximately $14,873,000, an increase of approximately $5,698,000, or 62%, compared to the approximately $9,175,000 net loss for the year ended 2024, primarily due to increases in general and administrative, selling and marketing, and research and development expense, as well as lower revenue.

Previous wording

During the year ended December 31, 2024, the net cash outflow from operating activities was $5,092,690. This amount was comprised primarily of our net loss of $9,174,958. This was offset by non-cash stock-based compensation expense of $3,768,819, amortization of prepaid assets of $224,625, depreciation and amortization expense of $ 218,907, and the amortization of right of use assets of $214,690. Additionally, net cash used from changes in assets and liabilities totaled $344,773. This included a decrease in accounts receivable of $231,953 and accrued expenses and compensation of $22,643. This was offset by a decrease in deferred revenue of $308,908, prepaid and deposits of $51,113, and a decrease in operating lease liabilities of $184,871 and a decrease in accounts payable of $54,477.

Current wording

During the year ended December 31, 2025, the net cash outflow from operating activities was $9,237,951 This amount comprised primarily of our net loss of $14,872,730. This was offset by non-cash stock-based compensation expense of $5,136,473, amortization of prepaid assets of $140,893, depreciation and amortization expense of $282,200, and the amortization of right of use assets of $263,430. Additionally, net cash used from changes in assets and liabilities totaled $188,217. This included a decrease in accounts receivable of $335,839, and, accrued expenses and compensation of $179,044. This was offset by an increase in prepaids and deposits of $350,147, right of use liabilities of $265,380, accounts payable of $37,573, and due to related parties of $50,000.

Previous wording

During the year ended December 31, 2024, the net cash outflow from investing activities was $98,847. This was for the purchase of equipment.

Current wording

During the year ended December 31, 2025, the net cash outflow from investing activities was $1,234,734. This was for the purchase of equipment.

Previous wording

During the year ended December 31, 2024, net cash provided by financing activities was $4,036,823, which consisted mainly of repayment of our note payable of $141,977, payment of $82,300 to the IRS for tax withholding related to the share settlement of RSUs issued to employees, offset by $4,171,601 in proceeds from sale of common stock and $89,499 in proceeds from the exercise of options.

Current wording

During the year ended December 31, 2025, net cash provided by financing activities was $16,743,956. This amount consisted of $16,794,248 in proceeds from sale of common stock and $126,467 from the exercise of options and warrants, which were offset by $17,434 tax withholdings related to the share settlement of RSUs and $159,325 of repayment of an insurance premium loan.

Previous wording

Based on the company’s current business plan, we believe our cash balance as of the date of this report, along with anticipated revenues from our contract anticipated contract revenue, will be sufficient to meet the company’s anticipated cash requirements for the near term. However, we cannot be certain that the current business plan will be achievable.

Current wording

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

Previous wording

The company’s existence depends upon management’s ability to develop profitable operations. Management is devoting a significant portion of its efforts to developing additional business and raising capital, as needed, but cannot be certain that these efforts will be successful. Management’s business development efforts may not result in profitable operations. To fund its research and development and marketing efforts, the company’s management continues to explore possible financing opportunities through discussions with investment bankers and private investors. The company may not be successful in its effort to secure additional financing on terms it considers favorable. The accompanying consolidated financial statements do not include any adjustments that might result should the company be unable to continue as a going concern. In January and February 2025, the company raised approximately $6 million through the private placement of shares of its common stock, par value, $0.001 per share, some of which were underlying pre-funded common stock purchase warrants, in a private sale to individual purchasers at a price of $0.75 per share (or $0.749 per underlying share for pre-funded warrants), all to accredited, sophisticated investors

Current wording

The company’s existence depends upon management’s ability to develop profitable operations. Management is devoting a significant portion of its efforts to developing additional business and raising capital, as needed, but cannot be certain that these efforts will be successful. Management’s business development efforts may not result in profitable operations. To fund its research and development and marketing efforts, the company’s management continues to explore possible financing opportunities through discussions with investment 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.

Previous wording

Additionally, international, macroeconomic events, including the Russian military action in Ukraine and related economic sanctions around the globe could impact the company’s ability to source necessary supplies and equipment which could materially and adversely affect our ability to continue as a going concern. These events may also impair our ability to raise capital, including as a result of increased market volatility, or decreased market liquidity, which also affects the company’s ability to continue as a going concern. Third-party financing may become unavailable on terms acceptable to the company or at all. The impact of such events on the world economy and the specific impact on the company’s financial position and results of operations are difficult to predict. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Current wording

Additionally, international, macroeconomic events, including the military action in the Middle East and South America, the Russian military action in Ukraine and related economic sanctions around the globe could impact the company’s ability to source necessary supplies and equipment which could materially and adversely affect our ability to continue as a going concern. These events may also impair our ability to raise capital, including as a result of increased market volatility, or decreased market liquidity, which also affects the company’s ability to continue as a going concern. Third-party financing may become unavailable on terms acceptable to the company or at all. The impact of such events on the world economy and the specific impact on the company’s financial position and results of operations are difficult to predict. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Previous wording

Budgeting for upcoming expenses and costs of supplies and equipment needed to perform our existing, and any future, grants or contracts requires that we estimate factors such as inflation and geo-political events that affect such expenses and costs. Although inflation generally moderated in 2023, the cost of labor continues to increase across certain sectors of the US and global economy which may drive up our general and administrative expenses as well as the cost of personnel working directly and indirectly on our grants and contracts, particularly given the highly skilled nature of this work. Inflation has also impacted the price of supplies and materials we must purchase in order to perform grants and contracts, some of which may have been bid on based on cost structures which were submitted during periods of lower inflation. In addition, geo-political events have further limited the number of countries from which we can source certain supplies and equipment. These limitations can range from outright prohibitions to strong discouragement based on potentially sensitive information. We continually monitor these events and the markets for needed supplies in order to make the best estimates possible, both in our internal budgeting and in any bids or proposals we submit.

Current wording

Budgeting for upcoming expenses and costs of supplies and equipment needed to perform our existing, and any future, grants or contracts requires that we estimate factors such as inflation and geo-political events that affect such expenses and costs. Although inflation generally moderated in 2024 and 2025, recent events in the Middle East are driving it back up. In addition, the cost of labor continues to increase across certain sectors of the US and global economy which may drive up our general and administrative expenses as well as the cost of personnel working directly and indirectly on our grants and contracts, particularly given the highly skilled nature of this work. Inflation has also impacted the price of supplies and materials we must purchase in order to perform grants and contracts, some of which may have been bid on based on cost structures which were submitted during periods of lower inflation. In addition, geo-political events have further limited the number of countries from which we can source certain supplies and equipment. These limitations can range from outright prohibitions to strong discouragement based on potentially sensitive information. We continually monitor these events and the markets for needed supplies in order to make the best estimates possible, both in our internal budgeting and in any bids or proposals we submit.

Previous wording

The following table summarize our contractual obligations and other commercial commitments as of December 31, 2024:

Current wording

The following table summarizes our contractual obligations and other commercial commitments as of December 31, 2025:

Previous wording

In March 2021, the company signed a five-year lease for an 11,000 usable square foot (13,000 rentable square foot) laboratory/office space in Tucson. The lease term commences May 1, 2021 and ends on April 30, 2026. The base rent is $6.7626 per rentable square foot for year one, and escalates to $9.2009 in year two, $11.4806 in year three, $13.1740 in year four and $14.9306 in year five, plus certain operating expenses and taxes.

Current wording

In March 2021, the company signed a five-year lease for an 11,000 usable square foot (13,000 rentable square foot) laboratory/office space in Tucson. The lease term commences May 1, 2021 and ends on April 30, 2026. The base rent is $6.7626 per rentable square foot for year one, and escalated to $9.2009 in year two, $11.4806 in year three, $13.1740 in year four and $14.9306 in year five, plus certain operating expenses and taxes.

Previous wording

On June 7, 2023, the company entered into an amendment to extend the term of the original lease from April 26, 2026 to July 31, 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 square feet. The initial base rent for the 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.

Current wording

On June 7, 2023, the company entered into an amendment to extend the term of the original lease from April 26, 2026 to July 31, 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 square feet. The initial base rent for the expansion space was $9.10 per rentable square foot for year one, and escalated to $10.20 in year two, and $11.30 in year three, and further escalates to $12.40 in year four and $13.50 in year five, plus certain operating expenses and taxes.

Previous wording

On July 3, 2024, we exercised the Option to support the company’s investment in a new Battle Lab. With this expansion, the company now occupies, in the aggregate, approximately 26,000 sq. ft. of space. Our aggregate rent expense, including common area maintenance costs, was approximately $318,000 and $212,000 for 2024 and 2023, respectively. This included the cost of the option until it was exercised and the rent on the Battle Lab space thereafter. These facilities are adequate for our current and expected level of operations.

Current wording

On July 3, 2024, the company exercised its option to least an additional 6,458 rentable square feet (5,520 usable square feet) of manufacturing space support the company’s investment in its Battle Lab. The option was at a price of $2,690.83 per month through the date of exercise. With this expansion, the company now occupies, in the aggregate, approximately 26,000 sq. ft. of space. Our aggregate rent expense, including common area maintenance costs, was approximately $359,000 and $318,000 for 2025 and 2024, respectively. This included the cost of the option until it was exercised and the rent on the Battle Lab space thereafter. These facilities are adequate for our current and expected level of operations.

Previous wording

The Series A Preferred Stock has a liquidation preference of $25.00 per share. The Series A Preferred Stock bears dividends at an initial rate of 6.5% of the liquidation preference per share per annum, which accrues from the date of issuance, and is payable quarterly. We have not paid dividends commencing with the quarterly dividend due August 1, 2013 and, as a result, the dividend rate has increased to 10% per annum and will remain at that level until such failure is cured. Dividends due as of December 31, 2024, and March 26, 2025, were approximately $397,000 and $408,000, respectively.

Current wording

The Series A Preferred Stock has a liquidation preference of $25.00 per share. The Series A Preferred Stock bears dividends at an initial rate of 6.5% of the liquidation preference per share per annum, which accrues from the date of issuance, and is payable quarterly. We have not paid dividends commencing with the quarterly dividend due August 1, 2013 and, as a result, the dividend rate has increased to 10% per annum and will remain at that level until such failure is cured. Dividends due as of December 31, 2025, and March 27, 2026, were approximately $433,000 and $442,000, respectively.

Previous wording

The holders of the Series A Preferred Stock have a right to put the stock to the company for an aggregate amount equal to the liquidation preference approximately $340,000 plus unpaid dividends of $397,000 as of December 31, 2024, in the event of a change in control. Dividends are payable 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 or (iii) any combination of the foregoing. As of December 31, 2024, there were 13,602 shares of Series A Preferred Stock outstanding.

Current wording

The holders of the Series A Preferred Stock have a right to put the stock to the company for an aggregate amount equal to the liquidation preference approximately $340,000 plus unpaid dividends of $433,000 as of December 31, 2025, in the event of a change in control. Dividends are payable 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 or (iii) any combination of the foregoing. As of December 31, 2025, there were 13,602 shares of Series A Preferred Stock outstanding.