# Applied Energetics, Inc.: Form 10-Q for the period ended Mar 31, 2025

- Company: [Applied Energetics, Inc.](/companies/aerg.md) (CIK 879911)
- Form: 10-Q
- Filed: 2025-05-15
- Accepted by EDGAR: May 14, 2025, 18:05 ET
- Period: 2025-03-31
- Accession: 0001213900-25-043482
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/879911/000121390025043482/ea0241122-10q_applied.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/879911/000121390025043482/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2025-01-01 to 2025-03-31 | $209.8k | us-gaap:Revenues |
| Cost of revenue | 3 months, 2025-01-01 to 2025-03-31 | $63.9k | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2025-01-01 to 2025-03-31 | $145.8k | us-gaap:GrossProfit |
| Research and development | 3 months, 2025-01-01 to 2025-03-31 | $323.0k | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2025-01-01 to 2025-03-31 | −$3.1m | us-gaap:OperatingIncomeLoss |
| Net income | 3 months, 2025-01-01 to 2025-03-31 | −$3.1m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2025-01-01 to 2025-03-31 | $0.00 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-01-01 to 2025-03-31 | $0.00 | us-gaap:EarningsPerShareBasic |
| Operating cash flow | 3 months, 2025-01-01 to 2025-03-31 | −$1.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2025-01-01 to 2025-03-31 | $114.1k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2025-03-31 | $4.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2025-03-31 | $4.5m | us-gaap:AssetsCurrent |
| Total assets | at 2025-03-31 | $5.9m | us-gaap:Assets |
| Current liabilities | at 2025-03-31 | $766.1k | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2025-03-31 | $1.6m | us-gaap:Liabilities |
| Shareholders' equity | at 2025-03-31 | $4.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 34,798 characters.

Our discussion and analysis of the financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the related disclosures included elsewhere herein and in the Management’s Discussion and Analysis of Financial Condition and Results of Operations included as part of our Annual Report on Form 10-K for the year ended December 31, 2024.

### CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the securities laws. Forward-looking statements include all statements that do not relate solely to the historical or current facts and can be identified by the use of forward-looking words such as “may,” “believe,” “will,” “would,” “could,” “should,” “expect,” “project,” “anticipate,” “estimates,” “possible,” “plan,” “strategy,” “target,” “prospect,” or “continue,” and other similar terms and phrases. These forward-looking statements are based on the current plans and expectations of our management and are subject to a number of uncertainties and risks that could significantly affect our current plans and expectations, as well as future results of operations and financial condition and may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Important factors that could cause our actual results to differ materially from our expectations are described in Item 1A (Risk Factors) of our Annual Report on Form 10-K, for the year ended December 31, 2024. Although we believe that the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to have been correct. We do not assume any obligation to update these forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting such forward-looking statements.

Applied Energetics, Inc., (sometimes referred to as the “company”) is a corporation organized and existing under the laws of the State of Delaware. Our executive office is located at 9070 S. Rita Road, Suite 1500, Tucson, Arizona 85747, (520) 628-7415. www. appliedenergetics.com

Applied Energetics, Inc., specializes in the development and manufacture of advanced high-performance lasers and optical systems and integrated guided energy systems for prospective defense, national security, industrial, biomedical, and scientific customers worldwide.

### Technology, Capabilities, and Patents

Applied Energetics, Inc. is recognized as a global leader in developing the next generation optical sources exhibiting ever-increasing output energy, peak power and frequency agility while also providing decreased size, weight, and cost of these systems for customers. Applied Energetics utilizes patented, dual-use technologies to advance critical industries. Leveraging our proprietary fiber-based architecture and wavelength- and pulse-agility capability, our Ultrashort Pulse (USP) technology can enable users to achieve specific effects across different use cases with an unmatched blend of size, weight, and power attributes. While initially designed to meet the emerging needs and priorities for the national security community, our directed energy technology also has commercial applications in both the biomedical and advanced manufacturing industries.

Our UltraShort Pulse Lasers (USP) are designed to provide:

- Frequency Agile Optical Sources from Ultraviolet (UV) to Far Infrared (IR)
- Pulse Duration Agility
- Size, Weight, and Power Optimization
- Advanced Fiber Applications
- Laser Guided Energy (LGE®)
- Laser Induced Plasma Channel (LIPC®)

The Applied Energetics scientific team is continuously innovating and expanding our patent portfolio to cover these technological breakthroughs and further enhance our suite of solutions for threat disruption for the Department of Defense, the intelligence community, and for commercial, biomedical and space applications with optical sources operating from the deep ultraviolet to the far infrared portions of the electromagnetic spectrum.

Applied Energetics has developed, successfully demonstrated and holds all crucial intellectual property rights to a dynamic directed energy technology called Laser Guided Energy (LGE®) and Laser Induced Plasma Channel (LIPC®). LGE and LIPC are technologies that can be used in a new generation of high-tech directed energy systems. Applied Energetics’ LGE and LIPC technologies are wholly owned by Applied Energetics and protected by one or more of Applied Energetics’ 25 issued patents and 11 Government Sensitive Patent Applications (GSPA). These GSPA’s are held under secrecy orders of the US government, providing the company with extended protection rights. The company also has nine pending patent applications. We continue to file patent applications as we deem appropriate to protect our intellectual property and enhance our competitive advantage.

Applied Energetics’ directed energy technologies are vastly different from conventional directed energy systems, i.e. Applied Energetics’ proprietary fiber-based architecture is a key differentiator for our most recent technology demonstrators. Compared with traditional continuous wave laser technologies with their larger footprints, AE’s architecture enables orders of magnitude size-weight-power reductions on all deliverables, creating powerful, dual-use and agile systems that can fit a host of platforms while delivering very high-intensity, ultrashort pulses of light to the required target. This unique directed energy solution allows extremely high peak power and energy, with target and effects tunability, and is effective against a wide variety of potential targets.

Applied Energetics’ unique optical fiber-based laser architectures also enable unmatched wavelength agility as well as pulse duration agility. Using innovative and highly specialized frequency shifting techniques, wavelengths can be custom tuned from the deep ultraviolet to the far infrared. In addition, temporal outputs can be adjusted from continuous wave to sub-picoseconds. The technology enables the customer to adjust the lasers’ operating parameters, ultimately creating more flexibility to change wavelength and pulse width. This feature allows for optimization of laser performance for defense or commercial applications.

Our proprietary USP laser technology provides a significantly more compact solution than current continuous wave laser platforms while still delivering high peak power. Continuous wave laser systems are typically used to heat a target and, during continuous illumination, this heat transfer leads to melting or charring of the material. Using continuous wave output powers that now exceed 100 kilowatts (1kW = 1000 watts), it can take anywhere from seconds to minutes to impact a target. By contrast, Applied Energetics has delivered USP lasers to national security users that exceed five terawatts (1 TW = 1 trillion watts) in peak power, with the difference being that this peak power from a USP laser is delivered in a pulse that is less than a trillionth of a second. During this short pulse duration, and having such a high peak intensity, near-instantaneous ablation of the surface of the threat takes place. The net results of our innovative USP approaches are highly effective lasers with mountable footprints that require only a fraction of the size and weight of other-directed energy technologies.

As Applied Energetics looks toward the future, our corporate strategic roadmap builds upon the significant value of the company’s USP laser capabilities and key intellectual property, including LGE and LIPC, to offer our prospective partners, co-developers and system integrators a variety of next-generation ultrashort pulse and frequency-agile optical sources, from the ultraviolet to the far infrared portion of the electromagnetic spectrum, to address numerous challenges within the national security, biomedical, and advanced manufacturing market sectors.

### Recent Developments

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.

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.

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.

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.

### Ongoing Business Operations

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.

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.

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.

### Business Development Activities

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.

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.

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.

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.

### Strategic Plan and Analysis

The core of our strategy has been to continue growing our management and science teams with highly qualified individuals. This has driven our recruitment efforts in the areas of R&D, science, modeling and simulation, marketing and finance. We are also contemplating adding members to our Board of Directors and our Board of Advisors. Our board and leadership team have worked to align key innovations with our roadmap to encourage and enable internal filing for a broad, strategic, and robust intellectual property portfolio and continue surveying the literature for acquisitions of parallel intellectual property to that end. We also intend to pursue strategic corporate acquisitions in related fields and technology. The company’s management continues to explore any favorable equity financing opportunities.

Our goal with the Applied Energetics Strategic Plan is to increase the energy, peak power and frequency agility of USP optical sources while decreasing the size, weight, and cost of these systems. We are in the process of developing this breadth of very high peak power USP lasers and additional optical sources that have a 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.

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.

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.

Through our analysis of the market, and in discussions with potential customers, we remain convinced that customers are becoming more receptive and interested in directed energy technologies. According to the US Department of Defense fiscal budgets from 2017 through 2023, its directed energy spending grew from approximately $500 million in 2017 to over $1.695 billion in 2023, an increase of nearly 240%. Market analysis and projections have estimated that this directed energy sector is anticipated to reach $32.1 billion globally by 2033. We continue to be optimistic about our future and the growing opportunities in directed energy applications, especially since this growth to nearly $1.7 B annually is being accomplished without a recognized Program of Record (POR) for directed energy platforms. We believe that once these technologies are funded in production for a POR, or are approved to be integrated on fielded platforms in volumes to effect threat reduction, these DOD budgets for directed energy will grow exponentially larger to support the technology insertion. Notwithstanding the funding cuts at the ONR as described above, the Applied Energetics team anticipates a continuation of strong funding for the directed energy community. With our existing patent portfolio, and through further advancements of our technologies, we believe we have the substantial building blocks needed to become a significant and successful developer in the USP marketplace. These innovations could play a significant role in the efforts from the new administration to implement the Golden Dome for America program by advancing directed energy and other integrated technological solutions for missile and other threat protection for the country. Estimated budget requirements would exceed $50B annually.

Our research and development programs depend on our ability to procure the necessary optical and fabricated materials, components, electronics and other supplies. A significant, prolonged increase in inflation could negatively impact the cost of materials and components, which could be a particular problem with respect to our fixed fee contracts. Within the current geopolitical context, there are ongoing embargos of exports from some global suppliers of various materials that are used in electronics and some diode and laser materials, which can have negative effects on technology supply chains. This, coupled with tariffs and other trade disruptions, could significantly impair our ability to source necessary supplies and equipment when and in quantities needed. We continuously monitor potential supply chain issues and supplier liquidity and work with our supply base to ensure adequate sources of materials at reasonable costs. In some instances, we depend upon a single source of supply, but we are developing multiple sources, both internal to AE and externally where possible to mitigate the risk. In some cases, we must comply with specific procurement requirements, which can limit the suppliers and subcontractors we may utilize.

### Results of Operations

### Comparison of Operations for the Three Months Ended March 31, 2025 and 2024:

|  | 2025 | 2024 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Revenue | $209,753 | $134,235 | 75,518 | 56.26% |
| Cost of revenue | (63,914) | (274,432) | 210,518 | -76.71% |
| General and administrative | (2,609,688) | (2,316,899) | (292,789) | 12.64% |
| Selling and marketing | (318,784) | (75,559) | (243,225) | 321.90% |
| Research and development | (323,047) | (80,780) | (242,267) | 299.91% |
| Other income | 14 | 2,057 | (2,043) | -99.32% |
| Net loss | $(3,105,666) | $(2,611,378) | (494,288) | 18.93% |

### Revenue

Revenue increased by $75,518 to approximately $209,753 for the three months ended March 31, 2025 from $134,235 for the three months ended March 31, 2024. The increase in revenue represents an additional contract that we received and commenced performing in June 2024. Offsetting this, in late April 2025, we were informed by our customer that two of our contracts are unfunded and remain unfunded at this time. The contracts would remain open, but we should stop work until and if funding is determined in the future. The company continues to work on the technology underlying the contracts as part of its internal research and development program, and the customer and the company continue to look for new funding sources within the contracting agency or within other departments of the DOD.

### Cost of Revenue

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.

### General and Administrative

General and administrative expenses increased by $292,789 to approximately $2,609,688 for the three months ended March 31, 2025, compared to approximately $2,316,899 for the three months ended March 31, 2024, primarily due to an increase in salaries and employee benefits and consulting of approximately $150,500 mainly due to non-cash compensation, an increase in travel and meals of approximately $22,742 an increase in software and licenses of approximately $16,300 an increase in depreciation expense of approximately $4,000 and increased capacity to include space, supplies, legal and insurance of $99,700.

### Selling and Marketing

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.

### Research and Development

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.

### Net Loss

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.

### Liquidity and Capital Resources

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. For the three months ended March 31, 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.

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.

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.

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

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.

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.

The company’s existence depends upon management’s ability to develop profitable operations. Management is devoting substantially all of its efforts to developing its business and raising capital, as needed, and cannot be certain that these efforts will be successful. Management’s business development efforts may not result in profitable operations. To fund its research and development and marketing efforts, the company’s management continues to explore possible financing opportunities through discussions with investment bankers and private investors. The company may not be successful in its effort to secure additional financing on terms it considers favorable. The accompanying consolidated financial statements do not include any adjustments that might result should the company be unable to continue as a going concern.

## Controls and procedures

As filed, 984 characters.

### Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2025 Based on that evaluation, our Principal Executive Officer has concluded that our disclosure controls and procedures as of March 31, 2025 are not effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

### Changes in Internal Controls Over Financial Reporting

There was no change in our internal controls over financial reporting that occurred during the period covered by this report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

Filed May 15, 2025.
Source: SEC EDGAR, the filing index for accession 0001213900-25-043482. Last ingested by Listed: Nov 5, 2026, 16:50 ET. No prices; not investment advice.