Gregory Quarles
About Gregory Quarles
Gregory J. Quarles (age 64 as of August 2025) is CEO Emeritus and a director of Applied Energetics, Inc. (AERG). He served as CEO from May 2019 to November 25, 2024 and as President since January 2021 before transitioning to CEO Emeritus under a one-year Employment and Transition Agreement; he holds a Ph.D. from Oklahoma State University and is a globally recognized laser scientist with 35+ years’ experience . During his PEO tenure, the company’s “Pay vs Performance” disclosure shows Compensation Actually Paid to the PEO of $2.18M in 2024 vs $0.90M in 2023 and $2.30M in 2022, with total shareholder return values of $217 (2024), $649 (2023), and $576 (2022), and net losses of $9.17M (2024), $7.35M (2023), and $5.77M (2022) .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Applied Energetics (AERG) | CEO; President; CEO Emeritus | CEO: 2019–2024; President: 2021–2024; CEO Emeritus since Nov 25, 2024 | Led company operations and technology strategy; transitioned to advisory role with structured compensation |
| Applied Energetics | Scientific Advisory Board Member | Since Mar 18, 2017 | Provided technical guidance prior to executive appointment |
| Optica (The Optical Society) | Chief Scientific Officer; Board & Executive Committee Member | ~6 years pre-2019 | Drove scientific content, global partnerships, and reports to Congress; strengthened defense/laser ecosystem ties |
External Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Nanocerox, Inc. (private) | Director | Since 2011 | Governance and technology oversight |
| Oklahoma State University | Physics Dept. Advisory Board | Since 2017 | Academic guidance and industry-academic linkage |
| Univ. of Rochester LLE | Advisory Board | Since 2021 | Laser Energetics collaboration; informs advanced laser R&D |
| National Academy of Sciences | Army Board | Since 2024 | National security advisory on advanced technologies |
| U.S. Dept. of Commerce BIS | Sensors & Instrumentation TAC Member | Long-standing | Policy/technology advisory with export/controls insight |
Fixed Compensation
| Year/Term | Role | Salary ($) | Notes |
|---|---|---|---|
| 2024 | CEO (through Nov 25, 2024) | 400,000 | Salary previously increased via amendments in 2020–2022 from $250k to $400k |
| 2023 | CEO | 400,000 | No bonus or stock awards disclosed in SCT for Quarles |
| Nov 25, 2024 – Mar 1, 2025 | CEO Emeritus | 33,333/month | Under Employment & Transition Agreement; subject to performance criteria |
| Mar 1, 2025 onward (initial term) | CEO Emeritus | 29,167/month | Agreement initial term one year, extendable by mutual consent |
Performance Compensation
| Award Type | Grant Date | Shares/Units | Price | Vesting & Performance | Expiration |
|---|---|---|---|---|---|
| CEO Stock Options | Apr 18, 2019 | 5,000,000 | $0.35 | 500,000 vested immediately; remaining 4,500,000 vest in semi-annual installments; time-based schedule disclosed | Apr 18, 2029 |
| Consultant Options (retained) | 2017 | 2,000,000 | N/A | Performance-milestone vesting under prior Consultant Stock Option Agreement | N/A |
| RSUs | Various | 1,954,545 | N/A | Time and milestone vesting; terminate Nov 2032 | Nov 2032 |
Notes:
- Outstanding and exercisable options at FY2024: 4,920,500 at $0.35 expiring 4/18/2029 per the option table . Beneficial ownership footnote indicates 4,880,000 fully vested options included in ownership; the slight variance reflects differing tabulations across disclosures .
- AERG’s 2025 Equity Incentive Plan establishes double-trigger vesting acceleration upon change-in-control with termination without cause/for good reason within 18 months; performance awards are settled based on target or committee-assessed attainment if metrics are indeterminable in a change-in-control .
Equity Ownership & Alignment
| Item | Detail |
|---|---|
| Total Beneficial Ownership | 6,834,545 shares; 3.1% of outstanding shares as of July 28, 2025 |
| Components | Includes options to purchase up to 4,880,000 shares (fully vested) and RSUs covering 1,954,545 shares subject to milestone/time vesting |
| Options (Exercisable) | 4,920,500 at $0.35 (exp. 4/18/2029) |
| Vested vs. Unvested | Options largely vested as above; RSUs unvested subject to milestones/time; terminate Nov 2032 |
| 10b5‑1 Plan (Insider Selling) | New plan adopted Aug 16, 2025 effective Nov 21, 2025–Nov 20, 2026 to sell up to 5,000,000 shares, replacing prior plan expired Oct 14, 2025; potential selling overhang |
Governance and policy notes:
- Company Code of Ethics covers conflicts, insider trading, and compliance; clawback policy embedded in the 2025 Plan allows cancellation/recoupment of awards pursuant to policy/law .
- No pledging/hedging disclosures specific to Quarles in proxy; ownership guidelines not disclosed for executives .
Employment Terms
| Provision | Terms |
|---|---|
| 2019 CEO Executive Employment Agreement | Salary $250k, discretionary bonus eligibility; 5,000,000 options at $0.35 (500k immediate vesting; 4.5M semi-annual); retains 2,000,000 consultant options subject to milestones; salary increased via amendments to $300k (effective Jan 1, 2021), $350k (Jan 1, 2022), $400k (Nov 1, 2022) |
| 2024 Employment & Transition Agreement (CEO Emeritus) | Initial term one year; $33,333/month until Mar 1, 2025 and $29,167/month thereafter; subject to performance criteria; renewable for 1 year by mutual agreement |
| Severance / Change-of-Control | Company states no termination/CIC agreements requiring payments beyond standard 90-day severance and vesting provisions for executive officers; 2025 Plan is double-trigger for equity acceleration |
| Clawback | Awards subject to recoupment under Company Clawback Policy and applicable law |
| Section 16(a) Compliance | One late Form 4 filing for Quarles in 2024 |
Board Governance
- Board service history: Director since May 2019; nominated for one-year Class III term in 2025 slate . Board held 13 formal meetings in 2024; Quarles missed the Nov 24, 2024 meeting; all other nominees attended .
- Committees: On Sept 25, 2025 the board established Audit and Compensation Committees; members are Bradford Adamczyk, Michael Alber, and Scott Andrews; Andrews chairs Compensation and Alber chairs Audit. Quarles is not listed as a committee member (dual-role mitigates potential independence concerns) .
- Independence: As an OTCQB smaller reporting company, independence standards are not required, but the board believes Adamczyk, Schultz, Alber, and Andrews qualify as independent; Quarles, as CEO Emeritus/director, is non-independent .
- Dual-role implications: Quarles’ shift from CEO to CEO Emeritus + director reduces executive control while retaining influence; committee separation and non-independence classification limit compensation oversight risk .
Performance & Track Record
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| PEO Compensation Actually Paid ($) | 2,299,555 | 898,409 | 2,179,999 |
| Total Shareholder Return (fixed $100 basis) ($) | 576 | 649 | 217 |
| Net Loss ($) | 5,771,642 | 7,350,435 | 9,174,958 |
Additional operating context:
- 2025 YTD: Revenue pressure from funding cessations on two DoD-related contracts; nine-month 2025 revenue $389k vs $1.66M in 2024; net loss nine-month 2025 $10.86M; going-concern language remains; material weakness in controls (segregation of duties) noted; capital raised via private offerings in 2025 improved liquidity near term .
Compensation Structure Analysis
- Equity-heavy history: Large option grants (2019 CEO options; 2017 consultant options) and significant RSU position suggest long-term equity alignment but time/milestone vesting (semi-annual) can reduce at-risk nature vs pure performance-based awards .
- Performance metrics: Current plan permits performance share awards; Quarles’ retained consultant options are milestone-based; RSUs include milestone/time vesting; however, detailed weighting and PSU targets (e.g., TSR or EBITDA) are not disclosed for Quarles’ awards .
- Change-in-control terms: Double-trigger acceleration under the 2025 Plan reduces termination risk but can create potential value transfer upon corporate events .
- Clawbacks: Robust clawback language mitigates misconduct risk; late Form 4 filing is a minor compliance blemish .
Risk Indicators & Red Flags
- Going-concern uncertainty due to recurring losses and funding suspensions; reliance on equity financings .
- Material weakness in internal controls (segregation of duties, lack of written procedures) under remediation; increases financial reporting risk .
- Insider selling overhang: New Rule 10b5‑1 plan to sell up to 5,000,000 shares (Nov 2025–Nov 2026) could pressure stock; monitor Rule 10b5‑1 sales cadence and liquidity .
- Program funding risk: DoD/ONR contract funding stopped; broader budget uncertainties (CR timelines, DOGE spending reviews) challenge near-term revenue .
Equity Ownership & Director Compensation (Board context)
- Beneficial ownership group: Directors/executives as a group held ~17.2% as of July 28, 2025; Quarles held 3.1% .
- Director compensation (for context): The proxy discloses cash and option compensation for selected directors (e.g., Adamczyk $215k cash; Alber $419k options in 2024), underscoring equity-centric board compensation; Quarles is treated in the NEO tables, not the director comp table .
Employment & Contracts: Severance and CIC Economics
- Company-wide: “Payments upon Termination or Change-In-Control” indicate no special parachutes beyond standard 90-day severance and vesting provisions; the 2025 Plan sets default double-trigger acceleration for equity .
- Quarles-specific transition: CEO Emeritus monthly pay structure with performance criteria; no disclosed enhanced CIC multiple or tax gross-ups .
Investment Implications
- Alignment: Quarles’ sizeable vested options and RSU holdings (with milestone/time vesting) indicate substantial alignment; however, the announced 10b5‑1 plan to sell up to 5M shares creates potential near-term supply overhang and trading signal to monitor .
- Pay-for-performance: While the plan architecture supports performance awards, Quarles’ historical awards are predominantly time-based/semi-annual vesting; limited disclosure of clear, weighted performance metrics reduces transparency of pay-for-performance linkage .
- Governance: Transition from CEO to CEO Emeritus plus committee formation without Quarles as a member mitigates dual-role concentration risk; nonetheless, ongoing internal control material weakness and going-concern language elevate execution risk .
- Retention: The CEO Emeritus role with structured monthly compensation and long-dated RSUs (to 2032) suggests continued engagement; absence of enhanced severance/CIC multiples reduces shareholder-unfriendly payout risk but also lowers contractual retention levers .