SEC Comment Letter for APPLIED ENERGETICS, INC. (AERG, AERGP) (CIK 0000879911) (AERG) — Sep 25, 2008
APPLIED ENERGETICS, INC. (AERG, AERGP) (CIK 0000879911)
Date: Sept. 25, 2008 · CIK: 0000879911 · Accession: 0000000000-08-048452
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 001-14015
Letter
Mail Stop 3561 September 25, 2008 Via U.S. Mail and Facsimile Dana A. Marshall Chief Executive Officer Applied Energetics, Inc. 3590 East Columbia Street Tucson, Arizona 85714 RE: Applied Energetics, Inc. Form 10-K for the fiscal year ended December 31, 2007 File No. 001-14015
Dear Mr. Marshall:
We have reviewed your filing and have the following comments. We have limited our review to only financial statements and related disclosures and do not intend to expand our review to othe r portions of your document. Where indicated, we think you should revise your document in response to these comments a nd comply with the remaining comments in all future filings. If you disagree, we will consider your explanation as to why our comments are inappl icable or a revision is unnecessary. Please be as detailed as necessary in your explanat ion. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure. After reviewing this information, we may raise additional comments. Please understand that the purpose of our re view process is to assist you in your compliance with the applicable disclosure requirements and to enhance the overall disclosure in your filing. We look forward to working with you in these respects. We welcome any questions you may have about our comments or any other aspect of our review. Feel free to call us at the telephone numbers listed at the end of this letter.
Dana A. Marshall Applied Energetics, Inc. Page 2
Form 10-K for the fiscal year ended December 31, 2007
Note 6. Property and Equipment, page F-16 1. We note that you have reported significant net operating losses and negative cash flows from operations since 2005. Also, we note that no impairment charges have been recorded for property and equipment during any of the pe riods in the three years ended December 31, 2007. Based on your history of losses and negative cash flows from operations, it appears that pursuant to paragr aph 8(e) of SFAS No. 144 an impairment test should ha ve been performed for property and equipment during the year ended December 31, 2007. In this regard, please advise us of the date of your property and equipment impairment test for the fiscal year ended December 31, 2007. If no impair ment test was completed during this period, please explain why this was not pe rformed pursuant to paragraph 8(e) of SFAS No. 144. Furthermore, provide us with a summary of material relevant facts, assumptions, and estimates you consid ered in the impairment analysis on an individual asset group basis, and for those long lived assets, for which no impairment charges were taken, further explain to us why you concluded that no impairment of those long-lived assets was necessary for the year ended December 31, 2007. Note 9. Stockholders’ Equity, page F-17
2. We note that you issued Redeemable Conve rtible Preferred Stock (the “Series A Preferred Stock”), which appears to ha ve a redemption date other than that described in page F-18. In this regard, please tell us if th e Series A Preferred Stock is redeemable (1) at a fixed or determinable price on a fixed or determinable date, (2) at the option of th e holder, or (3) upon the occurrence of an event that is not solely within the cont rol of the company. If so, please explain how you consider EITF D-98 in assessing your balance sheet classification of the Series A Preferred Stock.
Form 10-Q for the quarterly period ended June 30, 2008
Note 4- Securities Available for Sale, page 7 3. In light of your recent history of opera ting losses and negative cash flows from operations, please revise future filings to expand your discussion regarding your auction rate securities to explain why you believe you have the ability to hold these investments on a long-term basis.
Dana A. Marshall Applied Energetics, Inc. Page 3
4. We note that you refer to engaging a third pa rty expert valuation firm in note 4 on page 7. In future filings pleas e delete the reference to the “3rd party expert valuation firm” or provide a consent from that valuation firm as an exhibit to your periodic filings. Note 5. Property and Equipment, page 7
5. We note the disclosure included in Note 5 indicating that the Company purchased its principal office, manufacturing, storage, and primary research and development facility from Columbia Tucson, LLC at a purchase price of $2.2 million. We also note that Columbia Tucson, LLC is owned by certain of the Company’s current and former executive officers and by certain of the Company’s principal sharehol ders. Please tell us how the purchase price paid by the Company for this property compared to its estimated fair value at the date it was purchased. Also, if the purchase price paid for this property was estimated to be its estimated fair value, please explain in further detail how this fair value estimate was determined. We may have further comment upon receipt of your response. Exhibit 99.1
6. We note the disclosure of the non-GAAP measure “EBITDA.” Please revise future flings to include the disclosures required by Item 10(e) (i) C and D of Regulation S-K. These disclosures s hould include a discussion as to why management believes presentation of the non-GAAP measure is useful to investors and how the measure is used by the Company’s management.
As appropriate, please respond to these co mments within 10 business days or tell us when you will provide us with a response. Pl ease furnish a cover letter that keys your responses to our comments and provides any requested information. Detailed cover letters greatly facilitate our review. Please understand that we may have additional comments after reviewing your responses to our comments. We urge all persons who are responsi ble for the accuracy an d adequacy of the disclosure in the filing to be certain that the filing includes all in formation required under the Securities Exchange Act of 1934 and th at they have provided all information investors require for an informed invest ment decision. Since the company and its management are in possession of all facts re lating to a company’s disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made.
Dana A. Marshall Applied Energetics, Inc. Page 4
In connection with responding to our comments, please provide, in writing, a statement from the company acknowledging that:
the company is responsible for the adequacy and accuracy of the disclosure in the filing;
staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and the company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
In addition, please be advise d that the Division of Enfo rcement has access to all information you provide to the staff of the Divi sion of Corporation Fi nance in our review of your filing or in response to our comments on your filing.
You may contact Jeffrey Jaramillo at (202) 551-3212 if you have questions regarding comments on the financia l statements and related matte rs. Please contact me at (202) 551-3813 with any other questions.
Sincerely,
L i n d a C v r k e l B r a n c h C h i e f
Via facsimile: Kenneth M. Wall ace, Chief Financial Officer
(520) 622-3835
Show Raw Text
Mail Stop 3561
September 25, 2008
Via U.S. Mail and Facsimile
Dana A. Marshall Chief Executive Officer Applied Energetics, Inc. 3590 East Columbia Street Tucson, Arizona 85714
RE: Applied Energetics, Inc.
Form 10-K for the fiscal year ended December 31, 2007
File No. 001-14015
Dear Mr. Marshall:
We have reviewed your filing and have the following comments. We have
limited our review to only financial statements and related disclosures and do not intend
to expand our review to othe r portions of your document. Where indicated, we think you
should revise your document in response to these comments a nd comply with the
remaining comments in all future filings. If you disagree, we will consider your explanation as to why our comments are inappl icable or a revision is unnecessary. Please
be as detailed as necessary in your explanat ion. In some of our comments, we may ask
you to provide us with information so we may better understand your disclosure. After
reviewing this information, we may raise additional comments.
Please understand that the purpose of our re view process is to assist you in your
compliance with the applicable disclosure requirements and to enhance the overall
disclosure in your filing. We look forward to working with you in these respects. We
welcome any questions you may have about our comments or any other aspect of our review. Feel free to call us at the telephone numbers listed at the end of this letter.
Dana A. Marshall
Applied Energetics, Inc.
Page 2
Form 10-K for the fiscal year ended December 31, 2007
Note 6. Property and Equipment, page F-16
1. We note that you have reported significant net operating losses and negative cash
flows from operations since 2005. Also, we note that no impairment charges have
been recorded for property and equipment during any of the pe riods in the three
years ended December 31, 2007. Based on your history of losses and negative
cash flows from operations, it appears that pursuant to paragr aph 8(e) of SFAS
No. 144 an impairment test should ha ve been performed for property and
equipment during the year ended December 31, 2007. In this regard, please advise us of the date of your property and equipment impairment test for the fiscal
year ended December 31, 2007. If no impair ment test was completed during this
period, please explain why this was not pe rformed pursuant to paragraph 8(e) of
SFAS No. 144. Furthermore, provide us with a summary of material relevant
facts, assumptions, and estimates you consid ered in the impairment analysis on an
individual asset group basis, and for those long lived assets, for which no
impairment charges were taken, further explain to us why you concluded that no
impairment of those long-lived assets was necessary for the year ended December 31, 2007.
Note 9. Stockholders’ Equity, page F-17
2. We note that you issued Redeemable Conve rtible Preferred Stock (the “Series A
Preferred Stock”), which appears to ha ve a redemption date other than that
described in page F-18. In this regard, please tell us if th e Series A Preferred
Stock is redeemable (1) at a fixed or determinable price on a fixed or
determinable date, (2) at the option of th e holder, or (3) upon the occurrence of an
event that is not solely within the cont rol of the company. If so, please explain
how you consider EITF D-98 in assessing your balance sheet classification of the
Series A Preferred Stock.
Form 10-Q for the quarterly period ended June 30, 2008
Note 4- Securities Available for Sale, page 7
3. In light of your recent history of opera ting losses and negative cash flows from
operations, please revise future filings to expand your discussion regarding your
auction rate securities to explain why you believe you have the ability to hold
these investments on a long-term basis.
Dana A. Marshall
Applied Energetics, Inc.
Page 3
4. We note that you refer to engaging a third pa rty expert valuation firm in note 4 on
page 7. In future filings pleas e delete the reference to the “3rd party expert
valuation firm” or provide a consent from that valuation firm as an exhibit to your
periodic filings.
Note 5. Property and Equipment, page 7
5. We note the disclosure included in Note 5 indicating that the Company purchased
its principal office, manufacturing, storage, and primary research and
development facility from Columbia Tucson, LLC at a purchase price of $2.2
million. We also note that Columbia Tucson, LLC is owned by certain of the Company’s current and former executive officers and by certain of the Company’s principal sharehol ders. Please tell us how the purchase price paid by
the Company for this property compared to its estimated fair value at the date it
was purchased. Also, if the purchase price paid for this property was estimated to
be its estimated fair value, please explain in further detail how this fair value
estimate was determined. We may have further comment upon receipt of your
response.
Exhibit 99.1
6. We note the disclosure of the non-GAAP measure “EBITDA.” Please revise
future flings to include the disclosures required by Item 10(e) (i) C and D of Regulation S-K. These disclosures s hould include a discussion as to why
management believes presentation of the non-GAAP measure is useful to investors and how the measure is used by the Company’s management.
As appropriate, please respond to these co mments within 10 business days or tell
us when you will provide us with a response. Pl ease furnish a cover letter that keys your
responses to our comments and provides any requested information. Detailed cover
letters greatly facilitate our review. Please understand that we may have additional
comments after reviewing your responses to our comments.
We urge all persons who are responsi ble for the accuracy an d adequacy of the
disclosure in the filing to be certain that the filing includes all in formation required under
the Securities Exchange Act of 1934 and th at they have provided all information
investors require for an informed invest ment decision. Since the company and its
management are in possession of all facts re lating to a company’s disclosure, they are
responsible for the accuracy and adequacy of the disclosures they have made.
Dana A. Marshall
Applied Energetics, Inc. Page 4
In connection with responding to our comments, please provide, in writing, a
statement from the company acknowledging that:
the company is responsible for the adequacy and accuracy of the disclosure in the
filing;
staff comments or changes to disclosure in response to staff comments do not
foreclose the Commission from taking any action with respect to the filing; and
the company may not assert staff comments as a defense in any proceeding initiated
by the Commission or any person under the federal securities laws of the United States.
In addition, please be advise d that the Division of Enfo rcement has access to all
information you provide to the staff of the Divi sion of Corporation Fi nance in our review
of your filing or in response to our comments on your filing.
You may contact Jeffrey Jaramillo at (202) 551-3212 if you have questions
regarding comments on the financia l statements and related matte rs. Please contact me at
(202) 551-3813 with any other questions.
Sincerely,
L i n d a C v r k e l B r a n c h C h i e f
Via facsimile: Kenneth M. Wall ace, Chief Financial Officer
(520) 622-3835