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SEC Comment Letter for APPLIED ENERGETICS, INC. (AERG, AERGP) (CIK 0000879911) (AERG) — Nov 8, 2010

APPLIED ENERGETICS, INC. (AERG, AERGP) (CIK 0000879911)
Date: Nov. 8, 2010 · CIK: 0000879911 · Accession: 0000000000-10-066603

Financial Reporting Regulatory Compliance Risk Disclosure

AI Filing Summary & Sentiment

Sentiment
Urgency
Document Type
Confidence
SEC Posture
Company Posture

Summary

Reasoning

Date
November 8, 2010
Author
Linda Cvrkel
Form
UPLOAD
Company
APPLIED ENERGETICS, INC. (AERG, AERGP) (CIK 0000879911)

Letter

November 8, 2010 Via Fax & U.S. Mail Mr. Joseph C. Hayden Principal Executive Officer Applied Energetics, Inc. 3590 East Columbia Street Tucson, Arizona 85714

Re: Applied Energetics, Inc. Form 10-K for the year ended December 31, 2009 Filed March 18, 2010 File No. 1-14015

Dear Mr. Hayden: We have reviewed your filing and have th e following comments. We think you should revise your future filings in response to these co mments. If you disagree, we will consider your explanation as to why our comment is inapplicab le or a revision is unnecessary. Please be as detailed as necessary in your response. In some of our comments, we may ask you to provide us with supplemental information so we may bette r understand your disclosure. After reviewing this information, we may or may not raise additional comments.

Please understand that the purpose of our re view process is to assist you in your compliance with the applicable disclosure requir ements 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 on any other aspe ct of our review. Feel free to call us at the telephone numbers listed at the end of this letter.

Please respond to confirm that such comments will be complied with, or, if certain of the comments are deemed inappropriate, advise the staff of your reason. Your response should be submitted in electronic form, under the label “corres p” with a copy to the staff. Please respond within ten (10) business days.

Mr. Joseph C. Hayden Applied Energetics, Inc. November 8, 2010 Page 2

Results of Operations

Litigation Settlement, and Note 1-Organization of Business and Su mmary of Significant Accounting Policies Settlement Expenses, page F-8

1. In light of the materiality of the amount of settlement expenses incurred during 2009, please tell us and expand your disclosure in future filings to indicate the nature and amounts of the costs included in settlement expenses in your consolidated statement of operations. As part of your response and your revised disclosure, you should also explain how the fair value of the 2,283,887 shares i ssued as part of the settlement was determined. Note 14-Subsequent Events, page F-23

2. We note your disclosures indica ting that NewOak opted out of the class action settlement and alleges that the alleged misrepresentations constituted breaches of its agreement with the company and that the company breached wa rranties it made to NewOak in connection with the 2005 private placement. NewOak seeks indemnification and recovery for alleged breach of contract, unjust en richment, quantum meruit, fraudulent misrepresentation, tortuous interference with prospec tive economic relations and violation of Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder, and seeks an award of monetary damages in excess of $10 million, plus punitive damages and attorney’s fees and costs. Please not e that in accordance with ASC 450-20-50-3 if no accrual is made for a loss contingency because one or both of the conditions are not met, or an exposure to loss exists in excess of the amount accrued pursuant to the provisions of ASC 450-20-30-1, disclosure of the contingency shall be made when there is at least a reasonable possibility that a loss or an additional loss may have been incurred. The disclosure shall indicate the nature of the contingency and shall give an estimate of the possible loss or range of loss or state that such an estimate cannot be made. Please revise your disclosures in future filings to disclo se the amount of any accrual for loss that has been established in connection with this pe nding litigation as well as the amount or range of potential loss to which the company is exposed in connection with this pending litigation. Refer to the disclosure requirements outlined in ASC 450-20-50. Other

3. We urge all persons who are responsible for th e accuracy and adequacy of the disclosure in the filing to be certain that the fili ng includes all information required under the Securities Exchange Act of 1934 and that they have provided all information investors require for an informed investment decision. Since the company and its management are in possession of all facts relating to a compa ny’s disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made.

Mr. Joseph C. Hayden Applied Energetics, Inc. November 8, 2010 Page 3

In connection with responding to our comment s, please provide, in writing, a statement from the company acknowledging that: ‚ the company is responsible for the adequacy an d accuracy of the disclo sure 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 federa l 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 sta ff of the Division of Corporati on Finance in our review of your filing or in response to our comments on your filing.

You may contact Effie Simpson at (202) 551-3346, or the undersigned if you have questions regarding comments on the financial statem ents and related matters. Please contact the undersigned with any other questions at (202) 551-3750. Sincerely,

Linda Cvrkel Branch Chief Via Facsimile: Humberto Astorga (520) 622-3835

Show Raw Text
November 8, 2010
 Via Fax & U.S. Mail

 Mr. Joseph C. Hayden Principal Executive Officer Applied Energetics, Inc. 3590 East Columbia Street Tucson, Arizona 85714

Re: Applied Energetics, Inc.
 Form 10-K for the year ended December 31, 2009
Filed March 18, 2010
 File No. 1-14015

Dear Mr. Hayden:
 We have reviewed your filing and have th e following comments.  We think you should
revise your future filings in response to these co mments.  If you disagree, we will consider your
explanation as to why our comment is inapplicab le or a revision is unnecessary.  Please be as
detailed as necessary in your response.  In some  of our comments, we may ask you to provide us
with supplemental information so we may bette r understand your disclosure.  After reviewing
this information, we may or may not raise additional comments.

Please understand that the purpose of our re view process is to assist you in your
compliance with the applicable disclosure requir ements 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 on any other aspe ct of our review.  Feel free to call us at
the telephone numbers listed at  the end of this letter.

Please respond to confirm that such comments will be complied with, or, if certain of the
comments are deemed inappropriate, advise the staff of your reason.  Your response should be
submitted in electronic form, under the label “corres p” with a copy to the staff.  Please respond
within ten (10) business days.

Mr. Joseph C. Hayden Applied Energetics, Inc. November 8, 2010 Page 2

Results of Operations

Litigation Settlement, and
Note 1-Organization of Business and Su mmary of Significant Accounting Policies
Settlement Expenses, page F-8

1. In light of the materiality of the amount of settlement  expenses incurred during 2009,
please tell us and expand your disclosure in future filings to indicate the nature and
amounts of the costs included in  settlement expenses in your consolidated statement of
operations. As part of your response and your revised disclosure, you should also explain
how the fair value of the 2,283,887 shares i ssued as part of the settlement was
determined.
 Note 14-Subsequent Events, page F-23

2. We note your disclosures indica ting that NewOak opted out of the class action settlement
and alleges that the alleged misrepresentations  constituted breaches of its agreement with
the company and that the company breached wa rranties it made to NewOak in connection
with the 2005 private placement.  NewOak seeks indemnification and recovery for
alleged breach of contract, unjust en richment, quantum meruit, fraudulent
misrepresentation, tortuous interference with prospec tive economic relations and
violation of Section 10(b) of  the Exchange Act and Rule 10b-5 promulgated thereunder,
and seeks an award of monetary damages in  excess of $10 million, plus punitive damages
and attorney’s fees and costs.  Please not e that in accordance with  ASC 450-20-50-3 if no
accrual is made for a loss contingency because  one or both of the conditions are not met,
or an exposure to loss exists in excess of the amount accrued pursuant  to the provisions of
ASC 450-20-30-1, disclosure of the contingency shall be made when there is at least a
reasonable possibility that a loss or an  additional loss may have been incurred.  The
disclosure shall indicate the nature of the contingency and shall give an estimate of the
possible loss or range of loss or  state that such an estimate cannot be made.  Please revise
your disclosures in future filings to disclo se the amount of any accrual for loss that has
been established in connection with this pe nding litigation as well as  the amount or range
of potential loss to which the company is exposed in connection with this pending
litigation. Refer to the disclosure requirements outlined in ASC 450-20-50.
 Other

3. We urge all persons who are responsible for th e accuracy and adequacy of the disclosure
in the filing to be certain that the fili ng includes all information required under the
Securities Exchange Act of 1934 and that they  have provided all information investors
require for an informed investment decision.  Since the company and its management are
in possession of all facts relating to a compa ny’s disclosure, they are responsible for the
accuracy and adequacy of the disclosures they have made.

Mr. Joseph C. Hayden Applied Energetics, Inc. November 8, 2010 Page 3

In connection with responding to our comment s, please provide, in writing, a statement
from the company acknowledging that:
‚ the company is responsible for the adequacy an d accuracy of the disclo sure 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 federa l 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 sta ff of the Division of Corporati on Finance in our review of your
filing or in response to our comments on your filing.

You may contact Effie Simpson at (202)  551-3346, or the undersigned if you have
questions regarding comments on the financial statem ents and related matters.  Please contact the
undersigned with any other questions at (202) 551-3750.
Sincerely,

Linda Cvrkel Branch Chief
 Via Facsimile:  Humberto Astorga   (520) 622-3835