SEC Company Response from APPLIED ENERGETICS, INC. (AERG, AERGP) (CIK 0000879911) (AERG) — Sep 13, 2005
APPLIED ENERGETICS, INC. (AERG, AERGP) (CIK 0000879911)
Date: Sept. 13, 2005 · CIK: 0000879911 · Accession: 0001144204-05-028721
AI Filing Summary & Sentiment
Reasoning
Referenced dates: August 31, 2005
Letter
September 13, 2005 Securities and Exchange Commission 100 F Street Washington, D.C. 20549 Attention: Ms. Linda Cvrkel Ionatron, Inc. (the "Company") Form 10-K for the year ended December 31, 2004 File No. 1-14015 (the "Form 10-K")
Dear Ms. Cvrkel:
This letter is being submitted in response to the Staff's comment letter dated August 31, 2005 to the Company's Form 10-K (the "Comment Letter"). We have numbered the responses contained herein to correspond to the comments contained in the Comment Letter.
Management's Discussion and Analysis Results of Operations, page 12
1. COMMENT: Please revise to disclose results of operations for each reportable segment and the company as a whole. Refer to Item 303(a) of Regulation S-K.
ANSWER: The Company will provide separate line item comparisons for each reportable segment and the company as a whole, as appropriate, in future filings.
Note 1 - Summary of Significant Accounting Policies
Goodwill and Indefinite Life Intangible Assets, page F-12
2. COMMENT: You state that you believe that that the North Star Trade name is an indefinite life intangible asset. Supplementally advise us and expand your disclosure regarding your basis and assumptions that enabled you to reach this conclusion. As part of your response, specifically discuss your consideration of North Star's financial performance, and any assumptions used in anticipated cash flows that will result from this trade name over its indefinite life. We may have further comment upon reviewing your response.
<PAGE>
Securities and Exchange Commission Page 2 September 8, 2005
ANSWER: A key factor in determining that the North Star tradename intangible asset has an indefinite life is the length of time North Star has been in business. The Company has been in business for over 15 years and has built and maintained a solid reputation in the high voltage product industry via word of mouth among its customer base.
In our calculation of the North Star acquisition value, the customer list proved difficult to quantify since North Star's customers are primarily derived from word of mouth and referrals from existing customers. In a sense, the value associated with potential customers is due, primarily, to the Company's good reputation, and therefore, is embodied in the tradename.
Management has no intention of changing the North Star core name and the good reputation of the Company was a key factor in its purchase. Ionatron has the ability to continue the business of North Star - and intends to do so.
The $ 603,000 value assigned to the Tradename was determined by a valuation analysis prepared by Ionatron with the assistance of outside consultants in connection with the acquisition of North Star. The value is based on a discount of projected future cash flows. North Star is a segment of Ionatron and the tradename is used in the continued promotion of North Star products.
The Company will include the last sentence of the third paragraph and the complete fourth paragraph above in future filings.
Note 12 - Commitments and Contingencies
3. COMMENT: We note that your operating leases contain escalation clauses. It is not apparent from the disclosures whether the Company's policy is to straight-line rental expense in accordance with paragraph 15 of SFAS 13. Expand the footnote to specifically disclose, if true, this accounting treatment in view of the lease terms.
ANSWER: The Company's policy is to straight-line rental expense in accordance with paragraph 15 of SFAS 13. Expanded footnote disclosure will be provided in future filings as requested.
<PAGE>
Securities and Exchange Commission Page 3 September 8, 2005
Other
4. COMMENT: We urge all persons who are responsible for the accuracy and adequacy of the disclosure in the filings reviewed by the staff to be certain that they have provided all information investors require. Since the company and its management are in possession of all facts relating to a company's disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made.
In connection with responding to our comments, please provide, in writing, a statement from the company acknowledging that
o the company is responsible for the adequacy and accuracy of the disclosure in the filings;
o staff comments or changes to disclosure in response to staff comments in the filings reviewed by the staff do not foreclose the Commission from taking any action with respect to the filing; and
o 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.
ANSWER: The Company acknowledges that:
o the company is responsible for the adequacy and accuracy of the disclosure in the filings;
o staff comments or changes to disclosure in response to staff comments in the filings reviewed by the staff do not foreclose the Commission from taking any action with respect to the filing; and
o 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.
Please do not hesitate to contact the undersigned if you have any comments or questions.
Very truly yours,
IONATRON INC.
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[IONATRON LOGO]
3590 East Columbia Street
Tucson, AZ 85714
Telephone (520) 628-7415
FAX (520) 622-3835
Email: ionatron@ionatron.net
September 13, 2005
Securities and Exchange Commission
100 F Street
Washington, D.C. 20549
Attention: Ms. Linda Cvrkel
Ionatron, Inc. (the "Company")
Form 10-K for the year ended December 31, 2004
File No. 1-14015 (the "Form 10-K")
Dear Ms. Cvrkel:
This letter is being submitted in response to the Staff's comment letter
dated August 31, 2005 to the Company's Form 10-K (the "Comment Letter"). We have
numbered the responses contained herein to correspond to the comments contained
in the Comment Letter.
Management's Discussion and Analysis
Results of Operations, page 12
1. COMMENT: Please revise to disclose results of operations for each
reportable segment and the company as a whole. Refer to Item
303(a) of Regulation S-K.
ANSWER: The Company will provide separate line item comparisons for
each reportable segment and the company as a whole, as
appropriate, in future filings.
Note 1 - Summary of Significant Accounting Policies
Goodwill and Indefinite Life Intangible Assets, page F-12
2. COMMENT: You state that you believe that that the North Star Trade name
is an indefinite life intangible asset. Supplementally advise
us and expand your disclosure regarding your basis and
assumptions that enabled you to reach this conclusion. As part
of your response, specifically discuss your consideration of
North Star's financial performance, and any assumptions used
in anticipated cash flows that will result from this trade
name over its indefinite life. We may have further comment
upon reviewing your response.
<PAGE>
Securities and Exchange Commission
Page 2
September 8, 2005
ANSWER: A key factor in determining that the North Star tradename
intangible asset has an indefinite life is the length of time
North Star has been in business. The Company has been in
business for over 15 years and has built and maintained a
solid reputation in the high voltage product industry via word
of mouth among its customer base.
In our calculation of the North Star acquisition value, the
customer list proved difficult to quantify since North Star's
customers are primarily derived from word of mouth and
referrals from existing customers. In a sense, the value
associated with potential customers is due, primarily, to the
Company's good reputation, and therefore, is embodied in the
tradename.
Management has no intention of changing the North Star core
name and the good reputation of the Company was a key factor
in its purchase. Ionatron has the ability to continue the
business of North Star - and intends to do so.
The $ 603,000 value assigned to the Tradename was determined
by a valuation analysis prepared by Ionatron with the
assistance of outside consultants in connection with the
acquisition of North Star. The value is based on a discount of
projected future cash flows. North Star is a segment of
Ionatron and the tradename is used in the continued promotion
of North Star products.
The Company will include the last sentence of the third
paragraph and the complete fourth paragraph above in future
filings.
Note 12 - Commitments and Contingencies
3. COMMENT: We note that your operating leases contain escalation clauses.
It is not apparent from the disclosures whether the Company's
policy is to straight-line rental expense in accordance with
paragraph 15 of SFAS 13. Expand the footnote to specifically
disclose, if true, this accounting treatment in view of the
lease terms.
ANSWER: The Company's policy is to straight-line rental expense
in accordance with paragraph 15 of SFAS 13. Expanded
footnote disclosure will be provided in future filings as
requested.
<PAGE>
Securities and Exchange Commission
Page 3
September 8, 2005
Other
4. COMMENT: We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the
staff to be certain that they have provided all information
investors require. Since the company and its management are in
possession of all facts relating to a company's disclosure,
they are responsible for the accuracy and adequacy of the
disclosures they have made.
In connection with responding to our comments, please provide,
in writing, a statement from the company acknowledging that
o the company is responsible for the adequacy and
accuracy of the disclosure in the filings;
o staff comments or changes to disclosure in
response to staff comments in the filings reviewed
by the staff do not foreclose the Commission from
taking any action with respect to the filing; and
o 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.
ANSWER: The Company acknowledges that:
o the company is responsible for the adequacy and
accuracy of the disclosure in the filings;
o staff comments or changes to disclosure in
response to staff comments in the filings reviewed
by the staff do not foreclose the Commission from
taking any action with respect to the filing; and
o 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.
Please do not hesitate to contact the undersigned if you have any comments
or questions.
Very truly yours,
IONATRON INC.
By: /s/ Stephen McCommon
-----------------------------
Stephen McCommon
Vice President of Finance and
Chief Accounting Officer
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