SecProbe.io

CORRESP
1
filename1.htm

                    Phone:

                    (212)
      885-5442

                    Fax:

                    (212)
      885-5001

                    Email:

                    BShiffman@BlankRome.com

    December
29, 2008

    BY FEDEX AND
EDGAR

    Jeffrey
Jaramillo, Esq.

    Division
of Corporate Finance - Mail Stop 3561

    United
States Securities and Exchange Commission

    100 F
Street, N.E.

    Washington,
D.C.  20549

              Re:

              Applied
      Energetics, Inc.

              Form
      10-K for the Fiscal Year Ended December 31,
2007

                Form
      10-Q for the Quarterly Period Ended September 30, 2008

                File No.
      001-1405

    Dear Sir
and Madam:

    On behalf
of Applied Energetics, Inc. (“Company”), we hereby submit the following
responses to the Staff’s comment letter dated December 19, 2008.

    Form 10-Q for the Period
ended September 30, 2008

    Note 13. Subsequent
Events

              1.

              We
      note your response to our prior comment 2, but do not believe that your
      response was fully responsive to our prior comment 2.  Based on
      your response and the disclosure on page 12 in Form 10-Q for the period
      ended September 30, 1008, we note that the negotiated exchange of
      5,051,000 shares of your common stock in exchange for the return of
      505,100 shares of your Series A Redeemable Convertible Preferred Stock
      represents a modification to the original terms of your Convertible
      Preferred Stock held by certain parties to change the initial conversion
      price of $12.00 per share to a conversion price substantially less than
      $12.00 per share.  We also note from your response that the
      Company does not believe that SFAS No. 84, was applicable to this
      modification because the Company did not offer changed conversion
      privileges only exercisable for a limited period of time, but instead
      separately negotiated redemption of the preferred shares on an individual
      basis with a limited number of holders.  We further note from
      the Company’s response that instead accounting for this exchange as an
      inducement offer pursuant to SFAS No. 84, the Company intends to account
      for this transaction as a redemption of the preferred stock pursuant to
      EITF Topic D-42, under which the Company will account for the difference
      between the fair value of the common shares issued and the carrying value
      of the preferred shares as an adjustment to the Company’s net loss to
      arrive at the net loss available to common shareholders.  We
      also note that the Company expects a benefit to result to the Company’s
      common shareholders’ from using this accounting treatment for the
      transaction.

      405
Lexington Avenue New York, NY 10174-0208

      www.BlankRome.com

      Delaware · Florida · New Jersey · New York · Ohio · Pennsylvania · Washington,
DC · Hong
Kong

        Jeffrey
Jaramillo, Esq.

        December
29, 2008

        Page
2

    Based
on your response and the disclosures included on page 12 of your Form 10-Q, we
continue to believe that this transaction may be more appropriately accounted
for as an induced conversion of the preferred shares which should be accounted
for pursuant to the guidance in SFAS No. 84.  In this regard, please
address the following  matters with respect to the exchange
transaction:

              ·

              Tell
      us and disclose in future filings the business purpose for negotiating the
      exchange transaction.  As part of your response, please indicate
      whether the Company contacted all preferred shareholders with the purpose
      of initiating negotiations for a possible exchange
      transaction.  If not, please explain how the parties to the
      exchange transaction were determined.  If these parties
      contacted the Company to initiate the exchange, please note this in your
      response.

              ·

              Please
      indicate the period of time over which the exchange transaction was to be
      completed based on the Company’s negotiations with the six stockholders
      that entered into agreements with the Company to exchange their preferred
      shares for a revised number of common shares.  Also, please
      supplementally provide us with copies of any written agreements regarding
      the exchange transactions that were entered into with the preferred
      shareholders.  Your response should also explain in further
      detail why the Company does not believe that the changed conversion
      privileges were not exercisable for only a limited period of time as you
      have noted in your response.  If the revised conversion
      privileges were exercisable for an unlimited period of time as your
      response implies, please state this in your response and in your revised
      disclosures.

    We
may have further comment upon review of your response and any related agreements
with the preferred shareholders that were parties to this
transaction.

    The
Company’s business purpose for these exchange transactions was to significantly
reduce its quarterly preferred stock dividend expense.

    During
the summer of 2008, some of the preferred stockholders had inquired if the
Company would be interested in an exchange offer, but the Company did not take
any action when first contacted by these holders.  The Company
undertook extensive internal discussions in September and October 2008 to
develop a proposal to approach preferred stockholders.  The Company
did not contact all preferred stockholders for purposes of negotiating a
possible exchange transaction.

    The
Company initiated discussions with certain preferred stockholders in October
2008.  The Company contacted a limited number of preferred
stockholders, initially those with the largest positions in the preferred
stock.  The Company reached agreements with two of these stockholders
on or about October 30, 2008 and then advised the other contacted holders of the
terms of those agreements.  Over the next few days, the Company
entered into agreements with six of the seven initially contacted
stockholders.  Approximately one week later, the Company entered into
an exchange agreement with an eighth preferred stockholder who contacted the
Company asking to exchange its preferred stock on the same terms (following the
Company’s filing of a Form 8-K announcing the
exchanges).  Approximately the same time as the eighth preferred
stockholder’s initial request to exchange its preferred stock, a ninth preferred
stockholder contacted the Company also desiring to exchange its preferred stock
but subsequently determined to retain its preferred stock.  Subsequent
to this last inquiry there has not been any request by preferred stockholders to
exchange additional preferred stock.

    The
Company’s exchange transactions were different from typical exchange
offers.  In typical exchange offers, the issuer sets the terms on
which it will induce holders to accept an exchange offer and announces that the
offer is open for acceptance for a limited period of time.  The
Company’s exchange transactions were different.  First, the Company
did not set any time period by which the agreements had to be executed, and the
offer was neither fixed for a limited period of time nor open for an unlimited
period of time.  Additionally, each exchange was a separately
negotiated transaction and, in each case, the Company and the holder entered
into exchange agreements shortly after agreeing to terms.  For the
foregoing reasons, the Company believes that accounting for the transactions as
a redemption in accordance with EITF Topic D-42 is appropriate.

    Copies of
the exchange agreements will be provided under separate cover.

      Jeffrey
Jaramillo, Esq.

      December
29, 2008

      Page
3

    We thank
you in advance for your assistance. If you have any questions, please do not
hesitate to contact me.

                      Very
      truly yours,

                      /s/
      Brad L. Shiffman

                      Brad
      L. Shiffman