Applied Energetics

"Innovative Ultrafast Lasers and Particle Beam Systems"

Applied Energetics Reports Fourth Quarter 2010 Financial Results


TUCSON, Ariz. — March 14, 2011-- Applied Energetics, Inc., (NASDAQ: AERG), today reported summary financial results for the fourth quarter and fiscal year ended December 31, 2010. The Company will host a live conference call today, March 14th at 11:00 a.m. (Eastern Time).

Fourth Quarter and Year-to-Date 2010 Summary Financial Results

Revenue for the fourth quarter of 2010 increased about 162% to approximately $3.4 million, compared to approximately $1.3 million for the same period last year. Counter-IED (CIED) program revenue for the fourth quarter of 2010 increased by $2.1 million to $2.4 million as activities were focused on fulfilling our customers' requirements under the $10.4 million contract modification received in January of 2010. Revenue from Laser Guided Energy™ (LGE) for the fourth quarter of 2010 increased by $15,000 to $563,000 , and revenue from High Voltage products also increased by $191,000 to $329,000 for the fourth quarter of 2010. Revenues for the Ultrashort Pulse Laser product line had a decrease of $192,000 for the fourth quarter of 2010

Net loss attributable to common stockholders for the fourth quarter of 2010 was $1.0 million, or $0.01 per basic and diluted common share, compared to the prior comparable period net loss attributable to common stockholders of $1.7 million or $0.02 per basic and diluted common share.

Revenue for the twelve months ended December 31, 2010 was approximately $13.1 million, compared to approximately $7.5 million for the same period last year, an increase of 75%. Revenues from the CIED product line increased by $6.7 million to $9.1 million and revenues from the Ultrashort Pulse Laser product line increased by $358,000 to $684,000. Additionally, our High Voltage product line increased by $120,000 to $370,000. Offsetting these increases was a reduction in LGE product line revenue of approximately $1.5 million; total LGE revenue for 2010 was $2.9 million.

Net loss attributable to common stockholders for the twelve months ended December 31, 2010 was $3.2 million, or $0.04 per basic and diluted common share, as compared to a net loss attributable to common stockholders of $9.7 million or $0.11 per basic and diluted common share for the same period last year. Net loss attributable to common stockholders included non-cash stock based compensation of $1.0 million and $1.8 million for the 2010 and 2009 periods, respectively.

At December 31, 2010, the Company had approximately $9.0 million in cash and cash equivalents as compared to $9.8 million in cash, cash equivalents and a certificate of deposit at December 31, 2009.

At December 31, 2010, the Company had a backlog (workload remaining on signed contracts) of approximately $3.3 million, to be completed within the next twelve months.

Joe Hayden, President, commented, "2010 showed improvement for our company with increased revenues, controlled costs and several significant events including the continued field support of our Banshee Counter-IED system, the development of the next generation Banshee system, and the establishment of an important teaming agreement with L-3 Interstate Electronics Corporation. Our efforts to implement our Strategic Plan to diversify our business are beginning to show positive results with increased interest from potential commercial customers. Increasing our commercial revenues will be especially important given the challenging Federal Budget environment which has adversely affected funding for development programs within the military. We believe that the ultra-short pulse laser and high voltage technologies that we have developed will offer new capabilities for commercial applications and our investment in these areas will provide diversification in a time of reduced Federal, and military, budgets."

Conference Call

Applied Energetics will host a conference call on March 14, 2011, at 11:00 a.m. ET. Shareholders and other interested parties may participate in the conference call by dialing +1 888 680 0892 (domestic) or +1 617 213 4858 (international) and entering access code 66215688, a few minutes before 11:00 a.m. ET on March 14, 2011. A link to the call can also be found on the Internet at www.appliedenergetics.com

A replay of the conference call will be accessible two hours after its completion through March 21 by dialing +1 888 286 8010 (domestic) or +1 617 801 6888 (international) and entering access code 37055234.  The call will also be archived for 30 days at Investor Relations

About Applied Energetics, Inc.

Applied Energetics, Inc., based in Tucson, Arizona, specializes in development and manufacture of advanced high performance lasers, high voltage electronics, advanced optical systems, and integrated guided energy systems for defense, aerospace, industrial, and scientific customers worldwide. Applied Energetics pioneered the development of Laser Guided Energy(TM) (LGE(TM)) technology, and related solutions for defense and security applications. For more information about Applied Energetics, please visit www.appliedenergetics.com

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995:

Certain statements contained in this News Release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve a number of known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

Such factors include, but are not limited to: the dependence on sales of a limited number of products and the uncertainty of the timing and magnitude of government funding and orders, dependence on sales to government customers; the uncertainty of patent protection; the uncertainty of strategic alliances; the uncertainty of management tenure; the impact of third-party suppliers' manufacturing constraints or difficulties; management's ability to achieve business performance objectives, market acceptance of, and demand for, the Company's products, and resulting revenues; development and testing of technology and products; manufacturing capabilities; impact of competitive products and pricing; litigation and other risks detailed in the Company's filings with the Securities and Exchange Commission. The words "looking forward," "believe," "may," "plan," "seek," "strategy," "demonstrate," "intend," "expect," "continue," "contemplate," "estimate," "anticipate," "will," "likely" and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. Applied Energetics undertakes no obligation to update any forward-looking statements contained in this news release.

Financial Table

Consolidated Statements Of Operations Statement of Operations Balance Sheets

Consolidated Statements Of Operations

APPLIED ENERGETICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
    
  For the three months ended
 December 31,
 2010 2009
    
 Revenue   $ 3,354,339     $ 1,264,404  
    
 Cost of revenue   3,124,750      1,197,321  
    
 Gross profit   229,589      67,083  
    
 Operating expenses   
 General and administrative   909,356      1,524,149  
 Selling and marketing   225,299      70,168  
 Research and development   69,243      131,081  
 Total operating expenses   1,203,898      1,725,398  
    
 Operating loss   (974,309)     (1,658,315) 
    
 Other (expense) income   
 Interest expense   (928)     (1,112) 
 Interest income   1,942      4,339  
 Other      -  
  Total other   1,014      3,227  
    
 Net loss (973,295)    (1,655,088) 
    
 Preferred stock dividends   (45,842)   (55,080) 
 Deemed dividend from induced conversion of
  Series A Preferred Stock
  -    
    
 Net loss attributable to common stockholders $ (1,019,137) $ (1,710,168)
    
 Net loss per common share – basic and diluted   $ (0.01)     $ (0.02) 
    
 Weighted average number of shares outstanding, basic and diluted   91,068,357     88,968,812  

Statements Of Operations

APPLIED ENERGETICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
       
   FOR THE YEAR ENDED DECEMBER 31 ,
  2010  2009 2008
       
 Revenue  $ 13,089,136   $ 7,459,808  $ 16,614,211
 Cost of revenue    12,274,759     7,007,923      15,874,818  
       
 Gross profit     814,377     451,885      739,393  
       
 Operating expenses:       
 General and administrative    2,924,439    6,795,972      8,470,656  
 Settlement expenses    -    1,337,409      -  
 Selling and marketing    664,665     631,578      251,349  
 Research and development    161,280     1,182,652      1,372,396  
 Total operating expenses     3,750,384     9,947,611      10,094,401  
       
 Operating loss    (2,936,007)   (9,495,726)     (9,355,008) 
       
 Other income (expense):       
 Interest expense    (5,374)    (1,131)     (2,099) 
 Interest income    8,588     60,562      637,475  
 Other income    -     -      10  
  Total other income    3,214     59,431      635,386  
       
 Loss before provision for income taxes   (2,932,793)   (9,436,295)     (8,719,622) 
       
 Provision (benefit) for income taxes    -      -     -  
       
 Net loss    (2,932,793)   (9,436,295)     (8,719,622) 
       
 Preferred stock dividends    (207,221)    (242,174)     (870,985) 
 Deemed dividend from induced conversion of Series A preferred stock    (11,478)     -     (3,336,734) 
       
 Net loss attributable to common stockholders  $(3,151,492)  $(9,678,469)   $(12,927,341) 
       
 Net loss attributable to common stockholders per
  common share – basic and diluted
   $ (0.04)    $ (0.11)     $ (0.16) 
       
 Weighted average number of common shares
  outstanding, basic and diluted
  89,211,315   86,794,287    81,528,544 

Balance Sheets

APPLIED ENERGETICS, INC.
CONSOLIDATED BALANCE SHEETS
     
  DECEMBER 31 ,
  2010  2009
 ASSETS    
 Current assets    
 Cash and cash equivalents  $ 8,983,281 $ 8,983,281
 Certificate of Deposit    -      225,000  
 Accounts receivable - net    2,022,292     1,074,944  
 Inventory - net    683,546      785,479  
 Prepaid expenses    365,506      447,295  
 Other receivables    48,717      52,295  
 Total current assets    12,103,342     12,189,656  
 Long term receivable    205,313      205,313  
 Property and equipment - net    2,507,814     2,845,607  
 Other assets    10,000      20,800  
 TOTAL ASSETS  $ 14,826,469  $ 15,261,376
     
 LIABILITIES AND STOCKHOLDERS’ EQUITY     
 Current liabilities    
 Accounts payable    $ 870,009     $ 428,413  
 Accrued expenses    798,962      313,448  
 Insurance premium financing (3.9% interest for 2010,
 4.5% interest for 2009)
   206,720      214,834  
 Accrued compensation    507,341      505,188  
 Customer deposits    126,282      104,160  
 Billings in excess of costs    6,505      42,716  
 Total current liabilities    2,515,819     1,608,759  
     
 Total liabilities    2,515,819     1,608,759  
     
 Commitments and contingencies     
     
 Stockholders’ equity    
 Series A convertible preferred stock, $.001 par value, 2,000,000 shares authorized and 107,172 shares issued and outstanding at December 31, 2010 (Liquidation preference $2,679,300); 135,572 shares issued and outstanding at December 31, 2009 (Liquidation    107      136  
 Common stock, $.001 par value, 125,000,000 shares
  authorized; 91,068,357 shares issued and outstanding at December 31, 2010; 88,968,812 shares issued and outstanding at December 31, 2009
   91,068      88,969  
  Additional paid-in capital    78,738,520      76,931,065  
  Accumulated deficit    (66,519,045)    (63,367,553) 
 Total stockholders’ equity    12,310,650     13,652,617  
 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  $ 14,826,469   $ 15,261,376