Applied Energetics

"Innovative Ultrafast Lasers and Particle Beam Systems"

Applied Energetics Reports Third Quarter 2011 Financial Results


TUCSON, Ariz. — November 9, 2011-- Applied Energetics, Inc., (NASDAQ: AERG), today reported summary financial results for the third quarter ended September 30, 2011. The Company will host a live conference call Thursday, November 10 at 4:30 p.m. (Eastern Time).

Third Quarter and Year-to-Date 2011 Summary Financial Results

Revenue decreased by approximately $2.6 million to $611,000 for the three months ended September 30, 2011 compared to $3.2 million for the three months ended September 30, 2010. Revenue from the C-IED product line decreased by $2.4 million to $0 as the Company completed all deliverables and testing required in the second quarter of 2011. LGE revenue decreased by $459,000 to $407,000 and High Voltage revenues increased by $178,000 to $205,000.

Net loss attributable to common shareholders for the three months ended September 30, 2011 was $1.8 million, or $0.02 per basic and diluted common share, as compared to a net loss of $374,000 or $0.004 per basic and diluted common share for the same period last year.

Revenue decreased approximately $5.2 million to $4.5 million for the nine months ended September 30, 2011 compared to $9.7 million for the nine months ended September 30, 2010. Revenue from the C-IED product line decreased by $4.5 million to $2.2 million as the Company completed all deliverables and testing required under the C-IED contract during the second quarter of 2011. LGE product line revenue decreased $750,000 to $1.6 million and the ultrafast laser revenue decreased by $484,000 to $181,000. Offsetting these decreases was an increase in the High Voltage product line revenue of $427,000 to $478,000.

Net loss attributable to common shareholders for the nine months ended September 30, 2011 was $4.9 million, or $0.05 per basic and diluted common share, as compared to a net loss of $2.0 million or $0.02 per basic and diluted common share for the same period last year.

At September 30, 2011, the Company had approximately $5.5 million in cash and cash equivalents as compared to $9.0 million in cash and cash equivalents at December 31, 2010. The Company initiated cost reduction measures in the third quarter that included reductions in force of non-critical personnel and reductions in employee, executive and board compensation. We will continue to access our staffing requirements based on our level of business activity.

At September 30, 2011, the Company had a backlog (workload remaining on signed contracts) of approximately $0.9 million, to be completed within the next twelve months.

Joe Hayden, President, commented, "We opened our new Ultrafast Laser Applications Center and our Electron Beam Applications Center. We believe that our new products demonstrated at these Application Centers may offer significant growth and opportunity."

Third Quarter 2011 Program and Business Development Initiatives

The US Marine Corps (“USMC”) informed the Company that it was re-evaluating their plan for fielding direct electrical discharge technology for C-IED and would not be funding further procurement of the Company’s tested system in the immediate future.

Applied Energetics was issued a patent for an invention relating to igniting explosive devices through electric and/or electromagnetic discharge following the removal of a secrecy order. The patent claims priority to, and the benefit of, the earlier filing date from the Company’s provisional patent application filed on May 3, 2005.

The Company received an increase in funding of $379,000 from its customer, the U.S. Army’s Armament Research, Development and Engineering Command, to improve high voltage systems and optics to advance the Laser Guided Energy (“LGE”) technology toward a fielded capability.

The Company continued work on its High Voltage project for the Air Force Research Laboratory Phase II SBIR. This project utilizes its nested high voltage generator architecture to power a compact Marx generator for U.S. Air Force High Power Microwave applications. The project has a value of $746,000.

The Company completed its ultrafast laser application center as part of its commercial markets strategy. The application center enables potential customers and strategic partners to use the Company’s ultrafast laser systems to demonstrate and validate new and emerging applications prior to a potential purchase. The Company has processed samples of stainless steel, quartz, glass, graphite, copper and polymer materials. Subsequent to the end of the third quarter the Company entered into a cooperative work agreement with Laser Light Technologies to jointly develop ultra-short pulse lasers and processes for the laser micromachining market.

The Company completed its Electron Beam application center to demonstrate its nested high voltage generator products to potential manufacturing customers who use electron and ion beams in their manufacturing processes. The Electron Beam System, powered by a nested high voltage generatormay be used in a variety of commercial applications including materials processing and cross-linking of polymers.

Conference Call

Applied Energetics will host a conference call on November 10, 2011, at 4:30 p.m. ET. Shareholders and other interested parties may participate in the conference call by dialing +1 888 713 4205 (domestic) or +1 617 213 4862 (international) and entering access code 47880251, a few minutes before 4:30 p.m. ET on November 10, 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 November 17 by dialing +1 888 286 8010 (domestic) or +1 617 801 6888 (international) and entering access code 87290044. The call will also be archived for 30 days at www.appliedenergetics.com.

About Applied Energetics, Inc.

Applied Energetics develops and manufactures ultrafast lasers, high voltage electron beam systems, and other applied energy systems for commercial applications and the U.S. Government. Through the establishment of our core technologies for military applications, we have gained expertise and proprietary knowledge in high performance lasers, high-voltage electronics, advanced dynamic optics and atmospheric and plasma interactions. Potential industrial applications include micromachining for the medical, aerospace, electronic, and automotive industries, materials processing applications such as cross-linking of polymers, sterilization of medical equipment and other uses requiring compact, high energy systems. 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

Balance Sheets Consolidated Statements Of Operations Statements Of Operations YTD

Balance Sheets

APPLIED ENERGETICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
    
 September 30, 2011  December 31, 2010
 (Unaudited)  
 ASSETS   
 Current assets   
 Cash and cash equivalents   $ 5,464,258      $ 8,983,281  
 Accounts receivable   374,327    2,022,292  
 Inventory   93,756    683,546  
 Prepaid expenses and deposits   72,693    365,506  
 Other receivables   50,673    48,717  
 Total current assets   6,055,707      12,103,342  
 Long term receivables   205,313      205,313  
 Property and equipment - net   2,460,119      2,507,814  
 Other assets   -      10,000  
 TOTAL ASSETS   $ 8,721,139      $ 14,826,469  
    
 LIABILITIES AND STOCKHOLDERS’ EQUITY     
 Current liabilities   
 Accounts payable   $ 329,979      $ 870,009  
 Accrued expenses   203,629    1,005,682  
 Accrued compensation   322,813    507,341  
 Customer deposits   13,779    126,282  
 Billings in excess of costs   1,859      6,505  
  Total current liabilities   872,059    2,515,819  
    
 Total liabilities   872,059    2,515,819  
    
 Commitments and contingencies - See Note 9    
    
 Stockholders’ equity   
 Series A Convertible Preferred Stock, $.001 par value, 2,000,000 shares
  authorized;107,172 shares issued and outstanding at September 30, 2011 and at December 31, 2010
  107      107  
 Common stock, $.001 par value, 125,000,000 shares authorized;
  91,671,673 shares issued and outstanding at September 30, 2011 and
  91,068,357 shares issued and outstanding at December 31, 2010
  91,672      91,068  
 Additional paid-in capital   79,136,472      78,738,520  
 Accumulated deficit   (71,379,171)     (66,519,045) 
 Total stockholders’ equity   7,849,080      12,310,650  
 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY   $ 8,721,139      $ 14,826,469  

Consolidated Statements Of Operations

APPLIED ENERGETICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
    
  For the three months ended
 September 30,
 2011 2010
    
 Revenue   $ 611,206     $ 3,260,087  
    
 Cost of revenue   633,868     2,986,640  
    
 Gross profit/(loss)   (22,662)    273,447  
    
 Operating expenses   
 General and administrative   844,135     412,496  
 Selling and marketing   220,522     135,013  
 Research and development   677,665      55,518  
 Total operating expenses   1,742,322     603,027  
    
 Operating loss   (1,764,984)    (329,580) 
    
 Other (expense) income   
 Interest expense   (1,392)     (1,111) 
 Interest income   707      2,074  
  Total other (expense) income   (685)     963  
    
 Net loss   (1,765,669)   (328,617) 
    
 Preferred stock dividends   (45,830)   (45,839) 
    
 Net loss attributable to common stockholders $ (1,811,499) $ 374,456
    
 Net loss per common share – basic and diluted   $ (0.02)     $ 0.004  
    
 Weighted average number of shares outstanding, basic and diluted   91,100,100     89,791,303  

Statements Of Operations YTD

APPLIED ENERGETICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
    
  For the nine months ended
 September 30,
 2011 2010
    
 Revenue  $ 4,450,549      $ 9,734,797  
    
 Cost of revenue   4,233,710     9,150,009  
    
 Gross profit   216,839     584,788  
    
 Operating expenses   
 General and administrative   2,742,705     2,015,082  
 Selling and marketing   886,422     439,366  
 Research and development   1,309,453     92,038  
 Total operating expenses   4,938,580     2,546,486  
    
 Operating loss   (4,721,741)    (1,961,698) 
    
 Other (expense) income   
 Interest expense   (3,732)     (4,446) 
 Interest income   2,847      6,646  
  Total other (expense) income   (885)     2,200  
    
 Net loss   (4,722,626)   (1,959,498) 
    
 Preferred stock dividends   (137,500)   (161,380) 
 Deemed dividend from induced conversion of
  Series A Preferred Stock
  -      (11,478) 
    
 Net loss attributable to common stockholders $ (4,860,126) $ (2,132,356)
    
 Net loss per common share – basic and diluted   $ (0.05)     $ (0.02) 
    
 Weighted average number of shares outstanding, basic and diluted   90,969,324     89,179,404