LEGAL PROCEEDINGS

3 Months Ended

Mar. 31, 2017

LEGAL PROCEEDINGS [Abstract]

LEGAL PROCEEDINGS

6. LEGAL PROCEEDINGS

Three of the Company’s shareholders commenced an action entitled Superius Securities Group, Inc.et. al. vs George Farley, et.al. (CA No. 2017-0024-VCMR) in the Court of Chancery of the state of Delaware (the “Action”), The complaint asserts that in March 2016, George Farley (‘Farley”), Chairman of the Board of Directors, Farley, as sole director of Applied Energetics, Inc. (“AERG” or the “Company”), acted without proper shareholder approval to amend AERG’s certificate of incorporation to increase the number of its authorized shares of stock from 125 million to 500 million. However, the Complaint acknowledges that the amendment was approved by a majority of AERG’s shareholders in an April 10, 2012 proxy vote. The Complaint makes no allegations that there was any defect in that vote. The proxy for the amendment expressly permitted such an increase in the number of AERG’s authorized shares “for any proper corporate purpose, including, without limitation, in connection with stock splits, stock dividends, sale of our Common Stock, employee stock incentive plan, other stock ownership plans, acquisitions and to engage in other types of capital raises or strategic transactions.”

The Complaint asserts that Farley breached his fiduciary duties of “loyalty, honesty and due care by issuing shares of stock to himself and the Company’s legal counsel at below fair market value, and failing to pursue corporate opportunities allegedly in the best interests of the Company and its stockholders. The Complaint was amended on May 5, 2017 dismissing one defendant and adding no new claims against the remaining defendant.

The Company believes that the shareholder’s compliant is not meritorious and has filed a memorandum of law in support of a motion to dismiss the shareholder’s complaint in the Chancery Court of the State of Delaware.

We may from time to time be involved in legal proceedings arising from the normal course of business.