Basis of Presentation and Going Concern

9 Months Ended

Sep. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BASIS OF PRESENTATION AND GOING CONCERN

1. BASIS OF PRESENTATION AND GOING CONCERN

The accompanying interim unaudited condensed consolidated financial statements include the accounts of Applied Energetics, Inc. and its wholly owned subsidiary North Star Power Engineering, Inc. as of September 30, 2019 (collectively, "company," "Applied Energetics," "we," "our" or "us"). All intercompany balances and transactions have been eliminated. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary for a fair presentation of the results for the interim periods presented have been made. The results for the three-month and nine-month period ended September 30, 2019, may not be indicative of the results for the entire year. The interim unaudited condensed consolidated financial statements should be read in conjunction with the company's audited consolidated financial statements contained in our Annual Report on Form 10-K.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. For the nine months ended September 30, 2019, the company incurred a net loss of approximately $4,007,000, had negative cash flows from operations of $2,293,000 and may incur additional future losses due to the reduction in Government contract activity. These matters raise substantial doubt as to the company's ability to continue as a going concern.

The company's existence is dependent upon management's ability to develop profitable operations. Management is devoting substantially all of its efforts to developing its business and raising capital and there can be no assurance that the company's efforts will be successful. No assurance can be given that management's actions will result in profitable operations or the resolution of its liquidity problems. The accompanying consolidated financial statements do not include any adjustments that might result should the company be unable to continue as a going concern.

In order to improve the company's liquidity, the company's management is actively pursuing additional equity financing through discussions with investment bankers and private investors. There can be no assurance that the company will be successful in its effort to secure additional equity financing.

The financial statements do not include any adjustments relating to the recoverability of assets and the amount or classification of liabilities that might be necessary should the company be unable to continue as a going concern.

LIQUIDITY AND MANAGEMENT'S PLAN

The accompanying unaudited financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. For the nine months ended September 30, 2019, the company incurred a net loss of approximately $4,007,000, had negative cash flows from operations of approximately $2,293,000, conducted financing activities yielding $2,150,000 in proceeds from notes payable and $150,000 in proceeds from issuance of common stock, partially offset by payments on notes payable of $32,000 and expects to incur additional future losses due to the reactivation of its business activities. These matters raise substantial doubt as to the company's ability to continue as a going concern unless the company is able to obtain additional financing for its continuing operations. The financial statements do not include any adjustments relating to the recoverability of assets and the amount or classification of liabilities that might be necessary should the company be unable to continue as a going concern.

As of September 30, 2019, the company had approximately $149,000 in cash and cash equivalents.

USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with United States Generally Accepted Accounting Principles ("GAAP") requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and accompanying notes. Management bases its assumptions on historical experiences and on various other estimates that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. In addition, management considers the basis and methodology used in developing and selecting these estimates, the trends in and amounts of these estimates, specific matters affecting the amount of and changes in these estimates, and any other relevant matters related to these estimates, including significant issues concerning accounting principles and financial statement presentation. Such estimates and assumptions could change in the future, as more information becomes known which could materially impact the amounts reported and disclosed herein. Significant estimates include measurements of income tax assets and liabilities.

RECENT ACCOUNTING PRONOUNCEMENTS

The company has reviewed issued accounting pronouncements and plans to adopt those that are applicable to it. The company does not expect the adoption of any other pronouncements to have an impact on its results of operations or financial position.

CORRECTION OF IMMATERIAL ERROR TO PREVIOUSLY ISSUED UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Subsequent to the filing of the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2019, the Company identified prior period misstatements in the June 30, 2019 financial statements included therein related to stock compensation expense. The misstatements resulted in the understatement statement of general and administrative expense in the Company's consolidated statements of operations. The Company assessed the materiality of these misstatements both quantitatively and qualitatively and determined the correction of these errors to be immaterial to the prior consolidated financial statements taken. As a result, the Company has corrected the misstatements in the accompanying financial statements. The misstatements had no impact basic and diluted earnings per share or on the net cash flows from operating, investing, or financing activities. The misstatements did not impact assets or liabilities

The following tables summarize the impact of the correction to the prior financial statements

	Three months ended June 30, 2019 (as previosly reported)			Adjustments			Three months ended June 30, 2019 (as corrected)
General and administrative	$	610,446		$	37,511		$	647,957
Total operating expenses		760,335			37,511			797,846
Operating loss		(760,335	)		(37,511	)		(797,846	)
Net loss		(786,820	)		(37,511	)		(824,331	)
Net loss attibutable to common stockholders		(795,321	)		(37,511	)		(832,832	)
Net loss per common share - basic and diluted		(0.01	)		-			(0.01	)

	Six months ended June 30, 2019 (as previosly reported)			Adjustments			Six months ended June 30, 2019 (as corrected)
General and administrative	$	1,067,165		$	37,511		$	1,104,676
Total operating expenses		1,342,048			37,511			1,379,559
Operating loss		(1,342,048	)		(37,511	)		(1,379,559	)
Net loss		(1,372,973	)		(37,511	)		(1,410,484	)
Net loss attibutable to common stockholders		(1,389,976	)		(37,511	)		(1,427,487	)
Net loss per common share - basic and diluted		(0.01	)		-			(0.01	)

	June 30, 2019 (as previosly reported)			Adjustments			June 30, 2019 (as corrected)
Common Stock	$	204,157					$	204,157
Additional paid-in capital		83,294,517			(37,511	)		83,257,006
Accumulated  deficit		(84,852,906	)		(37,511	)		(84,890,417	)
Total stockholder' (deficit)		(1,354,232	)		(75,022.00	)		(1,429,254	)