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Document and Entity Information - USD ($)
12 Months Ended
Dec. 31, 2018
Mar. 28, 2019
Jun. 30, 2018
Document And Entity Information      
Entity Registrant Name APPLIED ENERGETICS, INC.    
Entity Central Index Key 0000879911    
Document Type 10-K    
Trading Symbol AERG    
Document Period End Date Dec. 31, 2018    
Amendment Flag false    
Current Fiscal Year End Date --12-31    
Entity a Well-known Seasoned Issuer No    
Entity a Voluntary Filer No    
Entity Shell Company false    
Entity Small Business true    
Entity's Reporting Status Current Yes    
Entity Filer Category Non-accelerated Filer    
Entity Emerging Growth Company false    
Entity Ex Transition Period false    
Entity Public Float     $ 20,745,000
Entity Common Stock, Shares Outstanding   204,197,396  
Document Fiscal Period Focus FY    
Document Fiscal Year Focus 2018    
CONSOLIDATED BALANCE SHEETS - USD ($)
Dec. 31, 2018
Dec. 31, 2017
Current assets    
Cash and cash equivalents $ 178,552 $ 2,764
Subscription receivable 60,000
Other receivable 312 312
Other assets 10,923
Total current assets 249,787 3,076
Long-term assets    
Property and equipment 38,887
Other long-term assets 441,195
TOTAL ASSETS 729,869 3,076
Current liabilities    
Accounts payable 681,408 80,743
Accrued compensation 384,833 266,480
Accrued officer compensation 206,000 230,500
Notes payable, net of unamortized discount of $102,219 53,097
Due to related parties 50,000
Accrued expenses 20 185,927
Accrued dividends 48,079 48,079
Total current liabilities 1,370,340 864,826
Total liabilities 1,370,340 864,826
Commitments and contingencies
Stockholders' deficit    
Series A convertible preferred stock, $.001 par value, 2,000,000 shares authorized and 13,602 shares issued and outstanding at December 31, 2018 and at December 31, 2017 (Liquidation preference $340,050 and $340,050, respectively) 14 14
Common stock, $.001 par value, 500,000,000 shares authorized; 201,697,396 and 157,785,520 shares issued and outstanding at December 31, 2018 and at December 31, 2017, respectively 201,697 157,785
Additional paid-in capital 82,637,749 79,452,635
Accumulated deficit (83,479,931) (80,472,184)
Total stockholders' deficit (640,471) (861,750)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 729,869 $ 3,076
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)
Dec. 31, 2018
Dec. 31, 2017
Statement of Financial Position [Abstract]    
Notes payable of unamortized discount $ 0 $ 102,219
Series A convertible preferred stock, par value (in dollars per Share) $ 0.001 $ 0.001
Series A convertible preferred stock, authorized 2,000,000 2,000,000
Series A convertible preferred stock, issued 13,602 13,602
Series A convertible preferred stock, outstanding 13,602 13,602
Series A convertible preferred stock, liquidation preference $ 340,050 $ 340,050
Common stock, par value (in dollars per Share) $ 0.001 $ 0.001
Common stock, authorized 500,000,000 500,000,000
Common stock, issued 201,697,396 157,785,520
Common stock, outstanding 201,697,396 157,785,520
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Income Statement [Abstract]    
Revenue
Cost of revenue
Gross profit
Operating expenses:    
General and administrative 2,521,837 752,260
Selling and marketing 50,085
Research and development 190,482
Total operating expenses 2,762,404 752,260
Operating loss (2,762,404) (752,260)
Other expense    
Interest expense (245,343) (37,786)
Total other expense (245,343) (37,786)
Loss before provision for income taxes (3,007,747) (790,046)
Provision for income taxes
Net loss (3,007,747) (790,046)
Preferred stock dividends (34,005) (34,005)
Net loss attributable to common stockholders $ (3,041,752) $ (824,051)
Net loss attributable to common stockholders per common share - basic and diluted (in dollars per share) $ (0.02) $ (0.01)
Weighted average number of common shares outstanding, basic and diluted (in shares) 191,593,774 155,034,836
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT - USD ($)
Preferred Stock [Member]
Common Stock [Member]
Additional Paid-in Capital [Member]
Accumulated Deficit [Member]
Total
Balance at Dec. 31, 2016 $ 14 $ 154,785 $ 79,179,432 $ (79,682,138) $ (347,907)
Balance (in shares) at Dec. 31, 2016 13,602 154,785,520      
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Stock-based compensaiton expense     79,013   79,013
Shares issues for services   $ 500 9,500   10,000
Shares issues for services (in shares)   500,000      
Sale of common stock   $ 2,500 60,000   62,500
Sale of common stock (in shares)   2,500,000      
Beneficial conversion factor on notes payable     124,690   124,690
Net loss       (790,046) (790,046)
Balance at Dec. 31, 2017 $ 14 $ 157,785 79,452,635 (80,472,184) (861,750)
Balance (in shares) at Dec. 31, 2017 13,602 157,785,520      
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Stock-based compensaiton expense     380,982   380,982
Shares issues for services   $ 9,745 388,929   398,674
Shares issues for services (in shares)   9,745,210      
Cancellation of shares   $ (5,000) (7,000)   (12,000)
Cancellation of shares (in shares)   (5,000,000)      
Sale of common stock   $ 39,167 2,310,833   2,350,000
Sale of common stock (in shares)   39,166,666      
Beneficial conversion factor on notes payable     111,370   111,370
Net loss       (3,007,747) (3,007,747)
Balance at Dec. 31, 2018 $ 14 $ 201,697 $ 82,637,749 $ (83,479,931) $ (640,471)
Balance (in shares) at Dec. 31, 2018 13,602 201,697,396      
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
CASH FLOWS FROM OPERATING ACTIVITIES    
Net loss $ (3,007,747) $ (790,046)
Adjustments to reconcile net loss to net cash used in operating activities:    
Noncash stock based compensation expense 380,982 89,013
Loss on early payoff of note payable 174,412
Shares issued for services 398,674
Amortization of beneficial conversion feature 204,119 31,941
Amortization of financing costs 22,721 2,529
Interest expense 18,501 3,316
Changes in assets and liabilities:    
Other long term assets (441,195)
Other receivable (60,000)
Prepaids and deposits (19,792)
Accounts payable 629,772 13,757
Accrued expenses and compensation (92,054) 449,074
Net cash used in operating activities (1,791,607) (200,416)
CASH FLOWS FROM INVESTING ACTIVITIES    
Purchase of equipment (38,887)
Net cash used by investing activities (38,887)
CASH FLOWS FROM FINANCING ACTIVITIES    
Proceeds from sale of common stock 2,230,000 62,500
Cancellation of stock (12,000)
Repayment on note payable (361,468)
Proceeds from note payable net of financing costs 149,750 140,000
Net cash provided by financing activities 2,006,282 202,500
Net increase in cash and cash equivalents 175,788 2,084
Cash and cash equivalents, beginning of year 2,764 680
Cash and cash equivalents, end of year 178,552 2,764
Supplemental Cash Flow Information    
Cash paid for interest 18,501
Cash paid for taxes
ORGANIZATION OF BUSINESS, GOING CONCERN AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
12 Months Ended
Dec. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
ORGANIZATION OF BUSINESS, GOING CONCERN AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1 - ORGANIZATION OF BUSINESS, GOING CONCERN AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The consolidated financial statements include the accounts of Applied Energetics, Inc. and its wholly owned subsidiary North Star Power Engineering, Inc. (“North Star”) (collectively, “company,” “Applied Energetics,” “AERG”, “we,” “our” or “us”). All intercompany balances and transactions have been eliminated. Certain reclassifications have been made to prior period financial statement amounts to conform to the current presentation.

 

Going Concern

 

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 year ended December 31, 2018, the company incurred a net loss of approximately $3,008,000, had negative cash flows from operations of $1,792,000 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.

 

Applied Energetics, Inc. is a corporation organized and existing under the laws of the State of Delaware. Our executive office is located at 2480 West Ruthrauff Road, Suite 140 Q, Tucson, Arizona, 85705 and our telephone number is (520) 628-7415.

 

Use of Estimates 

 

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 assumptions 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 impact the amounts reported and disclosed herein. Significant estimates include revenue recognition under the percentage of completion method of contract accounting, the valuation of inventory, carrying amounts of long-lived assets, valuation assumptions for share-based payments and measurements of income tax assets and liabilities, valuation of debt discount related to beneficial conversion features. 

 

Net Loss Attributable to Common Stockholders 

 

Basic loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period before giving effect to stock options, stock warrants, restricted stock units and convertible securities outstanding, which are considered to be dilutive common stock equivalents. Diluted net loss per common share is calculated based on the weighted average number of common and potentially dilutive shares outstanding during the period after giving effect to dilutive common stock equivalents. Contingently issuable shares are included in the computation of basic loss per share when issuance of the shares is no longer contingent. The number of warrants, options, restricted stock units and our Series A Convertible Preferred Stock, which were not included in the computation of earnings per share because the effect was antidilutive, was 27,793,924 and 15,361,688 for the years ended December 31, 2018 and 2017, respectively. 

 

Fair Value of Current Assets and Liabilities 

 

The carrying amount of accounts payable approximate fair value due to the short maturity of these instruments.

 

Cash and Cash Equivalents

 

Cash equivalents are investments in money market funds or securities with an initial maturity of three months or less. These money market funds are invested in government and US treasury based securities.

 

Income Taxes

 

Deferred tax assets and liabilities are recognized currently for the future tax consequences attributable to the temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets if it is more likely than not that such assets will not be realized. Our valuation allowance is currently 100% of our assets.

 

We consider all available evidence, both positive and negative, to determine whether, based on the weight of that evidence, a valuation allowance is needed for some portion or all of a net deferred tax asset. Judgment is used in considering the relative impact of negative and positive evidence. In arriving at these judgments, the weight given to the potential effect of negative and positive evidence is commensurate with the extent to which it can be objectively verified. We record a valuation allowance to reduce our deferred tax assets and review the amount of such allowance annually. When we determine certain deferred tax assets are more likely than not to be utilized, we will reduce our valuation allowance accordingly.

 

Share-Based Payments

 

Employee stock-based compensation cost is measured at grant date, based on the fair value of the award, and is recognized as an expense over the requisite service period. The fair value of each option grant is estimated at the date of grant using the Black-Scholes-Merton option valuation model. We make the following assumptions relative to this model: (i) the annual dividend yield is zero as we do not pay dividends on common stock, (ii) the weighted-average expected life is based on a midpoint scenario, where the expected life is determined to be half of the time from grant to expiration, regardless of vesting, (iii) the risk free interest rate is based on the U.S. Treasury security rate for the expected life, and (iv) the volatility is based on the level of fluctuations in our historical share price for a period equal to the weighted-average expected life. We estimate forfeitures when recognizing compensation expense and adjust this estimate over the requisite service period should actual forfeitures differ from such estimates. Changes in estimated forfeitures are recognized through a cumulative adjustment, which is recognized in the period of change and which impacts the amount of unamortized compensation expense to be recognized in future periods.

 

Significant Concentrations and Risks

 

We maintain cash balances at a commercial bank and, at times, balances exceed FDIC limits. Substantially all of our accounts receivable are with agents or departments of the US Federal Government which, although concentrated in one group of common entities, does not expose us to significant credit risk.

NEW ACCOUNTING STANDARDS
12 Months Ended
Dec. 31, 2018
New Accounting Pronouncements and Changes in Accounting Principles [Abstract]  
NEW ACCOUNTING STANDARDS

NOTE 2 – NEW ACCOUNTING STANDARDS

 

In June 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-07, “Compensation – Stock Compensation (Topic 718).” ASU 2018-07 simplifies the accounting for nonemployee share-based payment transactions. This ASU is effective for public entities for interim and annual reporting periods beginning after December 15, 2018. The company is currently evaluating the potential impact of this guidance and does not believe that it will have a material impact on the company’s consolidated financial statements.

 

In December 2017, the United States (“U.S.”) enacted the Tax Cuts and Jobs Act (the “2017 Act”), which changes existing U.S. tax law and includes various provisions that are expected to affect public companies. The 2017 Act (i) changes U.S. corporate tax rates, (ii) generally reduces a company’s ability to utilize accumulated net operating losses, and (iii) requires the calculation of a one-time transition tax on certain previously unrepatriated foreign earnings and profits (“E&P”). The 2017 Act will also impact estimates of a company’s deferred tax assets and liabilities. On December 22, 2017, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Tax Cuts and Jobs Act (“U.S. Tax Cuts and Jobs Act of 2017”). This new law did not have a significant impact on our consolidated financial statements for the year ended December 31, 2018 because we maintain a valuation allowance on the entirety of our deferred tax assets. However, the reduction of the U.S. federal corporate tax rate from 34% to 21% resulted in a remeasurement of our deferred tax assets.

 

In July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815) I. Accounting for Certain Financial Instruments with Down Round Features II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception (“ASU 2017-11”). Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II of this update addresses the difficulty of navigating Topic 480, Distinguishing Liabilities from Equity, because of the existence of extensive pending content in the FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable non-controlling interests. ASU 2017-11 is effective for fiscal years and interim periods after December 31, 2018.

 

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (“ASU 2016-35”), to reduce diversity in practice of how certain transactions are classified in the statement of cash flows. ASU 2016-15 is effective for fiscal and interim periods beginning after December 15, 2017. The company is currently evaluating the potential impact of this guidance and does not believe that it will have a material impact on the company’s consolidated financial statements.

 

There were other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the company’s financial position, results of operations or cash flows.

CONVERTIBLE NOTES PAYABLE
12 Months Ended
Dec. 31, 2018
Notes Payable [Abstract]  
CONVERTIBLE NOTES PAYABLE

NOTE 3 – CONVERTIBLE NOTES PAYABLE

 

On September 15, 2017 the company borrowed $53,000 under a convertible note maturing June 20, 2018. The note bears interest of 12% payable at maturity. Any amount of principal or interest on the note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid. The note is convertible into shares of the company’s $0.001 par value common stock after March 24, 2018 (the “Initial Conversion Date”). The conversion rate is variable and will be 58% of the average of the lowest one-day trading price during the twenty trading days preceding the holders notice of conversion. The number of shares issuable on conversion is limited to 4.99% of the company’s then issued and outstanding common stock. The company at the request of the note holder has reserved 36,369,879 shares of its $0.001 common stock for conversion. The note can be prepaid at the company’s option until the Initial Conversion Date. The company issued the note holder warrants to purchase 1,320,598 shares of it’s $0.001 par value common stock at an exercise price of $0.0301, The Warrants are exercisable at any time over a 7-year period commencing on the date of issuance. The company calculated a beneficial conversion feature of $53,000 on this note against which approximately $53,000 has been amortized.

 

The above transaction of a note for $53,000 and attached warrants of 1,320,598 shares were put in place by previous management. On March 12, 2018, the company’s newly elected board of directors discussed its options concerning the above referenced loan and attached warrant and agreed that it would be in the best interest of the company and its shareholders to pay in full the $53,000 convertible note funded on October 18, 2017, and additionally repurchase the warrant. On March 16, 2018, the company paid in full the $53,000 convertible note and cancelled its associated warrant to purchase 1,320,598 shares of common stock in a negotiated transaction. This note carried special early stock conversion rights at a material discount to market, and was considered to be a dilutive derivative event that could harm the future abilities of the company to operate and raise money. The total cost to the company to pay off this $53,000 note before the conversion date was $81,000. Additionally, the company cancelled the above referenced attached warrant which allowed the loan holder to purchase 1,320,598 shares of common stock at a material discount to the market. This warrant was given to the noteholder by previous management as an incentive to make the above referenced loan. The cost to the company to cancel the warrant was $40,000. The total combined cost to the company to cancel the loan and warrant was $121,000. The payment was comprised of $56,000 principal and accrued interest, prepayment premium of $25,000 and $40,000 to buy back the warrant. The note was paid in full on March 16, 2018. The company borrowed the $121,000 used to pay off this loan before the conversion date, via an interest free loan from two directors of the company.

 

On October 18, 2017 the company borrowed $33,000 under a convertible note maturing July 20, 2018. The note bears interest of 12% payable at maturity. Any amount of principal or interest on the note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid. The note is convertible into shares of the company’s $0.001 par value common stock after April 16, 2018 (the “Initial Conversion Date”). The conversion rate is variable and will be 58% of the average of the lowest one-day trading price during the twenty trading days preceding the holders notice of conversion. The number of shares issuable on conversion is limited to 4.99% of the company’s then issued and outstanding common stock. The company at the request of the note holder has reserved 18,062,397 shares of its $0.001 common stock for conversion. The note can be prepaid at the company’s option until the Initial Conversion Date. The company calculated a beneficial conversion feature of approximately $24,000 on this note against which $14,000 has been amortized.

 

The above transaction of a note for $33,000 was put in place by previous management. On April 10, 2018, the company’s newly elected board of directors discussed its options concerning the above referenced convertible loan funded on October 18, 2017 in the amount of $33,000 and agreed that it would be in the best interest of the company and its shareholders to pay in full the referenced note which was put in place by previous management. This note carried special early stock conversion rights at a material discount to market and was considered by the company to be a dilutive derivative event that could harm the future abilities of the company to operate and raise money. The cost to the company to pay off this $33,000 note before the conversion date was $51,000. The payment was comprised of $35,000 principal and accrued interest, and prepayment premium of $16,000. The note was paid in full on April 12, 2018.

 

On November 16, 2017 the company borrowed $38,000 under a convertible note maturing August 20, 2018. The note bears interest of 12% payable at maturity. Any amount of principal or interest on the note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid. The note is convertible into shares of the company’s $0.001 par value common stock after May 16, 2018 (the “Initial Conversion Date”). The conversion rate is variable and will be 58% of the average of the lowest one-day trading price during the twenty trading days preceding the holders notice of conversion. The number of shares issuable on conversion is limited to 4.99% of the company’s then issued and outstanding common stock. The company at the request of the Note Holder has reserved 20,716,914 shares of its $0.001 common stock for conversion. The note can be prepaid at the company’s option until the Initial Conversion Date. The company calculated a beneficial conversion feature of approximately $28,000 on this note against which $13,000 has been amortized.

 

The above transaction of a note for $38,000 was put in place by previous management. On May 4, 2018 the company’s newly elected board of directors discussed its options concerning the above referenced convertible loan funded on November 16, 2017 in the amount of $38,000 and agreed that it would be in the best interest of the company and its shareholders to pay in full the referenced note which was put in place by previous management. This note carried special early stock conversion rights at a material discount to market and was considered by the company to be a dilutive derivative event that could harm the future abilities of the company to operate and raise money. The cost to the company to pay off this $38,000 note before the conversion date was $58,000. The payment was comprised of $40,000 principal and accrued interest, and prepayment premium of $18,000. The note was paid in full on May 7, 2018.

 

On December 27, 2017 the company borrowed $28,000 under a convertible note maturing September 20, 2018. The note bears interest of 12% payable at maturity. Any amount of principal or interest on the note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid. The note is convertible into shares of the company’s $0.001 par value common stock after April 16, 2018 (the “Initial Conversion Date”). The conversion rate is variable and will be 58% of the average of the lowest one-day trading price during the twenty trading days preceding the holders notice of conversion. The number of shares issuable on conversion is limited to 4.99% of the company’s then issued and outstanding common stock. The company at the request of the note holder has reserved 17,164,750 shares of its $0.001 common stock for conversion. The note can be prepaid at the company’s option until the Initial Conversion Date. The company calculated a beneficial conversion feature of approximately $20,000 on this note against which $7,000 has been amortized.

 

The above transaction of a note for $28,000 was put in place by previous management. On May 4, 2018 the company’s newly elected board of directors discussed its options concerning the above referenced convertible loan funded on December 27, 2017 in the amount of $28,000 and agreed that it would be in the best interest of the company and its shareholders to pay in full the referenced note which was put in place by previous management. This note carried special early stock conversion rights at a material discount to market and was considered by the company to be a dilutive derivative event that could harm the future abilities of the company to operate and raise money. The cost to the company to pay off this $28,000 note before the conversion date was $41,000. The payment was comprised of $29,000 principal and accrued interest, and prepayment premium of $12,000. The note was paid in full on May 18, 2018.

 

On January 8, 2018 the company borrowed $105,000 under a convertible note maturing August 28, 2018. The note bears interest of 12% payable at maturity. Any amount of principal or interest on the note which is not paid when due shall bear interest at the rate of twenty-four percent (24%) per annum from the due date thereof until the same is paid. The note is convertible into shares of the company’s $0.001 par value common stock after April 27, 2018 (the “Initial Conversion Date”). The conversion rate is variable and will be 55% of the lowest one-day trading price during the twenty trading days preceding the holders notice of conversion. The number of shares issuable on any conversion is limited to 4.99% of the company’s then issued and outstanding common stock. The note holder may increase the 4,99% limit to 9.99% on 61 days prior notice to the company. The company, at the request of the note holder, has reserved 40 million shares of its $0.001 common stock for conversion. The note can be prepaid at the company’s option until May 29, 2018. The company also entered into a security agreement pledging substantially all of its assets except for those related to Laser Guided Energy as collateral for the note.

 

The above transaction of a note for $105,000 was put in place by previous management. On April 25, 2018, the company’s newly elected board of directors discussed its options concerning the above referenced convertible loan funded on January 08, 2017 in the amount of $105,000, the board agreed that it would be in the best interest of the company and its shareholders to pay in full the referenced note before its conversion date. The note carried special early stock conversion rights at a material discount to market, in addition it pledged virtually all the assets of the company as collateral. The company’s board of directors considered this to be a significant derivative event that was extremely dilutive to existing shareholders. Additionally, it was the opinion of the company’s board of directors that this loan harmed the future abilities of the company to operate as a going concern and would make it nearly impossible to raise money in the future. The cost to the company to pay off this $105,000 note before the conversion date was $163,000 The payment was executed as paid in full on April 27, 2018 and was comprised of $109,000 principal and accrued interest, and a prepayment premium of $54,000 for a total of $163,000.

 

On March 8, 2018 the company borrowed $26,500 under a convertible note maturing December 15, 2018. The note bears interest of 12% payable at maturity. Any amount of principal or interest on the note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid. The note is convertible into shares of the company’s $0.001 par value common stock after September 5, 2018 (the “Initial Conversion Date”). The conversion rate is variable and will be 51% of the average of the lowest one day trading price during the thirty trading days preceding the holders notice of conversion. The number of shares issuable on conversion is limited to 4.99% of the company’s then issued and outstanding Common Stock. The company at the request of the Note Holder has reserved 11,008,640 shares of its $0.001 common stock for conversion. The note can be prepaid at the company’s option until the Initial Conversion Date.

 

The above transaction of a note for $26,500 was put in place by previous management. On May 4, 2018 the company’s newly elected board of directors discussed its options concerning the above referenced convertible loan funded on December 27, 2017 in the amount of $26,500 and agreed that it would be in the best interest of the company and its shareholders to pay in full the referenced note which was put in place by previous management. This note carried special early stock conversion rights at a material discount to market and was considered by the company to be a dilutive derivative event that could harm the future abilities of the company to operate and raise money. The cost to the company to pay off this $26,500 note before the conversion date was $37,000. The payment was comprised of $27,000 principal and accrued interest, and prepayment premium of $10,000. The note was paid in full on May 18, 2018.

 

The following reconciles notes payable as of December 31, 2018 and December 31, 2017:

 

    December 31, 2018     December 31, 2017  
Convertible notes payable   $ (98,903 )   $ 152,000  
Financing costs     (3,317 )     (12,000 )
Accrued interest     (13,250 )     3,316  
Amortization of financing costs     22,721       2,529  
Beneficial conversion factor     (111,370 )     (124,689 )
Amortization of beneficial conversion factor     204,119       31,941  
                 
    $     $ 53,097  
DUE TO RELATED PARTIES
12 Months Ended
Dec. 31, 2018
Related Party Transactions [Abstract]  
DUE TO RELATED PARTIES

NOTE 4 – DUE TO RELATED PARTIES

 

During the six months ended June 30, 2018, the company, under its new management, has borrowed a total of $132,000 from Mr. Bradford T Adamczyk, the company’s PEO and director, and Jonathan Barcklow, the company’s Vice President and Secretary and director. These loans are interest free and are payable on demand. On May 1, 2018, both directors submitted subscription agreements for $60,000 for 1,000,000 shares of company common stock, each to be settled with the company’s debt. On July 23, 2018, the remaining balance of $12,000 was paid back to one director.

 

It has come to the board’s attention that on July 31, 2018, our now deceased CEO deposited $50,000 into the company’s account. Although it has been suggested that the funds may have been intended for use toward Mr. Dearmin’s healthcare, the board does not know for certain what the purpose of the funds were or the nature of any intended investment. Accordingly, the board is investigating the appropriate disposition of the funds which will likely be to the estate of Mr. Dearmin. Until such a determination is made, the board does not intend to use these funds for any corporate purpose. For reporting purposes, the company has treated the deposit as a due to related party

STOCKHOLDERS' DEFICIT
12 Months Ended
Dec. 31, 2018
Equity [Abstract]  
STOCKHOLDERS' DEFICIT

NOTE 5 – STOCKHOLDERS’ DEFICIT

 

Authorized Capital Stock

 

Our authorized capital stock consists of 500,000,000 shares of common stock at a par value of $.001 per share and 2,000,000 shares of preferred stock at a par value of $.001 per share.

 

A certificate of amendment to increase our authorize common stock from 125,000,000 to 500,000,000 shares was filed and accepted and recorded by the Secretary of State of the State of Delaware on March 3, 2016.

 

On December 4, 2017 previous management entered into a financial services agreement with BMA Securities for which, on January 26, 2018, it issued 5,000,000 shares of stock valued at $150,000.

 

On January 24, 2018, we issued 1,242,710 shares of common stock in settlement of invoices valued at $38,524.26 with a vendor. This transaction was consummated by previous management to pay its attorney fees.

 

On April 12, 2018 the company received $120,000 from an individual based on a subscription agreement with the company for which the company issued 2,000,000 shares of its common stock.

 

On April 16, 2018 the company received $30,000 from an individual based on a subscription agreement with the company for which the company issued 500,000 shares of its common stock.

 

On April 17, 2018 the company received $100,000 from an individual based on a subscription agreement with the company for which the company issued 1,666,667 shares of its common stock. 

 

On April 26, 2018 the company received $90,000 from an individual based on a subscription agreement with the company for which the company issued 1,500,000 shares of its common stock.

 

On May 4, 2018 the company received $30,000 from an individual based on a subscription agreement with the company for which the company issued 500,000 shares of its common stock.

 

On May 8, 2018 the company received $120,000 from an individual based on a subscription agreement with the company for which the company issued 2,000,000 shares of its common stock.

 

On May 14, 2018 the company received $30,000 from an individual based on a subscription agreement with the company for which the company issued 500,000 shares of its common stock.

 

On May 14, 2018 the company received $200,000 from an individual based on a subscription agreement with the company for which the company issued 3,333,333 shares of its common stock.

 

On May 15, 2018 the company received $30,000 from an individual based on a subscription agreement with the company for which the company issued 500,000 shares of its common stock.

 

On May 16, 2018 the company received $20,000 from an individual based on a subscription agreement with the company for which the company issued 333,333 shares of its common stock.

 

On May 25, 2018 the company received $600,000 from an individual based on a subscription agreement with the company for which the company issued 10,000,000 shares of its common stock.

 

On June 13, 2018 the company received $140,000 from an individual based on a subscription agreement with the company for which the company issued 2,333,333 shares of its common stock.

 

On September 20, 2018 the company received $120,000 from an individual based on a subscription agreement with the company for which the company issued 2,000,000 shares of its common stock.

 

On September 25, 2018 the company received a total of $60,000 from two individuals based on subscription agreements with the company for which the company issued 1,000,000 shares of its common stock.

 

On October 3, 2018 the company received $90,000 from an individual based on a subscription agreement with the company for which the company issued 1,500,000 shares of its common stock.

 

Effective October 19, 2018 the company received $20,000 and a note for $100,000 from an individual based on a subscription agreement with the company for which the company issued 2,000,000 shares of its common stock. The note is non-interest bearing and is to be paid in five monthly payments of $20,000 starting November 20, 2018 The balance of the note receivable at December 31, 2018 was $60,000. In the first three months of 2019, the remaining $60,000 was received.

 

On October 22, 2018 the company received $30,000 from an individual based on a subscription agreement with the company for which the company issued 500,000 shares of its common stock.

 

Effective October 30, 2018, AERG entered into a Mutual Release and Hold Harmless Agreement (“Agreement”) with Gregory Fettig and Mr. Fettig’s former law firm, Duff Bornsen and Fettig, LLP (collectively, the “Fettig Parties”). The Agreement resolves claims concerning the issuance of 5,000,000 shares of AERG common stock, par value $.001 per share, to the Fettig Parties as authorized by prior company director George Farley as compensation for legal services rendered to the company by the Fettig Parties valued at $5,000. The Agreement also resolves claims concerning unpaid invoices to AERG for legal services performed by the Fettig Parties. Pursuant to the Agreement, AERG paid the Fettig Parties an aggregate of $12,000, representing full satisfaction of fees for legal services of $9,825 plus additional consideration of $2,175. The Fettig Parties agreed to surrender to AERG the stock certificate representing the 5,000,000 shares. The Agreement also contains standard representations and warranties and mutual releases and indemnification provisions.

 

On November 1, 2018 the company received $120,000 from an individual based on a subscription agreement with the company for which the company issued 2,000,000 shares of its common stock.

 

On December 7, 2018 the company received $60,000 from an individual based on a subscription agreement with the company for which the company issued 1,000,000 shares of its common stock.

 

On December 21, 2018 the company received $60,000 from an individual based on a subscription agreement with the company for which the company issued 1,000,000 shares of its common stock.

 

On December 31, 2018 the company received $60,000 from an individual based on a subscription agreement with the company for which the company issued 1,000,000 shares of its common stock.

 

In January 2019, the company received $150,000 from 3 non-affiliated individuals based on subscription agreements with the company for which the company issued 2,500,000 shares of its common stock.

 

Preferred Stock

 

As of December 31, 2018 and 2017 there were 13,602 and 13,602 shares of Series A Redeemable Convertible Preferred Stock (the “Series A Preferred Stock”) outstanding, respectively. The company has not paid the dividends commencing with the quarterly dividend due August 1, 2013. Dividend arrearages as of December 31, 2018 including previously accrued dividends included in our balance sheet are approximately $187,000. Our Board of Directors suspended the declaration of the dividend, commencing with the dividend payable as of February 1, 2015 since we did not have a surplus (as such term is defined in the Delaware general corporation Law) as of December 31, 2014, until such time as we have a surplus or net profits for a fiscal year.

 

Our Series A Preferred Stock has a liquidation preference of $25.00 per Share. The Series A Preferred Stock bears dividends at the rate of 6.5% of the liquidation preference per share per annum, which accrues from the date of issuance, and is payable quarterly. Dividends may be paid in: (i) cash, (ii) shares of our common stock (valued for such purpose at 95% of the weighted average of the last sales prices of our common stock for each of the trading days in the ten trading day period ending on the third trading day prior to the applicable dividend payment date), provided that the issuance and/or resale of all such shares of our common stock are then covered by an effective registration statement and the company’s common stock is listed on a U.S. national securities exchange or the Nasdaq Stock Market at the time of issuance or (iii) any combination of the foregoing. If the company fails to make a dividend payment within five business days following a dividend payment date, the dividend rate shall immediately and automatically increase by 1% from 6.5% of the liquidation preference per offered share of Series A preferred stock to 7.5% of such liquidation preference. If a payment default shall occur on two consecutive dividend payment dates, the dividend rate shall immediately and automatically increase to 10% of the liquidation preference for as long as such payment default continues and shall immediately and automatically return to the Initial dividend rate at such time as the payment default is no longer continuing.

 

Each share of Series A Preferred Stock is convertible at any time at the option of the holder into a number of shares of common stock equal to the liquidation preference (plus any unpaid dividends for periods prior to the dividend payment date immediately preceding the date of conversion by the holder) divided by the conversion price (initially $12.00 per share, subject to adjustment in the event of a stock dividend or split, reorganization, recapitalization or similar event.) If the closing sale price of the common stock is greater than 140% of the conversion price on 20 out of 30 trading days, the company may redeem the Series A Preferred Stock in whole or in part at any time through October 31, 2010, upon at least 30 days’ notice, at a redemption price, payable in cash, equal to 100% of the liquidation preference of the shares to be redeemed, plus unpaid dividends thereon to, but excluding, the redemption date, subject to certain conditions. In addition, beginning November 1, 2010, the company may redeem the Series A Preferred Stock in whole or in part, upon at least 30 days’ notice, at a redemption price, payable in cash, equal to 100% of the liquidation preference of the Series A Preferred Stock to be redeemed, plus unpaid dividends thereon to, but excluding, the redemption date, under certain conditions.

 

If a change of control occurs, each holder of shares of Series A Convertible Preferred Stock that are outstanding immediately prior to the change of control shall have the right to require the corporation to purchase, out of legally available funds, any outstanding shares of Series A Convertible Preferred Stock at the defined purchase price. The purchase price is defined as: per share of Preferred Stock, 101% of the liquidation preference thereof, plus all unpaid and accumulated dividends, if any, to the date of purchase thereof. The purchase price is payable, at the corporation’s option, (x) in cash, (y) in shares of the common stock at a discount of 5% from the fair market value of Common Stock on the Purchase Date (i.e. valued at a 95% discount of the Common Stock on the Purchase Date), or (z) any combination thereof.

 

If the Corporation pays all or a portion of the Purchase Price in Common Stock, no fractional shares of Common Stock will be issued; instead, the company will round the applicable number of shares of Common Stock up to the nearest whole number of shares; provided that the Corporation may pay the Purchase Price (or a portion thereof), whether in cash or in shares of Common Stock, only if the Corporation has funds legally available for such payment and may pay the Purchase Price (or a portion thereof) in shares of its Common Stock only if (i) the Common Stock is listed on a U.S. national securities exchange or the Nasdaq Stock Market at the time of issuance and (ii) a shelf registration statement covering the issuance by the Corporation and/or resales of the Common Stock issuable as payment of the Purchase Price is effective on the Payment Date unless such shares are eligible for immediate resale in the public market by non-affiliates of the Corporation.

 

Dividends on our Preferred Stock are payable quarterly on the first day of February, May, August and November, in cash or shares of Common Stock, at our discretion.

 

In the fourth quarter of 2015, the company purchased 93,570 shares of its Series A Convertible Preferred Stock for approximately $58,000. The company cancelled the shares and returned them to unissued status. The company also reversed approximately $331,000 of accrued dividends payable.

 

Share-Based Payments

 

Effective November 12, 2018, the board of directors of Applied Energetics, Inc. adopted the 2018 Incentive Stock Plan. The plan provides for the allocation and issuance of stock, restricted stock purchase offers and options (both incentive stock options and non-qualified stock options) to officers, directors, employees and consultants of the company. The board reserved a total of 50,000,000 for possible issuance under the plan.

 

We have, from time to time, also granted non-plan options to certain officers, directors, employees and consultants. Total stock-based compensation expense for grants to officers, employees and consultants was approximately $381,000 and $89,000 for the years ended December 31, 2018 and 2017, respectively, which was charged to general and administrative expense.

 

There was no related income tax benefit recognized because our deferred tax assets are fully offset by a valuation allowance.

 

The following table sets forth information regarding awards under our 2018 Incentive Stock Plan:

 

As of December 31, 2018
   

Share

 Grants

Approved

 

   

Options

 Outstanding

 

   

Restricted

 Stock Awards

 Outstanding

 

   

Restricted

 Stock Units

 Outstanding

 

   

Shares

 Available for

 Award

 

 
2018 Incentive Stock Plan     50,000,000       13,500,000                   36,500,000  
Total     50,000,000       13,500,000                   36,500,000  

 

We determine the fair value of option grant share-based awards at their grant date, using a Black-Scholes- Merton Option-Pricing Model applying the assumptions in the following table:

 

    For the year ended December 31,  
    2018     2017  
Expected life (years)     5.2 - 10       5  
Dividend yield     0 %     0 %
Expected volatility     80% - 275 %     80 %
Risk free interest rates     3.1% - 3.33 %     1.97 %
Weighted average fair value of options at grant date   $ 0.0597     $ 0.0298  

 

For the year ended December 31, 2018, 13,750,000 options to purchase stock were granted, additionally, no options to purchase stock were exercised, expired or forfeited; no restricted stock purchase offers were granted, vested or forfeited. At December 31, 2018, options to purchase 27,750,000 shares of common stock were outstanding with a weighted average exercise price of $0.1037 with a weighted average remaining contract term of approximately 6.5 years with an aggregate intrinsic value of $-0-. At December 31, 2018 options for 9,712,500 shares were exercisable.

 

On November 1, 2018, a non-plan option for 250,000 shares was granted to a vendor with an exercise price of $0.13 with 62,500 vested on the date of option and an additional 62,500 vesting on the last day of each 90-day period following the date of option.

 

On November 12, 2018 13,500,000 options were grated with an exercise price of $0.07 and a vesting schedule of 36% on grant date and 4% each month to February 2020. Of the 13,500,000 options granted, 5,000,000 each were granted to Messrs. Bradford T. Adamczyk and Jonathan R. Barcklow, an option for 2,500,000 was granted to Mr. John E. Schultz Jr, and an option for 1,000,000 was granted to an independent consultant.

 

As of December 31, 2018, there was approximately $536,000 of unrecognized compensation cost related to unvested stock options granted and outstanding, net of estimated forfeitures. The cost is expected to be recognized on a weighted average basis over a period of approximately one and a half years.

 

During the year ended December 31, 2017 the company granted each member of the Scientific Advisory Board non-plan options to purchase 2 million shares of $.001 par value common stock at a price of $0.05 per share. These options have a five year term and vest to the extent of 500,000 shares on the first anniversary of the grant and to the extent of 62,500 options per month during the 24 months following the initial vesting date.

 

During the year ended December 31, 2017 the company also granted each member of the Scientific Advisory Board performance non-plan options to purchase 1.5 million shares of $0.001 par value common stock at a price of $0.25 per share. These options have a five year term and vest on the date the company has cumulative revenues of $5 million.

 

For the year ended December 31, 2017, 14,000,000 non-plan options to purchase stock were granted, additionally, no options to purchase stock were exercised, expired or forfeited. For the year ended December 31, 2016, 32,000 options to purchase stock were expired, additionally, no options to purchase stock were exercised, forfeited or granted. There was no activity of our restricted stock units and restricted stock grants for the years ended December 31, 2017 and 2016.

 

As of December 31, 2017 options to purchase 14,000,000 shares of common stock were outstanding with a weighted average exercise price of $0.136 with a weighted average remaining contract term of approximately 4.24 years, with an aggregate intrinsic value (amount by which Applied Energetics’ closing stock price on the last trading day of the year exceeds the exercise price of the option) of options outstanding was $0, as the exercise price was greater than the market price. At December 31, 2017 no options were exercisable.

 

As of December 31, 2017 and December 31, 2016, there was approximately $97,000 and -0-, respectively, of unrecognized compensation cost related to unvested stock options granted and outstanding, net of estimated forfeitures. The cost is expected to be recognized on a weighted average basis over a period of approximately 2.25 and -0- years, respectively.

 

The fair value of restricted stock and restricted stock units was estimated using the closing price of our common stock on the date of award and fully recognized upon vesting.

 

The following table summarizes the activity of our stock options for the years ended December 31, 2018, and 2017:

 

    Shares     Weighted Average
Exercise Price
 
             
Outstanding at December 31, 2016         $  
                 
Granted     14,000,000     $ 0.1357  
Exercised         $  
Forfeited or expired         $  
Outstanding at December 31, 2017     14,000,000     $ 0.1357  
                 
Granted     13,750,000     $ 0.0711  
Exercised         $  
Forfeited or expired         $  
Outstanding at December 31, 2018     27,750,000     $ 0.1037  
                 
Exercisable at December 31, 2018     9,712,500     $ 0.0616  

 

As of December 31, 2018 and December 31, 2017 there was no unrecognized stock-based compensation related to unvested restricted stock, net of estimated forfeitures.

COMMITMENTS AND CONTINGENCIES
12 Months Ended
Dec. 31, 2018
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES

NOTE 6 – COMMITMENTS AND CONTINGENCIES

 

Operating Leases

 

In May 2016, we moved and entered into a month-to-month lease agreement to lease office space in Tucson, Arizona.

 

Rent expense was approximately $4,000 and $4,000 for 2018 and 2017, respectively.

 

At December 31, 2018, we had approximately $325 in future minimum lease payments due in less than a year.

 

Guarantees

 

We agree to indemnify our officers and directors for certain events or occurrences arising as a result of the officers or directors serving in such capacity. The maximum amount of future payments that we could be required to make under these indemnification agreements is unlimited. However, we maintain a director’s and officer’s liability insurance policy that limits our exposure and enables us to recover a portion of any future amounts paid. As a result, we believe the estimated fair value of these indemnification agreements is minimal because of our insurance coverage and we have not recognized any liabilities for these agreements as of December 31, 2018 and 2017.

 

Litigation

 

As previously reported in our Current Report on Form 8-K filed on July 9, 2018, on July 3, 2018, we commenced a lawsuit in the Court of Chancery of the State of Delaware against the company’s former director and principal executive officer George Farley and AnneMarieCo LLC (“AMC”).

 

The lawsuit alleges to the following six causes of action:

 

1.       Breach of Fiduciary Duty of Loyalty against George Farley

2.       Breach of Fiduciary Duty of Care against George Farley

3.       Aiding and Abetting Breach of Fiduciary Duty against AMC

4.       Conversion against George Farley

5.       Fraudulent Transfer against George Farley and AMC

6.       Injunctive Relief against George Farley and AMC

 

This report provides an update on the progress of the litigation.

 

In connection with the lawsuit, the company requested a temporary restraining order prohibiting Mr. Farley and AMC from selling their 25 million shares of the company’s common stock which the company alleges were improperly issued. On July 20, 2018, the Delaware Court of Chancery, Vice Chancellor Tamika Montgomery-Reeves presiding, entered a “status quo” order upon the stipulation of the parties, whereby Mr. Farley and AMC agreed not to transfer, alienate or sell any of their shares pending a ruling on the company’s motion for a preliminary injunction.

 

On July 26, 2018, the Delaware Court of Chancery entered a scheduling order setting dates and deadlines for, among other matters, a hearing and briefing schedule on the amount of the bond the company would be required to post to maintain the “status quo” order through the preliminary injunction hearing, a hearing and briefing schedule on the motion for a preliminary injunction, and a discovery schedule.

 

Also, in connection with the lawsuit, on August 8, 2018, the company filed a motion to disqualify Mr. Farley’s attorney, Ryan Whalen, who had previously represented the company.

 

On August 14, 2018, the Delaware Court of Chancery issued an order requiring the company to post a bond in the total amount of $200,446.52. On August 21, 2018, the company posted the bond via Atlantic Specialty Insurance company acting as surety. Pursuant to the contract between the company and Atlantic Specialty Insurance company, the company deposited $200,446.52 in cash as collateral for the surety agreement.

 

On August 23, 2018, the Delaware Court of Chancery court extended the hearing date on the company’s motion for a preliminary injunction to October 23, 2018, and simultaneously ordered an increase in the bond amount of $55,446.52. On August 30, 2018, the company posted the increased bond amount, again with Atlantic Specialty Insurance Company acting as surety, and deposited the additional $55,446.52 in cash with the surety.

 

On September 7, 2018, the Delaware Court of Chancery entered an order setting a briefing schedule on the company’s motion to disqualify Mr. Whalen.

 

On September 10, 2018, the Delaware Court of Chancery entered an order governing the production and exchange of confidential documents and information among the parties in discovery.

 

In another Current Report on Form 8-K filed September 13, 2018, the company updated the status of the litigation to include events that occurred up to that date. This report further updates the progress of the litigation.

 

On October 16, 2018, the Delaware Court of Chancery entered a scheduling order continuing the hearing date on the company’s motion for a preliminary injunction against defendants George Farley and AMC to December 14, 2018.

 

The October 16, 2018 order also required the company to increase its bond amount by an additional $185,301.86 ($80,301.86 for AMC and $105,000.00 for Mr. Farley) to account for the continued hearing date. On October 24, 2018, the company posted the additional bond amount of $185,301.86.

 

On October 16, 2018, the Delaware Court of Chancery issued an order denying the company’s motion to disqualify Mr. Whalen.

 

On January 23, 2019, the Delaware Court of Chancery issued a Memorandum Opinion, granting a preliminary injunction prohibiting Mr. Farley and AMC from selling their 25 million shares of the company’s common stock, which the company alleges were improperly issued. On January 24, 2019, the Delaware Court of Chancery issued a revised Memorandum Opinion correcting calculations regarding the increased bond amount.

 

In granting the preliminary injunction, the Court found that the company met “its considerable burden” of demonstrating it was likely to win its lawsuit against Mr. Farley and AMC. Specifically, the Court found it was “reasonably probable” Mr. Farley had unlawfully issued the 25 million shares without proper authorization, Mr. Farley had breached his duty of loyalty to the company, Mr. Farley was unlikely to prove the stock issuance was procedurally or substantively “fair” to the company, and Mr. Farley had fraudulently transferred 20 million of the shares to AMC. Finally, the Court ruled because Farley and AMC’s 25 million shares represented one eighth of the company’s outstanding ownership, the injunction was necessary to protect the company’s capital structure, ability to attract new investors, ability to raise new capital and continue deployment of its plans now underway to revitalize its business.

 

The company had previously requested the temporary restraining order on July 20, 2018, the Delaware Court of Chancery, Vice Chancellor Tamika Montgomery-Reeves presiding, entered a “status quo” order upon the stipulation of the parties, whereby Mr. Farley and AMC agreed not to transfer, alienate or sell any of their shares pending a ruling on the company’s motion for the preliminary injunction.

 

In its Memorandum Opinion, the Court also required that the company post additional bond money, bringing the total cash collateral for the surety agreement to $582,377.26. The company posted the additional bond amount, and deposited the additional cash amount with the surety, on January 29, 2019.

 

In a related matter, on February 8, 2019, the company filed a complaint against Stein Riso Mantel McDonough, LLP (“Stein Riso”), its former counsel, in the United States District Court for the Southern District of New York alleging the following:

 

1.       breach of fiduciary duty;

2.       legal malpractice;

3.       aiding and abetting a breach of fiduciary duty;

4.       voidance of fees under New York Rules of Professional Conduct 1.8;

5.       violation of New York Rule of Professional Conduct 1.5;

6.       securities fraud;

7.       breach of contract; and

8.       unjust enrichment.

 

The complaint against Stein Riso followed the issuance, on January 23, 2019, of a Memorandum Opinion granting the company’s motion for a preliminary injunction by the Delaware Court of Chancery in the case against George Farley and AMC. Stein Riso has not yet formally responded to the complaint.

 

As with any litigation, the company cannot predict the outcome with certainty, but the company expects to provide further updates on the status of the litigation as circumstances warrant.

 

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

INCOME TAXES
12 Months Ended
Dec. 31, 2018
Income Tax Disclosure [Abstract]  
INCOME TAXES

NOTE 7 – INCOME TAXES

 

An analysis of the difference between the expected federal income tax for the years ended December 31, 2018 and 2017, and the effective income tax rate is as follows::

 

    2018           2017        
 Taxes calculated at federal rate   $ (631,627 )     21.0 %   $ (247,062 )     35.0 %
 State income tax, net of federal benefit     (35,215 )     1.2 %     (36,800 )     5.5 %
 Change in Valuation Allowance     712,113       -23.7 %     283,862       -40.5 %
 Prior period adjustment     (88,626 )     2.9 %           0.0 %
 Permenant items     43,355       -1.4 %           0.0 %
 Provision (benefit) for taxes   $       0 %   $       0 %

 

Tax effects of temporary differences at December 31, 2018 and December 31, 2017 are as follows:

 

    2018     2017  
Noncurrent deferred tax assets (liabilities):                
Deferred Tax Assets                
Accrued compensation   $ 88,789     $  
Net Operating Loss Carryforwards and Credits     13,933,735       13,310,411  
Total Deferred Tax Assets   $ 14,022,524     $ 13,310,411  
                 
Valuation allowance     (14,022,524 )     (13,310,411 )
Net deferred tax / (liabilities)   $     $  

 

Deferred tax assets and liabilities are computed by applying the federal and state income tax rates in effect to the gross amounts of temporary differences and other tax attributes, such as net operating loss carry-forwards. In assessing if the deferred tax assets will be realized, the company considers whether it is more likely than not that some or all of these deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which these deductible temporary differences reverse. During the year ended December 31, 2018, the deferred tax assets and the valuation allowance increased by $712,000 primarily as a result of current year tax loss.

 

On December 22, 2017, the Tax Cuts and Jobs Act (“The Act”), was signed into law by President Trump. The Act includes a number of provisions, including the lowering of the U.S. corporate tax rate from 35 percent to 21 percent, effective January 1, 2018 and the establishment of a territorial-style system for taxing foreign-source income of domestic multinational corporations. The company re-measured its deferred tax assets and liabilities as of December 31, 2017, applying the reduced corporate income tax rate and recorded a provisional decrease to the deferred tax assets of $7,701,000, with a corresponding adjustment to the valuation allowance.

 

As of December 31, 2018 and 2017, we have cumulative federal and Arizona net operating loss carryforwards of approximately $62.1 million and $8.0 million, respectively, which can be used to offset future income subject to taxes. Of the $62.1 million, of Federal net operating loss carryforwards, $59.3 begin to expire in 2020. The remaining balance of $2.8 million is limited in annual usage of 80% of current years taxable income, but do not have an expiration. Arizona net operating loss carryforwards begin to expire in 2032. In addition there are federal net operating loss carryforwards is approximately $27.0 million from USHG related to pre-merger losses. We also have pre-merger federal capital loss carryforwards of approximately $520,000.

 

As of December 31, 2018, we had cumulative unused research and development tax credits of approximately $239,000 and $340,000, which can be used to reduce future federal and Arizona income taxes, respectively. As of December 31, 2018, we have cumulative unused federal minimum tax credit carryforwards from USHG of approximately $244,000. The federal minimum tax credit carryforwards are not subject to expiration under current federal tax law.

 

Utilization of our USHG pre-merger net operating loss carryforwards and tax credits is subject to substantial annual limitations due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such an annual limitation could result in the expiration of the net operating loss carryforwards and tax credit carryforwards before utilization.

 

We have unrecognized tax benefits attributable to losses and minimum tax credit carryforwards that were incurred by USHG prior to the merger in March 2004 as follows:

 

Balance at December 31, 2016   $ 9,635,824  
Additions related to prior year tax positions      
Additions related to current year tax positions      
Reductions related to prior year tax positions and settlements        
Balance at December 31, 2017   $ 9,635,824  
Additions related to prior year tax positions      
Additions related to current year tax positions      
Reductions related to prior year tax positions and settlements      
Balance at December 31, 2018   $ 9,635,824  

 

These benefits are not recognized as a result of uncertainty regarding the utilization of the loss carryforwards and minimum tax credits. If in the future we utilize the attributes and resolve the uncertainty in our favor, the full amount will favorably impact our effective income tax rate.

 

The company considers the U.S. and Arizona to be major tax jurisdictions. As of December 31, 2018, for federal tax purposes the tax years 2013, 2014, 2015, 2016 and 2017 for Arizona the tax years 2013 through 2018 remain open to examination. The company currently does not expect any material changes to unrecognized tax positions within the next twelve months.

 

We recognize interest and penalties related to unrecognized tax benefits in income tax expense. As of December 31, 2018 and 2017, we had no accrued interest or penalties related to our unrecognized tax benefits.

SUBSEQUENT EVENT
12 Months Ended
Dec. 31, 2018
Subsequent Events [Abstract]  
SUBSEQUENT EVENT

NOTE 8 – SUBSEQUENT EVENT

 

In January 2019, the company received $150,000 from 3 non-affiliated individuals based on subscription agreements with the company for which the company issued 2,500,000 shares of its common stock.

 

Also in January 2019, the company received $200,000 from a non-affiliated individual based on a 10% Promissory Note (“Note”). The Note matures six months from the date of issuance. The Note will be accompanied by a Common Stock Purchase Warrant (a “Warrant”) entitling the holder to purchase one share of the company’s common stock, par value $0.001 per share (the “Common Shares”), for each $2.00 of Note principle, at an exercise price of $0.07 per share, for two years form the date of issuance.

 

In March 2019, the company received $200,000 from two non-affiliated individuals based on a 10% Promissory Note (“Note”). The Note matures six months from the date of issuance. The Note will be accompanied by a Common Stock Purchase Warrant (a “Warrant”) entitling the holder to purchase one share of the company’s common stock, par value $0.001 per share (the “Common Shares”), for each $2.00 of Note principle, at an exercise price of $0.07 per share, for two years form the date of issuance.

 

Effective October 19, 2018 the company received $20,000 and a note for $100,000 from an individual based on a subscription agreement with the company for which the company issued 2,000,000 shares of its common stock. The note is non-interest bearing and is to be paid in five monthly payments of $20,000 starting November 20, 2018 The balance of the note receivable at December 31, 2018 was $60,000. In the first three months of 2019, the remaining $60,000 was received.

 

The company’s management has evaluated subsequent events occurring after December 31, 2018, the date of our most recent balance sheet, through the date our financial statements were issued.

ORGANIZATION OF BUSINESS, GOING CONCERN AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
12 Months Ended
Dec. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Presentation

Basis of Presentation

 

The consolidated financial statements include the accounts of Applied Energetics, Inc. and its wholly owned subsidiary North Star Power Engineering, Inc. (“North Star”) (collectively, “company,” “Applied Energetics,” “AERG”, “we,” “our” or “us”). All intercompany balances and transactions have been eliminated. Certain reclassifications have been made to prior period financial statement amounts to conform to the current presentation.

Going Concern

Going Concern

 

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 year ended December 31, 2018, the company incurred a net loss of approximately $3,008,000, had negative cash flows from operations of $1,792,000 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.

 

Applied Energetics, Inc. is a corporation organized and existing under the laws of the State of Delaware. Our executive office is located at 2480 West Ruthrauff Road, Suite 140 Q, Tucson, Arizona, 85705 and our telephone number is (520) 628-7415.

Use of Estimates

Use of Estimates 

 

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 assumptions 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 impact the amounts reported and disclosed herein. Significant estimates include revenue recognition under the percentage of completion method of contract accounting, the valuation of inventory, carrying amounts of long-lived assets, valuation assumptions for share-based payments and measurements of income tax assets and liabilities, valuation of debt discount related to beneficial conversion features. 

Net Loss Attributable to Common Stockholders

Net Loss Attributable to Common Stockholders 

 

Basic loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period before giving effect to stock options, stock warrants, restricted stock units and convertible securities outstanding, which are considered to be dilutive common stock equivalents. Diluted net loss per common share is calculated based on the weighted average number of common and potentially dilutive shares outstanding during the period after giving effect to dilutive common stock equivalents. Contingently issuable shares are included in the computation of basic loss per share when issuance of the shares is no longer contingent. The number of warrants, options, restricted stock units and our Series A Convertible Preferred Stock, which were not included in the computation of earnings per share because the effect was antidilutive, was 27,793,924 and 15,361,688 for the years ended December 31, 2018 and 2017, respectively. 

Fair Value of Current Assets and Liabilities

Fair Value of Current Assets and Liabilities 

 

The carrying amount of accounts payable approximate fair value due to the short maturity of these instruments.

Cash and Cash Equivalients

Cash and Cash Equivalents

 

Cash equivalents are investments in money market funds or securities with an initial maturity of three months or less. These money market funds are invested in government and US treasury based securities.

Income Taxes

Income Taxes

 

Deferred tax assets and liabilities are recognized currently for the future tax consequences attributable to the temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets if it is more likely than not that such assets will not be realized. Our valuation allowance is currently 100% of our assets.

 

We consider all available evidence, both positive and negative, to determine whether, based on the weight of that evidence, a valuation allowance is needed for some portion or all of a net deferred tax asset. Judgment is used in considering the relative impact of negative and positive evidence. In arriving at these judgments, the weight given to the potential effect of negative and positive evidence is commensurate with the extent to which it can be objectively verified. We record a valuation allowance to reduce our deferred tax assets and review the amount of such allowance annually. When we determine certain deferred tax assets are more likely than not to be utilized, we will reduce our valuation allowance accordingly.

Share-Based Payments

Share-Based Payments

 

Employee stock-based compensation cost is measured at grant date, based on the fair value of the award, and is recognized as an expense over the requisite service period. The fair value of each option grant is estimated at the date of grant using the Black-Scholes-Merton option valuation model. We make the following assumptions relative to this model: (i) the annual dividend yield is zero as we do not pay dividends on common stock, (ii) the weighted-average expected life is based on a midpoint scenario, where the expected life is determined to be half of the time from grant to expiration, regardless of vesting, (iii) the risk free interest rate is based on the U.S. Treasury security rate for the expected life, and (iv) the volatility is based on the level of fluctuations in our historical share price for a period equal to the weighted-average expected life. We estimate forfeitures when recognizing compensation expense and adjust this estimate over the requisite service period should actual forfeitures differ from such estimates. Changes in estimated forfeitures are recognized through a cumulative adjustment, which is recognized in the period of change and which impacts the amount of unamortized compensation expense to be recognized in future periods.

Significant Concentrations and Risks

Significant Concentrations and Risks

 

We maintain cash balances at a commercial bank and, at times, balances exceed FDIC limits. Substantially all of our accounts receivable are with agents or departments of the US Federal Government which, although concentrated in one group of common entities, does not expose us to significant credit risk.

CONVERTIBLE NOTES PAYABLE (Tables)
12 Months Ended
Dec. 31, 2018
Notes Payable [Abstract]  
Schedule of reconciles notes payable

The following reconciles notes payable as of December 31, 2018 and December 31, 2017:

 

    December 31, 2018     December 31, 2017  
Convertible notes payable   $ (98,903 )   $ 152,000  
Financing costs     (3,317 )     (12,000 )
Accrued interest     (13,250 )     3,316  
Amortization of financing costs     22,721       2,529  
Beneficial conversion factor     (111,370 )     (124,689 )
Amortization of beneficial conversion factor     204,119       31,941  
                 
    $     $ 53,097  
STOCKHOLDERS' DEFICIT (Tables)
12 Months Ended
Dec. 31, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Schedule of Incentives stock plan

The following table sets forth information regarding awards under our 2018 Incentive Stock Plan:

 

As of December 31, 2018
   

Share

 Grants

Approved

 

   

Options

 Outstanding

 

   

Restricted

 Stock Awards

 Outstanding

 

   

Restricted

 Stock Units

 Outstanding

 

   

Shares

 Available for

 Award

 

 
2018 Incentive Stock Plan     50,000,000       13,500,000                   36,500,000  
Total     50,000,000       13,500,000                   36,500,000  
Schedule of fair value of option awards

We determine the fair value of option grant share-based awards at their grant date, using a Black-Scholes- Merton Option-Pricing Model applying the assumptions in the following table:

 

    For the year ended December 31,  
    2018     2017  
Expected life (years)     5.2 - 10       5  
Dividend yield     0 %     0 %
Expected volatility     80% - 275 %     80 %
Risk free interest rates     3.1% - 3.33 %     1.97 %
Weighted average fair value of options at grant date   $ 0.0597     $ 0.0298  
Schedule of stock options

The following table summarizes the activity of our stock options for the years ended December 31, 2018, and 2017:

 

    Shares     Weighted Average
Exercise Price
 
             
Outstanding at December 31, 2016         $  
                 
Granted     14,000,000     $ 0.1357  
Exercised         $  
Forfeited or expired         $  
Outstanding at December 31, 2017     14,000,000     $ 0.1357  
                 
Granted     13,750,000     $ 0.0711  
Exercised         $  
Forfeited or expired         $  
Outstanding at December 31, 2018     27,750,000     $ 0.1037  
                 
Exercisable at December 31, 2018     9,712,500     $ 0.0616  
INCOME TAXES (Tables)
12 Months Ended
Dec. 31, 2018
Income Tax Disclosure [Abstract]  
Schedule of reconciliation of income taxes

An analysis of the difference between the expected federal income tax for the years ended December 31, 2018 and 2017, and the effective income tax rate is as follows::

 

    2018           2017        
 Taxes calculated at federal rate   $ (631,627 )     21.0 %   $ (247,062 )     35.0 %
 State income tax, net of federal benefit     (35,215 )     1.2 %     (36,800 )     5.5 %
 Change in Valuation Allowance     712,113       -23.7 %     283,862       -40.5 %
 Prior period adjustment     (88,626 )     2.9 %           0.0 %
 Permenant items     43,355       -1.4 %           0.0 %
 Provision (benefit) for taxes   $       0 %   $       0 %
Schedue of deferred tax assets

Tax effects of temporary differences at December 31, 2018 and December 31, 2017 are as follows:

 

    2018     2017  
Noncurrent deferred tax assets (liabilities):                
Deferred Tax Assets                
Accrued compensation   $ 88,789     $  
Net Operating Loss Carryforwards and Credits     13,933,735       13,310,411  
Total Deferred Tax Assets   $ 14,022,524     $ 13,310,411  
                 
Valuation allowance     (14,022,524 )     (13,310,411 )
Net deferred tax / (liabilities)   $     $  
Schedule of unrecognized tax benefits and carryforwards

We have unrecognized tax benefits attributable to losses and minimum tax credit carryforwards that were incurred by USHG prior to the merger in March 2004 as follows:

 

Balance at December 31, 2016   $ 9,635,824  
Additions related to prior year tax positions      
Additions related to current year tax positions      
Reductions related to prior year tax positions and settlements        
Balance at December 31, 2017   $ 9,635,824  
Additions related to prior year tax positions      
Additions related to current year tax positions      
Reductions related to prior year tax positions and settlements      
Balance at December 31, 2018   $ 9,635,824  
ORGANIZATION OF BUSINESS, GOING CONCERN AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]    
Net loss $ (3,007,747) $ (790,046)
Cash flows from operations $ (1,791,607) $ (200,416)
Antidilutive options, restricted stock units, and Series A Convertible Preferred Stock shares excluded from of earnings per share (in shares) 27,793,924 15,361,688
Deferred income tax asset valuation allowance percentage 100.00%  
NEW ACCOUNTING STANDARDS (Details Narrative)
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
New Accounting Pronouncements and Changes in Accounting Principles [Abstract]    
Federal income tax rate 21.00%  
Previous federal income tax rate   34.00%
CONVERTIBLE NOTES PAYABLE (Details) - USD ($)
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Notes Payable [Abstract]    
Convertible notes payable $ (98,903) $ 152,000
Financing costs (3,317) (12,000)
Accrued interest (13,250) 3,316
Amortization of financing costs 22,721 2,529
Beneficial conversion factor (111,370) (124,690)
Amortization of beneficial conversion factor 204,119 31,941
Notes payable $ 53,097
CONVERTIBLE NOTES PAYABLE (Details Narrative) - USD ($)
12 Months Ended
May 04, 2018
Apr. 25, 2018
Apr. 10, 2018
Mar. 16, 2018
Mar. 16, 2018
Mar. 12, 2018
Mar. 08, 2018
Jan. 08, 2018
Dec. 27, 2017
Nov. 16, 2017
Oct. 18, 2017
Sep. 15, 2017
Dec. 31, 2018
Dec. 31, 2017
Debt Instrument [Line Items]                            
Debt face amount                         $ (98,903) $ 152,000
Convertible beneficial conversion feature                         111,370 124,690
Repayment of convertible notes                         $ 361,468
Conversion and cancellation cost of notes and warrants           $ 121,000                
12% Promissory Note [Member]                            
Debt Instrument [Line Items]                            
Debt face amount                       $ 53,000    
Debt maturity date                       Jun. 20, 2018    
Debt interest rate (in percent)                       12.00%    
Description of interest rate terms                       Any amount of principal or interest on the note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid.    
Conversion price (in dollars per share)                       $ 0.001    
Convertible note, initial maturity date                       Mar. 24, 2018    
Description of conversion for convertible notes                       The conversion rate is variable and will be 58% of the average of the lowest one-day trading price during the twenty trading days preceding the holders notice of conversion. The number of shares issuable on conversion is limited to 4.99% of the company’s then issued and outstanding common stock.    
Repayment of convertible notes         $ 53,000                  
Conversion and cancellation cost of notes and warrants           81,000                
Payment of principal and accrued interest           25,000                
12% Promissory Note [Member] | Two Directors [Member]                            
Debt Instrument [Line Items]                            
Borrowings for repayment of notes           121,000                
12% Promissory Note [Member] | Note warrant [Member]                            
Debt Instrument [Line Items]                            
Conversion price (in dollars per share)                       $ 0.001    
Number of warrants purchase                       1,320,598    
Issued of warrants or exercise price                       $ 0.0301    
Issued of warrants or exercisable                       7 years    
Convertible beneficial conversion feature                       $ 53,000    
Convertible beneficial conversion amortized                       $ 53,000    
Cancellation of warrant purchase       1,320,598                    
Payment of principal and accrued interest           40,000                
Prepayment premium           $ 40,000                
12% Promissory Note [Member] | Note holder [Member]                            
Debt Instrument [Line Items]                            
Conversion price (in dollars per share)                       $ 0.001    
Number of shares reserved for conversion (in shares)                       36,369,879    
12% Convertible Notes Due July 20, 2018 [Member]                            
Debt Instrument [Line Items]                            
Debt face amount                     $ 33,000      
Debt maturity date                     Jul. 20, 2018      
Debt interest rate (in percent)                     12.00%      
Description of interest rate terms                     Any amount of principal or interest on the note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid.      
Conversion price (in dollars per share)                     $ 0.001      
Convertible note, initial maturity date                     Apr. 16, 2018      
Description of conversion for convertible notes                     The conversion rate is variable and will be 58% of the average of the lowest one-day trading price during the twenty trading days preceding the holders notice of conversion. The number of shares issuable on conversion is limited to 4.99% of the company’s then issued and outstanding common stock.      
Convertible beneficial conversion feature                     $ 24,000      
Convertible beneficial conversion amortized                     $ 14,000      
Repayment of convertible notes     $ 33,000                      
Conversion and cancellation cost of notes and warrants     51,000                      
Payment of principal and accrued interest     35,000                      
Prepayment premium     $ 16,000                      
12% Convertible Notes Due July 20, 2018 [Member] | Note holder [Member]                            
Debt Instrument [Line Items]                            
Conversion price (in dollars per share)                     $ 0.001      
Number of shares reserved for conversion (in shares)                     18,062,397      
12% Convertible Notes Due August 20, 2018 [Member]                            
Debt Instrument [Line Items]                            
Debt face amount                   $ 38,000        
Debt maturity date                   Aug. 20, 2018        
Debt interest rate (in percent)                   12.00%        
Description of interest rate terms                   Any amount of principal or interest on the note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid.        
Conversion price (in dollars per share)                   $ 0.001        
Convertible note, initial maturity date                   May 16, 2018        
Description of conversion for convertible notes                   The conversion rate is variable and will be 58% of the average of the lowest one-day trading price during the twenty trading days preceding the holders notice of conversion. The number of shares issuable on conversion is limited to 4.99% of the company’s then issued and outstanding common stock.        
Convertible beneficial conversion feature                   $ 28,000        
Convertible beneficial conversion amortized                   $ 13,000        
Repayment of convertible notes $ 38,000                          
Conversion and cancellation cost of notes and warrants 58,000                          
Payment of principal and accrued interest 40,000                          
Prepayment premium 18,000                          
12% Convertible Notes Due August 20, 2018 [Member] | Note holder [Member]                            
Debt Instrument [Line Items]                            
Conversion price (in dollars per share)                   $ 0.001        
Number of shares reserved for conversion (in shares)                   20,716,914        
12% Convertible Notes Due September 20, 2018 [Member]                            
Debt Instrument [Line Items]                            
Debt face amount                 $ 28,000          
Debt maturity date                 Sep. 20, 2018          
Debt interest rate (in percent)                 12.00%          
Description of interest rate terms                 Any amount of principal or interest on the note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid.          
Conversion price (in dollars per share)                 $ 0.001          
Convertible note, initial maturity date                 Apr. 16, 2018          
Description of conversion for convertible notes                 The conversion rate is variable and will be 58% of the average of the lowest one-day trading price during the twenty trading days preceding the holders notice of conversion. The number of shares issuable on conversion is limited to 4.99% of the company’s then issued and outstanding common stock.          
Convertible beneficial conversion feature                 $ 20,000          
Convertible beneficial conversion amortized                 $ 7,000          
Repayment of convertible notes 28,000                          
Conversion and cancellation cost of notes and warrants 41,000                          
Payment of principal and accrued interest 29,000                          
Prepayment premium 12,000                          
12% Convertible Notes Due September 20, 2018 [Member] | Note holder [Member]                            
Debt Instrument [Line Items]                            
Conversion price (in dollars per share)                 $ 0.001          
Number of shares reserved for conversion (in shares)                 17,164,750          
12% Convertible Notes Due August 28, 2018 [Member]                            
Debt Instrument [Line Items]                            
Debt face amount               $ 105,000            
Debt maturity date               Aug. 28, 2018            
Debt interest rate (in percent)               12.00%            
Description of interest rate terms               Any amount of principal or interest on the note which is not paid when due shall bear interest at the rate of twenty-four percent (24%) per annum from the due date thereof until the same is paid.            
Conversion price (in dollars per share)               $ 0.001            
Convertible note, initial maturity date               Apr. 27, 2018            
Description of conversion for convertible notes               The conversion rate is variable and will be 55% of the lowest one-day trading price during the twenty trading days preceding the holders notice of conversion. The number of shares issuable on any conversion is limited to 4.99% of the company’s then issued and outstanding common stock. The note holder may increase the 4,99% limit to 9.99% on 61 days prior notice to the company. The company, at the request of the note holder, has reserved 40 million shares of its $0.001 common stock for conversion.            
Repayment of convertible notes   $ 105,000                        
Conversion and cancellation cost of notes and warrants   163,000                        
Payment of principal and accrued interest   109,000                        
Prepayment premium   $ 54,000                        
12% Convertible Notes Due August 28, 2018 [Member] | Note holder [Member]                            
Debt Instrument [Line Items]                            
Conversion price (in dollars per share)               $ 0.001            
Number of shares reserved for conversion (in shares)               40,000,000            
12% Convertible Notes Due December 15, 2018 [Member]                            
Debt Instrument [Line Items]                            
Debt face amount             $ 26,500              
Debt maturity date             Dec. 15, 2018              
Debt interest rate (in percent)             12.00%              
Description of interest rate terms             Any amount of principal or interest on the note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid.              
Conversion price (in dollars per share)             $ 0.001              
Convertible note, initial maturity date             Sep. 05, 2018              
Description of conversion for convertible notes             The conversion rate is variable and will be 51% of the average of the lowest one day trading price during the thirty trading days preceding the holders notice of conversion. The number of shares issuable on conversion is limited to 4.99% of the company’s then issued and outstanding Common Stock.              
Repayment of convertible notes 26,500                          
Conversion and cancellation cost of notes and warrants 37,000                          
Payment of principal and accrued interest 27,000                          
Prepayment premium $ 10,000                          
12% Convertible Notes Due December 15, 2018 [Member] | Note holder [Member]                            
Debt Instrument [Line Items]                            
Conversion price (in dollars per share)             $ 0.001              
Number of shares reserved for conversion (in shares)             11,008,640              
DUE TO RELATED PARTIES (Details Narrative) - USD ($)
6 Months Ended
Jul. 31, 2018
Jul. 23, 2018
Jun. 30, 2018
Dec. 31, 2018
May 01, 2018
Dec. 31, 2017
Common stock, value       $ 201,697   $ 157,785
CEO [Member]            
Borrowed $ 50,000          
New Management [Member]            
Borrowed     $ 132,000      
Subscription Agreements [Member] | Two Board of Director [Member]            
Number of common stock issued         1,000,000  
Common stock, value         $ 60,000  
Subscription Agreements [Member] | One Board of Director [Member]            
Repayment of debt   $ 12,000        
STOCKHOLDERS' DEFICIT (Details)
12 Months Ended
Dec. 31, 2018
shares
2018 Incentive Stock Plan [Member]  
Share grants approved 50,000,000
Options outstanding 13,500,000
Restricted stock awards outstanding
Restricted stock units outstanding
Shares available for award 36,500,000
2018 Incentive Stock Plan [Member] | Restricted Stock [Member]  
Share grants approved 50,000,000
Options outstanding 13,500,000
Restricted stock awards outstanding
Restricted stock units outstanding
Shares available for award 36,500,000
STOCKHOLDERS' DEFICIT (Details 1) - $ / shares
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Expected life (years)   5 years
Dividend yield 0.00% 0.00%
Expected volatility   80.00%
Risk free interest rates   1.97%
Weighted average fair value of options at grant date (in dollars per share) $ 0.0597 $ 0.0298
Minimum [Member]    
Expected life (years) 5 years 2 months 12 days  
Expected volatility 80.00%  
Risk free interest rates 3.10%  
Maximum [Member]    
Expected life (years) 10 years  
Expected volatility 275.00%  
Risk free interest rates 3.33%  
STOCKHOLDERS' DEFICIT (Details 2) - $ / shares
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]    
Beginning balance 14,000,000
Granted 13,750,000 14,000,000
Exercised
Forfeited or expired
Ending balance 27,750,000 14,000,000
Exercisable 9,712,500  
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward]    
Beginning balance $ 0.1357
Granted 0.0711 0.1357
Exercised
Forfeited or expired
Ending balance 0.1037 $ 0.1357
Exercisable $ 0.0616  
STOCKHOLDERS' DEFICIT (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended 12 Months Ended
Nov. 12, 2018
Nov. 01, 2018
Oct. 30, 2018
Oct. 19, 2018
Oct. 30, 2018
Dec. 31, 2015
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Mar. 31, 2019
Jan. 31, 2019
Dec. 21, 2018
Dec. 07, 2018
Oct. 22, 2018
Oct. 03, 2018
Sep. 25, 2018
Sep. 20, 2018
Jun. 13, 2018
May 25, 2018
May 16, 2018
May 15, 2018
May 14, 2018
May 08, 2018
May 04, 2018
May 01, 2018
Apr. 26, 2018
Apr. 17, 2018
Apr. 16, 2018
Apr. 12, 2018
Jan. 26, 2018
Jan. 24, 2018
Common stock, shares authorized (in shares)             500,000,000 500,000,000                                              
Common stock, par value (in Dollars per share)             $ 0.001 $ 0.001                                              
Series A convertible preferred stock, shares authorized (in shares)             2,000,000 2,000,000                                              
Series A convertible preferred stock, par value (in dollars per share)             $ 0.001 $ 0.001                                              
Pre Articles of Incorporation amendment authorized common stock (in shares)             125,000,000                                                
Common stock, value             $ 201,697 $ 157,785                                              
Note face amount             $ (98,903) $ 152,000                                              
Series A convertible preferred stock, shares outstanding (in shares)             13,602 13,602                                              
Preferred stock, amount of preferred dividends in arrears             $ 187,000                                                
Series A convertible preferred stock, liquidation preference (in dollars per share)             $ 25.00                                                
Series A convertible preferred stock, dividend rate (in Percent)             6.50%                                                
Valuation of dividends payable in shares, percent of the weighted average of common stock sales price on the last ten trading days ending on the third trading day prior to applicable dividend payment date (in Percent)             95.00%                                                
Amount of dividend rate increase if distribution not made within five business days following dividend payment date (in Percent)             1.00%                                                
Series A convertible preferred stock, dividend rate increased, if company fails to pay dividends on two consecutive dividend payment dates (in Percent)             7.50%                                                
Series A convertible preferred stock, increased dividend rate, if company fails to pay dividends within five days of dividend payment date (in Percent)             10.00%                                                
Preferred stock conversion price per share (in dollars per share)             $ 12.00                                                
Minimum percent of closing stock price (in Percent)             140.00%                                                
Notice period for Company redemption of preferred stock             30 days                                                
Purchase price per share, percent of liquidation preference required of Company to holders of Series A Convertible Preferred Stock (in Percent)             100.00%                                                
Purchase price per share, percent of liquidation preference required of Company on change of control (in Percent)             101.00%                                                
Percent discounting of common stock value required if change of control triggers Company redemption of preferred stock, and Company elects to redeem via common stock issuance (in Percent)             5.00%                                                
Purchase of preferred stock (in shares)           93,570                                                  
Payment for the purchase and cancellation of Shares of Company Series A Convertible Preferred Stock           $ 58,000                                                  
Reversal of convertible preferred stock dividend accrual           $ 331,000                                                  
Share-based compensation expense             $ 380,982 $ 89,013                                              
Share-based compensation, options granted (in shares)             13,750,000 14,000,000                                              
Share-based compensation, options outstanding, weighted average exercise price (in dollars per share)             $ 0.1037 $ 0.1357