Applied Energetics, Inc. ("AERG") was formed in 2002 as a response to the Secretary of Defense call to use innovation to combat terror. The founders privately funded the Company with the strategy to bring viable "new" products to market that did not rely on previous "programs of record" and that were highly unique. AERG developed and has patents for its Laser Guided Energy ("LGE") technology as a reliable and humane alternative to conventional weapons used for defense against many types of terror attacks. AERG's Joint Improvised Explosive Device Neutralizer ("JIN") units, which are used to detect, diffuse and/or explode hidden bombs, are an outgrowth of certain technologies used in the LGE technology and were AERG's first product deployed to the battlefield. Working with the US Marine Corps, AERG developed and delivered a system ("Banshee") that demonstrated significant capability in over 200 missions in Afghanistan countering IEDs, a major threat to military operations throughout the world. The Department of Defense has not issued any contracts for JIN or similar products since 2008 due to the wind down of the war in Iraq and Afghanistan. AERG is not aware of any current DOD proposals or interest for JIN type of Counter Improvised Explosive Devices. Between 2005 and 2010, AERG billed and collected $38,550,698 pursuant to contracts with U.S. Navy and U.S. Marine Corp. In 2004, AERG developed laboratory versions of its LGE weapons and was then contracted by the U.S. government for demonstrations and testing of the technologies against a very broad range of threats and within a broad range of operating environments. AERG has met with and demonstrated its LGE technology to all branches of the U.S. Military, as well as, other government organizations involved in various defense, anti-terrorism, and offensive military type operations. From these demonstrations, AERG received government support with increased security guidelines. Between 2003 and 2009, AERG billed and collected $48,078,031 for LGE applications and demonstrations pursuant to contracts from various branches of the U.S. Armed Forces and other branches of the Federal Government. AERG developed potential applications for its LGE devices for numerous aspects of defense, whether it is sea, land, or air applications. Some possible sea applications are: Opposed boarding of a ship, warship protection against suicide craft, and high value terrorist target protection such as oil tankers. Land opportunities include use in the battlefield to disable vehicles and improvised explosive devices, base and perimeter defense against car bombs and terrorist attacks, Security and Sentry Operations such as check points and crowd control, and protection within nuclear facilities, embassies, and other critical protection areas. AERG has created a 3 year plan to develop and demonstrate various unique critical underlying laser technologies that if successful will allow for Ultra-Short Pulse ("USP") Laser energy scaling toward the 1 J / pulse level and power scaling to the kW regime average power level. While the focus is directed towards LGE mobile DoD platform integration, requiring reduced volume, weight, and military level ruggedization, the commercial market space for such advanced USP lasers is a rapidly growing market segment. A primary driver for the commercial USP market spaces is high average power output allowing for an increase in manufacturing throughput. It is expected that AERG will adapt the advanced USP laser technology developed under the R&D plan to the commercial markets and specifically to the emerging Technology 4.0 manufacturing environment. To fully develop the commercial potential for expected AERG USP laser performance, AERG expects to team with existing major laser manufacturers and other companies that possess critically related advanced fabrication technologies to allow for shared system development costs and rapid market penetration. Our proprietary and confidential Research and Development plan will initially focus on development of a laser with 10-watt average power followed by development of lasers with 100-watt average power and 1-kilowatt average power. The lasers with higher power scaling are intended to be used for LGE and other military applications. We estimate that we will expend a minimum of $3.75 million over three years. We have acquired the materials and commenced work on the development of the 10 Watt average power laser.
