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Document and Entity Information - USD ($)
12 Months Ended
Dec. 31, 2017
Apr. 16, 2018
Jun. 30, 2017
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, 2017    
Amendment Flag false    
Current Fiscal Year End Date --12-31    
Entity a Well-known Seasoned Issuer No    
Entity a Voluntary Filer No    
Entity's Reporting Status Current Yes    
Entity Filer Category Smaller Reporting Company    
Entity Public Float     $ 6,891,000
Entity Common Stock, Shares Outstanding   164,028,230  
Document Fiscal Period Focus FY    
Document Fiscal Year Focus 2017    
CONSOLIDATED BALANCE SHEETS - USD ($)
Dec. 31, 2017
Dec. 31, 2016
Current assets    
Cash and cash equivalents $ 2,764 $ 680
Other assets 312 312
Total current assets 3,076 992
TOTAL ASSETS 3,076 992
Current liabilities    
Accounts payable 80,743 66,986
Accrued compensation 266,480 108,333
Accrued officer compensation 230,500 125,500
Notes payable, net of unamortized discount of $102,219 53,097
Accrued expenses 185,927
Accrued dividends 48,079 48,080
Total current liabilities 864,826 348,899
Total liabilities 864,826 348,899
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, 2017 and at December 31, 2016 (Liquidation preference $340,050 and $340,050, respectively) 14 14
Common stock, $.001 par value, 500,000,000 shares authorized; 157,785,520 and 154,785,520 shares issued and outstanding at December 31, 2017 and at December 31, 2016, respectively 157,785 154,785
Additional paid-in capital 79,452,635 79,179,432
Accumulated deficit (80,472,184) (79,682,138)
Total stockholders' deficit (861,750) (347,907)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 3,076 $ 992
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)
Dec. 31, 2017
Dec. 31, 2016
Statement of Financial Position [Abstract]    
Notes payable of unamortized discount $ 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 157,785,520 154,785,520
Common stock, outstanding 157,785,520 154,785,520
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Income Statement [Abstract]    
Cost of revenue
Gross profit
Operating expenses:    
General and administrative 752,260 495,169
Total operating expenses 752,260 495,169
Operating loss (752,260) (495,169)
Other income    
Other income 2,542
Interest income 22
Interest expense (37,786)
Total other income (37,786) 2,564
Loss before provision for income taxes (790,046) (492,605)
Provision for income taxes
Net loss (790,046) (492,605)
Preferred stock dividends (34,005) (34,005)
Net loss attributable to common stockholders $ (824,051) $ (526,610)
Net loss attributable to common stockholders per common share - basic and diluted (in dollars per share) $ (0.01) $ (0.01)
Weighted average number of common shares outstanding, basic and diluted (in shares) 155,034,836 93,207,438
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, 2015 $ 14 $ 91,785 $ 79,179,432 $ (79,189,533) $ 81,698
Balance (in shares) at Dec. 31, 2015 13,602 91,785,520      
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Stock-based compensaiton expense   $ 63,000     63,000
Stock-based compensaiton expense (in shares)   63,000,000      
Beneficial conversion factor on notes payable        
Net loss       (492,605) (492,605)
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
Warrants issued     40,590   40,590
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      
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
CASH FLOWS FROM OPERATING ACTIVITIES    
Net loss $ (790,046) $ (492,605)
Adjustments to reconcile net loss to net cash used in operating activities:    
Noncash stock based compensation expense 89,013 63,000
Amortization of beneficial conversion factror 31,941
Interest expense 3,316
Amortization of financing costs 2,529
Changes in assets and liabilities:    
Prepaid expenses and other assets (312)
Accounts payable 13,757 66,987
Accrued expenses 449,074 226,770
Net cash used in operating activities (200,416) (136,160)
CASH FLOWS FROM INVESTING ACTIVITIES    
Net cash provided by investing activities
CASH FLOWS FROM FINANCING ACTIVITIES    
Proceeds from sale of common stock 62,500
Proceeds from note payable net of financing costs 140,000
Net cash provided by financing activities 202,500
Net increase/(decrease) in cash and cash equivalents 2,084 (136,160)
Cash and cash equivalents, beginning of year 680 136,840
Cash and cash equivalents, end of year 2,764 680
Supplemental Cash Flow Information    
Cash paid for interest and taxes
ORGANIZATION OF BUSINESS, GOING CONCERN AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
12 Months Ended
Dec. 31, 2017
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, 2017, the company incurred a net loss of approximately $790,000, had negative cash flows from operations of $200,000 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 15,361,688 and 38,256 for the years ended December 31, 2017 and 2016, 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, 2017
New Accounting Pronouncements and Changes in Accounting Principles [Abstract]  
NEW ACCOUNTING STANDARDS

NOTE 2 – NEW ACCOUNTING STANDARDS

  

In July 2017, the FASB issued ASU 2017-11, “Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic 480) Derivatives and Hedging (Topic 815),” which 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. For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 with early adoption permitted. The company is currently evaluating the impact this standard will have on its disclosures and presentation of instruments with down round features and the impact it will have on the company’s financial statements.

 

In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. This ASU provides clarity about which changes to the terms or conditions of a share-based payment award require the application of modification accounting. Specifically, ASU 2017-09 clarifies that changes to the terms or conditions of an award should be accounted for as a modification unless all of the following are met: 1) the fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified, 2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified and 3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. ASU 2017-09 is effective for annual reporting periods beginning after December 15, 2017 and early adoption is permitted. The company does not expect the adoption of ASU 2017-09 to significantly impact its accounting for share-based payment awards, as changes to awards’ terms and conditions subsequent to the grant date are unusual and infrequent in nature.

 

In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-04 Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). This guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Under the amended guidance, a goodwill impairment charge will now be recognized for the amount by which the carrying value of a reporting unit exceeds its fair value, not to exceed the carrying amount of goodwill. This guidance is effective for interim and annual period beginning after December 15, 2019, with early adoption permitted for any impairment tests performed after January 1, 2017. The company does not expect this standard to have a material impact have on the company’s financial statements.

 

In January 2017, the FASB issued ASU 2017-01 Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”), which clarifies the definition of a business and assists entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Under this guidance, when substantially all of the fair value of gross assets acquired is concentrated in a single asset (or group of similar assets), the assets acquired would not represent a business. In addition, in order to be considered a business, an acquisition would have to include at a minimum an input and a substantive process that together significantly contribute to the ability to create an output. The amended guidance also narrows the definition of outputs by more closely aligning it with how outputs are described in FASB guidance for revenue recognition. This guidance is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The Company does not expect this standard to have a material impact on the Company’s financial statements.

 

In October 2016, the FASB issued ASU 2016-16 Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory (“ASU 2016-16”), which eliminates the exception in existing guidance which defers the recognition of the tax effects of intra-entity asset transfers other than inventory until the transferred asset is sold to a third party. Rather, the amended guidance requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This guidance is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted as of the beginning of an annual reporting period. The company is currently assessing the impact of this guidance on its consolidated financial statements.

 

In August 2016, the FASB issued ASU 2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). The standard is intended to eliminate diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 will be effective for fiscal years beginning after December 15, 2017. Early adoption is permitted for all entities. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

 

In March 2016, the FASB issued ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. ASU 2016-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and early adoption is permitted. Accordingly, the standard is effective for us on January 1, 2017 and the Company is currently evaluating the impact that the standard will have on its consolidated financial statements.

 

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606)”, which supersedes the revenue recognition requirements in Accounting Standard Codification (“ASC”) 605, (Topic 605), and most industry-specific guidance. Under the new model, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that reporting companies disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In August 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers – Deferral of the Effective Date”, which defers the effective date of ASU 2014-09 to annual reporting periods beginning after December 15, 2017, and interim periods therein. In 2016, the FASB issued ASU 2016-08, “Principal versus Agent Considerations (Reporting Revenue Gross versus Net)”, ASU 2016-10, “Identifying Performance Obligations and Licensing”, and ASU 2016-12, “Revenue from Contracts with Customers - Narrow-Scope Improvements and Practical Expedients”. Entities have the choice to adopt these updates using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a modified retrospective approach with the cumulative effect of these standards recognized at the date of the adoption. We will adopt the new standard on January 1, 2018 and while our evaluation remains preliminary, and we expect at this time to institute this under the modified retrospective approach, the company does not expect the adoption to have a material impact.

 

In March 2016, the FASB issued ASU 2016-07, Simplifying the Transition to the Equity Method of Accounting. The amendments in the ASU eliminate the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. The amendments require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. Therefore, upon qualifying for the equity method of accounting, no retroactive adjustment of the investment is required. This ASU is effective for annual reporting periods beginning after December 15, 2016, and interim periods within those years and should be applied prospectively upon the effective date. Early adoption is permitted. The Company does not expect this standard to have a material impact on the Company’s financial statement.

 

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). The standard requires a lessee to recognize assets and liabilities on the balance sheet for leases with lease terms greater than 12 months. ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, and early adoption is permitted. Accordingly, the standard is effective for us on September 1, 2019 using a modified retrospective approach. We are currently evaluating the impact that the standard will have on our 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, 2017
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 factor of $53,000 on this note against which approximately $21,000 was amortized.

 

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 factor of approximately $24,000 on this note against which $6,000 was amortized.

 

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 factor of approximately $28,000 on this note against which $5,000 was amortized.

  

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 factor of approximately $20,000 on this note against which $1,000 was amortized.

 

The following reconciles notes payable as of December 31, 2017 and December 31, 2016:

 

    December 31, 2017     December 31, 2016  
Convertible notes payable   $ 152,000     $ -  
Financing costs     (12,000 )     -  
Accrued interest     3,316       -  
Amortization of financing costs     2,529       -  
Beneficial conversion factor     (124,689 )        
Amortization of beneficial conversion factor     31,941          
                 
    $ 53,097     $ -  
STOCKHOLDERS' DEFICIT
12 Months Ended
Dec. 31, 2017
Equity [Abstract]  
STOCKHOLDERS' DEFICIT

NOTE 4 – 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.

 

In March 2017, the company issued 2,500,000 shares of common stock in exchange for $62,500 received from five individuals.

 

Preferred Stock

 

As of December 31, 2017 and 2016 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, 2017 including previously accrued dividends included in our balance sheet are approximately $153,000. 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

 

We currently do not have an active equity compensation 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 $89,000 and $63,000 for the years ended December 31, 2017 and 2016, 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.

 

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, 
   2017   2016 
Expected life (years)   5    - 
Dividend yield   0%   - 
Expected volatility   80%   - 
Risk free interest rates   1.97%   - 
Weighted average fair value of options at grant date  $0.0298    - 

 

During the year ended December 31, 2017 the company granted each member of the Scientific Advisory Board 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 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 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, 2016, options to purchase -0- shares of common stock were outstanding with a weighted average exercise price of -0- with a weighted average remaining contract term of approximately -0- 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, 2016 no options were exercisable.

 

At December 31, 2016, there were no outstanding options to purchase common stock. There were no unvested restricted stock units outstanding and there were no unvested restricted stock awards outstanding.

 

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.

 

No options were granted in 2016.

 

The following table summarizes the activity of our stock options for the years ended December 31, 2017, and 2016:

 

   Shares   Weighted Average
Exercise Price
 
         
Outstanding at December 31, 2015   32,000   $0.51 
           
Granted   -   $- 
Exercised   -   $- 
Forfeited or expired   (32,000)  $0.51 
Outstanding at December 31, 2016   -   $- 
           
Granted   14,000,000   $0.14 
Exercised   -   $- 
Forfeited or expired   -   $- 
Outstanding at December 31, 2017   14,000,000   $0.14 
           
Exercisable at December 31, 2017   -   $- 

 

As of December 31, 2017 and December 31, 2016 there was no unrecognized stock-based compensation related to unvested restricted stock, net of estimated forfeitures.

COMMITMENTS AND CONTINGENCIES
12 Months Ended
Dec. 31, 2017
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES

NOTE 5 – 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 2017 and 2016, respectively.

 

At December 31, 2017, 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, 2017 and 2016.

 

Litigation

 

On August 4, 2017, the previously reported legal proceeding entitled Superius Securities Group, Inc.et. al. vs George Farley, et.al. (CA No. 2017-0024-VCMR) in the Court of Chancery of the state of Delaware was dismissed.

 

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, 2017
Income Tax Disclosure [Abstract]  
INCOME TAXES

NOTE 6 – INCOME TAXES

 

An analysis of the difference between the expected federal income tax for the years ended December 31, 2017 and 2016, and the effective income tax rate is as follows:

  

   2017      2016    
                 
   Taxes calculated at federal rate  $(247,062)   35.0%  $(181,894)   35.0%
   State income tax, net of federal benefit   (36,800)   5.5%   (27,093)   5.5%
   Change in Valuation Allowance   283,862    -40.5%   208,987    -40.5%
     Provision (benefit) for taxes  $-    0%  $-    0%

 

Tax effects of temporary differences at December 31, 2017 and December 31, 2016 are as follows:

  

   December 31 , 
   2017   2016 
Noncurrent deferred tax assets (liabilities):          
Deferred Tax Assets          
Federal tax credit carryforwards  $239,007   $239,098 
State tax credit carryforwards   340,399    340,399 
Net operating loss   12,731,005    21,033,083 
Total Deferred Tax Assets  $13,310,411   $21,612,580 
           
Valuation allowance   (13,310,411)   (21,612,580)
           
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, 2017, the deferred tax assets and the valuation allowance both decreased by $8,259,000 as a result of the reduction in the Federal income tax rate from 35% to 21%. The remaining reduction in the valuation allowance was a result of current year tax loss.

 

As of December 31, 2017 and 2016, we have cumulative federal and Arizona net operating loss carryforwards of approximately $59.0 million and $5.3 million, respectively, which can be used to offset future income subject to taxes. Federal net operating loss carryforwards begin to expire in 2020. Arizona net operating loss carryforwards begin to expire in 2032. In addition there are federal net operating loss carryforwards is approximately $27.1 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, 2017, 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, 2016, 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.

 

On December 22, 2017, President Trump signed into law the “Tax Cuts and Jobs Act,” (“TCJA”), which significantly reforms the Internal Revenue Code of 1986, as amended. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on the deductibility of interest and net operating loss carryforwards, allows for the expensing of capital expenditures, and puts into effect the migration from a “worldwide” system of taxation to a territorial system.

 

The TCJA permanently lowers the corporate federal income tax rate to 21% from the existing maximum rate of 35%, effective for tax years including or commencing on January 1, 2018. As a result of the reduction of the corporate federal income tax rate to 21%, U.S. GAAP requires companies to revalue their deferred tax assets and deferred tax liabilities as of the date of enactment, with the resulting tax effects accounted for in the reporting period of enactment. The Company’s preliminary estimate of the TCJA and the remeasurement of its deferred tax assets and liabilities is subject to the finalization of management’s analysis related to certain matters, such as developing interpretations of the provisions of the TCJA, changes to certain estimates and the filing of its tax returns. U.S. Treasury regulations, administrative interpretations or court decisions interpreting TCJA may require further adjustments and changes to the Company’s estimates. The final determination of TCJA and the remeasurement of the Company’s deferred tax assets and liabilities will be completed as additional information becomes available, but no later than one year from the enactment of the TCJA.

 

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, 2015  $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, 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 

 

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, 2017, for federal tax purposes the tax years 2013, 2014, 2015, 2016 and 2017 for Arizona the tax years 2013 through 2017 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, 2017 and 2016, we had no accrued interest or penalties related to our unrecognized tax benefits.

SUBSEQUENT EVENT
12 Months Ended
Dec. 31, 2017
Subsequent Events [Abstract]  
SUBSEQUENT EVENT

NOTE 7 – SUBSEQUENT EVENT

 

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 a into a security agreement pledging substantially all of its assets except for those related to Laser Guided Energy as collateral for the note.

  

On December 4, 2017 we entered into a financial services agreement with BMA Securities for which, on January 26, 2018, we 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.

 

In March, 2018, the company paid off the $53,000 convertible note and cancelled its associated warrant to purchase 1,320,598 shares of common stock for a total of $121,073. The company borrowed the $121,073 to make the payment from two directors of the company.

 

In March, 2018, the company borrowed $8,107 to pay off a vendor’s invoices totaling $3,107 and paying a vendor’s retainer of $5,000.

  

On April 12, 2018 the company received $120,000 from an individual based on a subscription agreement with the company.

 

Also on April 12, 2018 the company paid off the $33,000 convertible note, which was funded on October 18, 2018, for a total of $50,682.

  

On April 13, the company received $100,020 from an individual based on a subscription agreement with the company.

 

On On April 16, the company received $30,000 from an individual based on a subscription agreement with the company.

 

The company’s management has evaluated subsequent events occurring after December 31, 2017, 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, 2017
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, 2017, the company incurred a net loss of approximately $790,000, had negative cash flows from operations of $200,000 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 15,361,688 and 38,256 for the years ended December 31, 2017 and 2016, 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, 2017
Notes Payable [Abstract]  
Schedule of reconciles notes payable

The following reconciles notes payable as of December 31, 2017 and December 31, 2016:

 

    December 31, 2017     December 31, 2016  
Convertible notes payable   $ 152,000     $ -  
Financing costs     (12,000 )     -  
Accrued interest     3,316       -  
Amortization of financing costs     2,529       -  
Beneficial conversion factor     (124,689 )        
Amortization of beneficial conversion factor     31,941          
                 
    $ 53,097     $ -  
STOCKHOLDERS' DEFICIT (Tables)
12 Months Ended
Dec. 31, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
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, 
   2017   2016 
Expected life (years)   5    - 
Dividend yield   0%   - 
Expected volatility   80%   - 
Risk free interest rates   1.97%   - 
Weighted average fair value of options at grant date  $0.0298    - 

Schedule of stock options

The following table summarizes the activity of our stock options for the years ended December 31, 2017, and 2016:

 

   Shares   Weighted Average
Exercise Price
 
         
Outstanding at December 31, 2015   32,000   $0.51 
           
Granted   -   $- 
Exercised   -   $- 
Forfeited or expired   (32,000)  $0.51 
Outstanding at December 31, 2016   -   $- 
           
Granted   14,000,000   $0.14 
Exercised   -   $- 
Forfeited or expired   -   $- 
Outstanding at December 31, 2017   14,000,000   $0.14 
           
Exercisable at December 31, 2017   -   $- 
INCOME TAXES (Tables)
12 Months Ended
Dec. 31, 2017
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, 2017 and 2016, and the effective income tax rate is as follows:

  

   2017      2016    
                 
   Taxes calculated at federal rate  $(247,062)   35.0%  $(181,894)   35.0%
   State income tax, net of federal benefit   (36,800)   5.5%   (27,093)   5.5%
   Change in Valuation Allowance   283,862    -40.5%   208,987    -40.5%
     Provision (benefit) for taxes  $-    0%  $-    0%
Schedue of deferred tax assets

Tax effects of temporary differences at December 31, 2017 and December 31, 2016 are as follows:

  

   December 31 , 
   2017   2016 
Noncurrent deferred tax assets (liabilities):          
Deferred Tax Assets          
Federal tax credit carryforwards  $239,007   $239,098 
State tax credit carryforwards   340,399    340,399 
Net operating loss   12,731,005    21,033,083 
Total Deferred Tax Assets  $13,310,411   $21,612,580 
           
Valuation allowance   (13,310,411)   (21,612,580)
           
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, 2015  $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, 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  $9,635,824 
ORGANIZATION OF BUSINESS, GOING CONCERN AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]      
Net loss $ (790,046) $ (492,605)  
Cash flows from operations $ (200,416) $ (136,160)  
Antidilutive options, restricted stock units, and Series A Convertible Preferred Stock shares excluded from of earnings per share (in shares) 15,361,688 38,256  
Deferred income tax asset valuation allowance percentage 100.00%    
Cash and cash equivalents $ 2,764 $ 680 $ 136,840
CONVERTIBLE NOTES PAYABLE (Details) - USD ($)
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Notes Payable [Abstract]    
Notes payable $ 152,000
Financing costs (12,000)
Accrued interest 3,316
Amortization of financing costs 2,529
Beneficial conversion factor 124,690
Amortization of beneficial conversion factror 31,941
Total notes payable $ 53,097
CONVERTIBLE NOTES PAYABLE (Details Narrative) - USD ($)
12 Months Ended
Dec. 27, 2017
Nov. 16, 2017
Oct. 18, 2017
Sep. 15, 2017
Dec. 31, 2017
Dec. 31, 2016
Debt face amount         $ 152,000
Convertible beneficial conversion feature         $ 124,690
12% Convertible Notes Due August 20, 2018 [Member]            
Debt face amount $ 28,000 $ 38,000 $ 33,000      
Debt maturity date Sep. 20, 2018 Aug. 20, 2018 Jul. 20, 2018      
Debt interest rate (in percent) 12.00% 12.00% 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.

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.

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 $ 0.001 $ 0.001      
Convertible note, initial maturity date Apr. 16, 2018 May 16, 2018 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.

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 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 $ 28,000 $ 24,000      
Convertible beneficial conversion amortized $ 1,000 $ 5,000 $ 6,000      
12% Convertible Notes Due June 20, 2018 [Member]            
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.

   
12% Convertible Notes Due June 20, 2018 [Member] | Note warrant [Member]            
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    
Debt issuarance of amortized       $ 21,000    
Convertible beneficial conversion feature       53,000    
Convertible beneficial conversion amortized       $ 21,000    
Note holder [Member] | 12% Convertible Notes Due August 20, 2018 [Member]            
Conversion price (in dollars per share) $ 0.001 $ 0.001 $ 0.001      
Number of shares reserved for conversion (in shares) 17,164,750 20,716,914 18,062,397      
Note holder [Member] | 12% Convertible Notes Due June 20, 2018 [Member]            
Conversion price (in dollars per share)       $ 0.001    
Number of shares reserved for conversion (in shares)       36,369,879    
STOCKHOLDERS' DEFICIT (Details) - $ / shares
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]    
Expected life (years) 5 years  
Dividend yield 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) $ 0.02980
STOCKHOLDERS' DEFICIT (Details 1) - $ / shares
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]    
Beginning balance 32,000
Granted 14,000,000
Exercised
Forfeited or expired (32,000)
Ending balance 14,000,000
Exercisable  
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward]    
Beginning balance $ 0.51
Granted 0.14  
Exercised  
Forfeited or expired 0.51
Ending balance 0.14
Exercisable  
STOCKHOLDERS' DEFICIT (Details Narrative)
1 Months Ended 3 Months Ended 12 Months Ended
Mar. 31, 2017
USD ($)
Investor
shares
Dec. 31, 2015
USD ($)
$ / shares
shares
Dec. 31, 2017
USD ($)
$ / shares
shares
Dec. 31, 2016
USD ($)
$ / shares
shares
Authorized Capital Stock        
Common stock, shares authorized (in shares) | shares     500,000,000 500,000,000
Common stock, par value (in Dollars per share) | $ / shares     $ 0.001 $ 0.001
Series A convertible preferred stock, shares authorized (in shares) | shares     2,000,000 2,000,000
Series A convertible preferred stock, par value (in dollars per share) | $ / shares     $ 0.001 $ 0.001
Pre Articles of Incorporation amendment authorized common stock (in shares) | shares       125,000,000
Preferred Stock        
Number of shares issued (in shares) | shares 2,500,000      
Number of investors | Investor 5      
Proceeds from stock subscription agreements | $ $ 62,500      
Series A convertible preferred stock, shares outstanding (in shares) | shares     13,602 13,602
Preferred stock, amount of preferred dividends in arrears | $     $ 153,000  
Series A convertible preferred stock, liquidation preference (in dollars per share) | $ / shares     $ 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, increased dividend rate, if company fails to pay dividends within five days of dividend payment date (in Percent)     7.50%  
Series A convertible preferred stock, dividend rate increased, if company fails to pay dividends on two consecutive dividend payment dates (in Percent)     10.00%  
Preferred stock conversion price per share (in dollars per share) | $ / shares     $ 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) | 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 Payments        
Share-based compensation expense | $     $ 89,013 $ 63,000
Common stock, par value (in dollars per share) | $ / shares     $ 0.001 $ 0.001
Share-based compensation, options outstanding (in shares) | shares   32,000 14,000,000
Share-based compensation, options outstanding, weighted average exercise price (in dollars per share) | $ / shares   $ 0.51 $ 0.14
Unrecognized compensation costs related to unvested equity awards, net of estimated forfeitures | $     $ 144,000  
Options exercisable (in shares) | shares      
Employee Stock Option [Member]        
Share-Based Payments        
Exercise price of options granted (in dollars per share) | $ / shares     $ 2.25 $ 0
Share-based compensation, options outstanding (in shares) | shares     14,000,000 32,000
Share-based compensation, options outstanding, weighted average exercise price (in dollars per share) | $ / shares     $ 0.136 $ 0.000
Share-based compensation, options outstanding, weighted average remaining contractual term     4 years 2 months 26 days 0 years
Unrecognized compensation costs related to unvested equity awards, net of estimated forfeitures | $     $ 97,000 $ 0
Options outstanding aggregate intrinsic value | $     $ 0 $ 0
Options exercisable (in shares) | shares     0 0
Employee Stock Option [Member] | $.25 per Share Price [Member] | Scientific Advisory Board Members [Member]        
Authorized Capital Stock        
Common stock, par value (in Dollars per share) | $ / shares     $ 0.001  
Share-Based Payments        
Share-based compensation, option awards, granted (in shares) | shares     1,500,000  
Common stock, par value (in dollars per share) | $ / shares     $ 0.001  
Exercise price of options granted (in dollars per share) | $ / shares     $ 0.05  
Term of options     5 years  
Cumulative revenue targeted | $     $ 5,000,000  
Employee Stock Option [Member] | $.05 per Share Price [Member] | Scientific Advisory Board Members [Member]        
Authorized Capital Stock        
Common stock, par value (in Dollars per share) | $ / shares     $ 0.001  
Share-Based Payments        
Share-based compensation, option awards, granted (in shares) | shares     2,000,000  
Common stock, par value (in dollars per share) | $ / shares     $ 0.001  
Exercise price of options granted (in dollars per share) | $ / shares     $ 0.05  
Number of options vesting on first anniversary from grant date (in shares) | shares     500,000  
Number of options vesting monthly from grant date (in shares) | shares     62,500  
Term of options vest monthly     24 months  
Term of options     5 years  
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($)
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Commitments and Contingencies Disclosure [Abstract]    
Rent expense $ 4,000 $ 4,000
Future minimum lease payments due in less than a year $ 325  
INCOME TAXES (Details) - USD ($)
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Income Tax Disclosure [Abstract]    
Taxes calculated at federal rate $ (247,062) $ (181,894)
State income tax, net of federal benefit (36,800) (27,093)
Change in valuation allowance 283,862 208,987
Provision (benefit) for taxes $ 0 $ 0
Taxes calculated at federal rate 35.00% 35.00%
State income tax, net of federal benefit 5.50% 5.50%
Change in valuation allowance 40.50% 40.50%
Provision (benefit) for taxes 0.00% 0.00%
INCOME TAXES (Details 1) - USD ($)
Dec. 31, 2017
Dec. 31, 2016
Deferred Tax Assets:    
Federal tax credit carryforwards $ 239,007 $ 239,098
State tax credit carryforwards 340,399 340,399
Net operating loss 12,692,710 21,033,083
Valuation allowance (13,272,116) (21,612,580)
Total deferred tax assets
INCOME TAXES (Details 2) - USD ($)
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Income Tax Disclosure [Abstract]      
Pre-USHG Merger unrecognized tax benefits $ 9,635,824 $ 9,635,824 $ 9,635,824
INCOME TAXES (Details Narrative) - USD ($)
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Income Tax Disclosure [Abstract]    
Change in valuation allowance $ 8,259,000 $ 279,000
Arizona operating loss carryforward 59,000,000 59,000,000
Federal operating loss carryforward 5,300,000 5,300,000
Pre-USHG merger operating loss carryforward 27,100,000  
Pre-USHG merger capital loss carryforward 520,000  
Federal research and development tax credits 239,000  
State research and development tax credits 340,000  
Pre-USHG merger cumulative unused tax credits   244,000
Accrued interest or penalties related to unrecognized tax benefits $ 0 $ 0
Federal income tax rate 21.00%  
Previous federal income tax rate 35.00% 35.00%
SUBSEQUENT EVENT (Details Narrative) - USD ($)
1 Months Ended 12 Months Ended
Oct. 18, 2018
Apr. 16, 2018
Apr. 13, 2018
Apr. 12, 2018
Jan. 26, 2018
Jan. 24, 2018
Jan. 08, 2018
Dec. 27, 2017
Nov. 16, 2017
Oct. 18, 2017
Sep. 15, 2017
Mar. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Subsequent Event [Line Items]                            
Debt face amount                         $ 152,000
Amount of shares issued                         62,500  
Amount of shares issued for settlement of invoices                         $ 10,000  
Subsequent Event [Member]                            
Subsequent Event [Line Items]                            
Number of shares issued for settlement of invoices (in shares)           1,242,710                
Amount of shares issued for settlement of invoices           $ 38,524.26                
Repayment of convertible note $ 50,682     $ 33,000               $ 53,000    
Number of warrants cancelled (in shares)                       1,320,598    
Amount of warrants cancelled                       $ 121,073    
Contribution of capital individual   $ 30,000 $ 100,020 $ 120,000                    
12% Convertible Notes Due August 28, 2018 [Member] | Subsequent Event [Member]                            
Subsequent Event [Line Items]                            
Debt face amount             $ 105,000              
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.

             
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.

             
Number of shares reserved for conversion (in shares)             40,000,000              
Conversion price (in dollars per share)             $ 0.001              
Debt prepayable date             May 29, 2018              
12% Convertible Notes Due August 20, 2018 [Member]                            
Subsequent Event [Line Items]                            
Debt face amount               $ 28,000 $ 38,000 $ 33,000        
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.

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.

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.

       
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.

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 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.

       
Conversion price (in dollars per share)               $ 0.001 $ 0.001 $ 0.001        
12% Convertible Notes Due June 20, 2018 [Member]                            
Subsequent Event [Line Items]                            
Debt face amount                     $ 53,000      
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.

     
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.

     
Conversion price (in dollars per share)                     $ 0.001      
Note holder [Member] | 12% Convertible Notes Due August 20, 2018 [Member]                            
Subsequent Event [Line Items]                            
Number of shares reserved for conversion (in shares)               17,164,750 20,716,914 18,062,397        
Conversion price (in dollars per share)               $ 0.001 $ 0.001 $ 0.001        
Note holder [Member] | 12% Convertible Notes Due June 20, 2018 [Member]                            
Subsequent Event [Line Items]                            
Number of shares reserved for conversion (in shares)                     36,369,879      
Conversion price (in dollars per share)                     $ 0.001      
Vendor [Member] | Subsequent Event [Member]                            
Subsequent Event [Line Items]                            
Debt face amount                       8,107    
Pay off vendor invoices                       3,107    
Amount of vendor's retainer                       $ 5,000    
BMA Securities [Member] | Subsequent Event [Member] | Financial Services Agreement [Member]                            
Subsequent Event [Line Items]                            
Number of shares issued (in shares)         5,000,000                  
Amount of shares issued         $ 150,000                  
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