Securities and Exchange Commission

Washington, D.C. 20549

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

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¨	Soliciting Material Pursuant to § 240.14a-12

Applied Energetics, Inc.

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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APPLIED ENERGETICS, INC.

3590 EAST COLUMBIA STREET

TUCSON, ARIZONA 85714

~~May 14, 2008~~August 15, 2011

Dear ~~Fellow Stockholders:~~Stockholder:

AnYou are cordially invited to attend the 2011 Annual Meeting of Stockholders that will be held on ~~Wednesday, June 11, 2008~~Monday, October 3, 2011 at ~~10:~~9:00 A.M., local time, at our corporate offices at 3590 East Columbia Street, Tucson, Arizona 85714.

As permitted by rules adopted by the ~~offices~~United States Securities and Exchange Commission, we are mailing a notice to many of ~~Blank Rome LLP, 405 Lexington Avenue - 24~~^th ~~Floor, New York, New York 10174.~~our stockholders instead of a paper copy of this proxy statement and our 2010 Annual Report to Stockholders. The notice contains instructions on how to access those documents over the Internet. The notice also contains instructions on how each of those stockholders can receive a paper copy of our proxy materials, including this proxy statement, our 2010 Annual Report to Stockholders and a proxy card. We believe that this process will provide our stockholders with easier access to these proxy materials, reduce the costs of printing and distributing our proxy materials and conserve environmental resources.

The ~~Notice~~notice of ~~Annual Meeting~~annual meeting and ~~Proxy Statement,~~proxy statement, which follow, describe the business to be conducted at the ~~Annual Meeting.~~

meeting. Whether or not you plan to attend the ~~Annual Meeting in person, it is important that your shares be represented and voted. After reading the enclosed Notice of Annual Meeting and Proxy Statement, I~~annual meeting, we urge you to ~~complete, sign, date~~read this material carefully and ~~return~~encourage you to vote promptly. You may vote your shares via a toll-free telephone number or over the Internet. If you received a proxy card by mail, you may vote by signing, dating and mailing the proxy card in the envelope provided. ~~If the address~~Instructions regarding all three methods of voting are contained on the ~~accompanying material is incorrect, please advise our Transfer Agent, Continental Stock Transfer & Trust Company, in writing, at 17 Battery Place, New York, New York 10004.~~proxy card.

~~The Annual Meeting~~If you plan to attend the annual meeting in person, you will need to present a government issued picture identification, such as a passport or driver’s license, to enter our corporate offices. Access to the secured portion of our facility will not be held solely to tabulate the votes cast and report on the results of the voting on those matters listed in the accompanying proxy statement. No presentations or other business matters are planned for the meeting.permitted.

~~Your vote is very important,~~Thank you and ~~we will appreciate a prompt return of your signed proxy card.~~I look forward to seeing you at the meeting.

Cordially,

~~Dana A. Marshall~~James M. Feigley

Chairman of the Board ~~Chief Executive Officer and President~~

APPLIED ENERGETICS, INC.

3590 EAST COLUMBIA STREET

TUCSON, ARIZONA 85714

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ~~JUNE 11, 2008~~OCTOBER 3, 2011

To the Stockholders of Applied Energetics, Inc.:

NOTICE IS HEREBY GIVEN that an Annual Meeting of Stockholders of Applied Energetics, Inc. (the “Company”) will be held on ~~Wednesday, June 11, 2008~~Monday, October 3, 2011 at ~~10:~~9:00 A.M. local time at our corporate offices at 3590 East Columbia Street, Tucson, Arizona 85714 to consider and vote upon the ~~offices of Blank Rome LLP, 405 Lexington Avenue - 24~~^th ~~Floor, New York, New York 10174 for~~proposals below, as explained more fully in the ~~following purposes:~~accompanying proxy statement:

(i)To A proposal to elect two Class I directors to hold office until the ~~2011 Annual Meeting of Stockholders and one Class II director to hold office until the 2009~~2014 Annual Meeting of Stockholders, and until their respective successors have been duly elected and qualified; ~~and~~

(ii)~~To transact such~~ A proposal to ratify the appointment of BDO USA, LLP as the Company’s independent registered accounting firm for the fiscal year ending December 31, 2011; and

(iii) Any other ~~business as may~~matters properly ~~come~~brought before the meeting, orincluding approval of any adjournment or ~~adjournments thereof.~~postponement of the meeting.

Only stockholders of record on the books of the Company at the close of business on ~~May 9, 2008~~August 11, 2011 will be entitled to notice of and to vote at the meeting or any adjournments thereof.

A copy of the Company’s Annual Report for the year ended December 31, ~~2007,~~2010, which contains financial statements, accompanies this Notice and the attached Proxy Statement. You may vote your shares via a toll-free telephone number or over the Internet. If you received a proxy card by mail, you may vote by signing, dating and mailing the proxy card in the envelope provided. Whether or not you attend the meeting, it is important your shares be represented and voted.

Your board of directors believes that the election of the nominees specified in the accompanying proxy statement as directors at the annual meeting is in the best interests of the Company and its stockholders and, accordingly, unanimously recommends a vote “FOR” such nominees.

~~May 14, 2008~~August 15, 2011	By order of the Board of Directors


	~~Dana A. Marshall~~James M. Feigley
	Chairman of the Board ~~Chief Executive Officer and President~~

YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE ENSURE YOU TAKE THE TIME TO CAST YOUR VOTE.

~~PLEASE FILL IN, DATE, SIGN AND RETURN~~

YOU MAY VOTE BY SUBMITTING YOUR PROXY BY TELEPHONE, THE ~~ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED FOR THAT PURPOSE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO EXERCISE, AND~~INTERNET OR MAIL. IF YOU ARE ~~PRESENT AT~~A REGISTERED STOCKHOLDER AND ATTEND THE MEETING, YOU MAY ~~IF YOU WISH,~~ REVOKE YOUR PROXY ~~AT THAT TIME~~ AND ~~EXERCISE THE RIGHT~~VOTE YOUR SHARES IN PERSON. IF YOU HOLD YOUR SHARES THROUGH A BANK OR BROKER AND WANT TO VOTE YOUR SHARES ~~PERSONALLY.~~IN PERSON AT THE MEETING, PLEASE CONTACT YOUR BANK OR BROKER TO OBTAIN A LEGAL PROXY.

~~PROXY STATEMENT~~

PROXY STATEMENT

APPLIED ENERGETICS, INC.

ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ~~JUNE 11, 2008~~OCTOBER 3, 2011

This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of Applied Energetics, Inc. (“Applied Energetics” or the “Company”) for use at the Annual Meeting of Stockholders to be held on ~~Wednesday, June 11, 2008~~Monday, October 3, 2011 (the “Annual Meeting”), including any ~~adjournment~~adjournments or ~~adjournments~~postponements thereof, for the purposes set forth in the accompanying Notice of Meeting.

~~Management intends to mail this proxy statement, the accompanying form of proxy and annual report to stockholders on or about May 15, 2008.~~

Proxies in the accompanying form, duly executed and returned to the management of the Company and not revoked, will be voted at the Annual Meeting. Any proxy given by a stockholder pursuant to such solicitation may be revoked by the stockholder at any time prior to the voting of the proxy by a subsequently dated proxy, by written notification to the Secretary of the Company, or by personally withdrawing the proxy at the meeting and voting in person.

The address and telephone number of the principal executive offices of the Company are:

3590 East Columbia Street

Tucson, Arizona 85714

Telephone: (520) 628-7415

TABLE OF CONTENTS

~~Page~~

	Page
GENERAL INFORMATION	2

~~Outstanding Stock and Voting Rights.~~	2
~~Voting Procedures.~~	2
1
PROPOSAL I: ELECTION OF DIRECTORS	2
3
STOCK OWNERSHIP AND SECTION 16 COMPLIANCE	5

CORPORATE GOVERNANCE	7
~~Director Independence~~	7
~~Board Meetings~~	7
~~Committees of the Board of Directors~~	7
~~Code of Ethics and Business Conduct~~	8
~~Communications with the Board~~	8
~~Consideration of Director Nominees~~	8
~~Deadline and Procedures for Submitting Board Nominations~~	9
~~Litigation~~	9

~~EXECUTIVE AND DIRECTOR COMPENSATION~~	10

~~COMPENSATION DISCUSSION AND ANALYSIS~~	10

~~Executive Compensation Philosophy~~	10
~~Compensation Committee~~	10
~~Elements of Compensation~~	11
~~Base Salary~~	12
~~Cash Bonus~~	12
~~Long-Term Incentives~~	13
~~Severance and Change in Control Agreements~~	14
~~Other Benefit Plans and Programs~~	15
~~Employment Agreements for Named Executive Officers~~	15
~~SUMMARY COMPENSATION TABLE~~	16
~~GRANTS OF PLAN-BASED AWARDS~~	17
~~OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END~~	18
~~POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL~~	19
~~Executive Payments Upon Termination or Change in Control~~	19

~~DIRECTOR COMPENSATION~~	20

~~Compensation Committee Interlocks And Insider Participation:~~	21
~~Compensation Committee Report:~~	21

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE:	21

~~Transactions With Related Parties~~	21
18
INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS	22
18
~~Principal Accountant Fees and Services~~AUDIT COMMITTEE REPORT	2219
~~Pre-Approval Policies and Procedures~~ PROPOSAL II: RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	2214
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING	19
OTHER INFORMATION	21

-i-

~~GENERAL INFORMATION~~

~~Outstanding Stock and Voting Rights.~~GENERAL INFORMATION

~~Only~~Notice of Electronic Availability of Proxy Statement and Annual Report

As permitted by rules adopted by the United States Securities and Exchange Commission (sometimes referred to as the SEC), Applied Energetics is making this proxy statement and its annual report available to its stockholders electronically via the Internet. On August 15, 2011, we mailed a notice to our stockholders containing instructions on how to access this proxy statement and our annual report and vote online. If you received a notice by mail, you will not receive a printed copy of the proxy materials in the mail. The notice instructs you on how to access and review all of the important information contained in the proxy statement and annual report. The notice also instructs you on how you may submit your proxy over the Internet. If you received a Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the notice.

Questions and Answers About The Proposals to be Voted Upon and The Voting Procedures

Q.	What am I voting on?

You are being asked to vote on the proposal to elect as Class I directors the two nominees recommended by the Company’s Board of Directors and named in this proxy statement (John F. Levy and Mark J. Lister) to serve as such commencing immediately following our 2010 annual meeting and until our annual meeting of stockholders in 2014.

In addition, you may be asked to consider and vote upon other matters that may properly come before the annual meeting, including approval of any adjournment or postponement of the meeting

Q.	Who is entitled to vote at the annual meeting?

Common stockholders of record as of the close of business on August 11, 2011, the record date, are entitled to vote on each of the proposals at the annual meeting. Each share of common stock entitles the holder thereof to cast one vote per each share held by such stockholder on the record date with respect to each proposal.

Q.	How do I vote?

A.	Stockholders can vote in person at the annual meeting or by proxy. There are three ways to vote by proxy:

By telephone –— You can vote by telephone by calling 1-800-690-6903 and following the instructions on the proxy card;

By Internet –— You can vote over the Internet at www.proxyvote.com by following the instructions on the proxy card; or

By mail –— If you received your proxy materials by mail, you can vote by mail by signing, dating and mailing the enclosed proxy card.

Telephone and Internet voting facilities for stockholders of record will be available 24 hours a day and will close at ~~the close of business~~11:59 p.m. (EDT) on May 9, 2008 (the “Record Date”) are entitled to notice of and to vote at the Annual Meeting. As of the Record Date, there were issued and outstanding 80,587,762 shares of the Company’s Common Stock, $.001 par value per share (the “Common Stock”), the Company’s only class of voting securities, and 950,000 shares of the Company’s Series A Redeemable Convertible Preferred Stock (the “Series A Preferred Stock”). Each share of Common Stock entitles the holder thereof to cast one vote on each matter submitted to a vote at the Annual Meeting. The holders of shares of Series A Preferred Stock do not have any vote rights, except as required by law, and, accordingly, are not entitled to vote on the election of directors.October 2, 2011.

~~Voting Procedures.~~

AtIf your shares are held in the Annual Meeting, the two nominees for election as Class I directors and the nominee for election as Class II director who receive the highest number of affirmative votes of shares of person or by proxy will be elected, provided a quorum is present. All other matters to come before the Annual Meeting will be decided by the affirmative votename of a ~~majority~~bank, broker or other holder of the shares of Common Stock represented at the Annual Meeting and entitled to vote on the matter presented in person or by proxy, provided a quorum is present. A quorum is present if at least a majority of the shares of Common Stock outstanding as of the Record Date are present in person or represented by proxy at the Annual Meeting. It is currently anticipated that votesrecord, you will be counted and certified by an Inspector of Election who is currently expected to be either an employee of the Company or its transfer agent. In accordance with Delaware law, abstentions and “broker non-votes” (i.e. proxies from brokers or nominees indicating that such persons have not receivedreceive instructions from the ~~beneficial owner or other persons entitled~~holder of record. You must follow the instructions of the holder of record in order for your shares to be voted. Telephone and Internet voting also will be offered to stockholders owning shares through certain banks and brokers. If your shares are not registered in your own name and you plan to vote your shares as to a matter with respect to which the brokers or nominees do not have discretionary power to vote) will be treated as present for purposes of determining the presence of a quorum. For purposes of determining approval of a matter presentedin person at the annual meeting, ~~abstentions will be deemed present~~you should contract your broker or agent to obtain a legal proxy or broker’s proxy card and ~~entitled~~bring it to ~~vote and will, therefore, have~~ the ~~same legal effect as a vote “against” a matter presented at the meeting. Broker non-votes will be deemed not entitled~~annual meeting in order to vote on the subject matter as to which the non-vote is indicated. Broker non-votes will have no legal effect on the vote on the election of directors or on any other particular matter which requires the affirmative vote of the holders of a majority of the shares of Common Stock represented at the Annual Meeting.vote.

The officers and directors of the Company who, in the aggregate own approximately 15.3% of the outstanding common stock of the Company on the Record Date, have indicated their intent to vote in favor of the nominees for director nominated by the Company.

Q.	How may I revoke or change my vote?

The enclosed proxies will be voted in accordance with the instructions thereon. Unless otherwise stated, all shares represented by such proxy will be voted as instructed. Proxies may be revoked as noted above.

You have the right to revoke your proxy any time before the meeting by (a) notifying Applied Energetics’ corporate secretary of your revocation or (b) returning a later-dated proxy. The last vote received chronologically will supersede any prior vote. You may also revoke your proxy by voting in person at the annual meeting. Attendance at the meeting, without voting at the meeting, will not in and of itself serve as a revocation of your proxy.

The entire cost of soliciting proxies, including the costs of preparing, assembling, printing and mailing this Proxy Statement, the proxy and any additional soliciting material furnished to stockholders, will be borne by the Company. Arrangements will be made with brokerage houses, banks and other custodians, nominees and fiduciaries to send proxies and proxy materials to the beneficial owners of stock, and the Company expects to reimburse such persons for their reasonable out-of-pocket expenses. Proxies may also be solicited by directors, officers or employees of the Company in person or by telephone, telegram or other means. No additional compensation will be paid to such individuals for these services.

Q.	What does it mean if I receive more than one notice or set of proxy materials.

A. It may mean that you are the registered holder of shares in more than one account. You may call our transfer agent, Continental Stock Transfer & Trust Company, at 212-509-4000, if you have any questions regarding the share information or your address appearing on the notice or proxy materials.

Q.	Who will count the votes?

A.	It is expected that either an employee of the Company or its counsel will tabulate the votes and act as the inspector of election.

Q.	What constitutes a quorum?

A.	A majority of the outstanding shares, present or represented by proxy, of Applied Energetics’ common stock will constitute a quorum for the annual meeting. As of the record date, there were 91,371,192 shares of Applied Energetics common stock, $.001 par value per share, issued and outstanding.

Q.	How many votes are needed for Proposal I –— the election of the two Class I directors?

Assuming a quorum is present, the two Class I directors will be elected by a plurality of the votes cast at the annual meeting, meaning the two nominees receiving the highest number of votes will be elected as directors. Only votes cast for a nominee will be counted, except that a properly executed proxy that does not specify a vote with respect to the nominees will be voted for the two nominees whose names are printed on the proxy card (John F. Levy and Mark J. Lister). Because the vote on this proposal is determined by a plurality of the votes cast, neither abstentions nor broker non-votes (as described below) will have any effect on the election of directors.

Q.	How many votes are needed to approve the other Proposal?

Assuming a quorum is present, the affirmative vote of the holders of a majority of the shares of the Company’s common stock represented at the annual meeting, either in person or by proxy, and entitled to vote at the annual meeting is required for Proposal II to pass. As described below, for this proposal, abstentions and broker-non votes will have the same effect as a vote against the proposal.

Q.	What happens if I abstain from voting?

If an executed proxy card is returned and the stockholder has explicitly abstained from voting on any proposal, the shares represented by the proxy will be considered present at the annual meeting for the purpose of determining a quorum. In addition, while they will not count as votes cast in favor of the proposal, they will count as votes cast on the proposal. As a result, other than with respect to Proposal I, which will be determined by a plurality of the votes cast, an abstention on a proposal will have the same effect as a vote against the proposal.

Q.	What is a “broker non-vote”?

A “broker non-vote” occurs when a broker submits a proxy that does not indicate a vote for one or more of the proposals because the broker has not received instructions from the beneficial owner on how to vote on such proposals and does not have discretionary authority to vote in the absence of instructions. While broker non-votes will be counted for the purposes of determining whether a quorum exists at the annual meeting, they will not be considered to have voted on any of the proposals on which such instructions have been withheld. In the case of any proposal requiring a majority vote in favor of the proposal, they will have the same effect as a vote against the proposal.

Q.	Who bears the cost of soliciting of proxies?

The entire cost of soliciting proxies, including the costs of preparing, assembling, printing and mailing the notice and, as applicable, this proxy statement, the proxy and any additional soliciting material furnished to stockholders, will be borne by us. In addition, arrangements will be made with brokerage houses and other custodians, nominees and fiduciaries to send proxies and proxy materials to the beneficial owners of stock, and we may reimburse such persons for their expenses.

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PROPOSAL I: ELECTION OF DIRECTORS

The Company’s By-Laws provide that the Board of Directors of the Company is divided into three classes (Class I, Class II and Class III). At each Annual Meeting of Stockholders, directors constituting one class are elected for a three-year term. At this year’s Annual Meeting of Stockholders, two (2) Class I directors will be elected to hold office for a term expiring at the Annual Meeting of Stockholders to be held in ~~2011 and one (1) Class II director will be elected to hold office for a term expiring at the Annual Meeting of Stockholders to be held in 2009.~~2014. It is the intention of the Board of Directors to nominate ~~Dana A. Marshall~~Mr. John F. Levy and ~~James A. McDivitt~~Mr. Mark J. Lister as Class I ~~directors and General James M. Feigley as Class II director.~~directors. Each director will be elected to serve until a successor is elected and qualified or until the director’s earlier resignation or removal.

At this year’s Annual Meeting of Stockholders, the proxies granted by stockholders will be voted individually for the election, as directors of the Company, of the persons listed below, unless a proxy specifies that it is not to be voted in favor of a nominee for director. In the event either or both of the nominees listed below shall be unable to serve, it is intended that the proxy will be voted for such other nominees as are designated by the Board of Directors. Each of the persons named below has indicated to the Board of Directors that he will be available to serve.

~~-2-~~

THE BOARD OF DIRECTORS RECOMMENDS THAT ~~SHAREHOLDERS~~STOCKHOLDERS VOTE FOR~~FOR~~ THE ELECTION OF THE NOMINEES SPECIFIED BELOW.

The following information is with respect to the nominees for election at this Annual Meeting of Stockholders:

CLASS I ~~DIRECTORS~~DIRECTOR

(To be Elected)

(New Term Expires in ~~2011)~~2014)

~~Dana A. Marshall:~~John F. Levy: ~~Dana A. Marshall, 49,~~ John F. Levy has been ~~our~~a director of the company since June, 2009. Mr. Levy serves as Chairman of our Nominating and Corporate Governance Committee and as a member of our Audit and Strategic Planning Committee. Since May 2005, Mr. Levy has served as the ~~Board since November 2007,~~ Chief Executive Officer ~~President~~of Board Advisory, a consulting firm that advises public companies in the areas of corporate governance, corporate compliance, financial reporting and ~~Director since August~~financial strategies. Mr. Levy served as the Interim Chief Financial Officer from November 2005 to March 2006 ~~and was appointed Assistant Secretary~~of Universal Food & Beverage Company, which filed a voluntary petition under the provisions of Chapter 11 of the United States Bankruptcy Act on August 31, 2007. From November 1997 to May 2005, Mr. Levy served as Chief Financial Officer of MediaBay, Inc., a NASDAQ listed company ~~in February 2008.~~and provider of spoken word audio content. While at MediaBay, he also served for a period as its Vice Chairman. Mr. ~~Marshall has over 20~~Levy is a certified public accountant with nine years of experience inwith the ~~laser~~national public accounting firms of Ernst & Young, Laventhol & Horwath and ~~optical technologies in the aerospace and defense industries.~~Grant Thornton. Mr. ~~Marshall~~Levy is a member of the Board of Directors of Research-Electro Optics, a privately held company. Mr. Marshall served as Vice President, Optical Systems SBU of Zygo Corporation, a publicly traded company, from September 2004 through March 2006. From June 2003 through August 2005, Mr. Marshall owneddirector and operated Infusafe LLC, a partner in a venture to develop and market designs for pharmaceutical packaging, and from June 2001 to September 2003, Mr. Marshall managed his income properties through Cricklewood Realty LLC. From 1993 through 2000, Mr. Marshall was Chief Executive Officer, President andnon-executive Chairman of the Board of ~~Cutting Edge Optronics,~~Applied Minerals, Inc., an exploration stage natural resource and mining company, a director, lead director and chair of the audit committee of Gilman Ciocia, Inc., a developer and manufacturer of high power solid state and semiconductor lasers which he founded in 1993, developed and sold to TRW Incorporated in 2004. Before founding Cutting Edge Optronics, Mr. Marshall’s career included substantial positions in strategicpublicly traded financial planning and ~~program management, at major defense companies, including serving as Program Manager, Lasers~~tax preparation firm, and ~~Electronic Systems Division~~a director of ~~McDonnell Douglas Corporation. Prior~~Brightpoint, Inc., a publicly traded company that provides supply chain solutions to ~~joining McDonnell Douglas,~~leading stakeholders in the wireless industry. Mr. ~~Marshall began~~Levy was formerly a director of Take-Two Interactive Software, Inc. and PNG Ventures, Inc. Mr. Levy has authored The 21st Century Director: Legal and Ethical Responsibilities of Board Members, a course on the ethical and legal responsibilities of board members initially presented to various state accounting societies. Mr. Levy has a B.S. degree in Economics from the Wharton School of the University of Pennsylvania and received his ~~defense industry career~~M.B.A. from St. Joseph's University in ~~1982 at General Dynamics Corporation, and rose to become Manager of Strategic Planning at Corporate Headquarters.~~Philadelphia.

~~James A. McDivitt:~~Mark J. Lister: ~~James A. McDivitt, 78,~~ Mark J. Lister has served as a member of our Board of Directors since ~~February 2006.~~June, 2009. Mr. ~~McDivitt~~Lister serves as the Chairman of our ~~lead independent director,~~Strategic Planning Committee. Since November, 2006, Mr. Lister has been President of StratTechs, Inc., a consulting firm he founded which specializes in brokering technology within the Defense, Intelligence and Homeland Security Government markets. Mr. Lister recently completed service on the Secretary of the Navy Advisory Panel and formerly served as Chairman of the Naval Research Advisory Committee. From January 1992 to June 2006, Mr. Lister was employed by the Sarnoff Corporation where he most recently served as Senior Vice President of Government Operations. While at Sarnoff, from 2001 to 2006, Mr. Lister served as Managing Director of the Rosettex Technology and Ventures Group, a joint venture of Sarnoff Corporation and SRI International for which he was a founder, and from 1996 to 2001, Mr. Lister served as Executive Director of the National Information Display Laboratory. From 1987 to 1992, he served as Director, Advanced Development and Applications in the Research and Development Group of the Office of the Assistant Secretary of the U.S. Air Force for Space. Mr. Lister’s government career began at the Naval Research Laboratory where he served as a researcher in the Space Applications Branch from 1977 to 1987. Mr. Lister has a B.S. in Electrical Engineering from Drexel University, a B.S. in Mathematics from St. Vincent College and a MEA from George Washington University.

-3-

DIRECTORS AND EXECUTIVE OFFICERS

The following information is with respect to incumbent directors in Class II and Class III of the Board of Directors who are not nominees for election at this Annual Meeting of Stockholders:

CLASS II DIRECTORS

(Term Expires in 2012)

James M. Feigley: James M. Feigley has served as a member of our ~~Compensation Committee and our Audit Committee~~Board of Directors since June 2008, and as Chairman since April of 2009. Mr. Feigley serves as a member of our Nominating and ~~Corporate~~ Governance Committee and our Strategic Planning Committee. Mr. McDivitt currently serves as a director of Silicon Graphics Inc., a publicly traded company. From 1981 until his retirement in 1995, Mr. McDivitt was employed at Rockwell International Corporation, most recently as its Senior Vice President, Government Operations and International. Mr. McDivitt joined Pullman Inc. in 1975 as its Executive Vice President and, in October 1975 he became President of its Pullman Standard Division, The Railcar Division, and later had additional responsibility for the leasing, engineering and construction areas of the company. From 1972 through 1975, he was Executive Vice President Corporate Affairs for Consumers Power Company. Mr. McDivitt joined the United States Air Force in 1951 and retired with the rank of Brigadier General in 1972. During his service with the U.S. Air Force, Mr. McDivitt was selected as an astronaut in 1962 and was Command Pilot for Gemini IV and Commander of Apollo 9 and Apollo Spacecraft Program Manager from 1969 to 1972, including Apollo 12 through 16 missions. Mr. McDivitt holds a B.S. degree in Aeronautical Engineering from the University of Michigan.

~~CLASS II DIRECTOR~~

~~(To be Elected)~~

~~(New Term Expires in 2009)~~

~~James M. Feigley:~~ ~~James M.~~ Feigley ~~58,~~ has served as President of Rock River Consulting, Inc., a defense consulting firm he founded in ~~early~~ May 2003 after retiring from the U.S. Marine Corps. General Feigley served as Commander of the Marine Corps Systems Command from 1998 through 2002, where he was the executive authority on research, development, procurement, fielding and life cycle support for all Marine Corps ground combat, combat support and combat service support equipment, ordinance and systems. General Feigley served as Direct Reporting Program Manager for Advanced Amphibious Assault to the Assistant Secretary of the Navy, Research, Development and Acquisition Program from 1993 through 1998, during which time he was in charge of business planning, cost estimating, technical risk analyses and management, systems engineering and numerous other responsibilities. He served as Project Manager for the Headquarters, U.S. Marine Corps and Naval Sea Systems Command from 1986 through 1993, where he managed all technology base projects for ‘Advanced Amphibious Assault Vehicle’ and wrote all technical, financial, cost, management, risk, planning and performance documentation. General Feigley ~~also~~ served as a member of the United States Marine Corps from 1972 through ~~1986.~~2002. He received a BS from the University of ~~Wisconsin-~~Wisconsin - Oshkosh in 1972 and graduated from the Army Logistics Management Center in 1982, the Marine Corps Command and Staff College in 1986 and the Defense Systems Management College in 1986. He currently serves as ~~Distinguished Guest Lecturer at the Defense Acquisition University and~~ an Associate Member of the Naval Research Advisory Committee. Mr. Feigley retired from the Marine Corps as a Brigadier General in 2002 and received many decorations and honors during his military career.

~~-3-~~

~~DIRECTORS AND EXECUTIVE OFFICERS~~George P. Farley:

~~The following information is with respect to incumbent directors in Class II and Class III of the Board of Directors who are not nominees for election at this Annual Meeting of Stockholders:~~

~~CLASS II DIRECTORS~~

~~(Term Expires in 2009)~~

George P. Farley,~~: George P. Farley, 69,~~ a certified public accountant, has been a member of our Board of Directors since March 2004. Mr. Farley is Chairman of our Audit Committee and also serves as a member of our Compensation Committee. Since 1999, Mr. Farley has operated a consulting practice in which he assists and advises public and private companies in complex financial transactions, on complex accounting and reporting issues and at time providing Chief Financial Officer services. Mr. Farley has been providing financial consulting services since 1999. Through ~~2006,~~2007, Mr. Farley served as a Director and a member of the Audit Committee of iCad, Inc. He has also served as a Director and member of the Audit Committee of Preserver Insurance Company, Inc. and Acorn Holdings Corp and as a Director for Olympia Leather Company, Inc. From November 1997 to August 1999, Mr. Farley was a Chief Financial Officer of Talk.com, Inc., which provides telecommunication services. Mr. Farley was also a director of Talk.com, Inc. Mr. Farley joined BDO ~~Seidman,~~USA, LLP in 1962 and was a partner at BDO ~~Seidman,~~USA, LLP from 1972 to 1995, ~~with extensive experience in accounting, auditing~~where he served as the managing partner of BDO’s Philadelphia Office, National Director of Mergers and ~~SEC matters.~~Acquisition and established BDO’s valuation practice.

CLASS III DIRECTORS

(Term Expires in ~~2008)~~2013)

James K. Harlan: James K. Harlan ~~56,~~ has been a member of our Board of Directors since March 2004. Mr. Harlan is the Chairman of our Compensation Committee and serves as a member of our Audit Committee. Mr. Harlan ~~is the~~founded HNG Storage, an underground natural gas storage development and operations enterprise, in 1992, and served as Executive Vice President and Chief Financial Officer ~~of HNG Storage, LP, a natural gas storage development~~from 1998 to 2007. This company acquired, developed and ~~operations business~~operated several projects that ~~he helped found in 1992.~~were sold to major energy companies. From 1991 to 1997, Mr. Harlan served as Group Development Manager for the Pacific Resources Group based in Indonesia, which was engaged with various manufacturing and distribution businesses and joint ventures in Asia, Australia, and North America. ~~He also~~Mr. Harlan has expertise in energy technology and markets having served as operations research and planning analyst for the White House Office of Energy Policy and Planning from 1977 to 1978, the Department of Energy from 1978 to 1981, and ~~U.S.~~U. S. Synthetic Fuels Corporation from 1981 to 1984. He has a PhD in Public Policy with an operations research dissertation from Harvard University and a BS in Chemical Engineering from Washington University in St. Louis. Mr. Harlan iswas a member of the Board of Directors of iCAD, ~~where~~serving on board audit and compensation committees from 2000 until 2008, when he became a candidate for U. S. Congress from Louisiana. Mr. Harlan is ~~a member~~currently chief executive of the ~~Audit Committee~~Vendevco group of companies with interests in oil/gas production, property and ~~is Chairman of~~venture development in the ~~Governance Committee.~~United States and internationally. He also serves on the advisory committee for Washington University’s International Center for Advanced and Renewable Energy and Sustainability.

~~David C. Hurley:~~ David C. Hurley, 67, has been a member of our Board of Directors since March 2004, serves as a member of our Nominating and Corporate Governance Committee, and served as the independent Chairman of our Board from March 2006 until December 2007. Mr. Hurley was appointed Vice Chairman of PrivatAir of Geneva, Switzerland on February 1, 2003, relinquishing the role of Chief Executive Officer, a position he held following the acquisition of Flight Services Group ("FSG") by PrivatAir in 2000. PrivatAir has major business aviation operations in over fifteen bases in the U.S. and aircraft service operations at Le Bourget, Paris, France; Dusseldorf, Munich and Hamburg Germany; and Geneva, Switzerland. Mr. Hurley founded FSG in 1984. FSG is one of the world's largest providers of corporate aircraft management, executive charter and aircraft sales and acquisitions in the U.S. Mr. Hurley has over 30 years experience in marketing and sales in the aerospace and telecommunications industries. Before founding FSG, he served as the Senior Vice President of Domestic and International Sales for Canadair Challenger. He also served as Regional Manager of the Cessna Aircraft Company and as Director of Marketing, Government and Military Products Division, for the Harris Intertype Corporation. Mr. Hurley serves as the Chairman of the Board of the Smithsonian Institution' s National Air and Space Museum, Washington, D.C.; and serves on the Boards of BE Aerospace, Inc., a public company, Hexcel Corp., a public company listed on the New York Stock Exchange, Genesee & Wyoming, Inc., a public company listed on the New York Stock Exchange, Genesis Lease, Ltd., a public company listed on the New York Stock Exchange, The Corporate Angel Network, White Plains, N.Y., and Aerosat, Inc., Manchester, NH. He is an alumnus of Hartwick College and served three years in the Special Services Branch of the US Army, receiving an honorable discharge.

-4-

The following is information with respect to the Company’s officers who are not directors or nominees for director:

~~Kenneth M. Wallace~~Joseph C. Hayden: ~~, 45,~~Joseph C. Hayden has been the ~~Chief Financial~~President since June 2010 and Principal Executive Officer since ~~March 2006 and Secretary since February 2008.~~April 2009. Mr. ~~Wallace was~~Hayden also served as Chief Operating Officer from July 2006 to October 2007. From October 2005 through March 2006, Mr. Wallace was Chief Financial Officer of Crosswalk, Inc., an early-stage software and grid storage development company. From July 2004 through May 2005, Mr. Wallace was Senior Vice President and Chief Operating Officer of a building products manufacturer based in Chandler, Arizona. From 2000 through 2004, Mr. Wallace was Chief Financial Officer and a Director of Moxtek, a scientific instrumentation company specializing in X-Ray optics and nano-structured polarization technologies. From 1996 to 2000, Mr. Wallace was Chief Financial Officer of LAB-Interlink, a high-tech laboratory automation company specializing in the remote handling of clinical laboratory specimens.

~~-4-~~

~~Joseph C. Hayden~~~~, 50, has been the~~Officer. Previously, he served as Executive Vice President - Programs for Applied Energetics ~~since~~(since December ~~2004.~~2004), directing all new business capture and the execution of awarded contracts. Prior to that, ~~Mr. Hayden~~he was ~~the~~ Executive Vice President of Business Operations from November 2002 to 2004. He is a founder of the company.

Formerly, Mr. Hayden ~~has over 25 years experience~~was a Program Manager and Senior Principal Systems Engineer at Raytheon Missile Systems working in ~~managing large engineering projects~~the Directed Energy Weapons and JSOW missile product lines. From 1998 to 1999, Mr. Hayden was the Engineering Manager for Delta V Technologies, Inc., overseeing the design and manufacture of high vacuum coating systems for the commercial thin film and glass coating industries. From 1993 to 1997, Mr. Hayden was employed by Molten Metal Technology, Inc., an environmental high technology ~~research~~start-up company. As Director of Commercial Services for Molten Metal Technology, he led the staffing and ~~development.~~start-up of three hazardous waste processing plants, including a joint venture for radioactive waste processing in Oak Ridge, Tennessee. While Director of Research and Development Operations for Molten Metal Technology, he managed the operations at the company’s R&D facility, which included a commercial-scale pilot plant. Mr. Hayden’s career began in the United States Navy, where he served as a Nuclear Surface Warfare Officer. His billets included tours on nuclear powered aircraft carriers, guided missile cruisers and destroyers, including being a member of the pre-commissioning crew of the USS George Washington (CVN-73) where he was closely involved in the testing and acceptance of the ship’s nuclear power plants. Mr. Hayden’s additional Navy tours included being a staff member of the Atlantic Fleet, an instructor and company officer at the U.S. Naval Academy, and service at the Naval Electronics Systems Command. Mr. Hayden ~~is responsible for Contract Bid~~received a B.S. in Mechanical Engineering from the United States Naval Academy.

Humberto A. Astorga: Humberto A. Astorga has been our Chief Financial Officer since June, 2010, and ~~Proposals~~our principal financial officer and ~~administration~~principal accounting officer since September, 2009. Since March 2006, Mr. Astorga has been Controller of ~~existing contracts for~~ Applied Energetics. Prior to joining the ~~founding~~company, Mr. Astorga was Controller of ~~Applied Energetics,~~Lasertel, Inc., a semi-conductor laser manufacturer he joined in June 2002. From 2001 through June 2002, Mr. ~~Hayden worked~~Astorga was senior financial analyst of NCS Pearson, Inc., a provider of educational assessments, products, services and solutions. Prior to joining NCS Pearson, Mr. Astorga was the SAP Business Analyst for Leoni Wiring Systems, Inc., a global supplier of wires, cables and wiring systems. From 1997 until he joined Leoni Wiring in 2000, Mr. Astorga was a senior financial analyst for the Chamberlain Group, Inc., a consumer electronics manufacturing company. Mr. Astorga is a graduate of Eller College at ~~Raytheon, Inc. (“Raytheon”)~~University of Arizona and ~~also~~he received an M.B.A. from University of Phoenix.

Eric F. Lau: Eric F. Lau has been the Chief Operating Officer and Vice President of Engineering since December, 2010. Since July, 2009, Mr. Lau served as Director of Engineering and Operations. From December 2002 to July 2009, Mr. Lau was a Program Manager for the Laser Guided Energy (LGE) and Counter-IED (CIED) Programs. Prior to joining the company in December, 2002, Mr. Lau was the Vice President of Operations for Mission Viejo S. A. de C. V. from 1998 through 2002. From 1994 to 1998, Mr. Lau was the New Product Development Team Leader for P. L. Porter Company. From 1991 to 1994, Mr. Lau was a Senior Project Engineer at ~~two other start-up companies. A~~Robertshaw Controls, Co. and from 1986 to 1991, Mr. Lau was a Project and Design Engineer at ITT General Controls. Mr. Lau is a graduate of the ~~U.S. Naval Academy, Mr. Hayden was~~University of Southern California, where he received a ~~U.S. Navy Surface Warfare Officer and Nuclear Engineer before leaving the service to work~~Bachelor’s Degree in ~~industry.~~Mechanical Engineering.

~~Stephen W. McCahon~~, 48, has been the Executive Vice President - Engineering for Applied Energetics since November 2002. Dr. McCahon has an extensive background in optical physics, solid-state physics, ultra-short pulse lasers and non-linear optics, and a broad background in Electrical Engineering (BSEE, MSEE, PH.D. EE/Physics). Dr. McCahon has more than 40 scientific publications and holds 10 issued patents with 3 pending. Prior to joining Applied Energetics, Dr. McCahon had been Chief Engineer of Raytheon’s Directed Energy Weapon Product Line. Previously, he had been a Member of the Research Staff at Hughes Research Laboratories in Malibu, CA (currently known as HRL Laboratories).

STOCK OWNERSHIP AND SECTION 16 COMPLIANCE

The following table sets forth information regarding the beneficial ownership of our Common Stock, based on information provided by the persons named below in publicly available filings, as of the ~~Record Date:~~record date:

each of the our directors and executive officers;

all directors and executive officers of ours as a group; and

each person who is known by us to beneficially own more than five percent of the outstanding shares of our Common Stock.

Unless otherwise indicated, the address of each ~~beneficial owner~~officer and director is in care of Applied Energetics, 3590 East Columbia Street, Tucson, Arizona 85714. Unless otherwise indicated, the Company believes that all persons named in the following table have sole voting and investment power with respect to all shares of common stock that they beneficially own.

-5-

For purposes of this table, a person is deemed to be the beneficial owner of the securities if that person has the right to acquire such securities within 60 days of the Record Date upon the exercise of options or warrants. In determining the percentage ownership of the persons in the table below, we assumed in each case that the person exercised all options and warrants which are currently held by that person and which are exercisable within such 60 day period, but that options and warrants held by all other persons were not exercised, and based the percentage ownership on ~~80,587,762~~91,371,192 shares outstanding on the Record Date. Restricted stock units which were granted February 28, 2011, do not begin vesting until the third business day following the dates on which we file our Annual Report on Form 10-K for the years ending December 31, 2011, 2012 and 2013 with the Securities and Exchange Commission. Therefore, they are not included in the table below.

~~-5-~~

	Number of Shares Beneficially			Percentage of Shares
Name of Beneficial Owner	Owned (1)			Beneficially Owned (1)
State of Wisconsin Investment Board		9,048,570	2		9.9	%
Superius Securities Group Inc.
Profit Sharing Plan		8,535,997	3		9.3	%
Joseph C. Hayden		5,604,468			6.1	%
Artis Capital Management, L.P.		5,070,161	4		5.5	%
James M. Feigley		533,697	5		*
Eric F. Lau		405,418	6		*
Humberto A. Astorga		292,516	7		*
James K. Harlan		255,615	8		*
Mark J. Lister		125,000	9		*
John F. Levy		87,500	10		*
George P. Farley		0	11		*
All directors and executive officers as a group (8 persons)		7,334,212			7.9	%

Name and Address of Beneficial Owner

Number of Shares

Beneficially Owned

Percentage of Shares

Beneficially Owned⁽¹⁾

(1)

Computed based upon the total number of shares of common stock, restricted shares of common stock and shares of common stock underlying options held by that person that are exercisable within 60 days of the Record Date.

(2)

Based on information contained in a report on Schedule ~~13D~~13G filed with the SEC on January 15, 2008. Represents: (i) 13,005,162 shares of common stock held directly by Mr. Howard; (ii) 2,334,000 shares of common stock held by the Robert Howard Family Foundation (the “Foundation”). Mr. Howard is a director of, and shares voting and dispositive power over the shares of common stock held by the Foundation. Mr. Howard disclaims beneficial ownershipFebruary 14, 2011. The address of the ~~shares~~State of ~~common stock held by the Foundation.~~Wisconsin Investment Board is P. O. Box 7842, Madison, WI 53707.

(3)

Based on information contained in a report on Schedule 13G filed with the SEC on October 29, 2009. The address of Superius Securities Group Inc. Profit Sharing Plan is 94 Grand Ave., Englewood, NJ 07631.

(4)

Based on information contained in a report on Schedule 13G filed with the SEC on February 14, ~~2008:~~2011: The address of Artis Capital Management, LLC (“Artis”) is One Market Plaza, ~~Spear~~Steuart Street Tower, Suite ~~1700,~~2700, San Francisco, CA 94105. Artis is a registered investment adviser and is the investment adviser of investment funds that hold the company’s stock for the benefit of the investors in those ~~funds, including Artis Technology 2X Ltd (“2X”).~~funds. Artis Inc. is the general partner of Artis. Stuart L. Peterson is the president of Artis Inc. and the controlling owner of Artis and Artis Inc. Each of Artis, Artis Inc., and Mr. Peterson disclaims beneficial ownership of the Stock, except to the extent of its or his pecuniary interest therein. ~~2X disclaims that it is, the beneficial owner as defined in Rule 13d-3 under the Securities Act of 1933 of any of such shares of common stock.~~

~~(4)~~

~~Based on information provided by Mr. Dearmin on February 11, 2008.~~

(5)

~~Based on information contained in a report on Schedule 13G filed with the SEC on February 14, 2008 which indicates sole voting~~Represents 103,697 shares of common stock and ~~investment power as to the shares~~430,000 options exercisable within 60 days of Record Date.

(6)

Represents ~~5,925,668~~35,084 shares of common stock and ~~45,000 unvested shares~~370,334 options exercisable within 60 days of ~~restricted common stock.~~Record Date.

(7)

Represents ~~5,828,968~~34,516 shares of common stock and ~~45,000 unvested shares~~258,000 options exercisable within 60 days of ~~restricted common stock.~~Record Date.

(8)

~~Based on information contained in a report on Schedule 13G filed with the SEC on February 14, 2008: The address~~Represents 64,365 shares of ~~S.A.C. Capital Advisors, LLC, 72 Cummings Point Road, Stamford, CT 06902. Pursuant to investment agreements, each~~common stock and 191,250 options exercisable within 60 days of S.A.C. Capital Advisors LLC (“SAC Capital Advisors”) and S.A.C. Capital Management LLC (“SAC Capital Management”) share all investment and voting power with respect to the securities held by SAC Capital Associates LLC (SAC Associates”). Steven A. Cohen controls each of SAC Capital Advisors and SAC Capital Management. By reason of the provisions of Rule 13d-3 of the Securities Exchange Act of 1934, as amended, each of SAC Capital Advisors, SAC Capital Management and Mr. Cohen may be deemed to own beneficially 5,480,000 shares. Each of SAC Capital Advisors, SAC Capital Management and Mr. Cohen disclaim beneficial ownership of any of the securities described in this footnote.Record Date.

(9)

Represents ~~56,612~~75,000 shares of common stock ~~206,250 unvested shares of restricted common stock~~ and ~~333,334~~50,000 options exercisable within 60 days of ~~the~~ Record Date.

(10)

Represents ~~16,893~~37,500 shares of common stock ~~98,334 unvested shares of restricted common stock~~ and ~~355,000~~50,000 options exercisable within 60 days of ~~the~~ Record Date.

(11)

~~Represents 33,871 shares of common stock and 285,000 options exercisable within 60 days~~Mr. Farley denies beneficial ownership of the ~~Record Date.~~common shares and common shares issuable upon exercise of options he transferred to various LLCs.

~~(13)~~

~~Represents 23,115 shares of common stock and 272,500 options exercisable within 60 days of the Record Date.~~

~~(14)~~

~~Represents 185,000 options exercisable within 60 days of the Record Date. Mr. Farley denies ownership or control over common stock he transferred to a family trust.~~

Section 16(A) Beneficial Ownership Reporting Compliance:

CORPORATE GOVERNANCE

Board Leadership Structure

The Boards role in the Company’s risk oversight process includes receiving regular reports from members of the executive management team on areas of material risk to the Company, including operational, financial, legal, regulatory, strategic, transactional and reputational risks. The full Board receives these reports from the appropriate “risk owner” within the organization to enable it to understand our risk identification, risk management and risk mitigation strategies.

All of our directors bring to our Board a wealth of executive leadership experience derived from their service as senior executives and, in many cases, founders of industry or knowledge specific consulting firms or operational businesses. They also offer extensive public company board experience. Each of our board members has demonstrated strong business acumen and an ability to exercise sound judgment and has a reputation for integrity, honesty and adherence to ethical standards. When considering whether directors and nominees have the experience, qualifications, attributes and skills, taken as a whole, to enable the Board of Directors ~~designated James A. McDivitt~~to satisfy its oversight responsibilities effectively in light of the company’s business and structure, the Corporate Governance and Nominating Committee and the Board of Directors focused primarily on the information discussed in each of the Directors’ individual biographies set forth above and the specific individual qualifications, experience and skills as ~~our Lead Independent Director.~~described below:

General Feigley’s service in the United States Marine Corps and ownership and operation of a defense consulting firm provides us with invaluable insight into our government customers’ needs and requirements, as well as contacts to key personnel within these companies.

Mr. Farley’s extensive knowledge of accounting, the capital markets, financial reporting and financial strategies from his extensive public accounting experience, and prior services as a chief financial officer of a public company and as audit committee member of several public companies. Mr. Farley specialized in “Transactional Accounting” managing the accounting and auditing function for numerous public financings, mergers, acquisitions, reorganizations and business dispositions. In 1993, Mr. Farley was part of the team that created a new financing vehicle, the Specified Purpose Acquisition Company “SPAC”.

Mr. Harlan’s service in senior executive positions in manufacturing and operations provide our Board with a wealth of knowledge for these aspects of our business. Mr. Harlan has significant experience with management and commercial issues associated with technology based businesses that comprise an important aspect of our business position. Mr. Harlan also has prior experience in serving on the compensation committee of other public companies.

Mr. Levy’s extensive knowledge of accounting, the capital markets, corporate governance, corporate compliance, financial reporting and financial strategies from his public accounting firm experience and service as chief financial officer and audit committee member of several public companies, as well as through the services he provides to public companies through Board Advisory Services, a consulting firm he founded.

Mr. Lister’s broad perspective regarding our customers, markets and bringing defense industry applications to market gained through the services provided by his consulting firm to customers in the Defense, Intelligence and Homeland Security Government markets, as well as from his current and previous positions with the Navy Advisory Panel and Navel Research Advisory Committee and senior assignment with the U.S. Air Force Office of Space Systems.

Applied Energetics, Inc.

Attn: Human Resources

~~Deadline and Procedures for Submitting Board Nominations~~

EXECUTIVE AND DIRECTOR COMPENSATION

EXECUTIVE COMPENSATION ~~DISCUSSION AND ANALYSIS~~

Executive Compensation Philosophy

Compensation Committee

Process and procedures for considering and determining executive and director ~~compensation.~~compensation:

Approve our compensation philosophy.

Formulate, evaluate, and approve compensation for our officers, as defined in Section 16 of the Securities and Exchange Act of 1934 and rules and regulations promulgated therein.

Formulate, approve, and administer cash incentives and deferred compensation plans for executives. Cash incentive plans are based on specific performance objectives defined in advance of approving and administering the plan.

Oversee and approve all compensation programs involving the issuance of our stock and other equity securities.

Review executive supplementary benefits, as well as our retirement, benefit, and special compensation programs involving significant cost to us, as necessary and appropriate.

~~Review compensation for terminated executives.~~

Oversee funding for all executive compensation programs.

Review compensation practices and trends of other companies to assess the adequacy of our executive compensation programs and policies.

Secure the services of external compensation consultants or other experts, as necessary and appropriate. These services, as required, will be paid from usfunds provided ~~board of directors budget.~~by the company. This system is designed to ensure the independence of such external advisors.

Approve employment contracts, severance agreements, change in control provisions, and other compensatory arrangements with our executives.

Role of ~~Chief~~Principal Executive Officer in Recommending Executive Compensation.

Compensation Goals

reward executives and employees for their contributions to our growth and profitability, recognize individual initiative, leadership, achievement, and other valuable contributions to our company.

to link a portion of the compensation of officers and employees with the achievement of our overall performance goals, to ensure alignment with the our strategic direction and values, and to ensure that individual performance is directed towards the achievement of our collective goals;

to enhance alignment of individual performance and contribution with long-term stockholder value and business objectives by providing equity awards;

to motivate and ~~incentivize~~provide incentives to our named executive officers and employees to continually contribute superior job performance throughout the year; and

to obtain and retain the services of skilled employees and executives so that they will continue to contribute to and be a part of our long-term success.

Compensation Surveys and Compensation Consultants

Elements of Compensation

base salary which is targeted at a competitive level and used to reward superior individual job performance of each named executive officer and to encourage continued superior job performance;

cash bonuses which are tied to specific, quantifiable and objective performance measures based on a combination of corporate and individual ~~goals, and discretionary bonuses;~~goals;

equity compensation which is based on corporate and individual performance, and discretionary equity awards;

severance and change of control agreements; ~~and~~

other benefits plan and programs.

Compensation Considerations

the proposed compensation package as a whole

each element of compensation individually

the executive's past and expected future contributions to our business

our overall company performance,

our financial condition and prospects,

the need to retain key employees, and

general economic conditions.

Base Equity Incentive

Upon promotion, assumption of greater responsibility, an advanced degree, or other appropriate milestone for an individual.

Annually; based on management’s assessment of the individuals performance and on the individuals job classification.

After a review of 2006 activities in progress in a number of areas, the committee established a compensation pool of approximately $250,000 (approximately 3% of gross payroll) and requested that Mr. Marshall recommend allocations of this pool for grants -- to be reviewed and approved by the committee, to key executives and employees based on their contribution to our objectives in 2006. As a part of the incentive bonus compensation program and in appreciation of their contribution to our goals during 2006, in 2006 the committee approved awards of cash bonuses of $20,000, $10,000 and $10,000 to Messrs. Wallace, Hayden and McCahon, respectively. Additionally, the committee reviewed and approved Mr. Marshall’s recommendation to compensate employees who were scheduled to forfeit excess earned vacation time due to our policy limiting the amount of time an employee is permitted to carry forward at year end. This payout was at a rate of 75% of the employees’ standard hourly base pay. Among the employees included in this program, Messrs. Wallace, McCahon, Hayden, Dearmin and Walik received payments of approximately $2,000, $3,000, $7,000, $1,000 and $5,000, respectively.

~~Long-Term Incentives~~

Severance and Change in Control Agreements

Pursuant to Mr. Wallace’s employment agreement, if Mr. Wallace’s employment is terminated by us without “cause”, he would receive payment of his base salary and benefits for six months, in monthly installments. If Mr. Wallace is terminated within three months following a change of control, all unvested stock options granted to Mr. Wallace will immediately vest and become exercisable for the full term of the option and all other unvested equity awards shall immediately vest.

Ot~~her~~Other Benefit Plans and Programs

~~Employment Agreements for Named Executive Officers~~

Mr. Wallace’s employment agreement is terminable by us immediately for “cause”, or by us without cause upon 30 days prior written notice or by Mr. Wallace upon 30 days prior written notice. If Mr. Wallace’s employment is terminated by us without cause, he would receive payment of his base salary and benefits, in monthly installments, for six months. Additionally, if Mr. Wallace is terminated within 3 months following a change of control, all unvested stock options awarded to Mr. Wallace will immediately vest and become exercisable for the full term of the option and all other unvested equity awards shall immediately vest.

~~SUMMARY COMPENSATION TABLE~~Summary Compensation Table

SUMMARY COMPENSATION TABLE

Name and Principal Position

Year

Salary⁽¹⁾

Bonus⁽²⁾⁽³⁾

Stock
Awards⁽⁴⁾

Option
Awards⁽⁵⁾

All Other
Compensation⁽⁶⁾

Total

Dana A. Marshall
Chairman, Chief Executive Officer, President and Assistant Secretary

2007
2006
$
273,077
87,500
$
125,000
75,000
$
300,385
-
$
500,666
243,108
$
89,439
16,185
$
1,288,567
421,793

Kenneth M. Wallace
Chief Financial Officer, Principal Accounting Officer and Secretary

2007
2006

210,046
146,154

100,000
20,000

126,162
-

368,029
421,851

6,858
27,360

811,095
615,365

Joseph C. Hayden
Executive Vice President - Programs

2007
2006

199,549
183,750

50,000
10,000

9,864
-

-
-

5,109
6,672

264,522
200,422

Stephen W. McCahon
Executive Vice President - Engineering

2007
2006

200,126
183,750

40,000
10,000

13,085
-

-
-

5,459
2,962

258,670
196,712

Stephen A. McCommon
Former Vice President - Finance⁽⁷⁾
2007 99,403 1,000 - 32,930 33,239 166,572

										All Other
Name and Principal						Stock		Option		Compensation
Position	Year	Salary (1)		Bonus (2)		Awards		Awards (3)			(4)	Total
Joseph C. Hayden	2010	$	222,384	$	25,000	$	-	$	-	$	5,259	$	252,644
President, principal	2009	$	209,615	$	-	$	-	$	-	$	4,479	$	214,094
executive officer	2008	$	225,000	$	-	$	-	$	-	$	4,813	$	229,813
Humberto A. Astorga	2010	$	142,308	$	-	$	-	$	16,432	$	2,887	$	161,627
Chief financial officer,	2009	$	120,769	$	22,750	$	-	$	61,547	$	1,650	$	206,716
principal financial
officer, Controller	2008	$	112,500	$	8,000	$	-	$	-	$	3,488	$	123,988
Eric F. Lau	2010	$	140,414	$	-	$	-	$	16,432	$	4,063	$	160,908
Chief Operating Officer,
Vice President of
Engineering

(1)

Mr. ~~Marshall’s 2007~~Hayden’s 2010 salary reflects the increase of his base salary to ~~$350,000~~$230,000 effective ~~October 1, 2007. In August 2006, we entered into an employment agreement with Mr. Marshall that provided for Mr. Marshall’s employment as the company’s President~~March 23, 2010 and ~~Chief Executive Officer at an initial annual base salary of $250,000. Mr. Wallace’s 2007~~his 2009 salary reflects ~~increases~~the voluntary decrease of his base salary to ~~$210,000~~$200,000 effective ~~February 1, 2007 and to $225,000 effective October 26, 2007. In March 2006, we hired~~May11, 2009. Mr. ~~Wallace as our Chief Financial Officer at an annual base~~Astorga’s 2011 salary will reflect the increase of $190,000. Accordingly, Mr. Wallace’s and Mr. Marshall’s salaries reflect only their service for the remaining portion of calendar year 2006. Messrs. Hayden and McCahon’s 2007 salary reflect increases in their annualhis base salary to ~~$200,000~~$170,000 effective ~~March~~January 3, 2011. Mr. Astorga’s 2010 salary reflects the increase of his base salary to $150,000 effective August 2, 2010. Mr. Astorga’s 2009 salary reflects the increase of his base salary to $137,500 effective September 1, ~~2007,~~2009 upon his appointment as Principal Financial officer from Controller of the company. Mr. Lau’s 2010 salary reflects the increase of his base salary to $170,000 upon his appointment as Chief Operating Officer and ~~another increase effective December 3, 2007 to $225,000 for Mr. Hayden and $235,000 for Mr. McCahon.~~Vice President of Engineering.

(2)

~~Mr. Marshall’s cash bonus~~Not included in the above table are amounts reflecting the value of ~~$125,000~~Restricted Stock Units which vested in ~~2007 was determined by the committee considering performance as specified~~2010, but were granted in ~~is per Mr. Marshall’s employment agreement. This cash bonus was paid in January 2008. Mr. Wallace’s 2007 $100,000 cash bonus was comprised~~prior years and an exercise of ~~a $60,000 bonus paid on the execution of his employment agreement and a $40,000 bonus, paid in January 2008,~~an option which was granted byprior to 2010. Please see the ~~compensation committee as a part of a performance based review related to his contribution to meeting corporate goals~~table labeled “Option Exercises and Stock Vested” on page 37 for 2007. The cash bonuses that Messrs. Hayden and McCahon received of $50,000 and $40,000, respectively, were granted by the compensation committee in consideration of their contributions to meeting goals during 2007 and prior years. These bonuses were paid in January 2008.more detail.

(3)

Mr. Marshall’s bonus of $75,000 in 2006 is comprised of a $15,000 signing bonus and a $60,000 cash bonus granted by the compensation committee in December 2006 in recognition of Mr. Marshall’s accomplishments in the first five months of employment. This cash bonus was paid in January 2007. The bonuses that Messrs. Wallace, Hayden and McCahon received of $20,000, $10,000 and $10,000, respectively, were granted by the compensation committee as a performance based award considering contribution to meeting goals during 2006.

~~(4)~~

The amounts included in the “Stock Awards” column represent the compensation cost recognized by the company in 2007 related to restricted stock awards, computed in accordance with SFAS No. 123R. For a discussion of valuation assumptions, see Note 9 to our 2007 Consolidated Financial Statements.

~~(5)~~

The amounts included in the “Option Awards” column represent the ~~compensation cost recognized by the company~~aggregate grant date fair value in ~~2007~~2010, 2009 and ~~2006~~2008 related to stock option awards, computed in accordance with ~~SFAS No. 123R.~~FASB ASC Topic 718. For a discussion of valuation assumptions, see Note 98 to our ~~2007~~2010 Consolidated Financial Statements.

~~(6)~~(4)

The ~~2007~~ amounts shown in the “All Other Compensation” column are attributable to ~~Mr. Marshall receiving $35,260~~the company match expense for ~~relocation assistance, $12,000 for automobile expenses and $34,799 “gross up” for the payment of taxes for his relocation assistance and automobile expenses.~~401(k) contributions. All named executives received ~~the~~an employer ~~match~~matching benefit ~~where~~pursuant to which we match 50% of the employees’ 401(K) contribution up to 3% of their eligible compensation ~~company contributions~~ to their 401(K) plans, a benefit that is available to all employees. Additionally, “All Other Compensation” includes the dollar value of life insurance premiums paid by us for all named executive officers. Mr. McCommon’s All Other Compensation includes an accrual of his severance package. The 2006 amounts shown in the “All Other Compensation” column for Messrs. Marshall and Wallace include payments for commuting costs, temporary housing assistance and relocation assistance, Mr. Marshall also received reimbursements of automotive expenses and Messrs. Wallace, McCahon and Hayden received payments in compensation for lost unused vacation time

~~GRANTS OF PLAN-BASED AWARDS~~Grants of Plan-Based Awards

Estimated Future Payouts Under

Non-Equity Incentive Plan Awards

Estimated Future Payouts Under

Equity Incentive Plan Awards

All Other Stock Awards: Number of Shares of Stock

Grant Date Fair Value of Stock Awards⁽¹⁾

(1)

The amounts included in the “Grant Date Fair Value of Stock Awards” column represent the full grant date fair value of the awards computed in accordance with ~~Financial Accounting Standards No. 123R.~~ASC 718. The fair value of stock option awards is recognized in the income statement as non-cash, equity based compensation expense over the vesting period of the grants. For a discussion of valuation assumptions, see Note 98 to the Consolidated Financial Statements of our ~~2007~~2010 Financial Statements.

(2)

~~The Estimated Future Payouts under Non-Equity Incentive Plan Awards represents Mr. Marshall’s eligibility~~Represents stock option awards granted to ~~receive~~the named executive officers. These awards have an ~~annual incentive bonus~~exercise price equal to the closing price of our common stock on the grant date and provide value to the recipient only if the price of our common stock increases after the grant date. There were no other performance or other market condition requirements included in ~~each calendar year~~the terms of upthe option awards to ~~50% of his base salary if we achieve goals and objectives established by~~ the ~~compensation committee in accordance with Mr. Marshall’s employment agreement. Based on his current annual base salary of $350,000.~~named executive officers.

Employment Agreements for Named Executive Officers

~~(3)~~

Pursuant to the amendment of Mr. Marshall’s employment agreement, on October 26, 2007, the Compensation Committee granted to Mr. Marshall 275,000 shares of restricted common stock of the company. This restricted stock vest as to 68,750 shares annually on each January 10th from 2008 through 2011.

~~(4)~~

The Estimated Future Payouts under Non-Equity Incentive Plan Awards represents Mr. Wallace’s eligibility to receive an annual incentive bonus in each calendar year of up to 25% of his base salary if we achieve goals and objectives established by the Compensation Committee in accordance with Mr. Wallace’s employment agreement. Based on his current annual base salary of $225,000.

~~(5)~~

Pursuant to his employment agreement, on October 26, 2007, the Compensation Committee granted to Mr. Wallace 80,000 shares of restricted common stock of the company. This restricted stock vest as to 26,666 shares on January 10, 2008 and 26,667 shares on each of January 10, 2009 and January 10, 2010.

~~(6)~~

On November 29, 2007, the Compensation Committee awarded 45,000 shares of restricted stock each to Messrs. Wallace, McCahon and Hayden. The restricted stock grants vest as to 13,500 shares on December 1, 2008, 2009 and 2010. Vesting of the remaining 4,500 shares awarded to each individual vest upon the achievement of certain specified performance targets.

~~OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END~~Outstanding Equity Awards at Fiscal Year-End

Number of Securities Underlying Unexercised Options Exercisable

Number of Securities Underlying Unexercised Options Unexercisable

Option Exercise Price

Option Expiration Date

Equity Incentive Plan Awards: Number of Unearned Shares That Have Not Vested

Equity Incentive Plan Awards: Market Value of Unearned Shares That Have Not Vested

~~___________~~

	Option Awards									Stock Awards
	Number of			Number of
	Securities			Securities
	Underlying			Underlying						Number of			Market Value
	Unexercised			Unexercised			Option		Option	shares of stock			of Shares of
	Options Exercisable			Options			Exercise		Expiration	that have not			stock that have
Name	(#)			Unexercisable (#)			Price		Date	vested			not vested
Joseph C. Hayden		-			-						-		$	-
		58,000	(1)		-		$	0.50	03/09/2012		-		$	-
Humberto A. Astorga		83,333	(2)		83,334	(2)	$	0.40	07/16/2014		-		$	-
		16,667	(3)		33,333	(3)	$	0.60	03/23/2015		-		$	-
		-			-						3,375	(4)	$	2,869
		69,500	(5)		-		$	0.50	03/09/2012		-		$	-
Eric F. Lau		17,500	(6)		-		$	0.50	03/09/2012		-		$	-
		166,666	(7)		83,334	(7)	$	0.40	07/16/2014		-		$	-
		16,667	(8)		33,333	(8)	$	0.60	03/23/2015		-		$	-

(1)

~~Vest~~

Pursuant to an exchange offer (the “Exchange Offer”) made in ~~three installments of 200,000~~March 2009 to all employees and directors with respect to all then outstanding options granted under our 2004 Stock Incentive Plans, Mr. Astorga exchanged options to purchase 116,000 shares of common stock ~~on August 18, 2008,~~in March 2009 for options to purchase 58,000 of common stock exercisable at $0.50 per share. The options received in the Exchange Offer vested immediately and ~~2010.~~are exercisable over a three year period from the date of the exchange. These options were granted under the 2004 Stock Incentive Plan.

(2)	~~Vest~~Vested as to 83,333 shares on ~~December 26, 2008.~~each of July 16, 2009 and 2010. Vests as to the remaining 83,334 shares on the third day following the filing of the second quarter form 10-Q in 2011. These options were granted under the 2007 Stock Incentive Plan.

(3)	~~Vest in two installments of 25,000~~Vested as to 16,667 shares ~~of common stock~~ on March ~~20, 2008~~23, 2010 and ~~2009.~~vests annually on each of March 23, 2011 and 2012. These options were granted under the 2007 Stock Incentive Plan.

(4)	~~Vest on June 2, 2008.~~

~~(5)~~

~~Vest on December 26, 2008.~~

~~(6)~~

~~Restricted stock grant vested as to 68,750 shares on January 10, 2008 and as to an additional 68,750 shares annually on January 10, 2009, 2010, and 2011.~~

~~(7)~~

Restricted stock grant vests ~~as to 13,500 shares annually~~ on December 1, ~~2008, 2009 and 2010. Vesting of the remaining 4,500 shares awarded to each individual~~2012, but will vest earlier upon the achievement of certain specified performance targets.

(5)

Pursuant to the Exchange Offer, Mr. Lau exchanged options to purchase 139,000 shares of common stock for options to purchase 69,500 of common stock exercisable at $0.50 per share. The options received in the Exchange Offer vested immediately and are exercisable over a three year period from the date of the exchange. These options were granted under the 2004 Stock Incentive Plan.

(6)	Vested on April 23, 2009. These options were granted under the 2007 Stock Incentive Plan.

(7)	Vested as to 83,333 shares on each of July 16, 2009 and 2010 and vests as to the remaining 83,334 shares on the third day following the filing of the second quarter form 10-Q in 2011. These options were granted under the 2007 Stock Incentive Plan.

(8)	~~Restricted stock grant vested as to 26,666 shares~~Vested on ~~January 10, 2008~~March 23, 2010 and ~~as to an additional 26,667 shares~~vests annually on each of ~~January 10, 2009~~March 23, 2011 and ~~2010.~~2012. These options were granted under the 2007 Stock Incentive Plan.

(9)	The market value of shares or units of stock that have not vested as reported in the table above is determined by multiplying the closing market price of our common stock on the last trading day of ~~2007~~2010 of ~~$2.86~~$0.85 by the number of shares stock that have not vested.

~~POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL~~Payments upon Termination or Change-In-Control

A Rights Agreement commonly known as a "poison pill", currently exists which provides that in the event an individual or entity becomes a beneficial holder of 12% or more of the shares of our capital stock, without the approval of the Board of Directors other stockholders of the company shall have the right to purchase shares of our (or in some cases, the acquirer’s) common stock from the company at 50% of its then market value.

~~Executive Payments Upon Termination or Change in Control~~

~~Name~~

~~Without~~

~~Cause~~

~~Termination~~

~~For Good~~

~~Reason~~

~~Resignation~~

~~For Cause~~

~~Termination or~~

~~Voluntary~~

~~Resignation~~

~~Change in~~

~~Control~~⁽¹⁾

~~Termination~~

~~Following~~

~~Change in~~

~~Control~~⁽¹⁾⁽²⁾

~~Dana A. Marshall~~

~~525,000~~⁽³⁾

~~786,500~~⁽⁴⁾

~~1,311,500~~⁽⁵⁾

~~Kenneth M. Wallace~~

~~140,625~~⁽⁶⁾

~~498,125~~⁽⁷⁾

~~(1)~~

~~The value of vested options as of December 31, 2007 is zero as our closing price was less than the exercise price of such options.~~

2010:

~~(2)~~

~~Assumes an effective date of a change in control within three months prior to December 31, 2007.~~

~~(3)~~

~~Consists of $350,000 base salary and $175,000 incentive bonus.~~

~~(4)~~

~~Represents vesting of 275,000 shares of restricted common stock valued at the closing price of the company's common stock on December 31, 2007.~~

~~(5)~~

~~Consists of $350,000 base salary, $175,000 incentive bonus and $786,500 for 275,000 shares of restricted common stock valued at the closing price of the company's common stock on December 31, 2007.~~

~~(6)~~

~~Consists of $112,500 base salary and $28,125 incentive bonus.~~

~~(7)~~

~~Consists of $112,500 base salary, $28,125 incentive bonus and $357,500 for 125,000 shares of restricted common stock valued at the closing price of the company's common stock on December 31, 2007.~~

~~DIRECTOR COMPENSATION~~Director Compensation

Name

Fees Earned or Paid in
Cash

Option Awards⁽¹⁾

Total
David C. Hurley $100,000
$177,000⁽²⁾
$277,000
George P. Farley   $75,000
$132,750⁽³⁾
$207,750
James K. Harlan   $62,500
$110,625⁽⁴⁾
$173,125
James A. McDivitt   $50,000
  $88,500⁽⁵⁾
$138,500

(1)

The amounts included in the ~~“Option~~“Stock Awards” column represent ~~the compensation cost recognized by the company~~aggregate grant date fair value in ~~2007~~2010 related to ~~stock option~~share awards to directors, computed in accordance with ~~SFAS No. 123R.~~FASB ASC Topic 718. For a discussion of valuation assumptions, see Note 98 to our ~~2007~~2010 Consolidated Financial Statements. All ~~options~~awards granted to directors in ~~2007~~2010 vested immediately and ~~became~~shares were immediately ~~exercisable upon grant.~~issued.

(2)	Mr. Hurley resigned as a director effective December 31, 2010.

(3)

Mr. Hurley was granted ~~options to purchase 100,000~~55,000 shares of common stock in ~~January 2007~~March 2010 with a ~~grant date fair~~market value ~~computed in accordance with SFAS No. 123R,~~ of ~~$177,000~~$33,000, which was recognized in ~~2007~~2010 for financial statement reporting purposes in accordance with ~~SFAS 123R. As of December 31, 2007, Mr. Hurley had options to purchase 275,000 shares of common stock outstanding.~~FASB ASC Topic 718.

~~(3)~~(4)

Mr. Farley was granted ~~options to purchase~~ 75,000 shares of common stock in ~~January 2007~~March 2010 with a ~~grant date fair~~market value ~~computed in accordance with SFAS No. 123R,~~ of ~~$132,750~~$45,000 which was recognized in ~~2007~~2010 for financial statement reporting purposes in accordance with ~~SFAS 123R. As of December 31, 2007, Mr. Farley had options to purchase 175,000 shares of common stock outstanding.~~FASB ASC Topic 718.

~~(4)~~(5)

Mr. Harlan was granted ~~options to purchase 62,500~~55,000 shares of common stock in ~~January 2007~~March 2010 with a ~~grant date fair~~market value ~~computed in accordance with SFAS No. 123R,~~ of ~~$110,625~~$33,000, which was recognized in ~~2007~~2010 for financial statement reporting purposes in accordance with ~~SFAS 123R. As of December 31, 2007, Mr. Harlan had options to purchase 262,500 shares of common stock outstanding.~~FASB ASC Topic 718.

~~(5)~~(6)

Mr. ~~McDivitt~~Feigley was granted ~~options to purchase 50,000~~125,000 shares of common stock in ~~January 2007~~March 2010 with a ~~grant date fair~~market value ~~computed in accordance with SFAS No. 123R,~~ of ~~$88,500~~$75,000 which was recognized in ~~2007~~2010 for financial statement reporting purposes in accordance with ~~SFAS 123R. As of December 31, 2007,~~ FASB ASC Topic 718.

(7)	Mr. ~~McDivitt had options to purchase 250,000~~Levy was granted 50,000 shares of common stock ~~outstanding.~~in March 2010 with a market value of $30,000, which was recognized in 2010 for financial statement reporting purposes in accordance with FASB ASC Topic 718.

(8)	Includes $25,000 of additional director’s fees awarded and paid in January 2010 for overseeing our strategic planning initiatives in 2009.

(9)	Mr. Lister was granted 100,000 shares of common stock in March 2010 with a market value of $60,000, which was recognized in 2010 for financial statement reporting purposes in accordance with FASB ASC Topic 718.

Under the program, if at anytime during an independent director serves in more than one position of Chairman of the Board, lead independent director and Chairman of the Audit Committee or Compensation Committee, that director shall receive the higher level compensation paid for any such position the director then holds. On March 13, 2008, Mr. McDivitt was appointed lead independent director and as such received a prorated adjustment in shares and cash compensation in accordance with this program. Also on March 13, 2008, upon relinquishing his role as lead independent director, Mr. Hurley’s prorated cash compensation for the balance of 2008 decreased.

~~Compensation~~ ~~Committee Interlocks And Insider Participation:~~COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION:

~~Compensation~~ ~~Committee Report:~~COMPENSATION COMMITTEE REPORT:

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ~~AND DIRECTOR INDEPENDENCE:~~

Review, Approval or Ratification of Transactions with Related Persons

INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS

AUDIT COMMITTEE REPORT

Audit Committee of the Board of Directors:

PROPOSAL II: RATIFICATION OF THE

APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING

Proxy Proposals Brought Under Rule 14a-8.

Director Nominations, Proposals for Action, and Other Business Brought Before the Annual Meeting

Our bylaws require that proposals of stockholders made outside of the processes of Rule 14a-8 under the Exchange Act must be submitted, in accordance with the requirements of the bylaws, including providing all of the information specified in the bylaws no earlier than the 75th day and not later than the 50th day prior to the meeting unless less than 65 days notice or prior public disclosure of the date of the meeting is given or made to stockholders, in which case, timely notice must be delivered not later than the close of business on the 10th day following the date on which the notice of the date of the meeting was mailed or other public disclosure was made. Stockholders are advised to review our bylaws, which contain additional requirements with respect to advance notice of stockholder proposals and director nominations. We did not receive notice of any business proposal to be brought by a stockholder, consistent with our Bylaws, before the Annual Meeting for a vote, and, therefore, in accordance with Exchange Act Rule 14a-4(c) any proxies held by persons designated as proxies by our Board of Directors and received in respect of this Annual Meeting will be voted in the discretion of our management on such other matter which may properly come before the Annual Meeting.

WHERE YOU CAN FIND MORE INFORMATION

Our 2010 annual report to stockholders is being made available to stockholders via the Internet. If you would like to receive printed copy of our proxy statement and annual report, you should follow the instructions for requesting such information in the notice you receive.

Copies of our Annual Report on Form 10-K for the fiscal year ended December 31, 2010 will be provided upon written request to Applied Energetics, Inc., 3590 East Columbia Street, Tucson, Arizona 85714, Attention Corporate Secretary. The Form 10-K also is available on our website www.appliedenergetics.com

We also file reports, proxy statements and other information with the Securities and Exchange Commission as required by the Securities Exchange Act of 1934, as amended. Copies of our reports, proxy statements and other information may be inspected and copied at the Public Reference Room maintained by the Securities and Exchange Commission at:

Washington, D.C. 20549

Information on the operation of the Public Reference Room may be obtained by calling the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission maintains a website that contains reports, proxy and information statements and other information regarding Applied Energetics. The address of the Securities and Exchange Commission website is http://www.sec.gov.

You should rely only on the information contained in this proxy statement to vote on the proposals set forth herein. Applied Energetics has not authorized anyone to provide you with information that is different from what is contained in this proxy statement. This proxy statement is dated August 15, 2011. You should not assume that the information contained in this proxy statement is accurate as of any date other than August 15, 2011, and neither the availability of this proxy statement via the Internet nor the mailing of this proxy statement to stockholders shall create any implication to the contrary.

By order of the Board of Directors,

Ú ~~FOLD AND DETACH HERE AND READ THE REVERSE SIDE~~ Ú


~~PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 11, 2008~~ ~~THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS~~		~~Please mark~~ ~~your votes~~ ~~like this~~		x

~~ELECTION OF CLASS I DIRECTORS:~~

~~FOR~~ ~~all nominees listed below (except as marked to the contrary below).~~

~~WITHHOLD AUTHORITY~~

~~to vote for all nominees listed below.~~

~~Dana A. Marshal (Class I)~~

~~James A. McDivitt (Class I)~~

~~General James M. Feigley (Class II)~~

~~(INSTRUCTION: To withhold authority to vote for any individual nominee,~~

~~write that nominee’s name in the space below.)~~


~~2. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting.~~


		~~COMPANY ID:~~
		~~PROXY NUMBER:~~
		~~ACCOUNT NUMBER:~~

~~SIGNATURE~~

~~SIGNATURE IF HELD JOINTLY~~

~~DATE~~

~~, 2008~~

NOTE: Please sign exactly as name appears hereon. When shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized person.

~~Table of Contents~~

Ú ~~FOLD AND DETACH HERE AND READ THE REVERSE SIDE~~ Ú

~~THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN ON THE REVERSE SIDE.~~

Name and Address of Beneficial Owner	Number of Shares Beneficially Owned	Percentage of Shares Beneficially Owned⁽¹⁾
Robert Howard	15,339,162⁽²⁾	19.0%
Artis Capital Management, L.P.	8,426,638⁽³⁾	10.5%
Thomas C. Dearmin	6,647,351⁽⁴⁾	8.2%
Galleon Management L.P.	6,010,817⁽⁵⁾	7.5%
Joseph C. Hayden	5,994,468⁽⁶⁾	7.4%
Stephen W. McCahon	5,873,968⁽⁷⁾	7.3%
S.A.C. Capital Advisors, LLC	5,480,000⁽⁸⁾	6.8%
Dana A. Marshall	596,196⁽⁹⁾	*
Kenneth M. Wallace	470,227⁽¹⁰⁾	*
James A. McDivitt	318,871⁽¹¹⁾	*
David C. Hurley	318,784⁽¹²⁾	*
James K. Harlan	295,615⁽¹³⁾	*
George P. Farley	185,000⁽¹⁴⁾	*
All directors and officers as a group (8 persons)	14,053,129	17.1%

			Estimated Future Payouts Under Non-Equity Incentive Plan Awards						Estimated Future Payouts Under Equity Incentive Plan Awards
Name	Grant Date		Threshold ($)		Target ($)		Maximum ($)		Threshold (#)		Target (#)		Maximum (#)		All Other Stock Awards: Number of Shares of Stock (#)		Grant Date Fair Value of Stock Awards⁽¹⁾
Dana A. Marshall						175,000⁽²⁾		175,000⁽²⁾		-		-		-
		10/26/2007⁽³⁾		-		-		-		-		-		-		275,000	$	976,250

Kenneth M. Wallace				-		56,250⁽⁴⁾		56,250⁽⁴⁾		-		-		-
		10/26/2007⁽⁵⁾		-		-		-		-		-		-		80,000	$	284,000
		11/29/2007⁽⁶⁾		-		-		-		-		4,500		4,500		40,500	$	147,600

Joseph C. Hayden		11/29/2007⁽⁶⁾		-		-		-		-		4,500		4,500		40,500	$	147,600

Stephen W. McCahon		11/29/2007⁽⁶⁾		-		-		-		-		4,500		4,500		40,500	$	147,600

	Option Awards								Stock Awards
Name	Number of Securities Underlying Unexercised Options Exercisable (#)		Number of Securities Underlying Unexercised Options Unexercisable (#)		Option Exercise Price		Option Expiration Date		Equity Incentive Plan Awards: Number of Unearned Shares That Have Not Vested (#)		Equity Incentive Plan Awards: Market Value of Unearned Shares That Have Not Vested ($)⁽⁹⁾
Dana A. Marshall		200,000		600,000⁽¹⁾	$	6.30		08/18/2011
		133,334		66,667⁽²⁾	$	3.84		12/26/2011
										275,000⁽⁶⁾	$	786,500

Kenneth M. Wallace		50,000		50,000⁽³⁾	$	9.75		02/13/2011
		100,000		100,000⁽⁴⁾	$	7.20		06/02/2011
		80,000		40,000⁽⁵⁾	$	3.84		12/26/2011
										45,000⁽⁷⁾	$	128,700
										80,000⁽⁸⁾	$	228,800

Joseph C. Hayden										45,000⁽⁷⁾	$	128,700

Stephen W. McCahon										45,000⁽⁷⁾	$	128,700

Stephen A. McCommon		6,000			$	5.10		01/02/2008
		37,500			$	7.16		01/02/2008
		9,000			$	7.20		01/02/2008
		10,000			$	3.84		01/02/2008

	Option Awards				Stock Awards
					Number of
	Number of Shares				Shares		Value
	Acquired on		Value Realized on		Acquired on		Realized on
Name	Exercise (#)		Exercise ($)		Vesting (#)		Vesting ($)
Joseph C. Hayden		-	$	-		13,500	$	10,800
Humberto A. Astorga		83,333	$	73,170		13,230	$	6,684
Eric F. Lau		-	$	-		24,209	$	13,367

	2007	2006	2010		2009
Audit Fees	$531,540	$541,340	$	326,500	$	239,000
Tax Fees	$10,875	$14,850	$	46,500	$	12,000

Name and Principal Position	Year		Salary⁽¹⁾		Bonus⁽²⁾⁽³⁾		Stock Awards⁽⁴⁾		Option Awards⁽⁵⁾		All Other Compensation⁽⁶⁾		Total
Dana A. Marshall Chairman, Chief Executive Officer, President and Assistant Secretary		2007 2006	$	273,077 87,500	$	125,000 75,000	$	300,385 -	$	500,666 243,108	$	89,439 16,185	$	1,288,567 421,793

Kenneth M. Wallace Chief Financial Officer, Principal Accounting Officer and Secretary		2007 2006		210,046 146,154		100,000 20,000		126,162 -		368,029 421,851		6,858 27,360		811,095 615,365

Joseph C. Hayden Executive Vice President - Programs		2007 2006		199,549 183,750		50,000 10,000		9,864 -		- -		5,109 6,672		264,522 200,422

Stephen W. McCahon Executive Vice President - Engineering		2007 2006		200,126 183,750		40,000 10,000		13,085 -		- -		5,459 2,962		258,670 196,712

Stephen A. McCommon Former Vice President - Finance⁽⁷⁾		2007		99,403		1,000		-		32,930		33,239		166,572

Name	Fees Earned or Paid in Cash	Option Awards⁽¹⁾	Total
David C. Hurley	$100,000	$177,000⁽²⁾	$277,000
George P. Farley	$75,000	$132,750⁽³⁾	$207,750
James K. Harlan	$62,500	$110,625⁽⁴⁾	$173,125
James A. McDivitt	$50,000	$88,500⁽⁵⁾	$138,500

	Fees Earned or			Stock
Name	Paid in Cash			Awards (1)			Total
David C. Hurley(2)	$	53,750		$	33,000	(3)	$	86,750
George P. Farley	$	75,000		$	45,000	(4)	$	120,000
James K. Harlan	$	55,000		$	33,000	(5)	$	88,000
James M. Feigley	$	125,000		$	75,000	(6)	$	200,000
John F. Levy	$	51,250		$	30,000	(7)	$	81,250
Mark J. Lister	$	125,000	(8)	$	60,000	(9)	$	185,000