RNS Number:0443U
Armor Designs, Inc.
09 May 2008
Press Release 9 May 2008
Armor Designs, Inc.
("Armor Designs" or "the Company")
Preliminary Results
Armor Designs, Inc., a designer and manufacturer of composite armour products
targeting numerous sectors, today announces its maiden set of preliminary
results for the year ended 31 December 2007.
Highlights
* Successful IPO in December 2007
* Transition from research and development to commercialisation of the
Company's body armour plates
* Cash at the end of the period in excess of US$13.5 million
* Established a number of sales distribution channels covering the US, Europe
and Latin America
* Since the period end, the Company has successfully restructured the Board,
and announced the appointment of Charles Snyder as CEO
Commenting on the results, Charles Snyder, CEO of Armor Designs, Inc., said:
"The Board is pleased with the progress made during the period, as the Company
has moved into the commercialisation stage of our body armour products. I was
delighted to join Armor Designs in April 2008, and look forward to working with
Dr. James St. Ville to continue to expand and diversify the Company's product
platforms, and establishing ourselves in global markets. The IPO in December
2007 has put the Company in a strong position to carry out our development and
growth strategies and to continue to commercialise our product lines."
For further information:
Armor Designs, Inc.
Charles Snyder, CEO Tel: +44 (0) 20 7398 7709
charles.snyder@armordesigns.com www.armordesigns.com
Zimmerman Adams International Limited
Graeme Thom / Fiona Kinghorn Tel: +44 (0) 20 7398 2900
graemet@zimmint.com / fionak@zimmint.com www.zimmint.com
Media enquiries:
Abchurch
Henry Harrison-Topham / Joanne Shears Tel: +44 (0) 20 7398 7709
joanne.shears@abchurch-group.com www.abchurch-group.com
Chairman's and CEO's Statement
The Board is pleased to report these maiden results for Armor Designs. 2007 has
been an extremely important year for the Company, culminating in the successful
admission of the Company's shares to trading on the AIM market on 31 December
2007.
During 2007, the Company made the significant step of moving beyond the initial
research and development (R&D) phase to that of commercialisation. As a result
of this R&D phase, which has now been completed for our body armour products,
the Company has effectively applied Volumetrically Controlled Manufacture
("VCM") design and manufacturing processes to this sector. VCM has broad
potential applications in the protection of people, vehicles and infrastructure
through its integrated design and manufacturing approach. The process optimises
materials by varying their properties; this produces advanced composite
materials that are lighter but just as strong and effective as traditional
materials. As such, the VCM technology is very much at the cutting edge of
twenty first century manufacturing solutions.
The funds raised at the IPO have allowed the Company to establish a production
facility in Phoenix, Arizona, and to commence the commercialisation of its body
armour products. By the end of the first quarter of 2008, we have already
established a number of sales distribution channels covering the US, European
and Latin American markets, with many others global regions identified to be
signed up over the coming months. We have a strong executive management team in
place, which positions the Company well for significant growth. In particular,
we were fortunate to attract Charles Snyder with his considerable international
experience to join the Company as CEO. Dr James St. Ville's move to the role of
Chairman will allow him to focus on further defining the Company's strategic
direction, progressing research and development for new product platforms while
continuing to guide international client development.
With production on one press now running and the commissioning of the second
press now well under way, the Board is confident that we have the production
capacity to meet the immediate needs of our body armour clients, and are
committed to increasing this capacity further in the second half of the year in
line with client demand. In addition, expansion outside the US is under review.
As anticipated, the 2007 financial results reflect the expenses associated with
the research and development stage that the business was pursuing to the end of
the year, and therefore include the research and development costs incurred
during the year as well as the general and administrative costs. The latter
includes the costs pertaining to the IPO as well as the issuance of "Share
Appreciation Units" and "Restricted Stock Units" (Options and Share grants)
during the year.
The balance sheet has been strengthened during the period by the net proceeds of
the IPO, with cash at the end of the period in excess of US$13.5 million. This
strong cash position is taken after the costs of two presses were accounted for,
as well as the expenses associated with the IPO.
2008 promises to be an exciting year in which the Company aims to work towards
establishing itself as a market leader in the design and manufacture of
composite materials for the body armour sector while developing further
applications for the vehicle, pipeline and infrastructure industries. We aim to
create a strong commercial presence both in the US and internationally. The
Company also intends to move from the research and development phase to
commercialisation in one or more of its industry platforms during the course of
the year. The Board is therefore confident that the Company is on track to
achieve its goals for 2008 and looks forward to a successful year.
Dr. James St. Ville Charles Snyder
Chairman Chief Executive Officer
9 May 2008
Consolidated Balance Sheets
31 December
2007 2006
US$ US$
ASSETS
CURRENT ASSETS
Cash and cash equivalents 13,521,453 66,621
Receivable from sale of common stock 3,304,000 -
Contracts and other receivables 7,763 279,322
Prepaid expenses and deposits 67,389 15,000
Total current assets 16,900,605 360,943
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of 4,282 and 0 as of
31 December 2007 and 2006, respectively 122,678 -
DEPOSITS
Equipment 1,005,477 -
Other 49,000 -
18,077,760 360,943
LIABILITIES AND EQUITY (DEFICIT)
CURRENT LIABILITIES
Line of credit - related party 2,941,467 3,265,117
Accounts payable 1,488,155 694,961
Accrued expenses 1,109,553 149,907
Total current liabilities 5,539,175 4,109,985
CONVERTIBLE BONDS, 10% SERIES A - 2,975,000
COMMITMENTS - -
EQUITY (DEFICIT)
Common stock, US$0.001 par value; 25,923 22,500
Authorised shares 50,000,000
Common Stock issued: 25,922,500
Additional paid-in capital 23,481,171 728,000
Deficit accumulated during development stage (10,968,509) (7,474,542)
12,538,585 (6,724,042)
18,077,760 360,943
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended 31 December
From 5 October 2004 to
31 December 2007 Year Ended 31 December
2007 2006
US$ US$ US$
Revenue - - -
COGS - - -
Gross Margin - - -
Operating expenses:
Research and development 7,136,755 1,024,922 1,340,248
General and administrative 2,009,753 1,453,823 543,254
Selling and marketing 267,878 198,318 19,560
Total operating
expenses 9,414,386 2,677,063 1,903,062
Interest expense 1,554,123 816,904 497,396
Loss before income
taxes 10,968,509 3,493,967 2,400,458
Provision for income taxes - - -
Net loss 10,968,509 3,493,967 2,400,458
Basic and diluted loss per share $ (0.16) $ (0.11)
Shares used in computation of basic
and diluted loss per share
22,509,377 22,500,000
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
Years Ended 31 December 2007 and 2006
Deficit
Accumulated
Amount Additional During the
Common Stock Paid-In Development
Shares Amount Capital Stage Total
US$ US$ US$ US$
Balances, 5 October 2004 - - - - -
Issuance of Common Stock 22,500 727,900 - 750,400 22,500,000
Net loss - - - (1,854,065) (1,854,065)
Balances, 31December 2004 22,500,000 22,500 727,900 (1,854,065) (1,103,665)
Net loss - - - (3,220,019) (3,220,019)
Balances, 31 December 2005 22,500 727,900 (5,074,084) (4,323,684) 22,500,000
Member contributions - - 100 - 100
Net loss - - - (2,400,458) (2,400,458)
Balances, 31 December 2006 22,500,000 22,500 728,000 (7,474,542) (6,724,042)
Issuance of common stock in
exchange for convertible
debt 1,822,500 1,823 8,998,177 - 9,000,000
Issuance of common stock on
London AIM, net of expenses
of US$2,243,406 1,600,000 1,600 13,754,994 - 13,756,594
Net loss - - (3,493,967) (3,493,967)
Balances, 31 December 2007 25,922,500 25,923 23,481,171 (10,968,509) 12,538,585
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended 31 December
From 5 October
2004 to 31 Year Ended 31 December,
December 2007 2007 2006
US$ US$ US$
Cash flows from operating activities:
Net loss (10,968,509) (3,493,967) (2,400,458)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 4,282 4,282 -
Changes in assets and
liabilities:
Contracts and other (3,311,763) (3,032,441) (279,322)
receivables
Prepaid expenses and deposits (116,389) (101,389) (15,000)
Accounts payable and accrued
expenses 2,597,708 1,752,840 605,045
Net cash used in
operating activities (11,794,671) (4,870,675) (2,089,735)
Cash flows from investing activities:
Purchase of property and equipment (126,960) (126,960) -
Deposits paid for property and equipment (1,005,477) (1,005,477) -
Net cash used in
investing activities (1,132,437) (1,132,437) -
Cash flows from financing activities:
Payments on line of credit - related
party (2,494,087) (775,339) (1,718,748)
Borrowings on line of credit - related
party 5,435,554 451,689 900,004
Proceeds from issuance of convertible
bonds 9,000,000 6,025,000 2,975,000
Proceeds from sale of common stock 13,756,594 13,756,594 -
Members' contributions 750,500 - 100
Net cash provided by
financing activities 26,448,561 19,457,944 2,156,356
Net increase (decrease)
in cash and cash
equivalents 13,521,453 13,454,832 66,621
Cash and cash equivalents:
Beginning 66,621 -
Ending 13,521,453 66,621
Supplemental cash flow information:
Cash paid for interest 1,384,235 721,259 662,976
Supplemental disclosure of non-cash investing and financing
activities:
Conversion of bonds into common
stock and warrants
9,000,000 9,000,000 -
NOTE 1 - NATURE OF BUSINESS
Armor Designs, Inc. (the Parent) was incorporated in Delaware on 30 March 2006.
On 1 January 2007, 100% of the membership interests of Armor Designs LLC (the
Subsidiary) were exchanged for common stock of the Parent. The Subsidiary was
organised in Delaware on 30 September 2004. The financial statements prior to
incorporation of the Parent represent activities of the Subsidiary. The Parent
and Subsidiary (collectively the Company) are engaged in the business of
developing, manufacturing and marketing innovative armour products to the
defense and law enforcement industries. The Company's focus is primarily on
introducing next generation armour based on patented Volumetrically Controlled
Manufacturing (VCM) technology.
The Company was a development stage entity during the period. The initial focus
of the Company's research and development efforts is the generation and testing
of armour products. The Company's success will depend on its ability to
effectively develop and manufacture innovative armour for military and law
enforcement use. There can be no assurance that the Company will not encounter
problems during the testing stage that will cause the Company to delay
production of the armour products.
The accompanying consolidated financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classifications of liabilities that
may result from the possible inability of the Company to continue as a going
concern.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all cash
balances with maturities of less than 90 days to be cash equivalents. While
cash held by financial institutions may at times exceed federally insured
limits, management believes that no material credit or market risk exposure
exists due to the high quality of the institutions. The Company has not
experienced any losses on such accounts.
Fair Value of Financial Instruments and Concentrations of Risk
Financial instruments, consisting of cash, contracts and other receivables,
accounts payable and accrued expenses, are recorded at cost, which approximates
fair value based on the short-term maturities of these instruments and the
current bond issue price.
Currently, contracts and other receivables are derived from related party
advances and revenue due to the Company under a long-term contract. To date,
the Company has not experienced any material credit losses, and therefore has
not recorded an allowance for uncollectible accounts.
Property and Equipment
Depreciation is provided using the straight-line method over an estimated useful
life of three years for computer equipment and seven years for capital
equipment. Depreciation expense amounted to US$4,282 and US$0 for the years
ended 31 December 2007 and 2006, respectively.
Revenue Recognition
The Company receives funds through a contract for research and development
services. This contract stipulated that the Company perform research and
contractor services with respect to specific applications of Volumetrically
Controlled Manufacture (VCM) design and manufacturing processes. The contract
has specific milestones, is on a best efforts basis, and payments are based on a
pre-determined schedule. As this contract was deemed to be a cost sharing
research contract, the funds are recognised upon completion of each milestone
per the contract terms, and netted against research and development expense.
Direct costs related to this contract are reported as research and development
expense and are detailed in Note 6.
Stock-Based Compensation
The Company records stock-based compensation in accordance with SFAS 123(R),
Share-Based Payment. SFAS 123(R) requires the measurement and recognition of
compensation expense in the financial statements for all share-based awards to
employees based on estimated fair values. This statement was adopted using the
modified prospective method. Under this method, compensation expense includes
the estimated fair value of equity awards vested during the reported period. The
Company's first issuance of stock-based compensation occurred 31 December 2007.
For the years ended 31 December 2007 and 2006, the Company has recorded no
compensation expense in connection with stock options awarded.
Income Taxes
The Company accounts for income taxes using the asset and liability method
recognising temporary differences between the financial reporting and tax bases
of its assets and liabilities as set forth in SFAS 109, Accounting for Income
Taxes. This method results in deferred income tax assets and liabilities at the
balance sheet date measured by the statutory tax rates in effect as enacted.
The Company's deferred income tax assets include certain future income tax
benefits net of appropriate valuation allowances. Recognition of deferred tax
assets is limited to amounts considered by the Company to be more likely than
not realisable in future periods.
As a limited liability company, the Subsidiary's taxable income or loss is
passed through to its members in accordance with their respective ownership
percentage. Therefore, no provision or liability for income taxes relating to
the Subsidiary has been included in the financial statements for periods ending
before 1 January 2007.
Principles of Consolidation
The financial statements include the accounts of Armor Designs, Inc. and Armor
Designs, LLC. All material intercompany balances and transactions have been
eliminated in consolidation.
Pervasiveness of Estimates
In preparing the financial statements in conformity with accounting principals
generally accepted in the United States of America, management is required to
make estimates and assumptions that affect the amounts reported in the financial
statements and related notes. Actual results could differ from those estimates.
NOTE 3 - INITIAL PUBLIC OFFERING AND STOCK SPLIT
On 20 December 2007, the Company effected a 450 for 1 stock split. Each holder
of record as of that date received four hundred fifty shares for each share of
common stock held. The par value of US$0.001 per share did not change with the
stock split. The accompanying financial statements reflect this transaction
retroactively.
On 31 December 2007 the common shares of the Company were admitted to trading on
the AIM Market of the London Stock Exchange ("Admission"). Upon Admission,
Capita Registrars (Jersey) Limited began serving as the Registrar of the
Company.
The company raised US$16,000,000, before expenses, by issuing 1,600,000 common
shares at a price of US$10 per share pursuant to a placing (the "Placing") in
conjunction with the Admission. These shares constitute approximately 6.0
percent of the Company's share capital at 31 December 2007. At Admission, the
Company had 25,922,500 common shares in issue and a market capitalisation of
US$259,225,000 at the placing price of US$10.00.
The placing shares are not registered under the US Securities Act 1933. The
shares are only offered (i) outside the United States to non-US persons in
reliance on Regulation S under the Securities Act and (ii) within the US to
Accredited US investors in reliance on Regulation D under the Securities Act. Of
the 1,600,000 common shares issued due to the IPO 1,275,000 were issued in
reliance on Regulation S and 325,000 were issued in reliance on Regulation D.
On 31 December 2007, funds in the amount of US$12,696,000 were collected from
the sale of common stock, with US$3,304,000 remaining to be collected as of that
date. Of this amount, US$500,000 remains to be collected as at 8 May 2008.
Management expect these funds to be collected during 2008.
Market Demand Arrangements were put in place in connection with the Placing on
31 December 2007 to meet potential demand for investors subsequent to the
original placement. The placing document made available up to 3,000,000 common
shares, of which 650,000 have been pledged for purchase subsequent to year end.
The common shares issued pursuant to the Market Demand Arrangements issued
represent approximately 2.5 per cent of the Enlarged Share Capital of the
Company.
Upon Admission to AIM, the conversion features of outstanding convertible bonds
were triggered (see Note 4). Each convertible bond unit issued converted to
2.025 shares of Common Stock and 2.025 warrants to purchase one share of Common
Stock in the Company. Each warrant granted entitled the holder to purchase one
Common Share at a price per share of 125 per cent of the placing price of $US10,
or US$12.50, exercisable on the second anniversary of Admission or the date of
any secondary issue of Common Shares by the Company following Admission. All
Bond Warrants expire if they are not exercised on the Warrant Exercise Date. A
total of 1,822,500 common shares and 1,822,500 warrants were issued as a result
of the conversion.
NOTE 4 - CONVERTIBLE BONDS
During 2006 the Company began issuing 10% series A convertible bonds. Through
31 December 2006, the Company raised US$2,975,000 from the sale of these bonds
at par. During 2007 the Company raised an additional US$6,025,000 for a
cumulative US$9,000,000 through 31 December 2007. The bonds carried an original
maturity date of 31 March 2011. Interest was payable semi-annually in May and
November, beginning 1 November 2006. Interest expense related to the
convertible bonds amounts to US$525,755 and US$118,642 for the years ended 31
December 2007 and 2006, respectively.
The bonds were automatically convertible into shares of the Company's common
stock in the event that any of the following occur: the consummation of an
initial public offering or substantial private investment, the sale of all or
substantially all of the assets of the Subsidiary or holding company, or an
optional conversion event in which the Subsidiary has the option to call the
bonds at par value, plus any accrued and unpaid interest after 31 December 2007.
The conversion rate of the bonds was dependent on the type of conversion event
noted above. The bonds expressed that each share of converted stock would carry
a warrant to purchase another share of stock at 125% of a price to be
determined. Upon Admission to AIM on 31 December 2007, the above conversion
features were triggered and all convertible bond units were converted into
common shares (see Note 3). Upon conversion, bond holders received 20,250
common shares for each US$100,000 bond unit held. The same rate was used for the
issuance of the warrants. A total of 1,822,500 common shares and 1,822,500
warrants were issued upon conversion.
NOTE 5 - WARRANTS AND OPTIONS
Warrants for 1,822,500 shares of Common Stock and Options for 507,900 shares of
Common Stock were outstanding at the time of the Admission. Exercise of any of
these warrants or options would have a commensurately dilutive effect on the
holdings of the previously issued Common Shares.
On 31 December 2007 the Company issued stock options to various equity owners
and key employees as a means of attracting and retaining quality personnel. The
option holders have the right to purchase a stated number of shares at the
exercise determined in the agreement. These options are issued under the Armor
Designs, Inc 2007 Omnibus Incentive Plan (Plan). The Plan allows the Company to
issue Registered Stock Units (RSUs) and Stock Appreciation Rights (SARs).
Awards may be made under the Plan over shares of common stock not to exceed 10%
of the issued share capital of the Company at the date of the award. The total
number of shares outstanding at 31 December 2007 under the Plan was 438,500 RSUs
and 69,400 SARs.
In accordance with disclosure requirement under SFAS 123(R), the estimated full
grant-date fair value of the Restricted Stock Units is US$4,385,000 using the
Black-Scholes method. Utilising the Black-Scholes method the Company assumes
3.0% volatility, 0 % dividend rate and 3.29% risk free rate for all options and
warrants.
Terms of Restricted Stock Unit Agreements
Date of Grant 31 December 2007
Exercise Price per share of Common Stock: US$0
Expiration Date 31 December 2017
Vesting Schedule 25% annually on the first, second, third and fourth
anniversaries of the Date of Grant. Vesting is accelerated in
full upon Change in Control
In accordance with disclosure requirement under SFAS 123(R), the estimated full
grant-date fair value of the Stock Appreciation Rights is US$193,233 using the
Black-Scholes method.
Terms of Stock Appreciation Right Agreements
Date of Grant 31 December 2007
Exercise Price per share of Common Stock: An amount equal to the per Share Listing Price of US$10.00 or
the Per Share Private Investment Price (as applicable)
Expiration Date 31 December 2017
Vesting Schedule 25% annually on the first, second, third and fourth
anniversaries of the Date of Grant. Vesting is accelerated in
full upon Change in Control
In accordance with disclosure requirement under SFAS 123(R), the estimated full
grant-date fair value of the warrants US$20 using the Black-Scholes method.
Terms of Warrants
Date of Grant 31 December 2007
Exercise Price per share of Common Stock: US$12.50
Expiration Date 31 December 2009
Warrant Exercise Date The earliest to occur of 31 December 2009, or the date, if
any, of any further issuance of Common Stock by the Company in
a public offering or other material transaction.
No compensation expense is recognised during fiscal year 2007 as the first
vesting period occurs in 2008. As such, all of the above RSUs and SARs are
unvested as of 31 December 2007. There were no exercises, forfeitures, or
expirations during the year. Compensation expense per FAS 123R requirements will
be recognised rateably over the four year period.
The following table shows unrecognised compensation expense related to unvested
RSUs and SARs outstanding as of 31 December 20007. This table does not include
an estimate for future grants that may be issued.
Fiscal Year Ended 31 December: Amount
US$
2008 1,144,558
2009 1,144,558
2010 1,144,558
2011 1,144,559
Total 4,578,233
NOTE 6 - RESEARCH AND DEVELOPMENT COSTS
Expenditures for research activities relating to product development are charged
to expense as incurred. In September 2006, the Subsidiary entered into a
contract to provide additional product testing. For the period ended 31
December 2007 and 2006, the Subsidiary earned US$291,780 and US$551,892,
respectively, under this contract. These amounts are netted against the gross
research and development costs incurred of US$1,024,922 and US$1,340,248
respectively, for the period ended 31 December 2007 and 2006, respectively.
NOTE 7 - RELATED PARTY TRANSACTIONS
Since inception, the Subsidiary, Armor Designs, LLC, has conducted the majority
of its business through transactions with a related corporation, Hawthorne &
York International, Ltd., owned by James A. St Ville, who owns approximately 86
per cent. of Armor Designs, Inc. subsequent to Admission.
During 2004, the Subsidiary entered into a services agreement with the related
party whereby the related party provides interim management and administrative
services, including accounting and human resources. Additionally, the related
party has been providing interim research and development services, including
labour, subcontracting, consulting, equipment and technical upgrades, materials,
and other related research and development activities.
The services agreement, as it relates to research and development activities, is
structured in the form of a Line of Credit with interest on unpaid invoices for
services charged at an annual rate of 9%. The outstanding balance of the Line
of Credit as of 31 December 2007 was US$2,941,467, and accrued interest totalled
of US$22,061.
Billings from the related party for general and administrative expenses, use of
licensed technology, and research and development services conducted on behalf
of the Subsidiary were as follows:
Period ended 31 December 2007 and 31 December 2006 US$494,642 US$354,002
Included in the accompanying consolidated balance sheets is accounts payable of
US$111,266 due to the related party at 31 December 2007, for billings related to
interest expense, general and administrative and research and development
activities, as well as US$47,038 for employee health premiums paid by the
related party.
Interest expense to the related party was as follows:
Period ended 31 December 2007 and 31 December 2006 US$288,986 US$378,490
The Subsidiary began repaying principal and accrued interest during 2006.
The Subsidiary paid rent and other facility occupancy costs on behalf of the
related party for the period ended 31 December 2007. Accordingly, the
accompanying consolidated balance sheets include receivables from the related
party at 31 December 2007 and 31 December 2006.
Facility Occupancy costs incurred on behalf of the related party were as
follows:
Period ended 31 December 2007 and 31 December 2006 US$28,267 US$6,860
Receivables due from the related party were as follows:
Period ended 31 December 2007 and 31 December 2006 US$7,763 US$6,860
Effective in 2007, the Company no longer utilises the interim management and
administrative services of the related party. The Company maintains independent
management, human resources, etc. The Company has also entered into a lease for
independent facilities (see Note 10). In January 2008, the outstanding balance
of the Line of Credit was repaid, along with all accrued interest due. The
Company continues to utilise the related party for select research and
development activities, and the Line of Credit remains open.
NOTE 8 - INCOME TAXES
For fiscal 2007, the Company recorded no current or deferred income tax
provision expense for state or federal taxes.
The provision for income taxes for the year ended 31 December 2007 differs from
the amount computed by applying the statutory U.S. federal income tax rate to
pre-tax loss as a result of the following:
US$ %
Computed tax benefit (1,398,000) 40
Increases (reductions) in tax expense resulting from:
Change in valuation allowance for deferred tax assets 1,355,000 36.9
Permanent items 43,000 3.1
Provision for income taxes - -
The Company provides deferred income taxes which reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and for income tax purposes. Significant components
of the Company's deferred tax assets and liabilities at 31 December 2007 were as
follows:
Deferred tax assets: 2007
US$
Non-current
Net operating loss carryforwards 1,571,000
Depreciation and amortisation 12,000
Research & development tax credits 96,000
Current deferred tax assets (liabilities)
Accruals 21,000
Prepaid expenses (15,000)
Total deferred tax assets 1,685,000
Valuation allowance (1,685,000)
Net deferred tax assets -
The Company has available at 31 December 2007, unused federal and state net
operating loss carryforwards of approximately US$3,928,000, which may be applied
against future taxable income expiring in 2027 and 2012, respectively.
Since the Company is a development stage entity and future revenues are
unpredictable, a valuation allowance equal to deferred tax benefits associated
with the above items has been provided. The valuation allowance increased by
US$1,685,000 in 2007.
NOTE 9 - PROPERTY, PLANT AND EQUIPMENT
The Company policy is to capitalise all equipment, either moveable or fixed,
with a unit acquisition cost of US$2,500 or greater and a useful life of two
years or more. Acquisition value includes the cost of the equipment and any
associated costs incurred to make the equipment usable for the purpose for which
it was intended, including installation costs.
As of 31 December 2007, the Company capitalised and was depreciating fixed
assets per the following schedule:
Life Book Value
US$
Equipment 7 114,070
Computer equipment 3 12,890
126,960
Less:accumulated depreciation (4,282)
122,678
NOTE 10 - COMMITMENTS, LEASE RENEWAL AND PURCHASE OPTIONS
In December 2007, the Company entered into an operating lease agreement for its
facility located at 4645 S. 35th Street in Phoenix, Arizona. Under the
agreement, the Company is required to pay rent through December 2012 as follows:
Years ending December 31, US$
2008 442,339
2009 539,368
2010 547,930
2011 565,052
2012 582,175
2,676,864
In December 2007, the Company entered into an Option Agreement to purchase the
facility located at 4645 S. 35th Street in Phoenix, Arizona. Under the
agreement, the Company was granted the exclusive right and option to purchase
the property. The option became effective at the signing of the lease and
continues until the earliest to occur of: (a) one hundred twenty (120) days
after the Commencement Date under the Lease; or (b) the date the Lease is
terminated if such Lease is terminated prior to Company purchasing the property.
The purchase price for the property is Seven Million Five Hundred Thousand
Dollars (US$7,500,000.00).
As of 31 December 2007, the Company had a commitment to purchase manufacturing
equipment per the following schedule:
Fixed Asset Total Cost Deposit Commitment
US$ US$ US$
900 Ton Thermal Press 336,359 336,359 0
1,500 Ton Thermal Press 749,696 655,818 93,878
Front Mold Sets 30,000 13,300 16,700
Total 1,116,055 1,005,477 110,578
Effective 13 September 2004, the Subsidiary, Armor Designs, LLC, entered into a
contract with Hawthorne & York International, Ltd., a company owned by James A.
St Ville (86% ownership of the Company), for use of certain licensed
technological products and processes owned by the related party. The Subsidiary
is obligated to pay 4% of gross sales on a quarterly basis to the related party
until September 13, 2009, at such time the contract will automatically renew for
five-year terms subject to a maximum amount payable of US$7,000 per quarter for
the first 18 months after the Company commences production or sub-licences. In
addition, the Subsidiary entered into a contract on the same date with Aztec IP,
a company owned by James A. St Ville (86% ownership of the Company) for use of
licensed patents owned by the related party. Under this contract, the
Subsidiary is obligated to pay the related entity 2% of gross sales on a
quarterly basis subject to a maximum amount payable of US$3,000 per quarter for
the first 18 months after the Company commences production or sub-licences.
This contract has the same expiration and renewal dates.
NOTE 11 - RETIREMENT PLAN
Effective 1 January 2006, employees of the Company that meet certain age and
service requirements are eligible to participate in the James A. St. Ville, M.D.
Savings and Profit Sharing Plan. Employer profit sharing and matching
contributions to the 401(k) component of the plan and profit sharing
contributions may be made at the discretion of the Company's management. The
Company did not make matching or profit sharing contributions for the years
ended 31 December 2007 or 2006.
NOTE 12 - EARNINGS PER SHARE
The Company accounts for income (loss) per share in accordance with SFAS No. 128
"Earnings Per Share". Basic income per share is computed by dividing net income
(loss) by the weighted average number of common shares outstanding during the
periods presented. Diluted income per share reflects the potential dilution
that could occur if outstanding stock options were exercised utilising the
treasury stock method. The calculation of the weighted average number of shares
outstanding and earnings per share are as follows:
Basic Earnings Per Share 2007 2006
Net loss after tax US$(3,493,967) US$(2,400,458)
Divided by weighted average shares 22,509,377 22,500,000
Basic loss per share US$(0.16) US$(0.11)
Diluted loss per share US$(0.16) US$(0.11)
For 2007 and 2006, because of our reported net loss, potentially diluted
securities were excluded from the per share computations due to their
anti-dilutive effect.
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
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