RNS Number : 4963E
Armor Designs, Inc.
29 September 2008
Press Release 29 September 2008
Armor Designs, Inc.
("Armor Designs" or "the Company")
Interim Results
Armor Designs, Inc., (AIM: ADID, ADIS), a designer and manufacturer of composite armour products targeting numerous sectors, today
announces its interim results for the six month period ended 30 June 2008.
Financial and operational highlights (un-audited)
� Secondary Placing raised approximately US$7 million in June 2008
� Executive team strengthened, with Charles Snyder appointed CEO in
April, 2008 and David Seaton joining as CFO in March, 2008
� Relocation to new manufacturing and office facility completed in Q1
2008
� Cash balance as at 30 June 2008: US$10.8 million
Since the period end
* Scorpion Works (the Company's dedicated expanded R&D facility) established
in August 2008 and already achieving rapid success
* Strategic alliance signed with ipCapital group, a leading IP value
management consultancy
* NIJ certification of Level 3 armour plates achieved in Q3 2008
* Initial production capacity has been established with two presses now fully
installed and in operation
Commenting on the interim results, Charles Snyder, CEO of Armor Designs, Inc., said: "The Board is pleased with the progress made during
the period, as the Company has transitioned into commercialisation. The core management team has been strengthened significantly, and we
have established our global sales network to support our commercialisation efforts, initially in the body armour sector. We are pleased to
have established our manufacturing facility in Phoenix, and the Placing in June puts the Company in a strong position for future growth."
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 / Thilo Hoffman Tel: +44 (0) 20 7398 2900
graemet@zimmint.com www.zimmint.com
Alexander David Securities Limited
David Scott / Nick Bealer Tel: +44 (0) 20 7448 9820
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 Statement
Armor Designs, Inc. (ADI) is first and foremost a knowledge-based, technology-innovation company that develops and manufactures the
highest quality armour materials to serve the military, government and commercial sectors on a global basis. Our commitment to
state-of-the-art innovation is driven through the application of patented Volumetrically Controlled Manufacturing (VCM) methodologies which
are a unique, integrated design and manufacturing approach that optimises parts by varying the mechanical properties of its material,
allowing for rapid design and manufacturing of advanced composite materials. We seek to leverage VCM and thus accelerate the design and
commercialisation of new products for future applications in the armour industry and beyond.
Having completed our admission to AIM in December 2007 we have focused on establishing our manufacturing base in Phoenix and
strengthening our management team to meet the challenges ahead. Our first heat press has been fully operational since March 2008 and our
second will be operational in the subsequent period. These presses provide adequate short-term capacity, and further presses will be added
as demand grows.
On the management side, I moved over from CEO to Chairman in April following the appointment of Charles Snyder, a seasoned executive who
has been brought in to run the day to day business and allow me to concentrate on furthering our R&D efforts and shaping the long term
strategy of the Company. Charles has been joined by David Seaton, our new CFO who joined the Company in March as a consultant, before his
appointment to the Board in June. Our COO, Ardy Sidhwa's, team has been strengthened by the recruitment of David Laube, our Engineering and
Production Director in early Q3 2008. We are continuing to select additional executives to enhance our corporate management team, to place
the Company in the strongest possible position for future growth.
Our Scorpion Works R & D team is quickly bedding in and achieving a positive impact having designed, developed, prototyped, tested and
subsequently certified two new NIJ Level 3 plates in the space of two months with a number of other projects in varying stages of
development. This rapid design to commercialisation of products underscores the true value of VCM and the competitive advantage the Company
has over those using traditional R&D methods. The Board is confident that Scorpion Works will continue to leverage VCM and produce a
consistent number of innovative and industry leading products within a wide variety of applications in the years to come.
This maiden reporting year has, however, not been without challenges. In particular, in terms of sales with delays in certifying plates
and establishing a global distribution network limiting our sales efforts. However, the initial feedback on the plates now certified is that
they have strong market acceptance and are offered at a market competitive price point. This acceptance, along with the strengthening of our
sales team and global distribution network, should produce increasing revenues at the back-end of this year.
As anticipated, the Company currently consumes cash through both CAPEX required to establish its manufacturing base as well as ongoing
working capital needs yet to be covered by ongoing revenues. We anticipate that the Company will not be cash generative until 2009 and
therefore have supplemented the funds raised at the time of the Initial Public Offering (US$16.0 million) by a secondary Placing in June
that raised US$7.0 million.
James A. St. Ville
Chairman
29 September 2008
Chief Executive's Statement
Overview
In the six months ended 30 June 2008 the Company has made significant progress in establishing the corporate and manufacturing
infrastructure to commercialise its initial product offerings. In particular we have established our manufacturing capacity in Phoenix with
two heat presses and have recruited the majority of our management team to take the business forward. We also have taken steps to establish
our sales network in key global markets. In addition the raising of a further US$7.0 million in June 2008, and the recent certification of
our Level 3 armoured plates puts the Company in a strong position to achieve its objectives in the second half of the financial year.
Armor Designs is a technology driven business that applies VCM technology to the design and subsequent manufacture of light weight
composite armour that offers similar or better strength than traditional armour but with significant weight advantages. VCM also enables the
Company to rapidly design, prototype and commercialise armour solutions much quicker than existing R&D methods thus giving the Company a
competitive advantage in bringing new solutions to market.
Our first area of focus is the body armour sector with several products being designed and commercialised already this year with others
in differing stages of development for possible commercialisation later in the year. The Company will commercialise solutions within other
sectors, including vehicles, aviation and infrastructure sectors in due course, all as a function of applying unique VCM technologies to
design the commercialised solutions.
Corporate developments
In April 2008 the Company appointed Alexander David Securities as its sole broker while retaining Zimmerman Adams as its Nominated
Advisor. In June 2008 the Company placed 700,000 ordinary shares at US$10.00, raising US$7.0 million from the Placing to supplement the
US$16.0 million raised in December 2007 from its Initial Public Offering.
The Placing in June 2008 has strengthened the Company's balance sheet, which will assist in meeting its challenges and goals in the
second half of the current year and beyond. In particular, it will help fund the ongoing R&D efforts required to design and commercialise
the many product opportunities that the Company has identified. Being in the early stages of its commercialisation roll out, the Company
currently does not have any banking facilities that support its working capital needs and so is utilising the funds raised through the June
2008 Placing and December 2007 IPO to meet its ongoing funding needs, including CAPEX.
Financial performance
During the six month period to 30 June 2008 pre-tax losses increased to US$4.4 million (30 June 2007: US$1.3 million), reflecting the
anticipated establishment of the Company's infrastructure to meet its commercialisation roll out as well as an increased level of R & D
activity. In particular General and Administrative expenses have increased to US$2.9 million (30 June 2007: US$525,834) with the recruitment
of a full management team and support staff required to manufacture, market and manage the products being designed. R&D costs for the period
were US$1.0 million (30 June 2007: US$413,388) as a result of additional staff having been recruited to accelerate the design and
prototyping of new armoured products. The increase in cost base also reflects the relocation of the company into its manufacturing facility
in Phoenix, Arizona and the establishment of its manufacturing capabilities.
Capital expenditure also increased to US$2.1 million with the purchase of two heat presses and ancillary equipment associated with their
installation and commissioning.
At the end of June 2008, the Company had cash of US$10.8 million on hand leaving it in a good position from which to achieve its short
term commercial targets.
Summary
The company has made significant progress in transitioning from a development entity to one of commercialisation in the first six months
of the year, having recruited the core of its required management team, established its manufacturing capabilities and raising additional
finances to meet its ongoing working capital needs. With certified plates now being manufactured, the Board is confident that the second
half of the year will generate material levels of sales and the delivery of enhanced shareholder value.
Charles W. Snyder
Chief Executive Officer
29 September 2008
CONSOLIDATED BALANCE SHEETS
A Development Stage Company
June 30, 2008, December 31 and June 30, 2007
Unaudited Unaudited Unaudited
30-June December 31, 30-June
2008 2007 2007
ASSETS US$ US$ US$
CURRENT ASSETS
Cash and cash equivalents 10,846,431 13,521,453 43,610
Receivable from sale of common stock 1,908,000 3,304,000 -
Contracts and other receivables 54,989 7,763 5,120
Inventory 393,944 - -
Prepaid expenses and deposits 134,753 67,389 16,281
Total current assets 13,338,117 16,900,605 65,011
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and 2008 2007
amortisation of 65,135 467 1,335,236 122,678 4,433
DEPOSITS
Equipment 1,817,721 1,005,477 82,068
Other 49,000 49,000 -
16,540,074 18,077,760 151,512
LIABILITIES AND EQUITY (DEFICIT)
CURRENT LIABILITIES
Line of credit - related party - 2,941,467 3,334,456
Accounts payable 598,154 1,382,318 101,436
Accounts payable, related party 31,786 105,837 334,312
Accrued expenses 408,533 1,109,553 244,815
Total current liabilities 1,038,473 5,539,175 4,015,019
CONVERTIBLE BONDS, 10% SERIES A - - 4,150,000
EQUITY (DEFICIT)
Common stock, US$0.001 par value; 26,623 25,923 22,500
Authorised shares 50,000,000
Issued Shares: 2008 2007
26,622,500 22,500,000
Additional paid-in capital 30,867,171 23,481,171 728,000
Deficit accumulated during development stage (15,392,193) (10,968,509) (8,764,007)
Total Equity (Deficit) 15,501,601 12,538,585 (8,013,507)
16,540,074 18,077,760 151,512
CONSOLIDATED STATEMENT OF OPERATIONS
A Development Stage Company
June 30, 2008, December 31 and June 30, 2007
Unaudited Unaudited Unaudited
Oct 5, 2004 to June June 30, June 30,
30,
2008 2008 2007
US$ US$ US$
Revenue 95,150 95,150 -
COGS 324,777 324,777 -
Gross Margin (229,627) (229,627) -
Operating expenses:
Research and development 8,165,265 1,028,510 413,388
General and administrative 4,923,413 2,913,660 525,834
Selling and marketing 514,014 246,136 28,018
Total operating expenses 13,602,692 4,188,306 967,240
Interest expense 1,559,874 5,751 322,225
Loss before income taxes 15,392,193 4,423,684 1,289,465
Provision for income taxes - - -
Net loss 15,392,193 4,423,684 1,289,465
Basic and diluted loss per share (0.17) (0.06)
Shares used in computation of basic
and diluted loss per share 25,945,577 22,500,000
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
A Development Stage Company
June 30 2008, December 31, 2007 and June 30, 2007
Common Stock Amount Additional Paid-In Deficit Accumulated
Total
US$ US$ Capital During the
US$
US$ Development Stage
US$
Balances, December 31, 2006 22,500,000 22,500 728,000 (7,474,542)
(6,724,042)
Net loss (1,289,465)
(1,289,465)
Balances, June 30, 2007 22,500,000 22,500 728,000 (8,764,007)
(8,013,507)
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
Common Stock par 0.001 1,600,000 1,600 13,754,994 -
13,756,594
Net loss - - - (3,493,967)
(3,493,967)
Balances, December 31, 2007 25,922,500 25,923 23,481,171 (10,968,509)
12,538,585
Issuance of common stock on London AIM
net of expenses of US $186,274
Common Stock par 0.001 700,000 700 6,813,726 -
6,814,426
Stock Compensation - - 572,274 -
572,274
Net loss - - - (4,423,684)
(4,423,684)
Balances, June 30, 2008 26,622,500 26,623 30,867,171 (15,392,193)
15,501,601
CONSOLIDATED STATEMENTS OF CASH FLOWS
A Development Stage Company
June 30, 2008, December 31 and June 30, 2007
Unaudited Unaudited Unaudited
Oct 5, 2004 to June June 30, June 30,
30,
2008 2008 2007
US$ US$ US$
RECONCILIATION OF NET LOSS TO NET CASH
USED IN OPERATING ACTIVITIES:
Net loss (15,392,193) (4,423,684) (1,289,465)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation & amortisation 65,135 60,853 467
Stock based compensation 572,274 572,274
Research and development costs charged
against line of credit - related party - - 64,839
Changes in assets and liabilities:
Contracts and other receivables (1,962,989) 1,348,774 274,202
Inventory (393,944) (393,944) -
Prepaid expenses and deposits (183,752) (67,363) (1,281)
Accounts payable and accrued expenses 1,038,473 (1,559,235) (164,305)
Net cash used in operating activities (16,256,996) (4,462,325) (1,115,543)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (1,400,372) (1,273,412) (4,900)
Deposits paid for property and equipment (1,817,721) (812,244) (82,068)
Net cash used in investing activities (3,218,093) (2,085,656) (86,968)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on line of credit - related party (5,435,554) (2,941,467) (357,500)
Borrowings on line of credit - related party 5,435,554 - 362,000
Proceeds from sale of convertible bonds 9,000,000 - 1,175,000
Proceeds from sale of common stock 20,571,020 6,814,426 1,175,000
Members' contributions 750,500 - -
Net cash provided by financing activities 30,321,520 3,872,959 2,354,500
Net increase (decrease) in
cash and cash equivalents 10,846,431 (2,675,022) 1,151,989
Cash and cash equivalents:
Beginning of period 13,521,453 66,621
Ending of period 10,846,431 1,218,610
CONSOLIDATED STATEMENTS OF CASH FLOWS
A Development Stage Company
June 30, 2008, December 31 and June 30, 2007
Unaudited Unaudited Unaudited
Oct 5, 2004 to June 30, June 30, June 30,
2008 2008 2007
US$ US$ US$
Supplemental cash flow information
Cash paid for interest 1,389,986 5,751 322,225
Supplemental disclosure of non-cash investing
and financing activities
Conversion of bonds into common
stocks and warrants 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 exchange does not meet the definition of a business combination, and, as such, purchase accounting does not apply. For purposes of
the statement of changes in equity (deficit) and for computation of earnings per share, the exchange (including the issuance of common
stock) has been presented retroactively.
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 2007 and has commenced a commercialisation process during 2008. The focus of the
Company's efforts is the generation, testing and manufacture 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.
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.
These interim financial statements have been prepared in accordance with accounting policies generally accepted in the United States of
America ("US GAAP"). These interim financial statements are presented in US dollars, unless otherwise stated.
The interim financial statements for the six-month period ended 30 June 2008 and 2007 are unaudited. In the opinion of management, all
adjustments, which consist solely of normal recurring adjustments, necessary to present fairly in accordance with US GAAP the financial
position, results of operations and cash flows for all periods presented have been made. The results of operations for the interim periods
presented are not necessarily indicative of the results that may be expected for the full year.
The interim financial statements follow the same accounting policies and methods of application as the financial statements for the year
ended 31 December 2007. These interim financial statements should be read in conjunction with the Company's audited financial statements and
notes thereto included in the Company's 2007 Annual Report.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all cash balances with original 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.
Inventory Valuation Method
The Company uses a First-in, First-out (FIFO) inventory valuation method for these interim financial statements.
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. Amortisation of leasehold improvements is provided using the straight-line method over the remaining life of
the lease on the Company's current facility. Depreciation and amortisation expense amounted to US$60,853 and US$467 for the periods ended 30
June 2008 and 2007, respectively.
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. For the period ended 30 June 2008, the Company has recorded a US$548,124 and US$24,150
expense for Restricted Stock Units (RSUs) and Stock Appreciation Rights (SARs) respectively.
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 with all tax benefits associated with
losses incurred having been reserved.
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.
NOTE 3 - PUBLIC OFFERING AND STOCK SPLIT
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.
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. The common shares issued pursuant
to the Market Demand Arrangements issued represent approximately 2.5 percent of the Enlarged Share Capital of the Company.
The Company raised US$7,000,000, before expenses, during the period ended June 2008 by issuing 700,000 common shares at a price of
US$10 per share pursuant to Market Demand Arrangements put in place in conjunction with the Admission. These shares constitute approximately
2.6 percent of the Company's share capital at 30 June 2008. Funds in the amount of US$5,742,000 were collected from the sale of common stock
as of 30 June 2008. Funds in the amount of US$1,908,000 remain to be collected as of 30 June 2008.
At admission on 31 December 2007, 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. As of 30 June 2008, the Company had 26,622,500 common shares in issue and a market capitalisation of
US$266,225,000 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 2,300,000 common shares issued due to the IPO 1,515,000 were issued in reliance on Regulation
S and 785,000 were issued in reliance on Regulation D.
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 percent 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. All convertible bonds have been converted into common stock effective 31 December 2007. As such, no interest charges
have been accrued during the period.
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, bondholders 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 awards to various equity owners and key employees as a means of attracting and retaining
quality personnel. The award holders have the right to purchase a stated number of shares at the exercise price 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 Restricted
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 awards outstanding at 31 December 2007 under the Plan
was 438,500 RSUs and 69,400 SARs. (No further awards were made during the period ended 30 June 2008).
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 An amount equal to the per Share Listing Price of US$10.00 or the
Common Stock 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 is 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.
A compensation expense of US$548,124 for RSU's and US$24,150 for SAR's was recognised during the first half of 2008 as the first vesting
period occurs in 2008. Compensation expense per FAS 123R requirements will be recognised rateably over the four-year period.
The following table shows unrecognised compensation expense related to unvested RSUs and SARs outstanding as of 31 December 2007. This
table does not include an estimate for future grants that may be issued.
Fiscal Year Ended 31 December: Amount
US$
2008 572,274
2009 1,144,558
2010 1,144,558
2011 1,144,559
Total 4,005,949
NOTE 6 - RELATED PARTY TRANSACTIONS
Since inception, the Subsidiary, Armor Designs, LLC, has conducted business through transactions with a related corporation, Hawthorne &
York International, Ltd. (HYI), owned by James A. St Ville, HYI owns approximately 84 percent 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 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 30 June 2008
was US$0, and accrued interest totalled of US$0.
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 30 June 2008 and 30 June 2007 US$209,713 US$244,959
Included in the accompanying consolidated balance sheets is accounts payable of US$31,786 due to the related party at 30 June 2008,
for billings related to general and administrative and research and development activities.
The Company maintains independent management and human resources. The Company has also entered into a lease for independent facilities.
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 7 - PROPERTY, PLANT AND EQUIPMENT
The Company policy is to capitalise all equipment, either moveable or fixed, with a unit acquisition cost of US$2,500 or greater and a
useful life of two years or more. Acquisition value includes the cost of the equipment and any associated costs incurred to make the
equipment usable for the purpose for which it was intended, including installation costs.
As of 30 June 2008, the Company capitalised and was depreciating fixed assets per the following schedule:
Life Book Value
US$
Computer equipment 3 91,082
Computer software 3 109,901
Equipment 7 647,923
Production Molds 3 81,024
Furniture & Fixtures 7 23,291
Leaseholds (Lease) 447,150
Subtotal: 1,400,371
Less: accumulated depreciation and amortisation
(65,135)
Total: 1,335,236
NOTE 8 - 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:
Periods ending December 31, US$
2008 530,807
2009 539,368
2010 547,930
2011 565,052
2012 582,175
2,765,332
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 US$7,500,000.00. To date, the purchase option has been extended but not exercised.
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 (84% 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 (84% 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$3,000 per quarter for the first 18 months after the Company commences production or sub-licences. This contract has the same expiration and renewal dates.
NOTE 9 - EARNINGS PER SHARE
The Company accounts for income (loss) per share in accordance with SFAS No. 128 "Earnings Per Share". Basic income per share is
computed by dividing net income (loss) by the weighted average number of common shares outstanding during the periods presented. Diluted
income per share reflects the potential dilution that could occur if outstanding stock options were exercised utilising the treasury stock
method. The calculation of the weighted average number of shares outstanding and earnings per share are as follows:
Basic Earnings Per Share 30 Jun 2008 30 Jun 2007
Net loss after tax US$(4,423,684) US$(1,289,465)
Divided by weighted average shares 25,945,577 22,500,000
Basic loss per share US$(0.17) US$(0.06)
Diluted loss per share US$(0.17) US$(0.06)
For 2008 and 2007, because of our reported net loss, all potentially diluted securities were excluded from the per share computations
due to their anti-dilutive effect.
NOTE 10 - SUBSEQUENT EVENT
The Company shareholders passed a resolution at the annual Meeting held on Sept 23, 2008, that empowers the Board to repurchase or
otherwise acquire shares of the Company's Common Stock in the open market or in private transactions, with such repurchases not to exceed
US$5,000,000 in the aggregate. The resolution states that no such repurchase shall be made when the capital of the Company is impaired or
when such purchase or acquisition would cause any impairment of the capital of the Company.
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
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