TIDMADID TIDMADIS
RNS Number : 6492Z
Armor Designs, Inc.
25 September 2009
+----------------------------------------+---------------------------------------+
| Press Release | 25 September 2009 |
+----------------------------------------+---------------------------------------+
Armor Designs, Inc.
("Armor Designs" or "the Company")
Interim Results
Armor Designs, Inc., (AIM: ADID, ADIS), a knowledge-based designer and
manufacturer of composite protective products, today announces its unaudited
interim results for the six month period ended 30 June 2009.
Financial and Operating Highlights (unaudited)
+--+---------------------------------------------------------------------------+
| | * Sales revenue of US$473k for the |
| | six months ended 30 June 2009* |
| | Net Losses from operations of US$6.8m |
| | for the six months ended 30 June |
| | 2009* |
| | Established international |
| | distribution network* |
| | Scorpion Works achievement of |
| | multiple technology milestones and |
| | product certifications* |
| | Established design, manufacturing and |
| | distribution joint venture in Asia* |
| | ISO 9001:2008 certification for |
| | manufacturing operation |
| | |
+--+---------------------------------------------------------------------------+
| | * Executive team strengthened with |
| | appointment of Philip Clement, CEO |
| | and J. Craig Johnson, CFO (both |
| | interim) |
| | |
+--+---------------------------------------------------------------------------+
| | * Board strengthened with addition |
| | of William A. Roper* |
| | The Company continues its efforts to |
| | correct the balance sheet conditions |
| | previously announced and described in |
| | the footnotes to the financial |
| | statements. |
| | Commenting on the interim results, |
| | Philip Clement, CEO of Armor Designs, |
| | Inc., said: "While the first six |
| | months of 2009 were challenging, we |
| | made progress in product development, |
| | operations and cost management that |
| | will help us to achieve our long term |
| | strategic plan. The Board is |
| | encouraged by the steps taken and |
| | excited by the accomplishments of our |
| | product development and design |
| | efforts. By broadening our product |
| | line beyond body armour, we believe |
| | the expanded market opportunities |
| | will improve Armor Designs' financial |
| | performance and increase shareholder |
| | value." |
| | The Chairman's and Chief Executive's |
| | Statement and the financial |
| | statements, that are contained below, |
| | form part of this announcement and |
| | should be read in their entirety. |
| | |
+--+---------------------------------------------------------------------------+
| | |
+--+---------------------------------------------------------------------------+
For further information:
+-------------------------------------------+----------------------------+
| Armor Designs, Inc. | |
+-------------------------------------------+----------------------------+
| Philip Clement, | Tel: +1 (602) 275-4633 |
| Interim CEO | |
+-------------------------------------------+----------------------------+
| philip.clement@armordesigns.com | www.armordesigns.com |
+-------------------------------------------+----------------------------+
| Merchant Capital Limited | Tel: +44 (0) 20 7332 2255 |
| | |
+-------------------------------------------+----------------------------+
| | www.merchant-capital.com |
+-------------------------------------------+----------------------------+
Media enquiries:
Brunswick Group LLP
+-------------------------------------------+----------------------------+
| Michael Harrison/Chris Blundell/Camilla | Tel +44 (0) 20 7404 5959 |
| Gore | adi@brunswickgroup.com |
| | |
+-------------------------------------------+----------------------------+
| | |
+-------------------------------------------+----------------------------+
| | |
+-------------------------------------------+----------------------------+
| | |
+-------------------------------------------+----------------------------+
Chairman's and Chief Executive's Statement
Armor Designs, Inc. (ADI) continues to be first and foremost a knowledge-based,
technology-innovation company that develops and manufactures high quality armour
materials to serve the military, government and commercial sectors on an
international 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.
The first half results were a mix of encouraging product developments and
organisational improvements, offset by delayed commercial results. The Company
showed its strength in both engineering and operations and learned that the
sales cycle for body armour is lengthier than anticipated.
During the first half of 2009, we achieved ISO 9001:2008 certification for the
manufacture of composite armour and expanded the certification to include the
design and development of composite armour. We believe that in a business such
as armour protection, this certification is a critical element in our marketing.
We also added two new board members, one of whom was installed as interim CEO.
New equity investments totalling $1,500,000 were made in the Company by both
existing and new shareholders and a commitment for future equity investment of
$1,000,000 was received. Our Scorpion Works research and development group made
significant strides in preparing new products and improving existing ones.
In the second half of 2008 the company established the capacity for high
production volumes. This preparation involved buying capital equipment, hiring
people, employees and advisors, and investing money in developing proposals with
longer term paybacks. Since the orders did not materialise as quickly as
anticipated, the resulting cash burn put the Company in the situation where it
could not properly invest in marketing and sales, was severely restricted in its
ability to acquire materials for production, and was unable to deploy resources
on development of new products.
Regrettably there were no major U.S. government military acquisitions of body
armour during the six months ended 30 June 2009. The largest soldier armoring
project had been awarded prior to this period, and no new large requests for
proposals were scheduled for 2009. It must also be recognised that the U.S.
retail market for the sale of standalone plates to consumers, is a very small
market, so the opportunity for sales through this channel is limited.
With the U.S. military business already committed to competitors and a small
sales management staff getting a late start in 2008, the decision was made to
focus on international sales as well as supplying plates to original equipment
manufacturers (OEMs). We also established a small U.S. independent
agent/distributor force to sell plates to law enforcement agencies in both the
federal, state and local government markets.
Though the sales cycle was slower than planned, the focus on international
distributors has begun to pay off with significant orders and prospects. Thus
far, the Philippines and Mexico have been our most successful territories. In
the case of Mexico, it should be noted that the distributor was appointed in
early 2008 and large unit sales are anticipated.
Additionally, the U.S. market for non-military body armour was negatively
affected by the recession's impact on state and local government tax revenues
and the pending change in certification of ballistic protection capabilities
standards (U.S. NIJ 06 standards vs. U.S. NIJ 04 standards). The pending
standards change, finalisation of which was delayed several months from its
initial target date, created uncertainty about buying products that were
certified under the soon to be obsolete standards. The result was a first half
in which the retailers/dealers and OEM's found themselves with excess inventory
of both finished and raw goods. This significantly impacted our first half
sales as our potential customers held-off on placing orders until their
inventories and those of the channel had been cleared.
In the first quarter it became clear to the Board that some changes had to be
made and further capital had to be raised. All Senior Executives deferred pay
while the staffing for a much larger operation was maintained in the first
quarter 2009. During that time, cash outflow remained at a disproportionately
high level per month as compared to the relatively negligible level of new
orders and sales, while efforts continued on longer term payoff projects and the
development of new products.
During the second quarter 2009 the Company appointed a new CEO, Philip A.
Clement and CFO, J. Craig Johnson (both interim) to strengthen the management
team. In addition, we brought an experienced corporate executive, William A.
Roper, onto the Board as a non executive director. Initial adjustments to
spending were made in order to conserve cash. One of the first things new
management did was to adjust staffing levels to be more in line with the actual
sales order activity. This resulted in a 40% reduction in the number of non
engineering staff and a 20% reduction in hours and compensation for all other
staff. In the second quarter of 2009 the Company raised $1,500,000 pursuant to
an equity placing. In addition the Company received a binding legal commitment
from an additional investor to subscribe for shares in the Company at an
aggregate price of $1,000,000. The Company expects to receive payment on this
commitment prior to the end of 2009.In addition another US$1.0 million was
collected on a separate previous commitment. While the outflow reduction and the
inflow generated helped relieve a tight cash position, neither was sufficient to
correct the working capital issues that were highlighted in the 2008 year end
accounts.
Meanwhile, our Scorpion Works design team continued to demonstrate the rapid
design and prototyping capability that is at the core of our strategic strength.
During the first half, the Scorpion Works team developed new body armour
products, Series 500 and 600, that when tested exceeded the ballistic protection
standards for which the products were developed. New applications of our
technological skill were developed with the design and prototype of a helmet
design for police and military use; the development of NIJ III and NATO 1
prototype materials for vehicle armour; and design and successful testing of
armour piercing and non armour piercing protection materials for use in
rotorcraft.
During the six month period to 30 June 2009 pre-tax losses increased to US$6.8
million (30 June 2008: US$4.4 million), reflecting the anticipated completion of
the Company's infrastructure to meet its commercialisation roll out as well as
an increased level of sales and marketing activity. In particular General and
Administrative expenses have increased to US$3.9 million (30 June 2008: US$2.9
million) with the recruitment of a full management team and support staff
required to manufacture, market and manage the products being designed. Selling
and Marketing expenses increased to US$683,172 (30 June 2008: US$246,136) as a
result of costs incurred to respond to longer term payoff projects and the
establishment of an international distribution network. Research and Development
costs for the period decreased to US$738,103 (30 June 2008: US$1.0 million).
During the six months ended 30 June 2009, capital expenditures decreased to
US$95,456 as compared to US$2.1 million for the six months ended 30 June 2008.
Our ability to continue as a going concern as described in the footnotes to the
financial statements is predicated upon our ability to continue to fund our cash
needs. We are pursuing ways to improve operating results in order to generate
additional cash flow from operations. The balance sheet conditions that existed
at year end, announced on June 23, 2009, have not yet been remedied. The Company
will consider undertaking further equity fundraisings if necessary to provide
for the implementation of its growth strategy which may or may not take place
over the next few months. The Company may also consider other forms of
non-equity fundraisings for the same purpose. Success in some of these efforts
is necessary to rectify the balance sheet condition.
Subsequent to the first half of 2009, there has been an improvement in order
activity as evidenced by sales in the third quarter which are substantially
above the run rate for the entire first half of 2009. More importantly, we have
established our first design, manufacturing and distribution joint venture to be
located in Asia and will not involve any capital expenditure investment on our
part. We believe this model is very appropriate for our business and anticipate
establishing additional similar arrangements. In addition, the Company appointed
Merchant Capital Limited as its sole broker and accepted the resignation of ZAI
Corporate Finance Limited as its Nominated Advisor. Consequently, in accordance
with AIM Rule 1, during the period of completion of the due diligence process
and pending appointment of a replacement Nominated Adviser, trading of shares in
the Company was temporarily suspended on 8 September 2009.
For the second half of the year our objectives are to at least double the level
of sales in the first half; select the specific products to offer through our
joint venture partner; receive our first substantial vehicle armour order;
certify our existing and newly developed Level III and Level IV body armour
products to the new NIJ standard; and complete development of the helmet. As a
result, subject to rectifying the capital deficiencies that arose last year, we
believe the Company is positioned to take advantage of our technical and
operational strengths to demonstrate the commercial effectiveness of our skills
and technology.
James A. St. Ville Philip A. Clement
Chairman Chief Executive Officer (Interim)
24 September 200924 September 2009
+----------+----------+----------+------------+------------+----------------+----------+----------------+----------+----------------+
| CONSOLIDATED BALANCE SHEET |
+-----------------------------------------------------------------------------------------------------------------------------------+
| June 30, 2009 and December 31, 2008 and June 30, 2008 |
+-----------------------------------------------------------------------------------------------------------------------------------+
| | | | | | | | | | |
+----------+----------+----------+------------+------------+----------------+----------+----------------+----------+----------------+
| | | | | | Unaudited | | | | Unaudited |
+----------+----------+----------+------------+------------+----------------+----------+----------------+----------+----------------+
| | | | | | 30-Jun | | 31-Dec | | 30-Jun |
+----------+----------+----------+------------+------------+----------------+----------+----------------+----------+----------------+
| | | | | | 2009 | | 2008 | | 2008 |
+----------+----------+----------+------------+------------+----------------+----------+----------------+----------+----------------+
| | | | | | US$ | | US$ | | US$ |
+----------+----------+----------+------------+------------+----------------+----------+----------------+----------+----------------+
| ASSETS | | | | | | | |
+--------------------------------+------------+------------+----------------+----------+----------------+----------+----------------+
| CURRENT ASSETS | | | | | | |
+---------------------------------------------+------------+----------------+----------+----------------+----------+----------------+
| | Cash and cash equivalents | 851,635 | | 1,199,179 | | 10,846,431 |
+----------+-----------------------------------------------+----------------+----------+----------------+----------+----------------+
| | Receivable from sale of common stock | 1,400,000 | | 1,189,922 | | 1,908,000 |
+----------+-----------------------------------------------+----------------+----------+----------------+----------+----------------+
| | Accounts receivable | | 106,237 | | 176,642 | | 54,989 |
+----------+----------------------------------+------------+----------------+----------+----------------+----------+----------------+
| | Inventory | | | 222,223 | | 456,194 | | 393,944 |
+----------+---------------------+------------+------------+----------------+----------+----------------+----------+----------------+
| | Prepaid expenses and deposits | 71,435 | | 194,816 | | 134,753.00 |
+----------+-----------------------------------------------+----------------+----------+----------------+----------+----------------+
| | | | | | | | | | |
+----------+----------+----------+------------+------------+----------------+----------+----------------+----------+----------------+
| | | | Total current | 2,651,530 | | 3,216,753 | | 13,338,117 |
| | | | assets | | | | | |
+----------+----------+----------+-------------------------+----------------+----------+----------------+----------+----------------+
| | | | | | | | | | |
+----------+----------+----------+------------+------------+----------------+----------+----------------+----------+----------------+
| PROPERTY AND EQUIPMENT | | | | | |
+----------------------------------------------------------+----------------+----------+----------------+----------+----------------+
| Net of accumulated depreciation | 3,145,223 | | 3,461,623 | | 1,335,236 |
+----------------------------------------------------------+----------------+----------+----------------+----------+----------------+
| | | | | | | | | | |
+----------+----------+----------+------------+------------+----------------+----------+----------------+----------+----------------+
| DEPOSITS | | | | | | | |
+--------------------------------+------------+------------+----------------+----------+----------------+----------+----------------+
| | Equipment | | | 2,417,106 | | 2,374,359 | | 1,817,721 |
+----------+---------------------+------------+------------+----------------+----------+----------------+----------+----------------+
| | Other | | | 116,940 | | 116,940 | | 49,000 |
+----------+---------------------+------------+------------+----------------+----------+----------------+----------+----------------+
| Total Deposits | | | 2,534,046 | | 2,491,299 | | 1,866,721 |
+--------------------------------+------------+------------+----------------+----------+----------------+----------+----------------+
| | | | | | | | | | |
+----------+----------+----------+------------+------------+----------------+----------+----------------+----------+----------------+
| Note Receivable | | | 465,000 | | 830,000 | | - |
+--------------------------------+------------+------------+----------------+----------+----------------+----------+----------------+
| | | | | | | | | | |
+----------+----------+----------+------------+------------+----------------+----------+----------------+----------+----------------+
| TOTAL ASSETS | | | $ | | $ | | $ |
| | | | 8,795,799 | | 9,999,675 | | 16,540,074 |
+--------------------------------+------------+------------+----------------+----------+----------------+----------+----------------+
| | | | | | | | | | |
+----------+----------+----------+------------+------------+----------------+----------+----------------+----------+----------------+
| LIABILITIES AND EQUITY (DEFICIT) | | | | | |
+----------------------------------------------------------+----------------+----------+----------------+----------+----------------+
| CURRENT LIABILITIES | | | | | | |
+---------------------------------------------+------------+----------------+----------+----------------+----------+----------------+
| | Accounts payable | | 1,304,793.00 | | 289,351 | | 598,154 |
+----------+----------------------------------+------------+----------------+----------+----------------+----------+----------------+
| | Accounts payable, related party | 323,958.59 | | 202,584 | | 31,786 |
+----------+-----------------------------------------------+----------------+----------+----------------+----------+----------------+
| | Accrued expenses | | 1,269,881.98 | | 861,527 | | 408,533 |
+----------+----------------------------------+------------+----------------+----------+----------------+----------+----------------+
| | Note payable - related party | 185,000.00 | | 0 | | 0 |
+----------+-----------------------------------------------+----------------+----------+----------------+----------+----------------+
| | Note payable | | | 407,127.00 | | 0 | | 0 |
+----------+---------------------+------------+------------+----------------+----------+----------------+----------+----------------+
| | | | | | | | | | |
+----------+----------+----------+------------+------------+----------------+----------+----------------+----------+----------------+
| | | | Total current | 3,490,761 | | 1,353,462 | | 1,038,473 |
| | | | liabilities | | | | | |
+----------+----------+----------+-------------------------+----------------+----------+----------------+----------+----------------+
| | | | | | | | | | |
+----------+----------+----------+------------+------------+----------------+----------+----------------+----------+----------------+
| EQUITY (DEFICIT) | | | | | | |
+---------------------------------------------+------------+----------------+----------+----------------+----------+----------------+
| | Common stock, $0.001 par value; | 26,562 | | 26,625 | | 26,523 |
+----------+-----------------------------------------------+----------------+----------+----------------+----------+----------------+
| | | Authorized shares | 50,000,000 | | | | | |
+----------+----------+-----------------------+------------+----------------+----------+----------------+----------+----------------+
| | | Issued | 2009 | 2008 | | | | | |
| | | Shares: | | | | | | | |
+----------+----------+----------+------------+------------+----------------+----------+----------------+----------+----------------+
| | | | 26,561,800 | 26,524,300 | | | | | |
+----------+----------+----------+------------+------------+----------------+----------+----------------+----------+----------------+
| | Additional paid-in capital | | 38,365,877 | | 34,917,341 | | 30,867,271 |
+----------+----------------------------------+------------+----------------+----------+----------------+----------+----------------+
| | Deficit accumulated during development | (33,087,401) | | (26,297,753) | | (15,392,193) |
| | stage | | | | | |
+----------+-----------------------------------------------+----------------+----------+----------------+----------+----------------+
| | | | | | | | | | |
+----------+----------+----------+------------+------------+----------------+----------+----------------+----------+----------------+
| TOTAL EQUITY | | | 5,305,039 | | 8,646,213 | | 15,501,601 |
+--------------------------------+------------+------------+----------------+----------+----------------+----------+----------------+
| | | | | | | | | | |
+----------+----------+----------+------------+------------+----------------+----------+----------------+----------+----------------+
| TOTAL EQUITY AND LIABILITIES | $ | | $ | | $ |
| | 8,795,799 | | 9,999,675 | | 16,540,074 |
+----------------------------------------------------------+----------------+----------+----------------+----------+----------------+
| |
+----------+----------+----------+------------+------------+----------------+----------+----------------+----------+----------------+
+----------+--------------+-----------+----+----------+----------------+----------+-----------------+----------+---------------+
| CONSOLIDATED STATEMENT OF OPERATIONS |
+------------------------------------------------------------------------------------------------------------------------------+
| For the periods ended June 30, 2009 and June 30, 2008 |
+------------------------------------------------------------------------------------------------------------------------------+
| | | | | | | | | | |
+----------+--------------+-----------+----+----------+----------------+----------+-----------------+----------+---------------+
| | | | | | Unaudited | | Unaudited | | Unaudited |
+----------+--------------+-----------+----+----------+----------------+----------+-----------------+----------+---------------+
| | | | | | Oct 5, 2004 to | | Six Months Ended June 30, |
+----------+--------------+-----------+----+----------+----------------+----------+--------------------------------------------+
| | | | | | June 30, 2009 | | 2009 | | 2008 |
+----------+--------------+-----------+----+----------+----------------+----------+-----------------+----------+---------------+
| | | | | | US$ | | US$ | | US$ |
+----------+--------------+-----------+----+----------+----------------+----------+-----------------+----------+---------------+
| REVENUE | | | | 665,744 | | 472,928 | | 95,150 |
+-------------------------+-----------+----+----------+----------------+----------+-----------------+----------+---------------+
| | | | | | | | | | |
+----------+--------------+-----------+----+----------+----------------+----------+-----------------+----------+---------------+
| COST OF GOODS SOLD | | | 3,671,785 | | 1,866,779 | | 324,777 |
+-------------------------------------+----+----------+----------------+----------+-----------------+----------+---------------+
| | | | | | | | | | |
+----------+--------------+-----------+----+----------+----------------+----------+-----------------+----------+---------------+
| GROSS MARGIN | | | (3,006,041) | | (1,393,851) | | (229,627) |
+-------------------------------------+----+----------+----------------+----------+-----------------+----------+---------------+
| | | | | | | | | | |
+----------+--------------+-----------+----+----------+----------------+----------+-----------------+----------+---------------+
| OPERATING EXPENSES: | | | | | | | |
+-------------------------------------+----+----------+----------------+----------+-----------------+----------+---------------+
| | Research and development | | 9,788,898 | | 738,103 | | 1,028,510 |
+----------+-------------------------------+----------+----------------+----------+-----------------+----------+---------------+
| | General and administrative | | 16,382,724 | | 3,887,261 | | 2,913,660 |
+----------+-------------------------------+----------+----------------+----------+-----------------+----------+---------------+
| | Selling and marketing | | | 1,695,792 | | 683,172 | | 246,136 |
+----------+--------------------------+----+----------+----------------+----------+-----------------+----------+---------------+
| | Other | | | | 304,140 | | 70,180 | | - |
+----------+--------------+-----------+----+----------+----------------+----------+-----------------+----------+---------------+
| | | | | | | | | | |
+----------+--------------+-----------+----+----------+----------------+----------+-----------------+----------+---------------+
| | | Total | | 28,171,555 | | 5,378,717 | | 4,188,306 |
| | | operating | | | | | | |
| | | expenses | | | | | | |
+----------+--------------+----------------+----------+----------------+----------+-----------------+----------+---------------+
| | | | | | | | | | |
+----------+--------------+-----------+----+----------+----------------+----------+-----------------+----------+---------------+
| OTHER INCOME/EXPENSE | | | | | | |
+------------------------------------------+----------+----------------+----------+-----------------+----------+---------------+
| | Interest income/(expense), | | (1,564,555) | | (17,080) | | (5,751) |
| | net | | | | | | |
+----------+-------------------------------+----------+----------------+----------+-----------------+----------+---------------+
| | Loss on investment, net | | (345,249) | | - | | - |
+----------+-------------------------------+----------+----------------+----------+-----------------+----------+---------------+
| | | | | | | | | | |
+----------+--------------+-----------+----+----------+----------------+----------+-----------------+----------+---------------+
| | | Total other | (1,909,804) | | (17,080) | | (5,751) |
| | | income/(expense) | | | | | |
+----------+--------------+---------------------------+----------------+----------+-----------------+----------+---------------+
| | | | | | | | | | |
+----------+--------------+-----------+----+----------+----------------+----------+-----------------+----------+---------------+
| | | Loss before | | (33,087,400) | | (6,789,648) | | (4,423,684) |
| | | income taxes | | | | | | |
+----------+--------------+----------------+----------+----------------+----------+-----------------+----------+---------------+
| | | | | | | | | | |
+----------+--------------+-----------+----+----------+----------------+----------+-----------------+----------+---------------+
| Provision for income taxes | | | - | | - | | - |
+-------------------------------------+----+----------+----------------+----------+-----------------+----------+---------------+
| | | | | | | | | | |
+----------+--------------+-----------+----+----------+----------------+----------+-----------------+----------+---------------+
| NET LOSS | | | | (33,087,400) | | (6,789,648) | | (4,423,684) |
+-------------------------+-----------+----+----------+----------------+----------+-----------------+----------+---------------+
| | | | | | | | | | |
+----------+--------------+-----------+----+----------+----------------+----------+-----------------+----------+---------------+
| Basic and diluted loss per share | | | | (0.26) | | (0.17) |
+------------------------------------------+----------+----------------+----------+-----------------+----------+---------------+
| | | | | | | | | | |
+----------+--------------+-----------+----+----------+----------------+----------+-----------------+----------+---------------+
| Shares used in computation of basic | | | | | | |
+------------------------------------------+----------+----------------+----------+-----------------+----------+---------------+
| | and diluted loss per share | | | | 26,548,545 | | 25,945,577 |
+----------+--------------+-----------+----+----------+----------------+----------+-----------------+----------+---------------+
+-----+--------+--------+---------------+--+-----------+--+---------------+--+----------------+--+----------------+
| CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT) |
+-----------------------------------------------------------------------------------------------------------------+
| June 30 2009, December 31, 2008 and June 30, 2008 |
+-----------------------------------------------------------------------------------------------------------------+
| | | | | | | | | | |
+-----+--------+--------+------------------------------+--+---------------+--+----------------+--+----------------+
| | | | Common | | Common | | Additional | | Deficit | | Total |
| | | | Stock | | Stock | | Paid-In | | Accumulated | | |
| | | | Shares | | Amount | | Capital | | During the | | |
| | | | | | | | | | Development | | |
| | | | | | | | | | Stage | | |
+-----+--------+--------+---------------+--+-----------+--+---------------+--+----------------+--+----------------+
| | | | | | US$ | | US$ | | US$ | | US$ |
+-----+--------+--------+---------------+--+-----------+--+---------------+--+----------------+--+----------------+
| Balances, December | 25,922,500 | | 25,923 | | 23,481,171 | | (10,968,509) | | 12,538,585 |
| 31, 2007 | | | | | | | | | |
+-----------------------+---------------+--+-----------+--+---------------+--+----------------+--+----------------+
| | | | | | | | | | | | |
+-----+--------+--------+---------------+--+-----------+--+---------------+--+----------------+--+----------------+
| | Issuance of | | | | | | | | | |
| | common stock on | | | | | | | | | |
| | London AIM | | | | | | | | | |
+-----+-----------------+---------------+--+-----------+--+---------------+--+----------------+--+----------------+
| | net of expenses | | | | | | | | | |
| | of US $489,786 | | | | | | | | | |
+-----+-----------------+---------------+--+-----------+--+---------------+--+----------------+--+----------------+
| | Common Stock | 601,800 | | 602 | | 6,527,613 | | - | | 6,528,215 |
| | par 0.001 | | | | | | | | | |
+-----+-----------------+---------------+--+-----------+--+---------------+--+----------------+--+----------------+
| | | | | | | | | | | | |
+-----+--------+--------+---------------+--+-----------+--+---------------+--+----------------+--+----------------+
| | Issuance of | | | | | | | | | |
| | common stock | | | | | | | | | |
+-----+-----------------+---------------+--+-----------+--+---------------+--+----------------+--+----------------+
| | by majority | - | | - | | 3,614,985 | | - | | 3,614,985 |
| | shareholder | | | | | | | | | |
+-----+-----------------+---------------+--+-----------+--+---------------+--+----------------+--+----------------+
| | | | | | | | | | | | |
+-----+--------+--------+---------------+--+-----------+--+---------------+--+----------------+--+----------------+
| | Stock based | - | | - | | 1,293,672 | | - | | 1,293,672 |
| | Compensation | | | | | | | | | |
+-----+-----------------+---------------+--+-----------+--+---------------+--+----------------+--+----------------+
| | | | | | | | | | | | |
+-----+--------+--------+---------------+--+-----------+--+---------------+--+----------------+--+----------------+
| | Net loss | | | | | | | (15,329,244) | | (15,329,244) |
+-----+-----------------+---------------+--+-----------+--+---------------+--+----------------+--+----------------+
| | | | | | | | | | | | |
+-----+--------+--------+---------------+--+-----------+--+---------------+--+----------------+--+----------------+
| Balances, December | 26,524,300 | | 26,525 | | 34,917,441 | | (26,297,753) | | 8,646,213 |
| 31, 2008 | | | | | | | | | |
+-----------------------+---------------+--+-----------+--+---------------+--+----------------+--+----------------+
| | | | | | | | | | | | |
+-----+--------+--------+---------------+--+-----------+--+---------------+--+----------------+--+----------------+
| | Issuance of | | | | | | | | | |
| | common stock on | | | | | | | | | |
| | London AIM | | | | | | | | | |
+-----+-----------------+---------------+--+-----------+--+---------------+--+----------------+--+----------------+
| | Common Stock | 15,000 | | 15 | | (15) | | - | | - |
| | par 0.001 | | | | | | | | | |
+-----+-----------------+---------------+--+-----------+--+---------------+--+----------------+--+----------------+
| | | | | | | | | | | | |
+-----+--------+--------+---------------+--+-----------+--+---------------+--+----------------+--+----------------+
| | Capital stock | - | | - | | 2,500,000 | | | | 2,500,000 |
| | subscribed | | | | | | | | | |
+-----+-----------------+---------------+--+-----------+--+---------------+--+----------------+--+----------------+
| | | | | | | | | | | | |
+-----+--------+--------+---------------+--+-----------+--+---------------+--+----------------+--+----------------+
| | Exercise of | 22,500 | | 23 | | (23) | | | | - |
| | Restricted | | | | | | | | | |
| | Stock | | | | | | | | | |
+-----+-----------------+---------------+--+-----------+--+---------------+--+----------------+--+----------------+
| | | | | | | | | | | | |
+-----+--------+--------+---------------+--+-----------+--+---------------+--+----------------+--+----------------+
| | Stock based | - | | - | | 948,474 | | - | | 948,474 |
| | compensation | | | | | | | | | |
+-----+-----------------+---------------+--+-----------+--+---------------+--+----------------+--+----------------+
| | | | | | | | | | | | |
+-----+--------+--------+---------------+--+-----------+--+---------------+--+----------------+--+----------------+
| | Net loss | | | | | | | (6,789,648) | | (6,789,648) |
+-----+-----------------+---------------+--+-----------+--+---------------+--+----------------+--+----------------+
| | | | | | | | | | | | |
+-----+--------+--------+---------------+--+-----------+--+---------------+--+----------------+--+----------------+
| Balances, June 30, | 26,561,800 | | 26,562 | | 38,365,877 | | (33,087,401) | | 5,305,039 |
| 2009 | | | | | | | | | |
+-----+--------+--------+---------------+--+-----------+--+---------------+--+----------------+--+----------------+
+--+----+---+-----+------+------+------+----------+----------+-----------------+----------+---------------+----------+---------------+
| CONSOLIDATED STATEMENT OF CASH FLOWS |
+------------------------------------------------------------------------------------------------------------------------------------+
| For the periods ended June 30, 2009 and 2008 |
+------------------------------------------------------------------------------------------------------------------------------------+
| | | | | | | | | | | | | | |
+--+----+---+-----+------+------+------+----------+----------+-----------------+----------+---------------+----------+---------------+
| | | | | | | | | | Unaudited | | Unaudited | | Unaudited |
+--+----+---+-----+------+------+------+----------+----------+-----------------+----------+---------------+----------+---------------+
| | | | | | | | | |Oct 5, 2004 to | | Six Months ended June 30 |
+--+----+---+-----+------+------+------+----------+----------+-----------------+----------+------------------------------------------+
| | | | | | | | | | 30-Jun-09 | | 2009 | | 2008 |
+--+----+---+-----+------+------+------+----------+----------+-----------------+----------+---------------+----------+---------------+
| Cash flows from operating | | | US$ | | US$ | | US$ |
| activities: | | | | | | | |
+--------------------------------------+----------+----------+-----------------+----------+---------------+----------+---------------+
| | Net loss | | | | | | $ (33,087,401) | | $ | | $ |
| | | | | | | | | | (6,789,648) | | (4,423,684) |
+--+--------------+------+------+------+----------+----------+-----------------+----------+---------------+----------+---------------+
| | Adjustments to reconcile net loss to net | | | | | | |
| | cash | | | | | | |
+--+----------------------------------------------+----------+-----------------+----------+---------------+----------+---------------+
| | used in operating activities: | | | | | | | |
+--+-----------------------------------+----------+----------+-----------------+----------+---------------+----------+---------------+
| | | Depreciation and | | | $ 670,021 | | $ 369,109 | | $ 60,853 |
| | | Amortization | | | | | | | |
+--+----+------------------------------+----------+----------+-----------------+----------+---------------+----------+---------------+
| | | Stock based compensation | | | $ 5,857,131 | | $ 948,474 | | $ 572,274 |
+--+----+------------------------------+----------+----------+-----------------+----------+---------------+----------+---------------+
| | | Changes in assets and | | | | | | | |
| | | liabilities: | | | | | | | |
+--+----+------------------------------+----------+----------+-----------------+----------+---------------+----------+---------------+
| | | | Accounts receivable and other | | $ (1,506,237) | | $ (139,673) | | $ 1,348,774 |
| | | | receivables | | | | | | |
+--+----+---+-------------------------------------+----------+-----------------+----------+---------------+----------+---------------+
| | | | Inventory | | | | $ (222,223) | | $ 233,971 | | $ (393,944) |
+--+----+---+-------------------+------+----------+----------+-----------------+----------+---------------+----------+---------------+
| | | | Prepaid expenses and deposits | | $ (188,375) | | $ 123,381 | | $ (67,363) |
+--+----+---+-------------------------------------+----------+-----------------+----------+---------------+----------+---------------+
| | | | Notes receivable | | | | $ (465,000) | | $ 365,000 | | $ - |
+--+----+---+-------------------+------+----------+----------+-----------------+----------+---------------+----------+---------------+
| | | | Accounts payable and accrued | | $ 2,898,634 | | $ 1,545,172 | | $ |
| | | | expense | | | | | | (1,559,235) |
+--+----+---+-------------------------------------+----------+-----------------+----------+---------------+----------+---------------+
| | | | | | | | | | | | | | |
+--+----+---+-----+------+------+------+----------+----------+-----------------+----------+---------------+----------+---------------+
| | | | | Net cash used in operating | | $ (26,043,451) | | $ | | $ |
| | | | | activities | | | | (3,344,215) | | (4,462,325) |
+--+----+---+-----+-------------------------------+----------+-----------------+----------+---------------+----------+---------------+
| | | | | | | | | | | | | | |
+--+----+---+-----+------+------+------+----------+----------+-----------------+----------+---------------+----------+---------------+
| Cash flows from investing activities | | | | | | | |
+--------------------------------------+----------+----------+-----------------+----------+---------------+----------+---------------+
| | Purchase of property and | | | (3,815,244) | | $ (52,709) | | (1,273,412) |
| | equipment | | | | | | | |
+--+-----------------------------------+----------+----------+-----------------+----------+---------------+----------+---------------+
| | Deposits paid for property and equipment | | (2,417,106) | | $ (42,747) | | (812,244) |
+--+----------------------------------------------+----------+-----------------+----------+---------------+----------+---------------+
| | | | | | | | | | | | | | |
+--+----+---+-----+------+------+------+----------+----------+-----------------+----------+---------------+----------+---------------+
| | | | | Net cash used in investing | | (6,232,350) | | $ (95,456) | | (2,085,656) |
| | | | | activities | | | | | | |
+--+----+---+-----+-------------------------------+----------+-----------------+----------+---------------+----------+---------------+
| | | | | | | | | | | | | | |
+--+----+---+-----+------+------+------+----------+----------+-----------------+----------+---------------+----------+---------------+
| Cash flows from financing activities | | | | | | | |
+--------------------------------------+----------+----------+-----------------+----------+---------------+----------+---------------+
| | Payments on line of credit - related party | | (5,435,554) | | $ - | | (2,941,467) |
+--+----------------------------------------------+----------+-----------------+----------+---------------+----------+---------------+
| | Borrowings on line of credit - related party | | 5,435,554 | | $ - | | - |
+--+----------------------------------------------+----------+-----------------+----------+---------------+----------+---------------+
| | Note payable payments - Related Party | | - | | $ - | | - |
+--+----------------------------------------------+----------+-----------------+----------+---------------+----------+---------------+
| | Note payable proceeds - Related Party | | 185,000 | | $ 185,000 | | - |
+--+----------------------------------------------+----------+-----------------+----------+---------------+----------+---------------+
| | Note payable payments | | | | (148,943) | | $ (148,943) | | - |
+--+----------------------------+------+----------+----------+-----------------+----------+---------------+----------+---------------+
| | Note payable proceeds | | | | 556,070 | | $ 556,070 | | - |
+--+----------------------------+------+----------+----------+-----------------+----------+---------------+----------+---------------+
| | Proceeds from issuance of convertible bonds | | 9,000,000 | | $ - | | - |
+--+----------------------------------------------+----------+-----------------+----------+---------------+----------+---------------+
| | Capital stock subscribed | | | | 22,784,809 | | $ 2,500,000 | | 6,814,426 |
+--+----------------------------+------+----------+----------+-----------------+----------+---------------+----------+---------------+
| | Members Contributions | | | | 750,500 | | | | |
+--+----------------------------+------+----------+----------+-----------------+----------+---------------+----------+---------------+
| | | | | | | | | | | | | | |
+--+----+---+-----+------+------+------+----------+----------+-----------------+----------+---------------+----------+---------------+
| | | | | Net cash provided by financing | 33,127,436 | | $ 3,092,127 | | 3,872,959 |
| | | | | activities | | | | | |
+--+----+---+-----+------------------------------------------+-----------------+----------+---------------+----------+---------------+
| | | | | | | | | | | | | | |
+--+----+---+-----+------+------+------+----------+----------+-----------------+----------+---------------+----------+---------------+
| | | | | Net increase | | | | | | | |
| | | | | (decrease) in | | | | | | | |
+--+----+---+-----+--------------------+----------+----------+-----------------+----------+---------------+----------+---------------+
| | | | | cash and cash equivalents | | 851,635 | | $ (347,544) | | (2,675,022) |
+--+----+---+-----+-------------------------------+----------+-----------------+----------+---------------+----------+---------------+
| | | | | | | | | | | | | | |
+--+----+---+-----+------+------+------+----------+----------+-----------------+----------+---------------+----------+---------------+
| Cash and cash equivalents: | | | | | | | | |
+-------------------------------+------+----------+----------+-----------------+----------+---------------+----------+---------------+
| | Beginning | | | | | - | | $ 1,199,179 | | 13,521,453 |
+--+---------------------+------+------+----------+----------+-----------------+----------+---------------+----------+---------------+
| | | | | | | | | | | | | | |
+--+----+---+-----+------+------+------+----------+----------+-----------------+----------+---------------+----------+---------------+
| | Ending | | | | | | $ 851,635 | | $ 851,635 | | $ |
| | | | | | | | | | | | 10,846,431 |
+--+--------------+------+------+------+----------+----------+-----------------+----------+---------------+----------+---------------+
| | | | | | | | | | | | | | |
+--+----+---+-----+------+------+------+----------+----------+-----------------+----------+---------------+----------+---------------+
| Supplemental cash flow information | | | | | | | |
+--------------------------------------+----------+----------+-----------------+----------+---------------+----------+---------------+
| | Cash paid for interest | | | | | | $17,080 | | $5,751 |
+--+----+---+-----+------+------+------+----------+----------+-----------------+----------+---------------+----------+---------------+
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 continued to focus on transitioning from a development stage entity
to commercialisation of its products,. The focus of the Company's efforts is the
generation, testing, manufacture and marketing of armour products. The Company's
success will depend on its ability to effectively develop, manufacture, obtain
certification and market innovative armour for military and law enforcement use.
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 2009 and
2008 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 2008.
These interim financial statements should be read in conjunction with the
Company's audited financial statements and notes thereto included in the
Company's 2008 Annual Report.
NOTE 2 - GOING CONCERN
The accompanying interim financial statements have been prepared on a going
concern basis which contemplates the realisation of assets and the satisfaction
of liabilities in the normal course of business as they become due.
For the six months ended 30 June 2009, the Company incurred net losses from
operations of US$6.7 million and has accumulated US$33.0 million from inception.
Additionally, during the six months ended 30 June 2009, the Company had negative
cash flows from operating activities of US$3.3 million. Historically, The
Company has relied, in part, upon debt financing, loans from related entities
and raising new capital to fund its operations. In the past, the Company has
been successful in obtaining the capital necessary to meet its obligations;
however, there are no assurances that the Company will be able continue to raise
the sufficient funds needed for working capital until such time as the
operations can provide positive cash flow.
The Company's ability to continue as a going concern is predicated upon its
ability to improve operating results and to continue to fund its cash needs.
Management is pursuing ways to improve operating results in order to generate
additional cash flow from operations. The Company will consider undertaking
further equity fundraisings to provide for working capital which may or may not
take place over the next few months. The Company may also consider other forms
of non-equity fundraisings for the same purpose which may include secured debt
financing collateralised by the Company's assets. Management has the ability to
curtail spending and negotiate payments to third parties, in the event the next
round of funding takes longer than anticipated.
The financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result if the Company is unable to
operate as a going concern.
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES
Accounting Estimates
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, as well as net sales and expenses reported for the
periods presented. The most significant estimates relate to revenue recognition,
inventory obsolescence, bad debts, long-lived assets, stock-based compensation,
and income taxes. The Company regularly assesses these estimates and, while
actual results may differ, management believes that the estimates are
reasonable.
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.
Accounts Receivable
Trade accounts receivable are recorded at the invoiced amount and do not bear
interest. As of 30 June 2009 the Company has limited historical collection
experience, and therefore has not recorded an allowance for uncollectible
accounts.
Inventory Valuation
Inventories are valued at the lower of cost or market with cost determined using
the First-In, First-Out (FIFO) method, with standard costs approximating actual
costs. Inventory balances for the six month periods ended 30 June 2009 and 2008
were as follows:
+-----------------+------------+--+------------+
| | 30-Jun | | 30-Jun |
+-----------------+------------+--+------------+
| | 2009 | | 2008 |
+-----------------+------------+--+------------+
| Raw Material | $56,918 | | $190,803 |
| | | | |
+-----------------+------------+--+------------+
| Work in Process | 2,915 | | 162,038 |
+-----------------+------------+--+------------+
| Finished Goods | 162,391 | | 41,103 |
+-----------------+------------+--+------------+
| Total Inventory | $222,223 | | $393,944 |
| | | | |
+-----------------+------------+--+------------+
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. Leasehold Improvements are amortised using the straight-line method
over the remaining term of the facility lease. Depreciation and Amortisation
expense for the six months ended 30 June 2009 and 2008 were as follows:
+-----------------+------------+--+----------+
| | 30-Jun | | 30-Jun |
+-----------------+------------+--+----------+
| | 2009 | | 2008 |
+-----------------+------------+--+----------+
| Depreciation | $231,550 | | $55,750 |
| | | | |
+-----------------+------------+--+----------+
| Amortization | 137,559 | | 5,103 |
+-----------------+------------+--+----------+
| | $369,109 | | $60,853 |
| | | | |
+-----------------+------------+--+----------+
Revenue Recognition
The Company sells its armour products primarily to the defence and law
enforcement industries. A portion of the Company's products are also sold
through distributors or resellers. The Company recognises revenue on product
sales when persuasive evidence of an arrangement with the customer exists, title
to the product passes to the customer (usually occurs at the time of shipment),
the sales price is fixed or determinable, and collectability of the related
billing is reasonably assured. Advance payments from customers are deferred and
recognised when the related products are shipped.
Shipping Costs
Shipping costs include charges associated with delivery of goods from the
Company's facilities to its customers and are reflected in cost of goods sold.
Shipping costs paid to the Company by our customers only for amounts that are a
direct reimbursement for shipping are classified as an offset to cost of goods
sold.
+-------------------------------+
| Product |
| Warranties |
+-------------------------------+
Estimated future warranty obligations related to certain products will be
provided by charges to operations in the period in which the related revenue is
recognised. The Company has not established a reserve for warranty obligations.
Research and Development
Research and development costs are expensed as incurred 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.
For the period ended 30 June 2008 and 2007, the Company has recorded stock-based
compensation expense as follows:
+----------------------------+------------+--+------------+
| | 30-Jun | | 30-Jun |
+----------------------------+------------+--+------------+
| | 2009 | | 2008 |
+----------------------------+------------+--+------------+
| Restricted Stock Units | 817,818 | | 548,124 |
| (RSUs) | | | |
+----------------------------+------------+--+------------+
| Stock Appreciation Rights | 22,415 | | 24,150 |
| (SARs) | | | |
+----------------------------+------------+--+------------+
| | 840,233 | | 572,274 |
+----------------------------+------------+--+------------+
A summary of the Company's stock option activity follows:
+----------------+-------------+-----------+----------+------------+-----------+----------+--------------+------------+
| | RSUs | | | SARs | | | Stock | |
| | | | | | | | Options | |
+----------------+-------------+-----------+----------+------------+-----------+----------+--------------+------------+
| | Shares | Weighted | | Shares | Weighted | | Shares | Weighted |
| | Under | Average | | Under | Average | | Under | Average |
| | Option | Exercise | | Option | Exercise | | Option | Exercise |
| | |Price per | | |Price per | | | Price per |
| | | Share | | | Share | | | Share |
+----------------+-------------+-----------+----------+------------+-----------+----------+--------------+------------+
| Granted in | 438,500 | $- | | 69,400 | $10.00 | | - | $- |
| 2007 | | | | | | | | |
+----------------+-------------+-----------+----------+------------+-----------+----------+--------------+------------+
| 31 December | 438,500 | $- | | 69,400 | $10.00 | | - | $- |
| 2007 | | | | | | | | |
+----------------+-------------+-----------+----------+------------+-----------+----------+--------------+------------+
| Granted in | 205,000 | $- | | 103,000 | $10.00 | | 2,600,000 | $10.00 |
| 2008 | | | | | | | | |
+----------------+-------------+-----------+----------+------------+-----------+----------+--------------+------------+
| Forfeited in | (100,000) | $- | | (6,300) | $10.00 | | - | $10.00 |
| 2008 | | | | | | | | |
+----------------+-------------+-----------+----------+------------+-----------+----------+--------------+------------+
| 31 December | 543,500 | $- | | 166,100 | $10.00 | | 2,600,000 | $10.00 |
| 2008 | | | | | | | | |
+----------------+-------------+-----------+----------+------------+-----------+----------+--------------+------------+
| Granted in | 29,020 | $- | | - | $- | | - | $- |
| 2009 | | | | | | | | |
+----------------+-------------+-----------+----------+------------+-----------+----------+--------------+------------+
| Forfeited in | (150,000) | $- | | - | $- | | - | $- |
| 2009 | | | | | | | | |
+----------------+-------------+-----------+----------+------------+-----------+----------+--------------+------------+
| 30 June 2009 | 422,520 | $- | | 166,100 | $10.00 | | 2,600,000 | $10.00 |
+----------------+-------------+-----------+----------+------------+-----------+----------+--------------+------------+
The Company recognises compensation expense using the straight-line method for
stock option awards that vest ratably over the vesting period. SFAS 123(R)
requires forfeitures to be estimated at the time of grant and revised, if
necessary, in subsequent periods if actual forfeitures differ from those
estimates.
The fair value of each option was estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions:
+------------------------+-------------+--+-------------+--+-------------+
| | Six months | |Year ended | |Year ended |
| | ended | | | | |
+------------------------+-------------+--+-------------+--+-------------+
| | 30 June | |31 December | |31 December |
| | 2009 | | 2008 | | 2007 |
+------------------------+-------------+--+-------------+--+-------------+
| Expected options term | 10 | | 5.9 | | 10 |
| (years) | | | | | |
+------------------------+-------------+--+-------------+--+-------------+
| Risk free interest | 1.77% | | 2.03% | | 3.29% |
| rate | | | | | |
+------------------------+-------------+--+-------------+--+-------------+
| Dividend yield | - | | - | | - |
+------------------------+-------------+--+-------------+--+-------------+
| Volatility | 1.41% | | 1.79% | | 3.00% |
+------------------------+-------------+--+-------------+--+-------------+
The table above is based on the Company's use of (i) the expected life of the
awards representing the weighted-average period the awards are expected to
remain outstanding; (ii) the risk-free interest rate assumption based upon
observed interest rates appropriate for the weighted average expected option
life of the Company's employee stock options; (iii) the dividend yield
assumption based on the Company's history and expectation of dividend payouts;
and (iv) historical volatility of the selected peer group as the expected
volatility in the Black-Scholes model.
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 and Interpretation No. 48, Accounting for Uncertaintyin Income Taxes - an
Interpretation of FASB Statement No. 109. 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 4 - 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.
The Placing shares were not registered under the US Securities Act of 1933. The
shares were 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 in connection with the Admission 1,275,000
were issued in reliance on Regulation S and 325,000 were issued in reliance on
Regulation D.
Upon admission to AIM, the conversion features of outstanding convertible bonds
were triggered. 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 or before 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.
During the period ended 31 December the Company issued 601,800 common shares
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 31 December 2008. Funds in the amount of US$5,810,078 were
collected from the sale of common stock as of 31 December 2008. Funds in the
amount of US$1,189,922 were included in the Balance Sheet as a receivable from
the sale of stock as of 31 December 2008. The amounts outstanding as of December
31, 2008 were collected during the six months ended 30 June 2009.
Funds in the amount of US$100,000 were collected from the sale of common stock
during the period ended 30 June 2009 and an additional amount of US$1,400,000
was included in the Balance Sheet as a receivable related to common stock
subscription agreements as of 30 June 2009. As of 30 June 2009 no shares were
issued related to these amounts.
As of 30 June 2009, the Company had 26,561,800 common shares in issue and a
market capitalisation of US$263,227,438 based on the Company's closing stock
price of US$9.91 (trading price of GBP6.00 converted utilising an exchange rate
of 1.652) on 30 June 2009.
NOTE 5 - WARRANTS AND OPTIONS
Warrants for 1,822,500 shares of Common Stock were outstanding at 30 June 2009.
Each warrant entitles the holder to purchase one Common Share at a price per
share of US$12.50, exercisable on or before 31 December 2009 or the date of any
secondary issue of Common Shares by the Company. All Bond Warrants expire if
they are not exercised on the Warrant Exercise Date.
Beginning with the year ended 31 December 2007, the Company issued stock awards
to various advisors and key employees as a means of attracting and retaining
quality personnel. The award holders have the right to purchase a stated number
of shares at the exercise price determined in the agreement. These options are
issued under the Armor Designs, Inc 2007 Omnibus Incentive Plan (Plan). The Plan
allows the Company to issue RSUs, SARs and Non-Qualified Stock Options (Stock
Options). Awards may be made under the Plan over shares of common stock not to
exceed 10% of the issued share capital of the Company at the date of the award.
Exercise of any of these warrants or options would have a commensurately
dilutive effect on the holdings of the previously issued Common Shares.
A summary of the Company's option activity and related full grant date fair
value is as follows:
+----------------+-------------+--------------+----------+-----------+-----------+----------+--------------+------------+
| | RSUs | | | SARs | | | Stock | |
| | | | | | | | Options | |
+----------------+-------------+--------------+----------+-----------+-----------+----------+--------------+------------+
| | Shares | US$ | | Shares | US$ | | Shares | US$ |
| | Under | | | Under | | | Under | |
| | Option | | | Option | | | Option | |
+----------------+-------------+--------------+----------+-----------+-----------+----------+--------------+------------+
| Granted in | 438,500 | $4,381,836 | | 69,400 | $193,233 | | - | $- |
| 2007 | | | | | | | | |
+----------------+-------------+--------------+----------+-----------+-----------+----------+--------------+------------+
| 31 December | 438,500 | $4,381,836 | | 69,400 | $193,233 | | - | $- |
| 2007 | | | | | | | | |
+----------------+-------------+--------------+----------+-----------+-----------+----------+--------------+------------+
| Granted in | 205,000 | $1,682,282 | | 103,000 | $180,008 | | 2,600,000 | $191,817 |
| 2008 | | | | | | | | |
+----------------+-------------+--------------+----------+-----------+-----------+----------+--------------+------------+
| Forfeited in | (100,000) | $(999,278) | | (6,300) | $(17,541) | | - | $- |
| 2008 | | | | | | | | |
+----------------+-------------+--------------+----------+-----------+-----------+----------+--------------+------------+
| 31 December | 543,500 | $5,064,840 | | 166,100 | $355,700 | | 2,600,000 | $191,817 |
| 2008 | | | | | | | | |
+----------------+-------------+--------------+----------+-----------+-----------+----------+--------------+------------+
| Granted in | 29,020 | $280,301 | | - | $- | | - | $- |
| 2009 | | | | | | | | |
+----------------+-------------+--------------+----------+-----------+-----------+----------+--------------+------------+
| Forfeited in | (150,000) | $(1,230,938) | | - | $- | | - | $- |
| 2009 | | | | | | | | |
+----------------+-------------+--------------+----------+-----------+-----------+----------+--------------+------------+
| 30 June 2009 | 422,520 | $4,114,203 | | 166,100 | $355,700 | | 2,600,000 | 191,817 |
| | | | | | | | | |
+----------------+-------------+--------------+----------+-----------+-----------+----------+--------------+------------+
Based on the Company's closing stock price of US$9.91 (trading price of GBP6.00
converted utilising an exchange rate of 1.652) on 30 June 2009, the last day of
trading in period, there were no in-the-money options exercisable at 30 June
2009.
A summary of the Company's option activity and related vesting value is as
follows
+--------------------+-------------+---------------+--+-------------+-------------+--+---------------+-------------+
| | RSUs | | | SARs | | | Stock | |
| | | | | | | | Options | |
+--------------------+-------------+---------------+--+-------------+-------------+--+---------------+-------------+
| | Shares | US$ | | Shares | US$ | | Shares | US$ |
| | Under | | | Under | | | Under | |
| | Option | | | Option | | | Option | |
+--------------------+-------------+---------------+--+-------------+-------------+--+---------------+-------------+
| Granted in 2007 | 438,500 | 4,381,836 | | 69,400 | 193,233 | | - | - |
+--------------------+-------------+---------------+--+-------------+-------------+--+---------------+-------------+
| Vested in 2007 | - | - | | - | - | | - | - |
+--------------------+-------------+---------------+--+-------------+-------------+--+---------------+-------------+
| Non-vested at 31 | 438,500 | 4,381,836 | | 69,400 | 193,233 | | - | - |
| December 2007 | | | | | | | | |
+--------------------+-------------+---------------+--+-------------+-------------+--+---------------+-------------+
| Granted in 2008 | 205,000 | 1,682,282 | | 103,000 | 180,008 | | 2,600,000 | 191,817 |
+--------------------+-------------+---------------+--+-------------+-------------+--+---------------+-------------+
| Vested in 2008 | (133,625) | (1,335,286) | | (40,775) | (88,782) | | (2,600,000) | (191,817) |
+--------------------+-------------+---------------+--+-------------+-------------+--+---------------+-------------+
| Forfeited in 2008 | (100,000) | (999,278) | | (6,300) | (17,541) | | - | - |
+--------------------+-------------+---------------+--+-------------+-------------+--+---------------+-------------+
| Non-vested at 31 | 409,875 | 3,729,554 | | 125,325 | 266,918 | | - | - |
| December 2008 | | | | | | | | |
+--------------------+-------------+---------------+--+-------------+-------------+--+---------------+-------------+
| Granted in 2009 | 29,020 | 280,301 | | | | | | |
+--------------------+-------------+---------------+--+-------------+-------------+--+---------------+-------------+
| Vested in 2009 | (2,500) | (20,288) | | (100,750) | (179,800) | | | |
+--------------------+-------------+---------------+--+-------------+-------------+--+---------------+-------------+
| Forfeited in 2009 | (150,000) | (1,231,629) | | - | - | | - | - |
+--------------------+-------------+---------------+--+-------------+-------------+--+---------------+-------------+
| Non-vested at 30 | 286,395 | 2,757,938 | | 24,575 | 87,118 | | - | - |
| June 2009 | | | | | | | | |
+--------------------+-------------+---------------+--+-------------+-------------+--+---------------+-------------+
Compensation expense per FAS 123R requirements is recognised rateably over the
vesting period. For the period ended 30 June 2008 and 2007, the Company has
recorded stock-based compensation expense as follows:
+----------------------------+------------+--+------------+
| | 30-Jun | | 30-Jun |
+----------------------------+------------+--+------------+
| | 2009 | | 2008 |
+----------------------------+------------+--+------------+
| Restricted Stock Units | 817,818 | | 548,124 |
| (RSUs) | | | |
+----------------------------+------------+--+------------+
| Stock Appreciation Rights | 22,415 | | 24,150 |
| (SARs) | | | |
+----------------------------+------------+--+------------+
| | 840,233 | | 572,274 |
+----------------------------+------------+--+------------+
The following table shows unrecognised compensation expense related to unvested
RSUs and SARs outstanding as of 30 June 2009. This table does not include an
estimate for future grants that may be issued.
+----------------------+------------+
| | Amount |
+----------------------+------------+
| | US$ |
+----------------------+------------+
| 2009 | $561,085 |
+----------------------+------------+
| 2010 | $873,771 |
+----------------------+------------+
| 2011 | $852,123 |
+----------------------+------------+
| 2012 | $4,309 |
+----------------------+------------+
| Total | $2,291,289 |
| | |
+----------------------+------------+
As outlined in the Placing Document, Hawthorne & York International, Ltd.
("HYI"), principal shareholder in ADI, has gifted 3.4 million shares of its ADI
shareholding to a number of individuals who have primarily assisted HYI in the
years prior to bringing ADI to market. The shares gifted have been transferred
into an irrevocable trust controlled by an independent trustee that will be used
to distribute awards to the recipients in tranches over the coming years. The
gifted shares will be distributed to individuals via the irrevocable trust in
the form of 450,000 shares, and, 2,950,000 share equivalents (non-qualified
stock options and restricted stock units). As of 30 June 2009, 450,000 shares
have been distributed. None of the gifted shares were distributed during the six
months ended 30 June 2009.
During the year ended 31 December 2008, HYI transferred 3,000,000 of its ADI
shares into a securities investment portfolio account. The securities investment
portfolio account into which the shares have been transferred enables borrowing
against all shares within this portfolio account and, therefore, from
time-to-time, some or all of the shares within this portfolio account, including
some ADI shares, could be subject to creditor liability. HYI has not divested
any shares.
NOTE 6 - RESEARCH & DEVELOPMENT COSTS
Expenditures for research activities relating to product development are charged
to expense as incurred. Research and development costs for the periods ended 30
June 2009 and 2008 were US$738,103 and US$1,028,510, respectively.
NOTE 7 - 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 82 percent of
Armor Designs, Inc. as of 30 June 2009, including 11 percent held in an
irrevocable trust.
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.
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 2009 and 2008 US$651,251 US$209,713
+-----------------------------------------------+----------+--+------------+
| | | | |
+-----------------------------------------------+----------+--+------------+
Included in the accompanying consolidated balance sheets is accounts payable of
US$323,959 and US$31,786 due to the related party at 30 June 2009 and 2008,
respectively, for billings related to general and administrative expenses, use
of licensed technology and research and development activities.
The Subsidiary paid rent and other facility occupancy costs on behalf of the
related party for the periods ended 31 December 2008 and 2007. Facility
Occupancy costs incurred on behalf of the related party for the periods ended 30
June 2009 and 2008 were US$78,873 and US$14,245, respectively.
The Company maintains independent management and human resources. The Company
has also entered into a lease for independent facilities. The Company continues
to utilise the related party for select research and development activities.
In May 2009 The Company entered a US$185,000 note payable with a related party,
Hawthorne & York International, Ltd. This note has a maturity date of October
29, 2009 and bears interest on unpaid principal balances at a rate of 7.50% per
annum. As of June 30, 2009 the outstanding balance on this note was $185,000.
On July 3, 2008 the Company executed a Multiple Advance Revolving Credit Note
with Mr. Charles Snyder, former Chief Executive Officer of the Company. The Note
provided Mr. Snyder the ability to borrow up to US$1,000,000 at a Stated
Interest Rate of 1% per annum. The Note is secured by a Deed of Trust,
Assignment of Rents, Security Agreement, Fixture Filing and Stock Pledge
Agreement. Following Mr Snyder's resignation from the Company in June 2009, 50
percent of the outstanding balance on the note was forgiven by the Company. As
of 30 June 2009, the outstanding balance to the Company was US$365,000 and is
due and payable on or before 22 December 2009.
On December 3, 2008 the Company loaned Mr. Robert McConnell, Vice President of
the Company, US$100,000. The Company has received a non-interest bearing
Promissory Note reflecting the commitment to repay the loan in full by 30 June
2009. The Note provides the Company the ability to offset the amount of the loan
against the stock in the Company held by Mr. McConnell. As of 30 June 2009 this
loan remains outstanding.
NOTE 8 - PROPERTY, PLANT AND EQUIPMENT
The Company policy is to capitalise all equipment, either moveable or fixed,
with a unit acquisition cost of US$2,500 or greater and a useful life of two
years or more. Acquisition value includes the cost of the equipment and any
associated costs incurred to make the equipment usable for the purpose for which
it was intended, including installation costs.
As of 30 June 2009, the Company capitalised and was depreciating fixed assets
per the following schedule:
+----------------------------+---------+--------------+
| | Life | Book Value |
+----------------------------+---------+--------------+
| | | US$ |
+----------------------------+---------+--------------+
| | | |
+----------------------------+---------+--------------+
| Computer equipment | 3 | 107,827 |
+----------------------------+---------+--------------+
| Computer software | 3 | 138,425 |
+----------------------------+---------+--------------+
| Equipment | 7 | 2,064,319 |
+----------------------------+---------+--------------+
| Production Molds | 3 | 309,769 |
+----------------------------+---------+--------------+
| Furniture & Fixtures | 7 | 34,121 |
+----------------------------+---------+--------------+
| Leaseholds |(Lease) | 1,160,782 |
+----------------------------+---------+--------------+
| Subtotal: | | 3,815,244 |
+----------------------------+---------+--------------+
| Less: accumulated | | (670,020) |
| depreciation and | | |
| amortisation | | |
+----------------------------+---------+--------------+
| Total: | | 3,145,223 |
+----------------------------+---------+--------------+
As of 30 June 2009 the Company has recorded US$2,417,106 in deposits towards the
purchase of production equipment. The deposits are recorded as other assets and
will be converted to fixed assets and depreciated once the equipment is placed
in service.
NOTE 9 - COMMITMENTS, LEASE RENEWAL AND PURCHASE OPTIONS
In December 2007, the Company entered into an operating lease agreement for its
facility located at 4645 S. 35th Street in Phoenix, Arizona. Under the
agreement, the Company is required to pay rent through December 2012 as follows:
+-----------------------------------------+--------------+
| Periods ending | US$ |
| December 31, | |
+-----------------------------------------+--------------+
| | |
+-----------------------------------------+--------------+
| | |
+-----------------------------------------+--------------+
| 2009 | 269,684 |
+-----------------------------------------+--------------+
| 2010 | 547,930 |
+-----------------------------------------+--------------+
| 2011 | 565,052 |
+-----------------------------------------+--------------+
| 2012 | 582,175 |
+-----------------------------------------+--------------+
| | |
+-----------------------------------------+--------------+
| | 2,765,332 |
+-----------------------------------------+--------------+
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 (82% ownership of the Company), for use of certain licensed
technological products and processes owned by the related party, until September
13, 2009, at such time the contract will automatically renew for five-year
terms. The Subsidiary is obligated to pay 4% of gross sales on a quarterly basis
to the related party 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 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 10 - Notes Payable
In February 2009 the Company executed a Commercial Loan Agreement with Republic
Bank and Trust for a Commercial Revolving Draw Loan of up to US$400,000. The
loan accrues interest at 6.00% per annum and has a maturity date of 19 February
2010. The loan is guaranteed by Hawthorne and York International, Ltd., which
also provided security in the form of a deposit/share account. As of 30 June
2009 the outstanding balance on this loan was US$308,000.
In March 2009 the Company executed a US$200,000 note payable with Arizona
Business Bank with an original maturity date of 10 May 2009. The note bears
interest on unpaid principal balances at a rate of 7.00% per annum, subject to
certain adjustments. This note is secured by substantially all of our tangible
and intangible assets. Effective 10 May 2009, the terms of the note were changed
to extend the maturity date to 10 September 2009. As of 30 June 2009 the
outstanding balance on this note was US$99,127.
In May 2009 The Company entered a US$185,000 note payable with a related party,
Hawthorne & York International, Ltd. This note has a maturity date of October
29, 2009 and bears interest on unpaid principal balances at a rate of 7.50% per
annum. As of June 30, 2009 the outstanding balance on this note was $185,000.
NOTE 11 - RETIREMENT PLAN
Employees of the Company that meet certain age and service requirements are
eligible to participate in the Armor Designs, Inc. 401(k) and Profit Sharing
Plan (formerly the James A. St. Ville, M.D. Savings and Profit Sharing Plan).
Employer profit sharing and matching contributions to the 401(k) component of
the plan and profit sharing contributions may be made at the discretion of the
Company's management. The Company did not make matching or profit sharing
contributions for the six months ended 30 June 2009 and 2008.
NOTE 12 - EARNINGS PER SHARE
The Company accounts for income (loss) per share in accordance with SFAS No. 128
"Earnings Per Share". Basic income per share is computed by dividing net income
(loss) by the weighted average number of common shares outstanding during the
periods presented. Diluted income per share reflects the potential dilution that
could occur if outstanding stock options were exercised utilising the treasury
stock method. The calculation of the weighted average number of shares
outstanding and earnings per share are as follows:
+--------------------------------+-----+----------------+-----------------+
| Basic Earnings Per Share | | 30 June 2009 | 30 June 2008 |
+--------------------------------+-----+----------------+-----------------+
| | | | |
+--------------------------------+-----+----------------+-----------------+
| Net loss after tax | |US$(6,521,564) | US$(4,423,684) |
+--------------------------------+-----+----------------+-----------------+
| Divided by weighted average | | 26,548,545 | 25,945,577 |
| shares | | | |
+--------------------------------+-----+----------------+-----------------+
| Basic loss per share | | US$(0.25) | US$(0.17) |
+--------------------------------+-----+----------------+-----------------+
| | | | |
+--------------------------------+-----+----------------+-----------------+
| Diluted loss per share | | US$(0.25) | US$(0.17) |
+--------------------------------+-----+----------------+-----------------+
| | | | |
+--------------------------------+-----+----------------+-----------------+
For the periods ended 30 June 2009 and 2008, because of our reported net loss,
all potentially diluted securities were excluded from the per share computations
due to their anti-dilutive effect.
NOTE 13 - SUBSEQUENT EVENTS
On 4 August 2009 the Company appointed Merchant Capital Limited as its sole
broker.
On 8 September 2009 the Company accepted the resignation of ZAI Corporate
Finance Limited as its Nominated Advisor. Consequently, in accordance with AIM
Rule 1, during the period of completion of the due diligence process and pending
appointment of a replacement Nominated Adviser, trading of shares in the Company
were temporarily suspended on 8 September 2009.
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR MGGZLRDZGLZM
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