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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Armor Des Regs | LSE:ADIS | London | Ordinary Share | COM SHS USD0.001 (REGS) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 120.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
Hot Features
Premium
TIDMADID TIDMADIS
RNS Number : 5516T
Armor Designs, Inc.
30 September 2010
+----------------------------------+---------------------------------+
| Press Release | 30 September 2010 |
+----------------------------------+---------------------------------+
Armor Designs, Inc.
("Armor Designs" or "the Company")
Interim Results for six month ended 30 June 2010
Today the Company announces its unaudited interim results for the six month
period ended 30 June 2010.
Financial and Operating Highlights (unaudited)
+----------+-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------+
| | · Sales revenue of US$577k for the six months ended 30 June 2010 |
| | (H1 2009: US$473k) |
| | · Net Losses from operations of US$7.8m for the six months ended |
| | 30 June 2010 (H1 2009: US$6.8m) |
| | · Scorpion Works achievement of improvement and expansion of |
| | product offerings |
+----------+-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------+
| | · The Company continues its efforts to correct the balance sheet conditions previously announced and described in the footnotes to the financial statements for the period ended 30 June 2010. |
| | |
| | Commenting on the interim results, Philip Clement, CEO of Armor Designs, Inc., said: "The first six months of 2010 were encouraging while challenging. We are pleased with the acceptance of the price increases we announced in 2009 and the results of our product development effort. Both our financial results and our product development were constrained by working capital. We continue to pursue new capital and to work towards concluding the Credit Facility as previously announced in June 2010, in order to allow us to more successfully take advantage of those opportunities that our technology can so capably address." |
| | |
| | The 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, Interim CEO Tel: +1 (602) 275-4633 |
| | philip.clement@armordesigns.com www.armordesigns.com |
| | Shore Capital & Corporate Tel: +44 (0) 20 7408 4090 |
| | Ltd. |
| | Anita Ghanekar www.shorecap.co.uk |
| | anita.ghanekar@shorecap.co.uk |
| | Edward Mansfield |
| | Edward.mansfield@shorecap.co.uk |
| | |
| | Brunswick Group LLP |
| | Michael Harrison/ Chris Blundell Tel: +44 (0) 20 7404 |
| | 5959 |
| | adi@brunswickgroup.com www.brunswickgroup.com |
| | |
+----------+-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------+
Chief Executive's Statement
While the results show some improvement over the first half of 2009,
particularly regarding decreased cash outflow and reduced expenses, we recognize
that there is still much work to be done to achieve financial stability. We
continue to pursue new capital in order to allow us to move quickly to improve
our results and move in the direction of financial stability.
Trading
We increased our revenue by 22%, from $104k to US$577k over the first half of
2009. In addition, the implementation of price increases in late December 2009,
have improved margins. Importantly, Scorpion Works and our manufacturing team
were able to introduce a new insert plate which we can sell at a lower price and
better margins than the previous product. We received our first order for the
new insert shortly after the close of the first half and will deliver that order
before the end of September. These achievements are indicators of what we can
do and we intend to accelerate the rate of improvement now.
Scorpion Works continued to work on improving our product offerings and we are
poised to quickly introduce ballistic protection products for vehicles and to
move forward with helmet design. Our products continue to get strong reviews
and during the first half we received our first orders for shipments to the
United Arab Emirates and Haiti. Additionally, we were able to provide custom
designed protection plates for workers who are working in at risk situations.
During the six month period to 30 June 2010 pre-tax losses increased to US$7.9
million (30 June 2009: US$6.8 million). In particular General and Administrative
expenses increased to US$5.7 million (30 June 2009: US$3.9 million) with the
most significant expense continuing to be the result of non-cash charges
relating to the ongoing expenses associated with the grant of Restricted Stock
Units and Stock Appreciation Rights by the Company along with Non-qualifying
Stock Options and the award of shares by its majority shareholder, Hawthorne and
York International Ltd (HYI). Due to HYI's majority ownership of the Company, US
GAAP accounting rules require the Company to reflect awards granted by HYI in
its financial results. These charges are non-cash items and totaled US$4.3
million or 75% of the General and Administrative expenses in the first half of
2010. Selling and Marketing expenses decreased to US$122k (30 June 2009:
US$683k). Research and Development costs for the period decreased to US$636k (30
June 2009: US$738k).
During the six months ended 30 June 2010 there was no capital expenditure
compared to US$95k for the six months ended 30 June 2009.
Working Capital
At this time, the Company also acknowledges that the balance sheet conditions
that existed at year end, announced on June 30, 2010, have not yet been
remedied. Efforts are underway, to do so, including continued work on the
remaining due diligence and legal documentation associated with the Credit
Facility announced on 28 June 2010. All other aspects of the announcement of the
results remain as previously stated. Success in some of these efforts in the
next few months is necessary to rectify the situation. The Company believes
these efforts will be successful and that the position will be resolved in the
next few months. The Company will keep the market updated as to its progress.
Our ability to continue as a going concern as described in more detail in note 2
of the notes to the financial statements is predicated upon our ability to
continue to fund our cash needs. For the six months ended 30 June, 2010, the
Company incurred net losses from operations of approximately US$7.9 million and
had negative cash flows from operating activities of approximately US$2.1
million.
On-going strategy
We are actively pursuing ways to improve operating results in order to generate
additional cash flow from operations. The Company is also considering
undertaking further equity fundraisings if necessary to provide for the
implementation of its growth strategy. Historically, the Company has relied, in
part, upon debt financing, loans from related entities and raising new capital
to fund its operations. . 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 current balance sheet position.
The current efforts underway to bring in new capital will provide the means to
concentrate our efforts on the product development and marketing milestones that
will enable our growth. Specifically, we intend to certify a multi hit NIJ
Level IV product and new cost reduced version of our stand alone NIJ certified
Level III; we also anticipate completion of the design and production samples of
our first helmet and anticipate completion of the design of the first vehicle
protection kit. We expect these efforts to start to show results in the form of
orders early in 2011.
At the same time we will be attempting to significantly expand the utilization
of our technology through the development of license and joint venture
arrangements that increase both geographic reach and areas of application of our
expertise.
We appreciate your support and look forward to reporting to you in the future
concerning our performance in the product development and knowledge exploitation
arenas.
Philip A. Clement
Chief Executive Officer (Interim)
30 September 2010
+--------+--------+---------+------------+------------+-------------------------------+--------+-------------------------------+--------+
| CONSOLIDATED BALANCE SHEET |
+---------------------------------------------------------------------------------------------------------------------------------------+
| 30 June |
+---------------------------------------------------------------------------------------------------------------------------------------+
| | | | | | | | | |
+--------+--------+---------+------------+------------+-------------------------------+--------+-------------------------------+--------+
| | | | | | | | | |
+--------+--------+---------+------------+------------+-------------------------------+--------+-------------------------------+--------+
| | | | | | 2010 | | 2009 | |
+--------+--------+---------+------------+------------+-------------------------------+--------+-------------------------------+--------+
| | | | | | US$ | | US$ | |
+--------+--------+---------+------------+------------+-------------------------------+--------+-------------------------------+--------+
| ASSETS | | | | | | |
+---------------------------+------------+------------+-------------------------------+--------+-------------------------------+--------+
| CURRENT ASSETS | | | | | | |
+---------------------------+------------+------------+-------------------------------+--------+-------------------------------+--------+
| | Cash and cash | | 132,154 | | 851,635 | |
| | equivalents | | | | | |
+--------+-------------------------------+------------+-------------------------------+--------+-------------------------------+--------+
| | Receivable from sale of common | | | 1,400,000 | |
| | stock | - | | | |
+--------+--------------------------------------------+-------------------------------+--------+-------------------------------+--------+
| | Accounts receivable, | | 90,000 | | 106,237 | |
| | net | | | | | |
+--------+-------------------------------+------------+-------------------------------+--------+-------------------------------+--------+
| | Inventory | | | 290,356 | | 222,223 | |
+--------+------------------+------------+------------+-------------------------------+--------+-------------------------------+--------+
| | Prepaid expenses and | | 87,821 | | 71,435 | |
| | deposits | | | | | |
+--------+-------------------------------+------------+-------------------------------+--------+-------------------------------+--------+
| | | | | | | | | |
+--------+--------+---------+------------+------------+-------------------------------+--------+-------------------------------+--------+
| | | | Total | 600,331 | | 2,651,530 | |
| | | | current | | | | |
| | | | assets | | | | |
+--------+--------+---------+-------------------------+-------------------------------+--------+-------------------------------+--------+
| | | | | | | | | |
+--------+--------+---------+------------+------------+-------------------------------+--------+-------------------------------+--------+
| NOTES RECEIVABLE, RELATED PARTY | 278,423 | | 465,000 | |
+-----------------------------------------------------+-------------------------------+--------+-------------------------------+--------+
| | | | | | | | | |
+--------+--------+---------+------------+------------+-------------------------------+--------+-------------------------------+--------+
| PROPERTY AND EQUIPMENT, NET | 4,413,018 | | 3,145,223 | |
+-----------------------------------------------------+-------------------------------+--------+-------------------------------+--------+
| | | | | | | | | |
+--------+--------+---------+------------+------------+-------------------------------+--------+-------------------------------+--------+
| DEPOSITS | | | | | | |
+---------------------------+------------+------------+-------------------------------+--------+-------------------------------+--------+
| | Equipment | | | | | 2,417,106 | |
| | | | | - | | | |
+--------+------------------+------------+------------+-------------------------------+--------+-------------------------------+--------+
| | Other | | | 105,827 | | 116,940 | |
+--------+------------------+------------+------------+-------------------------------+--------+-------------------------------+--------+
| Total deposits | | | 105,827 | | 2,534,046 | |
+---------------------------+------------+------------+-------------------------------+--------+-------------------------------+--------+
| | | | | | | | | |
+--------+--------+---------+------------+------------+-------------------------------+--------+-------------------------------+--------+
| TOTAL ASSETS | | | 5,397,599 | | 8,795,799 | |
+---------------------------+------------+------------+-------------------------------+--------+-------------------------------+--------+
| | | | | | | | | |
+--------+--------+---------+------------+------------+-------------------------------+--------+-------------------------------+--------+
| LIABILITIES AND EQUITY (DEFICIT) | | | | |
+-----------------------------------------------------+-------------------------------+--------+-------------------------------+--------+
| CURRENT LIABILITIES | | | | | |
+----------------------------------------+------------+-------------------------------+--------+-------------------------------+--------+
| | Accounts payable | | 1,975,110 | | 1,304,793 | |
+--------+-------------------------------+------------+-------------------------------+--------+-------------------------------+--------+
| | Accounts payable, related | 1,677,878 | | 323,959 | |
| | party | | | | |
+--------+--------------------------------------------+-------------------------------+--------+-------------------------------+--------+
| | Accrued expenses | | 413,850 | | 945,923 | |
+--------+-------------------------------+------------+-------------------------------+--------+-------------------------------+--------+
| | Accrued expenses, related | 292,000 | | 323,959 | |
| | party | | | | |
+--------+--------------------------------------------+-------------------------------+--------+-------------------------------+--------+
| | Notes payable, related | | 510,000 | | 185,000 | |
| | party | | | | | |
+--------+-------------------------------+------------+-------------------------------+--------+-------------------------------+--------+
| | Notes payable | | | 353,131 | | 407,127 | |
+--------+------------------+------------+------------+-------------------------------+--------+-------------------------------+--------+
| | | | | | | | | |
+--------+--------+---------+------------+------------+-------------------------------+--------+-------------------------------+--------+
| | | | Total | 5,221,969 | | 3,490,761 | |
| | | | current | | | | |
| | | | liabilities | | | | |
+--------+--------+---------+-------------------------+-------------------------------+--------+-------------------------------+--------+
| | | | | | | | | |
+--------+--------+---------+------------+------------+-------------------------------+--------+-------------------------------+--------+
| Commitments and contingencies (Note 9) | | | | |
| | - | | - | |
+-----------------------------------------------------+-------------------------------+--------+-------------------------------+--------+
| | | | | | | | | |
+--------+--------+---------+------------+------------+-------------------------------+--------+-------------------------------+--------+
| EQUITY (DEFICIT) | | | | | |
+----------------------------------------+------------+-------------------------------+--------+-------------------------------+--------+
| | Common stock, $0.001 par | 27,025 | | 26,562 | |
| | value; | | | | |
+--------+--------------------------------------------+-------------------------------+--------+-------------------------------+--------+
| | | Authorized | 50,000,000 | | | | |
| | | shares | | | | | |
+--------+--------+----------------------+------------+-------------------------------+--------+-------------------------------+--------+
| | | Issued | 2010 | 2009 | | | | |
| | | Shares: | | | | | | |
+--------+--------+---------+------------+------------+-------------------------------+--------+-------------------------------+--------+
| | | | 27,025,136 | 26,561,800 | | | | |
+--------+--------+---------+------------+------------+-------------------------------+--------+-------------------------------+--------+
| | Additional paid-in | | 48,447,322 | | 40,793,094 | |
| | capital | | | | | |
+--------+-------------------------------+------------+-------------------------------+--------+-------------------------------+--------+
| | Deficit accumulated during | (48,298,717) | | (35,514,618) | |
| | development stage | | | | |
+--------+--------------------------------------------+-------------------------------+--------+-------------------------------+--------+
| | | | | | | | | |
+--------+--------+---------+------------+------------+-------------------------------+--------+-------------------------------+--------+
| TOTAL EQUITY | | | 175,630 | | 5,305,038 | |
+---------------------------+------------+------------+-------------------------------+--------+-------------------------------+--------+
| | | | | | | | | |
+--------+--------+---------+------------+------------+-------------------------------+--------+-------------------------------+--------+
| TOTAL LIABILITIES AND EQUITY | 5,397,599 | | 8,795,799 | |
+--------+--------+---------+------------+------------+-------------------------------+--------+-------------------------------+--------+
The accompanying notes are an integral part of the financial statements.
+--+----------+---------------+--+--+---------------------------------+-----------------+----------------------------+------------+----------------------------+
| CONSOLIDATED STATEMENT OF OPERATIONS |
+--------------------------------------------------------------------------------------------------------------------------------------------------------------+
| |
+--------------------------------------------------------------------------------------------------------------------------------------------------------------+
| | | | | | | | | | |
+--+----------+---------------+--+--+---------------------------------+-----------------+----------------------------+------------+----------------------------+
| | | | | | Unaudited | | | | |
+--+----------+---------------+--+--+---------------------------------+-----------------+----------------------------+------------+----------------------------+
| | | | | | From 30 Sept. | | Six Months Ended June 30 |
| | | | | | 2004 | | |
| | | | | | (Inception) to | | |
| | | | | | 30 Jun. 2010 | | |
+--+----------+---------------+--+--+ +-----------------+----------------------------------------------------------------------+
| | | | | | | | 2010 | | 2009 |
+--+----------+---------------+--+--+---------------------------------+-----------------+----------------------------+------------+----------------------------+
| | | | | | US$ | | US$ | | US$ |
+--+----------+---------------+--+--+---------------------------------+-----------------+----------------------------+------------+----------------------------+
| REVENUE | | | | 1,814,914 | | 576,991 | | 472,928 |
+-------------+---------------+--+--+---------------------------------+-----------------+----------------------------+------------+----------------------------+
| | | | | | | | | | |
+--+----------+---------------+--+--+---------------------------------+-----------------+----------------------------+------------+----------------------------+
| COST OF GOODS SOLD | | | 7,203,291 | | 1,963,644 | | 1,866,779 |
+-----------------------------+--+--+---------------------------------+-----------------+----------------------------+------------+----------------------------+
| | | | | | | | | | |
+--+----------+---------------+--+--+---------------------------------+-----------------+----------------------------+------------+----------------------------+
| GROSS MARGIN | | | (5,388,377) | | (1,386,653) | | (1,393,851) |
+-----------------------------+--+--+---------------------------------+-----------------+----------------------------+------------+----------------------------+
| | | | | | | | | | |
+--+----------+---------------+--+--+---------------------------------+-----------------+----------------------------+------------+----------------------------+
| OPERATING EXPENSES: | | | | | | | |
+-----------------------------+--+--+---------------------------------+-----------------+----------------------------+------------+----------------------------+
| | Research and | | | 11,104,902 | | 636,434 | | 738,103 |
| | development | | | | | | | |
+--+--------------------------+--+--+---------------------------------+-----------------+----------------------------+------------+----------------------------+
| | General and | | | 27,456,773 | | 5,666,487 | | 3,887,262 |
| | administrative | | | | | | | |
+--+--------------------------+--+--+---------------------------------+-----------------+----------------------------+------------+----------------------------+
| | Selling and | | | 2,007,160 | | 122,271 | | 683,172 |
| | marketing | | | | | | | |
+--+--------------------------+--+--+---------------------------------+-----------------+----------------------------+------------+----------------------------+
| | Other | | | | 310,659 | | (6,344) | | 70,180 |
+--+----------+---------------+--+--+---------------------------------+-----------------+----------------------------+------------+----------------------------+
| | | | | | | | | | |
+--+----------+---------------+--+--+---------------------------------+-----------------+----------------------------+------------+----------------------------+
| | | Total | | 40,879,494 | | 6,418,848 | | 5,378,717 |
| | | operating | | | | | | |
| | | expenses | | | | | | |
+--+----------+------------------+--+---------------------------------+-----------------+----------------------------+------------+----------------------------+
| | | | | | | | | | |
+--+----------+---------------+--+--+---------------------------------+-----------------+----------------------------+------------+----------------------------+
| OTHER | | | | | | | |
| INCOME/EXPENSE | | | | | | | |
+-----------------------------+--+--+---------------------------------+-----------------+----------------------------+------------+----------------------------+
| | Interest | | (1,685,597) | | (68,944) | | (17,080) |
| | income/(expense), | | | | | | |
| | net | | | | | | |
+--+-----------------------------+--+---------------------------------+-----------------+----------------------------+------------+----------------------------+
| | Loss on | | | (345,249) | | | | |
| | investment, net | | | | | - | | - |
+--+--------------------------+--+--+---------------------------------+-----------------+----------------------------+------------+----------------------------+
| | | | | | | | | | |
+--+----------+---------------+--+--+---------------------------------+-----------------+----------------------------+------------+----------------------------+
| | | Total | | (2,030,846) | | (68,944) | | (17,080) |
| | | other | | | | | | |
| | | income/(expense) | | | | | | |
+--+----------+------------------+--+---------------------------------+-----------------+----------------------------+------------+----------------------------+
| | | | | | | | | | |
+--+----------+---------------+--+--+---------------------------------+-----------------+----------------------------+------------+----------------------------+
| | | Loss | | (48,298,717) | | (7,874,445) | | (6,789,648) |
| | | before | | | | | | |
| | | income | | | | | | |
| | | taxes | | | | | | |
+--+----------+------------------+--+---------------------------------+-----------------+----------------------------+------------+----------------------------+
| | | | | | | | | | |
+--+----------+---------------+--+--+---------------------------------+-----------------+----------------------------+------------+----------------------------+
| Provision for | | | | | | | |
| income taxes | | | - | | - | | - |
+-----------------------------+--+--+---------------------------------+-----------------+----------------------------+------------+----------------------------+
| | | | | | | | | | |
+--+----------+---------------+--+--+---------------------------------+-----------------+----------------------------+------------+----------------------------+
| NET LOSS | | | | (48,298,717) | | (7,874,445) | | (6,789,648) |
+-------------+---------------+--+--+---------------------------------+-----------------+----------------------------+------------+----------------------------+
| | | | | | | | | | |
+--+----------+---------------+--+--+---------------------------------+-----------------+----------------------------+------------+----------------------------+
| Basic and diluted | | | | | (0.29) | | (0.26) |
| loss per share | | | | | | | |
+-----------------------------+--+--+---------------------------------+-----------------+----------------------------+------------+----------------------------+
| | | | | | | | | | |
+--+----------+---------------+--+--+---------------------------------+-----------------+----------------------------+------------+----------------------------+
| Shares used in | | | | | | |
| computation of basic | | | | | | |
+--------------------------------+--+---------------------------------+-----------------+----------------------------+------------+----------------------------+
| | and diluted loss | | | | | 26,793,155 | | 26,548,545 |
| | per share | | | | | | | |
+--+----------+---------------+--+--+---------------------------------+-----------------+----------------------------+------------+----------------------------+
The accompanying notes are an integral part of the financial statements.
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT) |
+------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------+
| | | | Common | | Common | | Additional | | Deficit | | Total |
| | | | Stock | | Stock | | Paid-In | | Accumulated | | |
| | | | Shares | | Amount | | Capital | | During the | | |
| | | | | | | | | | Development | | |
| | | | | | | | | | Stage | | |
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | | | | | US$ | | US$ | | US$ | | US$ |
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| 30 September 2004 | | | | | | | | | |
| | - | | - | | - | | - | | - |
+--------------------------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | Issuance of | 22,500,000 | | 22,500 | | 727,900 | | | | 750,400 |
| | Common Stock | | | | | | | - | | |
+--------+-----------------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | | | | | | | | | | | |
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | Net | | | | | | | | (1,854,065) | | (1,854,065) |
| | loss | | - | | - | | - | | | | |
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | | | | | | | | | | | |
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| 31 December | | 22,500,000 | | 22,500 | | 727,900 | | (1,854,065) | | (1,103,665) |
| 2004 | | | | | | | | | | |
+-----------------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | | | | | | | | | | | |
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | Net | | | | | | | | (3,220,019) | | (3,220,019) |
| | loss | | - | | - | | - | | | | |
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | | | | | | | | | | | |
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| 31 December | | 22,500,000 | | 22,500 | | 727,900 | | (5,074,084) | | (4,323,684) |
| 2005 | | | | | | | | | | |
+-----------------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | | | | | | | | | | | |
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | Member | | | | | 100 | | | | 100 |
| | contributions | - | | - | | | | - | | |
+--------+-----------------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | | | | | | | | | | | |
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | Net | | | | | | | | (2,400,458) | | (2,400,458) |
| | loss | | - | | - | | - | | | | |
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | | | | | | | | | | | |
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| 31 December | | 22,500,000 | | 22,500 | | 728,000 | | (7,474,542) | | (6,724,042) |
| 2006 | | | | | | | | | | |
+-----------------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | Issuance of | | | | | | | | | |
| | common stock in | | | | | | | | | |
| | exchange | | | | | | | | | |
+--------+-----------------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | for | 1,822,500 | | 1,823 | | 8,998,177 | | | | 9,000,000 |
| | convertible | | | | | | | - | | |
| | debt | | | | | | | | | |
+--------+-----------------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | | | | | | | | | | | |
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | | | | | | | | | | | |
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | Issuance of | | | | | | | | | |
| | common stock on | | | | | | | | | |
| | London | | | | | | | | | |
+--------+-----------------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | AIM, net of | 1,600,000 | | 1,600 | | 13,754,994 | | | | 13,756,594 |
| | expenses of | | | | | | | - | | |
| | US$2,243,406 | | | | | | | | | |
+--------+-----------------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | | | | | | | | | | | |
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | Net | | | | | | | | (3,493,967) | | (3,493,967) |
| | loss | | - | | - | | - | | | | |
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | | | | | | | | | | | |
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| 31 December | | 25,922,500 | | 25,923 | | 23,481,171 | | (10,968,509) | | 12,538,585 |
| 2007 | | | | | | | | | | |
+-----------------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | Issuance of | | | | | | | | | |
| | common stock on | | | | | | | | | |
| | London AIM | | | | | | | | | |
+--------+-----------------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | net of expenses | 601,800 | | 602 | | 6,527,613 | | | | 6,528,215 |
| | of US $489,786 | | | | | | | - | | |
+--------+-----------------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | | | | | | | | | | | |
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | Issuance of | | | | | | | | | |
| | common stock | | | | | | | | | |
+--------+-----------------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | by majority | | | | | 3,614,985 | | | | 3,614,985 |
| | shareholder | - | | - | | | | - | | |
+--------+-----------------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | | | | | | | | | | | |
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | Stock based | | | | | 3,720,889 | | | | 3,720,889 |
| | compensation | - | | - | | | | - | | |
+--------+-----------------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | | | | | | | | | | | |
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | Net | | | | | | | | (17,756,461) | | (17,756,461) |
| | loss | | | | | | | | | | |
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | | | | | | | | | | | |
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| 31 December | | 26,524,300 | | 26,525 | | 37,344,658 | | (28,724,970) | | 8,646,213 |
| 2008 | | | | | | | | | | |
+-----------------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | | | | | | | | | | | |
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | Private | 215,000 | | 215 | | 1,499,785 | | | | 1,500,000 |
| | placement of | | | | | | | - | | |
| | common stock | | | | | | | | | |
+--------+-----------------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | | | | | | | | | | | |
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | Capital stock | | | | | 1,350,000 | | | | 1,350,000 |
| | subscribed, not | - | | - | | | | - | | |
| | issued | | | | | | | | | |
+--------+-----------------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | | | | | | | | | | | |
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | Exercise of | 47,501 | | 47 | | (47) | | | | |
| | restricted | | | | | | | - | | - |
| | stock | | | | | | | | | |
+--------+-----------------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | | | | | | | | | | | |
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | Stock based | | | | | 1,771,764 | | | | 1,771,764 |
| | compensation | - | | - | | | | - | | |
+--------+-----------------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | | | | | | | | | | | |
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | Net | | | | | | | | (11,699,302) | | (11,699,302) |
| | loss | | - | | - | | - | | | | |
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | | | | | | | | | | | |
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| 31 December | | 26,786,801 | | 26,787 | | 41,966,160 | | (40,424,272) | | 1,568,675 |
| 2009 | | | | | | | | | | |
+-----------------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | | | | | | | | | | | |
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | Private | 238,335 | | 238 | | 2,224,762 | | | | 2,225,000 |
| | placement of | | | | | | | - | | |
| | common stock | | | | | | | | | |
+--------+-----------------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | | | | | | | | | | | |
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | Stock based | | | | | 4,256,400 | | | | 4,256,400 |
| | compensation | - | | - | | | | - | | |
+--------+-----------------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | | | | | | | | | | | |
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | Net | | | | | | | | (7,874,445) | | (7,874,445) |
| | loss | | - | | - | | - | | | | |
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| | | | | | | | | | | | |
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
| 30 June 2010 | | 27,025,136 | | 27,025 | | 48,447,322 | | (48,298,717) | | 175,630 |
+--------+--------+--------+-----------------------+--------+--------------------------+--------+-------------------------+--------+--------------------+--------+-------------------------+
The accompanying notes are an integral part of the financial statements.
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| CONSOLIDATED STATEMENT OF CASH FLOWS |
+----------------------------------------------------------------------------------------------------------------------------------------------------+
| | Unaudited | | | | |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| | From 30 | | Six months ended 30 June |
| | September | | |
| | 2004 | | |
| | (Inception) | | |
+----------------------------------+--------------------------------+-------+------------------------------------------------------------------------+
| | to 30 June | | 2010 | | 2009 |
| | 2010 | | | | |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| Cash flows from operating | US$ | | US$ | | US$ |
| activities: | | | | | |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| Net loss | (48,298,717) | | (7,874,445) | | (6,789,648) |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| Adjustments to reconcile net | | | | | |
| loss to net | | | | | |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| cash provided by (used in) | | | | | |
| operating activities: | | | | | |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| Depreciation and Amortization | 1,615,500 | | 524,284 | | 369,109 |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| Stock based compensation | 13,364,038 | | 4,256,400 | | 948,474 |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| Changes in assets and | | | | | |
| liabilities: | | | | | |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| Accounts receivable and other | (90,000) | | 49,168 | | (139,673) |
| receivables | | | | | |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| Inventory | (290,356) | | (52,562) | | 233,971 |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| Prepaid expenses and deposits | 12,789 | | 56,668 | | 123,380 |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| Notes receivable, related party | (643,423) | | (871) | | 365,000 |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| Forgiveness of note receivable, | 365,000 | | | | |
| related party | | | - | | - |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| Accounts payable and accrued | 4,358,838 | | 932,902 | | 1,545,172 |
| expense | | | | | |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| Net cash used in operating | (29,606,331) | | (2,108,456) | | (3,344,215) |
| activities | | | | | |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| | | | | | |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| Cash flows from investing | | | | | |
| activities | | | | | |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| Purchase of property and | (6,234,955) | | | | (95,456) |
| equipment | | | - | | |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| | | | | | |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| Net cash (used in) investing | (6,234,955) | | | | (95,456) |
| activities | | | - | | |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| | | | | | |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| Cash flows from financing | | | | | |
| activities | | | | | |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| Payments on line of credit - | (5,435,554) | | | | |
| related party | | | - | | - |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| Borrowings on line of credit - | 5,435,554 | | | | |
| related party | | | - | | - |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| Note payable payments - related | (133,000) | | (20,000) | | |
| party | | | | | - |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| Note payable proceeds - related | 643,000 | | 20,000 | | 185,000 |
| party | | | | | |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| Note payable payments | (206,882) | | (5,825) | | (148,943) |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| Note payable proceeds | 560,013 | | | | 556,070 |
| | | | - | | |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| Proceeds from issuance of | 9,000,000 | | | | |
| convertible bonds | | | - | | - |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| Proceeds from the sale of common | 25,359,809 | | 2,225,000 | | 2,500,000 |
| stock and stock subscriptions | | | | | |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| Members contributions | 750,500 | | | | |
| | | | - | | - |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| Net cash provided by financing | 35,973,440 | | 2,219,175 | | 3,092,127 |
| activities | | | | | |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| | | | | | |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| Net increase (decrease) in cash | 132,154 | | 110,719 | | (347,544) |
| and cash equivalents | | | | | |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| | | | | | |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| Cash and cash equivalents: | | | | | |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| Beginning | | | 21,435 | | 1,199,179 |
| | - | | | | |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| | | | | | |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| Ending | 132,154 | | 132,154 | | 851,635 |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| | | | | | |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| Supplemental cash flow | | | | | |
| information | | | | | |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| Cash paid for interest | 1,529,133 | | 68,944 | | 17,080 |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| | | | | | |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| Supplemental disclosure of | | | | | |
| non-cash investing | | | | | |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| and financing activities | | | | | |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
| Conversion of bonds into common | 9,000,000 | | | | |
| stock and warrants | | | - | | - |
+----------------------------------+--------------------------------+-------+--------------------------------+-------+-------------------------------+
The accompanying notes are an integral part of the financial statements.
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 financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America ("US GAAP"). These
financial statements are presented in US dollars, unless otherwise stated.
NOTE 2 - GOING CONCERN
The accompanying 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, 2010, the Company incurred net losses from
operations of approximately US$7.9 million and has accumulated approximately
US$48.3 million in net losses from 30 September 2004 to 30 June 2010.
Additionally, during the six months ended 30 June, 2010, the Company had
negative cash flows from operating activities of approximately US$2.1 million.
The Company's current liabilities exceed its current assets by approximately US
$4.6 million as of 30 June 2010. 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 to 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. 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 that future funding takes longer than anticipated. There
can be no assurance that the Company will be able to raise capital needed to
fund its operations or implement management's plans.
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 inventory
obsolescence, long-lived assets, stock-based compensation, and income taxes. The
Company regularly assesses these estimates and actual results may differ
significantly from these estimates.
Cash and Cash Equivalents
For purposes of the consolidated balance sheets and statements 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.
Fair Value of Financial Instruments and Concentrations of Risk
Financial instruments, consisting of cash, accounts receivables, accounts
payable, accrued expenses, and fixed rate short term debt are recorded at cost,
which approximates fair value based on the short term maturities of these
instruments at 30 June 2010 and 2009.
Guidance establishes a fair value hierarchy that prioritizes observable and
unobservable inputs to valuation techniques used to measure fair value. These
levels, in order of highest to lowest priority are described below:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or
liabilities at the measurement date.
Level 2 - Observable price that are based on inputs not quoted on active
markets, but corroborated by market data.
Level 3- Prices that are unobservable for the asset or liability and are
developed based on the best information available in the circumstances which
might include the company's own data.
Accounts Receivable
Trade accounts receivable are recorded at the invoiced amount and do not bear
interest. Based on historical experience and a review of individual customer
balances, the Company has not recorded an allowance for uncollectible accounts
as of 30 June 2010 and 2009.
Inventory Valuation
Inventories are valued at the lower of cost or market with cost determined using
the First-In, First-Out (FIFO) method. Inventory balances at 30 June 2010 and
2009 were as follows:
+-----------+------------------------------+----------+--------------------------+
| | 30-Jun | | 30-Jun |
+-----------+------------------------------+----------+--------------------------+
| | 2010 | | 2009 |
+-----------+------------------------------+----------+--------------------------+
| | US$ | | US$ |
+-----------+------------------------------+----------+--------------------------+
| Raw | 50,914 | | 56,917 |
| Material | | | |
+-----------+------------------------------+----------+--------------------------+
| Work in | 117,758 | | 2,915 |
| Process | | | |
+-----------+------------------------------+----------+--------------------------+
| Finished | 121,684 | | 162,391 |
| Goods | | | |
+-----------+------------------------------+----------+--------------------------+
| Total | 290,356 | | 222,223 |
| Inventory | | | |
+-----------+------------------------------+----------+--------------------------+
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 2010 and 2009 were as follows:
+--------------+-----------------------------+----------+------------------------+
| | 30-Jun | | 30-Jun |
+--------------+-----------------------------+----------+------------------------+
| | 2010 | | 2009 |
+--------------+-----------------------------+----------+------------------------+
| | US$ | | US$ |
+--------------+-----------------------------+----------+------------------------+
| Depreciation | 402,278 | | 231,550 |
+--------------+-----------------------------+----------+------------------------+
| Amortization | 122,006 | | 137,559 |
+--------------+-----------------------------+----------+------------------------+
| | 524,284 | | 369,109 |
+--------------+-----------------------------+----------+------------------------+
Revenue Recognition
The Company sells its armour products primarily to the defence and law
enforcement industries. A portion of the Company's products are sold through
third party 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 and all other recognition
criteria have been met.
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
recognized. The Company has not established a reserve for warranty obligations
as warranty claims have been insignificant.
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 expense for all share-based awards
to employees and others based on estimated fair values. Compensation expense
includes the estimated fair value of equity awards vested during the reported
period. For the period ended 30 June 2010 and 2009, the Company has recorded
stock-based compensation expense as follows:
+--------------------------+------------------+----------+------------------+
| | 30-Jun | | 30-Jun |
+--------------------------+------------------+----------+------------------+
| | 2010 | | 2009 |
+--------------------------+------------------+----------+------------------+
| | US$ | | US$ |
+--------------------------+------------------+----------+------------------+
| Restricted Stock Units | 4,228,676 | | 817,818 |
| (RSUs) | | | |
+--------------------------+------------------+----------+------------------+
| Stock Appreciation | 27,724 | | 22,415 |
| Rights (SARs) | | | |
+--------------------------+------------------+----------+------------------+
| | 4,256,400 | | 840,233 |
+--------------------------+------------------+----------+------------------+
A summary of the Company's activity for restricted stock, stock appreciation
rights, and non-qualified stock options follows:
+----------------+-----------------+----------+--------------+---------------+---------------------+--------------+---------------+---------------------------+
| | | | | | |
| | RSUs | | SARs | | Stock Options |
+----------------+----------------------------+--------------+-------------------------------------+--------------+-------------------------------------------+
| | Shares |Weighted | | Shares | Weighted | | Shares | Weighted |
| | Under | Average | | Under | Average | | Under | Average |
| | Option |Exercise | | Option | Exercise | | Option | Exercise |
| | | Price | | | Price | | | Price |
| | | per | | | per | | | per |
| | | Share | | | Share | | | Share |
| | | US$ | | | US$ | | | US$ |
+----------------+-----------------+----------+--------------+---------------+---------------------+--------------+---------------+---------------------------+
| 31 December | 438,500 | | | 69,400 | 10.00 | | | |
| 2007 | | - | | | | | - | - |
+----------------+-----------------+----------+--------------+---------------+---------------------+--------------+---------------+---------------------------+
| Granted in | 205,000 | | | 103,000 | 10.00 | | 1,300,000 | 10.00 |
| 2008 | | - | | | | | | |
+----------------+-----------------+----------+--------------+---------------+---------------------+--------------+---------------+---------------------------+
| Forfeited in | (100,000) | | | (6,300) | 10.00 | | | |
| 2008 | | - | | | | | - | - |
+----------------+-----------------+----------+--------------+---------------+---------------------+--------------+---------------+---------------------------+
| 31 December | 543,500 | | | 166,100 | 10.00 | | 1,300,000 | 10.00 |
| 2008 | | - | | | | | | |
+----------------+-----------------+----------+--------------+---------------+---------------------+--------------+---------------+---------------------------+
| Granted in | 41,505 | | | 56,000 | 8.05 | | 23,385 | 8.05 |
| 2009 | | - | | | | | | |
+----------------+-----------------+----------+--------------+---------------+---------------------+--------------+---------------+---------------------------+
| Exercised in | (47,501) | | | | | | | |
| 2009 | | - | | - | - | | - | - |
+----------------+-----------------+----------+--------------+---------------+---------------------+--------------+---------------+---------------------------+
| Forfeited in | (150,000) | | | | | | | |
| 2009 | | - | | - | - | | - | - |
+----------------+-----------------+----------+--------------+---------------+---------------------+--------------+---------------+---------------------------+
| 31 December | 387,504 | | | 222,100 | 9.51 | | 1,323,385 | 9.97 |
| 2009 | | - | | | | | | |
+----------------+-----------------+----------+--------------+---------------+---------------------+--------------+---------------+---------------------------+
| Granted in | 1,300,000 | | | | | | | |
| 2010 | | - | | - | - | | - | - |
+----------------+-----------------+----------+--------------+---------------+---------------------+--------------+---------------+---------------------------+
| Forfeited in | | | | (2,250) | 10.00 | | | |
| 2010 | - | - | | | | | - | - |
+----------------+-----------------+----------+--------------+---------------+---------------------+--------------+---------------+---------------------------+
| 30 June 2010 | 1,687,504 | | | 219,850 | 9.50 | | 1,323,385 | 9.97 |
| | | - | | | | | | |
+----------------+-----------------+----------+--------------+---------------+---------------------+--------------+---------------+---------------------------+
The Company recognises compensation expense using the straight-line method for
stock option awards that vest ratably over the vesting period. Forfeitures are
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 | | Year |
| | months | | ended |
| |ended 30 | | 31 |
| | June | |December |
| | 2010 | | 2009 |
+-----------------+----------++----------+
| | | | |
+-----------------+----------++----------+
| Expected | 5 || 5 |
| options term | || |
| (years) | || |
+-----------------+----------++----------+
| Risk free | 1.47% || 1.62% |
| interest rate | || |
+-----------------+----------++----------+
| Dividend yield | || |
| | - || - |
+-----------------+----------++----------+
| Volatility | 36.50% || 33.75% |
+-----------------+----------++----------+
| | | | |
+-----------------+----------++----------+
| | | | |
+-----------------+----------+-------------------------------------------+----------+
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. 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. The Company has
no unrecognized tax benefits.
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"). 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 US$10, 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. In
December 2009, our Board of Directors agreed to extend the exercise term of the
warrants to 31 December 2010. There was no material impact to our financial
statements as a result of extending the warrant exercise term. 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 2008 the Company received subscriptions for
701,800 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
constituted approximately 2.6 percent of the Company's share capital at 31
December 2008. As of 31 December 2008, funds in the amount of US$5,810,078 were
collected from this sale of common stock and 601,800 shares were issued. 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 31
December 2008 were collected during the year ended 31 December 2009 and the
remaining 100,000 shares were issued.
During the period ended 31 December 2009 the Company raised $1,500,000 by
issuing 100,000 common shares at a price of US$15 pursuant to a private
placement.
During the six months ended 30 June 2010 the Company closed (the "Closing") a
fundraising (the "Fundraising") by which the Company has raised US$3,575,000,
before expenses, through a placing with investors of 238,335 new common shares
of US$0.001 each in the Company (the "Placing Shares"). The Closing has been
completed at a price of US$15 per Placing Share (the "Placing Price"). As part
of the Closing the Company has agreed with the investors that in the event the
Company issues any shares in the capital of the Company as part of a fundraising
prior to 31 December 2010 at a price less than the Placing Price (the "Lower
Price") the investors will have the option to subscribe at par (being US$0.001
per share), for such number of additional shares as they would have received had
the subscription price per share at Closing been the Lower Price rather than the
Placing Price. The net proceeds of the Closing totaled US$3,575,000 and were
used for initial short term working capital needs.
As of 30 June 2010, the Company had 27,025,136 common shares in issue and a
market capitalization of US$183,230,422 based on the Company's closing stock
price of US$6.78 (trading price of GBP4.50 converted utilising an exchange rate
of 1.507) on 30 June 2010.
NOTE 5 - WARRANTS AND OPTIONS
Warrants for 1,822,500 shares of Common Stock were outstanding at 30 June 2009
and 2008. Each warrant entitles the holder to purchase one Common Share at a
price per share of US$12.50. These warrants expire on 31 December 2010.
The Company issued stock awards to various advisors and key employees as a means
of attracting and retaining quality personnel. The award holders have the right
to purchase a stated number of shares at the exercise price determined in the
agreement. These options are issued under the Armor Designs, Inc 2007 Omnibus
Incentive Plan (Plan). The Plan allows the Company to issue RSUs, SARs and
Stock Options. Awards may be made under the Plan over shares of common stock
not to exceed 10% of the issued share capital of the Company at the date of the
award.
A summary of the Company's option activity and related full grant date fair
value is as follows:
+----------------+----------------+------------------+--------------+---------------+--------------------+--------------+----------------+---------------------+
| | | | | | Stock |
| | RSUs | | SARs | | Options |
+----------------+-----------------------------------+--------------+------------------------------------+--------------+--------------------------------------+
| | Shares | US$ | | Shares | US$ | | Shares | US$ |
| | Under | | | Under | | | Under | |
| | Option | | | Option | | | Option | |
+----------------+----------------+------------------+--------------+---------------+--------------------+--------------+----------------+---------------------+
| Granted in | 438,500 | 4,381,836 | | 69,400 | 245,144 | | | |
| 2007 | | | | | | | - | - |
+----------------+----------------+------------------+--------------+---------------+--------------------+--------------+----------------+---------------------+
| 31 December | 438,500 | 4,381,836 | | 69,400 | 245,144 | | | |
| 2007 | | | | | | | - | - |
+----------------+----------------+------------------+--------------+---------------+--------------------+--------------+----------------+---------------------+
| Granted in | 205,000 | 1,682,282 | | 103,000 | 332,039 | | 1,300,000 | 2,460,820 |
| 2008 (as | | | | | | | | |
| revised) | | | | | | | | |
+----------------+----------------+------------------+--------------+---------------+--------------------+--------------+----------------+---------------------+
| Forfeited in | (100,000) | (999,278) | | (6,300) | (22,254) | | | |
| 2008 | | | | | | | - | - |
+----------------+----------------+------------------+--------------+---------------+--------------------+--------------+----------------+---------------------+
| 31 December | 543,500 | 5,064,840 | | 166,100 | 554,929 | | 1,300,000 | 2,460,820 |
| 2008 | | | | | | | | |
+----------------+----------------+------------------+--------------+---------------+--------------------+--------------+----------------+---------------------+
| Granted in | 41,505 | 380,296 | | 56,000 | 145,108 | | 23,385 | 60,596 |
| 2009 | | | | | | | | |
+----------------+----------------+------------------+--------------+---------------+--------------------+--------------+----------------+---------------------+
| Exercised in | (47,501) | (430,150) | | | | | | |
| 2009 | | | | - | - | | - | - |
+----------------+----------------+------------------+--------------+---------------+--------------------+--------------+----------------+---------------------+
| Forfeited in | (150,000) | (1,231,629) | | | | | | |
| 2009 | | | | - | - | | - | - |
+----------------+----------------+------------------+--------------+---------------+--------------------+--------------+----------------+---------------------+
| 31 December | 387,504 | 3,783,357 | | 222,100 | 700,037 | | 1,323,385 | 2,521,416 |
| 2009 | | | | | | | | |
+----------------+----------------+------------------+--------------+---------------+--------------------+--------------+----------------+---------------------+
| Granted in | 1,300,000 | 9,967,564 | | | | | | |
| 2010 | | | | - | - | | - | - |
+----------------+----------------+------------------+--------------+---------------+--------------------+--------------+----------------+---------------------+
| Forfeited in | | | | (2,250) | (4,806) | | | |
| 2010 | - | - | | | | | - | - |
+----------------+----------------+------------------+--------------+---------------+--------------------+--------------+----------------+---------------------+
| 30 June 2010 | 1,687,504 | 13,750,921 | | 219,850 | 695,231 | | 1,323,385 | 2,521,416 |
+----------------+----------------+------------------+--------------+---------------+--------------------+--------------+----------------+---------------------+
Based on the Company's closing stock price of US$6.78 (trading price of GBP4.50
converted utilising an exchange rate of 1.507) on 30 June 2010, the last day of
trading in period, there were no in-the-money options exercisable at 30 June
2010.
A summary of the Company's option activity and related value of grant date
vesting is as follows
+----------------+-----------------+-----------------+--------------+------------------+------------------+--------------+------------------+------------------+
| | | | | | | | | |
| | RSUs | | | SARs | | | Stock | |
| | | | | | | | Options | |
+----------------+-----------------+-----------------+--------------+------------------+------------------+--------------+------------------+------------------+
| | Shares | US$ | | Shares | US$ | | Shares | US$ |
| | Under | | | Under | | | Under | |
| | Option | | | Option | | | Option | |
+----------------+-----------------+-----------------+--------------+------------------+------------------+--------------+------------------+------------------+
| Granted in | 438,500 | 4,381,836 | | 69,400 | 245,144 | | | |
| 2007 | | | | | | | - | - |
+----------------+-----------------+-----------------+--------------+------------------+------------------+--------------+------------------+------------------+
| Vested in 2007 | | | | | | | | |
| | - | - | | - | - | | - | - |
+----------------+-----------------+-----------------+--------------+------------------+------------------+--------------+------------------+------------------+
| Nonvested at | 438,500 | 4,381,836 | | 69,400 | 245,144 | | | |
| 31 December | | | | | | | - | - |
| 2007 | | | | | | | | |
+----------------+-----------------+-----------------+--------------+------------------+------------------+--------------+------------------+------------------+
| Granted in | 205,000 | 1,682,282 | | 103,000 | 332,039 | | 1,300,000 | 2,460,820 |
| 2008 (as | | | | | | | | |
| revised) | | | | | | | | |
+----------------+-----------------+-----------------+--------------+------------------+------------------+--------------+------------------+------------------+
| Vested in 2008 | (134,625) | (1,256,182) | | (40,775) | (137,130) | | (1,300,000) | (2,460,820) |
| (as revised) | | | | | | | | |
+----------------+-----------------+-----------------+--------------+------------------+------------------+--------------+------------------+------------------+
| Forfeited in | (100,000) | (999,278) | | (6,300) | (22,254) | | | |
| 2008 | | | | | | | - | - |
+----------------+-----------------+-----------------+--------------+------------------+------------------+--------------+------------------+------------------+
| Nonvested at | 408,875 | 3,808,657 | | 125,325 | 417,799 | | | |
| 31 December | | | | | | | - | - |
| 2008 | | | | | | | | |
+----------------+-----------------+-----------------+--------------+------------------+------------------+--------------+------------------+------------------+
| Granted in | 41,505 | 380,296 | | 56,000 | 145,108 | | 23,385 | 60,596 |
| 2009 | | | | | | | | |
+----------------+-----------------+-----------------+--------------+------------------+------------------+--------------+------------------+------------------+
| Vested in 2009 | (119,057) | (1,169,299) | | (147,525) | (446,656) | | (23,385) | (60,596) |
+----------------+-----------------+-----------------+--------------+------------------+------------------+--------------+------------------+------------------+
| Forfeited in | (150,000) | (1,231,629) | | | | | | |
| 2009 | | | | - | - | | - | - |
+----------------+-----------------+-----------------+--------------+------------------+------------------+--------------+------------------+------------------+
| Nonvested at | 181,323 | 1,788,025 | | 33,800 | 116,251 | | | |
| 31 December | | | | | | | - | - |
| 2009 | | | | | | | | |
+----------------+-----------------+-----------------+--------------+------------------+------------------+--------------+------------------+------------------+
| Granted in | 1,300,000 | 9,967,564 | | | | | | |
| 2010 | | | | - | - | | - | - |
+----------------+-----------------+-----------------+--------------+------------------+------------------+--------------+------------------+------------------+
| Vested in 2010 | (535,643) | (4,207,405) | | (7,888) | (27,861) | | | |
| | | | | | | | - | - |
+----------------+-----------------+-----------------+--------------+------------------+------------------+--------------+------------------+------------------+
| Forfeited in | | | | (2,250) | (4,806) | | | |
| 2010 | - | - | | | | | - | - |
+----------------+-----------------+-----------------+--------------+------------------+------------------+--------------+------------------+------------------+
| Nonvested at | 945,680 | 7,548,185 | | 23,663 | 83,584 | | | |
| 30 June 2010 | | | | | | | - | - |
+----------------+-----------------+-----------------+--------------+------------------+------------------+--------------+------------------+------------------+
| | | | | | | | | |
+----------------+-----------------+-----------------+--------------+------------------+------------------+--------------+------------------+------------------+
| | | | | | | | | |
+----------------+-----------------+-----------------+--------------+------------------+------------------+--------------+------------------+------------------+
| Available to | 741,824 | | | 196,188 | | | 1,323,385 | |
| be Exercised | | | | | | | | |
| at 30 June | | | | | | | | |
| 2010 | | | | | | | | |
+----------------+-----------------+-----------------+--------------+------------------+------------------+--------------+------------------+------------------+
The following table shows unrecognised compensation expense related to unvested
RSUs and SARs outstanding as of 30 June 2010. This table does not include an
estimate for future grants that may be issued.
+------------------+------------+
| | Amount |
+------------------+------------+
| | US$ |
+------------------+------------+
| 2010 | |
| | $1,713,292 |
+------------------+------------+
| 2011 | |
| | $3,426,585 |
+------------------+------------+
| 2012 | |
| | $2,491,892 |
+------------------+------------+
| | |
+------------------+------------+
| Total | |
| | $7,631,769 |
+------------------+------------+
As outlined in the Placing Document, Hawthorne & York International, Ltd. (HYI),
the principal shareholder in ADI, has gifted 3.4 million shares of its ADI
shareholding, for distribution to a number of individuals who have primarily
assisted HYI in the years prior to bringing ADI to market. This equity
compensation plan is separate from the 2007 Omnibus Incentive Plan approved by
security holders. 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. Of the 3.4 million total shares, 450,000 have been
issued in the form of shares of common stock, 1.3 million have been awarded in
the form of non-qualified stock options, 100,000 have been awarded in the form
of SARs, and 1,550,000 remain available for future issuance as share equivalents
(non-qualified stock options and restricted stock units).
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. As of 30 June 2010, 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 2010 and 2009 were US$650,547 and US$738,103, respectively.
NOTE 7 - RELATED PARTY TRANSACTIONS
Hawthorne & York International, Ltd
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 81 percent of
Armor Designs, Inc. as of 30 June 2010, including 11 percent held in an
irrevocable trust.
During 2004, the Subsidiary entered into a services agreement with HYI whereby
HYI provides interim research and development services, including labour,
subcontracting, consulting, equipment and technical upgrades, materials, and
other related research and development activities.
Also during 2004, the Subsidiary, entered into a contract with HYI for use of
certain licensed technological products and processes, as described in Note 9 of
these consolidated financial statements. Billings from the related party for the
use of licensed technology, and research and development services conducted on
behalf of the Subsidiary were as follows:
Periods ended 30 June 2010 and 2009
US$627,886 US$651,251
Included in the accompanying consolidated balance sheets is accounts payable of
US$1,032,844 and US$323,959 due to the related party at 30 June 2010 and 2009,
respectively, for billings related to the 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 30 June 2010 and 2009. Facility occupancy
costs incurred on behalf of the related party for the periods ended 30 June 2010
and 2009 were US$28,684 and US$25,573, respectively. Costs paid on behalf of
the related party are reimbursed in full by the related party.
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 bears interest on unpaid
principal balances at a rate of 8% per annum. As of 30 June 2010 the
outstanding balance on this note was US$185,000.
Aztec IP, LLC
The Subsidiary entered into a contract on 13 September 2004 with Aztec IP, LLC,
a company owned by James A. St. Ville, for use of licensed patents as described
in Note 9 of these consolidated financial statements. Billings from the related
party for the use of this licensed technology were US$128,000 and US$39,945 for
the six months ended 30 June 2010 and 2009, respectively. Included in the
accompanying consolidated balance sheets is accounts payable of US$142,200 and
US$39,945 due to Aztec IP at 30 June 2010 and 2009, respectively
Philip A. Clement
In December 2009 the Company entered a US$325,000 secured note payable with
Philip A. Clement, Interim CEO of the Company. This note bears interest on
unpaid principal balances at a simple interest rate of 1% per month, has a
maturity date of 31 December 2010, and contains certain affirmative covenants.
As of 30 June 2010 the outstanding balance on this note was US$325,000 and the
Company was in compliance with all covenants. In addition to this note payable
and included in the accompanying consolidated balance sheets is accounts payable
of US$286,836 due to Mr. Clement related to services performed as Interim CEO of
the Company.
James A. St. Ville
Included in the accompanying consolidated balance sheets is accounts payable of
US$120,478 and US$0 due to James A. St Ville for billings related to general and
administrative expenses at 30 June 2010 and 2009, respectively.
Charles Snyder
On 3 July 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 totaling $730,000 was forgiven by
the Company and is included as compensation cost in general and administrative
expenses. As of 30 June 2010, the outstanding balance to the Company was
US$365,000 and was due from Mr. Snyder on 22 December 2009. This balance is
reflected on our balance sheet as of 30 June 2010 as a note receivable, net of
amounts due to Mr. Snyder relating to outstanding salary and bonus of $186,577.
Robert McConnell
On 3 December 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 3 January
2012. The Note provides the Company the ability to offset the amount of the loan
against the stock in the Company held by Mr. McConnell.
David Seaton
Included on the Company's consolidated balance sheet as of 30 June 2010 is a
liability of $292,000 relating to accrued fees for David Seaton, former contract
CFO.
Other Related Parties
The remaining balance of $95,520 in accounts payable - related party relates to
reimbursable expenses or fees due to Directors incurred during the year.
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$1,000 or greater and a useful life of two
years or more. Acquisition value includes the cost of the equipment and any
associated costs incurred to make the equipment usable for the purpose for which
it was intended, including installation costs.
As of 30 June 2010, the Company capitalised and was depreciating fixed assets
per the following schedule:
+---------------------+---------------------+----------------------+--------------------+
| | | | |
+ +---------------------+----------------------+--------------------+
| | | | |
+---------------------+---------------------+----------------------+--------------------+
| | | US$ | US$ |
+---------------------+---------------------+----------------------+--------------------+
| | Expected | 2010 | 2009 |
| | life, in | | |
| | years | | |
+---------------------+---------------------+----------------------+--------------------+
| Computer equipment | 3 | | |
| | | $107,828 | $107,828 |
+---------------------+---------------------+----------------------+--------------------+
| Computer software | 3 | 138,425 | 138,425 |
+---------------------+---------------------+----------------------+--------------------+
| Equipment | 7 | 4,446,864 | 2,064,319 |
+---------------------+---------------------+----------------------+--------------------+
| Production Molds | 3 | 309,769 | 309,769 |
+---------------------+---------------------+----------------------+--------------------+
| Furniture & | 7 | 34,121 | 34,121 |
| Fixtures | | | |
+---------------------+---------------------+----------------------+--------------------+
| Leaseholds | 3 to | 991,511 | 1,160,782 |
| | 5 | | |
+---------------------+---------------------+----------------------+--------------------+
| Subtotal: | | 6,028,518 | 3,815,244 |
+---------------------+---------------------+----------------------+--------------------+
| Less: accumulated | | | |
| depreciation and | | | |
| amortisation | | | |
+ + +----------------------+--------------------+
| | | (1,615,500) | (670,020) |
+---------------------+---------------------+----------------------+--------------------+
| Total: | | | |
| | | $4,413,018 | $3,145,223 |
+---------------------+---------------------+----------------------+--------------------+
NOTE 9 - COMMITMENTS
In December 2007, the Company entered into an operating lease agreement for its
facility located at 4645 S. 35th Street in Phoenix, Arizona. Rental expense for
the periods ending 30 June 2010 and 2009 were US$268,558 and US$275,212,
respectively. Under the agreement, the Company is required to pay rent through
December 2012 as follows:
+--------+-----------+
| | |
| | US$ |
+--------+-----------+
| 2010 | $ |
| | 268,558 |
+--------+-----------+
| 2011 | 565,052 |
+--------+-----------+
| 2012 | 582,175 |
+--------+-----------+
| | $ |
| | 1,415,785 |
+--------+-----------+
Effective 13 September 2004, the Subsidiary, Armor Designs, LLC, entered into a
contract with Hawthorne & York International, Ltd. 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-licenses. Effective April 1, 2010 this contract provides for a guaranteed
minimum fee to Hawthorne & York International of US$250,000 per quarter.
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-licenses. Effective April 1, 2010 this contract
provides for a guaranteed minimum fee of US$125,000 per quarter. This contract
has the same expiration and renewal dates. The following table summarizes the
amounts due under these contracts.
+--------------------+--------------------------------+--------------------------------+--------------------------------+
| Years ending 31 | Hawthorne & | | Aztec IP |
| December | York | | US$ |
| | International, | | |
| | Ltd. US$ | | |
+--------------------+--------------------------------+--------------------------------+--------------------------------+
| 2010 | | | |
| | $750,000 | | $375,000 |
+--------------------+--------------------------------+--------------------------------+--------------------------------+
| 2011 | 1,000,000 | | 500,000 |
+--------------------+--------------------------------+--------------------------------+--------------------------------+
| 2012 | 1,000,000 | | 500,000 |
+--------------------+--------------------------------+--------------------------------+--------------------------------+
| 2013 | 1,000,000 | | 500,000 |
+--------------------+--------------------------------+--------------------------------+--------------------------------+
| 2014 | 750,000 | | 375,000 |
+--------------------+--------------------------------+--------------------------------+--------------------------------+
| | | | |
| | $4,500,000 | | $2,250,000 |
+--------------------+--------------------------------+--------------------------------+--------------------------------+
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
2011. 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
2010 the outstanding balance on this loan was US$309,440.
In March 2009 the Company executed a US$200,000 note payable with Arizona
Business Bank. The note bears interest on unpaid principal balances at a rate
of 7.00% per annum, subject to certain adjustments, and has a maturity date of
10 October 2010. This note is secured by substantially all of our tangible and
intangible assets. As of 30 June 2010 the outstanding balance on this note was
US$43,691.
In May 2009 The Company entered a US$185,000 note payable with Hawthorne & York
International, Ltd. This note has a maturity date of 31 December 2010 and bears
interest on unpaid principal balances at a rate of 8.00% per annum. As of 30
June 2010 the outstanding balance on this note was US$185,000.
In December 2009 the Company entered a US$325,000 secured note payable with
Philip A. Clement, Interim CEO of the Company. This note bears interest on
unpaid principal balances at a simple interest rate of 1% per month, has a
maturity date of 31 December 2010, and contains certain affirmative covenants.
As of 30 June 2010 the outstanding balance on this note was US$325,000 and the
Company was in compliance with all covenants.
NOTE 11 - RETIREMENT PLAN
Employees of the Company that meet certain age and service requirements are
eligible to participate in the Armor Designs, Inc. 401(k) and Profit Sharing
Plan (formerly the James A. St. Ville, M.D. Savings and Profit Sharing Plan).
Employer profit sharing and matching contributions to the 401(k) component of
the plan and profit sharing contributions may be made at the discretion of the
Company's management. The Company did not make matching or profit sharing
contributions for the six months ended 30 June 2010 and 2009.
NOTE 12 - LOSS PER SHARE
The income (loss) per share accounting guidance provides for the calculation of
basic and diluted income (loss) per share. Basic income per share includes no
dilution and is computed by dividing net income (loss) by the weighted average
number of common shares outstanding during the periods presented. Diluted
income per share reflects the potential dilution that could occur if outstanding
stock options were exercised utilising the treasury stock method. The effect of
dilutive securities is not included in the weighted average number of shares
outstanding when inclusion would increase the earnings per share or decrease the
loss per share. The computation of diluted income (loss) per share equals the
basic calculation for the six months ended 30 June 2010 and 2009 because all
potentially dilutive securities were excluded from the per share computations
due to their anti-dilutive effect. The calculation of the weighted average
number of shares outstanding and earnings per share are as follows:
+--------------------------+---+----------------+----------------+
| Basic Earnings Per Share | | 30 June | 30 June |
| | | 2010 | 2009 |
+--------------------------+---+----------------+----------------+
| | | | |
+--------------------------+---+----------------+----------------+
| Net loss after tax | |US$(7,874,445) |US$(6,789,648) |
+--------------------------+---+----------------+----------------+
| Divided by weighted | | 26,793,155 | 26,548,545 |
| average shares | | | |
+--------------------------+---+----------------+----------------+
| Basic loss per share | | US$(0.29) | US$(0.26) |
+--------------------------+---+----------------+----------------+
| | | | |
+--------------------------+---+----------------+----------------+
| Diluted loss per | | US$(0.29) | US$(0.26) |
| share | | | |
+--------------------------+---+----------------+----------------+
| | | | |
+--------------------------+---+----------------+----------------+
NOTE 13- Financing Arrangements
Effective April 9, 2009, the Company entered an agreement to assign
substantially all of its trade accounts receivable to a commercial factor.
Under the terms of the factoring agreement, the factor remits invoiced amounts
to the Company, up to a maximum credit limit established by the factor for each
customer. All accounts sold to the factor are with recourse to the Company.
Amounts paid under this agreement, included in the Consolidated Statement of
Operations as interest expense, totaled US$22,275 and US$4,704 for the six
months ended 30 June 2010 and 2009, respectively. As of 30 June 2010 and 2009
the Company had accrued $15,451 and $17,844 for accounts receivable sold with
full recourse, respectively.
NOTE 14 - Common Stock
The Company shareholders passed a resolution at the Annual Meeting held on 23
September, 2008, that empowered 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 make when the capital of
the Company is impaired or when such purchase or acquisition would cause any
impairment of the capital of the Company. The authority granted by this
resolution remains in effect as of 30 June 2010. As of 30 June 2010 the Company
has not repurchased any shares of the Company's Common Stock.
NOTE 15 - Availability of accounts
Copies of this statement are available to shareholders and members of the
public, free of charge, from the Company's principal place of business at Armor
Designs, Inc., 4645 South 35th Street, Phoenix, AZ 85040, United States.
Alternatively a downloadable version is available from the following web
address: http://www.armordesigns-ir.co.uk/content/investor/latest_results.aspx
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR ZMGZLVLMGGZM
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