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Share Name | Share Symbol | Market | Type |
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American Defense Systems, Common Stock | AMEX:EAG | AMEX | Ordinary Share |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 0.00 | - |
Q3 2010 Financial Results
Revenues from continuing operations in the third quarter of 2010 decreased 31% to $8.7 million from $12.6 million in the same year-ago quarter. This decrease was primarily due to a slow-down in government orders. Revenues from the company's physical security product business was $1.2 million in the third quarter of 2010, consistent with revenues in the same year-ago period.
Revenues from continuing operations for the first nine months in 2010 declined 1.7% to $35.6 million from $36.2 million in the same year-ago period. For the nine months, revenues from the company's physical security product business increased 152% to $8.3 million (23% of revenues), from $3.3 million (9% of revenues) in the comparable period in 2009.
Gross profit margin in the third quarter of 2010 was 46.7%, an improvement from 20.9% in the same year-ago quarter. The increase in gross profit margin resulted primarily from contract billings of $3.3 million that were under audit by the government as of June 30, 2010 and were recognized as revenue upon approval during the third quarter of 2010. The total contract was for $6.2 million of which $2.9 million of revenue and related cost of sales was recorded in the second quarter of 2010. The gross profit margin was 31.9% and 33.3% for the first nine months of 2010 and 2009, respectively.
Net loss in the third quarter totaled $395,000 or $(0.01) per share, an improvement from a net loss of $3.6 million or $(0.08) per share in the same year-ago period. Net loss in the first nine months of 2010 totaled $4.9 million or $(0.10) per share, an improvement from a net loss of $7.9 million or $(0.19) per share in the same year-ago period.
Adjusted EBITDA gain in the third quarter totaled $833,000 or $0.02 per basic and diluted share, versus an adjusted EBITDA loss of $1.7 million or $(0.04) per basic and diluted share in the same year-ago period (see the definition and important discussion about the presentation of adjusted EBITDA, a non-GAAP term, below).
Adjusted EBITDA loss in the first nine months totaled $164,000 or $(0.00) per basic and diluted share, versus an adjusted EBITDA loss of $627,000 or $(0.01) per basic and diluted share in the same year-ago period.
Third Quarter 2010 Operational Highlights
Management Commentary
"Revenues in the third quarter of 2010 came in slightly above our expectations, "said Anthony J. Piscitelli, chairman and CEO of American Defense Systems, "with a strong gross margin largely due to the timing of the recognition of revenue, as well as a slowdown in crew protection kit orders resulting in decreased costs in the quarter. We see this slowdown continuing into the fourth quarter, which is also typically our slowest, and have adjusted our expectations for the amount of our $31 million backlog we expect to ship before year's end.
"To offset this, we are continuing to focus on expanding our product mix beyond our core CPK business, reflected in the introduction in Q3 of our newest product, Cold Fire Tactical. We see strong potential for this product based on an expressed need by the military for better fire suppression systems, and we are aggressively pursuing this opportunity. We have also been very active internationally, and expect anticipated government clearances will pave the way for a number of major deals in our pipeline.
"Although flat in Q3 2010 on a year-over-year basis, our physical security segment of our business was a strong performer in the first nine months, up more than 150%, and driven primarily by sales to the private sector. We have been expecting our physical security business to grow from about 10% of our business last year to more than 25% going forward, and this remains on track. We believe the various high ratings, certifications, and endorsements we've received for our security products over the course of the last year will help pave the way for a stronger 2011."
Guidance
The company expects to report fourth quarter 2010 revenue of approximately $5.5 million, assuming order acceptance of completed orders.
Use of Non-GAAP Financial Information
Adjusted EBITDA is not a financial measure calculated and presented in accordance with U.S. generally accepted accounting principles ("GAAP") and should not be considered as an alternative to net income, operating income or any other financial measures so calculated and presented, nor as an alternative to cash flow from operating activities as a measure of the company's liquidity. ADSI defines adjusted EBITDA as net income/(loss) before net interest expense, depreciation, unrealized loss on adjustment of fair value of its Series A convertible preferred stock classified as a liability, income tax expense (benefit), loss on deemed extinguishment of debt, finance charge and unrealized loss (gain) on warrant liability. Other companies (including the company's competitors) may define adjusted EBITDA differently. The company presents adjusted EBITDA because it believes it to be an important supplemental measure of performance that is commonly used by securities analysts, investors and other interested parties in the evaluation of companies in a similar industry. Management also uses this information internally for forecasting and budgeting. It may not be indicative of the historical operating results of ADSI nor is it intended to be predictive of potential future results. Investors should not consider adjusted EBITDA in isolation or as a substitute for analysis of results as reported under GAAP. See "Reconciliation of GAAP Loss to Adjusted EBITDA Income (Loss)" below for further information on this non-GAAP measure and reconciliation of adjusted EBITDA to GAAP net loss for the periods indicated.
American Defense Systems, Inc. and Subsidiaries Reconciliation of GAAP Loss to Adjusted EBITDA Income (Loss) (in thousands, except per share amounts) (unaudited) Three Months Ended Nine Months Ended September 30, September 30, ------------------ ------------------ 2010 2009 2010 2009 -------- -------- -------- -------- GAAP net loss $ (395) $ (3,591) $ (4,912) $ (7,916) Reconciling items from GAAP net loss to Adjusted EBITDA Income (Loss) Interest expense, net 810 1,114 2,710 2,636 Depreciation 291 278 870 798 Unrealized loss on adjustment of fair value Series A convertible preferred stock classified as a liability 51 498 924 1,184 Income tax expense (benefit) - - - - Loss on deemed extinguishment of debt - - - 2,614 Finance charge 92 41 269 41 Unrealized loss (gain) on warrant liability (16) (11) (25) 16 -------- -------- -------- -------- Adjusted EBITDA Income (Loss) $ 833 $ (1,671) $ (164) $ (627) ======== ======== ======== ======== Adjusted EBITDA Income (Loss) per common share: Basic and diluted $ 0.02 $ (0.04) $ (0.00) $ (0.01) ======== ======== ======== ======== Weighted average common shares outstanding: Basic and diluted 49,394 45,514 48,033 42,388 ======== ======== ======== ========
About American Defense Systems, Inc.
American Defense Systems, Inc. (ADSI) (NYSE Amex: EAG) offers advanced solutions in the design, fabrication, and installation of transparent and opaque armor, security doors, windows and curtain wall systems for use by military, law enforcement, homeland defense and corporate customers. ADSI engineers also specialize in developing innovative, functional and aesthetically pleasing security applications for the mobile and fixed infrastructure physical security industry. For more information, visit the ADSI corporate Web site at www.adsiarmor.com.
Important Cautions Regarding Forward-Looking Statements
Some of the statements made by American Defense Systems, Inc. ("ADSI" or the "Company") in this press release, including, without limitation, statements regarding ADSI's anticipated future growth and expense reductions, are forward-looking in nature. ADSI intends that any forward-looking statements shall be covered by the safe harbor provisions for such statements contained in the Private Securities Litigation Reform Act of 1995. Statements that are predictive in nature, that depend upon or refer to future events or conditions, and include words such as "may," "will," "should," "expects," "anticipates," "intends," "plans," "believes," "estimates," "predicts," "potential," "continues," "projects," and variations of such words or similar expressions, are forward-looking statements, but the absence of such words does not mean that the statement is not forward-looking. ADSI cautions you that forward-looking statements are not guarantees of performance. ADSI undertakes no obligation and disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Forward-looking statements involve known and unknown risks and uncertainties that may cause ADSI's actual future results to differ materially from those projected or contemplated in the forward-looking statements. ADSI believes that these risks include, but are not limited to: ADSI's reliance on the U.S. government for a substantial amount of its sales and growth; decreases in U.S. government defense spending; ADSI's ability to contract further with the U.S. Department of Defense; ADSI's ability to comply with complex procurement laws and regulations; competition and other risks associated with the U.S. government bidding process; changes in the U.S. government's procurement practices; ADSI's ability to obtain and maintain required security clearances; ADSI's ability to realize the full amount of revenues reflected in its backlog; ADSI's ability to finance the redemption of ADSI's Series A convertible preferred stock in accordance with the terms of such stock and ADSI's settlement agreement with the holders of stock; ADSI's reliance on certain suppliers; and intense competition and other risks associated with the defense industry in general and the security-related defense sector in particular.
Additional information concerning these and other important risk factors can be found under the heading "Risk Factors" in ADSI's filings with the Securities and Exchange Commission, including, without limitation, its most recent annual report on Form 10-K and quarterly report on Form 10-Q. Statements in this press release should be evaluated in light of these important factors.
American Defense Systems, Inc. and Subsidiaries Condensed Consolidated Balance Sheets September 30, 2010 December 31, ASSETS (Unaudited) 2009 ------------- ------------- CURRENT ASSETS Cash $ 2,012,351 $ - Accounts receivable, net of allowance for doubtful accounts of $327,448 and $222,448 as of September 30, 2010 and December 31, 2009, respectively 2,059,895 2,288,666 Accounts receivable factoring 441,314 199,876 Tax receivable 333,258 108,741 Costs in excess of billings on uncompleted contracts, net 2,937,325 7,762,836 Prepaid expenses and other current assets 369,354 330,381 Deferred tax assets - 521 ------------- ------------- TOTAL CURRENT ASSETS 8,153,497 10,691,021 Property and equipment, net 2,436,074 3,078,724 Deferred financing costs, net 636,636 1,547,551 Notes receivable, net 400,000 400,000 Intangible assets 634,450 606,000 Goodwill 812,500 660,000 Deposits 652,137 407,137 Other assets - 138,001 ------------- ------------- TOTAL ASSETS $ 13,725,294 $ 17,528,434 ============= ============= LIABILITIES AND SHAREHOLDERS' DEFICIENCY CURRENT LIABILITIES Accounts payable $ 4,834,541 $ 6,695,712 Cash overdraft - 48,573 Accrued expenses 426,292 498,795 Warrant liability 9,915 35,413 ------------ ------------ TOTAL CURRENT LIABILITIES 5,270,748 7,278,493 LONG TERM LIABILITIES Mandatory redeemable Series A convertible preferred stock (cumulative), 15,000 shares authorized issued and outstanding 13,966,268 12,429,832 Deferred rent 198,243 - Deferred tax liability - 521 ------------ ------------ TOTAL LIABILITIES 19,435,259 19,708,846 ------------ ------------ COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' DEFICIENCY Common stock, $0.001 par value, 100,000,000 shares authorized, 51,971,685 and 46,611,457 shares issued and outstanding as of September 30, 2010 and December 31, 2009, respectively 51,971 46,611 Additional paid-in capital 16,088,766 14,712,414 Accumulated deficit (21,850,702) (16,939,437) ------------ ------------ TOTAL SHAREHOLDERS' DEFICIENCY (5,709,965) (2,180,412) ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIENCY $ 13,725,294 $ 17,528,434 ============ ============ American Defense Systems, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ----------------------- ------------------------ 2010 2009 2010 2009 ---------- ----------- ----------- ----------- CONTRACT REVENUES EARNED $8,725,874 $12,643,488 $35,610,715 $36,166,765 COST OF REVENUES EARNED (exclusive of depreciation shown separately below) 4,653,974 9,999,606 24,243,958 24,112,580 ---------- ----------- ----------- ----------- GROSS PROFIT 4,071,900 2,643,882 11,366,757 12,054,185 ---------- ----------- ----------- ----------- OPERATING EXPENSES General and administrative expenses 1,357,833 1,939,163 4,729,578 5,143,716 General and administrative salaries 870,384 1,051,214 2,687,891 3,146,617 Sales and marketing 431,140 560,231 1,565,749 2,017,804 T2 expenses 206,511 154,766 629,838 392,438 Research and development 274,750 117,268 548,464 320,495 Settlement of litigation - - - 63,441 Depreciation 290,868 278,264 870,120 797,676 Professional fees 99,463 471,098 1,369,660 1,563,876 ---------- ----------- ----------- ----------- TOTAL OPERATING EXPENSES 3,530,949 4,572,004 12,401,300 13,446,063 ---------- ----------- ----------- ----------- OPERATING INCOME (LOSS) 540,951 (1,928,122) (1,034,543) (1,391,878) ---------- ----------- ----------- ----------- OTHER INCOME (EXPENSE) Unrealized loss on adjustment of fair value Series A convertible preferred stock classified as a liability (50,594) (498,407) (923,609) (1,183,719) Unrealized gain (loss) on warrant liability 15,923 10,674 25,498 (15,676) Loss on deemed extinguishment of debt - - - (2,613,630) Other income (expense) - (21,040) - (33,770) Interest expense (434,621) (663,524) (1,585,111) (1,444,675) Interest expense - mandatorily redeemable preferred stock dividends (375,000) (450,000) (1,125,000) (1,200,000) Interest income - - - 8,859 Finance charge (91,930) (41,025) (268,793) (41,025) ---------- ----------- ----------- ----------- TOTAL OTHER INCOME (EXPENSE) (936,222) (1,663,322) (3,877,015) (6,523,636) ---------- ----------- ----------- ----------- LOSS BEFORE INCOME TAXES (395,271) (3,591,444) (4,911,558) (7,915,514) INCOME TAX PROVISION - - - - ---------- ----------- ----------- ----------- NET LOSS $ (395,271) $(3,591,444) $(4,911,558) $(7,915,514) ========== =========== =========== =========== Weighted Average Shares Outstanding (Basic and Diluted) 49,393,679 45,513,965 48,033,067 42,388,377 ========== =========== =========== =========== NET LOSS per Share - Basic and Diluted $ (0.01) $ (0.08) $ (0.10) $ (0.19) ========== =========== =========== ===========
Company Contacts: Roger Ward V.P. of Marketing & Investor Relations American Defense Systems, Inc. Tel 516-390-5300, x326 Email Contact Investor Relations: Ron Both Managing Director Liolios Group, Inc. Tel 949-574-3860 Email Contact
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