SOURCE: American Defense Systems, Inc.

November 10, 2008 18:04 ET

American Defense Systems Reports Record Third Quarter 2008 Financial Results

Record Revenues of $13.5 Million, Up 80% From Q3 2007

HICKSVILLE, NY--(Marketwire - November 10, 2008) - American Defense Systems, Inc. (ADSI) (AMEX: EAG), a leading provider of advanced transparent and opaque armor, architectural hardening and security products for Defense and Homeland Security, reported financial results for the third quarter ended September 30, 2008.

Q3 2008 Highlights

--  Revenues total a record $13.5 million, up 80% vs. Q3 2007
--  Contract Backlog reached a record $55 million at the end of the
--  ADSI named as a Tier 1 supplier by OshKosh Corporation

Financial Results for Q3 2008

Revenues for the third quarter of 2008 were a record $13.5 million, an increase of 48% from $9.1 million in the previous quarter and an increase of 80% from the $7.5 million in the same period in 2007. This brought revenues for the first nine months of 2008 to total $32.1 million, an increase of 33% from the $24.1 million reported for the first nine months of 2007.

Contract backlog as of September 30, 2008 totaled $55 million, up 22% from $45 million at the end of the previous quarter and up 31% from $42 million as of September 2007.

Gross margin as a percentage of revenue for the third quarter was 32.6%, as compared to 31.0% in the previous quarter and 39.4% for the third quarter of 2007.

Net income in accordance with Generally Accepted Accounting Principles (GAAP) for the third quarter was a loss $500,000 or $0.01 per basic and diluted share, compared to a GAAP net income for the third quarter 2007 of $256,000, or $0.01 per basic and diluted share.

Q3 2008 Operational Highlights

ADSI advanced development in a number of areas during the third quarter of 2008, including:

--  ADSI was selected to provide ballistic window prototypes that
    incorporate thin film coatings from Genvac Aerospace that prevent
    condensation in cold climates and reduce glare. The windows are planned to
    be delivered to the Australian Navy according to a contract between Genvac
    and BAE Systems Australia.
--  Received two contract modifications for armor and field services with
    a combined value of more than $1 million under its existing U.S. Army TACOM
--  Named by OshKosh Corporation as a Tier 1 supplier of transparent armor
    for the Interim High Mobility Engineering Excavator vehicles supplied to
    the United States Army via Tank and Automotive Armament Command (TACOM),
    and has submitted initial order.

Management Commentary

"This was another quarter of solid performance," said Anthony J. Piscitelli, chairman and CEO of American Defense Systems, "which brought our revenues to record levels and a return to positive income from operations that exceeded last year's third quarter. We plan to continue to strengthen and expand our portfolio of complementary military and homeland defense offerings, both organically and potentially through acquisitions, as well as develop methods to reduce our production costs."

"I have a very positive outlook on our non-military business prospects," said Piscitelli, "and we are particularly proud that our transparent barrier defense products were used to protect President-Elect Barack Obama during his election win speech in Chicago. We expect our newest division, American Physical Security Group, to produce $5 million to $6 million in revenue in 2008, which has contributed our record backlog of $55 million."

Financial Guidance

Based on current business conditions and expectations, ADSI expects to end fiscal 2008 with revenues of approximately $41.0 million, as compared to revenue of $36.5 million in fiscal 2007. The company expects fiscal 2009 to improve substantially over 2008 and operate profitably, and plans to provide a more detailed outlook for 2009 in an press announcement at a later date.

Conference Call and Webcast

The company will hold a conference call today at 5:00 p.m. Eastern time to discuss the quarter. Members of ADSI's executive management team will host the presentation, followed by a question and answer period.

Date: Monday, November 10, 2008
Time: 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time)
Dial-In Number: 1-800-894-5910
International: 1-785-424-1052
Conference ID#: 7DEFENSE

The conference call will be broadcast simultaneously and available for replay via the investor section of the company's Web site at

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization and ask you to wait until the call begins. If you have any difficulty connecting with the conference call, please contact the Liolios Group at 949-574-3860.

A replay of the call will be available after 8:00 p.m. Eastern time on the same day and until December 10, 2008:

Toll-free replay number: 1-800-283-7928
International replay number: 1-402-220-0866
(No passcode required)

About American Defense Systems, Inc.

American Defense Systems, Inc. ("ADSI") 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

Some of the statements made by American Defense Systems, Inc. ("ADSI") in this press release, including, without limitation, statements regarding ADSI's anticipated future growth, 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, or that include words such as "may," "will," "should," "expects," "anticipates," "intends," "plans," "believes," "estimates," "predicts," "potential," "continues" and similar expressions are forward-looking statements. 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 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 registration statement on Form 10. Statements in this press release should be evaluated in light of these important factors.

              American Defense Systems, Inc. and Subsidiaries
                  Consolidated Statements of Operations

                          For the three months      For the nine months
                          ended September 30,       ended September 30,
                            2008         2007         2008         2007
                        (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)
                        -----------  -----------  -----------  -----------

Contract revenues
 earned                 $13,495,301  $ 7,532,646   32,051,499  $24,100,012

Cost of revenues earned   9,101,568    4,593,085   20,870,141   14,205,381
                        -----------  -----------  -----------  -----------

   Gross profit           4,393,733    2,939,561   11,181,358    9,894,631

Operating expenses
   Research and
    development expense     170,784      183,184      539,936      418,809
   Marketing expense        688,024      381,893    2,047,591    1,661,576
   General and
    expense               1,999,335      998,927    4,655,742    2,532,112
   General and
    salaries expense        967,152      885,840    3,221,803    2,245,458
   Depreciation             266,434      102,733      548,869      277,712
   Settlement of
    litigation                    -       92,863       57,377      178,450
   Loss on disposal of
    fixed assets                  -            -            -            -
                        -----------  -----------  -----------  -----------
      Total operating
       expenses           4,091,729    2,645,440   11,071,318    7,314,117
                        -----------  -----------  -----------  -----------

Income (loss) from
 operations                 302,004      294,121      110,040    2,580,514

Other income and

   Gain on adjustment
    of fair value
      Series A convertible
       preferred stock
       classified as a
       liability            126,228            -    1,302,722            -
   Gain on investor
    warrant liability        52,001            -    1,365,844            -
   Other income
    (expense)              (332,353)      35,167     (335,776)       1,780
   Interest expense        (272,730)     (43,678)    (582,897)     (47,394)
   Interest income           24,152       26,329      114,233       91,871
                        -----------  -----------  -----------  -----------
      Total other
       income (expense)    (402,702)      17,818    1,864,126       46,257
                        -----------  -----------  -----------  -----------
         Net income
          before income
          taxes            (100,698)     311,939    1,974,166    2,626,771

Provision for income
 taxes                            -      537,388            -      537,388
                        -----------  -----------  -----------  -----------

Net income (loss)       $  (100,698) $  (225,449) $ 1,974,166  $ 2,089,383

Preferred stock
 dividend payable          (399,000)           -     (800,252)           -
                        -----------  -----------  -----------  -----------

Net income (loss)
 allocated to common
 stock shareholders        (499,698)    (225,449)   1,173,914    2,089,383
                        ===========  ===========  ===========  ===========

Net income (loss) per
 share - basic and
 diluted                $     (0.01) $     (0.01) $      0.03  $      0.06
                        ===========  ===========  ===========  ===========
Weighted average number
 of shares outstanding
 during the year - basic
 and diluted             39,442,800   37,300,000   39,442,800   37,300,000
                        ===========  ===========  ===========  ===========

              American Defense Systems, Inc. and Subsidiaries
                        Consolidated Balance Sheet

                                                September 30, December 31,
                                                    2008          2007
ASSETS                                          (Unaudited)     (Audited)
                                                ------------- -------------
Current Assets:
Cash                                            $   3,660,087 $   1,479,886
Accounts receivable, net                            8,508,334     6,711,161
Inventory                                           1,305,271       737,458
Prepaid expenses and other current assets           4,445,986     1,856,236
Deferred tax asset                                  4,136,982     4,136,982
Costs in excess of billings on uncompleted
 contracts                                          7,629,475     5,011,974
Deposits                                              433,496       608,020
                                                ------------- -------------
Total current assets                               30,119,631    20,541,718
Property and equipment, net                         3,417,910     1,194,676
Deferred financing  costs                           1,668,450             -
Goodwill                                            1,950,000     1,680,361
Advances for future acquisitions                      214,427       138,000
Total assets                                    $  37,370,418 $  23,554,754
                                                ============= =============
Current liabilities:
Accounts payable                                    5,179,320 $   4,381,930
Accrued payroll                                       527,044       205,230
Accrued expenses                                      371,338       599,258
Due to Tactical Applications Group                    125,000     1,012,741
Deferred tax liability                              3,427,657     3,965,150
Short term notes payable                              130,232        64,947
                                                ------------- -------------
Total current liabilities                           9,760,591    10,229,256

Long term notes payable                                     -        27,670
Mandatorily redeemable Series A Convertible
 Preferred Stock (cumulative).  5,000,000
 shares authorized, 15,000 shares issued and
 outstanding                                       12,444,850             -

Investor warrant liability                            213,603             -

                                                ------------- -------------
    Total liabilities                              22,419,044    10,256,926
                                                ------------- -------------

Stockholders' equity:                                       -
Common stock, $0.001 par value, 100,000,000
 shares authorized, 39,483,202 and 38,957,950
 shares issued and outstanding as of September
 30, 2008 and December 31, 2007                        49,073        48,379
Additional paid-in capital                         10,744,369    10,265,432
Retained earnings                                   4,157,932     2,984,017
                                                ------------- -------------
    Total stockholders' equity                     14,951,374    13,297,828
                                                ------------- -------------
  Total liabilities and stockholders' equity    $  37,370,418 $  23,554,754
                                                ============= =============

Contact Information

  • 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