SOURCE: Law Enforcement Associates

Law Enforcement Associates

November 15, 2010 17:25 ET

Law Enforcement Associates Reports Third Quarter Financial Results

RALEIGH, NC--(Marketwire - November 15, 2010) - Law Enforcement Associates Corporation (LEA) (OTCBB: LAWE), a leading U.S.-based developer and manufacturer of electronic surveillance equipment, today announced financial results for its third quarter ended September 30, 2010.

Third quarter net sales were $1.4 million versus $1.9 million in the comparable year-ago quarter. Gross margin was 28% versus 33% in the same quarter last year. The decline in gross margin was the result of lower revenue resulting in less favorable absorption of fixed costs.

The Company reported a third quarter operating loss of $1.0 million versus an operating loss of $156,000 in the comparable year-ago quarter. The increase was largely due to a $602,000 non-cash charge associated with the impairment of long-lived assets, which include the patents related to the Company's Electronic Discharge Weapon (EDW), as well as the trade name and marketing assets associated with the Company's AVS vehicle division. Operating expenses also included above-normal legal fees associated with previously discussed litigation. A trial related to this situation is currently scheduled to begin on Nov. 29, 2010.

Income tax expense was $1.3 million versus an income tax benefit of $64,000 in the year-ago third quarter. Due to prior net operating losses, LEA has accumulated net operating loss (NOL) carryforwards of approximately $1.4 million. However, due to the uncertainty of the ultimate realization of these NOLs, the Company recorded a 100% valuation allowance against its net deferred tax assets for the nine months ended September 30, 2010. Third quarter net loss was $2.3 million, or $0.09 per share, versus a net loss of $98,000, or less than $0.01 per share, in the third quarter last year.

Paul Briggs, president and CEO, said, "While our third quarter results were negatively impacted by the impairment charge and valuation allowance against our deferred tax assets, these were one-time, non-cash charges that are largely unrelated to our day-to-day operations. Moreover, we still hold approximately $1.4 million in NOL carryforwards, which we intend to use to offset future tax liabilities. We also are actively working to resolve our legal issues, and anticipate a substantial reduction in our legal expenses once they are behind us."

Briggs added, "Although third quarter sales started slowly, favorable customer reaction to several new product offerings fueled an improvement in order activity during the month of September, and that momentum has continued through the first half of the fourth quarter. Our Previews digital video system and Scorpion micro cameras are generating strong demand, and we are seeing sustained interest in legacy products such as our Under Vehicle Inspection System, which has been augmented with new license plate recognition technology and image stitching software. Improved order volume coupled with recent cost cutting initiatives indicates our sales and margin performance during the fourth quarter could be substantially better than that of the third."

"The steps we have taken to strengthen our portfolio of surveillance equipment have helped broaden the appeal of our product offering and have created a number of opportunities to enter new markets," Briggs added. "We are currently in discussions with several potential distribution partners that have expressed interest in marketing our products overseas. We hope to have one or more international distribution agreements in place before the end of the fiscal year. Our new products have also generated increased demand for our equipment demonstration and training programs from both federal and local law enforcement agencies. These sessions are often a precursor to new product orders."

"We are working very hard to capitalize on a number of new business prospects," Briggs said. "If our efforts during the coming months bear fruit, we believe LEA could deliver much improved operating results during fiscal 2011."

Year-to-date Results

Net sales at the nine-month mark were $4.3 million versus $10.5 million in the comparable period a year ago. Last year's nine-month results benefited from a non-recurring $5.7 million order from a large government agency. Gross margin for the nine-month period was 27% versus 32% in the same period last year. Operating loss was $1.0 million versus an operating loss of $156,000 at the nine-month mark a year ago. Net loss was $2.8 million, or $0.11 per share, versus net income of $593,000, or $0.02 per share, in the comparable period last year.

About Law Enforcement Associates Corporation

LEA is a leading security and surveillance technology Company that manufactures and markets a diverse product line to the worldwide law enforcement, military, security and corrections markets. The Company's Audio Intelligence Devices (AID) division has been serving the law enforcement sector for more than 30 years and is one of the most respected names in the surveillance equipment industry. LEA's products are used by a wide variety of government and non-governmental agencies, as well as public and private companies. These include military bases, nuclear facilities, embassies, government installations, oil refineries, United Nations and NATO locations. LEA's products have been used at high-profile events such as the Summer & Winter Olympics, Super Bowl, U.S. Golf Championship, and the Democratic and Republican National Conventions. Its products include the Under Vehicle Inspection System (UVIS), EDK123 (Explosive Detection Kit), Bloodhound and Birddog GPS Tracking Systems, Graffiti Cam, Letter-bomb Visualizer Spray, and a wide variety of Audio & Video Surveillance Equipment. Headquartered in Raleigh, N.C., the Company has been featured in many industry publications and websites. For more information, please visit www.leacorp.com.

Forward-Looking and Cautionary Statements

This release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Among other things, these statements relate to our financial condition, results of operations and future business plans, operations, opportunities and prospects. In addition, we and our representatives may from time to time make written or oral forward-looking statements, including statements contained in filings with the Securities and Exchange Commission and in our reports to stockholders. These forward-looking statements are generally identified by the words or phrases "may," "could," "should," "expect," "anticipate," "plan," "believe," "seek," "estimate," "predict," "project" or words of similar import. These forward-looking statements are based upon our current knowledge and assumptions about future events and involve risks and uncertainties that could cause our actual results, performance or achievements to be materially different from any anticipated results, prospects, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements are not guarantees of future performance. Many factors are beyond our ability to control or predict. You are accordingly cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date that we make them. For description of factors that may cause actual results to differ materially from such forward-looking statements, see the Company's Annual Report on Form 10-K for the year ended 2009, and other reports from time to time filed or furnished to the Securities and Exchange Commission. We do not undertake to update any forward-looking statement that may be made from time to time by us or on our behalf.

                 LAW ENFORCEMENT ASSOCIATES CORPORATION
             Condensed Consolidated Statements of Operations
         For the Three Months Ended September 30, 2010 and 2009

                                              September 30,  September 30,
                                                  2010           2009
                                               (Unaudited)    (Unaudited)
                                              -------------  ------------- 

 Net sales                                    $   1,350,015  $   1,920,551

 Cost of sales                                      969,875      1,288,833
                                              -------------  ------------- 

     Gross profit                                   380,140        631,718
                                              -------------  ------------- 

 Research and development                            65,917         63,762
 Loss on impairment of long-lived assets            602,497              -
 Operating expenses                                 731,464        723,980
                                              -------------  ------------- 

     Total operating expenses                     1,399,878        787,742
                                              -------------  ------------- 


 Operating loss                                  (1,019,738)      (156,024)
                                              -------------  ------------- 

 Other income (expense)
   Other income                                       4,626          1,287
   Interest income                                       15            787
   Interest expense                                       -         (8,524)
                                              -------------  ------------- 

     Total other income (expense)                     4,641         (6,450)
                                              -------------  ------------- 

 Net loss before income taxes                    (1,015,097)      (162,474)

 Income tax (expense) benefit                    (1,257,672)        63,501
                                              -------------  ------------- 

 Net loss                                     $  (2,272,769) $     (98,973)
                                              =============  ============= 

 Weighted average number of common shares         
  subject to redemption                           1,200,000      1,200,000 
 Net income (loss) per share common shares
  subject to redemption, basic and diluted    $           -  $        0.01
 Weighted average number of common shares
  outstanding, excluding shares subject to 
  redemption                                     24,582,436     24,582,436
 Net loss per common share, excluding shares
  subject to redemption, basic and diluted    $       (0.09) $       (0.00)









                 LAW ENFORCEMENT ASSOCIATES CORPORATION
             Condensed Consolidated Statements of Operations
          For the Nine Months Ended September 30, 2010 and 2009

                                              September 30,  September 30,
                                                  2010           2009
                                               (Unaudited)    (Unaudited)
                                              -------------  ------------- 

 Net sales                                    $   4,309,294  $  10,458,950

 Cost of sales                                    3,128,853      7,143,142
                                              -------------  ------------- 

     Gross profit                                 1,180,441      3,315,808
                                              -------------  ------------- 

 Research and development                           216,089        239,861
 Loss on impairment of long-lived assets            602,497              -
 Operating expenses                               2,179,222      1,969,723
                                              -------------  ------------- 

     Total operating expenses                     2,997,808      2,209,584
                                              -------------  ------------- 


 Operating income (loss)                         (1,817,367)     1,106,224
                                              -------------  ------------- 

 Other income (expense)
   Loss on sale of assets                           (17,823)        (8,361)
   Other income                                       8,042         11,625
   Interest income                                      364            812
   Interest expense                                       -       (145,188)
                                              -------------  ------------- 

     Total other income (expense)                    (9,417)      (141,112)
                                              -------------  ------------- 

 Net income (loss) before income taxes           (1,826,784)       965,112

 Income tax expense                                (951,011)      (372,045)
                                              -------------  ------------- 

 Net income (loss)                            $  (2,777,795) $     593,067
                                              =============  ============= 

 Weighted average number of common shares         
  subject to redemption                           1,200,000      1,200,000
 Net income (loss) per share common shares
  subject to redemption, basic and diluted    $           -  $        0.05
 Weighted average number of common shares
  outstanding, excluding shares subject to 
  redemption                                     24,582,436     24,582,436
 Net loss per common share, excluding shares
  subject to redemption, basic and diluted    $       (0.11) $        0.02









                  LAW ENFORCEMENT ASSOCIATES CORPORATION
                  Condensed Consolidated Balance Sheets

                                              September 30,  December 31,
                                                  2010           2009
                      Assets                   (Unaudited)     (Audited)
                                              -------------  ------------- 
 Current Assets
   Cash                                       $     234,075  $     480,148
   Trade accounts receivable (net of
    allowance for doubtful accounts of 
    $55,000 at September 30, 2010 and 
    December 31, 2009)                              786,160        982,505
   Refundable income taxes                                -        150,000
   Inventories                                    1,581,738      1,505,777
   Prepaid expenses                                  94,826         43,946
   Deferred tax asset - current                           -        246,368

                                              -------------  ------------- 
     Total current assets                         2,696,799      3,408,744
                                              -------------  ------------- 

 Property and Equipment - net                       108,094        150,971
                                              -------------  ------------- 

 Other Assets
   Intangibles - net                              1,546,799      2,324,809
   Deferred tax asset, less current portion               -        704,643

                                              -------------  ------------- 
     Total other assets                           1,546,799      3,029,452
                                              -------------  ------------- 

 Total assets                                 $   4,351,692  $   6,589,167
                                              =============  ============= 










                  LAW ENFORCEMENT ASSOCIATES CORPORATION
                  Condensed Consolidated Balance Sheets

                                              September 30,   December 31,
                                                  2010           2009
     Liabilities and Stockholders' Equity      (Unaudited)     (Audited)
                                              -------------  ------------- 
 Current Liabilities
   Trade accounts payable                     $     918,073  $     490,646
   Accrued expenses:
     Accrued salaries, wages and benefits           157,703        116,288
     Contract settlement                             30,000        100,000
     Warranty provision                              19,648         50,271
     Other accrued expenses                          15,077         65,072
     Customer deposits                              242,096         20,000
                                              -------------  ------------- 
     Total current liabilities, before shares
      subject to redemption                       1,382,597        842,277
                                              -------------  ------------- 

   Common stock, subject to redemption,
    1,200,000 shares, at redemption value         1,500,000      1,500,000

     Total current liabilities                    2,882,597      2,342,277
                                              -------------  ------------- 

     Total liabilities                            2,882,597      2,342,277
                                              -------------  ------------- 

 Stockholders' Equity
   Common stock, $0.001 par value, 50,000,000
    authorized, 25,782,436 (including 
    1,200,000 shares subject to redemption) 
    issued and outstanding at September 30, 
    2010 and December 31, 2009                       25,782         25,782
   Treasury stock at cost, 595 shares of
    common stock                                       (625)          (625)
   Paid in capital in excess of par               4,995,595      4,995,595
   Retained earnings/(accumulated deficit)       (3,551,657)      (773,862)
                                              -------------  ------------- 
     Total stockholders' equity                   1,469,095      4,246,890
                                              -------------  ------------- 

 Total liabilities and stockholders' equity   $   4,351,692  $   6,589,167
                                              =============  =============

Contact Information

  • Contact:
    Pfeiffer High Investor Relations, Inc.
    Geoff High
    303-393-7044