Pacific Safety Products Inc.
TSX VENTURE : PSP

Pacific Safety Products Inc.

August 09, 2005 17:13 ET

Pacific Safety Products Inc.: Corporate Update

KELOWNA, BRITISH COLUMBIA--(CCNMatthews - Aug. 9, 2005) - Pacific Safety Products Inc. (TSX VENTURE:PSP) ("PSP" or "the Company") releases update on strategic initiatives.

"At the nine-month mark we reported on a number of our strategic initiatives and now at the end of our fiscal year it is time to review our progress," stated Brad Field, President and CEO.

Following are the objectives set for PSP in fiscal 2005:

- Secure and deliver large Canadian government contracts

- Secure necessary resources to fund future growth

- Engineer total solution ensembles for our customers

- Expand into the US market

- Expand our current Canadian markets for our core products

- Return the Company to consistent profitability

Following is a status report as at today's date:

- Secure and deliver large Canadian government contracts

As scheduled, full production of our contract to provide Fragmentation Protective Vests to the Department of National Defence (DND) went into effect in our Arnprior facility in the first month of Q4. According to plan, Arnprior staff has increased by 35 production personnel to meet the demands of the contract. To date over 9,500 vests representing $5.7 million have been shipped to DND.

The Horizon 1 Chemical Warfare Protective Coveralls ("H1") contract was slated to commence production in May with full production being reached in the first quarter of fiscal 2006. The first 200 Horizon 1 Coveralls were shipped one month early and since then an additional 2,500 coveralls have come off the line in our Kelowna facility. Kelowna has added an additional 45 production personnel to its staff and a second shift has been added to increase manufacturing output. To date $910,000 in revenue has been realized through the H1 contract.

- Secure necessary resources to fund future growth

PSP's working cash position remains strong and is expected to improve as it is anticipated that a significant amount of warrants will be exercised from our first private placement equity financing earlier this year at an exercise price of $0.85. Approximately 350,000 warrants have been exercised to date. Exercise of the remaining warrants would provide PSP with an additional $1.4 million which will be used for the growth initiatives identified below. These warrants expire September 23, 2005. As a result of the second private placement equity financing, there are an additional 875,000 warrants outstanding which expire January 9, 2006. If these warrants are exercised it would provide PSP with an additional $3.28 million.

- Engineer total solution ensembles for our customers

PSP's project to manufacture ballistic material using ArmorWorks patented "T-Flex" technology is well underway. Two lots of ballistic material have been made from different fibers using this technology and our Research and Development team is about to embark on a rigorous testing program to identify the ballistic performance of the new materials. Having control of the supply of our own ballistic material will be highly advantageous for PSP.

- Expand into the US Market

PSP continues to look for opportunities in the US market either through joint ventures with successful like-minded companies in the United States or by creating our own manufacturing presence. In order to fully resource this objective, PSP announced a reorganization of the company with the reassignment of Mr. Brad Ditchfield from Executive Vice President Operations to Executive Vice President US Business Development and the hiring of Ms. Cynthia Mooney as the Director of Federal Law Enforcement and Military and Government Sales. Mr. Ditchfield will transition his operational duties for the Canadian market over to Mr. Gerry Bush, our newly assigned Chief Operating Officer, PSP Canada, which will allow him to focus solely on creating business opportunities in the US market. PSP's newly designed distribution channels utilizing experienced American distributors and dealers is already showing an increase in our overall business in this market.

- Expand our current Canadian markets for core product.

Q4 was a strong quarter for our core products with revenue of $1.7 million. We began manufacturing body armor for Durham Regional Police based on a contract won in Q2 for just over $0.5 million. This is a four year contract which other police departments in Ontario can order from. In Q4 we had orders from Windsor Police worth $177K piggy back off this contract. Q4 also saw additional wins by PSP of contracts for soft body armor for Securicor Canada Limited (a national security company) and Sûrete du Quebec (the Quebec Provincial Police) for just under $1.0 million. In addition, PSP has bids in progress with current and new customers for a value of approximately $4.4 million.

- Return the Company to consistent profitability

While we are making good progress on ensuring that the company remains consistently profitable, we will have to complete the ramp-up stages of our two major contracts before we realize the full financial benefits from them. In the fourth quarter we continued to add resources and personnel to these large programs which carry one-time costs for the company in training staff and building infrastructure. A total of 80 production personnel have been hired in the last quarter and we still expect to hire an additional 20 personnel over the next three months. Both of our production facilities will be at full production capacity for two shifts for the foreseeable future. This is where we will realize the full financial gains of not only our contract business but the ever increasing core order book as well.

Summary

We are making excellent progress on all of our strategic initiatives. Our order book continues to remain at an all-time high at approximately $42.3 million, plus potential options of $11.8 million, for a total of $54.1 million. Orders from core customers remain strong. Our production teams have met the challenge of ramping up to address the large Canadian contracts, which we are delivering on or ahead of schedule. Our Sales and Marketing team also continues to identify major new opportunities domestically and internationally while our Product Development Group is working to expand our product offerings in all market segments. In short, PSP continues to be excited about the present and future opportunities for the Company in bringing our everyday heroes home safely.

About PSP - The mission statement of Pacific Safety Products Inc. is ...we bring everyday heroes home safely™. PSP is an established industry leader in the production, distribution and sale of high-performance and high-quality safety products. These products primarily include body armor to protect against ballistic, stab and fragmentation threats. PSP is the largest armor manufacturer in Canada and has significant international customers. The Company also produces tactical clothing and emergency medical kits. These products are marketed under the labels Pacific Emergency Products®, PROTECTED by PSP™, EXPLOSAFE®, and O2B.O.S.S.™. The Company's primary customers include military agencies, law enforcement agencies, private security companies, fire departments and emergency medical service organizations.

The Company strives to provide quality protection solutions by effectively integrating the latest technologies to serve these customers' needs. Founded in 1984, PSP has grown to include more than 260 employees at three Canadian facilities in Kelowna, British Columbia; Brampton, Ontario; and Arnprior, Ontario. These facilities are equipped with complete design, production and research capabilities. The Kelowna facility has one of the most advanced non-government operated ballistic research labs in North America.

In light of the sensitive nature of its products and customers, PSP may not disclose all information regarding end-users, government agencies or countries purchasing its products. It continues to be PSP's corporate policy to conduct business only with recognized domestic law enforcement, military and government agencies and foreign agencies that are approved by the Canadian Department of Foreign Affairs and International Trade.

Pacific Safety Products Inc. is a reporting issuer in British Columbia, Alberta and Ontario, Canada and publicly trades under the symbol PSP on the TSX Venture Exchange.

Forward-Looking Statements: This release may contain forward-looking statements based on management's expectations, estimates and projections. All statements that address expectations or projections about the future, including statements about the Company's strategy for growth, product development, market position, expected expenditures and financial results are forward-looking statements. Some of the forward-looking statements may be identified by words like "expects", "anticipates", "plans", "intends", "projects", "indicates", and similar expressions. These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions. Many factors, including those discussed more fully elsewhere in this release and in documents, which may be filed with the British Columbia Securities Commission, Alberta Securities Commission, the Ontario Securities Commission and / or the TSX Venture Exchange, as well as others, could cause results to differ materially from those stated. These factors include, but are not limited to changes in the laws, regulations, policies and economic conditions, including inflation, interest and foreign currency exchange rates, of countries in which the Company does business; competitive pressures; successful integration of structural changes, including restructuring plans, acquisitions, divestitures and alliances; cost of raw material, research and development of new products, including regulatory approval and market acceptance; and seasonality of sales in some products.

PSP™, PROTECTED BY PSP™, O2BOSS™ and ...we bring everyday heroes home safely.™ are trademarks of Pacific Safety Products Inc.

Pacific Emergency Products® and EXPLOSAFE® are registered trademarks of Pacific Safety Products Inc.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

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