Pacific Safety Products Inc.
TSX VENTURE : PSP

Pacific Safety Products Inc.

September 22, 2005 17:19 ET

Pacific Safety Products Inc. Reports Fiscal 2005 Financial Results

KELOWNA, BRITISH COLUMBIA--(CCNMatthews - Sept. 22, 2005) - Pacific Safety Products Inc. (TSX VENTURE:PSP) ("PSP" or "the Company") announces its financial results for the fiscal year ended June 30, 2005.

Sales for the year were $16.7 million, which represents an increase of $4.1 million, or 33.0% over last year's sales of $12.5 million. Revenue generated from the two Canadian Military government contracts totaled $6.3 million for the year, or just over 10% of the total revenue expected over the life of the contracts. The Company incurred a loss of $2,555,671 or $0.153 per share, compared to a loss of $613,868 or $0.050 per share last year.

"The fiscal 2005 financial results were disappointing," states David Scott, Interim Chief Executive Officer. "In simple terms we built cost into our plan ahead of revenue and compounded this situation by underestimating the effort required to start up two significant contracts. While bottom line results are the ultimate measure for shareholders, it should not be forgotten that there were a number of positive decisions and results in quarter four that augur well for the future of the Company. These include meeting the Department of National Defence delivery requirements for quarter four, fiscal 2005, finalizing a co-production agreement with ArmorWorks for patented "T-Flex" ballistic material, establishing a sales and distribution network in the United States for our emergency and law enforcement product lines and last but not least recruiting, training and inducting 70 new employees, or a 40% increase, in the employee team within 90 days."

Recognizing that preparing for the contracts and penetrating the US market would require significant working capital, the Company secured financing through two private placements during the year, which raised $7.6 million. At year-end, the Company has a strong working capital balance of $5.9 million, compared to $1.3 million last year.

"We are ever mindful of a debt unpaid to our shareholders, both new and long-standing, and commit to deliver more positive results in fiscal 2006," continues David Scott. "PSP has excellent products, a talented team of individuals and a significant opportunity to excel. All the fundamentals are in place for growth and success. As we demonstrate our ability to grow and provide positive results we will continue to expand our horizons with new products and new markets. I want to thank the shareholders and stakeholders of Pacific Safety Products and commit to you that your patience is appreciated and the management and employee team are working diligently to ensure that your continuing support will be rewarded."

For complete financial statements with notes and management discussion and analysis please refer to PSP's annual report to shareholders. This report is posted on SEDAR (www.sedar.com) and on our web site or one can be requested by contacting PSP using the methods listed at the end of this release. Summary financial results for the year ended June 30, 2005 and summary consolidated financial results for June 30, 2004, are as follows:



SUMMARY BALANCE SHEETS

AS AT JUNE 30th 2005 2004
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ASSETS
CURRENT ASSETS $ 10,108,639 $ 4,037,426
LONG-TERM PREPAID EXPENSES AND DEPOSITS 24,072 -
FUTURE INCOME TAXES RECOVERABLE 289,586 -
PROPERTY, PLANT AND EQUIPMENT 3,332,417 2,813,461
OTHER ASSETS 83,447 306,577
INTANGIBLE ASSETS 471,278 366,648
GOODWILL 2,834,353 2,834,353
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TOTAL ASSETS $ 17,143,792 $ 10,358,465
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LIABILITIES
CURRENT LIABILITIES $ 4,728,368 $ 2,688,971
LONG-TERM DEBT 3,841,429 4,062,000
FUTURE INCOME TAXES PAYABLE - 247,842
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TOTAL LIABILITIES 8,569,797 6,998,813
SHAREHOLDERS' EQUITY 8,573,995 3,359,652
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 17,143,792 $ 10,358,465
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SUMMARY STATEMENTS OF OPERATIONS

THREE THREE TWELVE TWELVE
MONTHS ENDED MONTHS ENDED MONTHS ENDED MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2005 2004 2005 2004
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SALES $ 6,010,002 $ 3,429,766 $ 16,704,086 $ 12,560,648
COST OF
SALES 5,066,481 2,479,723 13,019,266 8,928,298
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GROSS
MARGIN 943,521 950,043 3,684,820 3,632,350
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EXPENSES 1,615,468 1,031,028 5,368,519 3,787,119
INTEREST
ON LONG-
TERM DEBT 140,174 139,319 580,742 538,348
EXPENSES
RELATED
TO ABANDONED
PROJECTS 676,768 126,522 676,768 126,522
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INCOME (LOSS)
BEFORE INCOME
TAXES (1,488,889) (346,826) (2,941,209) (819,639)
INCOME TAXES
(RECOVERY) 133,096 (4,384) (385,538) (205,771)
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NET INCOME
(LOSS) (1,621,985) (342,442) (2,555,671) (613,868)
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BASIC
EARNINGS
(LOSS)
PER SHARE $ (0.086) $ (0.027) $ (0.153) $ (0.050)
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WEIGHTED
AVERAGE
COMMON
SHARES
ISSUED AND
OUTSTANDING 18,846,632 12,462,220 16,743,780 12,376,454
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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, the Alberta Securities Commission, the Ontario Securities Commission, 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.

OVERVIEW OF THE BUSINESS

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 armour to protect against ballistic, stab and fragmentation threats. PSP is the largest armor manufacturer in Canada and also 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 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 235 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 is a reporting issuer in British Columbia, Alberta and Ontario, Canada and publicly trades under the symbol PSP on the TSX Venture Exchange.

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

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