American Defense Systems, Inc. Reports First Quarter 2008 Financial Results

First quarter revenue increases 52 percent year-over-year

Management reiterates full year 2008 revenue guidance
HICKSVILLE, N.Y.--(Business Wire)--
American Defense Systems, Inc. "ADSI", a leading provider of
advanced transparent as well as opaque armor, architectural hardening
and security products for the defense and homeland defense markets,
today announced financial results for the first quarter 2008, ended
March 31, 2008.

Mr. Anthony J. Piscitelli, Chairman & Chief Executive Officer of
American Defense Systems, Inc,, stated, "I am pleased to report ADSI
achieved an impressive 52 percent improvement in top line growth
year-over-year during the first quarter. Although some revenues which
we expected to generate in the first quarter have been pushed into the
second quarter due to slower than expected prototype testing and
approval by the military for new equipment orders, based on the
strength of our organic growth in the quarter and upcoming
availability of new products we are reiterating our annual revenue
target range. Our forecast reflects the confidence we have in
expanding the market penetration of our armor and architectural
business lines as we believe these end markets continue to show signs
of growth.

"In late March and early April we successfully secured a total of
$15 million in financing aimed at funding our organic growth
initiatives, expanding our international sales channels and funding
potential targeted acquisitions. As we look out on fiscal 2008, we see
new product introductions as providing additional long-term growth
drivers to ADSI, including the formal launch of our state-of-the-art
T2 interactive live-fire training system as well as the availability
of our American Anti Ram vehicle barriers. We believe these innovative
new offerings will extend our leadership position within our core
defense and homeland defense markets," concluded Mr. Piscitelli.

Revenues for the first quarter of 2008 were $9.4 million, an
increase of 52 percent from the $6.2 million reported for the same
period in 2007. Contract backlog as of March 31, 2008 totaled $48
million, up 37 percent compared to the March 31, 2007 contract backlog
of $35 million.

Gross margin as a percentage of revenue for the first quarter of
2008 was 42.0 percent as compared to 46.3 percent for the first
quarter of 2007.

Notable cash expenditures during the quarter included $1.0 million
associated with the development of the company's state-of-the-art T2
interactive live-fire training system, $0.5 million associated with
previously announced acquisitions, $0.5 million related to the
company's SEC registration and pending public exchange listing
initiative and a $0.2 million contribution to the Marine Corps-Law
Enforcement Foundation (MCLEF).

Net loss in accordance with Generally Accepted Accounting
Principles (GAAP) for the first quarter of 2008 was $1.7 million, or
$(0.04) per basic and diluted share, compared to a GAAP net income for
the first quarter 2007 of $0.6 million, or $0.01 per basic and diluted
share.

GAAP net loss during the first quarter of 2008 also includes the
impact of $1.6 million in non-cash charges related to the loss on the
adjustment of fair value associated with the series A convertible
preferred stock and related warrants as well as stock based
compensation expense.

Excluding the $1.6 million in non-cash charges related to the loss
on the adjustment of fair value associated with the series A
convertible preferred stock and related warrants as well as stock
based compensation expense, the company reported non-GAAP loss for the
first quarter of 2008 of $0.1 million, or $(0.00) per basic and
diluted share. Refer to the "Use of Non-GAAP Measures" section and
accompanying financial table for a reconciliation of GAAP financial
information to non-GAAP.

ADSI ended the first quarter with approximately $9.8 million in
cash and cash equivalents. Subsequent to the end of the first quarter
2008, the company completed the second phase of a previously announced
capital raise which provided the company with the final $4.0 million
of the $15.0 million financing round announced on April 8, 2008.

Financial Guidance

Based on current business conditions and expectations, ADSI
reiterates its previously released fiscal year 2008 top line revenue
target of between $47.0 million and $54.0 million, as compared to
revenue of $36.5 million reported for fiscal year 2007.

Use of Non-GAAP Measures

The non-GAAP financial measures discussed in the text of this
press release and accompanying non-GAAP supplemental information
represent financial measures used by American Defense Systems'
management to evaluate the operating performance of the company and to
conduct its business operations. Non-GAAP financial measures discussed
in this press release exclude non-cash charges related to stock-based
compensation expense, losses associated with adjustments from cost to
fair value for the company's series A convertible preferred stock and
losses associated with adjustments to fair value for the related
warrants. Management uses the non-GAAP financial measures for planning
purposes, including the preparation of operating budgets and to
determine appropriate levels of operating and capital investments.
Management also believes that the non-GAAP financial measures provide
additional insight for investors in evaluating ADSI's financial and
operational performance. However, these non-GAAP financial measures
are not intended to be an alternative to financial measures prepared
in accordance with GAAP and should not be considered in isolation from
our GAAP results of operations. A detailed reconciliation between the
company's GAAP and non-GAAP financial results is provided in this
press release and investors are advised to carefully review and
consider this information as well as the GAAP financial results that
are disclosed in the company's SEC filings.

About American Defense Systems, Inc. (ADSI)

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 about American Defense Systems, Inc. please
visit the corporate Web site at www.adsiarmor.com.

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 registration
statement on Form 10. Statements in this press release should be
evaluated in light of these important factors.

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American Defense Systems, Inc. and Subsidiaries
Consolidated Statements of Operations
For the three months ended March 31
2008 2007
(Unaudited) (Unaudited)
------------ ------------
Contract revenues earned $ 9,420,120 $ 6,163,856
Cost of revenues earned 5,466,678 3,308,327
------------ ------------
Gross profit 3,953,442 2,855,529

Operating expenses
Research and development expense 165,196 137,653
Marketing expense 632,307 670,195
General and administrative expense 3,085,713 1,317,554
Depreciation 134,769 83,971
Settlement of litigation 57,377 83,187
Loss on disposal of fixed assets - 136
------------ ------------
Total operating expenses 4,075,362 2,292,696
------------ ------------
Net operating (loss) (121,920) 562,833

Other (income) and expenses:

Loss on adjustment of fair value
Series A convertible preferred stock
classified as a liability 1,428,665 -
Loss on investor warrant liability 107,589 -
Other income and expense 9,046 (1,411)
Interest expense 55,737 787
Financing Charge 4,536 -
Interest income (31,123) (39,711)
------------ ------------
Total other (income) and expenses 1,574,450 (40,335)
------------ ------------
Net income (loss) before income taxes (1,696,370) 603,168

Provision (benefit) for income taxes - 3,750
------------ ------------
Net income (loss) $(1,696,370) $ 599,418
============ ============
Net (loss) per share - basic and diluted $ (0.04) $ 0.01
============ ============
Weighted average number of shares
outstanding
During the year - basic and diluted 39,124,616 38,801,840
============ ============
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American Defense Systems, Inc. and Subsidiaries
Reconciliation of GAAP Financial Information to Non-GAAP
For the three months ended March 31, 2008

Non-GAAP loss $ (126,431)

Less: Loss on adjustment of fair value Series A
convertible preferred stock classified as a liability (1,428,665)

Loss on investor warrant liability (107,589)

Stock based compensation (33,685)

------------
GAAP loss $(1,696,370)
============

Loss Per Share - basic and diluted

Weighted average number of shares outstanding 39,124,616
============

Net income (loss) per share - basic and diluted
Non-GAAP $ (0.00)
============

GAAP $ (0.04)
============
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American Defense Systems, Inc. and Subsidiaries
Consolidated Balance Sheets

March 31, December
31,
ASSETS 2008 2007
----------- -----------
Current Assets:
Cash $ 9,751,481 $ 1,479,886
Accounts receivable, net 4,758,135 6,711,161
Inventory 1,095,918 737,458
Prepaid expenses and other current assets 2,474,631 1,856,236
Deferred tax asset 4,136,982 4,136,982

Costs in excess of billings on uncompleted
contracts 8,697,869 5,011,974

Deposits 571,226 608,020
----------- -----------
Total current assets 31,486,242 20,541,718

Property and equipment, net 1,428,145 1,194,676

Deferred financing cost 1,009,190 -

Goodwill 1,960,361 1,680,361

Advances for future acquisitions 158,000 138,000
----------- -----------
Total assets $36,041,938 $23,554,754
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,236,151 $ 4,381,930
Accrued payroll 270,519 205,230
Accrued expenses 1,059,519 599,258
Due to Tactical Applications Group - 1,512,741
Deferred tax liability 3,965,150 3,965,150
Short term notes payable 134,515 64,947
----------- -----------
Total current liabilities 11,665,854 10,729,256

Long term notes payable 21,328 27,670

Mandatorily redeemable Series A Convertible
Preferred Stock (cumulative). 5,000,000
shares authorized, 15,000 shares issued
and outstanding 11,261,162 -
Investor warrant liability 1,275,423 -
----------- -----------
Total liabilities 24,223,767 10,756,926
----------- -----------
Stockholders' equity:
Common stock, $0.001 par value, 100,000,000
shares
authorized, 39,207,950 and 38,957,950 shares
issued
and outstanding as of March 31, 2008 and
December
31, 2007 48,949 48,379
Additional paid-in capital 10,481,575 9,765,432
Accumulated (deficit) 1,287,647 2,984,017
----------- -----------
Total stockholders' equity 11,818,171 12,797,828
----------- -----------
Total liabilities and stockholders' equity $36,041,938 $23,554,754
=========== ===========
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American Defense Systems, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the three months ended March 31

2008 2007
(Unaudited) (Unaudited)
------------ ------------
Cash flows from operating activities:
Net income (loss) $(1,696,370) $ 599,419

Adjustments to reconcile net income
(loss) to net cash
used in operating activities:
Change in fair value associated with
preferred stock and warrants 1,536,254 -
Stock based compensation expense 33,685 -
Depreciation and amortization 134,769 83,971
Decrease in inventory valuation - -

Changes in operating assets and
liabilities:
Restricted cash - 216,101
Accounts receivable 1,953,026 (599,289)
Inventories (358,460) -
Deposits and other assets 36,794 (35,363)
Cost in excess of billing on
uncompleted contracts (3,685,895) (1,392,808)
Prepaid expenses and other assets (618,395) 61,101
Deferred tax asset - (2,471,745)
Deferred financing costs (658,500) -
Investment in affiliate (20,000) (40,000)
Accounts payable and accrued expenses 1,303,390 (657,503)
Accrued liabilities 425,550 60,342
Deferred tax liability - 2,471,745
Due to related party (1,012,741) -
------------ ------------
Net cash used in operating activities (2,626,893) (1,704,029)
------------ ------------

Cash flows from investing activities:
Purchase of equipment (368,238) (173,726)
Cash paid for acquisition in excess of
cash received (100,000) -
Security deposits - -
------------ ------------
Net cash used in investing activities (468,238) (173,726)
------------ ------------
Cash flows from financing activities:
Proceeds from notes payable 69,568 -
Repayments of short term financing (6,342) (3,397)
Proceeds from sale of Series A
Convertible
Preferred Shares, net of capitalization
costs of $270,000 11,303,500 -
------------ ------------
Net cash provided by (used in)
financing activities 11,366,726 (3,397)
------------ ------------
NET INCREASE (DECREASE) IN CASH 8,271,595 (1,881,152)
CASH AT BEGINNING OF YEAR 1,479,886 4,951,302
------------ ------------
CASH AT END OF PERIOD $ 9,751,481 $ 3,070,150
-------------------------

Supplemental disclosure of cash flow
information:
Cash paid during the year for interest $ 6,163 $ 787
============ ============
Cash paid for taxes $ - $ -
============ ============

Supplemental disclosure of non-cash
financing
activities
Shares issued in lieu of compensation $ - $ -
============ ============
Shares issued for consulting services $ - $ -
============ ============
Fair value of placement agent warrants $ 374,933 $ -
============ ============

Assets and liabilities received in acquisition of American Anti-Ram,
Inc.
Fixed assets $ 30,000 $ -
Inventory $ 120,000 $ -
Goodwill $ 280,000 $ -
Accounts payable and accrued expense $ (30,000) $ -

Shares issuable in connection with
acquisition $ (200,000) $ -
Cash paid to American Anti-Ram, Inc. $ (100,000) $ -
Amounts due to American Anti-Ram, Inc. $ (100,000) $ -
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American Defense Systems, Inc.
Mr. Roger Ward, +1-516-390-5300, x326
Vice President of Marketing & Investor Relations
rward@adsiarmor.com

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