Nasdaq may delist Force Protection

Force Protection's accounting firm quits

FILE

Force Protection's Cheetah is smaller and faster than its Buffalo and Cougar vehicles.

Armored vehicle maker Force Protection Inc. said Monday that its stock could be removed from the Nasdaq Stock Market and that its outside accounting firm has resigned.

The Ladson-based company said it received notice on March 19 from Nasdaq officials stating that Force Protection was not in compliance with exchange rules because it had not filed its annual report for 2007 on time. As a result, Nasdaq said it could delist the stock.

Force Protection said it has requested and been granted a hearing before a panel that will decide whether a delisting is appropriate. No hearing date was given. Until then, shares of Force Protection's common stock will continue to trade on Nasdaq, where it has traded since January 2007.

"There can be no assurance, however, that Force Protection's stock will not be delisted," the company said.

Separately, Force Protection said it was informed on March 18 that Elliott Davis LLC was resigning as its independent registered public accounting firm, effective immediately. Greenville-based Elliott Davis had served in that role since November 2006.

Elliott Davis has not completed an audit or issued a report on Force Protection's financial statements for 2007.

Last month, Force Protection said it had "discovered significant accounting errors during its year-end review." Some of those errors were related to the way it recorded payments for inventory it bought from a subcontractor after that contract was terminated.

Force Protection said it will restate its previously reported results for the quarter and nine-month period ended Sept. 30.

Force Protection has restated its financial reports in the past and previously had reported to the Securities and Exchange Commission that it had found "material weaknesses in its internal control over financial reporting." The company said it does not think those weaknesses have been corrected and that they will continue to affect its financial reporting through the end of the current quarter.

In a conference call with investment analysts on Monday, Force Protection's chief executive, Michael Moody declined to give an estimate of how soon the company will file its 2007 annual report on Securities and Exchange Commission, a form known as a 10-K.

"The objective of management ... is to file an accurate 10-K," Moody said. "When we have an accurate 10-K, then we'll file it."

Force Protection's shares have fallen sharply since last May, when they posted a closing high of $30.27. The stock closed Monday at $2.03 a share, up 22 cents, or 12.2 percent.

In addition to the company's accounting problems, disappointment among investors with the number of vehicles ordered by the U.S. military has pressured the stock.

Moody said Force Protection's orders for this year totaled 1,134 vehicles, of which nearly 230 had been delivered by the end of February. The remaining approximately 870 trucks are expected to be delivered this year, he said, and the company currently has no orders on the books for 2009.

However, he emphasized, Force Protection is working along three main lines to try to make up for the diminished orders from the Pentagon:

--The company is "extremely active" in pursuing sales of its vehicles to foreign governments.

--It hopes to secure a significant share of contracts to maintain or upgrade vehicles already bought by the U.S. military.

--It is working on getting orders for its newest, smallest vehicle, the Cheetah, which Moody believes could be an interim replacement for the Humvee before a permanent replacement is phased in around 2014 or 2015.

Moody said the company also is trying to bolster its relationships with the Pentagon, legislators and investors. He said Force Protection officials believe they lost out to bigger companies such as BAE Systems and Navistar in the most recent rounds of orders from the Army and Marine Corps because of their "ability to tap into Congressional delegations."

Force Protection makes mine-resistant vehicles equipped with special V-shaped metal hulls that have been credited with saving the lives of service members in Iraq and other war zones littered with roadside bombs.