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SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-K

|ý                                                             | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|------------------------------------------------------------- | ----------------------------------------------------------------------------------------
|For the fiscal year ended December 31, 2003                  
|o                                                             | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|For the transition period
from                             to

Commission File Number 000-50420

DIGITALNET HOLDINGS, INC.(Exact Name of Registrant as Specified in Its Charter)

|Delaware(State or Other Jurisdiction of
Incorporation or Organization)        |  | 52-2339233(I.R.S. Employer Identification No.)
|----------------------------------------------------------------------------- |  | ----------------------------------------------
|2525 Network Place, Herndon, Virginia(Address of Principal Executive Offices) |  | 20171(Zip Code)                               

(703) 563-7500(Registrant's Telephone Number, Including Area Code)

Securities
registered pursuant to Section 12(b) of the Act: None

Securities
registered pursuant to Section 12(g) of the Act: Common Stock, Par Value $.001 Per Share

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for at least the past
90 days. YES ý    NO o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. ý

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the
Act): YES o    NO ý

The aggregate market value of the Common Stock held by non-affiliates of the Registrant was approximately $120 million as of
December 31, 2003, based upon the closing price for the shares of common stock reported on The Nasdaq Stock Market on such date.

As
of March 22, 2004, there were 16,290,158 shares of Common Stock, par value $0.001 per share, outstanding.

Portions
of the Registrant's definitive Proxy Statement for the 2004 Annual Meeting of Stockholders are incorporated by reference, in whole or in part, into Part III hereof.



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TABLE OF CONTENTS



|               |          | 
|-------------- | -------- | 
|Part I         |          | 
|               | Item 1.  | 
|               | Item 2.  | 
|               | Item 3.  | 
|               | Item 4.  | 
|Part II        |          | 
|               | Item 5.  | 
|               | Item 6.  | 
|               | Item 7.  | 
|               | Item 7a. | 
|               | Item 8.  | 
|               | Item 9.  | 
|Part III       |          | 
|               | Item 10. | 
|               | Item 11. | 
|               | Item 12. | 
|               | Item 13. | 
|               | Item 14. | 
|               | Item 15. | 
|Part IV        |          | 
|               | Item 16. | 
|Signatures    
|Certifications

Unless
otherwise indicated (a) all references to "DigitalNet," "Company," "Registrant," "we," "us," "our," and "ours," mean DigitalNet Holdings, Inc. and its subsidiaries,
taken as a whole, and (b) all references to "GTCR" refer to GTCR Golder Rauner, L.L.C. and its affiliates, including GTCR Fund VII, L.P.; GTCR Co-Invest, L.P. and GTCR Partners VII,
L.P.

CAUTIONARY NOTICE
REGARDING FORWARD-LOOKING STATEMENTS

This report contains statements that we believe are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All
statements other than statements of historical fact in this report, including statements regarding our competitive strengths, business strategy, expected benefits of any acquisition, future financial
position, budgets, projected costs and plans and objectives of management are forward-looking statements. In addition, forward-looking statements generally can be identified by the use of
forward-looking terminology such as "may," "will," "expect," "should," "intend," "estimate," "anticipate," "believe," "plan," "continue" or similar terminology. We undertake no obligation to publicly
update or revise any forward-looking statements contained in this report. These forward-looking are not guarantees of future performance and are subject to risks, uncertainties and other factors, some
of which are beyond our control, that could cause actual results to differ materially from those we express or imply in those forward-looking statements. These factors include those we describe under
the caption "Risk Factors" in Part I, Item 1 of this report, and these factors expressly qualify all written and oral forward-looking statements attributable to us.

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PART I

Item 1. BUSINESS

Company Overview

We are a leading provider of strategic consulting, managed network, information security, and application development services and solutions to U.S. civilian,
defense and intelligence federal government agencies as measured by our revenues. We have more than 30 years of proven experience in providing information technology services and solutions to
our U.S. federal government clients. Our comprehensive information technology services and solutions allow our clients to outsource the design, implementation, integration, management, and security of
their increasingly complex computer networks and systems. We are focused on increasing network reliability, reducing overall network costs, and rapidly migrating mission critical network computing
environments to new technologies, which are critical elements for maintaining the daily operations of numerous federal agencies. We were formed as a Delaware corporation on September 7, 2001.

On
November 26, 2002, we acquired all of the membership interests of DigitalNet Government Solutions, LLC (DGS, formerly Getronics Government Solutions, L.L.C.). DGS' results of
operations have been included in our consolidated statement of operations for the year ended December 31, 2002 from the date of acquisition. For the year ended December 31, 2002 we
discuss our pro forma results giving effect to the acquisition of our predecessor, Getronics Government Solutions, L.L.C. as if such transaction had occurred on January 1, 2002. Although this
approach is not consistent with generally accepted accounting principles, we believe it is the most practical way to comment on the results of operations for the year ended December 31, 2002.
Because our performance under a contract with the Immigration and Naturalization Service (INS) Facilities Operations Support (FOS) ended November 30, 2002, and our performance under a
subcontract for the National Aeronautics and Space Administration (NASA) Consolidated Space Operations Contract (CSOC) will end on March 31, 2004, we believe that
information adjusted to exclude the effects of these contracts gives our investors a more meaningful depiction of our ongoing business. Therefore, we often refer to our financial and operating results
for 2002 and 2003 as adjusted to reflect the exclusion of these contracts.

We
provide comprehensive information technology services and solutions through an integrated set of four core offerings:



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The
following table provides a percentage breakout of revenue for the indicated years for each of our core offerings:

|                                        |  | 2002
Pro forma |  | 2003
Actual |  | 2002
As adjusted |  | 2003
As adjusted
|--------------------------------------- |  | -------------- |  | ----------- |  | ---------------- |  | ----------------
|Strategic Consulting Services           |  | %             |  | 1%          |  | %               |  | 1%              
|Managed Network Services                |  | 72%            |  | 64%         |  | 61%              |  | 59%             
|Information Security Solutions          |  | 15%            |  | 20%         |  | 21%              |  | 23%             
|Application Development and Integration |  | 13%            |  | 15%         |  | 18%              |  | 17%             
|                                        |  |                |  |             |  |                  |  |                 
|Total                                   |  | 100%           |  | 100%        |  | 100%             |  | 100%            
|                                        |  |                |  |             |  |                  |  |                 

Competitive Strengths

We believe we are well positioned to address the specific requirements of our clients because we possess the following key competitive strengths:

Knowledge of Our Clients' Business Processes, Information Architecture and Technology Initiatives

We have served a number of our clients for more than 10 years, including some for more than 30 years. Through these long-standing
relationships, we have developed an extensive knowledge of our clients' business processes, cultures, contracting environments, information architectures, and technology initiatives, providing us with
an opportunity to further expand these relationships. This knowledge also enhances our ability to deliver services and solutions that can be efficiently integrated with our clients' existing systems
and business processes in a manner that is consistent with our clients' strategic goals. We have also strategically recruited employees with significant government, military, or technical experience
to increase our knowledge of our clients' business processes and to extend our expertise into new areas. We believe the strength of our long-term relationships is demonstrated by our
success in the task order renewal process.

In-Depth Managed Network Computing and Information Security Expertise

We believe our core strengths are in providing complex network and information security solutions.

In-depth Network Computing.Our expertise in complex network technologies covers the entire life cycle of an
organization's network requirements, including network design, implementation, integration, and management. We consider an organization's network to extend from the desktop to the
wide-area network. Our services and solutions allow our clients to more effectively and predictably manage their network, server, and desktop computing environments. Our services and
solutions include network design, implementation, integration, and management. Our clients have the ability to outsource all of their network requirements to us, or they can retain control over
certain aspects of their network and outsource only selected network management tasks. We have extensive experience in providing large scale network design and installation and managed network
services. As of December 31, 2003, we

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managed
and supported approximately 123,000 users across 24 different networks, including networks in the Department of Defense, the Department of the Treasury, the Department of State, and the
Department of Justice.

Information Security Expertise.We offer a comprehensive, integrated set of information security services and solutions
designed to meet our clients' information security needs. We evaluate our clients' security risks and develop a comprehensive plan to address these risks through the implementation, integration, and
management of our information security solutions.

As
part of our information security services and solutions, we offer TEMPEST and Zone solutions to our clients. Our TEMPEST and Zone solutions involve modifying electronic equipment for
our clients to eliminate or reduce electromagnetic radiation emanations to prevent electronic eavesdropping. We also offer, customize, integrate, and manage a secure software operating system called
XTS, which enables network administrators to control the access, data processing, and storage capability of multiple users across disparate networks with differing security levels. This operating
system has been evaluated by the National Security Agency, or NSA, and received a B3 rating. Division B is the second highest federal security level and B3 is the highest rating within that level. A
B3-rated system is highly resistant to penetration and is tamper-proof.

Highly Skilled Technical and Managerial Professionals

We believe our competitive position is enhanced by our ability to attract, retain, and develop qualified technical and managerial professionals. As of
December 31, 2003, approximately 80% of our nearly 1,650 employees were professional staff. As of December 31, 2003, approximately 67% of our employees held government security
clearances and approximately 54% of these employees held Top Secret clearance or higher, allowing us to work with our clients in highly classified environments. We believe our technical and managerial
training programs have contributed to our ability to attract and retain our professionals. For example, we have developed a Best Practices Program, which is required training for all of our program
managers, deputy program managers, and business managers. This program focuses
on teaching our managers how to comply with government regulations, successfully manage client programs, and develop themselves and their subordinates into better leaders for future assignment.

Disciplined Program Management Review Process

Our disciplined program management review process brings our project teams together on a regular basis to review each of our individual client programs. This
review helps ensure that we are meeting project goals. Employees from our operations, human resources, contracts, and finance organizations meet, at a minimum, on a quarterly basis for each client
program to discuss and evaluate the client program's progress and to develop a plan to ensure that the program is progressing on budget, on time, and that the client is satisfied. We also have
implemented a Quality Initiative Program survey as part of our program management review process. This program allows us to assess our clients' views of our performance and to address any concerns
that are identified.

Experienced Management Team

Our executive team includes Ken S. Bajaj, our Chairman and Chief Executive Officer, who has more than 27 years of experience in the information technology
industry, including 17 years in a government contracting environment. Our core group of eight senior executives has an average of 20 years of experience in the information technology
industry and an average of 15 years of experience providing information technology services and solutions to the federal government. Our Chief Executive Officer and our Chief Financial Officer
previously worked together at AppNet, Inc. in connection with the initial public offering and subsequent sale of AppNet, Inc. to Commerce One, Inc. Members of our executive team
have held senior positions with a number of large information technology services

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providers,
such as Computer Sciences Corporation, Electronic Data Systems Corporation, Getronics NV, I-NET, Inc., Perot Systems Corporation, Wang Laboratories, Inc., Mantech
International, Science Applications International Corporation, and General Dynamics.

Business Strategy

Our objective is to continue to profitably grow our business as a leading provider of information technology services and solutions. Key elements of our strategy
include:

Leverage Our Differentiated Services and Solutions to Expand Our Client Base

We believe our experience and highly differentiated services and solutions offerings will enable us to expand our client base in high growth areas of the federal
information technology services market. We also believe our investment in emerging technologies, and our processes, methodologies, and best practices ensure high quality and consistent offerings in
managed network services, information security solutions, and application development and integration solutions. We intend to continue to leverage our differentiated services and solutions to win
contracts from new clients in the federal government.

Build on Our Longstanding Client Relationships to Cross-Sell Our Full Range of Services and Solutions

We intend to continue our efforts to expand the scope of our existing client relationships by broadening the range of services we provide to our clients.
Providing additional services to our clients should increase our overall knowledge of our clients' business and technical requirements, which we believe will contribute to increased use of our
services over time.

Accelerate Our Sales and Marketing Efforts

Our business development organization is responsible for marketing, developing and acquiring contracts within the federal government. We intend to accelerate our
sales and marketing efforts by adding additional business development personnel, increasing our spending on bid and proposal efforts, and leveraging the industry relationships of Ken S. Bajaj, our
Chief Executive Officer, and Steven Hanau, the President of DGS.

Expand Our Services and Solutions Offerings

We plan to continue expanding our offerings of directory services, mobile computing solutions, and secure remote access solutions. We intend to continue to expand
our services and solutions in areas such as managed network services, information security services, and other emerging technologies. We maintain three state-of-the art
technology labs where our networking and security engineers use their extensive experience to learn about and then test emerging technologies and products. These labs provide an environment for
evaluating the performance and interoperability of networking and security solutions.

Our
advanced technology group develops methodologies and best practices for the introduction of the use of new technologies in our client engagements.

Pursue Strategic Acquisitions

We may pursue strategic acquisitions that can cost-effectively add new clients, specific federal agency knowledge, or technological expertise to
accelerate our access to existing or new markets. We plan to be very selective in our acquisition program and will focus on those businesses in either the government or commercial sectors that broaden
and complement our existing expertise. On February 5, 2004, we announced that we had entered into a definitive agreement to acquire User Technology Associates, Inc. We anticipate that
this transaction will close by the end of March 2004.

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Our Services and Solutions

We provide comprehensive information technology services and solutions through an integrated set of four core offerings:



We
provide many of our services under multi-year contracts.

Strategic Consulting Services and Solutions

We provide strategic consulting services that better enable our clients to improve mission performance and meet legislative mandates through the efficient use of
information technology (IT) and human capital. Our approach to providing strategic consulting services is described in the following table:

|Phase     |  | Service/Solution        |  | Description
|--------- |  | ----------------------- |  | -----------
|         
|Design    |  | Enterprise Architecture |  |           
|          |  |                         |  |           
|          |  |                        
|          |  | Strategic Advisory      |  |           
|          |  |                         |  |           
|          |  |                         |  |            
|          |  |                         |  |            
|          |  |                         |  |            
|          |  |                         |  |            
|          |  |                         |  |            
|          |  |                         |  |            
|          |  |                         |  |            
|          |  |                         |  |            
|         
|Implement |  | Enterprise Architecture |  |           
|          |  |                        
|          |  | Strategic Advisory      |  |           
|          |  |                         |  |            
|          |  |                         |  |            
|          |  |                         |  |            
|          |  |                         |  |            
|          |  |                         |  |            
|          |  |                         |  |            
|          |  |                         |  |            
|          |  |                         |  |            
|         

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|      
|------
|Manage
|      
|      
|      
|      
|      
|      
|      
|      
|      
|      
|      
|Train 
|      
|      
|      

As part of our strategic consulting services and solutions, we recently achieved certification as a Global Registered Education Provider by the
Project Management Institute (PMI). This certification enables us to better assist our government clients to maintain their existing program management professional credentials or obtain their initial
credentials by preparing our client's employees to sit for the Project Management Professional examination. We also plan to leverage this qualification by providing additional training to our
corporate program management staff.

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Managed Network Services and Solutions

We provide managed network services that help our clients more reliably and efficiently manage their increasingly complex network computing environments. Our
services and solutions can be delivered to our clients remotely and onsite. Our approach to providing managed network services and solutions is described in the following table:

|Phase     |  | Service/Solution                  |  | Description
|--------- |  | --------------------------------- |  | -----------
|         
|Design    |  | Network planning and architecture |  |           
|          |  |                                   |  |            
|          |  |                                   |  |            
|          |  |                                   |  |            
|          |  |                                   |  |           
|          |  |                                   |  |           
|          |  |                                   |  |           
|          |  |                                  
|          |  | Network design and engineering    |  |           
|          |  |                                   |  |            
|          |  |                                   |  |            
|          |  |                                   |  |            
|          |  |                                   |  |            
|          |  |                                   |  |            
|          |  |                                   |  |            
|          |  |                                   |  |           
|         
|Implement |  | Network components procurement    |  |           
|          |  |                                  
|          |  | Network components deployment     |  |           
|          |  |                                   |  |           
|         
|Integrate |  | Network integration               |  |           
|          |  |                                   |  |           
|         
|Manage    |  | Network management                |  |           
|          |  |                                   |  |            
|          |  |                                   |  |            
|          |  |                                   |  |            
|          |  |                                   |  |            
|          |  |                                   |  |            
|          |  |                                   |  |            
|          |  |                                   |  |            
|          |  |                                   |  |            
|         
|Train     |  | Network training                  |  |           
|         

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As part of our managed network services and solutions offerings, we have developed several services to assist us in assessing, monitoring, and
managing our clients' network computing environments to improve network reliability and performance. Our Platform Performance Monitor service allows us to assess whether each individual component of a
client's network is functioning properly. Our Network Performance Monitor service allows us to assess a client's network traffic patterns, network delays, and network failures. These tools help us
provide improved network reliability and performance.

Information Security Services and Solutions

We provide information security services and solutions that help our clients protect the availability, integrity, and confidentiality of their data and underlying
computing systems. Our approach to providing information security services and solutions is described in the following table:

|Phase           |  | Service/Solution                         |  | Description
|--------------- |  | ---------------------------------------- |  | -----------
|               
|Risk Assessment |  | Security assessment and policy design    |  |           
|                |  |                                          |  |            
|                |  |                                          |  |            
|                |  |                                          |  |           
|               
|Design          |  | Security planning and architecture       |  |           
|                |  |                                          |  |            
|                |  |                                          |  |            
|                |  |                                          |  |            
|                |  |                                          |  |           
|                |  |                                          |  |           
|                |  |                                          |  |           
|               
|                |  | Security design and engineering          |  |           
|                |  |                                          |  |            
|                |  |                                          |  |            
|                |  |                                          |  |            
|                |  |                                          |  |            
|                |  |                                          |  |            
|                |  |                                          |  |           
|               
|Implement       |  | Security component and tools procurement |  |           
|                |  |                                         
|                |  | Security component modification          |  |           
|                |  |                                         
|                |  | Security operating systems design        |  |           
|               
|Integrate       |  | Security integration                     |  |           
|                |  |                                          |  |           
|               

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|      
|------
|Manage
|      
|      
|      
|      
|      
|      
|      
|      
|      
|      
|      
|Train 
|      

As part of our information security offerings, we provide TEMPEST and Zone solutions to our clients. Our TEMPEST and Zone solutions involve
modifying electronic equipment to eliminate or reduce electromagnetic radiation emanations to prevent electronic eavesdropping. This work is done in our Tewksbury, Massachusetts integration facility
where we modify computer equipment and peripherals. The TEMPEST solution is designed to meet the standards set by the NSA.

Our
information security offerings also include a proprietary secure operating system called XTS, which we developed and customize to enable network administrators to control the access,
data processing, and storage capability of multiple users across disparate networks with differing security levels. This operating system has been evaluated by the NSA and received a B3 rating. We are
also in the process of updating and enhancing several of our other information security solutions, such as our High Assurance Web Guard, High Assurance Web Server, and High Assurance Directory Server
solutions. We believe these solutions will augment our current XTS offering and meet our clients' continuing information security requirements.

We
also maintain three Special Compartmentalized Information Facilities, or SCIFs, which are specially designed and authorized to store U.S. government classified information and provide
secure workspace, laboratory, and communications capabilities for classified-related work. Each of our SCIFs is accredited by U.S. intelligence agencies or military departments within the Department
of Defense.

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Application Development and Integration Services and Solutions

We provide application development and integration services and solutions that help our clients more efficiently run their organizations through the use of
customized software applications. Our approach to providing application development and integration services and solutions is described in the following table:

|Phase          |  | Service/Solution                  |  | Description
|-------------- |  | --------------------------------- |  | -----------
|              
|Design/Develop |  | Application planning and strategy |  |           
|               |  |                                   |  |           
|              
|               |  | Application development           |  |           
|              
|Implement      |  | Application software procurement  |  |           
|              
|               |  | Application deployment            |  |           
|              
|Integrate      |  | Application                       |  |           
|               |  |                                   |  |           
|              
|Manage         |  | Application management            |  |           
|               |  |                                   |  |            
|               |  |                                   |  |            
|               |  |                                   |  |            
|               |  |                                   |  |            
|               |  |                                   |  |            
|              
|Train          |  | Application training              |  |           
|              

As part of our application development and integration services and solutions offerings, we have developed:



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Our
application development and integration services methodologies are based on the practice guidelines established within the capability maturity model, or CMM, advocated by the
Software Engineering Institute, or SEI. The CMM assists organizations in the adoption and sustained use of standards of excellence for software development. We have established a data repository for
software code that we have developed that may be reused in subsequent application development programs.

Intellectual Property

We rely on a combination of patent and trade secret laws and contractual restrictions to protect our proprietary rights. We have filed a provisional patent
application relating to our XTS operating system. There can be no assurance that we will be successful in obtaining patent protection for any of our intellectual property or that third parties will
not challenge them. In addition, there can be no assurance that others will not independently develop similar or competing technology or design around any patents that may be issued.

We
believe that we have a number of trade secrets that contribute to our success and competitive position, and we endeavor to protect the secrecy of this proprietary information. While
we believe that retaining continuing protection of our trade secrets and confidential information is important, we are not materially dependent on any specific trade secret or group of trade secrets.

Clients

We have a broad base of over 65 U.S. civilian, defense, and intelligence federal government agency clients on over 170 active engagements, across many defense,
intelligence, and civilian agencies, which creates a diversified revenue stream. We have served many of our clients for over 10 years, and some for more than 30 years, which we believe
fosters a stable and predictable business environment for us as we provide ongoing modifications and support for our solutions. We believe our long-standing relationships are due in large
part to our technical expertise and proven performance on individual contracts, particularly in mission critical areas involving intelligence, national security, and other sensitive or classified
government functions. We derived approximately 50% of our
revenues from civilian agency clients, approximately 32% of our revenues from Department of Defense clients, and approximately 17% of our revenues from intelligence agency clients for the year ended
December 31, 2003. Excluding our National Aeronautics and Space Administration, or NASA, Consolidated Space Operations Contract, or CSOC, contract, we derived approximately 43% of our revenues,
as adjusted, from civilian agency clients, approximately 36% of our revenues, as adjusted, from Department of Defense clients, and approximately 20% of our revenues, as adjusted, from intelligence
agency clients for the year ended December 31, 2003.

Contracts
for which we act as the prime contractor represented approximately 67% of our revenues for the year ended December 31, 2003. Excluding our NASA CSOC contract, contracts
for which we act as the prime contractor represented approximately 77% of our revenues, as adjusted, for the year ended December 31, 2003.

For
the year ended December 31, 2003, our NASA CSOC contract accounted for 13% of our revenues and was the only contract that accounted for more than 10% of our revenues. Our NASA
CSOC contract work is performed through a subcontract relationship with Lockheed Martin Corporation and will end in March 2004.

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Backlog

We define total backlog as the estimate of the sum of:



We
do not include in total backlog:



Our
total backlog was approximately $890 million and approximately $792 million as of December 31, 2003 and 2002, respectively. Excluding the backlog associated with
our NASA CSOC contract from our total backlog, our total backlog was approximately $888 million and approximately $744 million as of December 31, 2003 and 2002, respectively.

We
define funded backlog as the portion of our backlog for which funding currently is appropriated and obligated to us under a signed contract or task order by the purchasing agency, or
otherwise authorized for payment to us by a customer upon completion of a specified portion of work, less the amount of revenue we have previously recognized under the contract. Our funded backlog
does not include the full potential value of our contracts, because Congress often appropriates funds to be used by an agency for a particular program or contract on a yearly or quarterly basis, even
through the contract may call for performance over a number of years.

Our
funded backlog was approximately $117 million and approximately $109 million as of December 31, 2003 and 2002, respectively. Excluding the funded backlog
associated with our NASA CSOC contract, our funded backlog was approximately $114 million and approximately $97 million as of December 31, 2003 and 2002, respectively.

Seasonality

Our revenues, gross profit and operating income have typically been negatively affected in the quarter ending September 30, primarily due to lower staff
utilization rates. These lower utilization rates are attributable both to summer vacations and to increased proposal activity in connection with the end of the federal government fiscal year. We
expect to continue to experience this seasonality and our future periods may be materially affected by it.

Our
revenues, gross profit, and operating income has typically been positively affected in the quarter ending December 31, primarily due to increased information security
solutions sales. The increased solutions sales levels are attributable to purchases made by our clients in advance of the federal government fiscal year. Although we expect to continue to experience
this seasonality, we cannot assure you that future periods will be positively affected by it.

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Business Development

Our business development organization, in cooperation with several of our other organizations, has designed systems and processes to successfully market, develop,
and acquire contracts within the government sector. These systems and processes include the development and management of company-wide new business opportunity pipeline reports, the bid
and proposal process, monthly agency and program account opportunity reviews, sales training, research, and competitive analyses.

Our
business development professionals are highly experienced in marketing to government clients and have extensive knowledge of both the services and solutions we offer, as well as the
particular client's organization, mission culture, and technology initiatives. These professionals also possess a working knowledge of the rules governing the marketing limitations that are specific
to the government arena. This includes knowledge of government funding systems, conflict of interest restrictions, procurement integrity limitations, and other pertinent procedural requirements
designed to establish a competitive playing field and to ensure the appropriate use of public funds. In fulfilling its mission, the business development organization cooperates closely with the
various operations groups and other support organizations.

Our
business development organization is responsible for managing the contract bidding process. For each new contract we bid for, members of our senior management team, along with the
business development organization, go through the following three-step process:



In
the opportunity identification stage, we assess the value of and our likelihood of success in competing for a specific contract opportunity and consider, among other factors, our
relationship with the specific agency, the strength of our services offering in relation to the contract requirements, potential competitors, and vulnerabilities of any existing contractor serving the
client. In the target capture plan stage, we formalize an offer plan and assemble a program team to perform detailed competitive and investment return analyses. In the offer cycle stage, we conduct
our formal bid proposal activities.

Competition

Our key competitors include divisions of large federal information technology services contractors such as Computer Sciences Corporation, Electronic Data Systems
Corporation, Lockheed Martin Corporation, Northrop Grumman Corporation, and Science Applications International Corporation, as well as a number of smaller federal information technology contractors
with specialized capabilities, such as CACI International Inc, ManTech International Corporation, PEC Solutions, Inc., SRA International, Inc., and Anteon Corporation. Because of the
diverse requirements of our U.S. government clients and the highly competitive nature of large procurement awards, companies frequently form teams to pursue contract opportunities. The same companies
listed as our competitors will, at times, team with us in the pursuit of new business. We believe that the major competitive factors that affect our ability to compete are:



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Although
we believe that we compare favorably with our competitors based on these factors, we may not maintain our competitive position against current or potential competitors.

Employees

Our ability to attract, train, and retain top quality employees is an important element in our ability to provide effective information technology services and
solutions. As of December 31, 2003, we had approximately 1,650 employees, located in 30 states, Washington, D.C., and seven foreign countries. The depth and breadth of the security clearances
held by our employees is instrumental in allowing us to compete for, and work on, classified projects. As of December 31, 2003, we had approximately 1,100 cleared personnel, of which
approximately 54% possessed top secret-level clearances or above. In addition, we had approximately 120 additional initial clearances pending as of December 31, 2003, which would provide an
initial clearance for approximately 120 of our personnel. We endeavor to be an
employer of choice in the government information technology industry, and we intend to improve our recruitment and retention efforts through the use of stock options and other incentive plans. None of
our employees are represented by a labor union or subject to a collective bargaining agreement. We believe that our relations with our employees are good.

Risk Factors

Investing in our securities involves risk. Before making an investment in our securities, potential investors should carefully consider the following risks, as
well as the other information included in or incorporated by reference into this report, including our consolidated financial statements and the related notes and "Management's Discussion and Analysis
of Financial Condition and Results of Operations." Additional risks and uncertainties not currently known to us, or risks that we currently deem immaterial, may also impair our business operations.
Any of the risk factors described below could significantly and adversely affect our business and results of operations. As a result, the trading price of our securities could decline and you may lose
all or part of your investment.

We depend on contracts with U.S. government agencies for substantially all of our revenues. If our relationships with these agencies were
harmed, our business would be adversely affected.

Contracts
funded by U.S. government agencies accounted for approximately 99% of our revenues for the year ended December 31, 2003. We believe that federal government contracts
will continue to be the source of substantially all of our revenues for the foreseeable future. For this reason, any issue that compromises our relationship with agencies of the federal government in
general, or with the Department of Defense in particular, would cause serious harm to our business. Among the key factors in maintaining our relationships with federal government agencies and
departments are our performance on individual contracts and delivery orders, the strength of our professional reputation, and the relationships of our key executives with client personnel. To the
extent that our performance does not meet client expectations, or our reputation or relationships with one or more key clients are impaired, our revenues and operating results could be materially
harmed.

We may not receive the full amount of our backlog, which could harm our business.

Our
total backlog includes both funded and unfunded orders for services under existing signed contracts, assuming the exercise of all options relating to those contracts that we
reasonably believe will be exercised. Congress often appropriates funds for our clients on a yearly basis, even though their

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contracts
with us may call for performance that is expected to take a number of years. As a result, contracts typically are only partially funded at any point during their term, and all or some of the
work to be performed under the contracts may remain unfunded unless and until Congress makes subsequent appropriations and the procuring agency allocates funding to the contract.

Our
backlog was approximately $890 million as of December 31, 2003, of which approximately $117 million was funded. Excluding the backlog associated with our NASA
CSOC contract, our backlog was approximately $888 million as of December 31, 2003, of which approximately $114 million was funded. Our backlog includes orders under contracts that
in some cases extend for several years, with the latest expiring at the end of calendar year 2015.

There
can be no assurance that our backlog will result in actual revenues in any particular period, or at all, or that any contract included in backlog will be profitable. This is
because the actual receipt and timing of any of these revenues is subject to various contingencies, many of which are beyond our control. In addition, we may never realize revenues from some of the
engagements that are included in our backlog, and there is a higher degree of risk in this regard with respect to unfunded backlog. The federal government's ability to select multiple winners under
multiple award schedule contracts, government-wide acquisition contracts, blanket purchase agreements and other indefinite delivery/indefinite quantity, or IDIQ, contracts, as well as its
right to award subsequent task orders among such multiple winners, means that there is no assurance that unfunded contract backlog will result in actual orders. The actual receipt of revenues on
engagements included in backlog may never occur or may change because a program schedule could change or the program could be canceled, or a contract could be reduced, modified, or terminated early.
Moreover, under multiple award schedule contracts, government wide acquisition contracts, blanket purchase agreements, and other IDIQ contracts, the government is frequently not obligated to order
more than a minimum quantity of goods or services.

For
example, our backlog as of December 31, 2001 included $10.9 million for a contract with a Department of Defense client that we believed at the time would continue
through 2005. The contract was not renewed during 2002, and we only realized $1.1 million in pro forma revenue in 2002. This resulted in a $9.8 million reduction of our backlog during
2002 without a corresponding increase in revenue.

Loss of our prime contractor position on one or more of our contracts would impair our operating results and our ability to win new
business.

We
believe many of our clients have recently shown a preference for procuring services and solutions from only a limited number of contracts or schedules. If we were to lose our prime
contractor position on any of our contracts, we could lose revenues and our ability to win new business and our operating results could be adversely affected.

Most of our sales are made under contracts with limited initial terms. We may expend significant resources in connection with these
contracts that we may not recover if our clients do not exercise their contract options.

Our
contracts typically have a one- or two-year initial term, with multiple options that are exercisable by our government clients to extend the contract for one
or more years. For example, the initial term under our managed network services contract that we signed with the Federal Technology Service office of the GSA, or FTS, during 2002, was a
one-year contract, with four subsequent one-year options. FTS has exercised the first two option years but we cannot assure you that FTS will exercise any of the remaining
options on this contract, nor can we assure you that any of our other clients will exercise options under their contracts. Moreover, because we believe that our contracts with limited initial terms
represent the early portion of longer client programs, we expend significant financial and personnel resources and expand our operations to be able to fulfill these programs beyond the initial
contract term. If a significant number of our contracts are not extended beyond their initial terms, we

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may
be unable to recover the costs we incurred, we would not recognize anticipated revenues, and our operating results would be harmed.

The loss of key members of our senior management team could impair our relationships with government clients and disrupt the management of
our business.

We
believe that our success depends on the continued contributions of the members of our senior management, including Ken S. Bajaj, our co-founder, Chairman, and Chief
Executive Officer. We rely on our executive officers and senior management to generate business and ensure successful performance of our contracts. The loss of the services of Mr. Bajaj or one
or more of our other executive officers or senior management members could have a material adverse effect on our financial performance and our ability to compete. In addition, the relationships and
reputation that many members of our senior management team have established and maintain with government personnel contribute to our ability to maintain good client relations and to identify new
business
opportunities. Although we have employment agreements with several members of our senior management, none of these contracts provide for a specific term of employment. The loss of any member of our
senior management could impair our ability to identify and secure new contracts, to maintain good client relations, and to otherwise manage our business.

If we fail to attract and retain skilled employees, we might not be able to perform under our contracts, and we may lose
revenues.

The
growth of our business and revenues depends in large part upon our ability to attract and retain sufficient numbers of highly qualified individuals who have advanced information
technology and technical services skills and who work well with our government and defense clients. For example, networking engineers and security experts are in great demand throughout our industry
and are likely to remain a limited resource in the foreseeable future. If we are unable to recruit and retain a sufficient number of these employees, our ability to maintain and grow our business
could be limited. If we encounter a tight labor market, as our predecessor did in the first half of the year ended December 31, 2000, we could be required to engage larger numbers of
subcontractor personnel, which could cause our profit margins to suffer. In addition, some of our contracts contain provisions requiring us to staff an engagement with personnel that the client
considers key to our successful performance under the contract. In the event we are unable to provide these key personnel or acceptable substitutions, the client may terminate the contract, we may not
be able to recover our costs, and we may lose revenues.

We face intense competition from many competitors that have greater resources than we do, which could result in price reductions, reduced
profitability, and loss of market share.

We
operate in highly competitive markets and generally encounter intense competition to win contracts. For example, we must often discount our GSA schedule rates in order to secure
contracts from many of our customers in competitive situations. We expect competition in our markets to increase as a result of a number of factors, including the entrance of new or larger
competitors, including those formed through consolidation, who have greater financial, technical, marketing, and public relations resources, larger client bases, and greater brand or name recognition
than we do. These competitors could, among other things:



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If
we lose business to our competitors or are forced to lower our prices, our revenues, and our operating profits could decline.

In
addition, we may face competition from our subcontractors who, from time to time, seek to obtain prime contractor status on contracts for which they currently serve as a subcontractor
for us. If one or more of our current subcontractors are awarded prime contractor status on such contracts in the future, it would divert sales from us and could force us to charge lower prices.

If we are not successful in developing, or if we are delayed in introducing, new and enhanced solutions and features that keep pace with
technology and our clients' needs and expectations, our sales and competitive position will suffer.

The
market for our solutions is characterized by rapidly changing technologies, frequent new product introductions, increasingly complex network environments, and evolving client
requirements and industry standards. In order to remain competitive, we will need to introduce on a timely basis new solutions or product enhancements that offer significantly improved performance and
features. We could damage our reputation and competitive position and experience reduced revenues if:



We derive significant revenues from contracts awarded through a competitive procurement process, which can impose substantial costs upon
us, and negatively impact our operating results.

We
derive significant revenues from federal government contracts that are awarded through a competitive procurement process. We expect that most of the government business we seek in the
foreseeable future will be awarded through competitive procedures. Competitive procurements impose substantial costs and present a number of risks, including:



The
costs we incur in the competitive procurement process may be substantial and, to the extent we participate in competitive procurements and are unable to win particular contracts,
these costs could negatively affect our operating results. In addition, GSA multiple award schedule contracts, government-wide acquisitions contracts, blanket purchase agreements, and
other IDIQ contracts do not guarantee more than a minimal amount of work for us, but instead provide us access to work generally through further competitive procedures. This competitive process may
result in increased competition and pricing pressure, requiring that we make sustained post-award efforts to realize revenues under the relevant contract.

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We may lose money on some contracts if we miscalculate the resources we need to perform under the contract.

We
provide services to the federal government under three basic types of contracts: time-and-materials, fixed-price, and cost-plus. For the year ended
December 31, 2003, we derived approximately 44%, 47% and 9% of our revenues from time-and-materials, fixed-price, and cost-plus contracts, respectively.
Excluding our NASA CSOC contract, for the year ended December 31, 2003, we derived approximately 50%, 39% and 11% of our revenues, as adjusted, from time-and-materials,
fixed-price and cost-plus contracts, respectively. Each of these types of contracts, to differing degrees, involves the risk that we could underestimate our cost of fulfilling the
contract, which may reduce the profit we earn or lead to a financial loss on the contract.

For
all three basic contract types, we bear varying degrees of risk associated with the assumptions we use to formulate our pricing for the work. To the extent our working assumptions
prove inaccurate, we may lose money on the contract, which would adversely affect our operating results. For example, we miscalculated the costs we would incur to provide telecommunications circuits
in connection with our NASA CSOC contract and, as a result, the total costs to perform under the contract exceeded the contract's fixed fee revenue through December 31, 2003.

Failure to maintain strong relationships with other contractors could result in a decline in our revenues.

We estimate that revenues derived from contracts in which we acted as a subcontractor to other companies represented approximately 33% of our revenues for the
year ended December 31, 2003. We expect to continue to depend on relationships with other contractors for a portion of our revenues in the foreseeable future. The reduction or elimination of
any of our subcontractor relationships could adversely affect our business and prospects. For example, in connection with our NASA CSOC contract, we were recently involved in litigation with Lockheed
Martin Space Operations Company regarding disputed charges under the contract. Although this litigation has been settled, it could adversely affect our ability to team with Lockheed Martin Space
Operations Company in the future.

If our subcontractors fail to perform their contractual obligations, our performance and reputation as a prime contractor and our ability
to obtain future business could suffer.

As a prime contractor, we often rely significantly upon other companies as subcontractors to perform work we are obligated to perform for our clients. We estimate
that revenues derived from work performed by our subcontractors represented approximately 18% of our revenues for the year ended
December 31, 2003. Excluding our NASA CSOC contract, we estimate that revenues derived from work performed by our subcontractors represented approximately 7% of our revenues, as adjusted, for
the year ended December 31, 2003. If one or more of our subcontractors fail to perform satisfactorily the agreed-upon services on a timely basis, or violate government contracting
policies, laws, or regulations, our ability to perform our obligations or meet our clients' expectations as a prime contractor may be compromised. In some cases, we have limited involvement in the
work performed by the subcontractors but are nevertheless responsible for the work performed. In extreme cases, performance or other deficiencies on the part of our subcontractors could result in a
client terminating our contract for default. A default termination could expose us to liability for the agency's costs of reprocurement, damage our reputation, and hurt our ability to compete for
future contracts.

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Unfavorable government audit results could subject us to a variety of penalties and sanctions, and could harm our reputation and
relationships with our clients.

The federal government audits and reviews our performance on contracts, pricing practices, cost structure, and compliance with applicable laws, regulations, and
standards. Like most large government contractors, our contracts are audited and reviewed on a continual basis by federal agencies, including the Defense Contract Audit Agency, or the DCAA. An
unfavorable audit of us or our subcontractors could have a substantial adverse effect on our operating results. For example, any costs which were originally reimbursed could subsequently be
disallowed. In this case, cash we have already collected may need to be refunded and future operating margins may be reduced.

Our
incurred cost submissions have been audited by the DCAA through December 31, 2001. Costs for which we were reimbursed after January 1, 2002 may be subsequently
disallowed upon the completion of future audits. In addition, non-audit review by the U.S. government may still be conducted on all of our government contracts.

If
a government audit uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts,
forfeiture of profits, suspension of payments, fines, and suspension or debarment from doing business with U.S. government agencies. In addition, we could suffer serious harm to our reputation if
allegations of impropriety were made against us, whether or not true.

If we experience systems or services failures, our reputation could be harmed and our clients could assert claims against us for damages
or refunds.

We create, implement, and maintain information technology solutions that are often critical to our clients' operations, some of which involve U.S.
government-classified or other sensitive information and work. We have experienced and may in the future experience some systems or services failures, schedule or delivery delays, and other problems
in connection with our work. If our solutions, services, or other applications have significant defects or errors, are subject to delivery delays, or fail to meet our clients' expectations, we may:



Many,
although not all, of our contracts limit our liability for consequential damages that may arise from negligence in rendering services to our clients. We cannot assure you, however,
that these contractual provisions will be legally sufficient to protect us if we are sued. In addition, our errors and omissions and product liability insurance coverage may not continue to be
available on reasonable terms or in sufficient amounts to cover one or more large claims, or the insurer may disclaim coverage as to some types of claims. The successful assertion of any large claims
against us could seriously harm our business. Even if not successful, these claims could result in significant legal and other costs, may be a distraction to our management, and may harm our
reputation.

Security breaches in sensitive government systems could result in the loss of clients and negative publicity.

Many of the systems we develop, install, and maintain involve managing and protecting information involved in intelligence, national security, and other sensitive
or classified government functions. A security breach in one of these systems could cause serious harm to our business, damage our reputation, and prevent us from being eligible for further work on
sensitive or classified systems for

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federal
government clients. We could incur losses from such a security breach that could exceed the policy limits under our errors and omissions and product liability insurance. Damage to our
reputation or limitations on our eligibility for additional work resulting from a security breach in one of the systems we develop, install, and maintain could materially reduce our revenues.

Our failure to obtain and maintain necessary security clearances may limit our ability to perform classified work for government clients,
which could cause us to lose business.

Some government contracts require us to maintain facility security clearances, and require some of our employees to maintain individual security clearances. If
our employees lose or are unable to timely obtain security clearances, or we lose a facility clearance, the government client can terminate the contract or decide not to renew it upon its expiration.
As a result, to the extent we cannot obtain or maintain the required security clearances for a particular contract, or we fail to obtain them on a timely basis, we may not derive the revenues
anticipated from the contract, which, if not replaced with revenues from other contracts, could harm our operating results. To the extent we are not able to obtain facility security clearances or
engage employees with the required security clearances for a particular contract, we will be unable to perform that contract and we may not be able to compete for or win new contracts for similar
work.

Our quarterly operating results may fluctuate significantly as a result of factors outside of our control, which could cause the market
price of our common stock to decline.

We expect our revenues and operating results to vary from quarter to quarter. As a consequence, our operating results may fall below the expectations of
securities analysts and investors, which could cause the price of our common stock to decline. Factors that may affect our operating results include those listed in this "Risk Factors" section of this
prospectus and others such as:



Reductions
in revenues in a particular quarter could lead to lower profitability in that quarter because a relatively large amount of our expenses are fixed in the
short-term. We may incur significant operating expenses during the start-up and early stages of large contracts and may not receive corresponding payments in that same quarter.
We may also incur additional expenses when contracts expire or are terminated or are not renewed. In addition, payments due to us from government

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agencies
may be delayed due to billing cycles or as a result of failures of governmental budgets to gain Congressional and administration approval in a timely manner.

We depend on our intellectual property and our failure or inability to protect it could enable competitors to market services and
solutions with similar features that may reduce demand for our services and solutions.

Our success and competitiveness are dependent to a significant degree upon the protection of our internally developed technology, proprietary processes, and other
intellectual property that we utilize to provide our services and incorporate in our solutions. If we are unable to protect our intellectual property, our competitors could market services or
solutions similar to our services and solutions, which could reduce demand for our offerings.

Federal
government clients typically retain a perpetual, world-wide, royalty-free license to use the intellectual property we develop for them, including
providing it to our competitors in connection with their performance of other federal government contracts. Federal government clients typically grant contractors the right to use and commercialize
software developed with federal funding. However, if we were to improperly use intellectual property even partially funded by the federal government, the federal government could seek damages from us,
sanction us, or prevent us from working on future government contracts.

We
may be unable to prevent unauthorized parties from attempting to copy or otherwise obtain and use our technology. Policing unauthorized use of our technology is difficult, and we may
not be able to prevent misappropriation of our technology, particularly in foreign countries where the laws may not protect our intellectual property as fully as those in the U.S. Others, including
our employees, may circumvent the protections provided by trade secrets and other intellectual property that we own. Although we require our new employees to execute non-disclosure and
intellectual property assignment agreements, many of our employees hired by our predecessor have not executed such agreements. In addition, these agreements may not be legally or practically
sufficient to protect our rights. Litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets and to determine the validity and scope of the proprietary
rights of others. Any litigation could result in substantial costs and diversion of resources, with no assurance of success. If we are unable to protect our proprietary rights against unauthorized use
by others, our reputation may be damaged and our competitive position may be significantly harmed.

We may be harmed by intellectual property infringement claims.

We may become subject to claims from our employees or third parties who assert that software and other forms of intellectual property that we use in delivering
services and solutions to our clients infringe upon intellectual property rights of such employees or third parties. Our employees develop much of the software and other forms of intellectual property
that we use to provide our services and solutions to our clients, but we also license technology from other vendors. If our vendors, our employees, or third parties assert claims that we or our
clients are infringing on their intellectual property, we could incur substantial costs to defend those claims. In addition, if any of these infringement claims are ultimately successful, in addition
to paying damages, we could be required to
do the following, each of which could entail incurring a significant expense or result in a significant reduction in revenues:



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In
addition, we do not own a federal trademark registration for the DigitalNet service mark or trademark. If a third party challenges our right to use our name, we may be prevented from
using the name or may be subject to other remedies sought by any such party. If a third party is successful in challenging the use of the DigitalNet name, in addition to paying damages, we could be
required to change our corporate name, which could:



If we make strategic acquisitions or investments, we could assume additional liabilities or have integration problems.

One of our strategies is to pursue growth through acquisitions. On February 5, 2004 we announced that we had entered into a definitive agreement to acquire
User Technology Associates, Inc. We expect to consider acquisitions in the future. In connection with the User Technology Associates acquisition and any acquisition or investment we may make in
the future, we may:



Changes in the spending policies or budget priorities of the federal government could cause us to lose revenues.

We derive substantially all of our revenues from contracts funded by federal government agencies. For the year ended December 31, 2003, civilian agency
clients accounted for approximately 50% of our revenues, Department of Defense clients accounted for approximately 32% of our revenues, and national security and intelligence agency clients accounted
for approximately 17% of our revenues. Excluding the NASA CSOC contract, for the year ended December 31, 2003, civilian agency clients accounted for approximately 43% of our revenues,
Department of Defense clients accounted for approximately 36% of our revenues, and national security and intelligence clients accounted for approximately 20% of our revenues. We believe that contracts
with federal government agencies, and defense agencies in particular, will continue to be the primary source of our revenues for the foreseeable future. Accordingly, changes in federal government
fiscal or spending policies or the U.S. defense budget could directly affect our financial performance. For example, the reduction in the U.S. defense budget during the early 1990s caused some
defense-related government contractors to

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experience
decreased sales, reduced operating margins and, in some cases, net losses. Among the factors that could harm our business are:



These
or other factors could cause federal government agencies and departments to reduce their purchases under contracts, to exercise their right to terminate contracts, or not to
exercise options to renew contracts, any of which could cause us to lose revenues. In addition, any limitations imposed on spending by U.S. government agencies that result from efforts to reduce the
federal deficit may limit both the continued funding of our existing contracts and our ability to obtain additional contracts. Our backlog consists almost exclusively of contracts with federal
departments and agencies, and the continuation of these contracts, or award of additional contracts from these agencies, could be materially harmed by federal government spending reductions or budget
cutbacks at these departments or agencies.

Federal government contracts contain provisions giving government clients a variety of rights that are unfavorable to us, including the
ability to terminate a contract at any time for convenience.

Federal government contracts contain provisions and are subject to laws and regulations that provide government clients with rights and remedies not typically
found in commercial contracts. These rights and remedies allow government clients, among other things, to:



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If
a federal government client terminates one of our contracts for convenience, we may recover only our incurred or committed costs, settlement expenses, and profit on work completed
prior to the termination. If a federal government client were to unexpectedly terminate, cancel, or decline to exercise an option to renew with respect to one or more of our significant contracts or
suspend or debar us from doing business with the federal government, our revenues and operating results would be materially harmed.

Our failure to comply with complex procurement laws and regulations could cause us to lose business and subject us to a variety of
penalties.

We must comply with laws and regulations relating to the formation, administration, and performance of federal government contracts, which affect how we do
business with our federal government clients and may impose added costs on our business. Among the most significant laws and regulations are:



If
a government review or investigation uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions, including the termination
of our contracts, the forfeiture of profits, the suspension of payments owed to us, fines, and our suspension or debarment from doing business with federal government agencies. In particular, the
civil False Claims Act provides for treble damages and potentially substantial civil penalties where, for example, a contractor presents a false or fraudulent claim to the government for payment or
approval, or makes a false statement in order to get a false or fraudulent claim paid or approved by the government. Actions under the civil False Claims Act may be brought by the government or by
other persons on behalf of

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the
government. These provisions of the civil False Claims Act permit parties, such as our employees, to sue us on behalf of the government and share a portion of any recovery. Any failure to comply
with applicable laws and regulations could result in contract termination, price or fee reductions, or suspension or debarment from contracting with the government, each of which could lead to a
material reduction in our revenues.

The adoption of new procurement laws or regulations could reduce the amount of services that are outsourced by the federal government and
cause us to experience reduced revenues.

New legislation, procurement regulations, or labor organization pressure could cause federal agencies to adopt restrictive procurement practices regarding the use
of outside information technology providers. The American Federation of Government Employees, the largest federal employee union, strongly endorses legislation that may restrict the procedure by which
services are outsourced to government contractors. One such proposal, the Truthfulness, Responsibility, and Accountability in Contracting Act, or TRAC, would have effectively reduced the volume of
services that is outsourced by the federal government by requiring agencies to give in-house government employees expanded opportunities to compete against contractors for work that could
be outsourced. Although the TRAC legislation did not pass committee in either house of Congress last term, and it has not been reintroduced in the current term, if TRAC, or similar legislation, were
to be enacted, it would likely reduce the amount of information technology services that could be outsourced by the federal government, which could materially reduce our revenues.

We may not be able to generate adequate cash to service our existing indebtedness and any additional future indebtedness.

We have a significant amount of debt outstanding, including approximately $81.3 million of outstanding indebtedness under our 9% senior notes due 2010. We
anticipate that by the end of March 2004 we will borrow up to an additional $35 million from our $50 million revolving credit facility in connection with the closing of the User
Technology Associates acquisition. You should be aware that this level of debt could have important consequences to you. Below we have identified some of the material potential consequences resulting
from this significant amount of debt:



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Our
ability to repay or refinance our debt, including the 9% senior notes due 2010, depends on our successful financial and operating performance and the availability of financing
through our credit facility. We cannot assure you that our business strategy will succeed or that we will achieve our anticipated financial results. Our financial and operating performance depends
upon a number of factors including those listed in this "Risk Factors" section of this prospectus, many of which are beyond our control. In addition, our ability to borrow funds in the future to make
payments on our debt will depend on our satisfaction of the covenants and other conditions in our credit facility and other agreements we may enter into in the future.

We
cannot assure you that we will continue to generate sufficient cash flow from operations or that we will be able to borrow funds under our credit facility in amounts sufficient to
enable us to service our debt, including the 9% senior notes due 2010, or meet our working capital and capital expenditure requirements. We must satisfy borrowing base restrictions in order to borrow
additional amounts under our credit facility. If we are not able to generate sufficient cash flow from operations or to borrow sufficient funds to service our debt, due to borrowing base restrictions
or otherwise, we may be required to sell assets, reduce capital expenditures, refinance all or a portion of our existing debt, including the 9% senior notes due 2010, or obtain additional financing.
We cannot assure you that we will be able to refinance our debt, sell assets or borrow more money on terms acceptable to us, if at all.

Under our credit facility, we will be able to incur more indebtedness, which may intensify the risks associated with our substantial
leverage, including our ability to service our indebtedness.

We and our subsidiaries will be able to incur substantial additional indebtedness in the future, including up to the greater of (i) $60.0 million
and (ii) specified percentages of our accounts receivable under our credit facility. Although our ability to incur additional debt will be restricted under the covenants contained in our credit
facility and the indenture governing the 9% senior notes due 2010, these restrictions are subject to a number of qualifications and exceptions, and the indebtedness incurred in compliance with these
restrictions could be substantial. To the extent new debt is added to our
currently anticipated debt levels, the substantial leverage risks described above would increase. Also, these restrictions do not prevent us from incurring obligations that do not constitute
indebtedness.

Covenants in the financing agreements governing our debt, including the 9% senior notes due 2010 and our credit facility, may restrict our
financial and operating flexibility and any event of default could cause acceleration of amounts outstanding under these agreements and have a material adverse effect on our business.

Our financing agreements, including the 9% senior notes due 2010 and our credit facility, contain covenants that limit or restrict our and our subsidiaries'
operating and financial activities.

Our
credit facility contains customary affirmative and negative covenants, including financial covenants that we are required to meet, including a consolidated total leverage ratio; a
consolidated fixed charge coverage ratio; and a minimum net worth covenant. Those covenants also restrict certain of our corporate activities, including, among other things, our ability to: make
acquisitions, merge or consolidate with other entities, dispose of assets, incur additional indebtedness, pay dividends, create liens, make investments, make capital expenditures, and engage in
certain transactions with affiliates. The credit agreement also contains customary events of default, including, among others, defaults based on certain bankruptcy and insolvency events; nonpayment;
cross-defaults to other debt; breach of specified covenants; change of control and material inaccuracy of representations and warranties.

The
indenture governing the 9% senior notes due 2010 restricts, among other things, our ability to pay dividends on, or redeem or repurchase, our stock, incur additional debt or sell
preferred stock, create liens, restrict dividend payments or other payments from subsidiaries to us, engage in

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consolidations
and mergers or sell or transfer assets, make specified types of investments, apply net proceeds from certain asset sales, create unrestricted subsidiaries, and engage in transactions
with our affiliates.

Our
ability to satisfy the covenants and other conditions in our credit facility can be affected by events beyond our control, and we cannot assure you that we will satisfy them. If we
cannot comply with the financial covenants in our credit facility, we may not be able to borrow under this facility. In addition, failure to comply with any of the covenants in our existing or future
financing agreements could result in a default under those agreements and under other agreements containing cross-default provisions. A default would permit the lenders under the applicable agreement
to declare amounts outstanding under such agreements to be due and, in the case of our credit facility, the lenders could proceed against the assets that are pledged. We have pledged substantially all
of our assets, including the stock of our subsidiaries, to secure the debt under our credit facility. If our creditors decide to exercise their rights,
we cannot assure you that our assets would be sufficient to pay that debt and other debt, including the 9% senior notes due 2010.

In
addition, in the event of a default, the lenders under our credit facility will, and any future lenders may, be able to terminate any commitments they made to supply us with further
funds. Under these circumstances, we might not have sufficient funds or other resources to satisfy all of our obligations, including our obligations under the 9% senior notes due 2010. In addition,
the limitations imposed by our financing agreements on our ability to incur additional debt and to take other actions might significantly impair our ability to obtain other financing. We cannot assure
you that we will be able to obtain waivers or amendments of our financing agreements, if necessary, at acceptable terms or at all. Any event of default could have a material adverse effect on our
business.

We may not be able to finance a change of control offer as required by the indenture governing the 9% senior notes due 2010, which would
result in defaults under the indenture governing the 9% senior notes due 2010 and our credit facility and may require us to repay any debt then outstanding under our credit facility. Any event of
default could have a material adverse effect on our business.

Upon a change of control under the indenture governing the 9% senior notes due 2010, we will be required to offer to repurchase all of the 9% senior notes due
2010 then outstanding at 101% of the principal amount, plus accrued and unpaid interest and liquidated damages, if any, to the repurchase date. Prior to repurchasing any of the 9% senior notes due
2010, we must either repay all debt under our credit facility or obtain the required consents from the applicable lenders to allow us to repurchase the 9% senior notes due 2010. In such circumstances,
we cannot assure you that we would have the financial resources available to repay our credit facility and any other debt that would become payable upon a change of control and to repurchase all of
the 9% senior notes due 2010 at the required premium. Our failure to do so would constitute an event of default under the indenture and, accordingly, under our credit facility. Any event of default
could have a material adverse effect on our business.

Available Information

Our internet address is www.digitalnet.com. We make available free of charge on or through our Internet website our Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

29

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Item 2. PROPERTIES

Our executive offices and principal operations are located at 2525 Network Place in Herndon, Virginia. We occupy approximately 273,000 square feet of leased space
in Virginia, Massachusetts, Maryland, Alabama, Colorado, Washington, D.C., Hawaii, Ohio, and Illinois. We also occupy government-provided facilities in a variety of locations to support ongoing
contracts, and we maintain three Special Compartmentalized Information Facilities. Our Tewksbury, Massachusetts facility houses our TEMPEST and Zone activities and holds certification under the
International Organization for Standards 9001, which is an international quality standard for sales, production, installation and distribution. We do not own any real estate and maintain flexibility
in facility occupancy through termination options concurrent with contract terms in many of our leases. We believe that our facilities are adequate to meet our current needs, and that additional
facilities will be available as we expand in the future.

Item 3. LEGAL PROCEEDINGS

From time to time, we are involved in various legal proceedings concerning matters arising in the ordinary course of business. We believe that any ultimate
liability arising out of these proceedings will not have a material adverse effect on our financial position or results of operations.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to the stockholders during the fourth quarter of 2003.

30

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PART II

Item 5.    MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

Since October 10, 2003, our common stock has been publicly traded on the Nasdaq National Market under the symbol "DNET." Prior to October 10, 2003,
our common stock was not publicly traded. From October 10, 2003 to December 31, 2003, the range of high and low prices of our common stock as reported by the Nasdaq for the 4th quarter
of 2003 was $17.13 (low) and $24.20 (high).

As
of March 15, 2004, there were approximately 15 holders of record of our common stock. The number of holders of record of our common stock is not representative of the number of
beneficial holders because many shares are nominally owned by depositories, brokers or nominees for the benefit of many beneficial holders.

Dividend Policy

We have never declared or paid any cash dividends on our common stock. We currently intend to retain earnings, if any, to support our growth strategy and do not
anticipate paying cash dividends in the foreseeable future. DigitalNet Holdings, Inc. is a holding company and relies upon dividends from DigitalNet, Inc. and its subsidiaries for
substantially all of its cash requirements. Under the terms of our 2003 credit facility, DigitalNet, Inc. is not permitted to pay dividends to DigitalNet Holdings, Inc. that are in turn
used to pay dividends declared by DigitalNet Holdings, Inc. As a result, DigitalNet Holdings, Inc. is effectively prevented from paying dividends to our stockholders by the terms of our
2003 credit facility. Additionally, the indenture under which our 9% senior notes due 2010 were issued contains covenants that could under certain circumstances restrict the ability of
DigitalNet, Inc. to pay dividends to DigitalNet Holdings, Inc.

Equity Compensation Plan Information

The following table sets forth as of December 31, 2003 regarding our equity compensation plans.

|Plan Category              |                                  | Number of Securities to
be issued upon exercise
of outstanding options,
warrants and rights.
(a) |                | Weighted-Average
Exercise price of
outstanding options,
warrants and rights.
(b) |                  | Number of Securities
remaining available
for future issuance
(excluding securities
reflected in column (a)).
(c)
|-------------------------- | -------------------------------- | ------------------------------------------------------------------------------------------------ | -------------- | -------------------------------------------------------------------------------- | ---------------- | ----------------------------------------------------------------------------------------------------------------
|Equity Compensation Plans: |                                  |                                                                                                  |                |                                                                                  |                  |                                                                                                                 
|                           | Approved by Security holders     |                                                                                                  | 311,125 shares |                                                                                  | $11.75 per share |                                                                                                                 
|                           | Not approved by Security holders |                                                                                                  |               |                                                                                  |                 |                                                                                                                 

---

Unregistered Sales of Securities

There were no unregistered sales of our common stock during the 4th quarter of 2003.

31

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Item 6.    SELECTED FINANCIAL DATA

The following selected consolidated financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of
Operations," our consolidated financial statements and the related notes, included elsewhere in this Form 10-K. The historical results are not necessarily indicative of results to
be expected for any future period. Our consolidated statement of operations data and other financial data for the period from September 7, 2001 (inception) through December 31, 2001 and
for the years ended December 31, 2002 and 2003 and the balance sheet data as of December 31, 2002 and 2003 are derived from our audited consolidated financial statements that are
included elsewhere in this Form 10-K.

The
statement of operations data and other financial data for DigitalNet Government Solutions, LLC for the years ended December 31, 2000 and 2001 and the period from
January 1, 2002 through November 25, 2002 and the balance sheet data as of December 31, 2000 and 2001 and as of November 25, 2002 are derived from the consolidated
financial statements of DigitalNet Government Solutions, LLC, which have been audited and are included elsewhere in this Form 10-K. The balance sheet data as of December 31,
1999 and 2000 and the statement of operations data and the other financial data for DigitalNet Government Solutions, LLC for the year ended December 31, 1999 are derived from audited
consolidated financial statements that are not included in this Form 10-K.

32

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DigitalNet Holdings, Inc.  Selected Data Table  (amounts in thousands, except share and per share data)

|                                                      |                                                | Predecessor                                                        |         | DigitalNet Holdings, Inc. |  
|----------------------------------------------------- | ---------------------------------------------- | ------------------------------------------------------------------ | ------- | ------------------------- | -
|
|
|Statement of Operations Data:                         |                                                |                                                                    |         |                           |  
|Revenues                                              |                                                | $                                                                  | 396,080 |                           | $
|Costs of revenues                                     |                                                |                                                                    | 320,271 |                           |  
|                                                      |                                                |                                                                    |         |                           |  
|Gross profit                                          |                                                |                                                                    | 75,809  |                           |  
|Operating expenses:                                   |                                                |                                                                    |         |                           |  
|                                                      | Selling, general and administrative            |                                                                    |         | 43,992                    |  
|                                                      | Acquisition, integration, and related expenses |                                                                    |         |                          |  
|                                                      | Amortization of intangibles (3)                |                                                                    |         | 6,023                     |  
|                                                      |                                                |                                                                    |         |                           |  
|Total operating expenses                              |                                                |                                                                    | 50,015  |                           |  
|                                                      |                                                |                                                                    |         |                           |  
|Income (loss) from operations                         |                                                |                                                                    | 25,794  |                           |  
|                                                      |                                                |                                                                    |         |                           |  
|Other income (expense):                               |                                                |                                                                    |         |                           |  
|                                                      | Interest income                                |                                                                    |         | 421                       |  
|                                                      | Interest expense                               |                                                                    |         |                          |  
|                                                      | Other expense, net                             |                                                                    |         | (221                      | )
|                                                      |                                                |                                                                    |         |                           |  
|Total other income (expense)                          |                                                |                                                                    | 200     |                           |  
|                                                      |                                                |                                                                    |         |                           |  
|Income (loss) before provision for income taxes       |                                                |                                                                    | 25,994  |                           |  
|Provision for income taxes                            |                                                |                                                                    | 11,586  |                           |  
|                                                      |                                                |                                                                    |         |                           |  
|Net income (loss) (3)                                 |                                                | $                                                                  | 14,408  |                           | $
|                                                      |                                                |                                                                    |         |                           |  
|Dividends and accretion on preferred stock, net       |                                                |                                                                    |         |                           |  
|                                                      |                                                |                                                                    |         |                           |  
|Net income (loss) attributable to common stockholders |                                                |                                                                    |         |                           |  
|                                                      |                                                |                                                                    |         |                           |  
|Earnings (loss) per common share:                     |                                                |                                                                    |         |                           |  
|                                                      | Basic earnings (loss) per common share         |                                                                    |         |                           |  
|                                                      |                                                |                                                                    |         |                           |  
|                                                      |                                                | Basic weighted average common shares outstanding                   |         |                           |  
|                                                      |                                                |                                                                    |         |                           |  
|                                                      | Diluted earnings (loss) per common share       |                                                                    |         |                           |  
|                                                      |                                                |                                                                    |         |                           |  
|                                                      |                                                | Diluted weighted average common shares outstanding                 |         |                           |  
|                                                      |                                                |                                                                    |         |                           |  
|                                                      |                                                | Pro forma basic and diluted loss per common share (4)              |         |                           |  
|                                                      |                                                |                                                                    |         |                           |  
|                                                      |                                                | Pro forma basic and diluted weighted common shares outstanding (4) |         |                           |  
|                                                      |                                                |                                                                    |         |                           |  
|Balance Sheet Data (at period end):                   |                                                |                                                                    |         |                           |  
|Cash and cash equivalents                             |                                                | $                                                                  | 5,733   |                           | $
|Working capital                                       |                                                |                                                                    | 40,078  |                           |  
|Total assets                                          |                                                |                                                                    | 193,828 |                           |  
|Total debt, including current portion                 |                                                |                                                                    |        |                           |  
|Redeemable convertible securities                     |                                                |                                                                    |        |                           |  
|Total stockholders' equity                            |                                                |                                                                    | 138,847 |                           |  
|Other Financial Data:                                 |                                                |                                                                    |         |                           |  
|Capital expenditures                                  |                                                | $                                                                  | 5,654   |                           | $

---

33

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Unaudited Pro Forma Consolidated Financial Information

On November 26, 2002, we acquired all of the membership interests of DigitalNet Government Solutions, LLC (DGS, formerly Getronics Government Solutions,
L.L.C.). The DGS results of operations have been included in our consolidated statement of operations for the year ended December 31, 2002 from the date of acquisition. The pro forma statement
of operations for the year ended December 31, 2002 presented below represents our pro forma statement of operations giving effect to the acquisition of our predecessor, Getronics Government
Solutions, L.L.C. and the related financing transactions as if such transactions had occurred on January 1, 2002. Although this approach is not consistent with generally accepted accounting
principles, we believe it is the most practical way to comment on the results of operations for 2002.

The
unaudited pro forma consolidated financial information provided below is based upon assumptions and estimates which we believe are reasonable. In our opinion, all adjustments have
been made that are necessary to present fairly the pro forma data. This unaudited pro forma consolidated financial information is presented for informational purposes only and is not indicative of
either future results of operations or results that might have been achieved if the transactions had been consummated as of January 1, 2002. The pro forma consolidated financial information
should be read in connection with our historical consolidated financial statements and those of DGS, together with the related notes thereto, that are included elsewhere in this Form 10-K.

34

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Unaudited Pro Forma Consolidated Statement of Operations        (Dollars in Thousands)

|                                                      |                                          | DigitalNet
historical for
the year ended
December 31,
2002 (A) |         | DigitalNet Government
Solutions, LLC historical
for the period from
January 1, 2002 through
November 25, 2002 |           | Acquisition and
related financing
adjustments |        |   |         | Pro forma for the
year ended
December 31,
2002 |   
|----------------------------------------------------- | ---------------------------------------- | -------------------------------------------------------------- | ------- | ------------------------------------------------------------------------------------------------------------- | --------- | --------------------------------------------- | ------ | - | ------- | ---------------------------------------------- | --
|Revenues                                              |                                          | $                                                              | 33,903  |                                                                                                               | $         | 333,910                                       |        | $ |        |                                                |   
|Costs of revenues                                     |                                          |                                                                | 26,951  |                                                                                                               |           | 262,389                                       |        |   | (1,322  | )                                              | (B
|                                                      |                                          |                                                                |         |                                                                                                               |           |                                               |        |   |         |                                                |   
|Gross profit                                          |                                          |                                                                | 6,952   |                                                                                                               |           | 71,521                                        |        |   | 1,322   |                                                |   
|                                                      |                                          |                                                                |         |                                                                                                               |           |                                               |        |   |         |                                                |   
|Operating expenses:                                   |                                          |                                                                |         |                                                                                                               |           |                                               |        |   |         |                                                |   
|                                                      | Selling, general, and administrative     |                                                                |         | 5,483                                                                                                         |           |                                               | 30,407 |   |         | (566                                           | ) 
|                                                      | Acquisition and related expenses         |                                                                |         | 921                                                                                                           |           |                                               |       |   |         |                                               |   
|                                                      | Amortization of intangibles              |                                                                |         | 800                                                                                                           |           |                                               |       |   |         | 9,711                                          |   
|                                                      |                                          |                                                                |         |                                                                                                               |           |                                               |        |   |         |                                                |   
|Total operating expenses                              |                                          |                                                                | 7,204   |                                                                                                               |           | 30,407                                        |        |   | 9,145   |                                                |   
|                                                      |                                          |                                                                |         |                                                                                                               |           |                                               |        |   |         |                                                |   
|Income from operations                                |                                          |                                                                | (252    | )                                                                                                             |           | 41,114                                        |        |   | (7,823  | )                                              |   
|Other income and (expense):                           |                                          |                                                                |         |                                                                                                               |           |                                               |        |   |         |                                                |   
|                                                      | Interest income                          |                                                                |         | 29                                                                                                            |           |                                               | 1,960  |   |         |                                               |   
|                                                      | Interest expense                         |                                                                |         | (1,517                                                                                                        | )         |                                               |       |   |         | (13,609                                        | ) 
|                                                      | Other expense                            |                                                                |         |                                                                                                              |           |                                               | (16    | ) |         |                                               |   
|                                                      |                                          |                                                                |         |                                                                                                               |           |                                               |        |   |         |                                                |   
|Total other income (expense), net                     |                                          |                                                                | (1,488  | )                                                                                                             |           | 1,944                                         |        |   | (13,609 | )                                              |   
|                                                      |                                          |                                                                |         |                                                                                                               |           |                                               |        |   |         |                                                |   
|Income (loss) before provision for income taxes       |                                          |                                                                | (1,740  | )                                                                                                             |           | 43,058                                        |        |   | (21,432 | )                                              |   
|(Provision) benefit for taxes                         |                                          |                                                                | (332    | )                                                                                                             |           | (16,245                                       | )      |   | 9,174   |                                                | (E
|                                                      |                                          |                                                                |         |                                                                                                               |           |                                               |        |   |         |                                                |   
|Net loss                                              |                                          | $                                                              | (2,072  | )                                                                                                             | $         | 26,813                                        |        | $ | (12,258 | )                                              |   
|                                                      |                                          |                                                                |         |                                                                                                               |           |                                               |        |   |         |                                                |   
|Dividends and accretion on preferred stock            |                                          |                                                                | (11,752 | )                                                                                                             |           |                                               |        |   | 5,930   |                                                | (F
|                                                      |                                          |                                                                |         |                                                                                                               |           |                                               |        |   |         |                                                |   
|Net income (loss) attributable to common stockholders |                                          | $                                                              | (13,824 | )                                                                                                             | $         | 26,813                                        |        | $ | (6,328  | )                                              |   
|                                                      |                                          |                                                                |         |                                                                                                               |           |                                               |        |   |         |                                                |   
|Earnings (loss) per common share:                     |                                          |                                                                |         |                                                                                                               |           |                                               |        |   |         |                                                |   
|                                                      | Basic earnings (loss) per common share   |                                                                | $       | (5.71                                                                                                         | )         |                                               |        |   |         |                                                |   
|                                                      |                                          |                                                                |         |                                                                                                               |           |                                               |        |   |         |                                                |   
|                                                      |                                          | Weighted average common shares outstanding                     |         |                                                                                                               | 2,421,324 |                                               |        |   |         |                                                |   
|                                                      |                                          |                                                                |         |                                                                                                               |           |                                               |        |   |         |                                                |   
|                                                      | Diluted earnings (loss) per common share |                                                                | $       | (5.71                                                                                                         | )         |                                               |        |   |         |                                                |   
|                                                      |                                          |                                                                |         |                                                                                                               |           |                                               |        |   |         |                                                |   
|                                                      |                                          | Weighted average common shares outstanding                     |         |                                                                                                               | 2,421,324 |                                               |        |   |         |                                                |   
|                                                      |                                          |                                                                |         |                                                                                                               |           |                                               |        |   |         |                                                |   

---

(A)  On
November 26, 2002 we acquired all of the membership interests of DGS. Our results of operations for the year ended December 31, 2002 include the
operating results of DGS from November 26, 2002 through December 31, 2002, along with our operating results for the entire year ended December 31, 2002.

(B)  Reflects
the elimination of the pension and post-retirement medical and life insurance expense recognized by DGS in its historical financial statements.
Immediately prior to the acquisition, DGS transferred all liabilities and assets related to these plans to its former parent, GetronicsWang Co., LLC.

(C)  Reflects
the amortization of identifiable intangible assets resulting from the allocation of the DGS purchase price.

(D)  Reflects
the additional interest expense on the indebtedness incurred to finance the acquisition of DGS.

(E)  Reflects
the incremental provision (benefit) for state and federal income taxes.

(F)  Reflects
the additional dividends on Class A Preferred Stock issued to finance the acquisition of DGS and Class B Preferred Stock issued as consideration
in the purchase of DGS and eliminates the one-time accretion to record the Class A

35

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Preferred
Stock at its redemption value recognized in the DigitalNet Holdings, Inc. historical statements for the year ended December 31, 2002.

(G)  The
pro forma basic weighted average common shares outstanding reflects the issuance of 2,371,025 shares of common stock issued in connection with the financing of our
acquisition of DGS, as if the shares had been issued on January 1, 2002. The basic weighted average common shares also includes the effect of 676,666 shares of carried stock issued in
connection with the financing of our acquisition of DGS as if such shares had been issued on January 1, 2002, with assumed vesting beginning on January 1, 2002. For additional
information regarding the carried stock, see footnote 9 to our audited consolidated financial statements included elsewhere in this Form 10-K.

(H)  The
calculation of pro forma diluted weighted average common shares outstanding reflects the treasury stock effect of warrants to purchase 94,868 shares of common stock
as if such warrants had been issued on January 1, 2002 and the treasury stock effect of unvested shares of reserved stock and carried stock issued prior to our acquisition of DGS and unvested
shares of restricted stock issued in 2002 based upon their respective issue dates. The treasury stock effect of 532,167 unvested shares as of December 31, 2002 of reserved stock and carried
stock issued in connection with the DGS acquisition have not been included in the calculation of the diluted weighted average shares outstanding because such effect is anti-dilutive. For additional
information regarding the reserved stock, carried stock and restricted stock, see footnote 9 to our audited consolidated financial statements included elsewhere in this Form 10-K.

Item 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

You should read the following discussion of the financial condition and results of operations of DigitalNet Holdings, Inc. and its predecessor, DigitalNet
Government Solutions, LLC, in conjunction with their respective consolidated financial statements and the related notes, "Unaudited Pro Forma Consolidated Financial Information" and "Selected
Financial Data" included elsewhere in this Form 10-K. This discussion contains forward looking statements that involve risks and uncertainties. For additional information regarding
some of the risks and uncertainties that affect our business and the industry in which we operate and that apply to an investment in our common stock, please read "Risk Factors" in Part I, Item
1 of this report.

Overview

We are a leading provider of strategic consulting, managed network, information security, and application development services and solutions to U.S. civilian,
defense and intelligence federal government agencies as measured by our revenues. Our comprehensive information technology services and solutions allow our federal government clients to outsource some
or all of the activities relating to the design, implementation, integration, management, and security of their computer networks and systems. We are focused on increasing network reliability,
reducing overall network costs, and simplifying timely migration of mission critical network computing environments to new technologies.

In
November 2002, we purchased DigitalNet Government Solutions, LLC, formerly known as Getronics Government Solutions, L.L.C., for $216.9 million, consisting of
$183.4 million in cash and shares of our Class B Preferred Stock with an aggregate liquidation preference of $33.5 million. The cash portion of the purchase price and associated
transaction costs were financed by a $63.6 million investment in our common stock and Class A Preferred Stock by GTCR, Ken S. Bajaj and Jack Pearlstein and their family entities, a
$44.0 million bridge loan under our senior subordinated bridge facility, and approximately $82.9 million of borrowings under our then existing $105.0 million senior credit
facility.

On
July 3, 2003, we applied the net proceeds from the sale of $125.0 million of our 9% senior notes due 2010 to repay the indebtedness under our subordinated bridge
facility and the term loan portion of our senior credit facility. Concurrent with the completion of the sale, we entered into our current credit facility, which provides us with up to
$50.0 million in borrowings.

On
October 16, 2003, we completed the initial public offering of our common stock and issued 5,750,000 shares at $17.00 per share, which generated proceeds, net of offering costs,
of approximately

36

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$89.1 million.
The net proceeds of our initial public offering, together with proceeds of $848,000 from the repayment of certain management notes, were used to redeem $43.8 million in
aggregate principal amount of our outstanding 9% senior notes due 2010 for approximately $47.7 million, or 109% of the aggregate principal amount of the notes being redeemed, and
$27.0 million was used to purchase all of our outstanding Class B Preferred Stock. We expect to use the remaining proceeds of our initial public offering for general corporate purposes,
including working capital and acquisition funding.

In
September 1997, our predecessor was awarded a five-year contract with the INS to provide managed network services. In March 2002, the INS and the GSA began
the process of re-competing this contract as a blanket purchase agreement under the GSA Information Technology Schedule. Our predecessor was notified in September 2002 that it was
not awarded the re-competed contract.

In
November 1998, Lockheed Martin awarded a subcontract to our predecessor to provide managed network services and telecommunications circuits to NASA under the NASA CSOC
contract. The base period of this subcontract ended on December 31, 2003. The contract was subsequently extended on a time-and-materials basis through March 31,
2004.

Our
total backlog was approximately $890.2 million as of December 31, 2003, of which approximately $117.1 million was funded. Excluding our NASA CSOC contract, our
total backlog was approximately $887.5 million and our funded backlog was approximately $114.3 million as of December 31, 2003. We expect to realize the remaining approximately
$2.7 million of the backlog associated with our NASA CSOC contract as of December 31, 2003 as revenue during the first three months of 2004. The NASA CSOC contract originally was
scheduled to end on December 31, 2003, but was extended on a time-and-materials basis through March 31, 2004. Our backlog provides us with significant visibility
and allows us to better manage our business. We review our backlog on a monthly basis to determine if any adjustments are necessary. Each year a significant portion of our revenues is derived from our
total backlog, and a significant portion of our backlog represents work related to the continuation of managed network services and solutions under contracts or projects where we are the incumbent
provider. We hold a number of contracts that provide for multiyear revenues. These contracts generate revenues over an initial base period, with one or more subsequent option periods, which may or may
not be exercised by our customers. Revenues generated over a base period may or may not exceed the revenues generated over the sum of the option periods.

Contracts
funded by U.S. government agencies account for substantially all of our revenues. The pricing environment for our products and services has not fluctuated significantly over
the past three years. For the year ended December 31, 2003, we derived approximately 67% of our revenues from contracts in which we acted as the prime contractor. We enter into three basic
types of contracts: time-and-materials, fixed price, and cost plus.

Under
time-and-materials contracts, we are paid a fixed hourly rate for each direct labor hour expended and we are generally also reimbursed for allowable
materials and out-of-pocket expenses. To the extent our actual labor hour costs vary from the negotiated hourly rates, we can generate more or less than the targeted amount of
profit, or even incur a loss. Under fixed price contracts, we agree to perform the specified work, or deliver a specified set of services, for a predetermined price. To the extent our actual costs
vary from the estimates upon which the price was negotiated, we can generate more or less than the targeted amount of profit or even incur a loss. Some fixed price contracts have a performance based
component, in which we can earn incentive payments or incur financial penalties based on our performance. Cost-plus contracts provide for reimbursement of allowable costs and the payment
of a fee, which may be fixed, or performance based. The following table sets forth the

37

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percentage
of our and our predecessor's revenues derived from each type of contract. Our information security solutions revenues are included in the fixed price line item below.

As a Percentage of Revenues:Year Ended December 31,2001

2002

2003Predecessor

Pro forma

DigitalNetTime and materials

47.5%

49.4%

43.6%Fixed price

43.1

40.8

47.0Cost plus

9.4

9.8

9.4Total

100.0%

100.0%

100.0%


Excluding
revenues from our NASA CSOC contract, our contract mix as a percentage of revenues for the year ended December 31, 2003 would have been approximately 50.1%
time-and-materials, approximately 39.1% fixed price, and approximately 10.8% cost-plus.

Certain
revenues and payments we receive are based on provisional billings and payments that are subject to adjustment under audit. U.S. government agencies and departments have the
right to challenge our cost estimates and allocation methodologies with respect to government contracts. In addition, contracts with such agencies are subject to audit and possible adjustment to give
effect to
unallowable costs under cost-plus contracts or to other regulatory requirements affecting both cost-plus and fixed price contracts.

Our
most significant expense is costs of revenues, which includes the costs of direct labor, subcontractors, materials, equipment, depreciation, travel, and an allocation of indirect
costs. The depreciation included in costs of revenues primarily relates to computer hardware and software that we have purchased on behalf of our clients, for use by them, and to which we retain
ownership. Indirect costs consist primarily of fringe benefits, human resources, recruiting, and certain other non-direct costs which are necessary to provide direct labor. The number and
types of personnel, their salaries, and other costs, can have a significant impact on our costs of revenues.

Our
selling, general, and administrative expenses include costs not directly associated with performing work for our clients. These costs include salaries, wages, plus associated fringe
benefits, stock-based compensation charges, rent, depreciation, travel, and insurance. Among the functions covered by these expenses are sales, business development, contracts, purchasing, legal,
finance, accounting, management, human resources, information systems, and general management. Most of these costs are allowable costs under the cost accounting standards for contracting with the U.S.
government and are recoverable under cost plus contracts.

Our
acquisition and related expenses in 2002 consisted of lease costs related to the consolidation of our facilities and costs related to the identification and evaluation of potential
acquisitions other than DGS that were not consummated.

Results of Operations

For purposes of this management's discussion and analysis only, our results for the year ended December 31, 2002 discussed below represent our pro forma
statement of operations giving effect to the acquisition of our predecessor, Getronics Government Solutions, L.L.C. and the related financing transactions as if such transactions had occurred on
January 1, 2002, as further described in "Unaudited Pro Forma Consolidated Financial Information." Although this approach is not consistent with generally accepted accounting principles, we
believe it is the most practical way to comment on the results of operations for 2002. Our pro forma results are presented for information purposes only and are not indicative of either future results
or results that might have been achieved if the

38

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transactions
had been consummated as of January 1, 2002. Our actual results from the year ended December 31, 2003 may not be indicative of results to be expected for future periods.

The
following table sets forth, for the periods indicated, (i) selected statements of operations data and (ii) selected statements of operations data expressed as a
percentage of revenues (dollars in thousands):

|                                                |                                     | Year Ended December 31, |         | Year Ended December 31, |  
|----------------------------------------------- | ----------------------------------- | ----------------------- | ------- | ----------------------- | -
|
|
|
|Revenues                                        |                                     | $                       | 346,773 |                         | $
|Costs of revenues                               |                                     |                         | 277,087 |                         |  
|                                                |                                     |                         |         |                         |  
|Gross profit                                    |                                     |                         | 69,686  |                         |  
|                                                |                                     |                         |         |                         |  
|Operating expenses:                             |                                     |                         |         |                         |  
|                                                | Selling, general and administrative |                         |         | 36,671                  |  
|                                                | Acquisition and related expenses    |                         |         |                        |  
|                                                | Amortization of intangibles         |                         |         | 4,239                   |  
|                                                |                                     |                         |         |                         |  
|Total operating expenses                        |                                     |                         | 40,910  |                         |  
|                                                |                                     |                         |         |                         |  
|Income from operations                          |                                     |                         | 28,776  |                         |  
|Other income and (expense):                     |                                     |                         |         |                         |  
|                                                | Interest income                     |                         |         | 4,852                   |  
|                                                | Interest expense                    |                         |         |                        |  
|                                                | Other expense                       |                         |         | (806                    | )
|                                                |                                     |                         |         |                         |  
|Total other income and (expense)                |                                     |                         | 4,046   |                         |  
|                                                |                                     |                         |         |                         |  
|Income (loss) before provision for income taxes |                                     |                         | 32,822  |                         |  
|Provision for income taxes                      |                                     |                         | 14,547  |                         |  
|                                                |                                     |                         |         |                         |  
|Net income (loss)                               |                                     | $                       | 18,275  |                         | $
|                                                |                                     |                         |         |                         |  

Because our performance under the INS/FOS contract ended November 30, 2002 and our performance under the NASA CSOC contract will end on
March 31, 2004, we believe that revenues and cost of revenues, as adjusted to exclude those contracts, presents investors with a more meaningful depiction of our ongoing business at the date of
the DGS acquisition. The NASA CSOC contract originally was scheduled to end on December 31, 2003, but was extended on a time-and-materials basis through March 31,
2004. The following table sets forth revenues, as adjusted, and costs of revenues, as adjusted, which represent revenues and costs of revenues as reported in the historical consolidated financial
statements and consolidated pro forma statement of operations, for the periods indicated, less

39

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revenues
and costs of revenues derived from our INS/FOS contract and our NASA CSOC contract (dollars in thousands):

|                                                                        |                    | Year Ended December 31,
|----------------------------------------------------------------------- | ------------------ | -----------------------
|
|
|
|Revenues, as reported                                                   |                    | $                      
|Less:                                                                   |                    |                        
|                                                                        | INS/FOS contract   |                        
|                                                                        | NASA CSOC contract |                        
|                                                                        |                    |                        
|Revenues, as adjusted                                                   |                    | $                      
|                                                                        |                    |                        
|Costs of revenues, as reported                                          |                    | $                      
|Less:                                                                   |                    |                        
|                                                                        | INS/FOS contract   |                        
|                                                                        | NASA CSOC contract |                        
|                                                                        |                    |                        
|Cost of revenues, as adjusted                                           |                    | $                      
|                                                                        |                    |                        
|Cost of revenues, as adjusted, as a percentage of revenues, as adjusted |                    |                        

DigitalNet for the Year Ended December 31, 2003 Compared to DigitalNet Pro Forma for the Year Ended
December 31, 2002

Revenues.Revenues for the year ended December 31, 2003 were approximately $336.3 million, compared to pro
forma revenues of approximately $367.8 million for the year ended December 31, 2002, representing a decrease of $31.6 million, or 8.6%. Approximately, $60.1 million of this
decrease was due to the loss by our predecessor of the INS/FOS contract re-compete in September of 2002 and approximately $4.5 million of this decrease was due to lower revenues
derived from the NASA CSOC contract. We estimate that these decreases were partially offset by increases of approximately $17.1 million in managed network services revenues and approximately
$7.8 million in information security solutions sales. Excluding revenues from both the INS/FOS and NASA CSOC contracts, revenues for the year ended December 31, 2003 were
$291.5 million, compared to pro forma revenues of approximately $258.4 million for the year ended December 31, 2002, representing an increase of approximately $33.1 million
or 12.8%. Because the INS/FOS contract ended November 30, 2002 and our performance under the NASA CSOC contract will end on March 31, 2004, management believes that revenues and costs of
revenues excluding these contracts presents investors with a more meaningful depiction of our ongoing business. For the year ended December 31, 2003, we estimate that we derived approximately
33% of our revenues from contracts in which we acted as a subcontractor to other contractors.

Costs of Revenues.Costs of revenues for the year ended December 31, 2003 were approximately $266.8 million, or
79.3% of revenues, compared to pro forma costs of revenues of approximately $288.0 million, or 78.3% of revenues, for the year ended December 31, 2002. Approximately $43.8 million
of this decrease was due to the loss by our predecessor of the INS/FOS contract re-compete in September of 2002 and approximately $4.5 million of this decrease was due to lower
costs required to perform under the NASA CSOC contract. These decreases were partially offset by cost increases of approximately $13.7 million related to performance under our managed network
services contracts and approximately $6.3 related to information security solutions sales. Excluding costs of revenue from both the INS/FOS and NASA CSOC contracts, costs of revenues for the year
ended December 31, 2003 were approximately $222.0 million, or 76.2% of revenues, compared to pro forma costs of revenues of $195.0 million, or 75.5% of revenues, for the year
ended December 31, 2002.

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Selling, General and Administrative Expenses.For the year ended December 31, 2003, selling, general and
administrative expenses were approximately $45.2 million, or 13.4% of revenues, compared to approximately $35.3 million of pro forma selling, general and administrative expenses, or 9.6%
of revenues, for the year ended December 31, 2002. During the years ended December 31, 2003 and 2002, we incurred approximately $11.5 million and approximately $265,000,
respectively, in stock-based compensation charges related to shares of restricted stock and reserved stock held by certain employees and stock options granted at exercise prices below the fair market
value of the underlying common stock. The increase in stock-based compensation charges was the primary cause of the increase in our selling, general and administrative expenses. The 2003 stock-based
compensation charge included a charge of approximately $10.6 million incurred in connection with our initial public offering.

Acquisition and Related Expenses.For the year ended December 31, 2003 we did not incur acquisition, and related
expenses. For the year ended December 31, 2002, pro forma acquisition and related expenses were approximately $921,000, and consisted of lease costs related to the consolidation of our
facilities and costs related to the identification and evaluation of potential acquisitions other than DigitalNet Government Solutions that were not consummated. The abandoned office space has been
sublet to a tenant that has the option to terminate the sublease in certain circumstances. If the option to terminate this lease is not exercised during the first or second quarter of 2004, the
liability for the abandoned facility will be reduced with the related benefit recorded in the statement of operations.

Amortization of Intangibles.For the year ended December 31, 2003, amortization expense was approximately
$10.6 million, or 3.2% of revenues, compared to approximately $10.5 million of pro forma amortization expense, or 2.9% of revenues, for the year ended December 31, 2002. The
amortization expense in 2003 and 2002 is related to the amortization of intangibles resulting from the purchase of our predecessor.

Operating Income.For the year ended December 31, 2003, operating income was approximately $13.7 million,
compared to approximately $33.0 million of pro forma operating income for the year ended December 31, 2002. The decrease in operating income was primarily due to the termination of the
INS/FOS contract, under which our predecessor recognized a gross profit of approximately $16.4 million for the year ended December 31, 2002, and the increase of approximately
$11.3 million in stock-based compensation charges for the year ended December 31, 2003, which were partially offset by the additional gross profit realized from the increases in our
managed network services revenues and information security solutions sales from 2002 to 2003.

Other Income and Expense.For the year ended December 31, 2003, interest income was approximately $202,000, compared
to of pro forma interest income approximately $2.0 million for the year ended December 31, 2002. This decrease was attributable to both lower average cash balances maintained and
declining interest rates during 2003. Interest expense for the year ended December 31, 2003 was approximately $24.3 million, compared to approximately $15.1 million of pro forma
interest expense for the year ended December 31, 2002. In 2003, interest expense included charges of approximately $3.9 million for the premium paid in connection with the partial
redemption of our 9% senior notes, the write-off of approximately $4.5 million of deferred financing fees related to the retirement of debt with the proceeds of the sale of our 9%
senior notes and the write-off of approximately $1.9 million of deferred financing fees from the partial redemption of the 9% senior notes with the proceeds of our initial public
offering. Nearly all of our interest expense was attributable to the debt we issued in connection with the acquisition of our predecessor, which was in turn refinanced with the proceeds of the sale of
our 9% senior notes.

Provision for Income Taxes.For the year ended December 31, 2003, our provision for income taxes was approximately
$328,000, compared to approximately $7.4 million pro forma provision for income taxes for the year ended December 31, 2002. We incurred income taxes for the year ended

41

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December 31,
2003, despite a pre-tax loss, due primarily to non-deductible expenses related to stock-based compensation.

DigitalNet Pro Forma for the Year Ended December 31, 2002 Compared to Our Predecessor's Year Ended December 31, 2001

Revenues.Pro forma revenues for the year ended December 31, 2002 were approximately $367.8 million, compared
to our predecessor's revenues of approximately $346.8 million for the year ended December 31, 2001, representing an increase of $21.0 million, or 6.1%. We estimate that
approximately $17.9 million of this increase was due to additional work generated under our managed network services contracts and approximately $3.6 million of this increase was due to
increased information security solutions sales. Excluding revenues from both the INS/FOS contract and the NASA CSOC contract, pro forma revenues for the year ended December 31, 2002 were
approximately $258.4 million, compared to our predecessor's revenues of approximately $238.3 million for the year ended December 31, 2001, representing an increase of 8.5%. For
the year ended December 31, 2002, we estimate that we derived approximately 31% of our revenues from contracts in which we acted as a subcontractor to other contractors.

Costs of Revenues.Pro forma costs of revenues for the year ended December 31, 2002 were approximately
$288.0 million, or 78.3% of revenues, compared to our predecessor's costs of revenues of approximately $277.1 million, or 79.9% of revenues, for the year ended December 31, 2001.
Nearly all of this increase in costs was due to performing the additional task order requirements generated under our managed network services contracts. Excluding costs of revenues from both the
INS/FOS and
NASA CSOC contracts, pro forma costs of revenues for the year ended December 31, 2002 were approximately $195.0 million, or 75.5% of revenues, compared to our predecessor's costs of
revenues of approximately $180.2 million, or 75.6% of revenues, for the year ended December 31, 2001. In connection with the termination of our INS/FOS contract, we terminated
approximately 580 of our employees in December 2002, most of whom were hired by the new contractor. We do not anticipate replacing these employees in the foreseeable future.

Selling, General, and Administrative Expenses.For the year ended December 31, 2002, pro forma selling, general, and
administrative expenses were approximately $35.3 million, or 9.6% of revenues, compared to approximately $36.7 million, or 10.6% of our predecessor's revenues, for the year ended
December 31, 2001. This change included a decrease of approximately $3.3 million in pro forma selling, general, and administrative costs in 2002 as a result of personnel reductions and
the implementation of other cost saving measures effected by our predecessor, which was partially offset by the expenses incurred by DigitalNet from January 1, 2002 through the acquisition of
our predecessor in November 2002. During 2002, we also incurred approximately $265,000 in pro forma stock-based compensation charges related to shares of restricted stock held by certain
employees. Our predecessor did not incur stock-based compensation during the year ended December 31, 2001.

Acquisition and Related Expenses.For the year ended December 31, 2002, pro forma acquisition and related expenses
were approximately $921,000, and consisted of lease costs related to the consolidation of our facilities and costs related to the identification and evaluation of potential acquisitions other than
DigitalNet Government Solutions that were not consummated. Our predecessor did not incur acquisition, and related expenses during the year ended December 31, 2001.

Amortization of Intangibles.For the year ended December 31, 2002, pro forma amortization expense was approximately
$10.5 million, compared to our predecessor's amortization expense of approximately $4.2 million for the year ended December 31, 2001. On January 1, 2002, our predecessor
adopted SFAS No. 142,Goodwill and Other Intangible Assets, and the goodwill and assembled workforce intangible assets from our predecessor's
acquisitions were no longer amortized. The pro forma

42

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amortization
expense of approximately $10.5 million for the year ended December 31, 2002, was solely related to the amortization of intangibles resulting from the purchase of our
predecessor.

Operating Income.For the year ended December 31, 2002, pro forma operating income was approximately
$33.0 million, compared to our predecessor's operating income of approximately $28.8 million for the year ended December 31, 2001. The increase in operating income was primarily
due to improved profitability from an increase of approximately $7.0 million in gross profit realized under our managed network services contracts and approximately $3.0 million in gross
profit realized under our information security contracts, which were partially offset by an increase of approximately $6.3 million in amortization expenses.

Other Income and Expense.For the year ended December 31, 2002, pro forma interest income was approximately
$2.0 million, compared to our predecessor's interest income of approximately $4.9 million for the year ended December 31, 2001. Nearly all of this decrease was attributable to
declining interest rates during 2002. Pro forma interest expense for the year ended December 31, 2002 was approximately $15.1 million. Our predecessor had no interest expense for the
year ended December 31, 2001. This pro forma interest expense was primarily attributable to the debt we issued in connection with the acquisition of our predecessor in 2002. For the year ended
December 31, 2002, pro forma other expenses were $16,000, compared to our predecessor's other expenses of $806,000 for the year ended December 31, 2001.

Provision for Income Taxes.For the year ended December 31, 2002, our provision for income taxes was approximately
$7.4 million, compared to our predecessor's provision for income taxes of approximately $14.5 million for the year ended December 31, 2001. The effective tax rates were 37.2% and
44.3% for the years ended December 31, 2002 and 2001, respectively.

DigitalNet Inception (September 7, 2001) through November 25, 2002

DigitalNet was founded on September 7, 2001. From inception through November 25, 2002, our operating activities primarily consisted of developing a
preliminary business plan, recruiting personnel, engaging in discussions with prospective lenders and strategic investors, identifying potential acquisition targets, and engaging in merger and
acquisition discussions and due diligence efforts. After reviewing and evaluating more than 25 companies, we acquired our predecessor, Getronics Government Solutions, L.L.C., on November 26,
2002. Our expenses from inception through December 31, 2001 were approximately $705,000. Our expenses from January 1, 2002 through November 25, 2002 were approximately
$2.3 million.

Seasonality

Our revenues, gross profit and operating income have typically been negatively affected in the quarter ending September 30, primarily due to lower staff
utilization rates. These lower utilization rates are attributable both to summer vacations and to increased proposal activity in connection with the end of the federal government fiscal year. We
expect to continue to experience this seasonality and our future periods may be materially affected by it.

Our
revenues, gross profit, and operating income has typically been positively affected in the quarter ending December 31, primarily due to increased information security
solutions sales. The increased solutions sales levels are attributable to purchases made by our clients in advance of the federal government fiscal year. Although we expect to continue to experience
this seasonality, we cannot assure you that future periods will be positively affected by it.

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Liquidity and Capital Resources

Our primary liquidity and capital resource needs are to finance the costs of our operations, to make capital expenditures, to service our debt and to fund
potential acquisitions. In July 2003, the proceeds from the sale of $125.0 million of our 9% senior notes due 2010 were used to repay the outstanding indebtedness under our subordinated
bridge facility and term loan facility. The proceeds of our initial public offering in October 2003, along with proceeds of approximately $848,000 from the repayment of certain management
notes, were used to redeem a portion of our outstanding 9% senior notes due 2010 and to exercise our right of first refusal to purchase all of our outstanding Class B Preferred Stock. After the
redemption of a portion of our 9% senior notes due 2010 and the purchase of our Class B Preferred Stock, approximately $14.3 million of the proceeds of our initial public offering were
available for general corporate purposes. Based upon our current level of operations, we expect that our cash flow from operations, together with cash on hand and amounts we are able to borrow under
our credit facility, will be adequate to meet our anticipated needs for the foreseeable future. In addition, we expect that our cash flow from operations will be adequate to meet all contractual
obligations under our 9% senior notes due 2010, our credit facility, our operating leases and our other contractual cash obligations. On February 5, 2004 we entered into a definitive agreement
to acquire User Technology Associates, Inc. for $50.0 million. We anticipate using cash on hand and borrowing up to an additional $35 million under our revolving credit facility
in March 2004 to fund the UTA acquisition.

Cash
provided by (used in) operations was approximately $32.8 million for the year ended December 31, 2003 and approximately ($2.5) million for the year ended
December 31, 2002. Our predecessor's cash provided by operations was approximately $32.5 million for the year ended December 31, 2001. Cash provided by operations for the year
ended December 31, 2003 was comprised of our net loss of approximately $10.8 million, depreciation, amortization, and other non-cash expense items of approximately
$43.1 million and an increase in net operating assets and liabilities of approximately $0.5 million. The increase in net operating assets and liabilities was primarily due to an increase
in accounts receivable of approximately $1.4 million primarily due to the delays in Congress approving portions of the 2004 U.S. government fiscal budget and an increase in prepaid expenses and
other assets of approximately $3.5 million primarily due to a deposit required under a performance bond on our Metropolitan Washington Airport Authority contract partially offset by an increase
in deferred revenue of approximately $3.2 million related to prepayments for equipment to be installed on customer sites, and an increase in accrued compensation of approximately
$0.9 million due to the timing of year-end payroll. Cash used in operations for the year ended December 31, 2002 was comprised of our net loss of approximately $2.1 million,
depreciation, amortization, and other non-cash expense items of approximately $2.6 million and an increase in net operating assets and liabilities of approximately
$3.0 million. The increase in net operating assets and liabilities was primarily due to an increase in accounts receivable of approximately $1.4 million, an increase in inventory of
approximately $1.0 million related to an increase in orders, and a decrease in accounts payable and accrued expenses of approximately $0.2 million primarily related to the usage of the
NASA CSOC loss reserve. Our predecessor's cash provided by operations for the year ended December 31, 2001 was comprised of net income of approximately $18.3 million, depreciation,
amortization, and other non-cash expense items of approximately $23.5 million and an increase in net operating assets and liabilities of approximately $9.3 million. The
increase in net operating assets and liabilities was primarily due to an increase in inventory of approximately $0.7 million related to an increase in orders, a decrease in accounts payable and
accrued expenses of approximately $15.4 million primarily due to the payment of severance costs, lease costs and the usage of the NASA CSOC loss reserve, partially offset by an increase in
deferred revenue of approximately $0.8 million due to prepayments from customers, and a decrease in accounts receivable of approximately $5.9 million due to the favorable timing of
collections.

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Cash
used in investing activities was approximately $18.4 million for the year ended December 31, 2003 and approximately $179.1 million for the year ended
December 31, 2002. Our predecessor's cash used in investing activities was approximately $6.8 million for the year ended December 31, 2001. Cash used in investing activities for
the year ended December 31, 2003 consisted primarily of expenditures incurred in connection with the acquisition of our predecessor and capital expenditures. Cash used in investing activities
for the year ended December 31, 2002 consisted primarily of expenditures incurred in connection with the acquisition of our predecessor. Our predecessor's cash used in investing activities for
the year ended December 31, 2001 consisted primarily of capital expenditures. Capital expenditures we make on behalf of our customers are primarily comprised of computer hardware and software
we purchase in connection with managed network services contracts. The timing and volume of those capital expenditures in the future will be affected by new contract wins or expansion of existing
contracts. There are no individually large outstanding commitments for capital expenditures.

Cash
provided by financing activities was approximately $5.3 million for the year ended December 31, 2003 and approximately $185.0 million for the year ended
December 31, 2002. Our predecessor's cash used in financing activities was approximately $25.2 million for the year ended December 31, 2001. Cash provided by financing activities
for the year ended December 31, 2003 related to proceeds from our initial public offering, the sale of our 9% senior notes and the collection of management notes receivable. These items were
partially offset by the repayment of debt, the partial redemption of our 9% senior notes due 2010 and the purchase of our Class B preferred stock. Cash provided by financing activities for the
year ended December 31, 2002 consisted primarily of borrowings (net of issuance costs) of approximately $120.7 million under our revolving credit facility, term loan facility, and
subordinated bridge facility and proceeds from the issuance of common and preferred stock of approximately $63.7 million. Our predecessor's cash used in financing activities for the year ended
December 31, 2001 consisted of the net cash advanced to our predecessor's parent.

Our
net working capital was approximately $58.4 million as of December 31, 2003 compared to a net working capital deficit of approximately $27.5 million as of
December 31, 2002. Our predecessor's net working capital was approximately $46.7 million as of December 31, 2001. The increase in our net working capital as of December 31,
2003 compared to our net working capital deficit as of December 31, 2002 was due primarily to the increase in cash of approximately $13.5 million from our initial public offering, the
refinancing of the current portion of the long-term debt that we incurred in 2002 to finance the acquisition of our predecessor of approximately $48.5 million, and the payment to
Getronics of $8.3 million for the purchase price adjustment associated with our acquisition of our predecessor. The decreases in our net working capital as of December 31, 2002 compared
to our predecessor's net working capital as of December 31, 2001 were due primarily to the current portion of the long-term debt that we incurred to finance the acquisition of our
predecessor of approximately $48.5 million and a decrease in accounts receivable primarily due to the termination of the INS/FOS contract in November 2002 and certain accounts receivable
associated with the NASA CSOC contract retained by the seller in connection with the acquisition of our predecessor in November 2002.

2002 Credit Facility

On November 26, 2002, we entered into a secured credit agreement with a syndicate of financial institutions led by Bank of America, N.A. for the
acquisition of DGS and for general corporate purposes. The credit agreement provided for an $80.0 million term loan facility and a $25.0 million revolving credit facility. Our revolving
credit facility was receivables based. As of December 31, 2002, we had $80.0 million in borrowings outstanding under the term loan facility and $3.9 million outstanding under the
revolving credit facility. We repaid all amounts under our revolving credit facility in January 2003 and repaid all amounts outstanding under our term loan facility and terminated the lending
commitments under our senior credit agreement concurrent with the July 2003 sale of our 9% senior notes due 2010.

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Bridge Loan Agreement

In connection with the acquisition of DGS on November 26, 2002, we obtained a $44.0 million bridge loan from Banc of America Mezzanine Capital LLC,
or BAMC, through the issuance of senior subordinated bridge notes. We repaid all outstanding indebtedness under our subordinated bridge facility with the proceeds of the July 2003 sale of our
9% senior notes due 2010 and terminated the lending commitments under our subordinated bridge facility concurrently.

2003 Credit Facility

In July 2003 and in connection with the completion of the offering of our 9% senior notes due 2010, we entered into a credit agreement with a syndicate of
commercial lenders which provides for a $50.0 million revolving credit facility available for working capital and general corporate purposes, including capital expenditures and future
acquisitions. The borrowing capacity under this credit facility also provides for the issuance of up to $5.0 million in letters of credit. The available borrowings under this credit facility
are based upon a percentage of our eligible billed and unbilled accounts receivable, as defined in the credit agreement. At December 31, 2003, we had $2.0 million in outstanding letters
of credit under this credit facility related to our leased facility in Herndon, Virginia. At December 31, 2003, we had available but unused borrowing capacity of $47.6 million under this
credit facility. We anticipate that by the end of March 2004 we will borrow up to an additional $35 million in connection with the closing of the User Technology Associates, Inc.
acquisition. Obligations under the credit facility are secured by substantially all of our assets. The credit facility contains certain restrictive covenants including, among others, requirements
related to operating results and leverage, as well as restrictions related to liens, investments, additional indebtedness, disposition of assets, dividends, distributions, issuances of equity
securities, transactions with affiliates, capital expenditures, and certain other changes in our business. The financial covenants include the requirements to maintain a maximum consolidated total
leverage ratio, minimum consolidated fixed charge coverage ratio, and minimum net worth. As of December 31, 2003, we were in compliance with these covenants.

Senior Notes

In July 2003, DigitalNet, Inc., our wholly-owned subsidiary, issued $125.0 million in aggregate principal amount of 9% senior notes due
July 15, 2010. The notes are unsecured obligations of DigitalNet, Inc. The notes are guaranteed on a full, unconditional, joint and several basis by DigitalNet Holdings, Inc. and
all of DigitalNet, Inc.'s domestic subsidiaries. The proceeds from the sale of the notes were used to the repay the outstanding balances of the term loan under our 2002 senior credit agreement
and the subordinated bridge note. On October 16, 2003, we completed our initial public offering and issued 5,750,000 shares of common stock at $17.00 per share, which generated proceeds, net of
offering costs, of approximately $89.1 million. The net proceeds of the initial public offering, together with proceeds of approximately $848,000 from the repayment of certain management notes,
were used to redeem
$43.8 million in aggregate principal amount of our outstanding notes for approximately approximately $47.7 million, or 109% of the aggregate principal amount of the notes redeemed, and
$27.0 million was used to purchase all of our outstanding Class B Preferred Stock. We are required to make semi-annual interest payments in arrears on January 15 and
July 15 of each year the notes are outstanding, commencing on January 15, 2004. As of December 31, 2003, we had approximately $81.3 million in notes outstanding.

Related Party Transactions

Since our formation in September 2001, GTCR, Messrs. Bajaj, Pearlstein and Hanau and trusts for the benefit of the family members of
Messrs. Bajaj and Pearlstein purchased, in the aggregate, 6,688,651 shares of our common stock and 61,376 shares of our Class A Preferred Stock. Messrs. Bajaj,

46

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Pearlstein
and Hanau paid for these purchases in part with promissory notes, which were repaid in October 2003 at the time of our initial public offering.

GTCR
Golder Rauner, L.L.C and DigitalNet Holdings, Inc. were parties to a professional services agreement, dated as of September 7, 2001, which entitled GTCR to receive an
annual fee of $200,000 until March 7, 2002, and $300,000 annually thereafter, paid in equal monthly installments, for providing financial and management consulting services to us. As of
December 31, 2003, we had incurred, but not paid, approximately $590,000 under the agreement. This agreement also entitled GTCR to receive an investment fee equal to 1% of the purchase price of
the common stock and Class A Preferred Stock it purchased from us. No investment fees were due for the year ended December 31, 2003 under this agreement. This agreement terminated in
October 2003 upon completion of our initial public offering.

From
March 2003 through December 2003, we issued four purchase orders totaling approximately $694,000, on a subcontract basis, to a company owned by the son of our Chairman
and Chief Executive Officer. As of December 31, 2003, we have paid approximately $236,000 to the company pursuant to these purchase orders. Through these purchase orders, the company acted as a
subcontractor under two of our civilian agency contracts, providing professional systems engineering and economic analysis services. These purchase orders were issued in the ordinary course of
business and, based on our historic practices with respect to retaining subcontractors to provide services of a similar nature, we believe these services were provided on terms no less favorable to us
than we would anticipate receiving from unrelated parties.

Commitments

The following table summarizes our contractual obligations and commercial commitments as of December 31, 2003 that require us to make future cash payments.

|                                         |  |   |         | Year ending December 31
|---------------------------------------- |  | - | ------- | -----------------------
|
|
|9% senior notes due 2010                 |  | $ | 81,250  |                        
|Operating leases, net of sublease income |  |   | 30,216  |                        
|Severance arrangements                   |  |   | 1,730   |                        
|                                         |  |   |         |                        
|                                         |  | $ | 113,196 |                        
|                                         |  |   |         |                        

|                  |  |   |       | Year ending December 31
|----------------- |  | - | ----- | -----------------------
|
|
|Letters of credit |  | $ | 2,000 |                        
|                  |  |   |       |                        
|                  |  | $ | 2,000 |                        
|                  |  |   |       |                        

The
$81.3 million outstanding principal amount of our 9% senior notes will be due in 2010, and any borrowings under our current credit facility will be due in
2007. We anticipate that by the end of March 2004 we will borrow up to an additional $35 million from our revolving credit facility in connection with the User Technology Associates,
Inc. acquisition of $50 million.

Based
upon our current level of operations, we expect that our cash flow from operations will be adequate to meet all our contractual cash obligations under the 9% senior notes due 2010,
our current credit facility, our operating leases and our other contractual obligations.

We
do not have off-balance sheet financing arrangements other than our operating leases and letters of credit issued under our revolving credit facility.

47

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Critical Accounting Policies

Our significant accounting policies are described in Note 2 to our accompanying consolidated financial statements. We consider our accounting policies
related to revenue recognition, and goodwill and other intangible assets, to be critical to the understanding of our results of operations. Critical accounting policies include the areas where we have
made what we consider to be particularly difficult, subjective or complex judgments in making estimates, and where these estimates can significantly impact our financial results under different
assumptions and conditions. We prepare our financial statements in conformity with accounting principles generally accepted in the United States. As such, we are required to make certain estimates,
judgments, and assumptions that we believe are reasonable based upon the information available. These estimates, judgments, and assumptions affect the reported amounts of assets and liabilities at the
date of the financial statement and the reported amounts of revenue and expenses during the periods presented. Actual results could be different from these estimates.

Revenues and Related Cost Recognition

We recognize revenues under our government contracts when a contract has been executed, the contract price is fixed and determinable, delivery of services or
products has occurred, and collection of the contract price is considered probable and can be reasonably estimated. We earn revenues under three basic types of contracts:
time-and-materials, fixed price and cost plus contracts. Deferred revenues represent payments received for services not yet rendered to the client. We expense contract costs as
incurred.

We
recognize revenues on time-and-materials contracts based on direct labor hours expended at contract billing rates, other billable direct costs and applicable
indirect costs.

Fixed
price contracts may include either a product delivery or specific service performance throughout a period. We recognize revenues on fixed price contracts that provide for us to
render services throughout a period as earned according to contract terms as the service is provided. The majority of revenues on our fixed price service contracts relate to managed network service
contracts in which customers receive a bundle of services often including management services, the use of our hardware and software, network administration services and help desk support. For these
contracts in which services are bundled and sold, the delivery of an individual service by itself does not represent the culmination of the earnings process. Customers pay us and we recognize revenue
based on fixed monthly prices often determined by the number of customer users. In other instances, we provide an individual customer with a number of different services that are generally documented
through separately negotiated task orders that detail the services to be provided and our compensation for these services. Services rendered under each task order represent a discrete earnings process
and are not dependent on any other service or product sold by us. We sell our XTS, TEMPEST and Zone products through this type of contract. Once delivered, these products do not require design,
integration or implementation support for our customers to receive immediate product functionality. Accordingly, we recognize revenues and associated contract costs upon product delivery and customer
acceptance, if required by the contract.

Under
cost plus contracts, we are reimbursed for allowable costs, and are paid a fee, which may be fixed or performance based. We recognize revenues on cost plus contracts as we incur
costs, plus an estimate of applicable fees earned. We consider fixed fees under cost plus contracts to be earned in proportion of the allowable costs incurred in performance of the contract, which
generally corresponds to the timing of contract billings. For cost plus contracts that include performance based or fee incentives, we recognize the portion of the expected fee to be awarded by the
customer at the time such fee can be reasonably estimated, based on factors such as our prior award experience and communications with the client regarding performance.

48

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Contract
revenue recognition inherently involves estimation. Examples of such estimates include the level of effort needed to accomplish tasks under the contract, the cost of those
efforts, and the continual assessment of our progress toward completion of the contract. From time to time, facts arise that require revisions to estimated total costs or expected revenues. We
recognize the cumulative impact of any revisions to estimates and the full impact on anticipated losses on any type of contract in the period in which they become known.

Our
contracts with agencies of the government are subject to periodic funding by the respective contracting agency. Funding for a contract may be provided in full at inception of the
contract or annually throughout the contract consistent with the federal government's fiscal year. In evaluating the probability of funding for purposes of recognizing revenue and assessing collection
of the contract price, we consider our previous experiences with our clients, communications with our clients regarding funding status, and our knowledge of available funding for the contract or
program. If funding is not considered probable, we defer revenue recognition until realization is probable.

The
allowability of certain costs under government contracts is subject to audit by the government. We charge certain indirect costs to contracts using provisional or estimated indirect
rates, which are subject to later revisions based on governmental audits of those costs. We are of the opinion that costs subsequently disallowed, if any, would not be significant.

Costs
of revenues include the costs of direct labor, subcontractors, materials, equipment, depreciation, travel, and an allocation of indirect costs. The depreciation included in costs
of revenues primarily relates to computer hardware and software that we have purchased on behalf of our clients, for use by them, and to which we retain ownership. Indirect costs consist primarily of
fringe benefits, human resources, recruiting, and certain other non-direct costs which are necessary to provide direct labor. Most of these costs are allowable costs under the cost
accounting rules for contracting with the government. As such, they may be directly reimbursed to us in cost-plus contracts, or they may be included in cost estimates used for bidding on
our time-and-materials and fixed price contracts.

Goodwill and Intangible Assets

In connection with the acquisition of DGS and the related purchase price allocation, we recorded certain identifiable intangible assets and goodwill. The
identifiable intangible assets consist of non-compete agreements, software, and customer relationships. The non-compete agreements and software are amortized on a
straight-line basis over their estimated useful lives. The customer relationship intangible is amortized on an accelerated basis over its estimated useful life. We periodically review the
remaining estimated useful lives of our intangible assets to determine if any revisions to our estimates are necessary.

In
accordance with Statement of Financial Accounting Standard, or SFAS, No. 144,Accounting for the Impairment or Disposal of Long-Lived
Assets, we review our long-lived assets including intangible assets other than goodwill, whenever events or changes in circumstances indicate that the carrying
amount of the assets may not be fully recoverable. To determine the recoverability of our intangible assets, we evaluate the probability that future estimated undiscounted net cash flows will be less
than the carrying amount of the intangible assets. If such estimated cash flows are less than the carrying amount of the intangible assets, then such assets are written down to their fair value. Our
estimates of anticipated cash flows and the remaining estimated useful lives of our intangible assets could be reduced significantly in the future. As a result, the carrying amount of our intangible
assets could be reduced in the future.

Effective
January 1, 2002, we adopted SFAS No. 142,Goodwill and Other Intangible Assets. SFAS No. 142 requires the
use of a non-amortization approach to account for purchased goodwill. Under the non-amortization approach, goodwill is not amortized into results of operations, but instead is
reviewed

49

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for
impairment at least annually and written down and charged to operations only in the periods in which the recorded value of goodwill exceeds its fair value.

SFAS
No. 142 requires a two-step impairment test be performed at least annually using fair value measurement techniques to assess whether the recorded goodwill is
impaired. The first step of the goodwill impairment test is used to identify potential impairment and requires us to compare the fair value of each reporting unit to its carrying amount, including
goodwill. To accomplish this, we must first identify our reporting units and determine the carrying value of each reporting unit by assigning our assets and liabilities, including goodwill, to each
unit. We believe that we currently have one reporting unit for purposes of applying the impairment test required by SFAS No. 142. We then determine the fair value of each reporting unit and
compare it to the carrying amount of the reporting unit. If the carrying amount of a reporting unit exceeds the fair value of the reporting unit, we will be required to perform the second step of the
impairment test, as this is an indication that the reporting unit goodwill may be impaired. In the second step, we would be required to compare the implied fair value of the reporting unit goodwill
with the carrying amount of the reporting unit goodwill. The implied fair value of goodwill would be determined by allocating the fair value of the reporting unit to all of the assets (recognized and
unrecognized) and liabilities of the reporting unit in a manner similar to a purchase price allocation, in accordance with SFAS No. 141,Business
Combinations. The residual fair value after this allocation will be the implied fair value of the reporting unit goodwill. To the extent the implied fair value of the reporting
unit goodwill is less than the carrying amount; we will be required to recognize an impairment loss. We have elected to perform the SFAS No. 142 impairment test annually as of October 31
of each calendar year. An interim goodwill impairment test will be performed if an event occurs or circumstances change between annual tests that indicate the goodwill might be impaired. During 2003
we completed the required annual test which indicated no impairment.

New Accounting Pronouncements

In April 2002, the FASB issued SFAS No. 145,Rescission of FASB StatementsNos. 4, 44 and 64, Amendment
of FASB Statement No. 13 and Technical Corrections. Among other things, SFAS No. 145 rescinds both SFAS No. 4, Reporting Gains and Losses from Extinguishment of Debt, and the amendment to SFAS No. 4, and 64,Extinguishment of Debt
Made to Satisfy Sinking Fund Requirements. Through this rescission, SFAS No. 145 eliminates the requirement that gains and losses from the extinguishment of debt be
aggregated and, if material, classified as an extraordinary item, net of the related income tax effect. Adoption of SFAS No. 145 required that the losses that we incurred as a result of the
early retirement of debt in 2003 be reflected as a component of interest expense and not treated as an extraordinary item.

In
June 2002, the FASB issued SFAS No. 146,Accounting for Costs of Exit or Disposal Activities. SFAS No. 146
nullifies EITF Issue No. 94-3,Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs
Incurred in a Restructuring). This statement requires that an exit or disposal activity related cost be recognized when the liability is incurred instead of when an entity
commits to an exit plan. We adopted SFAS No. 146 on January 1, 2003 and such adoption did not have a material impact on our results of operations or financial position.

In
May 2003, the FASB issued SFAS No. 150,Accounting for Certain Financial Instruments with Characteristics of both Liabilities and
Equity. This statement establishes standards for classifying and measuring as liabilities certain financial instruments that have characteristics of both liabilities and
equity. The provisions of this statement require that any financial instruments that are mandatorily redeemable on a fixed or determinable date or upon an event certain to occur be classified as
liabilities. This statement was effective immediately for instruments entered into or modified after May 31, 2003 and for all other instruments that exist as of the beginning of the first
interim financial

50

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reporting
period beginning after June 15, 2003. We adopted SFAS No. 150 during 2003 and such adoption did not have a material impact on our results of operation or financial position.

In
December 2002, the Emerging Issues Task Force, or EITF, issued EITF Issue 00-21,Accounting for Revenue Arrangements with Multiple
Deliverables. EITF Issue 00-21 provides guidance on determining whether a revenue arrangement contains multiple deliverable items and if so, requires that revenue
be allocated amongst the different items based on fair value. EITF Issue 00-21 also requires that revenue on any item in a revenue arrangement with multiple deliverables not delivered
completely must be deferred until delivery of the item is completed. The guidance in EITF Issue 00-21 is effective for revenue arrangements entered into in fiscal periods beginning after
June 15, 2003. We adopted EITF Issue 00-21 during 2003 and such adoption did not have a material impact on our results of operations or financial position.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our principal exposure to market risk relates to changes in interest rates. After the completion of the offering of our 9% senior notes due 2010, we repaid the
outstanding indebtedness under our senior secured credit agreement which had a variable interest rate and subordinated bridge note which had a fixed interest rate on July 3, 2003. Concurrent
with the completion of the offering of our 9% senior notes due 2010, we entered into our current credit facility, which provides us with up to $50.0 million in borrowings. Interest under our
current credit facility is based on the British Bankers Association Interest Settlement Rate for deposits in dollars, or based on the higher of Bank of America, N.A.'s prime rate or the federal funds
rate. As of December 31, 2003, we had no outstanding borrowings under
our current credit facility. The $81.3 million of indebtedness under our 9% senior notes due 2010 is at a fixed interest rate and only indebtedness under our credit facility will be subject to
changes in interest rates. Interest is paid semi-annually in January and July. Changes in interest affect the fair value of our long-term fixed-rate debt. The fair
value of our debt was estimated to be approximately $87.8 million as of December 31, 2003. This value was estimated by using the mid-point between the bid and ask prices on
December 31, 2003 that we obtained from a broker-dealer that makes a market with respect to our 9% senior notes due 2010.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this item are set forth on pages F-1 to F-53 of this report.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

No changes in, or disagreements with, our accountants have occurred.

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PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The
information required by this item is incorporated by reference from the information included under the captions, "Election of Directors" and "Section 16(a) Beneficial
Ownership Compliance," set forth in our definitive proxy statement for our 2004 annual meeting of stockholders.

Information
regarding our executive officers as of March 17, 2004 is set forth below. Each officer's term of office will expire at the first Board of Directors meeting held after our
next annual meeting of stockholders. There is no arrangement or understanding between any of the executive officers or any other person pursuant to which such executive officer was selected for the
office held. No family relationship of any kind exists between the officers.

|Name               |  | Age |  | Position                                                                     
|------------------ |  | --- |  | -----------------------------------------------------------------------------
|Ken S. Bajaj       |  | 62  |  | Chairman, Chief Executive Officer and President                              
|Jack Pearlstein    |  | 40  |  | Chief Financial Officer, Treasurer and Secretary                             
|Steven L. Hanau    |  | 59  |  | Senior Vice President                                                        
|Michael C. Sanders |  | 49  |  | Senior Vice President and Chief Operating Officer,
Civilian Operations of DGS
|Michael McHugh     |  | 45  |  | Senior Vice President, Department of Defense and
NASA Operations of DGS      
|William Anderson   |  | 55  |  | Senior Vice President, Secure Interoperable Solutions
of DGS                 
|Mitchell Rambler   |  | 53  |  | Senior Vice President, Military Programs of DGS                              
|Norman Lorentz     |  | 56  |  | Senior Vice President, Intergovernmental Solutions of DGS                    

Mr. Bajaj
has served as the Chairman of our board of directors and as our Chief Executive Officer and President since our inception in September 2001. Mr. Bajaj also
serves as the Chief Executive Officer and the Chairman of the board of managers of our subsidiary DigitalNet Government Services, LLC ("DGS"). From September 2000 until June 2001,
Mr. Bajaj served as Executive Vice President and Group President of Commerce One, Inc.'s Global Services division, which he joined in September 2000 when Commerce One, Inc.
acquired AppNet, Inc. From November 1997 until September 2000, Mr. Bajaj was Chairman, President and Chief Executive Officer of AppNet, Inc. From March 1997
until November 1997, Mr. Bajaj was Vice Chairman of Wang Laboratories, Inc., which he joined in 1996 when Wang Laboratories, Inc. acquired I-NET, Inc.,
where Mr. Bajaj served as Executive Vice President from 1988 until 1994 and President from 1994 until 1996. Prior to I-NET, Inc., Mr. Bajaj was a senior executive at
Electronic Data Systems Corporation and Perot Systems
Corporation. Mr. Bajaj has an M.S. in Electrical Engineering from the University of Toronto and a Ph.D. in Systems Science from Michigan State University.

Mr. Pearlstein
has served as our Chief Financial Officer, Treasurer and Secretary since our inception in September 2001. Mr. Pearlstein also serves as a Senior Vice
President and the Assistant Secretary of DGS. From September 2000 until July 2001, Mr. Pearlstein served as Chief Financial Officer of Commerce One, Inc.'s Global Services
division, which he joined in September 2000 when Commerce One, Inc. acquired AppNet, Inc. From July 1998 until September 2000, Mr. Pearlstein was AppNet's
Senior Vice President and from May 1999 until September 2000, Mr. Pearlstein was AppNet's Chief Financial Officer and Treasurer. From November 1996 until July 1998,
Mr. Pearlstein was a Managing Director and Principal of Foxhall Capital, LLC. Mr. Pearlstein has a B.S. in Accounting from New York University and an M.B.A. in Finance from the George
Washington University.

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Mr. Hanau
has served as our Senior Vice President since January 2003. Mr. Hanau also serves as the President of DGS. From January 2002 until
January 2003, Mr. Hanau was a consultant to us. From September 2000 until December 2001, Mr. Hanau served as Senior Vice President of Marketplace Services for
Commerce One, Inc., which he joined in September 2000 when Commerce One, Inc. acquired AppNet, Inc. From April 2000 until September 2000, he served as
AppNet's Senior Vice President of Managed Application and Outsourcing Services. From September 1996 until April 2000, Mr. Hanau served as President, Enterprise Managed Services
for Wang Global and Getronics NV, which he joined in 1996 when Wang Laboratories, Inc. acquired I-NET, Inc. Mr. Hanau holds a B.S. in Engineering from the United
States Military Academy, an M.B.A. from Long Island University and a Masters degree in Operations Research from Stanford University.

Mr. Sanders
has served as Senior Vice President, Civilian Operations of DGS since August 1999. From July 1996 until August 1999, Mr. Sanders served as
Senior Vice President and General Manager of Wang Laboratories, Inc., which he joined in 1996 when Wang Laboratories acquired I-NET, Inc., where Mr. Sanders served as
Group President since July 1995 and as Program Director/Manager from November 1990 until July 1995. Mr. Sanders holds a B.A. in Sociology from The College of William and
Mary and an M.B.A. in Executive Management from George Mason University.

Mr. McHugh
has served as Senior Vice President of DGS since February 2003, and as Senior Vice President, Department of Defense and NASA Operations of DGS since
May 2003. From April 1998 until February 2003, Mr. McHugh was Senior Vice President of the Technology Solutions Division of Butler International, Inc. From
November 1996 until January 1998, he served as President of North American Sales for Wang Global, which he joined in 1996 when Wang Laboratories, Inc. acquired
I-Net, Inc. Mr. McHugh has a B.S. in Management Information Systems from Old Dominion University.

Mr. Anderson
has served as Senior Vice President, Secure Interoperable Solutions of DGS since March 2003. From July 2002 until March 2003, Mr. Anderson
served as President, Global Technology Systems of Perot Systems Government Services, which he joined in 2002 when Perot Systems acquired ADI Technology, Inc., where Mr. Anderson served
as President and Chief Executive Officer since June 2000 and as Senior Vice President and Chief Operating Officer from May 1998 until June 2000. From July 1995 until
May 1998, Mr. Anderson was the Executive Vice President and Chief Operating Officer for NCI Information Systems. From December 1990 until July 1995, Mr. Anderson
served as Group President and Vice President of I-NET, Inc. Prior to I-NET, Inc., Mr. Anderson held senior executive positions with Planning Research
Corporation (PRC), Inc., General Dynamics, and Science Applications International Corporation (SAIC). Mr. Anderson has a B.A. in Management and Computer Science from the University of
South Florida.

Dr. Rambler
has served as Senior Vice President, Military Programs of DGS since February 2003. From October 2002 until February 2003, Dr. Rambler was
Senior Vice President for Corporate and Strategic Development at The Centech Group, and from October 2001 until October 2002, he was International Sales Director for Perot Systems. From
September 1998 until October 2001, Dr. Rambler was President and CEO of Cyntergy Corporation and from June 1994 until September 1998, he was Chief Operating Officer
of Universal Systems and Technology, Inc. (UNITECH). Prior to UNITECH, Dr. Rambler was Corporate Executive Vice President and sector President of Mantech International, Inc. from
August 1988 until June 1994. Dr. Rambler holds a B.S. from Fairleigh Dickinson University, and a Ed.M and Ph.D. in Space Science from Boston University.

Mr. Lorentz
has served as Senior Vice President, Intergovernmental Solutions of DGS since September 2003. From January 2002 to September 2003,
Mr. Lorentz served as Chief Technology Officer for the Federal Government at the Office of Management and Budget. From January 2000 until October 2001, Mr. Lorentz served
as Senior Vice President and Chief Technology Officer of Dice, Incorporated. From June 1994 to January 2000, Mr. Lorentz held several senior executive positions

53

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with
the United States Postal Service including Senior Vice President and Chief Technology Officer and Chief Quality Officer. Prior to 1994, Mr. Lorentz held several executive and technology
positions at U.S. West. Mr. Lorentz holds an Executive M.B.A. from Arizona State University, and a B.S. in Technical Management from Regis University.

Item 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference from the information included under the caption, "Executive Compensation," set forth in our
definitive proxy statement for our 2004 annual meeting of stockholders.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item is incorporated by reference from the information included under the caption,"Stock Ownership of Management and Others," set
forth in our definitive proxy statement for our 2004 annual meeting of stockholders.

The information required by this item is incorporated by reference from the information included under the caption, "Stock Ownership of Management and Others,"
set forth in our definitive proxy statement for our 2004 annual meeting of stockholders.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is incorporated by reference from the information included under the caption, "Certain Relationships and Transactions," set
forth in our definitive proxy statement for our 2004 annual meeting of stockholders.

Item 14. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures.Our principal executive officer (Chief Executive Officer) and principal
financial officer (Chief Financial Officer) have evaluated our disclosure controls and procedures and have concluded that, as of the end of the period covered by this Annual Report on
Form 10-K, these controls and procedures are designed to ensure that information we are required to disclose in this Annual Report on Form 10-K is recorded,
processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and Form 10-K. These disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 (15
USC § 78a et seq) is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions
regarding required disclosure. Our principal executive officer and our principal financial officer have also concluded, based upon their evaluation, that there are no significant deficiencies or
material weaknesses in these disclosure controls and procedures.

Changes in internal controls.There were no changes in our internal controls over financial reporting that occurred during
the period covered by this Annual Report on Form 10-K that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Item 15. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is incorporated by reference from the information included under the caption "Principal Accountant Fees Services," set forth
in our definitive proxy statement for our 2004 annual meeting of stockholders.

55

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PART IV

Item 16. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

The following is a list of the consolidated financial statements of DigitalNet Holdings, Inc., together with the report of independent auditors, included
in this report:

|                                                                                                                                                                            |  | Page
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|Report of Independent Auditors                                                                                                                                              |  | F-2 
|Consolidated Balance Sheets as of December 31, 2002 and 2003                                                                                                                |  | F-3 
|Consolidated Statements of Operations for the period from September 7, 2001 (Inception) through December 31, 2001, and the years ended December 31, 2002 and 2003           |  | F-4 
|Consolidated Statements of Stockholders' Equity for the period from September 7, 2001 (Inception) through December 31, 2001, and the years ended December 31, 2002 and 2003 |  | F-5 
|Consolidated Statements of Cash Flows for the period from September 7, 2001 (Inception) through December 31, 2001, and the years ended December 31, 2002 and 2003           |  | F-6 
|Notes to Consolidated Financial Statements                                                                                                                                  |  | F-7 

The following is a list of the consolidated financial statements of DigitalNet Government Solutions, LLC, together with the report of independent auditors, included in this report:

|                                                                                                                                                             |  | Page
|------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----
|Report of Independent Auditors                                                                                                                               |  | F-35
|Consolidated Balance Sheets
As of December 31, 2001 and November 25, 2002                                                                                    |  | F-36
|Consolidated Statements of Operations
For the years ended December 31, 2000 and 2001, and for the period from January 1, 2002 through November 25, 2002      |  | F-37
|Consolidated Statements of Members' Equity
For the years ended December 31, 2000 and 2001, and for the period from January 1, 2002 through November 25, 2002 |  | F-38
|Consolidated Statements of Cash Flows
For the years ended December 31, 2000 and 2001, and for the period from January 1, 2002 through November 25, 2002      |  | F-39
|Notes to Consolidated Financial Statements                                                                                                                   |  | F-40

The following is a list of data of DigitalNet Holdings, Inc., together with the report of independent auditors submitted with this report:

|                                                                                               |  | Page
|---------------------------------------------------------------------------------------------- |  | ----
|Report of Independent Auditors                                                                 |  | F-52
|Schedule II (Valuation and Qualifying Accounts) for the years ended December 31, 2002
and 2003 |  | F-53

All
other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are
not applicable and therefore have been omitted.

56

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|Exhibit |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1     |  | Certificate of Incorporation of the Company, as amended and restated (Incorporated by reference to Exhibit 3.1 to the Registrant's Registration Statement on Form S-4, File No. 333-10709502, filed July 16, 2003)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|3.2     |  | Bylaws of the Company, as amended and restated (Incorporated by reference to Exhibit 3.2 to the Registrant's Registration Statement on Form S-4, File No. 333-10709502, filed July 16, 2003)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|4.1     |  | Form of Certificate of Common Stock (Incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed August 8, 2003)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|4.2     |  | Form of Common Stock Purchase Warrant (Incorporated by reference to Exhibit 4.2 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed August 8, 2003)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|4.3     |  | Form of 9% Senior Notes Due 2010 (Incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement on Form S-4, File No. 333-10709502, filed July 16, 2003)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|4.4     |  | Amended and Restated Stockholders Agreement, made as of November 26, 2002, by and among DigitalNet Holdings, Inc., GTCR Fund VII, L.P., GTCR Co-Invest, L.P., the Pearlstein Family, LLC, the Ian Z. Pearlstein 2001 Trust, the Ivanna V. Pearlstein 2001
Trust, the J. Sunny Bajaj Trust, the Rueben Bajaj Trust, the Bajaj Family Limited Partnership, Ken S. Bajaj, Jack Pearlstein, GetronicsWang Co. LLC, and Banc of America Mezzanine Capital LLC as amended on March 28, 2003, and Stockholders Agreement
Joinder, dated March 26, 2003, by and among DigitalNet Holdings, Inc., GTCR Fund VII, L.P., GTCR Co-Invest, L.P., and each of the other stockholders of DigitalNet Holdings, Inc. whose names appear on the Schedule of Stockholders or on the signature
pages or joinders to the Stockholders Agreement, as such agreement may be amended from time to time (Incorporated by reference to Exhibit 4.3 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed August 8, 2003)
|4.5     |  | Amended and Restated Registration Agreement, made as of November 26, 2002, by and among DigitalNet Holdings, Inc., GTCR Fund VII, L.P., GTCR Co-Invest, L.P., the Pearlstein Family, LLC, the Ian Z. Pearlstein 2001 Trust, the Ivanna V. Pearlstein 2001
Trust, the J. Sunny Bajaj Trust, the Rueben Bajaj Trust and the Bajaj Family Limited Partnership, Ken S. Bajaj, Jack Pearlstein, GetronicsWang Co. LLC, and Banc of America Mezzanine Capital LLC, and Registration Agreement Joinder, dated March 26,
2003, by and among DigitalNet Holdings, Inc., GTCR Fund VII, L.P., GTCR Co-Invest, L.P., and each of the other stockholders of DigitalNet Holdings, Inc. whose names appear on the Schedule of Holders or on the signature pages or joinders to the
Registration Agreement, as such agreement may be amended from time to time (Incorporated by reference to Exhibit 4.4 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed August 8, 2003)                               
|4.6     |  | Indenture, dated as of July 3, 2003, among DigitalNet, Inc., DigitalNet Holdings, Inc., DigitalNet Government Solutions, LLC and Wells Fargo Bank Minnesota, National Association, as trustee(Incorporated by reference to Exhibit 4.5 to the Registrant's
Registration Statement on Form S-1, File No. 333-107764, filed August 8, 2003)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.7     |  | Registration Rights Agreement, made as of July 3, 2003, by and among DigitalNet, Inc., DigitalNet Holdings, Inc., DigitalNet Government Solutions, LLC and Banc of America Securities LLC, Jefferies/Quarterdeck, LLC and Jefferies & Company, Inc.
(Incorporated by reference to Exhibit 4.6 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed August 8, 2003)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

57

---

|10.1  |  | Purchase Agreement, made as of September 7,2001, by and among DigitalNet Holdings, Inc., GTCR Fund VII, L.P., GTCR Co-Invest, L.P., the J. Sunny Bajaj Trust, the Rueben Bajaj Trust and the Bajaj Family Limited Partnership and the Pearlstein Family,
LLC as supplemented on April 25, 2002, October 8,2002, November 26, 2002, and March 28, 2003 (Incorporated by reference to Exhibit 10.1 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed August 8, 2003)
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.2  |  | Senior Management Agreement, made as of September 7, 2001, by and among DigitalNet Holdings, Inc., DigitalNet, Inc., and Ken S. Bajaj as supplemented on April 25, 2002, October 8, 2002, November 26, 2002, January 24, 2003, and March 26, 2003
(Incorporated by reference to Exhibit 10.2 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed August 8, 2003)                                                                                                    
|10.3  |  | Revolving Promissory Note, dated September 7, 2001, in the principal amount of $183,596 made by Ken S. Bajaj payable to DigitalNet Holdings, Inc. (Incorporated by reference to Exhibit 10.3 to the Registrant's Registration Statement on Form S-1, File
No. 333-107764, filed August 8, 2003)                                                                                                                                                                                                    
|10.4  |  | Executive Stock Pledge Agreement, made as of September 7,2001, by and between Ken S. Bajaj and DigitalNet Holdings, Inc. (Incorporated by reference to Exhibit 10.4 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed
August 8, 2003)                                                                                                                                                                                                                             
|10.5  |  | Carry Promissory Note, dated September 7, 2001, in the principal amount of $170,347 made by Ken S. Bajaj payable to DigitalNet Holdings, Inc. (Incorporated by reference to Exhibit 10.5 to the Registrant's Registration Statement on Form S-1, File No.
333-107764, filed August 8, 2003)                                                                                                                                                                                                        
|10.6  |  | Free Transferability Agreement, dated as of September 25, 2002, by and between DigitalNet Holdings, Inc., and Ken S. Bajaj (Incorporated by reference to Exhibit 10.6 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed
August 8, 2003)                                                                                                                                                                                                                           
|10.7  |  | Senior Management Agreement, made as of September 7, 2001, by and among DigitalNet Holdings, Inc., DigitalNet., Inc., and Jack Pearlstein as supplemented on April 25, 2002, October 8, 2002, November 26, 2002, January 24, 2003, and March 28, 2003
(Incorporated by reference to Exhibit 10.7 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed August 8, 2003)                                                                                                
|10.8  |  | Revolving Promissory Note, dated September 7, 2001, in the principal amount of $45,899 made by Jack Pearlstein payable to DigitalNet Holdings, Inc. (Incorporated by reference to Exhibit 10.8 to the Registrant's Registration Statement on Form S-1,
File No. 333-107764, filed August 8, 2003)                                                                                                                                                                                                  
|10.9  |  | Executive Stock Pledge Agreement, made as of September 7,2001, by and between Jack Pearlstein and DigitalNet Holdings, Inc. (Incorporated by reference to Exhibit 10.9 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed
August 8, 2003)                                                                                                                                                                                                                          
|10.10 |  | Carry Promissory Note, dated September 7, 2001, in the principal amount of $42,587 made by Jack Pearlstein payable to DigitalNet Holdings, Inc. (Incorporated by reference to Exhibit 10.10 to the Registrant's Registration Statement on Form S-1, File
No. 333-107764, filed August 8, 2003)                                                                                                                                                                                                     
|10.11 |  | Free Transferability Agreement, dated as of September 25, 2002, by and between DigitalNet Holdings, Inc., and Jack Pearlstein (Incorporated by reference to Exhibit 10.11 to the Registrant's Registration Statement on Form S-1, File No. 333-107764,
filed August 8, 2003)                                                                                                                                                                                                                       
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

58

---

|10.12 |  | Amended and Restated Senior Management Agreement, made as of January 23, 2003, among DigitalNet Holdings, Inc., DigitalNet, Inc., DigitalNet Government Solutions, LLC, and Steven Hanau as supplemented on March 28, 2003 (Incorporated by reference to
Exhibit 10.12 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed August 8, 2003)
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.13 |  | Promissory Note, dated January 10, 2002, in the principal amount of $34,650 made by Steven Hanau payable to DigitalNet Holdings, Inc. (Incorporated by reference to Exhibit 10.13 to the Registrant's Registration Statement on Form S-1, File No.
333-107764, filed August 8, 2003)                                                                                     
|10.14 |  | Executive Stock Pledge Agreement, made as of January 10, 2002, between Steven Hanau and DigitalNet Holdings, Inc. (Incorporated by reference to Exhibit 10.14 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed August 8,
2003)                                                                                                         
|10.15 |  | Stock Purchase Agreement, made as of January 10, 2002, between DigitalNet Holdings, Inc., Jack Pearlstein and Ken S. Bajaj (Incorporated by reference to Exhibit 10.15 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed
August 8, 2003)                                                                                                
|10.16 |  | Stock Purchase Agreement, made as of February 15, 2002, between DigitalNet Holdings, Inc., Jack Pearlstein and Ken S. Bajaj (Incorporated by reference to Exhibit 10.16 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed
August 8, 2003)                                                                                               
|10.17 |  | Stock Purchase Agreement, made as of September 20, 2002, between DigitalNet Holdings, Inc., Jack Pearlstein and Ken S. Bajaj (Incorporated by reference to Exhibit 10.17 to the Registrant's Registration Statement on Form S-1, File No. 333-107764,
filed August 8, 2003)                                                                                              
|10.18 |  | Purchase Agreement, dated September 27, 2002, by and among GetronicsWang Co. LLC, Getronics Government Solutions, L.L.C., DigitalNet Holdings, Inc. and DigitalNet, Inc. (Incorporated by reference to Exhibit 10.18 to the Registrant's Registration
Statement on Form S-1, File No. 333-107764, filed August 8, 2003)                                                  
|10.19 |  | Escrow Agreement, dated as of November 26, 2002, by and among GetronicsWang Co. LLC, DigitalNet, Inc., and State Street Bank and Trust Co. (Incorporated by reference to Exhibit 10.19 to the Registrant's Registration Statement on Form S-1, File No.
333-107764, filed August 8, 2003)                                                                                
|10.20 |  | Master Agreement for Transitional Services, dated November 26, 2002, by and between GetronicsWang Co. LLC and Getronics Government Solutions, L.L.C. (Incorporated by reference to Exhibit 10.20 to the Registrant's Registration Statement on Form S-1,
File No. 333-107764, filed August 8, 2003)                                                                      
|10.21 |  | Amended and Restated Credit Agreement, dated as of July 3, 2003, among DigitalNet, Inc., DigitalNet Holdings, Inc., Bank of America, N.A., Madison Capital Funding LLC and the other lenders party thereto (Incorporated by reference to Exhibit 10.21 to
the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed August 8, 2003)                
|10.22 |  | DigitalNet Holdings, Inc. Amended and Restated 2003 Stock Incentive Plan (Incorporated by reference to Exhibit 10.22 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed August 8, 2003)                                                                                                                                                  
|10.23 |  | Form of Getronics Government Solutions, L.L.C. Special Severance Plan (Incorporated by reference to Exhibit 10.23 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed August 8, 2003)                                                                                                                                                     
|      |  |                                                                                                                                                                                                                                                                                                                                                                          

59

---

|10.24 |  | Getronics Government Solutions, L.L.C. 2002 Short Term Incentive Program Plan Document for Executive and Staff Management, dated January 1, 2002 (Incorporated by reference to Exhibit 10.24 to the Registrant's Registration Statement on Form S-1, File
No. 333-107764, filed August 8, 2003)                                                                                          
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.25 |  | Agreement of Lease made September 30, 1991 between The KMS Group, Inc. and J.G. Van Dyke & Associates, Inc. (as amended) (Incorporated by reference to Exhibit 10.25 to the Registrant's Registration Statement on Form S-1, File No. 333-107764,
filed August 8, 2003)                                                                                                                  
|10.26 |  | Office Space Lease dated as of July 7, 2000 between JACO Horse Pen II LLC and Wang Government Services, Inc. (as amended) (Incorporated by reference to Exhibit 10.26 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed
August 8, 2003)                                                                                                                 
|10.27 |  | Lease dated as of July 1, 1996 between RJR Ventures Limited Partnership and Wang Laboratories, Inc. (as amended) (Incorporated by reference to Exhibit 10.27 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed August 8,
2003)                                                                                                                          
|10.28 |  | Letter Agreement by and between DigitalNet Holdings, Inc. and Getronics Wang Co. LLC, dated February 28, 2003 (Incorporated by reference to Exhibit 10.28 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed August 8,
2003)                                                                                                                             
|10.29 |  | Professional Services Management, dated as of September 2001, between GTCR Golder Rauner, L.L.C. and DigitalNet, Inc. (Incorporated by reference to Exhibit 10.29 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed
August 8, 2003)                                                                                                                     
|10.30 |  | Purchase Agreement, dated as of June 27, 2003, by and among DigitalNet, Inc., DigitalNet Holdings, Inc., DigitalNet Government Solutions, LLC and Banc of America Securities LLC, Jefferies/Quarterdeck, LLC and Jefferies & Company, Inc.
(Incorporated by reference to Exhibit 10.30 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed August 8, 2003)
|21.1  |  | List of Subsidiaries of DigitalNet Holdings, Inc (Incorporated by reference to Exhibit 21.1 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed August 8, 2003)                                                                                                                                                                                           
|23.1  |  | Consent of Ernst & Young LLP                                                                                                                                                                                                                                                                                                                                                             
|31.1  |  | Certification of Principal Executive Officer Pursuant to Rule 13a-15(e) or 15d-15(e) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                           
|31.2  |  | Certification of Principal Financial Officer Pursuant to Rule 13a-15(e) or 15d-15(e) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                           
|32.1  |  | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                        
|32.2  |  | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                        
|99.1  |  | Definitive Proxy Statement for the 2000 Annual Meeting of Stockholders (to be filed with the Commission under Regulation 14A and incorporated by reference herein to the extent indicated in this report)                                                                                                                                                                                

On
October 30, 2003, the Company filed a Current Report on Form 8-K reporting under Items 7 and 9 the issuance of a press release announcing the results for the
quarter ended September 30, 2003.

Also
on October 30, 2003, the Company filed a Current Report on Form 8-K reporting under Items 7 and 9 excerpts from the Company's earnings call held on
October 30, 2003.

60

---



SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, as of March 25, 2004.

| |  | DIGITALNET HOLDINGS, INC.
| |  | -------------------------
| |  | By:                      
| |  | By:                      

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacity indicated
as of March 25, 2004.

|/s/KEN S. BAJAJKen S. Bajaj, Director                  |  | 
|------------------------------------------------------ |  | 
|/s/BRUCE V. RAUNERBruce V. Rauner, Director            |  | 
|/s/PHILIP A. CANFIELDPhilip A. Canfield, Director      |  | 
|/s/CRAIG A. BONDYCraig A. Bondy, Director              |  | 
|/s/RICHARD N. PERLEThe Hon. Richard N. Perle, Director |  | 
|/s/EDWARD C. MEYEREdward C. Meyer, Director            |  | 
|/s/ALAN G. MERTENAlan G. Merten, Director              |  | 
|/s/STUART J. YARBROUGHStuart J. Yarbrough, Director    |  | 

61

---



INDEX TO FINANCIAL INFORMATION

FINANCIAL STATEMENTS



|                                                                                                                                                                          
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|DIGITALNET HOLDINGS, INC.                                                                                                                                                 
|Report of Independent Auditors                                                                                                                                            
|Consolidated Balance Sheets
As of December 31, 2002 and 2003                                                                                                              
|Consolidated Statements of Operations
For the period from September 7, 2001 (Inception) through December 31, 2001 and the years ended December 31, 2002 and 2003          
|Consolidated Statements of Stockholders' Equity
For the period from September 7, 2001 (Inception) through December 31, 2001 and the years ended December 31, 2002 and 2003
|Consolidated Statements of Cash Flows
For the period from September 7, 2001 (Inception) through December 31, 2001 and the years ended December 31, 2002 and 2003          
|Notes to Consolidated Financial Statements                                                                                                                                
|DIGITALNET GOVERNMENT SOLUTIONS, LLC                                                                                                                                      
|Report of Independent Auditors                                                                                                                                            
|Consolidated Balance Sheets
As of December 31, 2001 and November 25, 2002                                                                                                 
|Consolidated Statements of Operations
For the years ended December 31, 2000 and 2001, and the period from January 1, 2002 through November 25, 2002                       
|Consolidated Statements of Member's Equity
For the years ended December 31, 2000 and 2001, and the period from January 1, 2002 through November 25, 2002                  
|Consolidated Statements of Cash Flows
For the years ended December 31, 2000 and 2001, and the period from January 1, 2002 through November 25, 2002                       
|Notes to Consolidated Financial Statements                                                                                                                                
|FINANCIAL SCHEDULES                                                                                                                                                       
|DIGITALNET HOLDINGS, INC.                                                                                                                                                 
|Report of Independent Auditors                                                                                                                                            
|Schedule II (Valuation and Qualifying Accounts) for the years ended December 31, 2002 and 2003                                                                            

F-1

---



REPORT OF INDEPENDENT AUDITORS

To
DigitalNet Holdings, Inc.:

We
have audited the accompanying consolidated balance sheets of DigitalNet Holdings, Inc. (the Company) as of December 31, 2002 and 2003, and the related consolidated
statements of operations, stockholders' equity, and cash flows for the period from September 7, 2001 (inception) through December 31, 2001 and the years ended December 31, 2002
and 2003. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In
our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of DigitalNet Holdings, Inc. as of
December 31, 2002 and 2003, and the consolidated results of its operations and its cash flows for the period from September 7, 2001 (inception) through December 31, 2001 and the
years ended December 31, 2002 and 2003, in conformity with accounting principles generally accepted in the United States.



McLean,
Virginia
February 3, 2004

F-2

---



DIGITALNET HOLDINGS, INC.  CONSOLIDATED BALANCE SHEETS  AS OF DECEMBER 31, 2002 AND 2003  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

|                                                                                                                                                                                                                    |                                                                                                                                                                      | December 31, |        
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------ | -------
|
|Assets                                                                                                                                                                                                              |                                                                                                                                                                      |              |        
|Current assets:                                                                                                                                                                                                     |                                                                                                                                                                      |              |        
|                                                                                                                                                                                                                    | Cash and cash equivalents                                                                                                                                            |              | $      
|                                                                                                                                                                                                                    | Accounts receivable (net of allowance for doubtful accounts of $3,454 and $2,526 at December 31, 2002 and 2003, respectively)                                        |              |        
|                                                                                                                                                                                                                    | Inventory                                                                                                                                                            |              |        
|                                                                                                                                                                                                                    | Prepaid expenses and other current assets                                                                                                                            |              |        
|                                                                                                                                                                                                                    |                                                                                                                                                                      |              |        
|Total current assets                                                                                                                                                                                                |                                                                                                                                                                      |              | 79,309 
|                                                                                                                                                                                                                    |                                                                                                                                                                      |              |        
|Other assets                                                                                                                                                                                                        |                                                                                                                                                                      |              | 5,939  
|Property and equipment, net                                                                                                                                                                                         |                                                                                                                                                                      |              | 13,222 
|Intangible assets, net                                                                                                                                                                                              |                                                                                                                                                                      |              | 188,311
|                                                                                                                                                                                                                    |                                                                                                                                                                      |              |        
|Total assets                                                                                                                                                                                                        |                                                                                                                                                                      | $            | 286,781
|                                                                                                                                                                                                                    |                                                                                                                                                                      |              |        
|Liabilities, redeemable convertible securities, and stockholders' equity                                                                                                                                            |                                                                                                                                                                      |              |        
|Current liabilities:                                                                                                                                                                                                |                                                                                                                                                                      |              |        
|                                                                                                                                                                                                                    | Accounts payable                                                                                                                                                     |              | $      
|                                                                                                                                                                                                                    | Accrued expenses                                                                                                                                                     |              |        
|                                                                                                                                                                                                                    | Deferred revenues                                                                                                                                                    |              |        
|                                                                                                                                                                                                                    | Current portion of long-term debt                                                                                                                                    |              |        
|                                                                                                                                                                                                                    |                                                                                                                                                                      |              |        
|Total current liabilities                                                                                                                                                                                           |                                                                                                                                                                      |              | 106,790
|                                                                                                                                                                                                                    |                                                                                                                                                                      |              |        
|Long-term debt, net of current portion                                                                                                                                                                              |                                                                                                                                                                      |              | 78,453 
|Other liabilities                                                                                                                                                                                                   |                                                                                                                                                                      |              | 5,051  
|Class A redeemable convertible preferred stock, $0.01 par value; 96,790 shares authorized; 61,376 shares issued and outstanding as of December 31, 2002 and no shares issued or outstanding as of December 31, 2003 |                                                                                                                                                                      |              | 61,739 
|Class B redeemable convertible preferred stock, $0.01 par value; 33,500 shares authorized; 33,500 shares issued and outstanding as of December 31, 2002 and no shares issued or outstanding as of December 31, 2003 |                                                                                                                                                                      |              | 33,698 
|Commitments and contingencies                                                                                                                                                                                       |                                                                                                                                                                      |              |        
|Stockholders' equity:                                                                                                                                                                                               |                                                                                                                                                                      |              |        
|                                                                                                                                                                                                                    | Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued or outstanding                                                                      |              |        
|                                                                                                                                                                                                                    | Common stock, $0.001 par value; 100,000,000 shares authorized; 6,733,026 and 16,290,158 shares issued and outstanding as of December 31, 2002 and 2003, respectively |              |        
|                                                                                                                                                                                                                    | Additional paid-in capital                                                                                                                                           |              |        
|                                                                                                                                                                                                                    | Warrants                                                                                                                                                             |              |        
|                                                                                                                                                                                                                    | Deferred compensation                                                                                                                                                |              |        
|                                                                                                                                                                                                                    | Notes receivable from management                                                                                                                                     |              |        
|                                                                                                                                                                                                                    | Accumulated deficit                                                                                                                                                  |              |        
|                                                                                                                                                                                                                    |                                                                                                                                                                      |              |        
|Total stockholders' equity                                                                                                                                                                                          |                                                                                                                                                                      |              | 1,050  
|                                                                                                                                                                                                                    |                                                                                                                                                                      |              |        
|Total liabilities, redeemable convertible securities, and stockholders' equity                                                                                                                                      |                                                                                                                                                                      | $            | 286,781
|                                                                                                                                                                                                                    |                                                                                                                                                                      |              |        

See accompanying notes.

F-3

---



DIGITALNET HOLDINGS, INC.  CONSOLIDATED STATEMENTS OF OPERATIONS  FOR THE PERIOD FROM SEPTEMBER 7, 2001 (INCEPTION)  THROUGH DECEMBER 31, 2001 AND THE YEARS ENDED DECEMBER 31, 2002 AND 2003  (DOLLARS IN
THOUSANDS, EXCEPT PER SHARE DATA)

|                                                                                                                                  |                                                                                                                                                                                                                                                                                           | Period From
September 7, 2001
(Inception) Through
December 31, 2001 |           | Year ended December 31, |  
|--------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------- | --------- | ----------------------- | -
|
|Revenues                                                                                                                          |                                                                                                                                                                                                                                                                                           | $                                                                   |          |                         | $
|Costs of revenues (includes depreciation expense of $718 and $6,227 for the years ended December 31, 2002 and 2003, respectively) |                                                                                                                                                                                                                                                                                           |                                                                     |          |                         |  
|                                                                                                                                  |                                                                                                                                                                                                                                                                                           |                                                                     |           |                         |  
|Gross profit                                                                                                                      |                                                                                                                                                                                                                                                                                           |                                                                     |          |                         |  
|                                                                                                                                  |                                                                                                                                                                                                                                                                                           |                                                                     |           |                         |  
|Operating expenses:                                                                                                               |                                                                                                                                                                                                                                                                                           |                                                                     |           |                         |  
|                                                                                                                                  | Selling, general and administrative (includes depreciation expense of $1, $138 and $1,445 for the 2001 period and the years ended December 31, 2002 and 2003, respectively and stock-based compensation of $265 and $11,546
for the years ended December 31, 2002 and 2003, respectively) |                                                                     |           | 705                     |  
|                                                                                                                                  | Acquisition and related expenses                                                                                                                                                                                                                                                          |                                                                     |           |                        |  
|                                                                                                                                  | Amortization of intangibles                                                                                                                                                                                                                                                               |                                                                     |           |                        |  
|                                                                                                                                  |                                                                                                                                                                                                                                                                                           |                                                                     |           |                         |  
|Total operating expenses                                                                                                          |                                                                                                                                                                                                                                                                                           |                                                                     | 705       |                         |  
|                                                                                                                                  |                                                                                                                                                                                                                                                                                           |                                                                     |           |                         |  
|Income (loss) from operations                                                                                                     |                                                                                                                                                                                                                                                                                           |                                                                     | (705      | )                       |  
|Other income (expense):                                                                                                           |                                                                                                                                                                                                                                                                                           |                                                                     |           |                         |  
|                                                                                                                                  | Interest income                                                                                                                                                                                                                                                                           |                                                                     |           | 7                       |  
|                                                                                                                                  | Interest expense                                                                                                                                                                                                                                                                          |                                                                     |           |                        |  
|                                                                                                                                  | Other expense, net                                                                                                                                                                                                                                                                        |                                                                     |           |                        |  
|                                                                                                                                  |                                                                                                                                                                                                                                                                                           |                                                                     |           |                         |  
|Total other income and (expense)                                                                                                  |                                                                                                                                                                                                                                                                                           |                                                                     | 7         |                         |  
|                                                                                                                                  |                                                                                                                                                                                                                                                                                           |                                                                     |           |                         |  
|Loss before provision for income taxes                                                                                            |                                                                                                                                                                                                                                                                                           |                                                                     | (698      | )                       |  
|Provision for income taxes                                                                                                        |                                                                                                                                                                                                                                                                                           |                                                                     |          |                         |  
|                                                                                                                                  |                                                                                                                                                                                                                                                                                           |                                                                     |           |                         |  
|Net loss                                                                                                                          |                                                                                                                                                                                                                                                                                           | $                                                                   | (698      | )                       | $
|                                                                                                                                  |                                                                                                                                                                                                                                                                                           |                                                                     |           |                         |  
|Dividends and accretion on preferred stock, net                                                                                   |                                                                                                                                                                                                                                                                                           |                                                                     |          |                         |  
|                                                                                                                                  |                                                                                                                                                                                                                                                                                           |                                                                     |           |                         |  
|Net loss attributable to common stockholders                                                                                      |                                                                                                                                                                                                                                                                                           | $                                                                   | (698      | )                       | $
|                                                                                                                                  |                                                                                                                                                                                                                                                                                           |                                                                     |           |                         |  
|Net loss per common share:                                                                                                        |                                                                                                                                                                                                                                                                                           |                                                                     |           |                         |  
|Basic and diluted net loss attributable to common stockholders per common share                                                   |                                                                                                                                                                                                                                                                                           | $                                                                   | (0.48     | )                       | $
|                                                                                                                                  |                                                                                                                                                                                                                                                                                           |                                                                     |           |                         |  
|Weighted average common shares outstanding                                                                                        |                                                                                                                                                                                                                                                                                           |                                                                     | 1,457,697 |                         |  
|                                                                                                                                  |                                                                                                                                                                                                                                                                                           |                                                                     |           |                         |  

See accompanying notes.

F-4

---



DIGITALNET HOLDINGS, INC.  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY  FOR THE PERIOD FROM SEPTEMBER 7, 2001 (INCEPTION) THROUGH DECEMBER 31, 2001  AND THE YEARS ENDED DECEMBER 31, 2002 AND 2003
(DOLLARS IN THOUSANDS)

|                           |                                                                         | Common Stock |    |   |            |           |   |         |         | Notes
Receivable
from
Management |     |     |   |      |        
|-------------------------- | ----------------------------------------------------------------------- | ------------ | -- | - | ---------- | --------- | - | ------- | ------- | -------------------------------- | --- | --- | - | ---- | -------
|
|
|Balance, September 7, 2001 |                                                                         | $            |   |   |           |           | $ |        |         | $                                |    |     | $ |     |        
|                           | Issuance of common stock                                                |              |    | 2 |            | 2,003,874 |   |         | 1,591   |                                  |     |    |   |      |       
|                           | Payments on notes receivable                                            |              |    |  |            |          |   |         |        |                                  |     |    |   |      |       
|                           | Net loss                                                                |              |    |  |            |          |   |         |        |                                  |     |    |   |      |       
|                           |                                                                         |              |    |   |            |           |   |         |         |                                  |     |     |   |      |        
|Balance, December 31, 2001 |                                                                         | $            | 2  |   | 2,003,874  |           |   | 1,591   |         | $                                |    |     | $ |     |        
|                           |                                                                         |              |    |   |            |           |   |         |         |                                  |     |     |   |      |        
|                           | Issuance of common stock                                                |              |    | 5 |            | 4,729,152 |   |         | 14,357  |                                  |     |    |   |      |       
|                           | Dividends and accretion on Class A Preferred Stock                      |              |    |  |            |          |   |         | (11,554 | )                                |     |    |   |      |       
|                           | Dividends on Class B Preferred Stock                                    |              |    |  |            |          |   |         | (198    | )                                |     |    |   |      |       
|                           | Issuance of warrants                                                    |              |    |  |            |          |   |         |        |                                  |     | 379 |   |      |       
|                           | Stock-based compensation                                                |              |    |  |            |          |   |         | 440     |                                  |     |    |   |      | (440   
|                           | Amortization of deferred compensation                                   |              |    |  |            |          |   |         |        |                                  |     |    |   |      | 265    
|                           | Payments on notes receivable                                            |              |    |  |            |          |   |         |        |                                  |     |    |   |      |       
|                           | Net loss                                                                |              |    |  |            |          |   |         |        |                                  |     |    |   |      |       
|                           |                                                                         |              |    |   |            |           |   |         |         |                                  |     |     |   |      |        
|Balance, December 31, 2002 |                                                                         | $            | 7  |   | 6,733,026  |           | $ | 4,636   |         | $                                | 379 |     | $ | (175 | )      
|                           |                                                                         |              |    |   |            |           |   |         |         |                                  |     |     |   |      |        
|                           | Dividends on Class A Preferred Stock                                    |              |    |  |            |          |   |         | (14,172 | )                                |     |    |   |      |       
|                           | Dividends on Class B Preferred Stock                                    |              |    |  |            |          |   |         | (1,628  | )                                |     |    |   |      |       
|                           | Initial public offering                                                 |              |    | 6 |            | 5,750,000 |   |         | 88,150  |                                  |     |    |   |      |       
|                           | Recognition of beneficial conversion feature on Class A Preferred Stock |              |    |  |            |          |   |         | 11,190  |                                  |     |    |   |      |       
|                           | Conversion of Class A Preferred Stock                                   |              |    | 4 |            | 3,807,132 |   |         | 64,717  |                                  |     |    |   |      |       
|                           | Purchase of Class B Preferred Stock                                     |              |    |  |            |          |   |         | 8,326   |                                  |     |    |   |      |       
|                           | Payments on notes receivable                                            |              |    |   |            |          |   |         |        |                                  |     |    |   |      |       
|                           | Stock-based compensation                                                |              |    |  |            |          |   |         | 12,259  |                                  |     |    |   |      | (12,259
|                           | Amortization of deferred compensation                                   |              |    |  |            |          |   |         |        |                                  |     |    |   |      | 11,546 
|                           | Net loss                                                                |              |    |  |            |          |   |         |        |                                  |     |    |   |      |       
|                           |                                                                         |              |    |   |            |           |   |         |         |                                  |     |     |   |      |        
|Balance, December 31, 2003 |                                                                         | $            | 17 |   | 16,290,158 |           | $ | 173,478 |         | $                                | 379 |     | $ | (888 | )      
|                           |                                                                         |              |    |   |            |           |   |         |         |                                  |     |     |   |      |        

See accompanying notes.

F-5

---



DIGITALNET HOLDINGS, INC.  CONSOLIDATED STATEMENTS OF CASH FLOWS  FOR THE PERIOD FROM SEPTEMBER 7, 2001 (INCEPTION)  THROUGH DECEMBER 31, 2001 AND THE YEARS ENDED DECEMBER 31, 2002 AND 2003  (DOLLARS IN
THOUSANDS)

|                                                                                          |                                                                            |                                       |       | Year Ended December 31, |    
|----------------------------------------------------------------------------------------- | -------------------------------------------------------------------------- | ------------------------------------- | ----- | ----------------------- | ---
|
|
|Cash flows from operating activities:                                                     |                                                                            |                                       |       |                         |    
|Net loss                                                                                  |                                                                            | $                                     | (698  | )                       | $  
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |                                                                            |                                       |       |                         |    
|                                                                                          | Depreciation                                                               |                                       |       | 1                       |    
|                                                                                          | Loss on sale of equipment                                                  |                                       |       |                        |    
|                                                                                          | Amortization of intangible assets                                          |                                       |       |                        |    
|                                                                                          | Premium on partial redemption of senior notes                              |                                       |       |                        |    
|                                                                                          | Amortization of deferred financing costs                                   |                                       |       |                        |    
|                                                                                          | Amortization of discount on debt                                           |                                       |       |                        |    
|                                                                                          | Amortization of deferred compensation                                      |                                       |       |                        |    
|                                                                                          | Deferred income taxes                                                      |                                       |       |                        |    
|                                                                                          | Changes in operating assets and liabilities, net of effect of acquisition: |                                       |       |                         |    
|                                                                                          |                                                                            | Accounts receivable                   |       |                         |   
|                                                                                          |                                                                            | Inventory                             |       |                         |   
|                                                                                          |                                                                            | Prepaid expenses and other assets     |       |                         | (91
|                                                                                          |                                                                            | Accounts payable and accrued expenses |       |                         | 105
|                                                                                          |                                                                            | Deferred revenues                     |       |                         |   
|                                                                                          |                                                                            | Other liabilities                     |       |                         |   
|                                                                                          |                                                                            |                                       |       |                         |    
|Net cash (used in) provided by operating activities                                       |                                                                            |                                       | (683  | )                       |    
|                                                                                          |                                                                            |                                       |       |                         |    
|Cash flows from investing activities:                                                     |                                                                            |                                       |       |                         |    
|Purchases of property and equipment                                                       |                                                                            |                                       | (22   | )                       |    
|Proceeds from sale of equipment                                                           |                                                                            |                                       |      |                         |    
|Purchase of DigitalNet Government Solutions, LLC, net of cash acquired                    |                                                                            |                                       |      |                         |    
|                                                                                          |                                                                            |                                       |       |                         |    
|Net cash used in investing activities                                                     |                                                                            |                                       | (22   | )                       |    
|                                                                                          |                                                                            |                                       |       |                         |    
|Cash flows from financing activities:                                                     |                                                                            |                                       |       |                         |    
|Proceeds from (repayments under) revolving credit facility                                |                                                                            |                                       |      |                         |    
|Proceeds from (repayments under) term loan facility                                       |                                                                            |                                       |      |                         |    
|Proceeds from (repayments under) subordinated bridge facility                             |                                                                            |                                       |      |                         |    
|Proceeds from issuance of warrants                                                        |                                                                            |                                       |      |                         |    
|Proceeds from issuance of senior notes                                                    |                                                                            |                                       |      |                         |    
|Redemption of senior notes                                                                |                                                                            |                                       |      |                         |    
|Debt issuance costs                                                                       |                                                                            |                                       |      |                         |    
|Proceeds from initial public offering, net of offering costs                              |                                                                            |                                       |      |                         |    
|Proceeds from issuance of common stock, net of offering costs                             |                                                                            |                                       | 1,150 |                         |    
|Proceeds from issuance of preferred stock, net of offering costs                          |                                                                            |                                       |      |                         |    
|Purchase of Class B Preferred Stock                                                       |                                                                            |                                       |      |                         |    
|Payments on management notes receivable                                                   |                                                                            |                                       | 18    |                         |    
|                                                                                          |                                                                            |                                       |       |                         |    
|Net cash provided by financing activities                                                 |                                                                            |                                       | 1,168 |                         |    
|                                                                                          |                                                                            |                                       |       |                         |    
|Net increase in cash and cash equivalents                                                 |                                                                            |                                       | 463   |                         |    
|Cash and cash equivalents, beginning of period                                            |                                                                            |                                       |      |                         |    
|                                                                                          |                                                                            |                                       |       |                         |    
|Cash and cash equivalents, end of period                                                  |                                                                            | $                                     | 463   |                         | $  
|                                                                                          |                                                                            |                                       |       |                         |    
|Supplemental disclosures of cash flow information:                                        |                                                                            |                                       |       |                         |    
|Cash paid for interest                                                                    |                                                                            | $                                     |      |                         | $  
|                                                                                          |                                                                            |                                       |       |                         |    
|Supplemental disclosures of noncash investing and financing activities:                   |                                                                            |                                       |       |                         |    
|Issuance of Class B Preferred Stock in acquisition                                        |                                                                            | $                                     |      |                         | $  
|                                                                                          |                                                                            |                                       |       |                         |    
|Issuance of common stock for notes receivable from management                             |                                                                            | $                                     | 443   |                         | $  
|                                                                                          |                                                                            |                                       |       |                         |    
|Conversion of Class A Preferred Stock into common stock                                   |                                                                            | $                                     |      |                         | $  
|                                                                                          |                                                                            |                                       |       |                         |    

See accompanying notes.

F-6

---



DIGITALNET HOLDINGS, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  DECEMBER 31, 2001, 2002 AND 2003

1.     The Company

Business Description and Basis of Presentation

DigitalNet Holdings, Inc. (DigitalNet or the Company) was incorporated in September 2001 (Inception), under the laws of the state of Delaware. On
November 26, 2002, the Company completed its acquisition of Getronics Government Solutions, L.L.C. (now DigitalNet Government Solutions, LLC or DGS). The accompanying statement of operations
for the year ended December 31, 2002 includes the operating results of DGS from November 26, 2002 through December 31, 2002 along with that of the Company for the entire year
ended December 31, 2002. Prior to this acquisition, the Company was involved primarily in developing its business plan, recruiting personnel, raising capital, and identifying and evaluating
operating assets for acquisition.

DigitalNet,
through its ownership of DGS, is a provider of strategic consulting services, managed network services, information security solutions, and application development and
integration services to U.S. defense, intelligence and civilian federal government agencies. The Company's comprehensive information technology services and solutions allow federal government clients
to outsource the design, implementation, integration, management and security of their computer networks and systems. Substantially all of the Company's revenues are derived from contracts with the
U.S. government, directly as a prime contractor or as a subcontractor.

The
Company's operations are subject to certain risks and uncertainties including, among others, the susceptibility of the Company's services to rapid technological change, dependence on
contracts with federal government agencies, dependence on significant customers, dependence on revenues derived from contracts awarded through competitive bidding, existence of contracts with fixed
pricing, dependence on subcontractors to fulfill contractual obligations, current and potential competitors with greater resources, dependence on key management personnel, ability to recruit and
retain employees, dependence on intellectual property, lack of operating history, and uncertainty of future profitability and possible fluctuations in financial results.

2.     Summary of Significant Accounting Policies and Practices

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated
upon consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

The Company recognizes revenues under its government contracts when a contract has been executed, the contract price is fixed and determinable, delivery of
services or products has occurred, and collection of the contract price is considered probable and can be reasonably estimated. Revenues are earned under time-and-materials,
fixed-price and cost-plus contracts. Deferred revenues represent

F-7

---

payments
received for services not yet rendered to the customer. Contract costs are expensed as incurred.

Revenues
on time-and-materials contracts are recognized based on direct labor hours expended at contract billing rates, other billable direct costs and applicable
indirect costs.

Fixed-price
contracts may include either a product delivery or specific service performance throughout a period. Revenues on fixed price contracts that provide for the Company to render
services throughout a period are recognized as earned according to contract terms as the service is provided. The majority of revenues on the Company's fixed-price service contracts relate to managed
network service contracts in which customers receive a bundle of services often including management services, the use of the Company's hardware and software, network administration services and help
desk support. For these contracts in which services are bundled and sold, the delivery of an individual service by itself does not represent the culmination of the earnings process. Customers pay the
Company and the Company recognizes revenue based on fixed monthly prices often determined by the number of customer users. In other instances, the Company provides an individual customer with a number
of different services that are generally documented through separately negotiated task orders that detail the services to be provided and the Company's compensation for these services. Services
rendered under each task order represent a discrete earnings process and are not dependent on any other service or product sold by the Company. The Company sells its XTS, TEMPEST and Zone products to
customers. Once delivered, these products do not require design, integration or implementation support for the Company's customers to receive immediate product functionality. Accordingly, revenues and
associated contract costs are recognized upon product delivery and customer acceptance if required by the contract.

Under
cost-plus contracts, the Company is reimbursed for allowable costs and paid a fee which may be fixed or performance-based. Revenues on cost-plus contracts
are recognized as costs are incurred plus an estimate of applicable fees earned. The Company considers fixed fees under cost-plus contracts to be earned in proportion to the allowable
costs incurred in performance of the contract which generally corresponds to the timing of contractual billings. For cost-plus contracts that include performance based or fee incentives,
the Company recognizes the portion of the expected fee to be awarded by the customer at the time such
fee can be reasonably estimated, based on factors such as the Company's prior award experience and communications with the customer regarding performance.

Contract
revenue recognition inherently involves estimation. From time to time, facts arise that require revisions to estimated total costs or expected revenues. The cumulative impact of
any revisions to estimates and the full impact of anticipated losses on any type of contract are recognized in the period in which they become known.

The
Company's contracts with agencies of the government are subject to periodic funding by the respective contracting agency. Funding for a contract may be provided in full at inception
of the contract or annually throughout the contract consistent with the federal government's fiscal year. In evaluating the probability of funding for purposes of recognizing revenue and assessing
collection of the contract price, the Company considers its previous experiences with its customers, communications with its customers regarding funding status, and the Company's knowledge of
available funding for the contract or program. If funding is not considered probable, revenue recognition is deferred until realization is probable.

The
allowability of certain costs under government contracts is subject to audit by the government. Certain indirect costs are charged to contracts using provisional or estimated
indirect rates, which are subject to later revisions based on governmental audits of those costs. Management is of the opinion that costs subsequently disallowed, if any, would not be significant.

F-8

---

Significant Customers

The Company had no revenues prior to its acquisition of DGS. Revenues generated from contracts with the federal government or prime contractors doing business
with the federal government have accounted for substantially all of the Company's revenues. Revenues from contracts representing greater than 10% of total revenues were as follows (dollars in
thousands):

|                                                                                                   |  | Year Ended December 31
|-------------------------------------------------------------------------------------------------- |  | ----------------------
|
|
|National Aeronautics and Space Administration (NASA) Consolidated Space Operations Contract (CSOC) |  | $                     

The
Company's NASA CSOC contract was scheduled to expire on December 31, 2003, but was extended to March 31, 2004 on a time-and-material basis.

Credit Risk

The Company's assets that are exposed to credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company maintains cash balances
at financial institutions that may at times exceed federally insured limits. The Company maintains this cash at high credit quality institutions and, as a result, believes credit risk related to its
cash is minimal. Accounts receivable consist primarily of billed and unbilled amounts, including indirect cost rate variances, due from various agencies of the federal government or prime contractors
doing business with the federal government. The Company historically has not experienced significant losses related to accounts receivable and therefore believes that credit risk related to accounts
receivable is not significant.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash and cash equivalents.

Inventory

Inventory consists of computer equipment and peripherals and is stated at the lower of cost or market where cost is determined primarily on the average costing
method. Allowances for obsolete or excess inventory are based on the Company's obsolescence experience and its assessment of future inventory requirements.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization are computed using the
straight-line method over the estimated useful lives of the assets, as follows:

Project assets

3-5 years or contract term, if shorterMachinery and equipment

3-10 yearsLeasehold improvements

6 years or lease term, if shorter


F-9

---

Intangible Assets

For intangible assets other than goodwill, amortization is recorded over the estimated useful life of the intangible asset. The Company evaluates the useful lives
assigned to its intangible assets on a regular basis. Amortization periods and methods are as follows:

Years

MethodNon-compete agreements

2.5

Straight-lineSoftware

3

Straight-lineCustomer relationships

8

Accelerated


The
accelerated method of amortization for the customer relationships intangible is based upon the estimated cash flows expected to be derived from the customer relationships.

Effective
January 1, 2002, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 142,Goodwill and Other Intangible
Assets.SFAS No. 142 requires the use of a non-amortization approach to account for purchased goodwill. Under the non-amortization approach,
goodwill is not amortized into results of operations, but instead is reviewed for impairment at least annually and written down and charged to operations only in the periods in which the recorded
value of goodwill exceeds its fair value.

SFAS
No. 142 requires a two-step impairment test be performed at least annually using fair value measurement techniques to assess whether the recorded goodwill is
impaired. The first step of the goodwill impairment test is used to identify potential impairment and requires the Company to compare the fair value of each of its reporting units to its carrying
amount, including goodwill. To accomplish this, the Company must first identify its reporting units and determine the carrying value of each reporting unit by assigning its assets and liabilities,
including goodwill, to each unit. Management has determined that the Company has one reporting unit for purposes of applying the impairment test required by SFAS No. 142. The Company then
determines the fair value of each reporting unit and compares it to the carrying amount of the reporting unit. If the carrying amount of a reporting unit exceeds the fair value of the reporting unit,
the Company will be required to perform the second step of the impairment test, as this is an indication that the reporting unit goodwill may be impaired. In the second step, the Company would be
required to compare the implied fair value of the reporting unit goodwill with the carrying amount of the reporting unit goodwill. The implied fair value of goodwill would be determined by allocating
the fair value of the reporting unit to all of the assets (recognized
and unrecognized) and liabilities of the reporting unit in a manner similar to a purchase price allocation, in accordance with SFAS No. 141,Business
Combinations. The residual fair value after this allocation will be the implied fair value of the reporting unit goodwill. To the extent the implied fair value of the reporting
unit goodwill is less than the carrying amount; the Company will be required to recognize an impairment loss.

The
Company has elected to perform the SFAS No. 142 impairment test annually as of October 31 of each calendar year. An interim goodwill impairment test will be performed
if an event occurs or circumstances change between annual tests that indicate the goodwill might be impaired. During 2003, the Company completed the required annual test which indicated there was no
impairment.

Long-Lived Assets

In accordance with SFAS No. 144,Accounting for the Impairment or Disposal of Long-Lived
Assets, the Company reviews its long-lived assets including property and equipment and intangible assets other than goodwill, whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be fully recoverable. To determine the recoverability of its long-lived assets, the Company evaluates the probability
that future estimated undiscounted net cash flows will be less than the carrying amount of the assets. If such estimated cash flows are less than the carrying amount of the

F-10

---

long-lived
assets, then such assets are written down to their fair value. The Company's estimates of anticipated cash flows and the remaining estimated useful lives of
long-lived assets could be reduced in the future. As a result, the carrying amount of long-lived assets could be reduced in the future.

Fair Value of Financial Instruments

The Company's financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, long-term debt, and
preferred stock. In management's opinion, the carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, long-term debt and preferred stock approximated their
fair values at December 31, 2002. In management's opinion, the carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable approximated their fair values at
December 31, 2003. The fair value of the Company's senior notes was estimated to be approximately $87.8 million at December 31, 2003. The fair value was estimated using the
mid-point between the bid and ask prices on December 31, 2003 that the Company obtained from a broker-dealer that makes a market with respect to the senior notes.

Stock-Based Compensation

The Company accounts for stock-based employee compensation arrangements using the intrinsic value method in accordance with provisions of Accounting Principles
Board Opinion (APB) No. 25,Accounting for Stock Issued to Employees,and complies with the disclosure provisions of SFAS No. 123, Accounting for Stock-Based
Compensation.Under APB Opinion No. 25, compensation cost is generally recognized based on the difference, if any, on
the date of grant between the fair value of the Company's stock and the amount an employee must pay to acquire the stock. In December 2002, the Financial Accounting Standards Board (FASB)
issued SFAS No. 148,Accounting for Stock-Based CompensationTransition and Disclosure, which prescribes certain disclosures and
provides guidance on how to transition from the intrinsic value method of accounting for stock-based employee compensation under APB No. 25 to the fair value method of accounting of SFAS
No. 123,Accounting for Stock-Based Compensation, if a company so elects. In 2003, the Company adopted SFAS No. 148. The Company continues
to account for its stock-based compensation in accordance with APB No. 25 and its related interpretations. The adoption of SFAS No. 148 did not have a material impact on the Company's
results of operations or financial position.

F-11

---

The
following table illustrates the effect on the net loss attributable to common shareholders and the net loss attributable to common shareholders per common share if the Company had
applied the fair value method of SFAS No. 123. For the period ended December 31, 2001 and the year ended December 31, 2002 there would be no effect on the net loss if the Company
had applied the fair value method of SFAS No. 123.

Year Ended
December 31, 2003Net loss attributable to common stockholders, as reported

$
(18,237
)Add: Stock-based employee compensation cost, net of related tax effects, included in the determination of net income


11,411Deduct: Stock-based employee compensation expense determined under fair value based method, net of related tax effects


(11,598
)Pro forma net loss attributable to common stockholders

$
(18,424
)Earnings per share:Basic and diluted net loss attributable to common stockholders per common share  as reported

$
(2.32
)Basic and diluted net loss attributable to common stockholders per common share  pro forma

$
(2.35
)


In
accordance with SFAS No. 123, the fair values of options were estimated at the grant date using a Black-Scholes option pricing model with the following weighted-average
assumptions: risk-free interest rate of approximately 3%; no dividends; expected life of the options of four years; and volatility from 50% to 56%. The effect of applying the fair value
method prescribed by SFAS No. 123 as described above is not necessarily representative of the effects on the reported net income (loss) for future years due to, among other things, the vesting
period of the stock options and the fair value of additional stock option grants in future years.

Income Taxes

The Company accounts for income taxes in accordance with SFAS No. 109,Accounting for Income Taxes.Under
SFAS No. 109, deferred tax assets or liabilities are computed based upon the difference between financial statement and income tax bases of assets and liabilities using the enacted marginal tax
rate. The Company provides a valuation allowance on its net deferred tax assets when it is more likely than not that such assets will not be realized.

Earnings Per Share

SFAS No. 128,Earnings Per Share, requires the presentation of basic and diluted earnings per share. Basic
earnings (loss) per common share is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period. The diluted
earnings (loss) per share is computed using the weighted average number of common shares outstanding plus the dilutive effect of common stock equivalents, unless the common stock equivalents are
antidilutive.

For
purposes of computing basic loss per common share, 1,265,440 shares of unvested common stock outstanding at December 31, 2002, held by executives and employees of the Company
(the Reserved Stock, Carried Stock and Restricted StockSee Note 9) were not treated as outstanding until they became vested in subsequent periods. The effect of the outstanding
shares of Class A Preferred Stock and Class B Preferred Stock converting into shares of common stock was not included in the computation of diluted loss per common share as the effect
would have been anti-dilutive for year ended December 31, 2002. In addition, warrants to purchase 94,868 shares of common stock that were

F-12

---

outstanding
as of December 31, 2002 were excluded from the computation of diluted loss per common share as their effect would have been anti-dilutive. The treasury stock effect of
1,265,440 shares of unvested Reserved Stock, Carried Stock and Restricted Stock as of December 31, 2002, has also not been included in the computation of diluted loss per common share as their
effect would have been anti-dilutive.

In
connection with the Company's initial public offering of its common stock (IPO), the Class A Preferred Stock, including accrued dividends, converted into 3,807,132 shares of
common stock and a portion of the net proceeds from the IPO were used to purchase all of the outstanding shares of Class B Preferred Stock. For the year ended December 31, 2003 and prior
to the IPO, the effect of the outstanding shares of Class A Preferred Stock and Class B Preferred Stock converting into shares of common stock was not included in the computation of
diluted loss per common share as the effect would have been anti-dilutive. Subsequent to the IPO, the shares of common stock into which the Class A Preferred Stock converted were
included in the computation of basic loss per common share. In addition, all of the remaining shares of unvested Reserved Stock, Carried Stock and Restricted Stock that were outstanding at the time of
the IPO became fully vested upon completion of the IPO. For the year ended December 31, 2003, the outstanding shares of unvested Reserved Stock, Carried Stock and Restricted Stock were not
included in the computation of basic loss per common share until they became vested and the treasury stock effect of those unvested shares was not included in the computation of diluted loss per
common share prior to vesting as the effect would have been anti-dilutive. In addition, options and warrants to purchase 405,993 shares of common stock that were outstanding as of
December 31, 2003 were excluded from the computation of diluted loss per common share for the year ended December 31, 2003 as their effect would have been anti-dilutive.

The
following details the computation of the net loss per common share (dollars in thousands, except per share data):

|                                                                          |                                                    | Period From
September 7,
2001 (Inception)
Through
December 31,
2001 |      |           |   |         |          
|------------------------------------------------------------------------- | -------------------------------------------------- | ------------------------------------------------------------------- | ---- | --------- | - | ------- | ---------
|
|
|Net loss                                                                  |                                                    | $                                                                   | (698 | )         | $ | (2,072  | )        
|Dividends on Class A Preferred Stock and Class B Preferred Stock          |                                                    |                                                                     |     |           |   | (562    | )        
|Accretion on Class A Preferred Stock                                      |                                                    |                                                                     |     |           |   | (11,190 | )        
|Dividend for beneficial conversion feature on Class A Preferred Stock     |                                                    |                                                                     |     |           |   |        |          
|Excess of carrying amount over purchase price for Class B Preferred Stock |                                                    |                                                                     |     |           |   |        |          
|                                                                          |                                                    |                                                                     |      |           |   |         |          
|Net loss attributable to common stockholders                              |                                                    | $                                                                   | (698 | )         | $ | (13,824 | )        
|                                                                          |                                                    |                                                                     |      |           |   |         |          
|Weighted average common share calculation:                                |                                                    |                                                                     |      |           |   |         |          
|                                                                          | Basic weighted average common shares outstanding   |                                                                     |      | 1,457,697 |   |         | 2,421,324
|                                                                          |                                                    | Conversion of Class A Preferred Stock                               |      |           |  |         |          
|                                                                          |                                                    | Conversion of Class B Preferred Stock                               |      |           |  |         |          
|                                                                          |                                                    | Treasury stock effect of shares of unvested common stock            |      |           |  |         |          
|                                                                          |                                                    | Treasury stock effect of options and warrants                       |      |           |  |         |          
|                                                                          |                                                    |                                                                     |      |           |   |         |          
|                                                                          | Diluted weighted average common shares outstanding |                                                                     |      | 1,457,697 |   |         | 2,421,324
|Net loss per common share:                                                |                                                    |                                                                     |      |           |   |         |          
|                                                                          | Basic loss per common share                        |                                                                     | $    | (0.48     | ) | $       | (5.71    
|                                                                          | Diluted loss per common share                      |                                                                     | $    | (0.48     | ) | $       | (5.71    

F-13

---

The
pro forma basic and diluted net loss per common share is computed using the pro forma net income (loss) attributable to common stockholders and the pro forma basic
and diluted weighted average number of common shares outstanding during the period. The pro forma net income (loss) attributable to common stockholders and the pro forma basic and diluted weighted
average common shares assumes the conversion of the Class A Preferred Stock into common stock as of January 1, 2003.

Year ended
December 31, 2003Net loss

$
(10,763
)Dividends on Class B Preferred Stock


(1,628
)Excess of carrying amount over purchase price for Class B Preferred Stock


8,326Pro forma net loss attributable to common stockholders

$
(4,065
)Weighted average common share calculation:Basic weighted average common shares outstanding


7,845,438Conversion of Class A Preferred Stock


3,003,984Pro forma basic weighted average common shares outstanding


10,849,422Treasury stock effect of shares of unvested common shares


Treasury stock effect of options and warrants


Diluted weighted average common shares outstanding


10,849,422Pro forma loss per common share:Pro forma basic and diluted loss per common share

$
(0.37
)


Segment Reporting

SFAS No. 131,Disclosure about Segments of an Enterprise and Related Information,establishes standards for
the way that public business enterprises report information about operating segments in annual financial statements and requires that these enterprises report selected information about operating
segments in interim financial reports. The Company operates in one segment.

Impact of Recently Issued and Proposed Accounting Pronouncements

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements Nos. 4, 44 and 64, Amendment of FASB Statement No. 13 and
Technical Corrections. Among other things, SFAS No. 145 rescinds both SFAS No. 4, Reporting Gains and Losses from Extinguishment of Debt, and the amendment to SFAS No. 4, SFAS
No. 64, Extinguishment of Debt Made to Satisfy Sinking Fund Requirements. Through this rescission, SFAS No. 145 eliminates the requirement that gains and losses from the extinguishment
of debt be aggregated and, if material, classified as an extraordinary item, net of the related income tax effect. Adoption of SFAS No. 145 required that the losses incurred by the Company as a
result of the early retirement of debt in 2003 be reflected as a component of interest expense and not treated as an extraordinary item.

In
June 2002, the FASB issued SFAS No. 146, Accounting for Costs of Exit or Disposal Activities. SFAS No. 146 nullifies Emerging Issues Task Force (EITF) Issue
No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). This statement
requires that an exit or disposal activity related cost be recognized when the liability is incurred instead of when an entity commits to an exit plan. The provisions of SFAS No. 146 are
effective for financial transactions initiated after December 31, 2002. The Company adopted SFAS No. 146 on January 1, 2003 and such adoption and did not have a material impact on
the Company's results of operations or financial position.

F-14

---

In
May 2003, the FASB issued SFAS No. 150,Accounting for Certain Financial Instruments with Characteristics of both Liabilities and
Equity. This statement establishes standards for classifying and measuring as liabilities certain financial instruments that have characteristics of both liabilities and
equity. The provisions of this statement require that any financial instruments that are mandatorily redeemable on a fixed or determinable date or upon an event certain to occur be classified as
liabilities. This statement was effective immediately for instruments entered into or modified after May 31, 2003 and for all other instruments that exist as of the beginning of the first
interim financial reporting period beginning after June 15, 2003. The Company adopted SFAS No. 150 during 2003, and such adoption did not have a material impact on the Company's results
of operation or financial position.

In
December 2002, the EITF issued EITF Issue 00-21,Accounting for Revenue Arrangements with Multiple Deliverables.
EITF Issue 00-21 provides guidance on determining whether a revenue arrangement contains multiple deliverable items and if so, requires that revenue be allocated amongst the different
items based on fair value. EITF Issue 00-21 also requires that revenue on any item in a revenue arrangement with multiple deliverables not delivered completely must be deferred until
delivery of the item is completed. The guidance in EITF Issue 00-21 is effective for revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The Company
has adopted EITF Issue 00-21 during 2003 and such adoption did not have a material impact on the Company's results of operations or financial position.

3.     Acquisitions

On November 26, 2002, the Company acquired all of the membership interests of DGS from Getronics Wang Co. LLC (Getronics Parent) in a transaction accounted
for using the purchase method of accounting. DGS' results of operations have been included in the accompanying consolidated statements of operations from the date of its acquisition. At closing,
consideration for the acquisition consisted of 33,500 shares of Class B Preferred Stock and $183.4 million in cash. This consideration was subject to adjustment based upon a final
determination of the amount of net working capital, depreciable assets and accrued contract losses, as defined, as of the date of acquisition. In 2003, the Company was required to pay approximately
$8.3 million in cash as additional consideration as a result
of the adjustment. This adjustment was included in the determination of the aggregate purchase price for the acquisition.

The
aggregate consideration was determined as follows (dollars in thousands):

Fair value of Class B Preferred Stock

$
33,500Cash paid to seller


191,702Transaction costs and other


11,389$
236,591


The
Company allocated the purchase price based upon the fair values of the assets acquired and the liabilities assumed. During 2003, the Company revised certain of its estimates, related
primarily to the fair value of certain performance and incentive fees, certain accrued liabilities and deferred income taxes. The purchase price allocation has been adjusted and finalized as of
November 26, 2003 to reflect the revisions to these estimates.

F-15

---

The purchase consideration has been allocated as follows (dollars in thousands):

Cash

$
5,873Accounts receivable


62,576Other assets


9,445Property and equipment


13,849Non-compete agreements


41Software


527Customer relationships


33,547Goodwill


150,407Net deferred income taxes


9,311Liabilities


(48,985
)$
236,591


The
goodwill recorded is expected to be fully deductible for income tax purposes. The change in the carrying value of goodwill for year ended December 31, 2003 is as follows
(dollars in thousands):

Balance at December 31, 2002

$
154,996Other assets


(2,045
)Liabilities and other


5,602Deferred income taxes


(8,146
)Balance at December 31, 2003

$
150,407


In
connection with the DGS acquisition, the Company recognized approximately $8.2 million in liabilities as the cost of abandoning certain leased DGS facilities and terminating
certain DGS employees. The liabilities consisted primarily of lease costs and severance and other employee termination costs related to the termination of approximately 70 employees in connection with
the expiration of the INS contract and the consolidation of certain other operations. For the years ended December 31, 2002 and 2003, the Company charged approximately $204,000 and
approximately $2.9 million, respectively, against the accrual for amounts paid. Payments related to the remaining obligation at December 31, 2003 will total approximately
$2.2 million for 2004, approximately $0.7 million for 2005, approximately $0.7 million for 2006, approximately $0.3 million per year for 2007, approximately
$0.3 million for 2008, and approximately $0.9 million thereafter.

The
DGS pre-acquisition November 25, 2002 balance sheet included $14.6 million of accounts receivable that were to be collected by the Company but remitted to
Getronics Parent. Because the Company only collected these accounts receivable on behalf of Getronics Parent, they were not included as acquired assets in the DGS purchase price allocation and
accordingly did not appear on the accompanying December 31, 2002 balance sheet. In addition, the Company did not record a liability related to these amounts in the DGS purchase price allocation
as the Company did not have an obligation to pay the Getronics Parent in the event that the accounts receivable were not collected. During 2003, the Company collected the entire $14.6 million
of such accounts receivable and remitted the amounts to Getronics Parent.

The
pro forma information presented below (dollars in thousands, except per share data) reflects the DGS acquisition and the related financing transactions as if each had occurred at the
beginning of

F-16

---

each
period presented. These results are not necessarily indicative of future operating results or those that would have occurred had the acquisition been consummated on those dates:

Year Ended December 31,2001

2002Pro forma revenues

$
346,773

$
367,813Pro forma net income


3,977


12,483Pro forma net income (loss) attributable to common stockholders


(1,844
)

6,661Pro forma basic earnings (loss) per share


(0.69
)

1.37Pro forma diluted earnings (loss) per share


(0.69
)

1.28


4.     Accounts Receivable

Accounts receivable consists of the following (dollars in thousands):

December 31,2002

2003Billed and currently billable accounts receivable

$
57,750

$
65,302Unbilled accounts receivable


9,727


3,421Allowance for doubtful accounts


(3,454
)

(2,526
)Account receivable, net

$
64,023

$
66,197


The
amounts included in currently billable accounts receivable represent amounts which were billed in the subsequent reporting period. They are billings for services rendered prior to
period-end that were billed once necessary billing data had been collected and an invoice produced. Unbilled accounts receivable represent amounts which are not yet billable based upon
contract terms. At December 31, 2002 and 2003, the unbilled accounts receivable relate primarily to accounts due under contracts that had not yet received formal government funding at
year-end due to delayed appropriations bills. The Company is precluded from billing for its services until the government has formally funded the contract. Substantially all of the
unbilled accounts receivable are expected to be billed and collected within 90 days of the balance sheet date.

5.     Property and Equipment

Property and equipment consist of the following (dollars in thousands):

December 31,2002

2003Project assets

$
11,851

$
14,011Machinery and equipment


1,445


4,431Leasehold improvements


783


832Accumulated depreciation


(857
)

(7,266
)Property and equipment, net

$
13,222

$
12,008


The
Company provides services under long-term contractual commitments whereby certain of its equipment is held for use by others. The cost of these assets is recovered
through contractual billings. The net book value of assets held for use by others was approximately $10.9 million and $7.7 million at December 31, 2002 and 2003, respectively.

F-17

---

6.     Intangible Assets

Intangible assets consist of the following (dollars in thousands):

December 31,2002

2003Non-compete agreements

$
41

$
41Software


527


527Customer relationships


33,547


33,547Accumulated amortization


(800
)

(11,394
)Goodwill


154,996


150,407Intangible assets, net

$
188,311

$
173,128


Future
expected amortization of intangibles as of December 31, 2003, is as follows (dollars in thousands):

2004

$
7,5262005


5,0692006


4,1772007


3,0312008


1,380Thereafter


1,538$
22,721


7.     Accrued Expenses

Accrued expenses consist of the following (dollars in thousands):

December 31,2002

2003Accrued compensation and benefits

$
11,651

$
11,923Accrued acquisition and related costs


6,702


2,738Accrued DGS purchase consideration


8,215


Accrued contract costs


9,388


7,303Accrued NASA CSOC contract obligation


5,276


Accrued interest


673


3,616Other


8,036


9,449Accrued expenses

$
49,941

$
35,029


In
connection with the DGS acquisition, the Company consolidated its facilities resulting in the closure of its Bethesda, Maryland office. As a result, the Company recorded a
restructuring charge for the related lease costs of approximately $446,000, which has been included in acquisition and related expenses in the accompanying consolidated statement of operations for the
year ended December 31, 2002. For the years ended December 31, 2002 and 2003, the Company paid lease costs of approximately $38,000 and $70,000, respectively, net of sublease income. The
office space has been sublet to a tenant that has the option to terminate the sublease in certain circumstances. If the option to terminate this lease is not exercised during the first or second
quarter of 2004, the liability for the abandoned facility will be reduced with the related benefit recorded in the statement of operations.

In
May 1999, DGS entered into a contract to design, install and operate a wide area network for NASA. The base term of the NASA COSC contract was scheduled to end on
December 31, 2003, but

F-18

---

was
extended on a time-and-material basis through March 31, 2004. The Company had determined that with respect to the base term of the contract, the estimated direct
contract costs exceeded the estimated contract revenues. The accrued NASA CSOC contract obligation was based, in part, upon management's estimate of revenues and costs and was revised based on actual
results.

8.     Debt

Debt consists of the following (dollars in thousands):

|                                                                            |                                                                                                                   | December 31,
2002 |         | December 31,
2003
|--------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------- | ----------------- | ------- | -----------------
|Senior Secured Credit Facility:                                             |                                                                                                                   |                   |         |                  
|                                                                            | Revolving Credit Facility, with an interest rate of 5.3% at December 31, 2002, due November 2006                  |                   | $       | 3,900            
|                                                                            | Term Loan, with an interest rate of 6.0% at December 31, 2002, quarterly principal payments through November 2007 |                   |         | 80,000           
|                                                                            | Discount on Term Loan                                                                                             |                   |         | (561             
|Subordinated Bridge Note, with an interest rate of 15%, due August 26, 2003 |                                                                                                                   |                   | 44,000  |                  
|Discount on Subordinated Bridge Note                                        |                                                                                                                   |                   | (337    | )                
|9% senior notes due 2010                                                    |                                                                                                                   |                   |        |                  
|                                                                            |                                                                                                                   |                   |         |                  
|Total                                                                       |                                                                                                                   | $                 | 127,002 |                  
|                                                                            |                                                                                                                   |                   |         |                  
|                                                                            | Less: Current portion                                                                                             |                   | $       | 48,549           
|                                                                            |                                                                                                                   |                   |         |                  
|                                                                            | Long-term portion                                                                                                 |                   | $       | 78,453           
|                                                                            |                                                                                                                   |                   |         |                  

Senior Secured Credit Facility

In November 2002, the Company entered into a $105.0 million credit agreement (the Senior Secured Credit Facility) with a syndicate of commercial
lenders. The Senior Secured Credit Facility included a receivable-based revolving line of credit that permitted borrowings and issuances of letters of credit of up to $25.0 million (Revolving
Credit Facility), and an $80.0 million term loan facility (the Term Loan).
As of December 31, 2002, the Company had $3.9 million in borrowings and $2.0 million in outstanding letters of credit under the Revolving Credit Facility. The $80.0 million
Term Loan was issued at a discount of approximately $570,000 from its face amount. This discount was recognized as additional interest expense over the term of the debt using the effective interest
method. Interest accrued on borrowings under the Senior Secured Credit Facility, at the Company's option, at a rate based on the British Bankers Association Interest Settlement Rate for deposits in
dollars or at a rate that is the higher of the prime rate or the federal funds rate plus 50 basis points, in each case plus an applicable margin that varied depending upon the Company's consolidated
leverage ratio, as defined. The obligations under the Senior Secured Credit Facility were secured by substantially all of the assets of the Company. The Senior Secured Credit Facility contained
certain restrictive covenants. The Company was in compliance with these covenants as of December 31, 2002. In connection with the Senior Secured Credit Facility, the Company incurred
approximately $4.3 million in financing costs that were being amortized as interest expense over the term of the debt using the effective interest method.

2003 Credit Facility

In July 2003 and in connection with the completion of the Company's offering of senior notes, the Company entered into an Amended and Restated Credit
Agreement (the 2003 Credit Facility) with a syndicate of commercial lenders, that provides for a $50.0 million revolving credit facility to be used for working capital and general corporate
purposes, for capital expenditures, and for future acquisitions.

F-19

---

The
borrowing capacity under the 2003 Credit Facility provides for the issuance of up to $5.0 million in letters of credit. The available borrowings under the 2003 Credit Facility may be
limited based upon a percentage of the Company's eligible billed and unbilled accounts receivable, as defined. At December 31, 2003, the Company had no borrowings outstanding and
$2.0 million in outstanding letters of credit under the 2003 Credit Facility related to its leased facility in Herndon, Virginia. At December 31, 2003, the Company had available but
unused borrowing capacity of $47.6 million under the 2003 Credit Facility.

Borrowings
under the 2003 Credit Facility bear interest at varying rates at the Company's option, based on either the British Bankers Association Interest Settlement Rate for deposits in
dollars or a rate that is the higher of the prime rate or the federal funds rate plus one-half of one percent, in each case plus an applicable margin that varies depending on the Company's
consolidated total leverage ratio, as defined. The Company also incurs a commitment fee on the unused portion of the 2003 Credit Facility at a rate that varies depending upon the Company's
consolidated total leverage ratio, as defined. Borrowings under the 2003 Credit Facility may be voluntarily prepaid and reborrowed in whole or in part at the option of the Company. However, the
Company is required to use the net proceeds from certain asset sales to prepay any outstanding borrowings. The 2003 Credit Facility will terminate in July 2007, at which time all outstanding
borrowings must be repaid in full.

Obligations
under the 2003 Credit Facility are secured by substantially all of the assets of the Company. The 2003 Credit Facility contains certain restrictive covenants including, among
others, requirements related to operating results and leverage, as well as restrictions related to liens, investments, additional indebtedness, disposition of assets, dividends, distributions,
issuances of equity securities, transactions with affiliates, capital expenditures, and certain other changes in the business. The financial covenants include the requirement to maintain a maximum
consolidated total leverage ratio, minimum consolidated fixed charge coverage ratio, and minimum net worth. As of December 31, 2003, the Company was in compliance with these covenants.

Bridge Loan Agreement

In November 2002, the Company entered into a bridge loan agreement with a commercial lender to borrow $44.0 million through a subordinated bridge
note (the Subordinated Bridge Note). Interest on the Subordinated Bridge Note accrued at an annual rate of 15% and the Subordinated Bridge Note was due on August 26, 2003 (Maturity Date).
Annual interest equal to 13% was payable in cash quarterly with the remaining 2% payable in cash or added to the outstanding principal balance at the Company's option. The Company had the option to
extend the due date to November 26, 2003 (Extended Maturity Date) upon meeting certain requirements in the agreement. In addition, if on the Maturity Date, or if applicable, the Extended
Maturity Date, an IPO had not occurred, there had been no continued events of default, as defined, and there had not been a material adverse effect, the Company, at its option, could rollover and
exchange borrowings under the Subordinated Bridge Note for a new note with a maturity date of the earlier of seven years from the date of its issuance or six months after the maturity of the Term
Loan. Borrowings under the Subordinated Bridge Note were subordinated to the Senior Secured Credit Facility. The bridge loan agreement contained certain restrictive covenants. The Company was in
compliance with these covenants as of December 31, 2002. In connection with the Subordinated Bridge Note, the Company incurred approximately $1.9 million in financing costs, that were
amortized as interest expense over the term of the debt using the effective interest method.

In
connection with the Subordinated Bridge Note, the Company issued warrants to purchase 94,868 shares of common stock to the lender. The warrants have a ten-year life, and
were issued with an exercise price of $0.01 per share. A portion of the proceeds of the Subordinated Bridge Note was allocated to the value of the warrants. The fair value of the warrants was
determined using the Black-Scholes option-pricing model with the following assumptions: risk-free interest rate of approximately

F-20

---

4%,
expected life of 10 years, volatility of 100% and no dividends. The resulting debt discount was amortized to interest expense using the effective interest rate method over the term of the
Subordinated Bridge Note. In the event the Subordinated Bridge Note was not repaid on either the Maturity Date or the Extended Maturity Date, the Company would have been required to release to the
lender warrants that were being held in escrow to purchase an additional 379,475 shares of common stock with an exercise price of $0.01 per share.

Senior Notes

In July 2003, DigitalNet, Inc., a wholly owned subsidiary of the Company, issued $125.0 million in aggregate principal amount of 9% senior
notes due July 15, 2010 (the Notes). The Notes are unsecured obligations of DigitalNet, Inc. The Notes are guaranteed on a full, unconditional, joint, and several basis by DigitalNet
Holdings, Inc. and all of DigitalNet, Inc.'s domestic subsidiaries (see Note 15). The proceeds from the sale of the Notes were used to the repay the outstanding balances of the
Term Loan and Subordinated Bridge Note and the related lending commitments were terminated. In connection with the repayments, the Company wrote-off approximately $4.5 million of
deferred financing costs. This amount has been included in interest expense in the accompanying statement of operations for 2003. In connection with the repayment of the Subordinated Bridge Note, the
warrants to purchase 379,475 shares of common stock held in escrow were cancelled. In connection with the 2003 Credit Facility and the Notes, the Company incurred approximately $6.6 million of
financing costs that are being amortized over the term of the debt using the effective interest method.

The
Company will be required to make semi-annual interest payments in arrears on January 15 and July 15 of each year the Notes are outstanding, commencing on
January 15, 2004. At any time prior to July 15, 2006, the Company had an option to redeem up to 35% of the aggregate principal amount of the Notes at a price equal to 109.00% of the
outstanding principal balance, plus accrued but unpaid interest and liquidated damages, as defined. However, any such redemption must occur within 90 days of the closing of an equity issuance,
as defined. After July 15, 2007, the Company may redeem the Notes, in whole or in part, at a redemption price equal to 104.50%, 102.25%, or 100.00% of the outstanding principal balance of the
Notes if redeemed during the twelve month period beginning on July 15, 2007, 2008, or 2009, respectively, plus accrued but unpaid interest and liquidated damages, as defined. Upon a change in
control, as defined, the holders of the Notes may require the Company to repurchase all or a portion of the Notes at a purchase price equal to 101.00% of the outstanding principal amount, plus accrued
but unpaid interest and liquidated damages, as defined. The indenture governing the Notes contains certain restrictive covenants including, among others, requirements related to liens, dividends,
investments, issuances of securities, repurchases of securities, consolidations and mergers, transactions with affiliates, and certain other changes in the business.

In
November 2003, a portion of the net proceeds of the IPO were used to redeem approximately $43.8 million in aggregate principal amount of the outstanding Notes for
approximately $47.7 million, or 109.00% of the aggregate principal amount of the Notes being redeemed. In connection with the redemption of the Notes, the Company recognized a charge of
approximately $3.9 million in the fourth quarter of 2003 attributable to the premium paid to redeem the Notes and a charge of approximately $1.9 million related to the
write-off of deferred financing costs related to the Notes redeemed. These amounts have been included in interest expense in the accompanying statement of operations for 2003.

9.     Stockholders' Equity

Reverse Stock Split

In March 2003, the Company effected a one-for-eight reverse stock split. Accordingly, all share and per share amounts have been
retroactively adjusted to give effect to this event.

F-21

---

Initial Public Offering

In October 2003, the Company completed its IPO of common stock by issuing 5,750,000 shares of common stock at $17.00 per share, which generated proceeds,
net of offering costs, of approximately $89.1 million. The net proceeds of the IPO, together with the proceeds of $848,000 from the concurrent repayment of certain management notes, were used
to redeem $43.8 million in aggregate principal amount of outstanding Notes for approximately $47.7 million, and $27.0 million was used to purchase all of the outstanding
Class B Preferred Stock. In connection with the IPO, all of the outstanding Class A Preferred Stock, including accrued dividends, converted into shares of common stock.

Stock Purchase Agreement

In September 2001, the Company entered into a purchase agreement (the Stock Purchase Agreement) and completed the first of a series of investment
transactions with GTCR Golder Rauner, L.L.C. (GTCR) and certain executives (including entities for the benefit of the executives or their family members, the Executives) of the Company. Under the
terms of the Stock Purchase Agreement, GTCR committed to provide up to $96 million in capital to the Company to fund acquisitions as well as for other general corporate purposes. Pursuant to
the Stock Purchase Agreement, up to 4,200,000 shares of common stock would be issued to GTCR at a price of $0.80 per share and up to 92,640 shares of Class A Redeemable Convertible Preferred
Stock (Class A Preferred Stock) would be issued to GTCR at a price of $1,000 per share. The Executives were also required to purchase additional common and Class A Preferred Stock at the
same per share prices in proportion to all GTCR investments.

As
part of the initial investment transaction in September 2001, the Company issued 1,250,000 shares of common stock to GTCR resulting in net cash proceeds of approximately
$990,000. Concurrent with the GTCR investment, the Executives purchased an aggregate of 753,874 shares of common stock for proceeds of approximately $603,000. In April 2002 and
October 2002, the Company sold an additional 662,500 and 215,000 shares of common stock, respectively, to GTCR resulting in net cash proceeds of approximately $695,000. Concurrent with these
GTCR investments, the Company sold to the Executives an additional 399,554 and 129,667 shares of common stock, in April 2002 and October 2002, respectively, for consideration of
approximately $423,000. In connection with the DGS acquisition in November 2002, the Company sold 2,072,500 shares of common stock and 58,744 shares of Class A Preferred Stock to GTCR
for net cash proceeds of approximately $59.8 million. Concurrent with this GTCR investment, the Executives purchased 1,249,931 shares of common stock and 2,632 shares of Class A
Preferred Stock from the Company for consideration of approximately $3.6 million. In addition, GTCR purchased 205,693 shares of common stock from the Executives for $0.80 per share in
connection with the DGS acquisition. The net proceeds of approximately $63.4 million received in November 2002 were allocated between the Company's common stock ($13.2 million)
and Class A Preferred Stock ($50.2 million) for financial reporting purposes based on the estimated fair value of each security, which was $4.00 per share for the common stock and
$825.47 per share for the Class A Preferred Stock.

In
March 2003, the Company, GTCR, and the Executives amended the Stock Purchase Agreement. Under the terms of the amended Stock Purchase Agreement, upon consummation of an IPO
GTCR will no longer be obligated to provide the $96 million in capital to the Company. The amended agreement also terminated the Executives' requirement to purchase additional shares of stock
in proportion to any future investment by GTCR upon consummation of an IPO.

F-22

---

Common Stock Held by Executives and Other Employees

Certain shares of common stock purchased by the Executives were subject to repurchase at the discretion of the Company (the Reserved Stock) and certain shares
held by the Executives and other employees were subject to repurchase by the Company upon the Executive's or the employee's separation from the Company.

Reserved Stock

The Reserved Stock is subject to senior management agreements (the Management Agreements) dated September 7, 2001 with each of the Executives. Concurrent
with the GTCR investments, an aggregate of 973,614 shares of Reserved Stock were purchased by the Executives. Consideration for the purchases consisted of a combination of cash and promissory notes.
Pursuant to the Management Agreements, the Company could at its discretion, repurchase any or all of the Reserved Stock for $0.80 per share in order to re-issue a corresponding number of
shares of common stock and/or options to purchase common stock to other employees. During the year ended December 31, 2002, the Company repurchased 88,125 shares of Reserved Stock from the
Executives for $0.80 per share, which were subsequently sold to certain other employees and consultants of the Company at a price per share of $0.80. The Executives held 679,796 shares of Reserved
Stock as of December 31, 2002 and 2003.

The
Company's unilateral option to repurchase the Reserved Stock would expire on the earlier of a liquidity event, as defined, or an IPO (collectively the Qualifying Events). Upon an
IPO, the Executives' Reserved Stock would vest immediately, and a portion of the vested Reserved Stock would be subject to transferability restrictions that lapse over time. Because the number of
shares of Reserved Stock to be held by the Executives would not be fixed until the occurrence of a Qualifying Event, the Company measured and recorded stock compensation costs on the date of the
Qualifying Event. As a result of the Company's IPO in October 2003, the Reserved Stock fully vested and the Company recognized stock-based compensation cost of approximately
$10.1 million which represented the difference between the IPO price per share and the per share purchase price paid by the Executives multiplied by the number of shares of Reserved Stock
purchased and held by the Executives.

Carried Stock

Concurrent with the GTCR investments, an aggregate 1,371,288 shares of common stock (the Carried Stock) were purchased by the Executives. Consideration for the
purchases consisted of a combination of cash and full recourse promissory notes. Pursuant to the Management Agreements, the Executives' Carried Stock vested approximately 35% on the date of the
Management Agreement and approximately 2% on the last day of each month thereafter. The vesting for any Carried Stock purchased by the Executives subsequent to the date of the initial purchase and the
date of the Management Agreements was determined retroactively, beginning with the original date of the Management Agreements. Any unvested shares of Carried Stock were subject to repurchase by the
Company upon the Executives' separation from the Company at the lower of (a) the Executives' original purchase price or (b) the fair market value of each share on the separation date.

In
March 2003, the Company amended the Executives' Management Agreements to provide for the immediate vesting of the outstanding shares of Carried Stock upon the consummation of
an IPO. The modification resulted in a new measurement date for purposes of measuring compensation related to the Carried Stock. Although measurement of compensation is made at the date of the
modification, the recognition of compensation expense, if any, will depend on whether the Executives retain or are expected to retain shares of the Carried Stock that otherwise would have been
forfeited. In the event of an Executive's separation or expected separation from the Company prior to the original vesting term, the Company will record compensation expense at that time based upon
the previously measured compensation and the benefit ultimately received by the Executive from the accelerated vesting. Upon

F-23

---

an
IPO, the Executives were also required to repay the outstanding balance of the promissory notes issued in connection with their purchases of Reserved Stock and Carried Stock. The amended Management
Agreements also terminated the Executives' requirement to purchase additional shares of stock in connection with any future GTCR investments upon the consummation of an IPO. As a result of the
Company's IPO in October 2003, the Carried Stock and Reserved Stock fully vested and the Executives repaid the related outstanding promissory notes.

Restricted Stock

During 2002, the Company sold an aggregate of 88,125 shares of common stock (the Restricted Stock) to other employees of the Company (the Initial Employees). The
shares were sold at $0.80 per share, in exchange for cash and promissory notes. In the event that the Initial Employees cease to be employed or engaged by the Company for any reason, the common stock
was subject to repurchase at the option of the Company. The Initial Employees vested in the Restricted Stock ratably over 3 to 4 year periods. Restricted Stock that has vested is subject to
repurchase at the fair market value of the stock (the Fair Value Shares) at the repurchase date. Restricted Stock that has not vested may be
repurchased at its original cost. The Fair Value Shares are subject to restrictions on transferability. Such restrictions lapse upon the occurrence of certain events.

Because
the promissory notes issued to finance the stock purchases of the Restricted Stock had a fixed rate of interest which might not equal a market rate of interest on the date the
shares of Restricted Stock became vested, these stock awards were accounted for as variable awards resulting in the requirement that stock-based compensation cost be measured each reporting period
based on the fair value of the Company's common stock at that date and attributed to expense based on the vesting of the Restricted Stock. Accordingly, the Company recognized deferred stock-based
compensation of approximately $440,000 as of December 31, 2002, of which approximately $265,000 was charged to expense during 2002.

In
March 2003, the Company amended the Initial Employees' employment agreements to provide for the immediate vesting of the outstanding shares of Restricted Stock in connection
with the consummation of an IPO. The amended employment agreements also prescribed that, upon an IPO, the Initial Employees were required to repay the outstanding balance of the promissory notes
issued in connection with the purchases of Restricted Stock. As a result of the Company's IPO in October 2003, the Restricted Stock fully vested and the Initial Employees repaid the related
outstanding promissory notes. As a result of vesting prior to and in connection with the IPO during 2003, the Company recognized $1.1 million in stock-based compensation expense for the year
ended December 31, 2003. The total stock-based compensation expense recorded in 2002 and 2003 related to the Restricted Stock represented the difference between the IPO price per share and the
per share price paid by the Initial employees, multiplied by the number of shares of Restricted Stock purchased and held by the Initial Employees.

Stockholders Agreement

In connection with the GTCR Purchase Agreement, the Company, GTCR, and the Executives (collectively, the "Investors"), entered into a stockholders agreement. The
stockholders agreement, among other things, granted the Executives certain participation rights in connection with the transfer of stock by GTCR, grants the Company and the Investors certain rights of
first refusal, and provided for voting rights with respect to the election of directors. In November 2002, the stockholders agreement was amended and restated to include the holders of the
Class A Preferred Stock, Class B Preferred Stock, and warrants to purchase common stock within its provisions. The stockholders agreement terminated in accordance with its terms upon
consummation of the IPO.

F-24

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10.   Amended and Restated 2003 Stock Incentive Plan

The Company adopted an Amended and Restated 2003 Stock Incentive Plan (the Plan) in March 2003. The Plan permits the grant of a variety of equity awards
including, among others, incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, and other stock-based awards to consultants, directors,
officers, and other employees of the Company. Under the Plan, 373,416 shares of common stock were available for issuance in connection with awards in 2003. Under the Plan, an additional
325,803 shares became available for issuance as of January 1, 2004. Options generally vest with respect to 25% of the shares subject to the option on the first anniversary of the grant
date and monthly thereafter for the remaining three years. Any unvested portion of an option is generally forfeitable upon termination of an option holder's service as an employee or director. The
Plan is administered by the compensation committee of the board of directors.

During
2003, the Company granted 311,125 options to purchase common stock to certain employees and directors under the Plan. Stock-based compensation cost related to stock option grants
has been reflected in the net loss for the year ended December 31, 2003, as certain options granted had an exercise price less than the fair market value of the underlying common stock on the
date of grant. The Company recorded approximately $1.2 million of deferred stock-based compensation relating to the issuance of these options. The deferred stock-based compensation is amortized
over the vesting period of the options. For the year ended December 31, 2003, the Company recorded stock-based compensation expense of approximately $344,000 related to these options.

Stock
option activity of the Plan from inception through December 31, 2003 is as follows:

Options

Weighted Average
Exercise Price
Per ShareOutstanding at December 31, 2002



$
Granted

311,125


11.75Outstanding at December 31, 2003

311,125

$
11.75


At
December 31, 2003, the price range of options outstanding was as follows:

|            |  | Options
Outstanding |  | Weighted
Average
Exercise
Price |       | Weighted Average
Remaining
Contractual
Life (Years) |     | Options
Exercisable |        | Weighted
Average
Exercise
Price
|----------- |  | ------------------- |  | ------------------------------- | ----- | --------------------------------------------------- | --- | ------------------- | ------ | -------------------------------
|$8.00-9.00  |  | 86,000              |  | $                               | 8.12  |                                                     | 9.7 |                     | 11,673 |                                
|10.00-12.50 |  | 103,250             |  | $                               | 11.03 |                                                     | 9.7 |                     | 23,132 |                                
|14.17-20.90 |  | 121,875             |  | $                               | 14.93 |                                                     | 9.8 |                     | 50,027 |                                
|            |  |                     |  |                                 |       |                                                     |     |                     |        |                                
|            |  | 311,125             |  | $                               | 11.75 |                                                     |     |                     | 84,832 |                                
|            |  |                     |  |                                 |       |                                                     |     |                     |        |                                

The
grant date weighted average fair value of options granted in 2003 was $8.42.

11.   Preferred Stock

Class A Redeemable Convertible Preferred Stock

The holders of the Class A Preferred Stock were entitled to a 6% cumulative dividend. As of December 31, 2002, accrued but unpaid dividends totaled
approximately $363,000. The Company could redeem the shares at any time for their liquidation value of $1,000 per share plus accrued but unpaid dividends. The shares had no voting rights. Upon the
occurrence of an IPO, change in ownership, or fundamental change, as defined, a majority of the holders of the Class A Preferred Stock could require

F-25

---

the
Company to redeem all or a portion of their shares for cash in an amount equal to their liquidation value, which includes accrued but unpaid dividends. If the Class A Preferred Stock had
not been redeemed prior to or upon a qualified IPO, each share would automatically convert into common stock based on the aggregate liquidation value of the preferred stock, which includes accrued but
unpaid dividends, divided by a number which is equal to the price per share of the Company's common stock at its IPO.

In
connection with financing the acquisition of DGS, the Company issued shares of common stock and Class A Preferred Stock concurrently for total consideration of approximately
$63.4 million, net of a one percent investment fee paid to GTCR in connection with the investment. For financial reporting purposes, the Company allocated the proceeds between the common stock
and the Class A Preferred Stock based upon management's estimate of the fair value of each security with approximately $13.2 million allocated to the common stock and
$50.2 million allocated to the Class A Preferred Stock. The liquidation value of the shares of Class A Preferred Stock was approximately $61.4 million on the date of
issuance. Because the initial carrying amount of the Class A Preferred Stock on the date of
issuance was less than the redemption amount and the Class A Preferred Stock was immediately redeemable, the Company recorded approximately $11.2 million in accretion on the date of
issuance. In addition, because the Class A Preferred Stock was issued at a discount to its liquidation value which was the basis for conversion upon an IPO, the effective conversion price of
the Class A Preferred Stock was less than the price per share offered to the public upon an IPO. Upon consummation of the IPO in October 2003, all the Class A Preferred Stock was
converted into 3,807,132 shares of common stock. In accordance with EITF 98-5, "Accounting for Convertible Securities with Beneficial Conversion Features or
Contingently Adjustable Conversion Ratios," the beneficial conversion feature of approximately $11.2 million was measured at the date of issuance and was recognized and
recorded as a dividend and a corresponding credit to additional paid-in capital upon consummation of the IPO.

Class B Redeemable Convertible Preferred Stock

As consideration in the DGS acquisition, the Company issued 33,500 shares of Class B Redeemable Convertible Preferred Stock (the Class B Preferred
Stock). The holders of the Class B Preferred Stock were entitled to a 6% cumulative dividend. The Class B Preferred Stock had no voting rights.

In
the event that the Company exercised its right to redeem the Class A Preferred Stock, the holders of the Class B Preferred Stock would have the right to participate in
such redemption. In addition, upon the occurrence of an IPO, a majority of the holders of the Class A Preferred Stock could require the Company to redeem all or any portion of the
Class A Preferred Stock and the Class B Preferred Stock for its liquidation value, plus accrued but unpaid dividends, provided however that any holder of the Class B Preferred
Stock could elect to convert their respective shares into common stock. If the Class B Preferred Stock was not redeemed at the consummation of an IPO, the shares would automatically convert
into common stock based on the aggregate liquidation value of the Class B Preferred Stock, which include accrued but unpaid dividends, divided by a number which was equal to 81.667% of the
price per share of the Company's common stock at its IPO. This discount to the price per share offered to the public, resulted in a beneficial conversion feature of approximately $7.5 million.
Because conversion was contingent on the occurrence of a future event, the value of the beneficial conversion feature would not be recognized until the contingent future event occured in accordance
with EITF 98-5,Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios.If
converted at an IPO, the Company would record the $7.5 million beneficial conversion feature and the related dividend.

During
2003, the holders of the Class B Preferred Stock entered into a contract with a third party to sell the Class B Preferred Stock. Under the terms of the Company's
stockholder agreement, the Company had a right of first refusal to purchase the Class B Preferred Stock in such circumstances.

F-26

---

The
Company used a portion of the proceeds from its IPO and exercised its right of first refusal and purchased the Class B Preferred Stock for $27.0 million. The Company recognized a
benefit to income attributable to common stockholders in the fourth quarter of 2003 of approximately $8.3 million related to the excess of the carrying amount of the Class B Preferred
Stock over the purchase price paid for the Class B Preferred Stock. Since the Class B Preferred Stock was not converted into common stock at the IPO, the $7.5 million beneficial
conversion was not recognized.

The
changes in redeemable convertible preferred stock for the year ended December 31, 2002 and 2003 are as follows (dollars in thousands):

|                           |                                                                           | Class A
Preferred Stock |        | Class B
Preferred Stock |       
|-------------------------- | ------------------------------------------------------------------------- | ----------------------- | ------ | ----------------------- | ------
|
|Balance, December 31, 2001 |                                                                           | $                       |       |                         |      
|                           | Issuance of Class A Preferred Stock                                       |                         |        | 50,185                  |       
|                           | Issuance of Class B Preferred Stock in connection with the acquisition    |                         |        |                        |       
|                           | Dividends                                                                 |                         |        | 364                     |       
|                           | Accretion                                                                 |                         |        | 11,190                  |       
|                           |                                                                           |                         |        |                         |       
|Balance, December 31, 2002 |                                                                           | $                       | 61,739 |                         | 61,376
|                           |                                                                           |                         |        |                         |       
|                           | Dividends                                                                 |                         |        | 2,982                   |       
|                           | Conversion of Class A Preferred Stock into common stock                   |                         |        | (64,721                 | )     
|                           | Purchase of Class B Preferred Stock                                       |                         |        |                        |       
|                           | Excess of carrying amount over purchase price for Class B Preferred Stock |                         |        |                        |       
|                           |                                                                           |                         |        |                         |       
|Balance, December 31, 2003 |                                                                           | $                       |       |                         |      
|                           |                                                                           |                         |        |                         |       

12.   Income Taxes

The components of the Company's net deferred tax asset, are as follows (dollars in thousands):

December 31,2002

2003Deferred tax assets:Net operating loss carryforwards

$
4,869

$
4,367Reserves and other accruals


326


5,963Stock-based compensation





134Inventory related





124Organization costs


67


49Deferred tax liabilities:Unbilled accounts receivable


(3,891
)

(1,318
)Depreciation and amortization


(538
)

(668
)Net deferred tax asset

$
833

$
8,651


The
Company had net operating loss carryforwards to offset future taxable income of approximately $11.2 million as of December 31, 2003, respectively. These net operating
loss carryforwards expire through the year 2022.

F-27

---

The
components of the provision (benefit) for income taxes are as follows (dollars in thousands):

Year Ended
December 31,For the period from
inception through
December 31, 20012002

2003Current

$
(195
)
$
(4,674
)
$
Deferred


(83
)

4,119


328Valuation allowance


278


887


Total

$


$
332

$
328


The
provision (benefit) for income taxes results in an effective rate that differs from the Federal statutory rate as follows:

|                                                                       |  |     |    | Year Ended
December 31, |   
|---------------------------------------------------------------------- |  | --- | -- | ----------------------- | --
|
|
|Federal statutory rate                                                 |  | (35 | )% | (35                     | )%
|Effect of graduated rates                                              |  | 1   |    | 1                       |   
|State income taxes, net of federal income tax benefit                  |  | (6  | )  | (6                      | ) 
|Net operating losses for which no tax benefit is currently available   |  | 28  |    | 52                      |   
|Other changes in valuation allowance                                   |  | 12  |    | (1                      | ) 
|Non-deductible expenses (primarily stock-based compensation) and other |  |    |    | 8                       |   
|                                                                       |  |     |    |                         |   
|Total                                                                  |  |    | %  | 19                      | % 
|                                                                       |  |     |    |                         |   

13.   Related Party Transactions

At December 31, 2002, the Company held notes receivable related to purchases of common stock totaling approximately $1.0 million, from the
Executives and the Initial Employees. These notes accrued
interest at 5 percent per annum and were due at varying dates through September 2010. The outstanding balance of the Notes as of the date of the IPO totaled approximately $848,000 and
such amounts were repaid in connection with the IPO.

In
connection with the Stock Purchase Agreement, the Company entered into a management services agreement with GTCR for $200,000 per year. In March 2002, this amount increased to
$300,000 per year. The Company incurred approximately $67,000, $283,000, and $238,000 related to these agreements for the period from September 7, 2001 (inception) through December 31,
2001 and the years ended December 31, 2002 and 2003, respectively. The agreement also provided for a one percent fee on certain issuances of company stock. GTCR received a fee of $10,000 and
$613,000 in connection with the GTCR investments during the period from inception through December 31, 2001 and the year ended December 31, 2002, respectively. In connection with the
IPO, the management services agreement terminated and all unpaid amounts due will be paid in the first quarter of 2004.

In
connection with the acquisition of DGS, the Company entered into certain transitional services and other agreements with Getronics Parent. Pursuant to these agreements, the Company
agreed to provide maintenance services and office space to Getronics Parent. In addition, Getronics Parent agreed to provide the Company with services and facilities. These agreements terminate at
various dates through 2006. For the years ended December 31, 2002 and 2003, the Company paid approximately $1.7 million and $5.7 million, respectively, to Getronics Parent
for services rendered under these agreements. For the year ended December 31, 2003, the Company received approximately

F-28

---

$1.2 million
from Getronics Parent for services rendered under these agreements. The Company did not receive any payments from Getronics Parent in 2002.

From
March 2003 through December 2003, the Company issued four purchase orders totaling approximately $694,000, on a subcontract basis, to a company owned by the son of the
Company's Chairman and Chief Executive Officer. As of December 31, 2003, the Company has paid approximately $236,000 to the company pursuant to these purchase orders. Through these purchase
orders, the company acted as a subcontractor to the Company under two civilian agency contracts, providing professional systems engineering and economic analysis services. These purchase orders were
issued in the ordinary course of business and, based on the Company's historic practices with respect to retaining subcontractors to provide services of a similar nature, management believes these
services were provided on terms no less favorable than the Company would anticipate receiving from unrelated parties.

14.   Commitments and Contingencies

Operating Leases

The Company leases office space, network equipment, and certain office equipment under various cancelable and non-cancelable operating leases that
expire through October 2011. Rental expense is recognized on a straight-line basis over the term of the lease, regardless of when payments are due. Rental expense was approximately
$73,000, $869,000, and $6.1 million for the period from inception through December 31, 2001 and the years ended December 31, 2002 and 2003, respectively.

Future
minimum commitments under the Company's operating leases and subleases are as follows for each of the years ended December 31 (dollars in thousands):

Gross
Commitment

Sublease
Income

Net
Commitment2004

$
5,068

$
191

$
4,8772005


4,785


96


4,6892006


4,296





4,2962007


3,365





3,3652008


3,302





3,302Thereafter


9,687





9,687


Audit Review

Substantially all payments to DGS and the Company on government cost reimbursable contracts are provisional payments which are subject to adjustment upon audit by
certain government audit agencies. DGS's incurred cost submissions have been completed through December 31, 2002 and have been audited through December 31, 2001. There are no outstanding
incurred cost submissions or audits for any of DGS's previously acquired entities. The 2002 and 2003 incurred cost audits for DGS are not expected to have a material adverse effect on the Company's
financial position or results of operations.

Litigation and Claims

The Company is periodically involved in disputes arising from normal business activities. In the opinion of management, resolution of these matters will not have
a material adverse effect upon the financial position or future operating results of the Company, and adequate provision for any probable losses has been made in the accompanying consolidated
financial statements.

F-29

---

401(k) Plan

In January 2003, the Company established a 401(k) retirement plan for the benefit of all eligible employees. Participants may contribute a portion of
eligible wages, not to exceed annual statutory limitations, to the plan. The Company may also elect to make a discretionary contribution as determined by its Board of Directors on an annual basis. The
Company has elected to match 50 percent of each employee's contribution up to six percent of each employee's salary. Employees vest in the Company discretionary contributions ratably over three
years. The Company's contribution was approximately $2.2 million for year ended December 2003.

15.   Guarantor Financial Statements

The Notes issued by DigitalNet, Inc. are guaranteed on a full, unconditional, joint and several basis by DigitalNet Holdings, Inc. and
DigitalNet, Inc.'s wholly owned domestic subsidiaries including DigitalNet Government Solutions, LLC.

The
following condensed consolidating financial information includes:



The
condensed consolidating financial statements do not present the financial statements of the Company's non-guarantor subsidiaries, HFS GmbH and Getronics Government
Solutions Puerto Rico, Inc., because these subsidiaries had no material operations, assets, or liabilities for the periods presented.

Investments
in consolidated subsidiaries are presented using the equity method of accounting. The principal elimination entries eliminate investments in consolidated subsidiaries and
intercompany balances and transactions.

F-30

---



|                                                             |                                           | As of December 31, 2002 |        | As of December 31, 2003
|------------------------------------------------------------ | ----------------------------------------- | ----------------------- | ------ | -----------------------
|
|
|Assets                                                       |                                           |                         |        |                        
|Current assets:                                              |                                           |                         |        |                        
|                                                             | Cash and cash equivalents                 |                         | $      |                       
|                                                             | Accounts receivable, net                  |                         |        |                       
|                                                             | Intercompany receivables                  |                         |        | 99,246                 
|                                                             | Prepaid expenses and other current assets |                         |        |                       
|                                                             | Inventory                                 |                         |        |                       
|                                                             |                                           |                         |        |                        
|Total current assets                                         |                                           |                         | 99,246 |                        
|                                                             |                                           |                         |        |                        
|Other assets                                                 |                                           |                         |       |                        
|Property and equipment, net                                  |                                           |                         |       |                        
|Investment in consolidated subsidiaries                      |                                           |                         |       |                        
|Intangible assets, net                                       |                                           |                         |       |                        
|                                                             |                                           |                         |        |                        
|Total assets                                                 |                                           | $                       | 99,246 |                        
|                                                             |                                           |                         |        |                        
|Liabilities, preferred stock, and stockholders' equity       |                                           |                         |        |                        
|Current liabilities:                                         |                                           |                         |        |                        
|                                                             | Account payable                           |                         | $      |                       
|                                                             | Accrued expenses                          |                         |        |                       
|                                                             | Intercompany payables                     |                         |        |                       
|                                                             | Investment in consolidated subsidiaries   |                         |        | 2,584                  
|                                                             | Deferred revenue                          |                         |        |                       
|                                                             | Current portion of long-term debt         |                         |        |                       
|                                                             |                                           |                         |        |                        
|Total current liabilities                                    |                                           |                         | 2,584  |                        
|                                                             |                                           |                         |        |                        
|Long-term debt, net of current portion                       |                                           |                         |       |                        
|Other liabilities                                            |                                           |                         |       |                        
|Class A Preferred Stock                                      |                                           |                         | 61,739 |                        
|Class B Preferred Stock                                      |                                           |                         | 33,698 |                        
|Stockholders' equity (deficit):                              |                                           |                         | 1,225  |                        
|                                                             |                                           |                         |        |                        
|Total liabilities, preferred stock, and stockholders' equity |                                           | $                       | 99,246 |                        
|                                                             |                                           |                         |        |                        

F-31

---

|                                                      |                                              | Period from September 7, 2001 (inception)
through December 31, 2001 |      | Year Ended December 31, 2002 |   | Year Ended December 31, 2003 |    
|----------------------------------------------------- | -------------------------------------------- | ------------------------------------------------------------------- | ---- | ---------------------------- | - | ---------------------------- | ---
|
|
|Revenues                                              |                                              | $                                                                   |     |                              | $ |                             |    
|Costs of revenues                                     |                                              |                                                                     |     |                              |   |                             |    
|                                                      |                                              |                                                                     |      |                              |   |                              |    
|                                                      | Gross profit                                 |                                                                     |      |                             |   |                              |   
|                                                      |                                              |                                                                     |      |                              |   |                              |    
|Operating expenses:                                   |                                              |                                                                     |      |                              |   |                              |    
|                                                      | Selling, general, and administrative         |                                                                     |      | 199                          |   |                              | 506
|                                                      | Acquisition and related expenses             |                                                                     |      |                             |   |                              |   
|                                                      | Amortization of intangibles                  |                                                                     |      |                             |   |                              |   
|                                                      |                                              |                                                                     |      |                              |   |                              |    
|Total operating expenses                              |                                              |                                                                     | 199  |                              |   | 506                          |    
|                                                      |                                              |                                                                     |      |                              |   |                              |    
|Operating income (loss)                               |                                              |                                                                     | (199 | )                            |   | (506                         | )  
|Other income (expense):                               |                                              |                                                                     |      |                              |   |                              |    
|                                                      | Interest income                              |                                                                     |      | 1                            |   |                              | 6  
|                                                      | Interest expense                             |                                                                     |      |                             |   |                              |   
|                                                      | Other income (expense), net                  |                                                                     |      |                             |   |                              |   
|                                                      | Equity income from consolidated subsidiaries |                                                                     |      | (500                         | ) |                              |   
|                                                      |                                              |                                                                     |      |                              |   |                              |    
|Total other income (expense)                          |                                              |                                                                     | (499 | )                            |   | 6                            |    
|                                                      |                                              |                                                                     |      |                              |   |                              |    
|Income (loss) before provision for income taxes       |                                              |                                                                     | (698 | )                            |   | (500                         | )  
|Provision for income taxes                            |                                              |                                                                     |     |                              |   |                             |    
|                                                      |                                              |                                                                     |      |                              |   |                              |    
|Net income (loss)                                     |                                              | $                                                                   | (698 | )                            | $ | (500                         | )  
|                                                      |                                              |                                                                     |      |                              |   |                              |    
|Dividends and accretion on preferred stock, net       |                                              |                                                                     |     |                              |   |                             |    
|                                                      |                                              |                                                                     |      |                              |   |                              |    
|Net income (loss) attributable to common stockholders |                                              | $                                                                   | (698 | )                            | $ | (500                         | )  
|                                                      |                                              |                                                                     |      |                              |   |                              |    

F-32

---



|                                                                                       |                                                                       | Period from September 7, 2001 (inception)
through December 31, 2001        |                                       | Year Ended December 31, 2002 |     | Year Ended December 31, 2003 |    
|-------------------------------------------------------------------------------------- | --------------------------------------------------------------------- | -------------------------------------------------------------------------- | ------------------------------------- | ---------------------------- | --- | ---------------------------- | ---
|
|
|Cash flows from operating activities:                                                  |                                                                       |                                                                            |                                       |                              |     |                              |    
|Net income (loss)                                                                      |                                                                       | $                                                                          | (698                                  | )                            | $   | (500                         | )  
|Adjustment to reconcile net income (loss) to net cash provided by (used in) operations |                                                                       |                                                                            |                                       |                              |     |                              |    
|                                                                                       |                                                                       | Depreciation                                                               |                                       |                              |    |                              |    
|                                                                                       |                                                                       | Loss on sale of equipment                                                  |                                       |                              |    |                              |    
|                                                                                       |                                                                       | Amortization of intangible assets                                          |                                       |                              |    |                              |    
|                                                                                       |                                                                       | Premium on partial redemption of 9% senior notes due 2010                  |                                       |                              |    |                              |    
|                                                                                       |                                                                       | Amortization of deferred financing costs                                   |                                       |                              |    |                              |    
|                                                                                       |                                                                       | Amortization of discount on debt                                           |                                       |                              |    |                              |    
|                                                                                       |                                                                       | Amortization of deferred compensation                                      |                                       |                              |    |                              |    
|                                                                                       |                                                                       | Deferred income taxes                                                      |                                       |                              |    |                              |    
|                                                                                       |                                                                       | Equity (income) loss from consolidated subsidiaries                        |                                       |                              | 500 |                              |    
|                                                                                       |                                                                       | Changes in operating assets and liabilities, net of effect of acquisition: |                                       |                              |    |                              |    
|                                                                                       |                                                                       |                                                                            | Accounts receivable                   |                              |     |                             |    
|                                                                                       |                                                                       |                                                                            | Inventory                             |                              |     |                             |    
|                                                                                       |                                                                       |                                                                            | Prepaid expenses and other assets     |                              |     |                             |    
|                                                                                       |                                                                       |                                                                            | Accounts payable and accrued expenses |                              |     |                             |    
|                                                                                       |                                                                       |                                                                            | Deferred revenues                     |                              |     |                             |    
|                                                                                       |                                                                       |                                                                            | Other liabilities                     |                              |     |                             |    
|                                                                                       |                                                                       |                                                                            |                                       |                              |     |                              |    
|Net cash (used in) provided by operating activities                                    |                                                                       |                                                                            | (198                                  | )                            |     | (485                         | )  
|                                                                                       |                                                                       |                                                                            |                                       |                              |     |                              |    
|Cash flows from investing activities:                                                  |                                                                       |                                                                            |                                       |                              |     |                              |    
|                                                                                       | Purchases of property and equipment                                   |                                                                            |                                       |                             |     |                              | (22
|                                                                                       | Proceeds from sale of equipment                                       |                                                                            |                                       |                             |     |                              |   
|                                                                                       | Purchase of DigitalNet Government Solutions, LLC net of cash acquired |                                                                            |                                       |                             |     |                              |   
|                                                                                       |                                                                       |                                                                            |                                       |                              |     |                              |    
|Net cash used in investing activities                                                  |                                                                       |                                                                            |                                      |                              |     | (22                          | )  
|                                                                                       |                                                                       |                                                                            |                                       |                              |     |                              |    
|Cash flows from financing activities:                                                  |                                                                       |                                                                            |                                       |                              |     |                              |    
|                                                                                       | Proceeds from (repayments under) revolving credit facility            |                                                                            |                                       |                             |     |                              |   
|                                                                                       | Proceeds from (repayments under) term loan facility                   |                                                                            |                                       |                             |     |                              |   
|                                                                                       | Proceeds from (repayments under) subordinated bridge facility         |                                                                            |                                       |                             |     |                              |   
|                                                                                       | Proceeds from issuance of warrants                                    |                                                                            |                                       |                             |     |                              |   
|                                                                                       | Proceeds from issuance of senior notes                                |                                                                            |                                       |                             |     |                              |   
|                                                                                       | Redemption of senior notes                                            |                                                                            |                                       |                             |     |                              |   
|                                                                                       | Debt issuance costs                                                   |                                                                            |                                       |                             |     |                              |   
|                                                                                       | Proceeds from initial public offering, net of offering costs          |                                                                            |                                       |                             |     |                              |   
|                                                                                       | Proceeds from issuance of common stock, net of offering costs         |                                                                            |                                       | 1,150                        |     |                              |   
|                                                                                       | Proceeds from issuance of preferred stock, net of offering costs      |                                                                            |                                       |                             |     |                              |   
|                                                                                       | Purchase of Class B Preferred Stock                                   |                                                                            |                                       |                             |     |                              |   
|                                                                                       | Decrease (increase) in intercompany receivables, net                  |                                                                            |                                       | (970                         | )   |                              | 970
|                                                                                       | Payments on management notes receivable                               |                                                                            |                                       | 18                           |     |                              |   
|                                                                                       |                                                                       |                                                                            |                                       |                              |     |                              |    
|Net cash provided by (used in) financing activities                                    |                                                                       |                                                                            | 198                                   |                              |     | 970                          |    
|                                                                                       |                                                                       |                                                                            |                                       |                              |     |                              |    
|Net increase (decrease) in cash and cash equivalents                                   |                                                                       |                                                                            |                                      |                              |     | 463                          |    
|Cash and cash equivalents, beginning of period                                         |                                                                       |                                                                            |                                      |                              |     |                             |    
|                                                                                       |                                                                       |                                                                            |                                       |                              |     |                              |    
|Cash and cash equivalents, end of period                                               |                                                                       | $                                                                          |                                      |                              | $   | 463                          |    
|                                                                                       |                                                                       |                                                                            |                                       |                              |     |                              |    

F-33

---

16.   Unaudited Quarterly Financial Data (in thousands, except per share amounts):

|                                                                         |  | March 31,
2002 |       | June 30,
2002 |   | September 30,
2002 |   | December 31,
2002 (1) |       | March 31,
2003 |   | June 30,
2003 |   | September 30,
2003 (2) |        | December 31,
2003 (3) |  
|------------------------------------------------------------------------ |  | -------------- | ----- | ------------- | - | ------------------ | - | --------------------- | ----- | -------------- | - | ------------- | - | ---------------------- | ------ | --------------------- | -
|Revenues                                                                 |  | $              |      |               | $ |                   |   | $                     |      |                | $ | 33,903        |   | $                      | 77,902 |                       | $
|Gross Profit                                                             |  |                |      |               |   |                   |   |                       |      |                |   | 6,952         |   |                        | 16,018 |                       |  
|Net loss attributable to common stockholders                             |  |                | (378  | )             |   | (838               | ) |                       | (726  | )              |   | (11,882       | ) |                        | (1,058 | )                     |  
|Basic and diluted net loss attributable to common shareholders per share |  | $              | (0.25 | )             | $ | (0.40              | ) | $                     | (0.31 | )              | $ | (3.18         | ) | $                      | (0.19  | )                     | $

---

17.   Unaudited Subsequent Event

On February 5, 2004, the Company entered into an agreement to acquire all of the outstanding equity securities of User Technology Associates, Inc.
(UTA) for $50.0 million in cash. The Company expects to utilize cash on hand and approximately $35.0 million in borrowings under its 2003 Credit Facility to fund the purchase price.
Closing of the acquisition is subject to normal and customary conditions, the novation of one of UTA's contracts to an entity recently formed by the selling shareholder and obtaining necessary
regulatory approvals. The Company expects the transaction to close by the end of March 2004.

F-34

---



REPORT OF INDEPENDENT AUDITORS

To
DigitalNet Government Solutions, LLC:

We
have audited the accompanying consolidated balance sheets of DigitalNet Government Solutions, LLC, formerly Getronics Government Solutions, L.L.C. and subsidiaries (the Company), as
of December 31, 2001 and November 25, 2002, and the related consolidated statements of operations, member's equity, and cash flows for the years ended December 31, 2000 and 2001,
and the period from January 1, 2002 to November 25, 2002. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In
our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of DigitalNet Government Solutions, LLC as of
December 31, 2001 and November 25, 2002, and the consolidated results of its operations and its cash flows for the years ended December 31, 2000 and 2001 and the period from
January 1, 2002 to November 25, 2002, in conformity with accounting principles generally accepted in the United States.

As
discussed in Note 2 to the consolidated financial statements, effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142,
"Accounting for Goodwill and Other Intangible Assets."



McLean,
Virginia
January 27, 2003

F-35

---



DIGITALNET GOVERNMENT SOLUTIONS, LLC  CONSOLIDATED BALANCE SHEETS  AS OF DECEMBER 31, 2001 AND NOVEMBER 25, 2002  (DOLLARS IN THOUSANDS)

|                                      |                                                                                                                                            | December 31, 2001 |         | November 25, 2002 |  
|------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------ | ----------------- | ------- | ----------------- | -
|Assets                                |                                                                                                                                            |                   |         |                   |  
|Current assets:                       |                                                                                                                                            |                   |         |                   |  
|                                      | Cash and cash equivalents                                                                                                                  |                   | $       | 6,035             |  
|                                      | Accounts receivable (net of allowance for doubtful accounts of $3,452 and $3,454 at December 31, 2001 and November 25, 2002, respectively) |                   |         | 75,602            |  
|                                      | Inventory, net                                                                                                                             |                   |         | 6,704             |  
|                                      | Deferred income taxes                                                                                                                      |                   |         | 9,616             |  
|                                      | Other current assets                                                                                                                       |                   |         | 1,770             |  
|                                      |                                                                                                                                            |                   |         |                   |  
|Total current assets                  |                                                                                                                                            |                   | 99,727  |                   |  
|Property and equipment, net           |                                                                                                                                            |                   | 13,055  |                   |  
|Intangible assets, net                |                                                                                                                                            |                   | 70,199  |                   |  
|Deferred income taxes                 |                                                                                                                                            |                   | 6,874   |                   |  
|                                      |                                                                                                                                            |                   |         |                   |  
|Total assets                          |                                                                                                                                            | $                 | 189,855 |                   | $
|                                      |                                                                                                                                            |                   |         |                   |  
|Liabilities and member's equity       |                                                                                                                                            |                   |         |                   |  
|Current liabilities:                  |                                                                                                                                            |                   |         |                   |  
|                                      | Accounts payable                                                                                                                           |                   | $       | 3,989             |  
|                                      | Accrued expenses                                                                                                                           |                   |         | 31,779            |  
|                                      | Accrued contract losses                                                                                                                    |                   |         | 11,462            |  
|                                      | Deferred revenues                                                                                                                          |                   |         | 5,771             |  
|                                      |                                                                                                                                            |                   |         |                   |  
|Total current liabilities             |                                                                                                                                            |                   | 53,001  |                   |  
|Long-term liabilities                 |                                                                                                                                            |                   | 1,307   |                   |  
|Minimum pension liability, net        |                                                                                                                                            |                   | 8,874   |                   |  
|                                      |                                                                                                                                            |                   |         |                   |  
|Total liabilities                     |                                                                                                                                            |                   | 63,182  |                   |  
|                                      |                                                                                                                                            |                   |         |                   |  
|Commitments and contingencies         |                                                                                                                                            |                   |         |                   |  
|Member's equity:                      |                                                                                                                                            |                   |         |                   |  
|                                      | Member's capital                                                                                                                           |                   |         | 69,561            |  
|                                      | Receivables from Getronics Parent, net                                                                                                     |                   |         | (41,068           | )
|                                      | Accumulated other comprehensive loss                                                                                                       |                   |         | (13,465           | )
|                                      | Accumulated earnings                                                                                                                       |                   |         | 111,645           |  
|                                      |                                                                                                                                            |                   |         |                   |  
|Total member's equity                 |                                                                                                                                            |                   | 126,673 |                   |  
|                                      |                                                                                                                                            |                   |         |                   |  
|Total liabilities and member's equity |                                                                                                                                            | $                 | 189,855 |                   | $
|                                      |                                                                                                                                            |                   |         |                   |  

See accompanying notes.

F-36

---



DIGITALNET GOVERNMENT SOLUTIONS, LLC  CONSOLIDATED STATEMENTS OF OPERATIONS  FOR THE YEARS ENDED DECEMBER 31, 2000 AND 2001, AND THE PERIOD FROM  JANUARY 1, 2002 THROUGH NOVEMBER 25, 2002  (DOLLARS IN
THOUSANDS)

|                                         |                                     | Year ended December 31, |         | Period from
January 1, 2002
through November
25, 2002 |  
|---------------------------------------- | ----------------------------------- | ----------------------- | ------- | ----------------------------------------------------- | -
|
|Revenues                                 |                                     | $                       | 361,818 |                                                       | $
|Cost of revenues                         |                                     |                         | 313,028 |                                                       |  
|                                         |                                     |                         |         |                                                       |  
|Gross profit                             |                                     |                         | 48,790  |                                                       |  
|                                         |                                     |                         |         |                                                       |  
|Operating expenses:                      |                                     |                         |         |                                                       |  
|                                         | Selling, general and administrative |                         |         | 44,534                                                |  
|                                         | Amortization of intangibles         |                         |         | 5,378                                                 |  
|                                         |                                     |                         |         |                                                       |  
|Total operating expenses                 |                                     |                         | 49,912  |                                                       |  
|                                         |                                     |                         |         |                                                       |  
|Income (loss) from operations            |                                     |                         | (1,122  | )                                                     |  
|                                         |                                     |                         |         |                                                       |  
|Other income and (expense):              |                                     |                         |         |                                                       |  
|                                         | Interest income                     |                         |         | 7,603                                                 |  
|                                         | Other expense                       |                         |         | (6                                                    | )
|                                         |                                     |                         |         |                                                       |  
|Total other income                       |                                     |                         | 7,597   |                                                       |  
|                                         |                                     |                         |         |                                                       |  
|Income before provision for income taxes |                                     |                         | 6,475   |                                                       |  
|Provision for income taxes               |                                     |                         | 4,617   |                                                       |  
|                                         |                                     |                         |         |                                                       |  
|Net income                               |                                     | $                       | 1,858   |                                                       | $
|                                         |                                     |                         |         |                                                       |  

See accompanying notes.

F-37

---



DIGITALNET GOVERNMENT SOLUTIONS, LLC  CONSOLIDATED STATEMENTS OF MEMBER'S EQUITY  FOR THE YEARS ENDED DECEMBER 31, 2000 AND 2001, AND THE PERIOD FROM  JANUARY 1, 2002 THROUGH NOVEMBER 25, 2002  (DOLLARS IN
THOUSANDS)

|                           |                                                                        | Member's Equity |        |       |  
|-------------------------- | ---------------------------------------------------------------------- | --------------- | ------ | ----- | -
|
|Balance, December 31, 1999 |                                                                        | $               | 67,031 |       | $
|                           | Capital contribution                                                   |                 |        | 2,530 |  
|                           | Increase in receivables from Getronics Parent, net                     |                 |        |      |  
|                           | Increase in minimum pension liability, net of deferred taxes of $1,574 |                 |        |      |  
|                           | Net income                                                             |                 |        |      |  
|                           |                                                                        |                 |        |       |  
|Balance, December 31, 2000 |                                                                        | $               | 69,561 |       | $
|                           |                                                                        |                 |        |       |  
|                           | Increase in receivables from Getronics Parent, net                     |                 |        |      |  
|                           | Increase in minimum pension liability, net of deferred taxes of $6,891 |                 |        |      |  
|                           | Net income                                                             |                 |        |      |  
|                           |                                                                        |                 |        |       |  
|Balance, December 31, 2001 |                                                                        | $               | 69,561 |       | $
|                           |                                                                        |                 |        |       |  
|                           | Increase in receivables from Getronics Parent, net                     |                 |        |      |  
|                           | Increase in minimum pension liability, net of deferred taxes of $5,636 |                 |        |      |  
|                           | Transfer of minimum pension liability to Getronics Parent              |                 |        |      |  
|                           | Net income                                                             |                 |        |      |  
|                           |                                                                        |                 |        |       |  
|Balance, November 25, 2002 |                                                                        | $               | 69,561 |       | $
|                           |                                                                        |                 |        |       |  

See accompanying notes.

F-38

---



DIGITALNET GOVERNMENT SOLUTIONS, LLC  CONSOLIDATED STATEMENTS OF CASH FLOWS  FOR THE YEARS ENDED DECEMBER 31, 2000 AND 2001, AND THE PERIOD FROM  JANUARY 1, 2002 THROUGH NOVEMBER 25, 2002  (DOLLARS IN
THOUSANDS)

|                                                                                  |                                                   | Year ended December 31, |         | Period from
January 1, 2002
through
November 25, 2002 |       
|--------------------------------------------------------------------------------- | ------------------------------------------------- | ----------------------- | ------- | ----------------------------------------------------- | ------
|
|Cash flows from operating activities                                              |                                                   |                         |         |                                                       |       
|Net income                                                                        |                                                   | $                       | 1,858   |                                                       | $     
|Adjustments to reconcile net income to net cash provided by operating activities: |                                                   |                         |         |                                                       |       
|                                                                                  | Depreciation                                      |                         |         | 6,039                                                 |       
|                                                                                  | Amortization of intangibles                       |                         |         | 5,378                                                 |       
|                                                                                  | Loss on disposal of assets                        |                         |         |                                                      |       
|                                                                                  | Deferred income taxes                             |                         |         | (5,221                                                | )     
|                                                                                  | Current tax provision payable to Getronics Parent |                         |         | 9,838                                                 |       
|                                                                                  | Provision for doubtful accounts                   |                         |         | (1,880                                                | )     
|                                                                                  | Intercompany interest income                      |                         |         | (7,272                                                | )     
|                                                                                  | Changes in assets and liabilities:                |                         |         |                                                       |       
|                                                                                  |                                                   | Accounts receivable     |         |                                                       | (1,196
|                                                                                  |                                                   | Inventory               |         |                                                       | (3,086
|                                                                                  |                                                   | Other assets            |         |                                                       | (2,104
|                                                                                  |                                                   | Accounts payable        |         |                                                       | 7,631 
|                                                                                  |                                                   | Accrued expenses        |         |                                                       | 13,470
|                                                                                  |                                                   | Deferred revenues       |         |                                                       | (3,451
|                                                                                  |                                                   |                         |         |                                                       |       
|Net cash provided by operating activities                                         |                                                   |                         | 20,004  |                                                       |       
|                                                                                  |                                                   |                         |         |                                                       |       
|Cash flows from investing activities                                              |                                                   |                         |         |                                                       |       
|Capital expenditures                                                              |                                                   |                         | (10,453 | )                                                     |       
|Proceeds from the sale of assets                                                  |                                                   |                         | 86      |                                                       |       
|Business acquisition payment                                                      |                                                   |                         | (3,500  | )                                                     |       
|                                                                                  |                                                   |                         |         |                                                       |       
|Net cash used in investing activities                                             |                                                   |                         | (13,867 | )                                                     |       
|                                                                                  |                                                   |                         |         |                                                       |       
|Cash flows from financing activities                                              |                                                   |                         |         |                                                       |       
|Advances to parent, net                                                           |                                                   |                         | (6,362  | )                                                     |       
|                                                                                  |                                                   |                         |         |                                                       |       
|Net cash used in financing activities                                             |                                                   |                         | (6,362  | )                                                     |       
|                                                                                  |                                                   |                         |         |                                                       |       
|Increase (decrease) in cash and cash equivalents                                  |                                                   |                         | (225    | )                                                     |       
|Cash and cash equivalents at beginning of period                                  |                                                   |                         | 5,733   |                                                       |       
|                                                                                  |                                                   |                         |         |                                                       |       
|Cash and cash equivalents at end of period                                        |                                                   | $                       | 5,508   |                                                       | $     
|                                                                                  |                                                   |                         |         |                                                       |       

See accompanying notes.

F-39

---



DIGITALNET GOVERNMENT SOLUTIONS, LLC  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  DECEMBER 31, 2001 AND NOVEMBER 25, 2002

1.     The Company

Business Description

DigitalNet Government Solutions, LLC, formerly Getronics Government Solutions, L.L.C. (the Company) is a Delaware Limited Liability Company. On
November 26, 2002, all of the Company's membership interests were purchased by DigitalNet Holdings, Inc. (DigitalNet) in exchange for cash and shares of DigitalNet preferred stock. Prior
to this acquisition, Getronics Government Solutions, L.L.C., was a wholly owned subsidiary of GetronicsWang Co. LLC, (GetronicsWang) which was wholly owned by Getronics, NV (collectively referred to
as the Getronics Parent).

The
Company is a provider of managed network services, information security solutions, and application development and integration services to U.S. defense intelligence and civilian
federal government agencies. The Company's comprehensive information technology services and solutions allow federal government clients to outsource some or all of the activities related to the
design, implementation, integration, management and security of their computer networks and systems. During each of the periods presented, substantially all of the Company's consolidated revenues were
derived from contracts with the U.S. government, directly as a prime contractor or as a subcontractor.

2.     Summary of Significant Accounting Policies and Practices

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of DigitalNet Government Solutions, LLC and its wholly owned subsidiary. All intercompany
accounts and transactions have been eliminated upon consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

The Company recognizes revenue under its government contracts when a contract has been executed, the contract price is fixed and determinable, delivery of
services or products has occurred, and collection of the contract price is considered probable and can be reasonably estimated. Revenue is earned under time-and-materials,
fixed-price and cost-plus contracts. Deferred revenues represent payments received for goods and services not yet shipped or rendered to the customer. Contract costs are expensed as
incurred.

Revenues
on time-and-materials contracts are recognized based on direct labor hours expended at contract billing rates, other billable direct costs and applicable
indirect costs.

Fixed-price
contracts may include either a product delivery or specific service performance throughout a period. Revenue on fixed-price contracts that provide for the Company to render
services throughout a period are recognized as earned according to contract terms as the service is provided. The majority of revenues on the Company's fixed-price service contracts relate to managed
network service contracts in which customers receive a bundle of services often including management services,

F-40

---

the
use of the Company's hardware and software, network administration services and help desk support. For these contracts in which services are bundled and sold, the delivery of an individual service
by itself does not represent the culmination of the earnings process. Customers pay the Company and the Company recognizes revenue based on fixed monthly prices often determined by the number of
customer users. In other instances, the Company provides an individual customer with a number of different services that are generally documented through separately negotiated task orders that detail
the services to be provided and the Company's compensation for these services. Services rendered under each task order represent a discrete earnings process and are not dependent on any other service
or product sold by the Company. The Company sells its XTS, TEMPEST and Zone products to customers. Once delivered, these products do not require design, integration or implementation support for the
Company's customers to receive immediate product functionality, accordingly. Revenues and associated contract costs are recognized upon product delivery and customer acceptance if required by
contract.

Under
cost-plus contracts, the Company is reimbursed for allowable costs and paid a fee, which may be fixed or performance-based. Revenues on cost-plus contracts
are recognized as costs are incurred plus an estimate of applicable fees earned. The Company considers fixed fees under cost-plus contracts to be earned in proportion to the allowable
costs incurred in performance of the contract, which generally corresponds to the timing of contractual billings. For cost-plus contracts that include performance based or fee incentives,
the Company recognizes the portion of the expected fee to be awarded by the customer at the time such fee can be reasonably estimated, based on factors such as the Company's prior award experience and
communications with the customer regarding performance.

The
Company's contracts with agencies of the government are subject to periodic funding by the respective contracting agency. Funding for a contract may be provided in full at inception
of the contract or annually throughout the contract consistent with the federal government's fiscal year. In evaluating the probability of funding for purposes of recognizing revenue and assessing
collection of the contract price, the Company considers its previous experiences with its customers, communications with its customers regarding funding status, and the Company's knowledge of
available funding for the contract or program. If funding is not considered probable, revenue recognition is deferred until realization is probable.

Contract
revenue recognition inherently involves estimation. From time to time, facts arise that require revisions to estimated total costs or expected revenues. The cumulative impact of
any revisions to estimates and the full impact of anticipated losses on any type of contract are recognized in the period in which they become known.

The
allowability of certain costs under government contracts is subject to audit by the government. Certain indirect costs are charged to contracts using provisional or estimated
indirect rates, which are subject to later revisions based on governmental audits of those costs. Management is of the opinion that costs subsequently disallowed, if any, would not be significant.

Significant Customers

Revenues generated from contracts with the federal government or prime contractors doing business with the federal government accounted for substantially all of
the Company's revenues for the years ending December 31, 2000 and 2001, and for the period from January 1, 2002 through

F-41

---

November 25,
2002. Revenues from contracts representing greater than 10 percent of revenues were as follows:

|                                                                                                    |  | Percent of Revenues |  
|--------------------------------------------------------------------------------------------------- |  | ------------------- | -
|
|
|National Aeronautics and Space Administration (NASA) Consolidated Space Operations Contracts (CSOC) |  | 19                  | %
|Immigration Naturalization Services (INS) Facilities Operation Support (FOS)                        |  | 15                  |  

The
term of the Company's INS/FOS contract expired on November 30, 2002 and was not renewed by the customer. The Company's NASA CSOC contract base period expires on
December 31, 2003 and the Company has been notified by its customer, the prime contractor, that the contract will not be renewed because NASA has decided not to renew the prime contractor's
contract. See Note 8 for a further discussion of this contract.

Credit Risk

The Company's assets that are exposed to credit risk consist primarily of cash and cash equivalents and accounts receivable. Accounts receivable consist primarily
of billed and unbilled amounts, including indirect cost rate variances, due from various agencies of the federal government or prime contractors doing business with the federal government. The Company
historically has not experienced significant losses related to accounts receivable and therefore believes that credit risk related to accounts receivable is minimal. The Company maintains cash
balances at financial institutions that may at times exceed federally insured limits. The Company maintains this cash at high credit quality institutions and, as a result, believes credit risk related
to its cash is minimal.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents.

Inventory

Inventories consist of computer equipment and peripherals and are stated at the lower of cost or market where cost is determined primarily on the average costing
method. Allowances for obsolete or slow-moving inventory are based on the Company's overall obsolescence experience and its assessment of future inventory requirements.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization are computed using the
straight-line method over the estimated useful lives of the related assets, as follows:

Project assets

3-5 years or contract term, if shorterMachinery and equipment

3-10 yearsLeasehold improvements

6 years or lease term, if shorter


F-42

---

Intangible Assets

Amortization of acquired intangible assets is recorded on a straight-line basis over their expected useful lives. The Company evaluates the useful
lives assigned to intangible assets on a regular basis. Amortization periods (prior to January 1, 2002) are as follows:

Software license

5.5 yearsAssembled workforce

10 yearsGoodwill

15-25 years


Impairment of Long-Lived Assets

During 2000 and 2001 long-lived assets, including property and equipment, goodwill and identifiable intangible assets to be held and used, were
reviewed for impairment whenever events or changes in circumstances indicated that the carrying amount should be addressed pursuant to Statement of Financial Accounting Standards (SFAS)
No. 121,Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. Commencing
January 1, 2002, the Company adopted the provisions of SFAS No. 144,Accounting for the Impairment or Disposal of Long-Lived
Assetsto assess impairment of its long-lived assets excluding goodwill as more fully described in "Impact of Recently Issued Accounting Standards." Beginning in
the first quarter of fiscal year 2002, the Company's goodwill is subject to the impairment test requirements of SFAS No. 142. The impairment evaluation criteria of SFAS No. 144 are
generally consistent with SFAS No. 121. Pursuant to these accounting standards, impairment is determined by comparing the carrying value of these long-lived assets to management's
estimate of the future undiscounted cash flows expected to result from the use of the assets and eventual disposition. In the event impairment exists, a loss is recognized based on the amount by which
the carrying value exceeds the fair value of the asset, which is generally determined by using quoted market prices or valuation techniques such as the discounted present value of expected future cash
flows, appraisals, or other pricing models as appropriate. The Company believes that no impairment existed as of December 31, 2001 and November 25, 2002. In the event that there are
changes in the planned use of the Company's long-term assets or its expected future undiscounted cash flows are reduced significantly, the Company's assessment of its ability to recover
the carrying value of these assets under SFAS No. 144 would change.

Fair Value of Financial Instruments

The Company's financial instruments consist primarily of cash and cash equivalents, accounts receivable, and accounts payable. In management's opinion, the
carrying amounts of these financial instruments approximate their fair values at December 31, 2001 and November 25, 2002.

Income Taxes

The Company follows the provisions of SFAS No. 109,Accounting for Income Taxes,for financial reporting
purposes. The Company is taxed as a single- member LLC and, therefore, for all periods presented, the Company was included in the consolidated federal return of Getronics Parent. The accompanying
financial statements provide for income taxes as if the Company had been taxed as a separate C corporation. Income taxes are accounted for using an asset and liability approach that requires the
recognition of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the Company's financial
statements or tax returns. The measurement of current and deferred tax liabilities and assets are based on provisions of the enacted tax law; the effects of future changes in tax laws or rates are not
anticipated. The measurement of net deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized.

F-43

---

Receivable from Getronics Parent, Net

Prior to its acquisition by DigitalNet, the Company transferred excess cash to Getronics Parent throughout the year. In addition, the Company incurred expenses
for services provided by Getronics Parent on a fee for service basis. These services included payroll processing, insurance, legal support, tax and other miscellaneous services. The net cash
transferred and amounts due for services is reflected as Receivables from Getronics Parent, net in the accompanying consolidated balance sheets (see Note 13 for further discussion of related
party transactions).

Impact of Recently Issued Accounting Standards

In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 141,Business
Combinationsand SFAS No. 142,Goodwill and Other Intangible Assets. SFAS No. 141 requires business combinations
initiated after June 30, 2001, to be accounted for using the purchase method of accounting, and broadens the criteria for recording intangible assets separate from goodwill. Recorded goodwill
and intangible assets were evaluated against these new criteria with the result that certain intangible assets were reclassified into goodwill.

SFAS
No. 142 requires the use of the non-amortization approach to account for purchased goodwill and certain related intangibles. Under the
non-amortization approach, goodwill and certain related intangibles are not amortized into results of operations, but instead are reviewed for impairment at least annually and written down
and charged to operations only in the periods in which the recorded value of goodwill and certain related intangibles exceeds its fair value.

The
Company adopted the provision of SFAS No. 142 beginning January 1, 2002. The adoption of these accounting standards has resulted in a reclassification of the previously
identified intangible asset, assembled workforce, into goodwill and the cessation of goodwill amortization commencing on January 1, 2002. The carrying values of assembled workforce and goodwill
were $391,000 and $69.7 million, respectively, as of December 31, 2001. Amortization related to goodwill and assembled workforce was approximately $5.4 million and
$4.2 million for the years ended December 31, 2000 and 2001, respectively.

The
Company completed the required impairment tests of goodwill that existed on January 1, 2002 and concluded that no impairment existed.

A
reconciliation of previously reported net income with the amounts adjusted for the exclusion of goodwill and assembled workforce amortization net of related income tax effect follows
(dollars in thousands):

Year ended December 31,2000

2001Reported net income

$
1,858

$
18,275Goodwill and assembled workforce amortization


5,378


4,239Adjusted net income

$
7,236

$
22,514


In
June 2001, FASB issued SFAS No. 143,Accounting for Asset Retirement Obligations. SFAS No. 143 addresses financial
accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This statement is effective for financial
statements issued for fiscal years beginning after June 15, 2002. The Company will be required to implement SFAS No. 143 on January 1, 2003. The Company does not believe that
adoption of this standard will have a material impact on its future earnings or results of operations or financial position.

F-44

---

In
April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements Nos. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections. Among
other things, SFAS No. 145 rescinds both SFAS No. 4, Reporting Gains and Losses from Extinguishment of Debt, and the amendment to SFAS No. 4, SFAS No. 64, Extinguishment of
Debt Made to Satisfy Sinking Fund Requirements. Through this rescission, SFAS No. 145 eliminates the requirement that gains and losses from the extinguishment of debt be aggregated and, if
material, classified as an extraordinary item, net of the related income tax effect. Generally, SFAS No. 145 is effective for transactions occurring after May 15, 2002. The Company does not
believe SFAS No. 145 will have a material impact on its results of operation or financial position.

In
June 2002, the FASB issued SFAS No. 146, Accounting for Costs of Exit or Disposal Activities. SFAS No. 146 nullifies EITF Issue No. 94-3,
Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). This statement requires that an exit or
disposal activity related cost be recognized when the liability is incurred instead of when an entity commits to an exit plan. The provisions of SFAS No. 146 are effective for financial
transactions initiated after December 31, 2002. The Company does not believe SFAS No. 146 will have a material impact on its results of operation or financial position.

3.     Purchase of the Company by DigitalNet Holdings, Inc.

On November 26, 2002, DigitalNet completed its acquisition of the Company from GetronicsWang Co. LLC for approximately $183.4 million in cash and
33,500 shares of DigitalNet Class B Preferred Stock. The cash consideration is subject to adjustment based upon a final determination of net working capital, depreciable assets and accrued
contract losses, as defined, as of the date of acquisition. Immediately after the acquisition, Getronics Government Solutions, L.L.C. changed its name to DigitalNet Government Solutions, LLC.

4.     Accounts Receivable

Accounts receivable consists of the following (dollars in thousands):

December 31,
2001

November 25,
2002Billed and currently billable accounts receivable

$
71,855

$
74,648Unbilled accounts receivable


7,199


6,004Allowance for doubtful accounts


(3,452
)

(3,454
)Accounts receivable, net

$
75,602

$
77,198


The
amounts included in currently billable accounts receivable represent amounts which were billed in the subsequent reporting period. They are billings for services rendered prior to
period-end that were billed once necessary billing data had been collected and an invoice produced. Unbilled accounts receivable represent amounts which are not yet billable based upon
contract terms. At November 25, 2002, the unbilled accounts receivable relate primarily to accounts due under contracts that had not yet received formal government funding at
year-end due to delayed appropriations bills. The Company is precluded from billing for its services until the government has formally funded the contract. Substantially all of the
unbilled accounts receivable are expected to be billed and collected within 90 days of the balance sheet date.

F-45

---

5.     Property and Equipment

Property and equipment consists of the following (dollars in thousands):

December 31,
2001

November 25,
2002Project assets

$
16,530

$
28,999Machinery and equipment


10,902


11,057Leasehold improvements


6,143


1,568Accumulated depreciation


(20,520
)

(22,904
)Property and equipment, net

$
13,055

$
18,720


6.     Intangible Assets

Intangible assets consist of the following (dollars in thousands):

December 31,
2001

November 25,
2002Goodwill

$
88,883

$
89,719Software license and other


7,076


7,076Assembled workforce


836


Accumulated amortization


(26,596
)

(26,596
)Intangible assets, net

$
70,199

$
70,199


The
Company recognized approximately $5,378 and $4,239 of amortization during the years ended December 31, 2000 and 2001. Because intangibles other than goodwill were fully
amortized prior to 2002, and the Company ceased amortization of goodwill as of January 1, 2002 in accordance with SFAS No. 142, the Company recognized no amortization expense during the
period ended November 25, 2002.

7.     Accrued Expenses

Accrued expenses consist of the following (dollars in thousands):

December 31, 2001

November 25, 2002Accrued compensation and benefits

$
9,329

$
16,467Accrued contract costs


14,742


6,716Other


7,708


5,718Accrued expenses

$
31,779

$
28,901


8.     Accrued Contract Losses

In May 1999, the Company entered into a contract to design, install and operate a wide area network for NASA (the CSOC Contract). The contract had a base
term extending through December 31, 2003 with renewal options. During 2000, the Company determined that it would incur a loss on this contract. Accordingly, the accompanying financial
statements reflect the accrual of this estimated loss in 2000 based on management's estimate of contract revenues and direct contract costs for the remaining term of the contract.

F-46

---

Accrued
contract losses consist of the following (dollars in thousands):

December 31, 2001

November 25, 2002NASA CSOC

$
10,252

$
5,663All other contracts


1,210


1,002Accrued contract losses

$
11,462

$
6,665


9.     Income Taxes

Deferred income tax assets/liabilities consist of the following (dollars in thousands):

December 31, 2001

November 25, 2002Allowance for bad debts

$
1,332

$
1,333Contract reserves


4,424


2,573Inventory reserves


817


832Employee-related accruals


2,968


3,805Warranty reserves and other


75


75Current deferred tax asset

$
9,616

$
8,618Intangible assets

$
3,939

$
3,452Depreciable assets


2,851


2,433Pension and postretirement benefits


(1,027
)

Acquisition lease reserve and other


455


270State income tax accrual


656


1,478Noncurrent deferred tax asset

$
6,874

$
7,633


The
provision for income taxes consists of the following (dollars in thousands):

Year ended
December 31,Period from
January 1, 2002
through November 25,
20022000

2001Current Federal

$
8,983

$
9,503

$
14,482Current State


855


986


1,5249,838


10,489


16,006Deferred Federal


(4,735
)

3,680


218Deferred State


(486
)

378


21(5,221
)

4,058


239$
4,617

$
14,547

$
16,245


F-47

---

The
following table presents the principal reasons for the difference between the Company's effective tax rate and the United States federal statutory income tax rate (dollars in
thousands):

|                                                               |  | Year ended December 31, |       | Period from
January 1, 2002
through
November 25,
2002 |  
|-------------------------------------------------------------- |  | ----------------------- | ----- | ----------------------------------------------------- | -
|
|Income taxes at U.S. federal statutory income tax rate         |  | $                       | 2,267 |                                                       | $
|State and local income taxes, net of federal income tax effect |  |                         | 233   |                                                       |  
|Amortization of intangibles, not deductible                    |  |                         | 2,071 |                                                       |  
|Other                                                          |  |                         | 46    |                                                       |  
|                                                               |  |                         |       |                                                       |  
|                                                               |  | $                       | 4,617 |                                                       | $
|                                                               |  |                         |       |                                                       |  

10.   Postretirement Benefits

Defined Contribution Benefit Plans

Prior to its acquisition by DigitalNet on November 26, 2002, the Company participated in the Getronics Parent's defined contribution benefit plan, which
covered substantially all employees of the Company. Contributions were generally based on fixed amounts of eligible compensation. The Company expensed $3.4 million, $3.3 million, and
$3.3 million for the years ended December 31, 2000 and 2001, and for the period from January 1, 2002 through November 25, 2002, respectively, related to the plan.
Immediately upon the acquisition by DigitalNet, the Company's participation in the plan ended.

Pension and Other Postretirement Benefit Plans

Prior to its acquisition by DigitalNet on November 26, 2002, the Company had a frozen defined benefit pension plan. As a result, no increase in
compensation was factored into participants' benefits subsequent to the date that the plan was frozen. The Company also had a post-retirement medical and life insurance plan for certain of
its employees as a result of prior acquisitions. Immediately prior to its acquisition by DigitalNet, the Company transferred all liabilities and related assets associated with the frozen defined
benefit pension plan and post-retirement medical and life insurance plans to Getronics Parent. This transfer is shown as pension plan liabilities transferred to Getronics Parent in the
accompanying statement of member's equity.

The
benefit obligation, plan assets and funded status at December 31, 2001 consisted of the following (dollars in thousands):

|                                                 |                                | Pension |         | Other Post-
Retirement |  
|------------------------------------------------ | ------------------------------ | ------- | ------- | ---------------------- | -
|Benefit obligation                               |                                | $       | (71,980 | )                      | $
|Plan assets                                      |                                |         | 55,105  |                        |  
|                                                 |                                |         |         |                        |  
|Funded status                                    |                                |         | (16,875 | )                      |  
|Unrecognized net actuarial loss                  |                                |         | 21,466  |                        |  
|Employer contributions (3 months)                |                                |         |        |                        |  
|                                                 |                                |         |         |                        |  
|Prepaid (accrued) benefit cost                   |                                | $       | 4,591   |                        | $
|                                                 |                                |         |         |                        |  
|Weighted-average assumption as of end of period: |                                |         |         |                        |  
|                                                 | Discount rate                  |         |         | 7.25                   | %
|                                                 | Expected return on plan assets |         |         | 9.00                   | %

F-48

---

Net
pension and other post-retirement plan cost (benefit) consisted of the following (dollars in thousands):

|                            |  | Year ended
December 31, 2000 |        | Year ended
December 31, 2001 |   | Period from
January 1, 2002
through
November 25, 2002
|--------------------------- |  | ---------------------------- | ------ | ---------------------------- | - | -----------------------------------------------------
|
|Interest cost               |  | $                            | 5,023  |                              | $ | 190                                                  
|Expected return on assets   |  |                              | (6,068 | )                            |   |                                                     
|Recognized actuarial loss   |  |                              |       |                              |   |                                                     
|                            |  |                              |        |                              |   |                                                      
|Net periodic cost (benefit) |  | $                            | (1,045 | )                            | $ | 190                                                  
|                            |  |                              |        |                              |   |                                                      

As
of December 31, 2001 and November 25, 2002 the Company recorded a minimum pension liability of $21.9 million and $36.5 million, respectively, related to
the accumulated benefit obligation in excess of the fair value of plan assets with related charges, net of deferred taxes, recorded as a component of "accumulated other comprehensive income."

11.   Commitments and Contingencies

Leases

As of December 31, 2001, the Company has noncancelable operating leases, primarily for real estate, that expire over the next ten years. Rental expense and
sublease income were $5.3 million and $2.3 million, respectively, for the year ended December 31, 2000, $7.4 million and $2.1 million, respectively, for the year
ended December 31, 2001 and $7.1 million and $339,000, respectively, for the period from January 1, 2002 through November 25, 2002.

Future
minimum lease commitments on non-cancelable operating leases and subleases are as follows (dollars in thousands):

|                                                          |  | Year ended December 31, |       | 
|--------------------------------------------------------- |  | ----------------------- | ----- | 
|
|Future minimum lease commitments on non-cancelable leases |  | $                       | 5,244 | 
|Future minimum noncancelable sublease income              |  |                         | 380   | 

On
July 7, 2000, the Company entered into a lease for its new headquarters. The term of the lease is 10 years commencing November 1, 2001. Concurrently, the Company
established an irrevocable letter of credit in the amount of $2.0 million for the benefit of the landlord in lieu of a cash deposit.

Audit Review

Substantially all payments to the Company on government cost reimbursable contracts are provisional payments which are subject to adjustment upon audit by the
Defense Contract Audit Agency (DCAA). Getronics Government Solutions, L.L.C. incurred cost submissions have been completed through December 31, 2001 and have been audited through
December 31, 2000. There are no outstanding incurred cost submissions or audits for any previously acquired entities (I-NET, Inc., J.G. Van Dyke & Associates). The
2001 incurred cost audit is not expected to result in a material adverse effect on the Company's financial position or results of operations.

F-49

---

Litigation and Claims

The Company is periodically involved in disputes arising from normal business activities. In the opinion of management, resolution of these matters will not have
a material adverse effect upon the financial position or future operating results of the Company, and adequate provision for any potential losses has been made in the accompanying consolidated
financial statements.

On
February 2, 2002, the Company filed an action against Lockheed Martin Space Operations Company (Lockheed Martin) in connection with the NASA CSOC contract. The Company's
complaint alleged multiple counts of breach of contract and other claims related to its subcontract with Lockheed Martin
under the NASA CSOC program. In January 2003, the Company entered into a settlement agreement with Lockheed Martin that sets forth the amounts that Lockheed Martin has agreed to pay the Company
for services previously performed and for future services under the NASA CSOC contract. The settlement agreement is subject to approval by NASA.

12.   Other Balance Sheet Information

The Company provides services under long-term contractual commitments whereby certain of its equipment is held for use by others. The cost of these
assets is recovered through contractual billings. The net book value of assets held for use by others amounted to approximately $9.3 million and $15.6 million at December 31, 2001
and November 25, 2002, respectively.

13.   Related-Party Transactions

As of December 31, 2001 and November 25, 2002, Receivables from Getronics Parent, net, amounting to $41.1 million and $55.8 million,
respectively, have been reflected as a reduction in member's equity. During the year ended December 31, 2001 and the period from January 1, 2002 through November 25, 2002, the
following transactions occurred between the Company and Getronics Parent (dollars in thousands):

|                                                                   |  | Year ended
December 31,
2001 |          | Period from
January 1, 2002
through
November 25,
2002 |  
|------------------------------------------------------------------ |  | ---------------------------- | -------- | ----------------------------------------------------- | -
|Receivable from the Parent, net  beginning of year                |  | $                            | 22,266   |                                                       | $
|Cash transferred to the Parent, net                                |  |                              | 216,100  |                                                       |  
|Payroll and fringe benefits funded by Parent                       |  |                              | (182,800 | )                                                     |  
|Services provided by the Parent                                    |  |                              | (3,100   | )                                                     |  
|Release of German tax liability  transferred to Parent            |  |                              | (1,186   | )                                                     |  
|Transfer of net receivables from Parent                            |  |                              | (659     | )                                                     |  
|Current income tax provision                                       |  |                              | (10,489  | )                                                     |  
|Intercompany interest income from Parent (based on USD-LIBOR rate) |  |                              | 4,750    |                                                       |  
|Other                                                              |  |                              | (3,814   | )                                                     |  
|                                                                   |  |                              |          |                                                       |  
|                                                                   |  | $                            | 41,068   |                                                       | $
|                                                                   |  |                              |          |                                                       |  

F-50

---

14.   Line of Credit

On May 19, 2000 the Company entered into a credit facility with a financial institution that provided for a maximum borrowing capacity of
$15 million until maturity on April 30, 2003. At December 31, 2001 and 2000, the Company had utilized approximately $2 million to support a letter of credit arrangement.
Borrowings under the facility bore interest at the London Interbank Offered Rate, plus the applicable margin (as defined in the loan agreement). The facility contained financial covenants, including
but not limited to tangible net worth coverage and required maintenance of specific billed accounts receivable levels and funded debt ratio percentage levels as defined in the loan agreement. The
Company was not required to maintain compensating balances, however, it was required to pay a fee of 0.125% plus an applicable margin on the unused portion of the total facility. The Company did not
have any borrowings on the credit facility as of December 31, 2001 or November 25, 2002. Concurrent with the Company's acquisition by DigitalNet, the $15 million credit facility
was terminated.

F-51

---



REPORT OF INDEPENDENT AUDITORS

We audited the consolidated balance sheets of DigitalNet Holdings, Inc. (the Company) as of December 31, 2002 and 2003 and the related consolidated
statements of operations, stockholders' equity, and cash flows for the period from September 7, 2001 (inception) to December 31, 2001 and the years ended December 31, 2002 and
2003, and have issued our report thereon dated February 3, 2004 (included elsewhere in this Form 10-K). Our audits also included the financial statement schedule listed in
Item 16(a)(2) of this Form 10-K. This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits.

In
our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.



McLean,
Virginia
February 3, 2004

F-52

---



Schedule IIValuation and Qualifying Accounts and Revenues  for the years ended December 31, 2002 and 2003

DIGITALNET HOLDINGS, INC.  VALUATION AND QUALIFYING ACCOUNTS  (dollars in thousands)

|Description                          |                                  | Balance at
beginning
of period    |  | Charged to
costs and
expenses |       | Reserves
related to
purchased
entities |     |  |       | Deductions |     | Balance
at end of
period
|------------------------------------ | -------------------------------- | --------------------------------- |  | ----------------------------- | ----- | -------------------------------------- | --- |  | ----- | ---------- | --- | ------------------------
|For the year ended December 31, 2002 |                                  |                                   |  |                               |       |                                        |     |  |       |            |     |                         
|                                     | Deducted from asset accounts:    |                                   |  |                               |       |                                        |     |  |       |            |     |                         
|                                     |                                  | Allowance for doubtful accounts   |  | $                             |      |                                        |    |  | 3,454 |            | (A) |                         
|                                     | Included in current liabilities: |                                   |  |                               |       |                                        |     |  |       |            |     |                         
|                                     |                                  | Reserves related to restructuring |  | $                             |      |                                        | 446 |  |      |            |     |                         
|For the year ended December 31, 2003 |                                  |                                   |  |                               |       |                                        |     |  |       |            |     |                         
|                                     | Deducted from asset accounts:    |                                   |  |                               |       |                                        |     |  |       |            |     |                         
|                                     |                                  | Allowance for doubtful accounts   |  | $                             | 3,454 |                                        |    |  |      |            |     |                         
|                                     | Included in current liabilities: |                                   |  |                               |       |                                        |     |  |       |            |     |                         
|                                     |                                  | Reserves related to restructuring |  | $                             | 408   |                                        |    |  |      |            |     |                         

---

F-53

---

Exhibit Index

|Exhibit |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1     |  | Certificate of Incorporation of the Company, as amended and restated (Incorporated by reference to Exhibit 3.1 to the Registrant's Registration Statement on Form S-4, File No. 333-10709502, filed July 16, 2003)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|3.2     |  | Bylaws of the Company, as amended and restated (Incorporated by reference to Exhibit 3.2 to the Registrant's Registration Statement on Form S-4, File No. 333-10709502, filed July 16, 2003)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|4.1     |  | Form of Certificate of Common Stock (Incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed August 8, 2003)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|4.2     |  | Form of Common Stock Purchase Warrant (Incorporated by reference to Exhibit 4.2 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed August 8, 2003)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|4.3     |  | Form of 9% Senior Notes Due 2010 (Incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement on Form S-4, File No. 333-10709502, filed July 16, 2003)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|4.4     |  | Amended and Restated Stockholders Agreement, made as of November 26, 2002, by and among DigitalNet Holdings, Inc., GTCR Fund VII, L.P., GTCR Co-Invest, L.P., the Pearlstein Family, LLC, the Ian Z. Pearlstein 2001 Trust, the Ivanna V. Pearlstein 2001
Trust, the J. Sunny Bajaj Trust, the Rueben Bajaj Trust, the Bajaj Family Limited Partnership, Ken S. Bajaj, Jack Pearlstein, GetronicsWang Co. LLC, and Banc of America Mezzanine Capital LLC as amended on March 28, 2003, and Stockholders Agreement
Joinder, dated March 26, 2003, by and among DigitalNet Holdings, Inc., GTCR Fund VII, L.P., GTCR Co-Invest, L.P., and each of the other stockholders of DigitalNet Holdings, Inc. whose names appear on the Schedule of Stockholders or on the signature
pages or joinders to the Stockholders Agreement, as such agreement may be amended from time to time (Incorporated by reference to Exhibit 4.3 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed August 8, 2003)
|4.5     |  | Amended and Restated Registration Agreement, made as of November 26, 2002, by and among DigitalNet Holdings, Inc., GTCR Fund VII, L.P., GTCR Co-Invest, L.P., the Pearlstein Family, LLC, the Ian Z. Pearlstein 2001 Trust, the Ivanna V. Pearlstein 2001
Trust, the J. Sunny Bajaj Trust, the Rueben Bajaj Trust and the Bajaj Family Limited Partnership, Ken S. Bajaj, Jack Pearlstein, GetronicsWang Co. LLC, and Banc of America Mezzanine Capital LLC, and Registration Agreement Joinder, dated March 26,
2003, by and among DigitalNet Holdings, Inc., GTCR Fund VII, L.P., GTCR Co-Invest, L.P., and each of the other stockholders of DigitalNet Holdings, Inc. whose names appear on the Schedule of Holders or on the signature pages or joinders to the
Registration Agreement, as such agreement may be amended from time to time (Incorporated by reference to Exhibit 4.4 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed August 8, 2003)                               
|4.6     |  | Indenture, dated as of July 3, 2003, among DigitalNet, Inc., DigitalNet Holdings, Inc., DigitalNet Government Solutions, LLC and Wells Fargo Bank Minnesota, National Association, as trustee(Incorporated by reference to Exhibit 4.5 to the Registrant's
Registration Statement on Form S-1, File No. 333-107764, filed August 8, 2003)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.7     |  | Registration Rights Agreement, made as of July 3, 2003, by and among DigitalNet, Inc., DigitalNet Holdings, Inc., DigitalNet Government Solutions, LLC and Banc of America Securities LLC, Jefferies/Quarterdeck, LLC and Jefferies & Company, Inc.
(Incorporated by reference to Exhibit 4.6 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed August 8, 2003)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

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|10.1  |  | Purchase Agreement, made as of September 7,2001, by and among DigitalNet Holdings, Inc., GTCR Fund VII, L.P., GTCR Co-Invest, L.P., the J. Sunny Bajaj Trust, the Rueben Bajaj Trust and the Bajaj Family Limited Partnership and the Pearlstein Family,
LLC as supplemented on April 25, 2002, October 8,2002, November 26, 2002, and March 28, 2003 (Incorporated by reference to Exhibit 10.1 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed August 8, 2003)
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.2  |  | Senior Management Agreement, made as of September 7, 2001, by and among DigitalNet Holdings, Inc., DigitalNet, Inc., and Ken S. Bajaj as supplemented on April 25, 2002, October 8, 2002, November 26, 2002, January 24, 2003, and March 26, 2003
(Incorporated by reference to Exhibit 10.2 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed August 8, 2003)                                                                                                    
|10.3  |  | Revolving Promissory Note, dated September 7, 2001, in the principal amount of $183,596 made by Ken S. Bajaj payable to DigitalNet Holdings, Inc. (Incorporated by reference to Exhibit 10.3 to the Registrant's Registration Statement on Form S-1, File
No. 333-107764, filed August 8, 2003)                                                                                                                                                                                                    
|10.4  |  | Executive Stock Pledge Agreement, made as of September 7,2001, by and between Ken S. Bajaj and DigitalNet Holdings, Inc. (Incorporated by reference to Exhibit 10.4 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed
August 8, 2003)                                                                                                                                                                                                                             
|10.5  |  | Carry Promissory Note, dated September 7, 2001, in the principal amount of $170,347 made by Ken S. Bajaj payable to DigitalNet Holdings, Inc. (Incorporated by reference to Exhibit 10.5 to the Registrant's Registration Statement on Form S-1, File No.
333-107764, filed August 8, 2003)                                                                                                                                                                                                        
|10.6  |  | Free Transferability Agreement, dated as of September 25, 2002, by and between DigitalNet Holdings, Inc., and Ken S. Bajaj (Incorporated by reference to Exhibit 10.6 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed
August 8, 2003)                                                                                                                                                                                                                           
|10.7  |  | Senior Management Agreement, made as of September 7, 2001, by and among DigitalNet Holdings, Inc., DigitalNet., Inc., and Jack Pearlstein as supplemented on April 25, 2002, October 8, 2002, November 26, 2002, January 24, 2003, and March 28, 2003
(Incorporated by reference to Exhibit 10.7 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed August 8, 2003)                                                                                                
|10.8  |  | Revolving Promissory Note, dated September 7, 2001, in the principal amount of $45,899 made by Jack Pearlstein payable to DigitalNet Holdings, Inc. (Incorporated by reference to Exhibit 10.8 to the Registrant's Registration Statement on Form S-1,
File No. 333-107764, filed August 8, 2003)                                                                                                                                                                                                  
|10.9  |  | Executive Stock Pledge Agreement, made as of September 7,2001, by and between Jack Pearlstein and DigitalNet Holdings, Inc. (Incorporated by reference to Exhibit 10.9 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed
August 8, 2003)                                                                                                                                                                                                                          
|10.10 |  | Carry Promissory Note, dated September 7, 2001, in the principal amount of $42,587 made by Jack Pearlstein payable to DigitalNet Holdings, Inc. (Incorporated by reference to Exhibit 10.10 to the Registrant's Registration Statement on Form S-1, File
No. 333-107764, filed August 8, 2003)                                                                                                                                                                                                     
|10.11 |  | Free Transferability Agreement, dated as of September 25, 2002, by and between DigitalNet Holdings, Inc., and Jack Pearlstein (Incorporated by reference to Exhibit 10.11 to the Registrant's Registration Statement on Form S-1, File No. 333-107764,
filed August 8, 2003)                                                                                                                                                                                                                       
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|10.12 |  | Amended and Restated Senior Management Agreement, made as of January 23, 2003, among DigitalNet Holdings, Inc., DigitalNet, Inc., DigitalNet Government Solutions, LLC, and Steven Hanau as supplemented on March 28, 2003 (Incorporated by reference to
Exhibit 10.12 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed August 8, 2003)
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|10.13 |  | Promissory Note, dated January 10, 2002, in the principal amount of $34,650 made by Steven Hanau payable to DigitalNet Holdings, Inc. (Incorporated by reference to Exhibit 10.13 to the Registrant's Registration Statement on Form S-1, File No.
333-107764, filed August 8, 2003)                                                                                     
|10.14 |  | Executive Stock Pledge Agreement, made as of January 10, 2002, between Steven Hanau and DigitalNet Holdings, Inc. (Incorporated by reference to Exhibit 10.14 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed August 8,
2003)                                                                                                         
|10.15 |  | Stock Purchase Agreement, made as of January 10, 2002, between DigitalNet Holdings, Inc., Jack Pearlstein and Ken S. Bajaj (Incorporated by reference to Exhibit 10.15 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed
August 8, 2003)                                                                                                
|10.16 |  | Stock Purchase Agreement, made as of February 15, 2002, between DigitalNet Holdings, Inc., Jack Pearlstein and Ken S. Bajaj (Incorporated by reference to Exhibit 10.16 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed
August 8, 2003)                                                                                               
|10.17 |  | Stock Purchase Agreement, made as of September 20, 2002, between DigitalNet Holdings, Inc., Jack Pearlstein and Ken S. Bajaj (Incorporated by reference to Exhibit 10.17 to the Registrant's Registration Statement on Form S-1, File No. 333-107764,
filed August 8, 2003)                                                                                              
|10.18 |  | Purchase Agreement, dated September 27, 2002, by and among GetronicsWang Co. LLC, Getronics Government Solutions, L.L.C., DigitalNet Holdings, Inc. and DigitalNet, Inc. (Incorporated by reference to Exhibit 10.18 to the Registrant's Registration
Statement on Form S-1, File No. 333-107764, filed August 8, 2003)                                                  
|10.19 |  | Escrow Agreement, dated as of November 26, 2002, by and among GetronicsWang Co. LLC, DigitalNet, Inc., and State Street Bank and Trust Co. (Incorporated by reference to Exhibit 10.19 to the Registrant's Registration Statement on Form S-1, File No.
333-107764, filed August 8, 2003)                                                                                
|10.20 |  | Master Agreement for Transitional Services, dated November 26, 2002, by and between GetronicsWang Co. LLC and Getronics Government Solutions, L.L.C. (Incorporated by reference to Exhibit 10.20 to the Registrant's Registration Statement on Form S-1,
File No. 333-107764, filed August 8, 2003)                                                                      
|10.21 |  | Amended and Restated Credit Agreement, dated as of July 3, 2003, among DigitalNet, Inc., DigitalNet Holdings, Inc., Bank of America, N.A., Madison Capital Funding LLC and the other lenders party thereto (Incorporated by reference to Exhibit 10.21 to
the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed August 8, 2003)                
|10.22 |  | DigitalNet Holdings, Inc. Amended and Restated 2003 Stock Incentive Plan (Incorporated by reference to Exhibit 10.22 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed August 8, 2003)                                                                                                                                                  
|10.23 |  | Form of Getronics Government Solutions, L.L.C. Special Severance Plan (Incorporated by reference to Exhibit 10.23 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed August 8, 2003)                                                                                                                                                     
|10.24 |  | Getronics Government Solutions, L.L.C. 2002 Short Term Incentive Program Plan Document for Executive and Staff Management, dated January 1, 2002 (Incorporated by reference to Exhibit 10.24 to the Registrant's Registration Statement on Form S-1, File
No. 333-107764, filed August 8, 2003)                                                                          
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|10.25 |  | Agreement of Lease made September 30, 1991 between The KMS Group, Inc. and J.G. Van Dyke & Associates, Inc. (as amended) (Incorporated by reference to Exhibit 10.25 to the Registrant's Registration Statement on Form S-1, File No. 333-107764,
filed August 8, 2003)                                                                                                                  
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|10.26 |  | Office Space Lease dated as of July 7, 2000 between JACO Horse Pen II LLC and Wang Government Services, Inc. (as amended) (Incorporated by reference to Exhibit 10.26 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed
August 8, 2003)                                                                                                                 
|10.27 |  | Lease dated as of July 1, 1996 between RJR Ventures Limited Partnership and Wang Laboratories, Inc. (as amended) (Incorporated by reference to Exhibit 10.27 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed August 8,
2003)                                                                                                                          
|10.28 |  | Letter Agreement by and between DigitalNet Holdings, Inc. and Getronics Wang Co. LLC, dated February 28, 2003 (Incorporated by reference to Exhibit 10.28 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed August 8,
2003)                                                                                                                             
|10.29 |  | Professional Services Management, dated as of September 2001, between GTCR Golder Rauner, L.L.C. and DigitalNet, Inc. (Incorporated by reference to Exhibit 10.29 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed
August 8, 2003)                                                                                                                     
|10.30 |  | Purchase Agreement, dated as of June 27, 2003, by and among DigitalNet, Inc., DigitalNet Holdings, Inc., DigitalNet Government Solutions, LLC and Banc of America Securities LLC, Jefferies/Quarterdeck, LLC and Jefferies & Company, Inc.
(Incorporated by reference to Exhibit 10.30 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed August 8, 2003)
|21.1  |  | List of Subsidiaries of DigitalNet Holdings, Inc (Incorporated by reference to Exhibit 21.1 to the Registrant's Registration Statement on Form S-1, File No. 333-107764, filed August 8, 2003)                                                                                                                                                                                           
|23.1  |  | Consent of Ernst & Young LLP                                                                                                                                                                                                                                                                                                                                                             
|31.1  |  | Certification of Principal Executive Officer Pursuant to Rule 13a-15(e) or 15d-15(e) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                           
|31.2  |  | Certification of Principal Financial Officer Pursuant to Rule 13a-15(e) or 15d-15(e) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                           
|32.1  |  | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                        
|32.2  |  | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                        
|99.1  |  | Definitive Proxy Statement for the 2000 Annual Meeting of Stockholders (to be filed with the Commission under Regulation 14A and incorporated by reference herein to the extent indicated in this report)                                                                                                                                                                                

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