Table of Contents

 

 

 

**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**WASHINGTON, DC 20549**

 

**FORM 10-Q**

 

**(MarkOne)**

 
| **x**                                                                                                                                                                                                                                                                                                                                        | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934**  |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------|
| ** **                                                                                                                                                                                                                                                                                                                                   | ** **                                                                                               |
| **For the quarterly period ended September 30,  2009**                                                                                                                                                                                                                                                                                  |
| ** **                                                                                                                                                                                                                                                                                                                                   | ** **                                                                                               |
| **OR**                                                                                                                                                                                                                                                                                                                                       |
| ** **                                                                                                                                                                                                                                                                                                                                   | ** **                                                                                               |
| **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 001-33253**

 

**FORCEPROTECTION, INC.**

(Exact Name of Registrant as Specified in Its Charter)

 

| **Nevada**                                                       | ** ** | **84-1383888**                        |
|------------------------------------------------------------------|------------|---------------------------------------|
| (State or Other Jurisdiction of  Incorporation or Organization)  |       | (I.R.S. Employer  Identification No.) |
|                                                             |       |                                  |
| **9801 Highway 78, Building No. 1  Ladson, South Carolina** | ** ** | **29456**                             |
| (Address of Principal Executive Offices)                         |       | (Zip Code)                            |

 

**(843) 574-7000**

(Registrant’s Telephone Number, Including Area Code)

 

Indicateby check mark whether the registrant: (1) has filed all reports requiredto be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90days.         x  Yes         o   No

 

Indicateby check mark whether the registrant has submitted electronically and posted onits corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T during thepreceding 12 months (or for such shorter period that the registrant wasrequired to submit and post such files).   o Yes                o No

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer, or a smaller reporting company. Seethe definitions of “large accelerated filer,” “accelerated filer,” and “smallerreporting company” in Rule 12b-2 of the Exchange Act.

 
| Large accelerated filer  o                                            | Accelerated filer  x         |
|---------------------------------------------------------------------------------|----------------------------------------|
|                                                                            |                                   |
| Non-accelerated filer  o(Do not check if a smaller reporting company) | Smaller reporting company  o |

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act).o Yes    x  No

 

Theregistrant had 69,957,834 shares of common stock outstanding as of October 27,2009.

 

 

 

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TABLE OF CONTENTS

 
| **PART I —  FINANCIAL INFORMATION**                                                             | 3          |
|-----------------------------------------------------------------------------------------------------------|------------|
|                                                                                                      |       |
| Item  1. Financial Statements                                                                        | 3          |
|                                                                                                      |       |
| Item  2. Management’s Discussion and Analysis of Financial Condition and  Results of Operations | 14         |
|                                                                                                      |       |
| Item  3. Quantitative and Qualitative Disclosures About Market Risk                                  | 22         |
|                                                                                                      |       |
| Item  4. Controls and Procedures                                                                     | 23         |
|                                                                                                      |       |
| **PART II  — OTHER INFORMATION**                                                                | 24         |
| ** **                                                                                                | ** ** |
| Item 1. Legal  Proceedings                                                                           | 24         |
|                                                                                                      |       |
| Item  1A. Risk Factors                                                                               | 25         |
|                                                                                                      |       |
| Item  2. Unregistered Sales Of Equity Securities And Use Of Proceeds                                 | 26         |
|                                                                                                      |       |
| Item  3. Defaults Upon Senior Securities                                                             | 26         |
|                                                                                                      |       |
| Item  4. Submission of Matters to a Vote of Security Holders                                         | 26         |
|                                                                                                      |       |
| Item 5. Other Information                                                                                 | 26         |
|                                                                                                      |       |
| Item  6. Exhibits                                                                                    | 26         |

 

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**PART I. FINANCIAL STATEMENTS**

 

**Item 1.**   **Financial Statements**

 
| ** **                                           | ** ** | **As of September 30,  2009** | ** ** | **As of December 31,  2008** | ** ** |
|------------------------------------------------------|------------|------------------------------------|------------|-----------------------------------|------------|
| ** **                                           | ** ** | **(In Thousands)**            | ** ** |
| **Assets**                                           |       |                               |       |                              |       |
| **Current assets:**                                  |       |                               |       |                              |       |
| Cash and cash equivalents                            |       | $                                  | 111,949    |                              | $          | 111,001 |   |
| Marketable securities                                |       | 9,996                              |       | —                            |       |
| Accounts receivable, net                             |       | 188,575                            |       | 138,449                           |       |
| Inventories                                          |       | 113,847                            |       | 88,502                            |       |
| Advances to subcontractor                            |       | 5,192                              |       | —                            |       |
| Deferred income tax assets                           |       | 16,378                             |       | 15,572                            |       |
| Prepaid income taxes                                 |       | 4,572                              |       | —                            |       |
| Other current assets                                 |       | 4,217                              |       | 2,417                             |       |
| Total current assets                                 |       | 454,726                            |       | 355,941                           |       |
| Property and equipment, net                          |       | 60,059                             |       | 61,429                            |       |
| Investment in joint venture                          |       | 2,048                              |       | —                            |       |
| Intangible assets, net                               |       | 302                                |       | 654                               |       |
| **Total assets**                                     |       | $                                  | 517,135    |                              | $          | 418,024 |   |
|                                                 |       |                               |       |                              |       |
| **Liabilities  and Shareholders’ Equity**       |       |                               |       |                              |       |
| **Current liabilities:**                             |       |                               |       |                              |       |
| Accounts payable                                     |       | $                                  | 138,750    |                              | $          | 47,115 |   |
| Due to United States government                      |       | 33,760                             |       | 39,015                            |       |
| Advance payments on contracts                        |       | 36,927                             |       | 29,504                            |       |
| Other current liabilities                            |       | 14,119                             |       | 20,783                            |       |
| Total current liabilities                            |       | 223,556                            |       | 136,417                           |       |
| Deferred income tax liabilities                      |       | 1,899                              |       | 3,141                             |       |
| Other long-term liabilities                          |       | —                             |       | 139                               |       |
|                                                 |       | 225,455                            |       | 139,697                           |       |
| Commitments and contingencies                        |       |                               |       |                              |       |
|                                                 |       |                               |       |                              |       |
| **Shareholders’ equity:**                       |       |                               |       |                              |       |
| Common stock                                         |       | 70                                 |       | 68                                |       |
| Additional paid-in capital                           |       | 259,102                            |       | 256,939                           |       |
| Accumulated other comprehensive income               |       | 152                                |       | —                            |       |
| Retained earnings                                    |       | 32,356                             |       | 21,320                            |       |
| Total shareholders’ equity                      |       | 291,680                            |       | 278,327                           |       |
| **Total liabilities and  shareholders’ equity** |       | $                                  | 517,135    |                              | $          | 418,024 |   |

 

The accompanying notes to condensed consolidated financial statements arean integral part of these statements.

 

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** **

**Force Protection, Inc. and Subsidiaries**

**Condensed Consolidated Statements of Operations**

**(Unaudited)**

 
| ** **                                       | ** ** | **For the three months ended  September 30,** | ** ** | **For the nine months ended  September 30,** | ** ** |
|--------------------------------------------------|------------|------------------------------------------------------------------------|------------|-----------------------------------------------------------------------|------------|
| ** **                                       | ** ** | **2009**                                                               | ** ** | **2008**                                                              | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                                       | ** ** | **(In Thousands, Except Per Share Data)**     | ** ** | **(In Thousands, Except Per Share Data)**    | ** ** |
| Net sales                                        |       | $                                                                      | 316,164    |                                                                  | $          | 343,309 |   | $ | 688,014 |   | $ | 1,087,273 |   |
| Cost of sales                                    |       | 289,628                                                                |       | 279,532                                                               |       | 598,863 |   | 947,814 |   |
| Gross profit                                     |       | 26,536                                                                 |       | 63,777                                                                |       | 89,151 |   | 139,459 |   |
| General and administrative expenses              |       | 19,196                                                                 |       | 27,817                                                                |       | 60,219 |   | 73,967 |   |
| Research and development expenses                |       | 4,239                                                                  |       | 4,306                                                                 |       | 13,736 |   | 10,205 |   |
| Operating income                                 |       | 3,101                                                                  |       | 31,654                                                                |       | 15,196 |   | 55,287 |   |
| Other income, net                                |       | 252                                                                    |       | 440                                                                   |       | 57 |   | 1,411 |   |
| Interest expense, net                            |       | (46                                                                    | )          | (2                                                                    | )          | (79 | ) | (225 | ) |
| Income before income tax expense                 |       | 3,307                                                                  |       | 32,092                                                                |       | 15,174 |   | 56,473 |   |
| Income tax expense                               |       | (88                                                                    | )          | (12,185                                                               | )          | (4,138 | ) | (21,262 | ) |
| Net income                                       |       | $                                                                      | 3,219      |                                                                  | $          | 19,907 |   | $ | 11,036 |   | $ | 35,211 |   |
| **Earnings per common share:**                   |       |                                                                   |       |                                                                  |       |   |   |   |   |
| Basic                                            |       | $                                                                      | 0.05       |                                                                  | $          | 0.29 |   | $ | 0.16 |   | $ | 0.52 |   |
| Diluted                                          |       | $                                                                      | 0.05       |                                                                  | $          | 0.29 |   | $ | 0.16 |   | $ | 0.51 |   |
| **Weighted average common shares  outstanding:** |       |                                                                   |       |                                                                  |       |   |   |   |   |
| Basic                                            |       | 68,436                                                                 |       | 68,318                                                                |       | 68,423 |   | 68,309 |   |
| Diluted                                          |       | 68,863                                                                 |       | 68,381                                                                |       | 68,930 |   | 68,372 |   |

 

The accompanying notes to condensed consolidated financial statements arean integral part of these statements.

 

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** **

**Force Protection, Inc. and Subsidiaries**

**Condensed Consolidated Statements of Cash Flows**

**(Unaudited)**

 
| ** **                                                                                         | ** ** | **For the nine months ended September 30,** | ** ** |
|----------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------|------------|
| ** **                                                                                         | ** ** | **2009**                                                                  | ** ** | **2008** | ** ** |
| ** **                                                                                         | ** ** | **(In Thousands)**                                                   | ** ** |
| **Cash flows from operating  activities:**                                                         |       |                                                                      |       |   |   |
| Net income                                                                                         |       | $                                                                         | 11,036     |   | $ | 35,211 |   |
| Adjustments to reconcile net income to net cash  provided by (used in) operating activities — |       |                                                                      |       |   |   |
| Depreciation and amortization                                                                      |       | 10,285                                                                    |       | 9,426 |   |
| Deferred income tax (benefit) provision                                                            |       | (2,132                                                                    | )          | 1,856 |   |
| Stock-based compensation                                                                           |       | 2,126                                                                     |       | 97 |   |
| Allowance for doubtful accounts                                                                    |       | —                                                                    |       | 531 |   |
| Provision for asset impairment                                                                     |       | 748                                                                       |       | 4,947 |   |
| Provision for inventory                                                                            |       | 19,791                                                                    |       | 7,733 |   |
| Loss on disposal of property and equipment                                                         |       | 166                                                                       |       | 6 |   |
| Loss from joint venture                                                                            |       | 315                                                                       |       | — |   |
| (Increase) decrease in assets —                                                               |       |                                                                      |       |   |   |
| Accounts receivable                                                                                |       | (78,454                                                                   | )          | (77,866 | ) |
| Inventories                                                                                        |       | (45,136                                                                   | )          | 27,107 |   |
| Advances to subcontractor                                                                          |       | (5,192                                                                    | )          | 18,956 |   |
| Prepaid income taxes                                                                               |       | (4,572                                                                    | )          | 6,565 |   |
| Other current assets                                                                               |       | (1,777                                                                    | )          | 4,303 |   |
| Increase (decrease) in liabilities —                                                          |       |                                                                      |       |   |   |
| Accounts payable                                                                                   |       | 90,899                                                                    |       | (21,357 | ) |
| Advance payments on contracts                                                                      |       | 35,751                                                                    |       | (30,501 | ) |
| Due to United States government                                                                    |       | (5,255                                                                    | )          | 346 |   |
| Other current liabilities                                                                          |       | (6,675                                                                    | )          | 11,301 |   |
| Total adjustments                                                                                  |       | 10,888                                                                    |       | (36,550 | ) |
| **Net cash provided by (used in)  operating activities**                                           |       | 21,924                                                                    |       | (1,339 | ) |
| **Cash flows from investing  activities:**                                                         |       |                                                                      |       |   |   |
| Purchases of marketable securities                                                                 |       | (9,996                                                                    | )          | — |   |
| Capital expenditures                                                                               |       | (8,740                                                                    | )          | (10,041 | ) |
| Investment in joint venture                                                                        |       | (2,149                                                                    | )          | — |   |
| **Net cash used in investing  activities**                                                         |       | (20,885                                                                   | )          | (10,041 | ) |
| **Cash flows from financing  activities:**                                                         |       |                                                                      |       |   |   |
| Proceeds from issuance of common stock                                                             |       | 37                                                                        |       | — |   |
| Net decrease in other long-term liabilities                                                        |       | (128                                                                      | )          | (219 | ) |
| **Net cash used in financing  activities**                                                         |       | (91                                                                       | )          | (219 | ) |
| **Increase (decrease) in cash and  cash equivalents**                                              |       | 948                                                                       |       | (11,599 | ) |
| **Cash and cash equivalents at  beginning of year**                                                |       | 111,001                                                                   |       | 90,997 |   |
| **Cash and cash equivalents at end  of period**                                                    |       | $                                                                         | 111,949    |   | $ | 79,398 |   |
| **Supplemental cash flow  information:**                                                           |       |                                                                      |       |   |   |
| Cash paid during the period for                                                                    |       |                                                                      |       |   |   |
| Interest, net of amounts capitalized                                                               |       | $                                                                         | 113        |   | $ | 240 |   |
| Income taxes                                                                                       |       | $                                                                         | 15,134     |   | $ | 111 |   |
| **Supplemental schedule of noncash  investing and financing activities:**                          |       |                                                                      |       |   |   |
| Property and equipment additions in accounts  payable                                              |       | $                                                                         | 1,009      |   | $ | — |   |

 

Theaccompanying notes to condensed consolidated financial statements are an integralpart of these statements.

 

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**1.**    **Summary of Significant Accounting Policies**

 

***Organization and Description of theBusiness***

 

ForceProtection, Inc., a Nevada corporation, together with its subsidiaries, isa provider of blast- and ballistic-protected products used to support armedforces and security personnel in harm’s way.  We design, manufacture,test, deliver and support our blast- and ballistic-protected products with thepurpose to increase survivability of the users of the products.  Ourspecialty vehicles, which we believe are the forefront of blast- andballistic-protected technology, are designed to protect their occupants fromlandmines, hostile fire, and improvised explosive devices (“IEDs”).  Weare a key provider of vehicles to the United States military under the MineResistant Ambush Protected (“MRAP”) program. Our customers include all branchesof the United States Department of Defense (“DoD”) and through foreign militarysales of the DoD, military customers located in the United Kingdom, Iraq,Canada, Italy, and France, as well as direct sales to the United KingdomMinistry of Defence and the Hungarian Ministry of Defense.

 

Referencesherein to “Force Protection,” the “Company,” “we,” “our,” or “us” refer toForce Protection, Inc. and its subsidiaries unless otherwise stated orindicated by context.

 

In 2009, we formed Integrated Survivability Technologies Limited, anEngland and Wales company (“IST”), a joint venture between Force ProtectionEurope Limited (formerly Force Protection Advanced Solutions Limited) (“ForceProtection Europe”), a subsidiary of Force Protection Industries, Inc.,and NP Aerospace Limited (“NPA”), a subsidiary of The Morgan Crucible Companyplc.   Pursuant to the terms of thejoint venture, IST shall act as the prime contractor for vehicles and relatedtotal life cycle support awarded by the United Kingdom Ministry of Defence toensure that this customer has a single point of contact for its current andfuture Force Protection fleet of vehicles (Buffalo, Mastiff, Ridgback andWolfhound).  Force Protection Europe and NPA each own a 50% interest inIST and the board of IST consists of six members, three of whom are appointedby Force Protection.  As of September 30,2009, we have contributed $2.1 million for this investment in IST.  In September 2009, the IST board agreedto defer indefinitely any future capital contributions.   We account for this joint venture as anequity-method investment.

 

On April 1, 2009, IST received its first award from the UnitedKingdom Ministry of Defence, for the production of 97 fully integratedWolfhound vehicles, which are based on the Mastiff vehicle model, valued atapproximately $122.6 million.  On April 1,2009, IST awarded a sub-contract to Force Protection Industries, Inc. forthe delivery of 97 base Wolfhound vehicles.  On April 1, 2009, ISTawarded a subcontract to NPA for the integration of equipment and armor on thebase vehicles provided to IST by Force Protection Industries, Inc. In May 2009,the United Kingdom Ministry of Defence exercised its option under the ISTcontract to purchase an additional representative blast vehicle, which ISTsubcontracted to Force Protection Industries, Inc.

 

Weare focusing on enhancing the market presence of Force Protection Europe andleveraging its brand strength in the United Kingdom and other internationalmarkets.  Force Protection Europedeveloped a new vehicle platform, the Ocelot, with Ricardo plc, which debutedat the Defence System and Equipment exhibition in London during September 2009.  The Ocelot has been submitted by ForceProtection Europe to the United Kingdom Ministry of Defence for the LightProtected Patrol Vehicle (“LPPV”) program. In September 2009, we formed Force Protection Australasia Pty Ltd (“ForceProtection Australasia”), an Australian company to pursue market opportunitiesin Australia and Asia.  Force ProtectionAustralasia is a wholly owned subsidiary of Force Protection Europe.

 

OnJanuary 25, 2007, we were awarded a Government Prime Contract by theUnited States Marine Corps Systems Command (“MARCORSYSCOM”) for the deliveryof, among other things, certain Category I and Category II Cougar vehicles andrelated life cycle support services (“MRAP Competitive Contract”).  MARCORSYSCOM subsequently issued a series ofdelivery orders related to the MRAP Competitive Contract.  We have completed the vehicle production workunder these delivery orders, are continuing to perform the outstanding serviceand spare work, and  may  receive additional delivery orders under theMRAP Competitive Contract in the future.

 

CommencingFebruary 5, 2007, we entered into certain letter agreements with GeneralDynamics Land Systems, Inc. (“GDLS”), whereby GDLS would act as asubcontractor for certain work under the MRAP Competitive Contract.  On May 4, 2007, we requested thatMARCORSYSCOM novate the MRAP Competitive Contract to Force Dynamics (describedbelow), but the novation has not yet occurred. On September 10, 2007, weentered into a subcontract (the “MRAP Subcontract”) with GDLS, incorporatingall prior letters of agreement and

 

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settingforth the provisions related to any subsequent work awarded to GDLS by us underthe MRAP Competitive Contract. The work under the MRAP Competitive Contractcontinues to be performed by Force Protection Industries, Inc. as theprime contractor and specific work is performed by GDLS under the MRAPSubcontract.

 

OnDecember 8, 2008, the MRAP Joint Program Office issued a competitiveRequest for Proposal (“RFP”), named the M-ATV, through which the United Statesgovernment was seeking a vehicle solution that provides MRAP levels ofsurvivability with enhanced mobility. On January 12, 2009, Force DynamicsLLC, our joint venture with GDLS, submitted a proposal to the US Army Tank-Automotiveand Armaments Command (“TACOM”) for this RFP offering our Cheetah vehicle as asolution. In the first half of 2009, Force Dynamics was awarded contracts for 5production representative Cheetah vehicles and testing. Force Dynamicssubcontracted the production of these 5 vehicles to Force Protection Industries, Inc.and the testing to GDLS. On June 30, 2009, Force Dynamics was informed byTACOM that our Cheetah vehicle was not selected to receive the initialproduction delivery order in the M-ATV competition.

 

***Basis of Presentation and Consolidation***

 

Theaccompanying unaudited condensed consolidated financial statements should beread in conjunction with our audited consolidated financial statements includedin our Annual Report on Form 10-K for the year ended December 31,2008 filed with the United States Securities and Exchange Commission (“SEC”) onMarch 26, 2009. These unaudited condensed consolidated financialstatements have been prepared pursuant to Rule 10-01 of Regulation S-X.Certain information and note disclosures normally included in annual financialstatements prepared in accordance with generally accepted accounting principlesin the United States of America (“GAAP”) have been condensed or omittedpursuant to those rules and regulations, although we believe that thedisclosures made herein are adequate to make the information not misleading.

 

Theunaudited results of operations for the interim periods shown in thesecondensed consolidated financial statements are not necessarily indicative ofoperating results for the entire year. In our opinion, the accompanyingunaudited condensed consolidated financial statements recognize all adjustmentsof a normal recurring nature considered necessary to fairly state the financialposition, results of operations and cash flows for each interim periodpresented.

 

Theseunaudited condensed consolidated financial statements include the assets,liabilities, revenues and expenses of our wholly owned subsidiaries, ForceProtection Industries, Inc. and Force Protection Technologies, Inc.,and our 50% owned Delaware limited liability company, Force Dynamics, LLC. Weeliminate from our financial results all significant intercompany accounts andtransactions.

 

Certainprior period information has been reclassified to conform to the current periodpresentation.

 

***Fair Value of Financial Instruments***

 

FASBStatement No. 107, *Disclosures about FairValue of Financial Instruments*, which was primarily codified intoTopic 825, “*Financial Instruments*,” requiresdisclosures of the fair value of financial instruments. Our financialinstruments include cash and cash equivalents, marketable securities, accountsreceivable, advances to subcontractor, accounts payable, accrued liabilitiesand amounts due to United States government. The carrying amounts of cash andcash equivalents, marketable securities, accounts receivable, advances tosubcontractors, accounts payable, accrued liabilities and amounts due to theU.S. government, approximate their fair value because of the short-termmaturity and highly liquid nature of these instruments. The carrying values ofour financial instruments approximate their fair value as of September 30,2009.

 

***Recent Accounting Pronouncements***

 

InApril 2008, the Financial Accounting Standard Board (“FASB”) issued FASBStaff Position (“FSP”) FAS No. 142-3,*Determination of Useful Life of Intangible Assets,* which wascodified into Topic 350 “*Intangibles — Goodwill andOther”* in the Accounting Standards Codification (“ASC”).  This guidance amends the factors that shouldbe considered in developing the renewal or extension assumptions used todetermine the useful life of a recognized intangible asset and requiresexpanded disclosure related to the determination of intangible asset usefullives. This guidance is effective for fiscal years beginning after December 15,2008. Earlier adoption was prohibited. We adopted this guidance in the firstquarter of 2009 and it did not have a material impact on our consolidatedfinancial position, results of operations and cash flows.

 

InSeptember 2006, the FASB issued FASB Statement No. 157, *Fair Value Measurements,* which wascodified into Topic 820 “*Fair Value Measurementsand Disclosures,*” which clarifies the definition of fair valuewhenever another standard requires or permits assets or liabilities to bemeasured at fair value. Specifically, this guidance

 

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clarifiesthat fair value should be based on the assumptions market participants woulduse when pricing the asset or liability, and establishes a fair value hierarchythat prioritizes the information used to develop those assumptions.  This guidance does not expand the use of fairvalue to any new circumstances, and must be applied on a prospective basis,except in certain cases. This guidance also requires expanded financialstatement disclosures about fair value measurements, including disclosure ofthe methods used and the effect on earnings.

 

InFebruary 2008, FSP FAS No. 157-2, *Effective Date of FASB Statement No. 157,* was issued,which was primarily codified into Topic 820 “*Fair ValueMeasurements and Disclosures*.” This guidance  defers theeffective date for nonfinancial assets and nonfinancial liabilities exceptthose that are recognized or disclosed at fair value in the financialstatements on a recurring basis (at least annually) until fiscal yearsbeginning after December 15, 2008, and interim periods within those fiscalyears.   Examples of items within thescope of this guidance are nonfinancial assets and nonfinancial liabilitiesinitially measured at fair value in a business combination (but not measured atfair value in subsequent periods), and long-lived assets, such as property,plant, equipment and intangible assets measured at fair value for an impairmentassessment.

 

Theadoption of FASB Statement No. 157, including FSP FAS No. 157-2,which were codified into Topic 820 “*Fair Value Measurementsand Disclosures*,” did not have a material impact on our consolidatedfinancial position, results of operations and cash flows. The Company adoptedthis guidance for financial assets and liabilities on January 1, 2008, andfor nonfinancial assets and liabilities on January 1, 2009.

 

InApril 2009, FSP FAS 107-1/APB 28-1 was issued, which was primarilycodified into Topic 825 “*Financial Instruments*”in the ASC.  This guidance requiresdisclosures about fair values of financial instruments in interim and annualfinancial statements. Prior to the issuance of this guidance, disclosures aboutfair values of financial instruments were only required to be disclosedannually.  We adopted this guidancebeginning in the second quarter of 2009 and it did not have an impact on our consolidatedfinancial position, results of operations and cash flows.

 

InMay 2009, the FASB issued FASB Statement No. 165, *Subsequent Events,*which was primarily codified into Topic 855 *“Subsequent Events”*in the ASC.  This guidance defines a datethrough which management must evaluate subsequent events, and lists thecircumstances which an entity must recognize and disclose events ortransactions occurring after the balance sheet date.  It is effective prospectively for interim andannual periods ending after June 15, 2009. We adopted this guidance on June 30, 2009.  This guidance did not have a material impacton our consolidated financial position, results of operations and cash flows.

 

InJune 2009, the FASB issued FASB Statement No. 168, *The FASB Accounting Standards Codification and the Hierarchy ofGenerally Accepted Accounting Principles,* which was codified into Topic 105 “*GenerallyAccepted Accounting Standards.*” This guidance launched the FASB Accounting Standards Codification thatis the single source of non-SEC authoritative GAAP.  It is effective for interim and annualperiods beginning after September 15, 2009.  We adopted this guidance as of September 30,2009.  This guidance did not have amaterial impact on our consolidated financial position, results of operationsand cash flows.

 

InAugust 2009, the FASB issued Update No. 2009-05 (“ASU 2009-05”), anupdate to Topic 820 “*Fair Value Measurementsand Disclosures*,” which clarified how to measure the fair value ofliabilities in circumstances when a quoted price in an active market for theidentical liability is not available. ASU 2009-05 is effective for the first reporting period beginning afterthe issuance of this standard.  We expectto adopt ASU 2009-05 in the fourth quarter of 2009.  The adoption of this guidance is not expectedto have a material impact on our consolidated financial position, results ofoperations and cash flows.

 

InOctober 2009, the FASB issued Update No. 2009-13 (“ASU 2009-13”), anupdate to Topic 605 “*Revenue Recognition*,”which addresses the accounting for multiple-deliverable arrangements to enablevendors to account for products or services (deliverables) separately ratherthan as a combined unit.  ASU 2009-13 iseffective prospectively for revenue recognition arrangements entered into ormaterially modified beginning in fiscal years on or after June 15,2010.  Early adoption is permitted.  We are currently evaluating the impact thatthe adoption of this guidance will have on our consolidated financial position,results of operations and cash flows, if any.

 

Wehave determined that all other recently issued accounting guidance will nothave a material impact on our consolidated financial position, results ofoperations and cash flows, or do not apply to our operations.

 

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**2.**    **Accounts Receivable**

 

Accounts receivableconsists of the following (in thousands):

 
| ** **                | ** ** | **As of September 30,** | ** ** | **As of December 31,** | ** ** |
|---------------------------|------------|----------------------------------------|------------|---------------------------------------|------------|
| ** **                | ** ** | **2009**                               | ** ** | **2008**                              | ** ** |
| United States government  |       | $                                      | 168,933    |                                  | $          | 114,230 |   |
| Other accounts receivable |       | 19,642                                 |       | 24,219                                |       |
| Accounts receivable, net  |       | $                                      | 188,575    |                                  | $          | 138,449 |   |

 

Other accounts receivableincludes amounts that relate to non-government entities and the sale of rawmaterials to suppliers.  Any gain or loss on the sale of raw materials isincluded in*Other income, net* inthe accompanying condensed consolidated statements of operations.  As of September 30,2009 and December 31, 2008, our accounts receivable included $82.8 millionand $8.6 million, respectively, of earned and unbilled accounts receivable, ofwhich $3.7 million and zero, respectively, is earned and unbilled to IST.  The earned and unbilled accounts receivableas of September 30, 2009 has grown significantly since December 31, 2008primarily due to an increased amount of “not-to-exceed” undefinitized contractswhere we cannot fully bill until the contracts are definitized.

 

**3.**    **Inventories**

 

Inventories consist ofthe following (in thousands):

 
| ** **                | ** ** | **As of September 30,** | ** ** | **As of December 31,** | ** ** |
|---------------------------|------------|----------------------------------------|------------|---------------------------------------|------------|
| ** **                | ** ** | **2009**                               | ** ** | **2008**                              | ** ** |
| Raw material and supplies |       | $                                      | 77,710     |                                  | $          | 64,857 |   |
| Work in process           |       | 27,764                                 |       | 23,645                                |       |
| Finished goods            |       | 8,373                                  |       | —                                |       |
| Inventories               |       | $                                      | 113,847    |                                  | $          | 88,502 |   |

 

Due to excess andobsolete inventory and to account for our inventory at the lower of cost ormarket, we reduce the cost basis of our raw material and supplies and incur anexpense to*Cost of sales*.

 

Work in process consistsof vehicles and subassemblies in process and overhead costs capitalized inending inventory.

 

As of September 30,2009, the finished goods consist mostly of Wolfhounds and other finishedproducts.

 

Total inventory relatingto the Cheetah vehicles submitted for the M-ATV competition at September 30,2009 is $3.3 million. We reduced the net realizable value of these Cheetahvehicles in inventory by $18.2 million during the third quarter of 2009 toreflect our estimate of the current market value of this inventory.  Although we were not selected in the M-ATVcompetition for our Cheetah vehicles, we are actively pursuing otheropportunities with some potential customers and believe that we can recover theremaining value of this inventory after this write-down.

 

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**4.**    **Property and Equipment**

 

Property and equipmentconsist of the following (in thousands):

 
| ** **                                           | ** ** | **As of September 30,** | ** ** | **As of December 31,** | ** ** |
|------------------------------------------------------|------------|----------------------------------------|------------|---------------------------------------|------------|
| ** **                                           | ** ** | **2009**                               | ** ** | **2008**                              | ** ** |
| Land                                                 |       | $                                      | 4,419      |                                  | $          | 4,419 |   |
| Buildings                                            |       | 13,223                                 |       | 12,669                                |       |
| Leasehold improvements                               |       | 15,420                                 |       | 13,988                                |       |
| Machinery and equipment; including tooling and molds |       | 32,835                                 |       | 32,421                                |       |
| Computer equipment and software                      |       | 11,924                                 |       | 9,062                                 |       |
| Furniture and fixtures                               |       | 3,560                                  |       | 3,580                                 |       |
| Demonstration vehicles                               |       | 1,863                                  |       | 1,863                                 |       |
| Manuals                                              |       | 705                                    |       | 705                                   |       |
| Vehicles                                             |       | 794                                    |       | 676                                   |       |
|                                                 |       | 84,743                                 |       | 79,383                                |       |
| Less: Accumulated depreciation                       |       | (28,311                                | )          | (18,683                               | )          |
|                                                 |       | 56,432                                 |       | 60,700                                |       |
| Construction in progress                             |       | 3,627                                  |       | 729                                   |       |
| Property and equipment, net                          |       | $                                      | 60,059     |                                  | $          | 61,429 |   |

 

In March 2008, wedecided to suspend the construction of the assembly line at our Roxboro, NorthCarolina facility.  As a result, wecharged $4.9 million to operations in the first quarter of 2008, comprised of$2.1 million in deposits on services to be provided and $2.8 million in designcosts.

 

During 2008, we completedthe renovation of our Roxboro facility and capitalized costs as buildingimprovements of approximately $5.8 million.  In May 2009, we began to use the Roxborofacility for training purposes.

 

In June 2009, wedetermined that certain customized machines, which were used to dispensevehicle fluids, no longer had a future benefit to us.  As a result, we charged $0.7 million tooperations in the second quarter of 2009 for these machines.

 

**5.**    **Advance Payments on Contracts**

 

Advance payments on contracts consist of the following(in thousands):

 
| ** **                                                 | ** ** | **As of September 30,** | ** ** | **As of December 31,** | ** ** |
|------------------------------------------------------------|------------|----------------------------------------|------------|---------------------------------------|------------|
| ** **                                                 | ** ** | **2009**                               | ** ** | **2008**                              | ** ** |
| Independent Suspension System (“ISS”) kits       |       | $                                      | 34,306     |                                  | $          | — |   |
| Wolfhound                                                  |       | 1,493                                  |       | —                                |       |
| Mine Resistant Ambush Protected (“MRAP”) vehicle |       | 1,054                                  |       | 29,504                                |       |
| Iraqi Light Armored Vehicles (“ILAV”)            |       | 74                                     |       | —                                |       |
| Advance payments on contracts                              |       | $                                      | 36,927     |                                  | $          | 29,504 |   |

 

Under some of our United States government contractsand direct commercial contracts, we receive performance-based payments based oncompletion of specific milestones stipulated under the contract (for example,completion of manufacturing fabrication). We report these payments as*Advance payments on contracts* in ourconsolidated balance sheet until the final delivery of the products and formalacceptance by the customer.

 

**6.**    **Income Taxes**

 

Weprovide for income taxes using the liability method in accordance with FASB ASCTopic 740, “*Income Taxes*.” In accordance with thisguidance, the provision for taxes on income recognizes our estimate of theeffective tax rate expected to be applicable for the full year, adjusted forthe impact of any discrete events, which are reported in the period in whichthey occur. Each quarter, we re-evaluate our estimated tax expense for the yearand make adjustments for changes in the estimated tax rate.  Additionally, we evaluate the realizabilityof our deferred tax

 

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assets on aquarterly basis. Our evaluation considers all positive and negative evidenceand factors, such as the scheduled reversal of temporary differences,historical and projected future taxable income or losses, and prudent andfeasible tax planning strategies.

 

The**incometax expense for the three- and nine- month periods ended September 30,2009 was based on the estimated effective tax rates applicable for the fiscalyear ending December 31, 2009, after considering items specificallyrelated to the interim period.  Theincome tax expense for the three- and nine-month periods ended September 30,2008 was based on the estimated effective tax rates applicable for the fiscalyear ended December 31, 2008, after considering items specifically relatedto the interim period.

 

ForceProtection is subject to United States federal, state, and local income taxes.*Income before income tax expense*is as follows (in thousands):

 
| ** **                       | ** ** | **For the  three months ended  September 30,** | ** ** | **For the  nine months ended  September 30,** | ** ** |
|----------------------------------|------------|-----------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                       | ** ** | **2009**                                            | ** ** | **2008**                                           | ** ** | **2009** | ** ** | **2008** | ** ** |
| Income before income tax expense |       | $                                                   | 3,307      |                                               | $          | 32,092 |   | $ | 15,174 |   | $ | 56,473 |   |
|                                  |            |                                                     |            |                                                    |            |  |  |  |  |  |  |  |  |

 

A reconciliation of thestatutory federal income tax expense rate to the effective income tax expenserate is as follows:

 
| ** **                                       | ** ** | **For the  three months ended  September 30,** | ** ** | **For the  nine months ended  September 30,** | ** ** |
|--------------------------------------------------|------------|-----------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                       | ** ** | **2009**                                            | ** ** | **2008**                                           | ** ** | **2009** | ** ** | **2008** | ** ** |
| Income tax expense at statutory rate             |       | 35.00                                               | %          | 35.00                                              | %          | 35.00 | % | 35.00 | % |
| Increase  (decrease) in tax rate resulting from: |       |                                                |       |                                               |       |   |   |   |   |
| State  income taxes, net of federal tax benefit  |       | (9.93                                               | )%         | 1.73                                               | %          | (1.63 | )% | 1.41 | % |
| Research and development credit                  |       | (3.05                                               | )%         | —                                             |       | (1.87 | )% | — |   |
| Domestic Production Activities Deduction         |       | (15.52                                              | )%         | —                                             |       | (4.21 | )% | — |   |
| Nondeductible items                              |       | (3.82                                               | )%         | 1.24                                               | %          | (0.02 | )% | 1.24 | % |
| Effective income tax expense rate                |       | 2.68                                                | %          | 37.97                                              | %          | 27.27 | % | 37.65 | % |

 

The effective income taxrate is the provision for income tax expense as a percent of income beforeincome taxes. The effective rate for the three and nine months ended September 30,2009 is lower than the expected federal statutory rate of 35% due to researchand development tax credits, the Domestic Production Activities Deduction,state income taxes and nondeductible items.

 

We adopted FASBInterpretation No. 48 on January 1, 2007, which was codified intoTopic 740, “*Income Taxes*.”  This guidance clarifies the accounting foruncertainty in income taxes recognized in a company’s financial statements inaccordance with FASB Statement No. 109,*Accounting for Income Taxes*,which was also codified into Topic 740, “*IncomeTaxes*.”  Topic 740 doesnot prescribe a recognition threshold or measurement attribute for thefinancial statement recognition and measurement of a tax position taken in atax return. This guidance also defines a criterion that an individual taxposition must meet for any part of the benefit of that position to berecognized in a company’s financial statements. Additionally, this guidanceprovides direction on measurement, derecognition, classification, interest andpenalties, accounting in interim periods, disclosure, and transition. Weinclude interest and penalties related to federal and state income taxes, ifany, as a component of*Income tax expense*in the accompanying unaudited condensed consolidated statements of operations.

 

We believe that we haveappropriate support for the income tax positions taken and to be taken on ourincome tax returns and that our income tax receivable and accruals for taxliabilities are adequate for all open years based on an assessment of manyfactors including past experience and interpretations of tax laws applied tothe facts of each matter.  However, wehave a $0.8 million reserve for prior years income taxes as a result ofapplying the guidance in FASB ASC Topic 740, “*Income Taxes*.”

 

**7.**    **Earnings Per Common Share**

 

The following table showsthe information used in the calculation of basic and diluted earnings percommon

 

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share (in thousands,except number of shares and per share amounts):

 
| ** **                                                | ** ** | **For the  three months ended  September 30,** | ** ** | **For the  nine months ended  September 30,** | ** ** |
|-----------------------------------------------------------|------------|-----------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                                | ** ** | **2009**                                            | ** ** | **2008**                                           | ** ** | **2009** | ** ** | **2008** | ** ** |
| **Numerator — Basic and diluted:**                   |       |                                                |       |                                               |       |   |   |   |   |
| Net income                                                |       | $                                                   | 3,219      |                                               | $          | 19,907 |   | $ | 11,036 |   | $ | 35,211 |   |
| **Denominator:**                                          |       |                                                |       |                                               |       |   |   |   |   |
| Weighted average common shares outstanding — basic   |       | 68,435,550                                          |       | 68,318,162                                         |       | 68,422,738 |   | 68,308,921 |   |
| Add:     Stock options           |       | 74,058                                              |       | 26,288                                             |       | 130,117 |   | 26,513 |   |
| Add:     Stock grants            |       | 353,813                                             |       | 36,228                                             |       | 377,331 |   | 36,354 |   |
| Weighted average common shares outstanding — diluted |       | 68,863,421                                          |       | 68,380,678                                         |       | 68,930,186 |   | 68,371,788 |   |
| **Basic earning per common share:**                       |       |                                                |       |                                               |       |   |   |   |   |
| Net income — basic                                   |       | $                                                   | 0.05       |                                               | $          | 0.29 |   | $ | 0.16 |   | $ | 0.52 |   |
| **Diluted earning per common share:**                     |       |                                                |       |                                               |       |   |   |   |   |
| Net income — diluted                                 |       | $                                                   | 0.05       |                                               | $          | 0.29 |   | $ | 0.16 |   | $ | 0.51 |   |

 

The calculation ofearnings per common share is based on the weighted-average number of our commonshares outstanding during the applicable period. The calculation for dilutedearnings per common share recognizes the effect of all dilutive potential commonshares that were outstanding during the respective periods, unless their impactwould be anti-dilutive. We use the treasury stock method to calculate thedilutive effect of stock options and other common stock equivalents(potentially dilutive shares). These potentially dilutive shares include stockoptions and stock grants.  We did notinclude stock options to purchase zero and 37,960 shares of common stock in ourcomputation of diluted earnings per share in the three and nine months ending September 30,2009, respectively, as the effect of including such options would beanti-dilutive.  For the 2008 periodspresented above, we have not excluded any potentially dilutive shares from thecalculation of diluted earnings per share.

 

**8.**    **Commitments and Contingencies**

 

*Financing Commitments— Creditfacility*

 

On July 20, 2007, weentered into a revolving credit agreement with Wachovia Bank, NA, now owned byWells Fargo Company.  Borrowings underthe original credit agreement bore interest at a floating rate per annum equalto the one-month London Interbank Offered Rate (“LIBOR”) plus 2.0%. Theoriginal amount of the agreement was $50 million and all amounts payable underthis credit agreement were originally due and payable on September 30,2007. We have entered into several modification agreements with the lender toreduce the principal amount, change terms and extend the maturity.

 

On October 31, 2008,we modified the agreement to adjust the principal amount to a maximum of $40million, subject to several new covenants, to extend the maturity to April 30,2010, and to modify the interest rate. One of the new covenants is a maximumratio of debt (“Funded Debt”) to net income plus interest expense, incometaxes, depreciation and amortization (“EBITDA”) of 2.0 to 1.0. Another newcovenant is a minimum fixed charge coverage ratio of 1.5 to 1.0.

 

Until March 31,2009, the floating rate interest per annum was reduced to the one-month LIBORplus an additional amount (“Applicable Margin”) of 1.75%. Beginning with thequarter started April 1, 2009, the Applicable Margin is determinedquarterly based on the Funded Debt to EBITDA ratio calculated on a rolling fourquarter basis and varies from 1.75% to 2.75% depending on that ratio.

 

Accrued interest is dueand payable on a monthly basis, starting on November 30, 2008, and allprincipal is due and payable on April 30, 2010. Until the expiration date,we may borrow, repay and re-borrow amounts under the terms of the note as longas the total principal balance outstanding does not exceed $40 million.Additionally, in connection with the original credit agreement dated July 20,2007, we granted Wachovia Bank a security interest in all of our personalproperty, as defined in the credit agreement. Since its inception through thedate of this filing, we have not borrowed any amounts under the creditagreement.  As of September 30,2009, we are in compliance with all of our line of credit covenants.

 

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Shareholder Derivative Complaints

 

As previously reported, between March 27, 2008and May 28, 2008, various alleged shareholders filed derivative lawsuitsagainst former and current officers or board members wherein the plaintiffshareholders are seeking damages for the Company. The Company has been named anominal defendant in each derivative lawsuit. Four derivative lawsuits pendingin the United States District Court for the District of South CarolinaCharleston Division were consolidated on March 31,2009, under the caption “In Re Force Protection, Inc.  Derivative Litigation, Action No. 2:08-cv-01907-CWH”,three derivative lawsuits are pending in Charleston, South Carolina CircuitCourt, and one derivative lawsuit pending in Clark County, Nevada DistrictCourt has been stayed.  The plaintiffs in the derivative lawsuitstayed in Clark County, Nevada re-filed their lawsuit in Charleston,South Carolina Circuit Court on April 9, 2009.  An order to consolidatethe three shareholder derivative actions filed in Charleston, South CarolinaCircuit Court was issued by the Court on May 27, 2009.

 

The related class action lawsuits filed in the UnitedStates District Court for the District of South Carolina Charleston Divisionwere consolidated on June 10, 2008, under the caption ‘In Re ForceProtection, Inc. Securities Litigations, Action No. 2:08-cv-845-CWH.’ On September 29, 2009 the court denied defendants’ motion to dismiss theplaintiffs’ consolidated complaint in the consolidated class actions, and theparties will proceed with discovery.

 

CertainOther Disputes

 

As previously reported,on June 26, 2009 a temporary independent contractor whose services we hadterminated in 2007 filed a complaint against the Company in the United StatesDistrict Court for the District of South Carolina, Charleston Division as CivilAction No. 2:09cv1708-DCN-BM, which alleges a violation under the employeeprotection provisions of Section 806 of the Corporate and Criminal FraudAccountability Act of 2002, Title VIII of the Sarbanes-Oxley Act of 2002, 18U.S.C. §1514A. The former independent contractor alleges that we terminated hisengagement in retaliation for his allegation of certain corporate governance,government contracting, accounting and other irregularities.

 

Although we intend todefend ourselves in connection with the foregoing legal proceedings and claimsand the legal proceedings set forth in Part I, Note 14, *Commitments and Contingencies*, of our Annual Report on Form 10-Kfor the year ended December 31, 2008, there can be no assurance that wewill ultimately prevail in any of these matters.  Moreover, the defense of these claims andproceedings may result in substantial legal expenses and diversion of our management,and any settlement or adverse judgment may require us to make substantialpayments, any of which could have a material adverse effect on our business orfinancial position, results of operations, or cash flows.

 

We are also a party toother litigation which we consider routine and incidental to our business. Wemay be involved from time to time in other litigation that could have amaterial effect on our operations or finances. Other than the litigationdescribed above and in Part I, Note 14, *Commitmentsand Contingencies*, of our Annual Report on Form 10-K for theyear ended December 31, 2008, we are not aware of any pending orthreatened litigation against us that could have a material adverse effect onour business or financial position, results of operations, or cash flows.

 

**9.**    **Subsequent Events**

 

Subsequent events havebeen considered through November 9, 2009.

 

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**Item2. Management’s Discussion and Analysis of Financial Condition and Results ofOperations**

 

Management’s Discussionand Analysis of Financial Condition and Results of Operations (“MD&A”) isdesigned to provide information that is supplemental to, and should be readtogether with our unaudited condensed consolidated financial statements and theaccompanying notes included in this Quarterly Report on Form 10-Q. Information in this Item 2 is intended to assist the reader in obtaining anunderstanding of our unaudited condensed consolidated financial statements, thechanges in certain key items in those financial statements from period toperiod, the primary factors that accounted for those changes, and any knowntrends or uncertainties that we are aware of that may have a material effect onour future performance, as well as how certain accounting principles affect ourunaudited condensed consolidated financial statements.

 

**SPECIALNOTE REGARDING FORWARD-LOOKING STATEMENTS**

 

This Quarterly Report on Form 10-Qcontains both historical and forward-looking statements within the meaning of Section 27Aof the Securities Act of 1933, as amended (‘‘Securities Act’’), and Section 21Eof the United States Securities Exchange Act of 1934, as amended (“Exchange Act”). All statements other than statements of historical fact included in thisQuarterly Report on Form 10-Q that address activities, events ordevelopments that we expect, believe or anticipate will or may occur in thefuture are forward-looking statements including, in particular, the statementsabout our plans, objectives, strategies and prospects regarding, among otherthings, our financial position, results of operations, cash flows and business.We have identified some of these forward-looking statements with words likebelieve, may, will, should, expect, intend, plan, predict, anticipate, estimateor continue and other words and terms of similar meaning. These forward-lookingstatements include, among other things:

 

·                  statements regarding the growth of theUnited States and world market for blast- and ballistic-protected vehicles andour survivability products, services and solutions;

 

·                  statements regarding any changes in ourcost of sales, our general and administrative expenses or our research anddevelopment expenses;

 

·                  statements regarding the effect on ourfinancial statements of the adoption of new accounting standards;

 

·                  statements regarding the revenues thatmay be derived from, and the quantities of vehicles that may be purchased orordered pursuant to, existing or possible future contracts or orders by variouscustomers, including statements regarding the estimated value of those ordersand contracts and statements about the amount of vehicles in and the value ofour backlog;

 

·                  statements relating to the write-down ofthe Cheetah vehicle inventory and any potential sale or recovery of theremaining value of our Cheetah inventory;

 

·                  statements regarding our ability tostabilize our business to match our contract delivery order requirements,including the rebalancing of our work force to meet the demand for ourvehicles;

 

·                  statements regarding the amount ofcapital we will require in the future and our expectations regarding ourcapital expenditures;

 

·                  statements regarding the risk of defaulton our accounts receivable and the ability of our customers to fund defensecontracts and programs;

 

·                  statements regarding our plans for theuse of our product development and production facilities; and

 

·                  statements regarding the rate at which weproduce our vehicles, including orders for our Cougar and Buffalo vehicles andwhen we and Integrated Survivability Technologies Limited (“IST”) will produceWolfhound vehicles, and the date as of which we will achieve any particularmonthly production rate of these vehicles.

 

When used in thisQuarterly Report on Form 10-Q, except as specifically noted otherwise, theterm “Force Protection, Inc.” refers to Force Protection, Inc. only,and references  to the terms “Company,” “we,” “our,” “ours” and “us” referto Force Protection, Inc. and its consolidated subsidiaries.

 

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**Our Business**

 

***Overview***

 

Force Protection, Inc., together with itssubsidiaries, is a provider of blast- and ballistic-protected products used tosupport armed forces and security personnel in harm’s way and relatedsurvivability services and solutions.  We design, manufacture, test,deliver and support our blast- and ballistic-protected products with thepurpose to increase survivability of the users of the products.  Ourspecialty vehicles, which we believe are the forefront of blast- andballistic-protected technology, are designed to protect their occupants fromlandmines, hostile fire, and improvised explosive devices (“IEDs”).  Ourbusiness is heavily influenced by the needs of the United States military forblast- and ballistic-protected wheeled vehicles, and the increasing needs forsurvivability services and solutions. Our customers include all branches of the United States Department ofDefense (“DoD”) and through foreign military sales of the DoD, militarycustomers located in the United Kingdom, Iraq, Canada, Italy, and France, inaddition to our direct sales to the United Kingdom Ministry of Defence and theHungarian Ministry of Defense.

 

We are headquartered, andhave leased manufacturing facilities, in Ladson, South Carolina.  We have office space in Sterling Heights,Michigan, Edgefield, South Carolina, North Charleston, South Carolina,Arlington, Virginia and Bristol, United Kingdom.  We conduct our blast range, research anddevelopment activities and customer training requirements at properties locatedin Edgefield, South Carolina, Summerville, South Carolina and Roxboro, NorthCarolina.  We also have a vehicle supportfacility in Kuwait.

 

*Key Trends*

 

We expect that certainkey trends may affect our results of operations as compared to results reportedthrough 2008. Some of these trends include:

 

·                  The  reductionof combat forces using our vehicles in Iraq will reduce the operational tempoplaced on our fleet;

 

·                  Any increase in military forces deploying toAfghanistan will necessitate modifications to the vehicles and increasedsustainment and maintenance requirements;

 

·                  Declining defense budgets may have an impact onplanned future defense procurement needs; and

 

·                  Our current customers establishing long-term plans andvisibility for their fleet of our vehicles.

 

The main uncertaintyabout our future operations is whether we will continue to receive additionalorders or contracts for our vehicles and our survivability products, servicesand solutions.  Current orders for ourCougar variant vehicles will allow us to continue production through the fourthquarter of 2009 and for our Buffalo vehicles to extend production through thethird quarter of 2010.

 

Substantially all of our income has previously comefrom our United States government contracts either as a prime contractor or asa subcontractor to another prime contractor to the United States government.However, approximately 28% of our current vehicle backlog relates to oursubcontract with Integrated Survivability Technologies Limited to deliver baseWolfhound vehicles which will ultimately be delivered to the United KingdomMinistry of Defence.  We received andfulfilled a large number of vehicle orders from the United States militaryunder its Mine Resistant Ambush Protected (“MRAP”) program, which accounted forsubstantially all of the increase in our net sales during the year ended December 31,2008. These orders have resulted, in significant part, from the particularcombat situations encountered by the United States military in Iraq andAfghanistan, especially the use of improvised explosive devices, or IEDs, andexplosively formed projectiles, or EFPs, by enemy combatants. We cannot becertain, therefore, to what degree the United States military or other foreigngovernments will continue placing orders, and these orders may decrease significantlyor cease. The loss or significant reduction in government funding of a largeprogram in which we participate could also result in a material decrease to ourfuture sales, earnings and cash flows.

 

We have identified material weaknesses in our internalcontrol over financial reporting and have concluded that our disclosurecontrols were not effective as of September 30, 2009.  Although we have taken steps to correct ourmaterial weaknesses, we may still be subject to risks. If we are unsuccessfulin implementing or following our remediation plan, or fail to update ourinternal control over financial reporting as our business evolves, we may beunable to report financial information timely and accurately or to maintaineffective internal controls and

 

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procedures. There can be no assurance that, as a result of theseremediation efforts or otherwise, we will not identify other inaccuracies ineither our previous or future financial statements that will require amendmentsand restatements to those financial statements, which could have a materialadverse effect on us and the price of our common stock.

 

During 2008 and the firstnine months of 2009, we sought to stabilize our business to match our contractdelivery order requirements. We recognize that our business is changing, and inresponse, we are attempting to rebalance our workforce and manufacturing capacity.We may incur costs as a result of our efforts to recalibrate our business tomeet the needs of our customers.  We havemade, and continue to make, improvements in our accounting and financialsystems in order to accommodate our current and projected production levels andto support our government compliance requirements.  We are continuing to improve ouradministrative, operating, managerial, accounting and financial systems toaccommodate our current and projected production levels.

 

**Results of Operations**

 

The following discussionand analysis is based on our unaudited condensed consolidated statements ofoperations, which reflect our results of operations for the three- andnine-month periods ended September 30, 2009 and 2008 as prepared inaccordance with generally accepted accounting principles in the United Statesof America (“GAAP”).

 

***Comparison ofResults of Operations for the Three and Nine months Ended September 30,2009 and 2008***

 

The following tablepresents our results of operations for the three- and nine-month periods ended September 30,2009 and 2008 as well as the percentage change from year to year.

 
| ** **                           | ** ** | **For the three months ended September 30,** | ** ** | **For the nine months ended September 30,** | ** ** |
|--------------------------------------|------------|---------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                           | ** ** | ** **                                        | ** ** | ** **                                       | ** ** | **Percentage** | ** ** | ** ** | ** ** | ** ** | ** ** | **Percentage** | ** ** |
| **(in thousands)**              | ** ** | **2009**                                          | ** ** | **2008**                                         | ** ** | **Change** | ** ** | **2009** | ** ** | **2008** | ** ** | **Change** | ** ** |
| Net sales                            |       | $                                                 | 316,164    |                                             | $          | 343,309 |   | -8 | % | $ | 688,014 |   | $ | 1,087,273 |   | -37 | % |
| Cost of sales                        |       | 289,628                                           |       | 279,532                                          |       | 4 | % | 598,863 |   | 947,814 |   | -37 | % |
| Gross profit                         |       | 26,536                                            |       | 63,777                                           |       | -58 | % | 89,151 |   | 139,459 |   | -36 | % |
| General and  administrative expenses |       | 19,196                                            |       | 27,817                                           |       | -31 | % | 60,219 |   | 73,967 |   | -19 | % |
| Research and  development expenses   |       | 4,239                                             |       | 4,306                                            |       | -2 | % | 13,736 |   | 10,205 |   | 35 | % |
| Operating income                     |       | 3,101                                             |       | 31,654                                           |       | -90 | % | 15,196 |   | 55,287 |   | -73 | % |
| Other income,  net                   |       | 252                                               |       | 440                                              |       | -43 | % | 57 |   | 1,411 |   | -96 | % |
| Interest expense,  net               |       | (46                                               | )          | (2                                               | )          | 2200 | % | (79 | ) | (225 | ) | -65 | % |
| Income before  income tax expense    |       | 3,307                                             |       | 32,092                                           |       | -90 | % | 15,174 |   | 56,473 |   | -73 | % |
| Income tax  expense                  |       | (88                                               | )          | (12,185                                          | )          | -99 | % | (4,138 | ) | (21,262 | ) | -81 | % |
| Net income                           |       | $                                                 | 3,219      |                                             | $          | 19,907 |   | -84 | % | $ | 11,036 |   | $ | 35,211 |   | -69 | % |

 

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*Units sold*

 

The following tablepresents our vehicle shipments for the three- and nine-month periods ended September 30,2009 and 2008 as well as the percentage change from year to year.

 
| ** **             | ** ** | **For the three months ended September 30,** | ** ** | **For the nine months ended September 30,** | ** ** |
|------------------------|------------|---------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **             | ** ** | ** **                                        | ** ** | ** **                                       | ** ** | **Percentage** | ** ** | ** ** | ** ** | ** ** | ** ** | **Percentage** | ** ** |
| **(units  sold)**      | ** ** | **2009**                                          | ** ** | **2008**                                         | ** ** | **Change** | ** ** | **2009** | ** ** | **2008** | ** ** | **Change** | ** ** |
| Buffalo                |       | 51                                                |       | 22                                               |       | 132 | % | 80 |   | 71 |   | 13 | % |
| Cougar (all  variants) |       | 59                                                |       | 422                                              | *          | -86 | % | 203 |   | 1,737 | * | -88 | % |
| Cheetah                |       | —                                            |       | —                                           |       | n/m |   | 5 |   | — |   | n/m |   |
| Total units sold       |       | 110                                               |       | 444                                              |       | -75 | % | 288 |   | 1,808 |   | -84 | % |

 

----

n/m—not meaningful

 

* Includes 140 and 861vehicles produced by GDLS for the three and nine months ended September 30,2008, respectively. This balance excludes 53 and 80 Iraqi Light ArmoredVehicles (“ILAV”) for the three and nine months ended September 30, 2008,respectively, for which we act as a subcontractor to primarily provide laboronly for a portion of the production of the vehicles.

 

The decrease in vehiclessold for the three- and nine-month comparative periods is primarily due to thecompletion of the sole source and competitive contracts awarded to us under theMRAP program during 2008.

 

*Net sales*

 

The decrease in net salesfrom the comparative periods is attributable to a decrease in volume of vehicledeliveries, partially offset by an increase in sales of spare parts andlogistics services, which includes field service representatives, training,modernization efforts, ILAV subcontractor revenues and technical publications.The mix of vehicles delivered and spare parts and logistics sales and thepercentage change in the comparative periods are set forth in the followingtable:

 
|                       |   | **For the three months ended September 30,** |       | **For the nine months ended September 30,** |       |
|----------------------------|--------|---------------------------------------------------|------------|--------------------------------------------------|------------|
|                       |   | ** **                                        | ** ** | ** **                                       | ** ** | **Percentage** |   | ** ** | ** ** | ** ** | ** ** | **Percentage** |   |
| **(in  thousands)**        |   | **2009**                                          | ** ** | **2008**                                         | ** ** | **Change** |   | **2009** | ** ** | **2008** | ** ** | **Change** |   |
| Buffalo                    |   | $                                                 | 51,252     |                                             | $          | 15,612 |   | 228 | % | $ | 80,682 |   | $ | 49,272 |   | 64 | % |
| Cougar (all  variants)     |   | 34,911                                            | *          | 255,508                                          | *          | -86 | % | 108,891 | * | 882,534 | * | -88 | % |
| Cheetah                    |   | —                                            |       | —                                           |       | n/m |   | 3,362 |   | — |   | n/m |   |
| Spare parts and  logistics |   | 230,001                                           |       | 72,189                                           |       | 219 | % | 495,079 |   | 155,467 |   | 218 | % |
|                       |   | $                                                 | 316,164    |                                             | $          | 343,309 |   | -8 | % | $ | 688,014 |   | $ | 1,087,273 |   | -37 | % |

 

----

n/m—not meaningful

 

* Excludes revenue from the ILAV for which we act as asubcontractor to primarily provide labor only for a portion of the productionof the Cougar (all variants) and related spare parts and logistics revenue. Asa result, we have recorded $0.0 million and $0.4 million and $4.0 million and$10.1 million from Cougar (all variants) to spare parts and logistics revenuefor the three and nine months ended September 30, 2009 and September 30,2008, respectively.

 

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*Cost of sales and Gross profit*

 
|                                  |   | **For the  three months ended September 30,** |       | **For the  nine months ended September 30,** |       |
|---------------------------------------|--------|----------------------------------------------------|------------|---------------------------------------------------|------------|
| **(in  thousands)**                   |   | **2009**                                           | ** ** | **2008**                                          | ** ** | **2009** | ** ** | **2008** |   |
| Cost of sales                         |   | $                                                  | 289,628    |                                              | $          | 279,532 |   | $ | 598,863 |   | $ | 947,814 |   |
| Gross profit                          |   | $                                                  | 26,536     |                                              | $          | 63,777 |   | $ | 89,151 |   | $ | 139,459 |   |
| Gross profit  percentage of net sales |   | 8.4                                                | %          | 18.6                                              | %          | 13.0 | % | 12.8 | % |

 

The gross profitpercentage decreased for the three months ended September 30, 2009, overthe comparable 2008 period, primarily due to the $19.3 million Cheetah charge($18.2 million of inventory and $1.1 million of other associated costs), aprice increase on Cougar MRAP vehicles delivered in 2008, manufacturing costsassociated with fewer vehicles produced, and increased severance costs relatedto our 2009 cost reduction initiative.  **The gross profitpercentage slightly increased for the nine months ended September 30,2009, over the comparable 2008 period. The increase was primarily due to theabsence of GDLS sales in 2009 and a price increase on Cougar MRAP vehiclesdelivered in 2008, partially offset by the $19.3 million of Cheetah expenses($18.2 million of inventory and $1.1 million of other associated costs) and**manufacturingcosts associated with fewer vehicles produced**.  During the three and ninemonths ended September 30, 2008, we recognized**minimal gross profit on $106.9 million and $446.6 million, respectively, ofvehicles sold that were produced by GDLS. There were no vehicles produced byGDLS under the MRAP Subcontract during the three and nine months ended September 30,2009.

 

*General and administrative expenses*

* *
| ** **                           | ** ** | **For the three months ended September 30,** | ** ** | **For the nine months ended September 30,** | ** ** |
|--------------------------------------|------------|---------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                           | ** ** | **2009**                                          | ** ** | **2008**                                         | ** ** | **2009** | ** ** | **2008** | ** ** |
| General and  administrative expenses |       | $                                                 | 19,196     |                                             | $          | 27,817 |   | $ | 60,219 |   | $ | 73,967 |   |
| As a percentage  of net sales        |       | 6.1                                               | %          | 8.1                                              | %          | 8.8 | % | 6.8 | % |
|                                      |            |                                                   |            |                                                  |            |  |  |  |  |  |  |  |  |

 

General andadministrative expenses decreased $8.6 million and $13.7 million for the threeand nine months ended September 30, 2009, respectively, from thecomparable 2008 periods.  The $8.6million decrease for the three months ended September 30, 2009 from thecomparative 2008 period is primarily due to the decrease in legal, accountingand other service fees, partially offset by an increase in advertising andmarketing costs.  The $13.7 milliondecrease for the nine months ended September 30, 2009 from the comparative2008 period is primarily due to the $4.9 million impairment charge for certainRoxboro, North Carolina assets and the $1.5 million contribution to the MedicalUniversity of South Carolina Foundation for brain trauma research, which bothoccurred in the first quarter of 2008, and the decrease in legal, accountingand other service costs, which occurred during the first nine months of2009.  These decreases were partiallyoffset by $3.2 million of 2006 re-audit costs during the first quarter of 2009and the $0.7 million impairment charge for certain custom machines that bothwere incurred in the second quarter of 2009.

 

*Research and development expenses*

 
| ** **                         | ** ** | **For the three months ended September 30,** | ** ** | **For the nine months ended September 30,** | ** ** |
|------------------------------------|------------|---------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                         | ** ** | **2009**                                          | ** ** | **2008**                                         | ** ** | **2009** | ** ** | **2008** | ** ** |
| Research and  development expenses |       | $                                                 | 4,239      |                                             | $          | 4,306 |   | $ | 13,736 |   | $ | 10,205 |   |
| As a percentage  of net sales      |       | 1.3                                               | %          | 1.3                                              | %          | 2.0 | % | 0.9 | % |
|                                    |            |                                                   |            |                                                  |            |  |  |  |  |  |  |  |  |

 

Research and developmentexpenses were relatively flat in the three months and increased $3.5 million inthe nine months ended September 30, 2009, respectively, over thecomparable periods in 2008.  The increasefor the nine-month comparative period ended September 30, 2009 wasprimarily due to an increased level of expenditures on the Cheetah, Ocelot andother prototypes.

 

*Other income, net*

 

Other income decreased inthe three and nine months ended September 30, 2009, as compared to the2008 periods, due to lower interest income as a result of decreased interestrates coupled with a $0.2 million gain and a $0.3 million loss on our IST jointventure in the three and nine months ended September 30, 2009, respectively.  See Note 1, *Organizationand Description of the Business*, in the accompanying unauditedcondensed consolidated financial statements.

 

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*Interest expense, net*

 

Interest expense wasrelatively flat for the three and nine months ended September 30, 2009, ascompared to the 2008 periods.

 

*Income tax expense*

 

The effective income taxexpense percentages for the three and nine months ended September 30, 2009were approximately 2.7% and 27.3%, respectively, compared to the effectiveincome tax expense of approximately 38% for each of the comparable 2008periods.  See Note 6,*Income Taxes*,in the accompanying unaudited condensed consolidated financial statements.

 

*Net income*

 
| ** **                                               | ** ** | **For the three months ended September 30,** | ** ** | **For the nine months ended September 30,** | ** ** |
|----------------------------------------------------------|------------|---------------------------------------------------|------------|--------------------------------------------------|------------|
| **(in thousands, except per share)** | ** ** | **2009**                                          | ** ** | **2008**                                         | ** ** | **2009** | ** ** | **2008** | ** ** |
| Net income                                               |       | $                                                 | 3,219      |                                             | $          | 19,907 |   | $ | 11,036 |   | $ | 35,211 |   |
| Diluted earnings  per share                              |       | $                                                 | 0.05       |                                             | $          | 0.29 |   | $ | 0.16 |   | $ | 0.51 |   |

 

Net income for the threeand nine months ended September 30, 2009 decreased over the comparable2008 periods primarily due to a decrease in our revenue and the $19.3 millionCheetah charge that we incurred during the third quarter of 2009 relating tothe write-down of inventory ($18.2 million) and associated costs ($1.1million).

 

*Backlog*

 

The following table setsforth the number of vehicles included in our backlog as of September 30,2009 and 2008.  The backlog shown in the following table is “funded”backlog, meaning that it reflects vehicles for which we have received ordersand for which funding has been appropriated and authorized for expenditure bythe applicable customer. We cannot assure you that we will deliver or sell allof the vehicles included in our backlog. See Part I, Item 1A, RiskFactors, included in our Annual Report on Form 10-K for the year ended December 31,2008.

 
| ** **                   | ** ** | **Vehicle Funded Backlog  as of September 30,** | ** ** |
|------------------------------|------------|------------------------------------------------------|------------|
| ** **                   | ** ** | **2009**                                             | ** ** | **2008** | ** ** |
| Buffalo                      |       | 99                                                   |       | 7 |   |
| Cougar MRAP  (Competitive)*  |       | —                                               |       | 116 |   |
| Mastiff                      |       | —                                               |       | 73 |   |
| Ridgback                     |       | —                                               |       | 136 |   |
| Wolfhound                    |       | 42                                                   |       | — |   |
| Cougar (all  other variants) |       | 10                                                   |       | 3 |   |
| Total                        |       | 151                                                  |       | 335 |   |

 

----

*  Refers to Cougar vehicles manufactured underthe MRAP Subcontract pursuant to which we and GDLS fulfill the MRAP CompetitiveContract.

 

**Liquidity and Capital Resources**

 

Our liquidity andavailable capital resources are impacted by operating, financing and investingactivities.  Our principal sources of liquidity are cash on hand and cash fromoperations, primarily from the United States government.

 

*Sources and Uses of Cash*

 

Our primary sources offunding are cash flows from operations. Our funds were used primarily to fundworking

 

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capital requirements and make capital expenditures. The following chartshows the cash flows provided by or used in operating, investing, and financingactivities for the nine months ended September 30, 2009 and 2008:

 
| ** **                                           | ** ** | **For the nine months ended September 30,** | ** ** |
|------------------------------------------------------|------------|--------------------------------------------------|------------|
| **(in thousands)**                              | ** ** | **2009**                                         | ** ** | **2008** | ** ** |
| Net cash  provided by (used in) operating activities |       | $                                                | 21,924     |   | $ | (1,339 | ) |
| Net cash used in  investing activities               |       | (20,885                                          | )          | (10,041 | ) |
| Net cash used in  financing activities               |       | (91                                              | )          | (219 | ) |
| Increase  (decrease) in cash and cash equivalents    |       | $                                                | 948        |   | $ | (11,599 | ) |

 

As of September 30,2009, we had $111.9 million of cash and cash equivalents, a slight increasefrom $111.0 million as of December 31, 2008, and an increase from $79.4million at September 30, 2008.

 

*CashFlows from Operating Activities*

 

Cash provided byoperating activities increased by $23.3 million during the first nine months of2009 compared with the first nine months of 2008.

 

Below are the significantchanges in working capital for the first nine months of 2009:

 

Increases to *Cash Flows from Operating Activities*:

 

Working capitalliabilities:

 

(1)          an increase in accounts payable of $90.9 millionprimarily resulting from increased inventory and the timing of purchases andrelated payments; and

 

(2)          an increase in advance payments on contracts of $35.8million primarily resulting from customer advances received on contracts forISS kits and Wolfhound vehicles.

 

Decreases to *Cash Flows from Operating Activities*:

 

Working capital assets:

 

(1)          an increase in accounts receivable of $78.5 millionresulting primarily from (a) the increase in our earned and unbilledaccounts receivable balance during the first nine months of 2009, (b) thetiming of sales (a higher portion of third quarter 2009 shipments were madenear the end of the period in comparison to the fourth quarter of 2008) and (c) highernet sales in the third quarter of 2009 as compared to fourth quarter 2008;

 

(2)          a net increase in inventories of $45.1 millionresulting primarily from the purchase of raw materials to be used in theproduction of Independent Suspension System kits and finished goods inventoryfor the Wolfhound tactical support vehicle;

 

(3)          an increase in advances to subcontractor of $5.2million resulting from the advance payments for the  Independent Suspension System (“ISS”) kits;and

 

(4)          an increase in prepaid income taxes of $4.6 millionresulting from a federal income tax payment made during the first nine monthsof 2009.

 

Working capitalliabilities:

 

(1)          a decrease in the amount due to the United Statesgovernment of $5.3 million, primarily due to a $28.6 million payment during thethird quarter of 2009, partially offset by increased definitization reserverequirements for vehicles sold under the DoD’s foreign military sales contractsand MRAP-related spare parts sales; and

 

(2)          a decrease in other current liabilities of $6.7million primarily resulting from a decrease in income taxes payable, warrantyreserve  and royalty accural.

 

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*CashFlows from Investing Activities*

 

Cash used in investingactivities increased by $10.8 million during the first nine months of 2009compared with the first nine months of 2008 due to a $10.0 million investmentin marketable securities consisting of held-to-maturity (180-day) treasurybills and a $2.1 million investment in IST, our joint venture with NP Aerospace(“NPA”), partially offset by reduced capital expenditures.

 

*CashFlows from Financing Activities*

 

Cash used infinancing activities was relatively flat during the first nine months of 2009compared with the first nine months of 2008 due to minimal stock optionexercises and a minimal change in other long-term liabilities.

 

*CurrentLiquidity and Capital Resources*

 

Our cash and cashequivalents as of September 30, 2009 were held for working capitalpurposes and were invested primarily in short-term United States Treasury billsand money market funds.  Our marketablesecurities balance as of September 30, 2009 consisted of a 180-dayinvestment in United States Treasury bills and was classified asheld-to-maturity.  We do not enter intoinvestments for trading or speculative purposes.

 

During 2008, we expendedapproximately $16.3 million to complete the expansion of our manufacturingcapability and capacity and to upgrade our information technologyinfrastructure.  We have not had any significant capital expenditures formanufacturing to date during 2009 and we do not expect any significantexpenditures in the remainder of 2009. During the first nine months of 2009, capital expenditures was $8.7million, mostly due to upgrades of our information technology infrastructure aswell as leasehold improvements.

 

The amount of capitalthat we will require depends on several factors, including without limitation,the extent and timing of sales of our products, performance-based payments,inventory costs, costs of raw materials and components, labor costs, costs ofimproving our financial and accounting systems, the timing and costs associatedwith the expansion of our manufacturing, development, engineering and customersupport capabilities, the timing and cost of our product development andenhancement activities and our operating results. We currently estimate thatthe cash flow will be sufficient to meet our presently budgeted capitalexpenditures and our other presently anticipated cash needs for the year endingDecember 31, 2009.  In addition, wehave available to us a $40 million line of credit, which expires on April 30,2010. After that time, we expect that we may need to obtain additional sourcesof capital, which may include borrowings or the issuance of debt or equitysecurities, including common stock, and there can be no assurance that suchfinancing will be available to us when we need it or, if available, that theterms of any such financing will be satisfactory to us and not dilutive to ourshareholders. Any failure to obtain necessary capital as and when requiredcould have a material adverse effect on our business, prospects, financialposition, results of operations and cash flows.

 

**Off-BalanceSheet Arrangements**

 

In accordance with thedefinition under SEC rules and regulations, the following qualify as off-balancesheet arrangements:

 

·                  any obligation under certain guaranteesor contracts;

 

·                  a retained or contingent interest inassets transferred to an unconsolidated entity or similar entity or similararrangement that serves as credit, liquidity, or market risk support to thatentity for such assets;

 

·                  any obligation under certain derivativeinstruments; and

 

·                  any obligation under a material variableinterest held by the registrant in an unconsolidated entity that providesfinancing, liquidity, market risk, or credit risk support to the registrant, orengages in leasing, 

 

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hedging, or research and development services with theregistrant.

 

The following discussionaddresses each of the above items for the Company.

 

As of September 30,2009, we did not have any obligation under certain guarantees or contracts asdefined above.

 

As of September 30,2009, we did not have any retained or contingent interest in assets as definedabove.

 

As of September 30,2009, we did not hold derivative financial instruments, as defined by FASBAccounting Standards Codification Topic 815, “*Derivativesand Hedging*.”

 

As part of our ongoingbusiness, we do not participate in transactions that generate relationshipswith unconsolidated entities or financial partnerships, such as entities oftenreferred to as structured finance or special purpose entities (“SPEs”), whichwould have been established for the purpose of facilitating off-balance sheetarrangements or other contractually narrow or limited purposes. As of September 30,2009 and December 31, 2008, we were not involved in any unconsolidated SPEtransactions.

 

**ContractualObligations**

 

We have future obligationsunder various contracts relating to debt and interest payments, operatingleases, and purchase obligations.  During the nine months ended September 30,2009, there were no significant changes to these obligations as reported in ourAnnual Report on Form 10-K for the year ended December 31, 2008,except that our purchase obligations increased to $172.6 million as of September 30,2009, from $117.5 million as of December 31, 2008.  The increase in purchase obligations as of September 30,2009 was primarily due to purchase orders for approximately $124.0 millionrelated to orders for the Independent Suspension Systems kits.

 

**CriticalAccounting Policies and Estimates**

 

For the quarterly periodended September 30, 2009, there were no significant changes in criticalaccounting policies and estimates from those disclosed in our Annual Report on Form 10-Kfor the year ended December 31, 2008 filed with the SEC on March 26,2009.

 

**NewAccounting Pronouncements**

 

For the quarterly periodended September 30, 2009, there were no new accounting pronouncements thatwe anticipate would have a material effect on our consolidated financialposition, results of operations and cash flows since those disclosed in ourAnnual Report on Form 10-K for the year ended December 31, 2008 filedwith the SEC on March 26, 2009.

 

**Item3. Quantitative and Qualitative Disclosures About Market Risk**

 

**CommodityPrices**

 

We are exposed to marketrisk from changes in commodity prices. If the price of steel increasessignificantly, the cost of our products could increase. It is unlikely we willbe able to pass on this cost under our current contracts. As a result, if thecost of our raw materials increases, our profitability, if any, could decrease.

 

**ForeignCurrency**

 

The majority of ourbusiness is denominated in United States dollars and, as such, movement in theforeign currency markets will have a minimal direct impact on our business.

 

**InterestRates**

 

We do not have a tradingportfolio and although our current financing is at a variable rate, we do nothave any borrowings under the arrangement.  As a result, we are notcurrently directly at risk of interest rate fluctuations. As our financingneeds change in the future, interest rate risk may become a more significantissue for us.

 

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Currently, we do not useany derivative financial instruments for the purpose of reducing our exposureto adverse fluctuations in interest rates, foreign currency exchange, orcommodity prices. We are not a party to leveraged derivatives nor do we hold orissue financial investments for speculative purposes.

 

**Item 4. Controls and Procedures**

 

**Evaluation of Disclosure Controls andProcedures**

 

Disclosure controls and procedures are controls andother procedures that are designed to provide reasonable assurance that theinformation required to be disclosed in reports filed or submitted under theExchange Act, is recorded, processed, summarized and reported within thetime periods specified in the rules and forms of the SEC and accumulatedand communicated to management, including the chief executive officer and chieffinancial officer, as appropriate to allow timely decisions regarding requireddisclosure.

 

In connection with thepreparation of this Quarterly Report on Form 10-Q for the period ended September 30,2009, members of our management, at the direction (and with the participation)of our chief executive officer and chief financial officer, performed anevaluation of the effectiveness of the design and operation of our disclosurecontrols and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) underthe Exchange Act), as of September 30, 2009. Based on that evaluation, ourchief executive officer and chief financial officer concluded that ourdisclosure controls and procedures were not effective at a reasonable assurancelevel as of September 30, 2009, because of the material weaknesses in ourinternal control over financial reporting identified and discussed in ourAnnual Report on Form 10-K for the year ended December 31, 2008 filedwith the SEC on March 26, 2009.

 

Notwithstanding thesematerial weaknesses described in the Annual Report on Form 10-K for theyear ended December 31, 2008, management has concluded that our unauditedcondensed consolidated financial statements included in this report presentfairly, in all material respects, Force Protection’s financial position andresults of operations and cash flows for the periods presented in conformitywith United States generally accepted accounting principles (“GAAP”).

 

Based on our assessmentand the criteria discussed above, our management, including our chief executiveofficer and chief financial officer, concluded that our disclosure controls andprocedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) underthe Exchange Act) were not effective as of September 30, 2009 as a resultof the following material weaknesses:

 

*Accountingfor revenue recognition*—We did not maintain effective controls over the completeness andaccuracy of revenue, accounts receivable and related reserves. Specifically,effective controls were not designed and in place to ensure that sales orderswere complete, accurate and recorded on a timely basis. Further,reconciliations were not completed in a timely manner to ensure the accuracy ofrevenue recognition.

 

*Inadequatemonitoring of non-routine and non-systematic transactions* —We did not have effective controls inplace to monitor and accurately record non-routine and non-systematictransactions. During the fourth quarter of 2008, we implemented additionalprocesses for reviewing and monitoring non-routine business activities withinour financial statement close process. These processes have not been in placefor an adequate period of time for us to determine whether this materialweakness has been adequately addressed.

 

**Changesin Internal Control Over Financial Reporting**

 

There were no changes inour internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the period covered by thisreport that have materially affected, or are reasonably likely to materiallyaffect, our internal control over financial reporting.

 

**Remediationof Remaining Material Weaknesses**

 

As previouslydisclosed under “Item 9A—Controls and Procedures” in our Annual Report on Form 10-Kfor the fiscal year ended December 31, 2008, we concluded that ourinternal control over financial reporting was not effective based on thematerial weaknesses identified.  Duringthe first nine months of 2009, we continued our

 

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ongoing effort toremediate the two material weaknesses that existed as of December 31,2008.

 

Although there were nosignificant changes in our internal control over financial reporting during thefirst nine months of 2009, we have engaged in, and continue to engage in,substantial efforts to improve our internal control over financial reportingand disclosure controls and procedures related to our financial statements anddisclosures. These efforts include the following: strengthening the processesand controls over sales order maintenance and invoicing, timeliness ofreconciliations, and monitoring of revenue, accounts receivable and relatedreserves. This is accomplished with the addition of professional staff with theskills and experience needed for a public company of our size and complexity.

 

Management will considerthe design and operating effectiveness of these actions and will makeadditional changes it determines appropriate.

 

The effectiveness ofForce Protection’s or any system of disclosure controls and procedures andinternal control over financial reporting is subject to certain limitations,including the exercise of judgment in designing, implementing, and evaluatingthe controls and procedures, the assumptions used in identifying the likelihoodof future events, and the inability to eliminate misconduct completely. As aresult, our disclosure controls and procedures and internal control overfinancial reporting may not prevent all errors or improper acts or ensure thatall material information will be made known to appropriate management in atimely fashion.

 

**PART II. OTHER INFORMATION**

 

**ITEM 1.  LEGAL PROCEEDINGS**

 

Shareholder Derivative Complaint

 

As previously reported,between March 27, 2008 and May 28, 2008, various alleged shareholdersfiled derivative lawsuits against former and current officers or board memberswherein the plaintiff shareholders are seeking damages for the Company. TheCompany has been named a nominal defendant in each derivative lawsuit. Fourderivative lawsuits pending in the United States District Court for theDistrict of South Carolina Charleston Division were consolidated on March 31,2009, under the caption “In Re Force Protection, Inc.  Derivative Litigation, Action No. 2:08-cv-01907-CWH”,three derivative lawsuits are pending in Charleston, South Carolina CircuitCourt, and one  derivative lawsuit pending in Clark County, NevadaDistrict Court has been stayed.  The plaintiffs in the derivativelawsuit stayed in Clark County, Nevada re-filed their lawsuit inCharleston, South Carolina Circuit Court on April 9, 2009.  An orderto consolidate the three shareholder derivative actions filed in Charleston,South Carolina Circuit Court was issued by the Court on May 27, 2009.

 

The related class actionlawsuits filed in the United States District Court for the District of SouthCarolina Charleston Division were consolidated on June 10, 2008, under thecaption ‘In Re Force Protection, Inc. Securities Litigations, Action No. 2:08-cv-845-CWH.’ On September 29, 2009 the court denied defendants’ motion to dismiss theplaintiffs’ consolidated complaint in the consolidated class actions, and theparties will proceed with discovery.

 

CertainOther Disputes

 

As previously reported,on June 26, 2009 a temporary independent contractor whose services we hadterminated in 2007 filed a complaint against the Company in the United StatesDistrict Court for the District of South Carolina, Charleston Division as CivilAction No. 2:09cv1708-DCN-BM, which alleges a violation under the employeeprotection provisions of Section 806 of the Corporate and Criminal FraudAccountability Act of 2002, Title VIII of the Sarbanes-Oxley Act of 2002, 18U.S.C. §1514A. The former independent contractor alleges that we terminated hisengagement in retaliation for his allegation of certain corporate governance,government contracting, accounting and other irregularities.

 

Although we intend todefend ourselves in connection with the foregoing legal proceedings and claimsand the legal proceedings set forth in Part I, Item 3 of our Annual Reporton Form 10-K for the year ended December 31, 2008, there can be noassurance that we will ultimately prevail in any of these matters.  Moreover, the defense of these claims andproceedings may result in substantial legal expenses and diversion of ourmanagement, and any settlement or adverse judgment may require us to makesubstantial payments, any of which could have a material adverse effect on ourbusiness or financial position, results of operations, or cash flows.

 

We are also a party toother litigation which we consider routine and incidental to our business. Wemay be

 

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involved from time totime in other litigation that could have a material effect on our operations orfinances. Other than the litigation described above and in Part I, Item 3of our Annual Report on Form 10-K for the year ended December 31,2008, we are not aware of any pending or threatened litigation against us thatcould have a material adverse effect on our business or financial position,results of operations, or cash flows.

 

**Item1A. Risk Factors**

 

In addition to the otherinformation set forth in this Quarterly Report on Form 10-Q and the riskfactors discussed below, you should carefully consider the risk factorsdiscussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-Kfor the year ended December 31, 2008 filed with the SEC on March 26,2009, which could materially affect our business, financial condition or futureresults. The risks described in our Annual Report on Form 10-K and asdescribed below are not the only risks facing Force Protection. Additionalrisks and uncertainties not currently known to us or that we currently deem tobe immaterial also may materially adversely affect our business, financialcondition, operating results or cash flows.

 

# ***We areexpanding international operations, the conduct of which subjects us to risksthat may have a material adverse effect on our business.***

# ** **

Expanding internationalsales and operations is a part of our growth strategy.  In the second quarter of 2009, through our50% owned joint venture, IST, we received awards from the United KingdomMinistry of Defence, and we began operations in the United Kingdom.  In March 2009, IST executed an officelease in Bristol, United Kingdom and in May 2009 Force ProtectionIndustries, Inc. signed an agreement to sublease a vehicle supportfacility in Kuwait.  Internationaloperations and sales are subject to various risks, including political,religious and economic instability, local labor market conditions, theimposition of foreign tariffs and other trade barriers, the impact of foreigngovernment regulations and the effects of income and withholding taxes,governmental expropriation and differences in business practices. We may incurincreased costs and experience delays or disruptions in product deliveries andpayments in connection with international manufacturing and sales that couldcause loss of revenues and earnings. In addition, we are increasingly subjectto export control regulations, including, without limitation, the United StatesExport Administration Regulations and the International Traffic in Arms Regulations.Unfavorable changes in the political, regulatory and business climate couldhave a material adverse effect on our net sales, financial condition,profitability and/or cash flows.

 

***Our limited control over our joint ventures andsubcontractors may delay or prevent us from implementing our business strategywhich may adversely affect our financial results.***

 

We are currently aparty to a joint venture arrangement with NPA, subcontract arrangements withGDLS and BAE Land Systems for the award and production of our vehicles, and asubcontract with Oshkosh for upgrades of our vehicles.  We may also enter into additional jointventures or similar subcontract arrangements in the future, and some of ourpartners and subcontractors are our competitors.  Pursuant to the terms of IST, our jointventure with NPA, we share control over significant decisions with our jointventure partner.  For example, inconnection with the contract awarded to IST, NPA, our joint partner, and otherUnited Kingdom subcontractors will perform services and or supply goods for thecompletion of the Wolfhound, including but not limited to program management,system engineering design, integration, armor supply and commissioning andinstalling armor equipment.  Because wehave shared control over our joint ventures, we may not be able to require ourpartners to take actions that we believe are necessary to implement ourbusiness strategy. Accordingly, this limited control could have a materialadverse effect on our financial results.

 

Under our jointventure agreement with NPA, we may be jointly and severally liable to customersfor the performance of the entire contract and any non-performance by oursubcontractors on the project is our responsibility to the customer.  If our partner or subcontractor in sucharrangement fails to fulfill its obligations, we could be responsible to thecustomer and would have to rely on our ability to obtain reimbursement fromour  partner or subcontractor for our costs,over and above any reimbursement which may be due from the customer. Obtainingsuch reimbursement could require us to engage in litigation and could take asubstantial amount of time and could require us to expend significantresources. If our partner or subcontractor becomes insolvent or ceasesoperations, we might not be able to obtain reimbursement.  We also face risks through our equity methodinvestment in IST, which we do not control.

 

***We have started the manufacture and production of certain of ourproducts for which we have no orders. If we do not receive orders for thoseproducts, we may incur losses and be required to write-off significant amounts.***

 

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At times, if webelieve that there is a probability of selling certain of our vehicles orproducts, we may commence the manufacture and production of such items withoutorders.  We have in the past, and may doso in the future, commence the manufacture and production of our vehicles andproducts, and incur expenses for components, raw materials, and other expenseswithout any orders from customers to purchase the vehicles and products wemanufacture.  We may experiencedifficulties, expenses and delays in starting up production for these vehiclesif we have no prior experience in manufacturing such vehicles and products incommercial quantities and it may take a substantial period of time for us andour employees to achieve requisite efficiencies in producing such vehicles orproducts.  In the event that we do notreceive orders for these vehicles or products, we may have excess inventory andincur losses, and, as a result, our business, financial position, results ofoperations, or cash flows may be affected.

 

In anticipation ofreceiving orders from TACOM pursuant to the M-ATV competition, we began toprocure materials and fabricate parts for the manufacture of approximately 50Cheetah vehicles.  On June 30, 2009,we were informed by TACOM that our Cheetah vehicle was not selected for theM-ATV competition.  We incurred expensesfor components, materials, and other expenses related to the procurement,fabrication and initial production of approximately 50 Cheetah vehicles withoutany orders to purchase these vehicles. In the third quarter of 2009, we wrote-down $18.2 million of Cheetahvehicles in inventory to reflect our estimate of the current market value ofthis inventory.  We also incurred otherassociated costs related to the Cheetah vehicles submitted for the M-ATVcompetition of approximately $1.1 million.

 

**Item2. Unregistered Sales of Equity Securities and Use of Proceeds**

 

**Purchasesof Equity Securities by the Issuer and Affiliated Purchasers**

 

The followingtable sets forth purchases of our common stock for the three months ended September 30,2009:

 
| **Period**                                        | ** ** | **(a) Total Number  of   Shares Purchased** | ** ** | **(b) Average  Price   Paid Per Share** | ** ** | **(c) Total Number of  Shares Purchased as  Part of Publicly  Announced   Plans or Programs** | ** ** | **(d)  Maximum  Number of Shares  that May Yet Be  Purchased   Under the   Plans or Programs** | ** ** |
|---------------------------------------------------|------------|--------------------------------------------------|------------|----------------------------------------------|------------|---------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------|------------|
| September 1,  2009 - September 30, 2009 |       | 485                                              |       | $                                            | 5.46       |                                                                                                    | —     |                                                                                                     | —     |   |
|                                                   |            |                                                  |            |                                              |            |                                                                                                         |            |                                                                                                          |            |  |

 

Pursuant to anemployment agreement dated March 16, 2009 between Force Protection, Inc.and James Grazioplene, Executive Vice President, Total Life Cycle Support, Mr. Grazioplenewas granted 6,369 shares of our common stock, vesting in four equalinstallments commencing on May 4, 2009 and ending on December 31,2009.  Accordingly, on September 30,2009, 1,592 shares vested.  In order tocomply with his minimum statutory federal and state tax withholding taxes plusMedicare, Mr. Grazioplene surrendered 485 of his vested shares to ForceProtection, Inc. to satisfy his withholding obligations.

 

**Item3. Defaults Upon Senior Securities**

 

None.

 

**Item4. Submission of Matters to a Vote of Security Holders**

 

None.

 

**Item5. Other Information**

 

None.

 

**Item6. Exhibits**

** **

Thefollowing is an index of the exhibits included in this Quarterly Report on Form 10-Q.

 

 

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**EXHIBIT INDEX**

 

In reviewing theagreements included as exhibits to this Quarterly Report on Form 10-Q,please remember they are included to provide you with information regardingtheir terms and are not intended to provide any other factual or disclosureinformation about Force Protection or the other parties to the agreements. Someof the agreements contain representations and warranties by each of the partiesto the applicable agreement. These representations and warranties have beenmade solely for the benefit of the other parties to the applicable agreementand:

 

· Should not in all instances be treatedas categorical statements of fact, but rather as a way of allocating the riskto one of the parties if those statements prove to be inaccurate;

 

· May have been qualified by thedisclosures that were made to the other party in connection with thenegotiation of the applicable agreement, which disclosures are not necessarilyreflected in the agreement;

 

· May apply standards of materialityin a way that is different from what may be viewed as material to you or other investors;and

 

· Were made only as of the date of theapplicable agreement or such other date or dates may be specified in theagreement and are subject to more recent developments.

 

Accordingly, therepresentations and warranties may not describe the actual state of affairs asof the date they were made or at any other time. Additional information aboutForce Protection, Inc. may be found elsewhere in this Quarterly Report on Form 10-Qand Force Protection’s other public filings, which are available without chargeon Force Protection, Inc.’s website at *www.forceprotection.net*.

 
| **NUMBER** | ** ** | **DESCRIPTION**                                                                                                                                                                                                                                                                                                                   |
|------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                                        |
| 2.1        |       | Agreement and  Plan of Merger, filed as Exhibit 2.1 to the Company’s Annual Report on  Form 10-K filed September 15, 2008, is hereby incorporated by reference.                                                                                                                                               |
|       |       |                                                                                                                                                                                                                                                                                                                              |
| 3.1        |       | Restated Articles of  Incorporation, filed as Exhibit 3.1 to the Company’s Quarterly Report on  Form 10-K filed May 11, 2009, is hereby incorporated by reference.                                                                                                                                            |
|       |       |                                                                                                                                                                                                                                                                                                                              |
| 3.2        |       | Certificate of  Amendment to Articles of Incorporation, filed as Exhibit 3.1 to the  Company’s Current Report on Form 8-K filed November 26, 2008, is  hereby incorporated by reference.                                                                                                                      |
|       |       |                                                                                                                                                                                                                                                                                                                              |
| 3.3        |       | Certificate of  Correction to Restated Articles of Incorporation, filed as Exhibit 3.3  to the Company’s Quarterly Report on Form 10-Q filed May 11, 2009,  is hereby incorporated by reference.                                                                                                              |
|       |       |                                                                                                                                                                                                                                                                                                                              |
| 3.4        |       | Second Amended and  Restated By-Laws of Force Protection, Inc., filed as Exhibit 3.2 to  the Company’s Current Report on Form 8-K filed November 26, 2008,  is hereby incorporated by reference.                                                                                                         |
|       |       |                                                                                                                                                                                                                                                                                                                              |
| 10.1       |       | Amendment of  Solicitation/Modification of Contract under Contract  No. M67854-07-D-5031 with the United States Marine Corps Systems  Command, dated July 1, 2009. † *                                                                                                                                             |
|       |       |                                                                                                                                                                                                                                                                                                                              |
| 10.2       |       | Amendment of  Solicitation/Modification of Contract under Contract No. M67854-07-D-5031  with the United States Marine Corps Systems Command, dated July 21,  2009. † *                                                                                                                                            |
|       |       |                                                                                                                                                                                                                                                                                                                              |
| 10.3       |       | Amendment of  Solicitation/Modification of Contract under Contract  No. W56HZV-08-C-0028 with the U.S. Army Contracting Command, dated  July 24, 2009. † *                                                                                                                                                         |
|       |       |                                                                                                                                                                                                                                                                                                                              |
| 10.4       |       | Third Amendment to  Lease dated as of July 27, 2009 by and among Aerospace/Defense, Inc., Force Protection Industries, Inc.****and Force  Protection, Inc., filed as Exhibit 10.1 to the Company’s  Current Report on Form 8-K filed July 29, 2009, is hereby  incorporated by reference. |

 

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| **NUMBER** | ** ** | **DESCRIPTION**                                                                                                                                                                                                                                                                                                                                        |
|------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |       |                                                                                                                                                                                                                                                                                                                                                   |
| 10.5       |       | Amendment No. 2  dated as of September 21, 2009 to the Employment Agreement entered into  as of March 19, 2008, by and between Force Protection, Inc. and  Michael Moody filed as Exhibit 10.1 to the Company’s Current Report on  Form 8-K filed September 24, 2009, is hereby incorporated by  reference. ** |
|       |       |                                                                                                                                                                                                                                                                                                                                                   |
| 10.6       |       | Amendment of  Solicitation/Modification of Contract under Contract No. W56HV-08-C-0028  with the U.S. Army Contracting Command, dated September 25, 2009. † *                                                                                                                                                                           |
|       |       |                                                                                                                                                                                                                                                                                                                                                   |
| 31.1       |       | Certification of the  Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002. †                                                                                                                                                                                                                                  |
|       |       |                                                                                                                                                                                                                                                                                                                                                   |
| 31.2       |       | Certification of the  Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002. †                                                                                                                                                                                                                                  |
|       |       |                                                                                                                                                                                                                                                                                                                                                   |
| 32.1       |       | Certification of  Officers pursuant to 18 U.S.C. Section 1350, as adopted pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002. †                                                                                                                                                                                                 |

 

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(Exhibits marked with a(†) are filed electronically herewith.)

 

(Exhibits marked with oneasterisk (*) have portions of the exhibit omitted pursuant to a confidentialtreatment request. This information has been filed or will be filed separatelywith the Securities and Exchange Commission.)

 

(Exhibits marked with anasterisk (**) are a management contract or compensatory plan required to befiled as an Exhibit to this Quarterly Report on Form 10-Q.)

 

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**SIGNATURES**

 

Pursuant to the requirementsof the Securities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned thereunto duly authorized.

 
| * *                     | **FORCE  PROTECTION, INC.***(Registrant)* |
|------------------------------|-------------------------------------------|
| * *                     | * *                                  | * * |
| * *                     | * *                                  | * * |
| Date: November 9,  2009 | By:                                       | /s/ MICHAEL MOODY |
| ** **                   | ** **                                | **Name:** | **Michael  Moody** |
| ** **                   | ** **                                | **Title:** | **President  and Chief Executive Officer  (principal executive officer)** |
| ** **                   | ** **                                | ** ** |
| ** **                   | ** **                                | ** ** |
| Date: November 9,  2009 | By:                                       | /s/ CHARLES MATHIS |
| ** **                   | ** **                                | **Name:** | **Charles  Mathis** |
| ** **                   | ** **                                | **Title:** | **Chief  Financial Officer  (principal financial and accounting officer)** |

 

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