**UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549**

**FORM 10-Q/A**
| **x**                                                   | ** ** | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934**  |
|---------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------|
| ** **                                              |
| **FOR  THE QUARTERLY PERIOD ENDED MARCH 31, 2007** |
| ** **                                              |
| **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**

**FORCE PROTECTION, INC.**

| **Nevada**                |   | **84-1383888** |
|---------------------------|--------|----------------|
| (State of  Incorporation) |   | (I.R.S. EIN)   |

 

**9801 Highway 78, Building No. 1Ladson, South Carolina29456**Registrant’s telephone number:**(843) 740-7015**

Securities registered pursuant toSection 12(b) of the Act: **CommonStock par value $0.001 per share**

Securities registered pursuant toSection 12(g) of the Act:**None**

Indicateby check mark whether the registrant (1) filed all reports required to befiled by Section 13 or 15(d) of the Securities Act of 1934 during the preceding 12 months (or for such shorter period that the registrantwas required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.** Yes****x**                               No o

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, or a non-accelerated filer  (See definition of “acceleratedfiler and large accelerated filer “ in Rule 12b-2 of the Exchange Act.):
| Large  Accelerated Filer o |   | Accelerated  Filer x |   | Non- Accelerated  Filer o |
|----------------------------|--------|----------------------|--------|---------------------------|

 

Indicateby check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act).

Yes     o               **No**     **x**

As of March 31, 2007, the registrant had68,010,335 shares of common stock issued and outstanding.

 

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**Table of Contents**
|                                                                                                       | ** ** | ** ** |
|------------------------------------------------------------------------------------------------------------|------------|------------|
| Part I: Financial Information                                                                         |       |       |
|                                                                                                       |       |       |
| Item  1 – Consolidated Financial Statements                                                           |       |       |
| Report  on Review By Registered Independent Public Accounting Firm                                         |       |       |
| Consolidated  Statements of Operations For The Three Months Ended March 31, 2007 and  2006            |       |       |
| Consolidated  Balance Sheets As of March 31, 2007 and December 31, 2006                               |       |       |
| Consolidated  Statements of Cash Flows For The Three Months Ended March 31, 2007 and  2006            |       |       |
| Notes  To Consolidated Financial Statements                                                                |       |       |
| Item 2 –  Management’s Discussion and Analysis of Financial Condition and Results of  Operations |       |       |
| Item 3 –  Quantitative and Qualitative Disclosures About Market Risk                                  |       |       |
| Item 4 – Controls and  Procedures                                                                     |       |       |
|                                                                                                       |       |       |
| Part II: Other Information                                                                            |       |       |
|                                                                                                       |       |       |
| Item  1 – Legal Proceedings                                                                           |       |       |
| Item  1A – Risk Factors                                                                               |       |       |
| Item 2 –  Unregistered Sales of Equity Securities and Use of Proceeds                                 |       |       |
| Item 3 –  Defaults Upon Senior Securities                                                             |       |       |
| Item 4 –  Submission of Matters To a Vote of Security Holders                                         |       |       |
| Item  5 – Other Information                                                                           |       |       |
| Item 6  – Exhibits                                                                                    |       |       |

 

2

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**PART I— FINANCIAL INFORMATION**

**ITEM 1 — CONSOLIDATED FINANCIALSTATEMENTS**

**FORCE PROTECTION, INC. ANDSUBSIDIARIES**

**REPORTON REVIEW BY INDEPENDENT REGISTERED ACCOUNTING FIRM**

**Report of Independent RegisteredPublic Accounting Firm**

We havereviewed the accompanying consolidated balance sheet and statements ofoperation and cash flows of Force Protection, Inc. as of March 31, 2007 and forthe three-month period then ended.  These interim financial statements arethe responsibility of the Company’s management.

Weconducted our review in accordance with the standards of the Public CompanyAccounting Oversight Board (United States).  A review of interim financialinformation consists principally of applying analytical procedures to financialdata and making inquiries of persons responsible for financial and accountingmatters.  It is substantially less in scope than an audit conducted inaccordance with the standards of the Public Company Accounting Oversight Board,the objective of which is the expression of an opinion regarding the financialstatements taken as a whole.  Accordingly, we do not express such anopinion.

Basedon our review, we are not aware of any material modifications that should bemade to the accompanying interim financial statements for them to be inconformity with U.S. generally accepted accounting principles.
| /s/ Elliott Davis, LLC    |   |
|---------------------------|--------|
| Columbia, South  Carolina |
| May 14, 2007              |

 

3

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**FORCE PROTECTION, INC. ANDSUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**For thethree months ended(unaudited)**
| ** **                                                 | ** ** | **March 31,** | ** **  |
|------------------------------------------------------------|------------|--------------------|-------------|
| ** **                                                 | ** ** | **2007**           | ** **  | **2006** | ** ** |
| Net sales                                                  |       | $                  | 100,158,766 |   | $ | 34,802,585 |   |
| Cost of sales                                              |       | 78,403,575         |        | 28,164,816 |   |
| Gross profit                                               |       | 21,755,191         |        | 6,637,769 |   |
|                                                       |       |               |        |   |   |
| General and  administrative expense                        |       | 14,378,611         |        | 5,961,353 |   |
| Research and  development                                  |       | 4,841,819          |        | 663,590 |   |
| **Operating  profit**                                      |       | 2,534,761          |        | 12,826 |   |
|                                                       |       |               |        |   |   |
| Other income                                               |       | 1,788,093          |        | 27,049 |   |
| Interest expense                                           |       | (9,613             | )           | (807,324 | ) |
| **Net  earnings (loss) before taxes**                      |       | 4,313,241          |        | (767,449 | ) |
|                                                       |       |               |        |   |   |
| Tax Expense                                                |       | 1,800,000          |        | — |   |
| **Net  earnings (loss) after taxes**                       |       | $                  | 2,513,241   |   | $ | (767,449 | ) |
|                                                       |       |               |        |   |   |
| Series D  preferred stock dividend                         |       | —             |        | (161,115 | ) |
| Accretion of  Series D preferred stock to redemption value |       | —             |        | (484,750 | ) |
| **Net  earnings (loss) available to common shareholders**  |       | $                  | 2,513,241   |   | $ | (1,413,314 | ) |
|                                                       |       |               |        |   |   |
| **Earnings  (loss) per common share**                      |       |               |        |   |   |
| Basic                                                      |       | $                  | 0.04        |   | $ | (0.04 | ) |
| Diluted                                                    |       | $                  | 0.04        |   | $ | (0.04 | ) |
|                                                       |       |               |        |   |   |
| **Weighted  average shares used to compute:**              | ** ** | ** **         | ** **  | ** ** | ** ** |
| Basic earnings (loss) per common share                     |       | 67,636,052         |        | 37,451,698 |   |
| Diluted earnings  (loss) per common share                  |       | 68,004,752         |        | 37,451,698 |   |

 

The accompanying Notes are an integral part of thesefinancial statements.

4

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**FORCEPROTECTION, INC. AND SUBSIDIARIES**

**CONSOLIDATEDBALANCE SHEETS**
| ** **                                                                                                                             | ** ** | **March 31,** | ** **  | **December 31,** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|-------------|-----------------------|------------|
| ** **                                                                                                                             | ** ** | **2007**           | ** **  | **2006**              | ** ** |
| ** **                                                                                                                             | ** ** | **(unaudited)**    | ** **  | ** **            | ** ** |
| **ASSETS**                                                                                                                             |       |               |        |                  |       |
| Current assets:                                                                                                                        |       |               |        |                  |       |
| Cash and cash  equivalents                                                                                                             |       | $                  | 113,441,469 |                  | $          | 156,319,004 |   |
| Accounts  receivable, net of allowance for contractual obligations of $6,833,446 and  $6,068,087 for 2007 and 2006                     |       | 43,790,815         |        | 36,011,568            |       |
| Inventories                                                                                                                            |       | 97,922,981         |        | 60,396,297            |       |
| Other current  assets                                                                                                                  |       | 2,573,700          |        | 374,051               |       |
| Current portion  of deferred taxes                                                                                                     |       | 7,762,500          |        | 9,562,500             |       |
| Total current  assets                                                                                                                  |       | 265,491,465        |        | 262,663,420           |       |
| Long-term  portion of deferred taxes                                                                                                   |       | 2,763,991          |        | 2,763,991             |       |
| Property and  equipment, net                                                                                                           |       | 23,387,568         |        | 8,963,901             |       |
| Intangible  assets                                                                                                                     |       | 1,962,500          |        | —                |       |
| **Total  assets**                                                                                                                      |       | $                  | 293,605,524 |                  | $          | 274,391,312 |   |
|                                                                                                                                   |       |               |        |                  |       |
| **LIABILITIES  & SHAREHOLDERS’ EQUITY LIABILITIES**                                                                           |       |               |        |                  |       |
| Current  liabilities:                                                                                                                  |       |               |        |                  |       |
| Accounts payable                                                                                                                       |       | 54,811,260         |        | 38,653,813            |       |
| Other accrued  liabilities                                                                                                             |       | 9,283,943          |        | 2,968,859             |       |
| Contract  liabilities                                                                                                                  |       | 1,850,000          |        | 1,850,000             |       |
| Current portion  of long-term liabilities                                                                                              |       | 204,385            |        | 71,685                |       |
| Deferred revenue                                                                                                                       |       | 5,173,035          |        | 12,824,211            |       |
| Total current  liabilities                                                                                                             |       | 71,322,623         |        | 56,368,568            |       |
|                                                                                                                                   |       |               |        |                  |       |
| Long-term debt:                                                                                                                        |       |               |        |                  |       |
| Other long term  liabilities                                                                                                           |       | 463,110            |        | 167,937               |       |
| **Total  liabilities**                                                                                                                 |       | 71,785,733         |        | 56,536,505            |       |
|                                                                                                                                   |       |               |        |                  |       |
| Commitment and  Contingencies (See Note 12)                                                                                            |       |               |        |                  |       |
|                                                                                                                                   |       |               |        |                  |       |
| **SHAREHOLDERS’  EQUITY**                                                                                                         |       |               |        |                  |       |
| Preferred stock,  $0.001 par value, authorized 10,000,000 shares                                                                       |       | —             |        | —                |       |
| Common stock,  $0.001 par value, 300,000,000 shares authorized, 68,010,335 and 66,762,566  shares issued and outstanding, respectively |       | 68,010             |        | 66,763                |       |
| Shares to be  issued                                                                                                                   |       | —             |        | 31                    |       |
| Additional  paid-in capital                                                                                                            |       | 250,705,134        |        | 249,694,850           |       |
| Accumulated  deficit                                                                                                                   |       | (28,953,353        | )           | (31,906,837           | )          |
| **Total  shareholders’ equity**                                                                                                   |       | 221,819,791        |        | 217,854,807           |       |
|                                                                                                                                   |       |               |        |                  |       |
| **Total liabilities and shareholders’  equity**                                                                                   |       | $                  | 293,605,524 |                  | $          | 274,391,312 |   |

 

The accompanying Notes are an integral part of thesefinancial statements.

5

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**FORCEPROTECTION, INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**For the three months ended(unaudited)(in dollars)**
| ** **                                                                                                 | ** ** | **March 31,** | ** **  |
|------------------------------------------------------------------------------------------------------------|------------|--------------------|-------------|
| ** **                                                                                                 | ** ** | **2007**           | ** **  | **2006** | ** ** |
| **CASH  FLOWS FROM OPERATING ACTIVITIES:**                                                                 |       |               |        |   |   |
| Net earnings  (loss) after taxes                                                                           |       | $                  | 2,513,241   |   | $ | (767,449 | ) |
| **Adjustments  to reconcile net earnings (loss) to net cash (used in) provided by operating  activities:** |       |               |        |   |   |
| Depreciation and  amortization                                                                             |       | 761,629            |        | 183,558 |   |
| Deferred tax  expense                                                                                      |       | 1,800,000          |        | — |   |
| Stock-based  compensation (FAS 123R)                                                                       |       | 440,243            |        | 101,816 |   |
| Stock-based  compensation                                                                                  |       | —             |        | 551,529 |   |
|                                                                                                       |       |               |        |   |   |
| Net change in  Definitization                                                                              |       | 765,359            |        |   |   |
| Decrease  (increase) in inventory reserve                                                                  |       | (298,830           | )           | 150,000 |   |
| Increase  (decrease) in contract liabilities                                                               |       | —             |        | (33,416 | ) |
| Change in assets  and liabilities:                                                                         |       |               |        |   |   |
| Decrease (increase) in accounts receivable                                                                 |       | (8,544,606         | )           | 2,249,629 |   |
| Decrease (increase) in inventories                                                                         |       | (37,227,854        | )           | (1,250,332 | ) |
| Decrease (increase) in other current assets                                                                |       | (2,199,649         | )           | (103,948 | ) |
| Increase (decrease) in accounts payable                                                                    |       | 16,157,447         |        | 4,862,535 |   |
| Increase (decrease) in other accrued liabilities                                                           |       | 6,315,084          |        | (140,652 | ) |
| Deferred revenue                                                                                           |       | (7,651,176         | )           | 1,135,393 |   |
| **Net  cash (used in) provided by operating activities**                                                   |       | (27,169,112        | )           | 6,938,663 |   |
|                                                                                                       |       |               |        |   |   |
| **CASH  FLOWS FROM INVESTING ACTIVITIES:**                                                                 |       |               |        |   |   |
| Purchases of  property and equipment - intangibles                                                         |       | (1,550,000         | )           | — |   |
| Purchases of  property and equipment                                                                       |       | (15,147,796        | )           | (641,960 | ) |
| **Net cash  used in investing activities**                                                                 |       | (16,697,796        | )           | (641,960 | ) |
|                                                                                                       |       |               |        |   |   |
| **CASH  FLOWS FROM FINANCING ACTIVITIES:**                                                                 |       |               |        |   |   |
| Proceeds from  options                                                                                     |       | 1,011,500          |        | — |   |
| Preferred stock  dividends paid                                                                            |       | —             |        | (117,474 | ) |
| Proceeds from  loans, net                                                                                  |       | —             |        | (1,250,000 | ) |
| Increase in contract  liabilities - non-compete agreement                                                  |       | —             |        | — |   |
| Payments on  capitalized lease                                                                             |       | (22,127            | )           | — |   |
| **Net  cash provided by (used in) financing activities**                                                   |       | 989,373            |        | (1,367,474 | ) |
| **Net  (decrease) increase in cash**                                                                       |       | (42,877,535        | )           | 4,929,229 |   |
| **Cash—beginning  of period**                                                                         |       | 156,319,004        |        | 1,217,509 |   |
| **Cash—end  of period**                                                                               |       | $                  | 113,441,469 |   | $ | 6,146,738 |   |
|                                                                                                       |       |               |        |   |   |
| **Supplemental  disclosure:**                                                                              |       |               |        |   |   |
| Cash paid for  interest                                                                                    |       | 9,613              |        | 285,806 |   |
| Cash paid for  taxes                                                                                       |       | 625,000            |        | — |   |
| Dividends and  accretion on Series D convertible preferred stock                                           |       | —             |        | 484,750 |   |
|                                                                                                       |       |               |        |   |   |
| **NONCASH  INVESTING AND FINANCING ACTIVITY:**                                                             |       |               |        |   |   |
| Note payable issued as  consideration for non-compete agreement                                            |       | 450,000            |        | — |   |

 

The accompanying Notes are an integral part of thesefinancial statements.

6

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**FORCEPROTECTION, INC. AND SUBSIDIARIES**

**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS**

**These Notes are an integral part of the Company’s financialstatements set forth above.**

**NOTE1—BASIS OF PRESENTATION**

**2006 Year End Amendment and Q1Restatement**

The financialinformation included in this 10-Q referring to the year ended December 31,2006 and the quarter ended March 31, 2007 has been amended to include theeffect of the updated amended financial statements for the year ended 2006,filed July 12, 2007. The financial information included in this 10-Qreferring to the quarter ended March 31, 2006 have been restated for theeffects of stock based compensation to employees (FAS 123R) and the effecton the basic earning per share (EPS) of accretion on preferred stock and thecalculation of weighted average common shares used to compute diluted earningsper share.

**Effectsof Amendment**
| ** **                             | ** ** | **March 31,  2007** | ** ** | **December 31, 2006** | ** ** |
|----------------------------------------|------------|--------------------------|------------|---------------------------------|------------|
| Decrease in Additional paid-in-capital |       | (1,789,228               | )          | (1,348,985                      | )          |
| Decrease in Accumulative deficit       |       | 1,789,228                |       | 1,348,985                       |       |

 

**Effectsof Restatement**

**StockBased Compensation**

The Company has restated its calculation of stock based compensation(SFAS 123(R)) for the first quarter 2006.
| ** **                                             | ** ** | **March 31, 2006** | ** ** |
|--------------------------------------------------------|------------|------------------------------|------------|
| Increase in General and administrative cost            |       | $                            | 101,816    |   |
| Increase in Net loss                                   |       | $                            | 101,816    |   |
| Increase in Net loss available to common  shareholders |       | $                            | 101,816    |   |
| Decrease in Basic earnings per common share            |       | $                            | (0.01      | ) |
| Decrease in Diluted earnings per common share          |       | $                            | (0.01      | ) |

 

**EarningsPer Share**

The Company has reviewed the Financial AccountingStandards Board’s Statement of Financial Accounting StandardNo. 128—Earnings Per Share (EPS) and determined that income available tocommon shareholders did not include the accretion related to preferred stockand the weighted average number of common shares outstanding used to calculatediluted earnings per share did not give effect to common shares issued uponconversion for the quarter ended March 31, 2006.
| ** **                                             | ** ** | **March 31, 2006** | ** ** |
|--------------------------------------------------------|------------|------------------------------|------------|
| Increase in Net loss available to common  shareholders |       | $                            | 44,186     |   |
|                                                        |            |                              |            |  |

 

Theunaudited interim consolidated financial statements and related notes have beenprepared pursuant to the rules and regulations of the Securities and ExchangeCommission, or SEC. Accordingly, certain information and footnote disclosuresnormally included in complete financial statements prepared in accordance withgenerally accepted accounting principles have been omitted pursuant to suchrules and regulations. The accompanying unaudited interim consolidatedfinancials statements and related notes should be read in conjunction with theconsolidated financial statements and notes thereto included in the Form 10-Kfor Force Protection, Inc. and Subsidiaries filed for the year ended December31, 2006.

**NOTE2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

**Natureof the Business**

ForceProtection, Inc. and its subsidiaries (the “Company”) design, manufactureand market blast and ballistics armored vehicles for sale to militarycustomers.

**Principlesof Consolidation**

Theconsolidated financial statements include the accounts of ForceProtection, Inc., and its two wholly-owned subsidiaries, Force ProtectionIndustries, Inc. and Force Protection Technologies, Inc.  Allinter-company balances and transactions are eliminated in consolidation.

**GeneralStatement**

The SEChas issued Financial Reporting Release No. 60, “Cautionary AdviceRegarding Disclosure About Critical Accounting Policies,” (“FRR 60”),suggesting companies provide additional disclosure and commentary on their mostcritical accounting policies. In FRR 60, the SEC defined the most criticalaccounting policies as the ones that are most important to the portrayal of acompany’s financial condition and operating results, and require management tomake its most difficult and subjective judgments, often as a result of the needto make estimates of matters that are inherently uncertain. The methods,estimates and judgments the Company uses in applying these most criticalaccounting policies have a significant impact on the results the Companyreports in its financial statements.

TheCompany believes the following critical accounting policies and procedures,among others, affect its more significant judgments and estimates used in thepreparation of the Company’s consolidated financial statements:

**RevenueRecognition**

TheCompany’s revenue is derived principally from the sale of its vehicles andassociated spare parts and training services. Revenue from product sales andspare part sales, net of an allowance for contractual adjustments, isrecognized when the products or spare parts are delivered to and “formally”accepted by the customer. The Company defines “formal acceptance” as takingplace when a representative of the United States government signs the UnitedStates Form DD250 entitled “Material Inspection and Receiving Report” whichunder the Federal Acquisition Regulations signifies contractual inspection andacceptance of the work performed by the contractor.  It also acts as thecontractual invoice creating payment liability on the United StatesGovernment.  In accordance with standard industry practice, there is arepresentative from the United States Defense Contract Management Agency (“DCMA”)acting as a contractual representative of the United States Government presentat the Company’s facilities.  This DCMA representative inspects eachvehicle as it is delivered by the Company and upon confirmation of the vehicle’sconformity with the contractual specifications the inspector signs the FormDD250 and formally accepts delivery of the vehicle.  The Company onlyrecognizes revenues arising from its U.S. Government contracts upon executionof the Form DD250 by the DCMA inspector. Under some of the Company’s U.S.Government contracts, it receives performance-based payments based oncompletion of specific milestones stipulated under the contract (for example,delivery of raw material to the Company’s Ladson facility). These payments arerecorded as “deferred revenue” and carried on the Company’s balance sheet untilthe final delivery of the products and formal acceptance by the U.S. Governmentpursuant to the Form DD250. Upon acceptance of the products and the executionof the Form DD250, the Company recognizes the full sale price of the product asrevenue.

Revenuesfrom services provided are recorded in accordance with specific contractualterms.  Services have historically consisted of the Company providingon-site personnel on an as-needed basis in a timely manner, and have generallybeen provided in foreign locations.

TheCompany negotiates contracts with its customers which may include revenuearrangements with multiple deliverables, as outlined by Emerging Issues TaskForce No. 00-21 (“EITF 00-21”).  The Company’s accounting policies aredefined such that each deliverable under a contract is accounted forseparately.  Historically, the Company has negotiated and signed contractswith its customers which outline the contract amount and specific terms andconditions associated with each deliverable.

7

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**Allowancefor Contractual Adjustments**

The Company’s contracts with the U.S. Government arenegotiated as a “sole source” or “open competition” bid process.  A solesource process is one in which the Company is the sole bidder for thecontract.  An open competition could involve various bidders.  Once abid is accepted, the U.S. Government expects work to commenceimmediately.  An open competition results in a final agreed-upon contractprice which the U.S. Government has agreed to.  A sole source process resultsin an agreed-upon contract with the U.S. Government, subject to an adjustmentprocess at a later date, termed the “definitization process”. Thedefinitization process commences upon delivery of a product, whereby the U.S.Government completes a detailed review of the Company’s costs involved in themanufacturing and delivery process.  The U.S. Government and the Companythen work to determine an adequate and fair final contract price.  As aresult of the potential adjustments related to the definitization process, theCompany maintains an allowance for contractual adjustments account.  Thisaccount is reviewed on a monthly basis to determine adequate adjustments, ifnecessary.  The allowance is maintained and deemed adequate based on theanalysis of historical data and calculation of pro-rata percentages of currentcontracts in place, which remain subject to the definitization process.

Historically, the Company has not encountered salesreturns.  The Company does not anticipate sales returns in the future.

**Researchand Development**

Research,development, and engineering costs are expensed as incurred, in accordance withSFAS No. 2,*Accounting for Research andDevelopment Costs*. Research, development, and engineering expensesprimarily include payroll and headcount related costs, contractor fees,infrastructure costs, and administrative expenses directly related to researchand development support.

**CashEquivalents**

Forpurposes of reporting cash flows, the Company considers all highly liquid debtinstruments purchased with maturity of three months or less to be cashequivalents.

**Inventories**

Inventoriesare stated at the lower of cost or market. The cost is determined under thefirst-in-first-out (“FIFO”) valuation method.  An allowance forobsolescence and shrinkage is maintained by the Company.  The Companydetermines an appropriate balance in this account based on historical data andspecific identification of certain inventory items.

**Propertyand Equipment**

Propertyand equipment are stated at cost or at the value of the operating agreement.The Company capitalizes additions and improvements which include all material,labor and engineering cost to design, install or improve the asset. Routinerepairs and maintenance are expensed as incurred. Depreciation and amortizationare computed using the straight-line method over the following estimated usefullives:
| Leasehold improvements   |   | 2-5 years |
|--------------------------|--------|-----------|
| Furniture and  fixtures  |   | 3 years   |
| Machinery and  equipment |   | 7 years   |
| Tooling and  molds       |   | 7 years   |
| Vehicles                 |   | 5 years   |
| Buildings                |   | 29 years  |

 

Constructionin progress projects are not depreciated until placed into service.

**Impairmentof Long-Lived Assets**

TheCompany reviews long-lived assets to be held and used for impairment wheneverevents or changes in circumstances indicate that the carrying amount of anasset may not be recoverable. If the sum of the expected future cash flows(undiscounted and without interest charges) is less than the carrying amount ofthe asset, the Company would recognize an impairment loss based on theestimated fair value of the asset.

**Goodwilland Other Intangible Assets**

TheCompany has no goodwill. Intangibles include licenses, a non-compete agreement,customer list and purchase expertise. Such intangible assets are amortized on astraight line basis over their useful life from 3 to 7 years.

**ForeignCurrency Transaction**

Assetsand liabilities in foreign currencies are translated at the exchange rateprevailing at the balance sheet date. Revenues and expenses are translated at theexchange rate prevailing at the transaction date, and the resulting gains andlosses are reflected in the statements of operations. Gains and losses arisingfrom translation of a subsidiary’s foreign currency financial statements areshown as a component of shareholders’ equity (deficit) as accumulatedcomprehensive income (loss).

8

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**JointVenture**

On December 15, 2006, the Company entered into a JointVenture Agreement (the “Agreement”) with General Dynamics Land Systems Inc. (“GDLS”),pursuant to which the Company agreed to work together with GDLS to win andexecute a contract for the Mine Resistant Ambush Protected (“MRAP”) VehicleProgram. Under the Agreement, the MRAP Program is defined to include any andall solicitations and requests for proposals for MRAP production and LifecycleSupport and/or any follow on work that may be performed. The scope of work tobe undertaken by the Joint Venture is limited to the use of the Company’sCougar 4x4 and 6x6 armored vehicles for the MRAP Category I and Category IIrequirements. The Joint Venture board is made up of three designees fromVenture Force Protection, Inc. (“FPI”) and three designees from GLDS. The JointVenture board will have authority to execute documents in accordance with theterms of the Agreement. Decisions of the Joint Venture board shall be made bymajority vote. The Company agreed to operate the Joint Venture on the principleof equitable division of burden and benefit with GDLS. This means that partiesare expected to contribute resources equally to the venture. The Company agreedto divide the Joint Venture revenues between the Company and GDLS on a 50%/50%basis. Wherever practicable, Force Dynamics will act as the prime contractorfor Joint Venture work, and the Company, along with GDLS, shall act as theexclusive subcontractors. For the three months ended March 31, 2007 the JointVenture had no activity.

**IncomeTaxes**

TheCompany uses the asset and liability method of accounting for income taxes. Theasset and liability method accounts for deferred income taxes by applyingenacted statutory rates in effect for periods in which the difference betweenthe book value and the tax basis of assets and liabilities are scheduled toreverse. The resulting deferred tax asset or liability is adjusted to reflectchanges in tax laws or rates. The Company records a valuation allowance for anydeferred tax allowance that it believes will not be realized.

**Stock-BasedCompensation**

InDecember 2004, the Financial Accounting Standards Board (“FASB”) issuedStatement No. 123(R),*Share-BasedPayment,* which establishes accounting standards for transactions inwhich an entity receives employee services in exchange for (a) equityinstruments of the entity or (b) liabilities that are based on the fairvalue of the entity’s equity instruments or that may be settled by the issuanceof equity instruments. Effective July 1, 2005, the Company adopted SFAS 123(R),which requires the Company to recognize the grant-date fair value of stockoptions and equity based compensation issued to employees in the statement ofoperations. The statement also requires that such transactions be accounted forusing the fair-value-based method, thereby eliminating use of the intrinsicmethod of accounting in APB No. 25,*Accounting for Stock Issued to Employees,*  which was permittedunder Statement 123, as originally issued.

**Earnings(Loss) per Common Share**

TheCompany utilizes SFAS No. 128, “Earnings per Share” to calculate earnings/lossper share. Basic earnings/loss per share is computed by dividing theearnings/loss available to common shareholders (as the numerator) by theweighted-average number of common shares outstanding (as the denominator).Diluted earnings/loss per share is computed similar to basic earnings/loss pershare except that the denominator is increased to include the number ofadditional common shares that would have been outstanding if all potentialcommon stock (including common stock equivalents) had all been issued, and ifsuch additional common shares were dilutive. Under SFAS No. 128, if theadditional common shares are dilutive, they are not added to the denominator inthe calculation. Where there is a loss, the inclusion of additional commonshares is anti-dilutive (since the increased number of shares reduces the per shareloss available to common shareholders). Earnings/loss available to commonshareholders is derived from net income adjusted for preferred stock dividendsand accretion on preferred stock.

**Estimates**

Thepreparation of financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date ofthe financial statements, as well as the reported amounts of revenues andexpenses during the reporting period. Actual results could differ from thoseestimates. Estimates and assumptions are periodically reviewed and the effectsof revisions are reflected in the consolidated financial statements in theperiod they are determined to be necessary.

**RecentAccounting Pronouncements**

In June2006, the FASB issued FIN No. 48 “Accounting for Uncertainty in IncomeTaxes — an interpretation of FASB Statement No. 109.” FIN No. 48established a single model to address accounting for uncertain tax positions.FIN No. 48 clarifies the accounting for income taxes by prescribing a minimumrecognition threshold a tax position is required to meet before beingrecognized in the financial statements. FIN No. 48 also provides guidance onderecognition, measurement classification, interest and penalties, accountingin interim periods, disclosure and transition.  FIN No. 48 is effectivefor the Company in the first quarter of fiscal 2007.  The adoption of FINNo. 48 did not have a material effect on its financial position, results ofoperations or cash flows.

InDecember 2006, the FASB issued a Staff Position (“FSP”) on EITF 00-19-2, “Accountingfor Registration Payment Arrangements (“FSP EITF 00-19-2”).”  This FSPspecifies that the contingent obligation to make future payments or otherwisetransfer consideration under a registration payment arrangement, whether issuedas a separate agreement or included as a provision of a financial instrument orother agreement, should be separately recognized and measured in accordancewith SFAS No. 5, “Accounting for Contingencies”.  If the transfer ofconsideration under a registration payment arrangement is probable and can bereasonably estimated at inception, the contingent liability under theregistration payment arrangements is included in the allocation of proceedsfrom the related financing

9

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transaction(or recorded subsequent to the inception of a prior financing transaction)using the measurement guidance in SFAS No. 5.  This FSP is effectiveimmediately for registration payment arrangements and the financial instrumentssubject to those arrangements that are entered into or modified subsequent tothe issuance of the FSP.  For prior arrangements, the FSP is effective forfinancial statements issued for fiscal years beginning after December 15, 2006and interim periods within those years.  The Company adopted the FSPeffective January 1, 2007.  See Note 12, Commitments and Contingencies.

**NOTE 3 —CONCENTRATIONS**

TheCompany’s future operations and continued expansion is subject to a significantconcentration risk.  During the three months ended March 31, 2007 andMarch 31, 2006, the Company’s revenues from military units of the U.S. Governmentaccounted for 95%  and 93% of total revenues, respectively.  TheCompany’s accounts receivable from military units of the U.S. Government as ofMarch 31, 2007 and December 31, 2006 amounted to 95% and 81%, respectively, oftotal accounts receivable.

**NOTE 4 —STOCK BASED COMPENSATION PLANS**

The Company does not have a formal stock option plan.However, the Company has issued stock options to its employees.

Compensationcost related to stock options recognized in operating results (included inselling, general, and administrative expenses) under SFAS 123R was $440,243 and$101,816 for the three months ended March 31, 2007 and 2006,respectively.  During the three months ended March 31, 2006, compensationcost related to common stock shares issued was $551,529.

Thefollowing table summarizes the attributes used by the Company to determinecompensation cost for stock options consistent with requirements of SFAS 123R.No stock options were granted during the three months ended March 31, 2007.
|                                                             | ** ** | **For the three months ended March 31,** | ** ** |
|-------------------------------------------------------------|------------|------------------------------------------------------------------------|------------|
| **Valuation assumptions**                              | ** ** | **2007**                                                               | ** ** | **2006** | ** ** |
| Stock price on  date of grant                               |       | —                                                                 |       | $0.77-$7.48 |   |
| Expected option  term (in years)                            |       | —                                                                 |       | 2 |   |
| Expected  duration from grant to expiration date (in years) |       | —                                                                 |       | 4 and 5 |   |
| Option vesting  term (in years)                             |       | —                                                                 |       | 5 |   |
| Expected  volatility                                        |       | —                                                                 |       | 45.82%-70.31 | % |
| Risk-free  interest rate                                    |       | —                                                                 |       | 4.40%-4.97 | % |
| Expected  forfeiture rate                                   |       | —                                                                 |       | 5 | % |
| Estimated  corporate tax rate                               |       | —                                                                 |       | 38.50 | % |
| Expected dividend yield                                     |       | —                                                                 |       | 0 | % |

 

Thefollowing table summarizes information about stock option activity for thethree months ended March 31, 2007.
| Options                        | ** ** | **Number of   options** | ** ** | **Weighted  average per  share  exercise  price** | ** ** | **Weighted  average  remaining  contractual  term** | ** ** | **Aggregate  intrinsic  value** | ** ** |
|--------------------------------|------------|-----------------------------------|------------|--------------------------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------|------------|
| Outstanding  December 31,2006  |       | 1,959,443                         |       | $                                                      | 2.53       |                                                | 2.6        |                            | $          | 29,293,673 |   |
| Options granted                |       | —                            |       |                                                   |       |                                                |       |                            |       |
| Options exercised              |       | (1,198,681                        | )          | $                                                      | 0.84       |                                                |       |                            |       |   |
| Outstanding  March 31, 2007    |       | 760,762                           |       | $                                                      | 5.42       |                                                | 2.1        |                            | $          | 10,148,565 |   |
|                           |       |                              |       |                                                   |       |                                                |       |                            |       |
| Exercisable at March  31, 2007 |       | 385,762                           |       | $                                                      | 3.44       |                                                | 2          |                            | $          | 5,909,874 |   |

 

Thefollowing table summarizes information about non-vested stock grants activityfor the three months ended March 31, 2007.
| Non-vested shares        | ** ** | **Number of shares** | ** ** | **Weighted average per  share grant price** | ** ** |
|-------------------------------|------------|--------------------------------|------------|-----------------------------------------------------------------|------------|
| Outstanding December  31,2006 |       | 191,026                        |       | $                                                               | 5.48       |   |
| Shares granted                |       | —                         |       | $                                                               | —     |   |
| Shares vested                 |       | (50,000                        | )          | $                                                               | 6.45       |   |
| Outstanding March 31,  2007   |       | 141,026                        |       | $                                                               | 5.14       |   |

 

**NOTE 5 —TAXES**

TheFASB has issued Statement of Financial Accounting Standards Number 109 (“SFAS109”) “Accounting for Income Taxes”,

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whichrequires the asset and liability method of accounting for income taxes. Underthe asset and liability method, deferred income taxes are recognized for thetax consequences of “temporary differences” by applying enacted statutory taxrates applicable to future years to differences between the financial statementcarrying amounts and the tax basis of existing assets and liabilities.

TheCompany’s net deferred tax asset consists of the following as of March 31, 2007and December 31, 2006, respectively:

|                                      | ** ** | **March 31, 2007** | ** ** | **December 31, 2006** | ** ** |
|--------------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| Net deferred tax  asset              |       |                         |       |                            |       |
| Provisions and allowances            |       | $                            | 4,420,966  |                            | $          | 5,745,308 |   |
| Depreciation tax loss difference     |       | (122,206                     | )          | (268,110                        | )          |
| Net operating loss carry forwards    |       | 6,227,731                    |       | 6,849,293                       |       |
|                                 |       | 10,526,491                   |       | 12,326,491                      |       |
| Valuation  allowance                 |       | —                       |       | —                          |       |
| Deferred tax  benefit                |       | $                            | 10,526,491 |                            | $          | 12,326,491 |   |
|                                 |       |                         |       |                            |       |
| Current portion  of deferred taxes   |       | $                            | 7,762,500  |                            | $          | 9,562,500 |   |
| Long-term  portion of deferred taxes |       | 2,763,991                    |       | 2,763,991                       |       |
| Total deferred taxes                 |       | $                            | 10,526,491 |                            | $          | 12,326,491 |   |

 

As ofMarch 31, 2007 the Company has available federal operating loss carry-forwardsof $18,611,810, expiring through 2025 and state operating loss carry-forwardsof $7,438,470, expiring through 2025.

Thefollowing is a reconciliation of the provision for income taxes at the U.S.federal income tax rate to the income taxes reflected in the Statement ofOperations:
|                                                 | ** ** | **March 31, 2007** | ** ** | **March 31, 2006** | ** ** |
|-------------------------------------------------|------------|------------------------------|------------|------------------------------|------------|
| Tax expense  (credit) at statutory rate-federal |       | 35.00                        | %          | 35.00                        | %          |
| Other permanent  differences                    |       | 3.45                         | %          | —                       | %          |
| State tax  expense net of federal tax           |       | 3.25                         | %          | 3.25                         | %          |
| Changes in  valuation allowance                 |       | —                       | %          | (38.25                       | )%         |
| Tax expense at actual  rate                     |       | 41.7                         | %          | —                       | %          |

 

**NOTE 6 —EARNINGS/LOSS PER SHARE**

The Companyutilizes SFAS No. 128, “Earnings per Share” to calculate earnings/loss pershare. Basic earnings/loss per share is computed by dividing the earnings/lossavailable to common shareholders (as the numerator) by the weighted-averagenumber of common shares outstanding (as the denominator). Diluted earnings/lossper share is computed similar to basic earnings/loss per share except that thedenominator is increased to include the number of additional common shares thatwould have been outstanding if all potential common stock (including commonstock equivalents) had all been issued, and if such additional common shareswere dilutive.

For thethree months ending March 31, 2006, the Company had experienced a loss, andthus the following common stock equivalents have been excluded from thecalculation of dilutive loss per share:
|                                       | ** ** | **2006**  | ** ** |
|---------------------------------------|------------|-----------|------------|
| Convertible  Preferred Stock Series D |       | 5,155,306 |       |
| Warrants                              |       | 2,633,333 |       |
| Options                               |       | 1,441,292 |       |
| Total                                 |       | 9,229,931 |       |

 

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**Earnings Per Share Computation**
|                                                       | ** ** | **For the three months ended March 31,** | ** ** |
|-------------------------------------------------------|------------|------------------------------------------------------------------------|------------|
| ** **                                            | ** ** | **2007**                                                               | ** ** | **2006** | ** ** |
| **Basic  earning per share computation**              |       |                                                                   |       |   |   |
| Net earnings  (loss) available to common shareholders |       | $                                                                      | 2,513,241  |   | $ | (1,413,314 | ) |
|                                                  |       |                                                                   |       |   |   |
| **Weighted-  average shares used to compute:**        |       |                                                                   |       |   |   |
| Basic earnings  per share                             |       | 67,636,052                                                             |       | 37,451,698 |   |
| Dilutive effect  of stock options                     |       | 227,674                                                                |       | — |   |
| Dilutive effect  of stock grants                      |       | 141,026                                                                |       | — |   |
| Dilutive  weighted earnings per share                 |       | 68,004,752                                                             |       | 37,451,698 |   |
|                                                  |       |                                                                   |       |   |   |
| **Earnings  (loss) per share of common stock:**       |       |                                                                   |       |   |   |
| Basic                                                 |       | $                                                                      | 0.04       |   | $ | (0.04 | ) |
|                                                  |       |                                                                   |       |   |   |
| **Earnings  (loss) per share of common stock:**       |       |                                                                   |       |   |   |
| Assuming dilution                                     |       | $                                                                      | 0.04       |   | $ | (0.04 | ) |

 

**NOTE 7 —ACCOUNTS RECEIVABLES & “DEFINITIZATION”**

Themajority of the Company’s contracts are with the United States Government and assuch they are “public sector” contracts subject to the Federal AcquisitionRegulations set out at Title 41 of the United States Code (“FAR”), and mayresult either from competitive bidding or may be awarded as “sole source”contracts “subject to definitization” as provided under FAR Section252.217-7027.

Followingthe award of a sole source contract, a central component of the definitizationprocess is the negotiation and finalization of the contract price between thecontractor and the United States contracting officer.  As part of thisprocess, the parties make a mutual determination of the direct material andlabor costs for the work based upon the bill of materials and other purchasinginformation and then the parties mutually agree upon “rates” for the indirectlabor costs and the General and Administrative costs and upon a “fee” (orprofit).  While the direct material costs and labor can be establishedthrough objective evidence, the “rates” and fee are more subjective and arebased upon an analysis of multiple factors including historical performancedata and projected operational factors.  The contractor has the right tosubmit proposed rates and fee, but these are subject to final review andapproval by the contracting officer, who may insist on using alternate ratesand fee.  As provided in section 252.217-7027(c):

*If agreement on a definitive contract action to supersedethis undefinitized contract action is not reached by the target date inparagraph (b) of this clause, or within any extension of it granted by theContracting Officer, the Contracting Officer may, with the approval of the headof the contracting activity, determine a reasonable price or fee in accordancewith subpart 15.4 and part 31 of the FAR, subject to Contractor appeal as providedin the Disputes clause.*

Finally,although both parties make an effort to definitize the contract as quickly aspossible, the process is time consuming and can take months or even years tocomplete.  During the definitization process the contractor is required toperform the contract work and to make deliveries under the contract before thefinal contract price has been established.  For this reason, as part ofthe original letter award, the contractor provides a rough order of magnitude (“ROM”)price to be used for invoicing and accounting purposes pending definitization.

As aresult of the potential adjustments related to the definitization process, theCompany maintains an allowance for contractual adjustments account.  Thisaccount is reviewed on a regular basis to determine adequate adjustments, ifnecessary.  The allowance is evaluated and deemed adequate based on theanalysis of historical data and calculation of pro-rata percentages of currentcontracts in place, which remain subject to the definitization process.

Belowis a table detailing activity within the allowance for contractual adjustmentsaccount for the three months ended March 31, 2007 and March 31, 2006respectively.
|                         | ** ** | **For the three months ended March 31,** | ** ** |
|-------------------------|------------|------------------------------------------------------------------------|------------|
| ** **              | ** ** | **2007**                                                               | ** ** | **2006** | ** ** |
| Balance December  31    |       | $                                                                      | 6,068,087  |   | $ | 1,018,051 |   |
| Additions to  allowance |       | 2,814,664                                                              |       | 869,520 |   |
| Reduction to  allowance |       | (2,049,305                                                             | )          | (423,916 | ) |
| Balance March 31        |       | $                                                                      | 6,833,446  |   | $ | 1,463,655 |   |

 

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TheCompany does not maintain an allowance for doubtful accounts.  The Company’ssignificant sales for the quarter ended March 31, 2007 and March 31, 2006involved contracts signed with the U.S. Government. As of the date of thisreport, all non-direct government year-end receivables have been collected. TheCompany does not believe an allowance for doubtful accounts is necessary due tothe credit-worthiness of the U.S. Government.

Historically,the Company has not encountered sales returns.  The Company does notanticipate sales returns in the future.

**NOTE8—INVENTORIES**

Inventories at March 31, 2007 andDecember 31, 2006 consisted of the following:

|                                                 | ** ** | **March 31, 2007** | ** ** | **December 31, 2006** | ** ** |
|-------------------------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| Raw materials  and supplies                     |       | $                            | 53,926,897 |                            | $          | 45,131,126 |   |
| Work in process                                 |       | 46,120,867                   |       | 17,688,784                      |       |
| Less: allowance  for obsolescence and shrinkage |       | (2,124,783                   | )          | (2,423,613                      | )          |
| Net inventories                                 |       | $                            | 97,922,981 |                            | $          | 60,396,297 |   |

 

**NOTE 9—ASSETS PURCHASED**

OnMarch 9, 2007, the Company purchased the Research and Developmental TestingFacility of NEWTEC Services Group, Inc., located near Edgefield, SC for$5,500,000.  The Company intends to use the facility to expand the Company’sresearch and development activities and support the verification and qualitycontrol validation of the Company’s armored vehicles used to protect militarypersonnel against explosive threats. The acquisition consisted of land -$2,100,000, furniture and fixtures - $800,000, procedure manuals -$600,000 andintangible assets - $2,000,000.  These assets were reported in accordancewith SFAS141.

OnMarch 22, 2007, the Company purchased real and personal property located inSummerville, SC for $4,100,000. The Company intends to use the facility as aproduct development and logistic services training center. The acquisitionconsisted of land - $1,320,000, building -  $2,502,000 and furniture andfixtures - $278,000.

**NOTE10—PROPERTY, PLANT AND EQUIPMENT**

Property,Plant and Equipment at March 31, 2007 and December 31, 2006:
|                                     | ** ** | **March 31, 2007** | ** ** | **December 31, 2006** | ** ** |
|-------------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| Furniture and  fixtures             |       | $                            | 3,244,203  |                            | $          | 1,022,984 |   |
| Leasehold  improvements             |       | 4,076,822                    |       | 1,534,057                       |       |
| Machinery and  equipment            |       | 7,595,109                    |       | 6,534,550                       |       |
| Test equipment                      |       | 27,179                       |       | 16,790                          |       |
| Manuals                             |       | 704,798                      |       | 104,797                         |       |
| Vehicles                            |       | 393,819                      |       | 143,464                         |       |
| Demo vehicles                       |       | 1,095,925                    |       | 1,095,925                       |       |
| Buildings                           |       | 2,502,000                    |       | —                          |       |
| Construction in  progress           |       | 2,540,508                    |       | —                          |       |
| Land                                |       | 3,420,000                    |       | —                          |       |
| Less  depreciation and amortization |       | (2,212,795                   | )          | (1,488,666                      | )          |
|                                |       |                         |       |                            |       |
| Net property and  equipment         |       | $                            | 23,387,568 |                            | $          | 8,963,901 |   |

 

Depreciationexpense for the three months ended March 31, 2007 and March 31, 2006 was $724,129 and $183,558 respectively.

**NOTE 11 — ACQUIRED INTANGIBLE ASSETS**

As aresult of the acquisition of the Research and Development Testing Facility (explainedin Note 9), the following is a summary of the intangible assets acquired:

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|                           | ** ** | **Gross carrying  amount** | ** ** | **Accumulated  amortization** | ** ** | **March 31, 2007  net book value** | ** ** |
|---------------------------|------------|---------------------------------|------------|-------------------------------|------------|--------------------------------------------------------|------------|
| Subject to  amortization: |       |                            |       |                          |       |                                                   |       |
| License                   |       | $                               | 800,000    |                          | $          | —                                                 |       | $ | 800,000 |   |
|                      |       |                            |       |                          |       |                                                   |       |
| Non-compete  agreement    |       | 600,000                         |       | 37,500                        |       | 562,500                                                |       |
| Customer base             |       | 200,000                         |       | —                        |       | 200,000                                                |       |
|                      |       |                            |       |                          |       |                                                   |       |
| Special  expertise        |       | 400,000                         |       | —                        |       | 400,000                                                |       |
| Total                     |       | $                               | 2,000,000  |                          | $          | 37,500                                                 |       | $ | 1,962,500 |   |

 

Amortizationexpense for the three months ended March 31, 2007 was $37,500. Estimatedaggregate amortization expenses for each of the next three years is $466,667,$466,667, and $429,167.

**NOTE12—COMMITMENTS AND CONTINGENCIES**

**OtherAccrued Liabilities**

TheCompany’s other accrued liabilities include the following:
|                            | ** ** | **March 31, 2007** | ** ** | **December 31, 2006** | ** ** |
|----------------------------|------------|------------------------------|------------|---------------------------------|------------|
| Compensation and  benefits |       | $                            | 3,365,315  |                            | $          | 1,222,143 |   |
| Vehicle fee payable        |       | 1,042,848                    |       | 1,139,250                       |       |
| Settlement                 |       | —                       |       | 607,466                         |       |
| Liquidated damages         |       | $                            | 4,875,780  |                            | —     |   |
|                       |       | $                            | 9,283,943  |                            | $          | 2,968,859 |   |

 

TheMarch 31, 2007 compensation and benefits includes $1,005,922 for taxes withheldrelating to options exercised which was paid in April.

**LiquidatedDamages**

OnDecember 20, 2006, the Company completed a private placement of 13,000,000shares of its common stock to institutional investors at $11.75 per share,resulting in gross proceeds of $152,750,000.  The proceeds, net ofcommissions, were $146,640,000.

Per theSecurities Purchase Agreement, the Company agreed to file a registrationstatement to register all 13,000,000 shares of common stock for resale anddistribution under the 1933 Act within 30 calendar days (January 19, 2007) andcause the registration statement to be declared effective not later than 120calendar days (April 19, 2007). If the Registration Statement is not declaredeffective on or before the Effective Date by the SEC, then the Company shalldeliver to each Purchaser, as****LiquidatedDamages , an amount equal to one and one third percent (1 1/3%) for each thirty(30) days (or such lesser pro-rata amount for any period of less than thirty(30) days) of the total purchase price of the Securities purchased and stillheld by such Purchaser pursuant to the Agreement on the first day of eachthirty (30) day or shorter period for which Liquidated Damages are calculable.As of the date of the filing of this 10-Q, the registration statement is noteffective. The Company believes that the best estimate of when the registrationstatement will become effective is  June 30, 2007. In accordance with FSPEITF 00-19-2 — Accounting for Registration Payment Arrangements, the Companyhas recorded a contingent liability for liquidated damages of $4,875,780.

**ContractLiabilities**

TheCompany’s sales contracts generally include a warranty such that the Company’sproducts are free from defects in design, material, and workmanship for aperiod of 1 year from the acceptance date.  The warranty does not apply toany damage or failure to perform caused by the misuse or abuse of the vehicle,combat damage, fair wear and tear items (brake shoes, track pads, wiper blades,etc.), or by the customer’s failure to perform proper maintenance or service onthe supplies.

TheCompany routinely reviews its exposure for warranty costs and determineswarranty and pricing reserves based on historical data and known events. Belowis a table detailing the Company’s accruals for warranty-related costs as ofMarch 31, 2007 and December 31, 2006:
|                         | ** ** | **March 31, 2007** | ** ** | **December 31, 2006** | ** ** |
|-------------------------|------------|------------------------------|------------|---------------------------------|------------|
|                    |       |                         |       |                            |       |
| Non recurring  warranty |       | $                            | 1,500,000  |                            | $          | 1,500,000 |   |
| General warranty        |       | 350,000                      |       | 350,000                         |       |
|                    |       | $                            | 1,850,000  |                            | $          | 1,850,000 |   |

 

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**GainShare Program**

OnMarch 1, 2007, the Board of Directors approved a quarterly gain share program.The program will distribute 10% of each quarter’s net earnings to employees.

**Constructionin Progress**

Duringthe first quarter 2007, the Company entered into a contract to build a 90,000square foot warehouse facility in Ladson, SC. As of March 31, 2007, the Companyhas expended $1,795,520 in progress payments (accounted for as construction inprogress) against the total contract of $4,474,000. The construction isscheduled to be completed by August 31, 2007.  The remaining constructionin progress is associated with the ongoing development and implementation of variousbusiness operating systems software.

**LegalProceedings**

DuringJune, 2006, the Company confirmed that two former employees had filed claimsunder 31 U.S.C. §3730 alleging*inter alia* that the Company had failed to comply with the terms of the JERRV contract inrespect to the allocation and use of the initial contract milestone payment forsuch “accelerated delivery costs.” On August 23, 2006, the Company agreed tosettle with the United States Government and with these former employees allclaims relating to or arising under the JERRV contract and the payment of suchaccelerated delivery costs for a total of $1,905,000 plus interest of $23,000.As of December 31, 2006, the Company has paid $1,297,534 under the terms ofsuch settlement agreement and the Company has established a provision of$607,466 for the remaining liability. The final payment on this settlement waspaid February 7, 2007.

TheCompany may be involved from time to time in ordinary litigation that will nothave a material effect on its operations or finances. Other than the litigationdescribed above, the Company is not aware of any pending or threatenedlitigation against the Company or its officers and directors in their capacityas such that could have a material impact on the Company’s operations orfinances.

**NOTE13—LONG-TERM LIABILITIES**

InOctober 2006, the Company acquired capital equipment valued at $234,875 using anote with implied interest of 11.25% from the supplier with a repayment basedon usage of materials used with the equipment.  It is expected that basedon usage estimates the note payments in 2007, 2008, and 2009 will be $92,608,$92,608 and $69,456, respectively.

As partof the purchased of NEWTEC Services Group, Inc, a non-compete arrangement wasagreed upon where the President of NEWTEC Services Group Inc., would notoperate a competitive business during the period of employment with the Companyand for two years thereafter.  As part of the non-compete provision,$450,000 was withheld payable in three equal installments of $150,000 onJanuary 1 of 2008, 2009, and 2010.

**NOTE14—SHAREHOLDERS’ EQUITY**

Duringthe three months ended March 31, 2007, the Company recorded the followingtransactions within its shareholders’ equity accounts:

**Common Stock Transactions**

·                  27,700shares were cancelled relating to the December 2006 PIPE (Private Investment inPublic Equity) offering.

·                  50,000shares of common stock granted in June 2006 to an employee vested and wereissued on January 1, 2007.  The valuation of these shares was recorded in2006 under SFAS123R.

·                  26,789shares of common stock were issued to members of the Board of Directors as 2006compensation. These shares were classified as shares to be issued as ofDecember 31, 2006.

·                  Employeesexercised stock options to purchase 1,198,681 shares of the Company’s commonstock valued at $1,011,500.  The valuation of these shares was recorded in2006 under SFAS123R.

15

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**NOTE 15— VALUATION AND QUALIFYING ACCOUNTS AND RESERVES**

Thefollowing table summarizes information about accounts and reserves for thethree months ending March 31,:
|                                 | ** ** | **Balance at**   | ** ** | **Additions**                 | ** ** | ** **     | ** ** | ** **                   | ** ** |
|---------------------------------|------------|-----------------------|------------|-------------------------------|------------|----------------|------------|------------------------------|------------|
| ** **                      | ** ** | **beginning of** | ** ** | **charged to cost** | ** ** | ** **     | ** ** | **Balance at end** | ** ** |
| **Description**                 | ** ** | **period**            | ** ** | **and expenses**         | ** ** | **Write-offs** | ** ** | **of period**           | ** ** |
|                            |       |                  |       |                          |       |           |       |                         |       |
| Revenue based  provisions       |       |                  |       |                          |       |           |       |                         |       |
| 2007                            |       | $                     | 6,068,087  |                          | $          | 2,814,664      |       | $                            | 2,049,305  |   | $ | 6,833,446 |   |
| 2006                            |       | $                     | 1,018,051  |                          | $          | 869,520        |       | $                            | 423,916    |   | $ | 1,463,655 |   |
|                            |       |                  |       |                          |       |           |       |                         |       |
| Allowance for inventory  losses |       |                  |       |                          |       |           |       |                         |       |
| 2007                            |       | $                     | 2,423,613  |                          |       |           | $          | 298,830                      |       | $ | 2,124,783 |   |
| 2006                            |       | $                     | 498,281    |                          | $          | 150,000        |       |                         |       | $ | 648,281 |   |
|                            |       |                  |       |                          |       |           |       |                         |       |
| Warranty reserve                |       |                  |       |                          |       |           |       |                         |       |
| 2007                            |       | $                     | 1,850,000  |                          |       |           |       |                         | $          | 1,850,000 |   |
| 2006                            |       | $                     | 1,686,062  |                          | $          | 459,775        |       | $                            | 1,306,018  |   | $ | 839,819 |   |

 

**NOTE16—SUBSEQUENT EVENTS**

OnApril 18, 2007 the U. S. Marine Corps announced a $6.9 million contract awardedto Force Dynamics to provide sustainment Integrated Logistics Support (ILS) forthe U.S. Marine Corp’s Mine Resistant Ambush Protected (“MRAP”) vehicleprogram. On April 24, 2007, the U. S. Marine Corps released a delivery orderfor 300 Category I Cougar 4X4 and 700 Category II Cougar 6X6 vehicles for theU.S. Marine Corps’ MRAP program with a value of approximately $490 million.

On May3, 2007, the Company received an $8.867 million contract to produce Buffalo andCougar mine-protected vehicles of the Canadian Expeditionary Force Command.Marine Corps Systems Command will administer the contract under a foreignmilitary sales agreement.

**ITEM 2 – MANAGEMENT’S DISCUSSION ANDANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

**CautionaryStatement Concerning Forward-Looking Statements**

ThisReport contains forward-looking statements, including, without limitation,statements concerning possible or assumed future results of operations andthose preceded by, followed by or that include the words “believes,” “could,” “expects,”“intends,” “anticipates,” or similar expressions. Our actual results coulddiffer materially from these anticipated in the forward-looking statements formany reasons including our ability to raise capital when necessary;availability of parts and raw materials for our products; continued customeracceptance of our products; on-going success of our research and developmentefforts and other risks described in our Form 10-K and other reports filed withthe Securities and Exchange Commission elsewhere in this report. Although webelieve the expectations reflected in the forward-looking statements arereasonable, they relate only to events as of the date on which the statementsare made, and our future results, levels of activity, performance orachievements may not meet these expectations. We do not intend to update any ofthe forward-looking statements after the date of this report to conform thesestatements to actual results or to changes in our expectations, except asrequired by law.

**Applicationof Critical Accounting Policies**

Management’sDiscussion and Analysis of the Company’s Financial Condition and Results ofOperations is based on the Company’s unaudited Consolidated FinancialStatements, which have been prepared in accordance with U.S. generally acceptedaccounting principles, or GAAP. The preparation of financial statements inaccordance with GAAP requires management to make estimates and assumptions thataffect the reported amounts of assets and liabilities and the disclosure ofcontingent assets and liabilities at the date of the financial statements, aswell as the reported amounts of revenues and expenses during the reportingperiod. On an ongoing basis, management evaluates its estimates, includingthose related to long-term contracts and programs, claims for unanticipatedcontract costs, goodwill and other intangible assets, income taxes, worker’scompensation, warranty obligations and contingencies and litigation. Managementbases its estimates on historical experience and on various other assumptionsthat it believes to be reasonable under the circumstances. The results of theseestimates form the basis for making judgments about the carrying values ofassets and liabilities that are not readily available from other sources.Actual results may differ from these estimates under different assumptions orconditions. There were no significant changes in the Company’s criticalaccounting policies during the first quarter of 2007.

16

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DividendPolicy: We have never declared or paid a cash dividend on ourcommon stock, and we do not anticipate paying any cash dividends on our commonstock in the foreseeable future. Any future determination to pay cash dividendson our common stock will be at the discretion of our board of directors andwill depend upon our financial condition, operating results, capitalrequirements, restrictions contained in our agreements and other factors whichour board of directors deems relevant. Under the terms of the Certificate ofDesignation for our Series D Convertible Preferred stock, we are obligatedto pay a 6% dividend in cash or shares of common stock on the outstandingshares of Series D stock. As of March 31, 2007, there are no outstandingSeries D shares and we have no obligation to make such dividend payments.

Off-Balance Sheet Arrangements*:* As of March 31, 2007, other thanoperating leases, the Company had no off-balance sheet arrangements. (Refer to Note 12 of the Financial Statements included in this 10-Q)

JointVenture Agreement:  On December 15, 2006, we enteredinto a Joint Venture Agreement with General Dynamics Land Systems Inc. (“GDLS”),pursuant to which we agreed to work together with GDLS to win and execute acontract for the Mine Resistant Ambush Protected Vehicle Program, or MRAPProgram. Under the Agreement, the MRAP Program is defined to include any andall solicitations and requests for proposals for MRAP production and LifecycleSupport and/or any follow on work that may be performed. The scope of work tobe undertaken by the Joint Venture is limited to the use of our Cougar 4x4 and6x6 armored vehicles for the MRAP Category I and Category II requirements. TheJoint Venture board is made up of three designees from Venture FPI and threedesignees from GLDS. The Joint Venture board will have authority to execute documentsin accordance with the terms of the Agreement. Decisions of the Joint Ventureboard shall be made by majority vote. We agreed to operate the Joint Venture onthe principle of equitable division of burden and benefit with GDLS. This meansthat parties are expected to contribute resources equally to the venture. Weagreed to divide the Joint Venture revenues between us on a 50%/50% basis.Wherever practicable, Force Dynamics will act as the prime contractor for JointVenture work, and we, along with GDLS, shall act as the exclusivesubcontractors.

**FinancialCondition and Results of Operations**

 Overview:We generated net earnings of $2,513,241 for the three month period endedMarch 31, 2007. Sales for this period from all sources generated grossrevenue of $100,158,766, against which we incurred total cost of goods of$78,403,575 generating a gross profit of $21,755,191, or 21.7%. We incurredSelling, General and Administrative expenses of $14,378,611 which includes a$4,875,780 charge for liquidated damages for late effective registration ofstock, plus Research and Development expenses in the amount of $4,841,819resulting in an operating profit of $2,534,761. During this three month period,we delivered a total of 195 vehicles consisting of 13 Buffalo and 182 Cougars –all variants.

Results of Operations —First Quarter 2007 Compared with First Quarter 2006

Thefollowing table sets forth our unaudited consolidated statements of operationsfor the three month period ended March 31 for the years 2007 and 2006. Thediscussion and analysis that follows should be read in conjunction with ourconsolidated financial statements and related notes included elsewhere in thisreport.

17

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**Consolidated Statement of Operations(unaudited)**
|                                | ** ** | **For the three months ended March 31,** | ** **  |
|--------------------------------|------------|------------------------------------------------------------------------|-------------|
| ** **                     | ** ** | **2007**                                                               | ** **  | **2006** | ** ** | **Difference** | ** ** | **% Change** | ** ** |
| Revenues                       |       | $                                                                      | 100,158,766 |   | $ | 34,802,585 |   | $ | 65,356,181 |   | 187.8 |   |
| Cost of sales                  |       | 78,403,575                                                             |        | 28,164,816 |   | 50,238,759 |   | 178.4 |   |
|                           |       |                                                                   |        |   |   |   |   |   |   |
| Gross profit                   |       | 21,755,191                                                             |        | 6,637,769 |   | 15,117,422 |   | 227.7 |   |
|                           |       |                                                                   |        |   |   |   |   |   |   |
| S,G&A expense              |       | 14,378,611                                                             |        | 5,961,353 |   | 8,471,258 |   | 142.1 |   |
| R&D expense                |       | 4,841,819                                                              |        | 663,590 |   | 4,178,229 |   | 629.6 |   |
| Total S,G&A                |       | 19,220,430                                                             |        | 6, 624,943 |   | 12,595,487 |   | 190.1 |   |
|                           |       |                                                                   |        |   |   |   |   |   |   |
| Operating profit               |       | 2,534,761                                                              |        | 12,826 |   | 2,521,935 |   | N/M |   |
|                           |       |                                                                   |        |   |   |   |   |   |   |
| Interest expense               |       | (9,613                                                                 | )           | (807,324 | ) | 797,711 |   | 98.8 |   |
| Other Income                   |       | 1,788,093                                                              |        | 27,049 |   | 1,761,044 |   | N/M |   |
|                           |       |                                                                   |        |   |   |   |   |   |   |
| Net earnings/(loss) before tax |       | 4,313,241                                                              |        | (767,449 | ) | 5,080,690 |   | 662.0 |   |
|                           |       |                                                                   |        |   |   |   |   |   |   |
| Tax expense                    |       | 1,800,000                                                              |        | — |   | (1,800,000 | ) | N/M |   |
|                           |       |                                                                   |        |   |   |   |   |   |   |
| Net earnings/(loss) after tax  |       | $                                                                      | 2,513,241   |   | $ | (767,449 | ) | $ | 3,280,690 |   | 427.5 |   |

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N/M—Not Material
|                                      | ** ** | **For the three months ended March 31,** | ** **  |
|--------------------------------------|------------|------------------------------------------------------------------------|-------------|
| **Net Sales**                   | ** ** | **2007**                                                               | ** **  | **2006** | ** ** |
| Net sales                            |       | $                                                                      | 100,158,766 |   | $ | 34,802,585 |   |
| % change compared with  prior period |       | 188                                                                    | %           | — | % |
|                                      |            |                                                                        |             |  |  |  |  |

 

Theincrease in net sales in the first quarter of 2007 compared with the firstquarter of 2006 is attributable to volume changes in the following:
| Buffalo vehicles                |   | 22 | % |
|---------------------------------|--------|----|---|
| Cougar vehicles  (all variants) |   | 86 | % |
| Spares/Logistics                |   | 80 | % |

 
|                                                                 | ** ** | **For the three months ended March 31,** | ** ** |
|-----------------------------------------------------------------|------------|------------------------------------------------------------------------|------------|
| **Cost of Products and Services Sold** | ** ** | **2007**                                                               | ** ** | **2006** | ** ** |
| Cost of products and  services sold                             |       | $                                                                      | 78,403,575 |   | $ | 28,164,816 |   |
| Gross Margin%                                                   |       | 21.7                                                                   | %          | 19.1 | % |
|                                                                 |            |                                                                        |            |  |  |  |  |

 

Grossmargin increased in the first quarter of 2007 compared with the first quarterof 2006 by 2.6 percentage points due to reduced material cost, improved laborefficiencies and increased leverage of fixed cost.
|                                                                      | ** ** | **For the three months ended March 31,** | ** ** |
|----------------------------------------------------------------------|------------|------------------------------------------------------------------------|------------|
| **Selling, General and Administrative Expenses** | ** ** | **2007**                                                               | ** ** | **2006** | ** ** |
| Selling, general and  administrative expenses                        |       | $                                                                      | 14,378,611 |   | $ | 5,961,353 |   |
| Percent of sales                                                     |       | 14.4                                                                   | %          | 17.1 | % |
|                                                                      |            |                                                                        |            |  |  |  |  |

 

Selling,general and administrative expenses as a percentage of sales decreased in thefirst quarter of 2007 compared with the first quarter of 2006 by 2.7 percentagepoints due primarily to increased leverage of administrative cost to supportthe business partially offset by the establishment of a liquidated damagescharge of $4,875,780 (3.8 percentage points) resulting from the delayedregistration of the December Private Investment of Public Equity  (seeFootnote 12 of the unaudited consolidated financial statements of this 10-Q).

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|                                                      | ** ** | **For the three months ended March 31,** | ** ** |
|------------------------------------------------------|------------|------------------------------------------------------------------------|------------|
| **Research and Development Expenses** | ** ** | **2007**                                                               | ** ** | **2006** | ** ** |
| Research and  development expenses                   |       | $                                                                      | 4,841,819  |   | $ | 663,590 |   |
| % change compared with  prior period                 |       | 629.6                                                                  | %          |   |   |
|                                                      |            |                                                                        |            |  |  |  |  |

 

Researchand development expenses increased in the first quarter of 2007 compared withthe first quarter of 2006 due primarily to increased expenditures incurred todevelop the Cheetah product line.
|                                       | ** ** | **For the three months ended March 31,** | ** ** |
|---------------------------------------|------------|------------------------------------------------------------------------|------------|
| **Interest Expense**             | ** ** | **2007**                                                               | ** ** | **2006** | ** ** |
| Interest and other  financial charges |       | $                                                                      | (9,613     | ) | $ | (807,324 | ) |
| % change compared with  prior period  |       | 98.8                                                                   | %          |   |   |
|                                       |            |                                                                        |            |  |  |  |  |

 

Interestcharges decreased in the first quarter of 2007 compared with the first quarterof 2006 due to pay-off of the short term Longview Capital loan (August 2006)and the termination of the accounts receivable factoring agreement with G.C.Financial (June 2006).
|                                      | ** ** | **For the three months ended March 31,** | ** ** |
|--------------------------------------|------------|------------------------------------------------------------------------|------------|
| **Other Income**                | ** ** | **2007**                                                               | ** ** | **2006** | ** ** |
| Other income                         |       | $                                                                      | 1,788,093  |   | $ | 27,049 |   |
| % change  compared with prior period |       | N/M                                                                    |       |   |   |
|                                      |            |                                                                        |            |  |  |  |  |

 

Otherincome increased in the first quarter of 2007 compared with the first quarterof 2006 due to interest income earned on investing the funds received from theDecember 2006 Private Investment of Public Equity.
|                      | ** ** | **For the three months ended March 31,** | ** ** |
|----------------------|------------|------------------------------------------------------------------------|------------|
| **Tax Expense** | ** ** | **2007**                                                               | ** ** | **2006** | ** ** |
| Tax expense          |       | $                                                                      | 1,800,000  |   | $ | — |   |
| Effective tax rate   |       | 41.7                                                                   | %          | — | % |
|                      |            |                                                                        |            |  |  |  |  |

 

Theeffective tax rate increased in the first quarter of 2007 compared with thefirst quarter of 2006 by 41.7 points due principally to the requirement to paytaxes resulting from us generating a profit.
|                                                            | ** ** | **Three months ended March 31,** | ** ** |
|------------------------------------------------------------|------------|------------------------------------------------------|------------|
| **Net Income**                                        | ** ** | **2007**                                             | ** ** | **2006** | ** ** |
| Net income                                                 |       | $                                                    | 2,513,241  |   | $ | (767,449 | ) |
| Earnings (loss) per  share of common stock — assuming |       |                                                 |       |   |   |
| dilution                                                   |       | $                                                    | 0.04       |   | $ | (0.04 | ) |

 

Theincrease of $0.08 earnings per share in the first quarter of 2007 compared withthe first quarter of 2006 results from  increased earnings  due tovolume increases, improved gross margin percentages, higher interest income andlower interest expense partially offset by increased selling, general andadministrative and research and development cost.

Backlog:On January 15, 2007, the U.S. Marine Corps awarded a firm fixed price contractfor 15 Cougar Joint EOD Rapid Response Vehicles, or JERRV.  The value ofthis contract is approximately $9.4 million.

OnJanuary 26, 2007, the U.S. Marine Corps awarded us an Indefinite Delivery,Indefinite Quantity, or IDIQ, contract for the MRAP program.  Thiscontract allows the U.S. Marine Corps to place delivery orders for up to 4,100MRAP vehicles per ordering year for 5 years for a total possible vehiclequantity of 20,500.  On January 26, 2007, the U.S. Marine Corps issued adelivery order for 4 MRAP vehicles to be used in survivability and mobilitytesting as part of the program.  On February 14, 2007, the Marine Corpsissued a second delivery order for 125 MRAP production vehicles.  Thetotal value of these delivery orders is $74,636,994.

OnFebruary 14, 2007, Force Dynamics - a joint venture between Force Protection,Inc. and General Dynamics Land Systems, a business unit of General DynamicsCorporation announced it has received a $67.4 million contract award from theU.S. Marine Corps to produce 125 vehicles for its MRAP program.

OnMarch 9, 2007, the U.S. Marine Corps issued a delivery order for an additional19 Buffalo mine-protected vehicles worth an estimated $16.2 million.  OnMarch 14, 2007, the Mastiff contract was modified to add 22 additional Mastiffsincreasing the total Mastiffs to be delivered to 108 vehicles.

Subsequentto the quarter ended March 31, 2007,  on April 18, 2007, the U. S. MarineCorps announced a $6.9 million contract

19

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awardedto Force Dynamics to provide sustainment Integrated Logistics Support  forthe U.S. Marine Corp’s MRAP program. On April 24, 2007, the U. S. Marine Corpsreleased a delivery order for 300 Category I Cougar 4X4 and 700 Category IICougar 6X6 vehicles for the U.S. Marine Corps’ MRAP program with a value ofapproximately $490 million. On May 3, 2007, we received an $8.867 millioncontract to produce Buffalo and Cougar mine-protected vehicles of the CanadianExpeditionary Force Command. Marine Corps Systems Command will administer thecontract under a foreign military sales agreement.

FutureResults: During the remainder of calendar year 2007, weexpect to have incurred the majority of our presently anticipatedinfra-structure expansion costs and to achieve a substantially increased levelof vehicle production capacity, resulting in increased revenues andprofitability for such upcoming period. Set out below is a table showing actualdeliveries of our vehicles during 2006 and the first quarter of 2007.

**Vehicle Deliveries and Backlog**
| ** **             | ** ** | **Q1-  2006** | ** ** | **Q2-  2006** | ** ** | **Q3-  2006** | ** ** | **Q4-  2006** | ** ** | **Q1 2007** | ** ** | **Funded Backlog  (1) March 31, 2007** | ** ** |
|------------------------|------------|---------------|------------|---------------|------------|---------------|------------|---------------|------------|------------------|------------|------------------------------------------------------------|------------|
| Buffalo                |       | 3             |       | 5             |       | 3             |       | 15            |       | 13               |       | 61                                                         |       |
| Cougar (all  variants) |       | 45            |       | 59            |       | 55            |       | 100           |       | 182              |       | 287                                                        |       |
| Total                  |       | 48            |       | 64            |       | 58            |       | 115           |       | 195              |       | 348                                                        |       |

 

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(1)Excludes 17 vehicles (Buffalos, Cougars) that are on contract but not funded asof March 31, 2007. In addition, it does not include the post March 31, 2007awards under the recently awarded MRAP program or those vehicles for theCanadian Expeditionary Force command or future MRAP orders.

**Trends, Risks And Uncertainties**

Theresults of our operations for the first quarter ended March 31, 2007reflect the costs associated with our  continued growth, as we expand ourmanufacturing facility and capabilities to meet the expected demand for ourvehicles for potential future and follow-on orders. This included substantialvehicle and automotive engineering work, manufacturing engineering development,hiring and training workforce and the expansion of our manufacturing andadministrative facilities. We continue to face the challenges of expanding ourmanufacturing capacity to fully exploit all opportunities. These activitieshave required a significant commitment of short term resources, but we expectthe long term benefits will be substantial.

Werecognize there are risks associated with our on-going expansion activities. Wecontinue to rely upon the U.S. Army and the U.S. Marine Corps for our sales,and if either customer elected not to issue further orders to us, it would havea dramatic impact upon our financial performance. In addition, if we aredelayed in meeting the delivery schedule under contracts, we may beobligated to pay liquidated damages for any delayed vehicle, and in the eventof any substantial failure to perform, the customer could cancel the contractand/or claim additional damages. Payment of liquidated damages could negativelyimpact our future liquidity, and since we are incurring significant costsassociated with our expansion program based on the expectation of futurecontract revenues, loss of contracts would have a dramatic impact on both ourliquidity and our financial performance. We currently do not have any reason toexpect that our customers will choose to stop buying our vehicles or that anysignificant contracts will be cancelled.

In thepast, we have encountered some difficulties in securing the necessarycomponents for our vehicles, for example armor steel, truck chassis, axle setsand ballistic glass. To mitigate this risk, we have identified multiple vendorsfor certain components to ensure we have alternate sources of supply ifnecessary. Additionally, we have implemented a program of advance purchasingand stockpiling critical materials. For example, we currently havepre-purchased steel and truck parts to ensure availability of material neededfor current and potential future orders. While we do not currently expect thepotential non-availability of parts or raw materials to materially affect ouroperations, there is a possibility that delays or increased costs couldnegatively impact our financial performance if circumstances change. Apart fromthe foregoing, the main uncertainty about our future operations is whether wewill continue to receive additional orders for our vehicles. It is impossible topredict with certainty whether such future orders will be placed by existing ornew customers. If we do not receive future orders, it is unlikely that ourbusiness will continue. However, we believe our vehicles provide proven blastand ballistic protection, and that for so long as there is a risk of bodilyharm to service personnel from explosive blasts, there will be a market for ourproducts. A number of recent market surveys and requests for information issuedby the U.S. military, for armored vehicles with characteristics substantiallysimilar to ours, support this view.

**Liquidity And Capital Resources**

CashFlow Summary:  Our cash flows from operating, investingand financing activities, as reflected in the Consolidated Statement of CashFlows for the three months ended March 31, 2007 and 2006, are summarized asfollows:

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|                                                       | ** ** | **For the three months ended March 31,** | ** **  |
|-------------------------------------------------------|------------|------------------------------------------------------------------------|-------------|
| ** **                                            | ** ** | **2007**                                                               | ** **  | **2006** | ** ** |
| Cash provided by  (used for):                         |       |                                                                   |        |   |   |
| Operating activities                                  |       | $                                                                      | (27,169,112 | ) | $ | 6,938,663 |   |
| Investing activities                                  |       | (16,697,796                                                            | )           | (641,960 | ) |
| Financing activities                                  |       | 989,373                                                                |        | (1,367,474 | ) |
|                                                  |       |                                                                   |        |   |   |
| Net increase (decrease)  in cash and cash equivalents |       | $                                                                      | (42,877,535 | ) | $ | 4,929,229 |   |

 

Cashprovided by operating activities decreased by $34,107,775 during the firstthree months of 2007 compared with the first three months of 2006 primarily dueto increased inventory as a result of higher sales, increased receivables as aresult of higher sales, the termination of the factoring agreement with G.C.Financial and delays in receipt of performance based payments, partially offsetby increased earnings and higher accounts payables.

Cashused for investing activities increased by $16,055,836 during the first threemonths of 2007 compared with the first three months of 2006 due primarily tothe purchase of a research and test facility ($5,500,000), a facility to expanddevelopment and logistics training activities ($4,100,000), warehousingfacilities, manufacturing equipment and infrastructure to support existing andfuture planned growth of the business.

Cashprovided by financing activities increased by $2,356,847 during the firstquarter of 2007 compared with the first quarter of 2006 primarily due to anincrease in proceeds from exercised options of $1,011,500, and a reduction inthe payment of debt of $1,250,000.

Uncertainties:The amount of working capital that we will require depends on several factors,including without limitation, the extent and timing of sales of our products,future inventory costs, the timing and costs associated with the expansion ofour manufacturing, development, engineering and customer support capabilities,the timing and cost of our product development and enhancement activities andour operating results. The realization of a major portion of the assets shownon our balance sheet is dependent upon the success of such futureoperations.  We expect to be able to generate cash flows from operationssufficient to satisfy our cash requirements for the remainder of 2007, but ifwe are unable to do so, we may need to seek alternative sources of cash.

Inflation andMaterial Cost:  We do not believe that inflation has hador is likely to have any significant impact on our revenues, and we currentlyare not facing any material shortages of material or parts. We currently haveenough steel on hand or on order to manufacture our existing contracts, and wecontinue to purchase steel anticipating future requirements. If the price ofsteel increases significantly, the cost of our products could increase, and wemay not be able to pass on this cost under our current contracts. As a result,if the cost of our raw materials increases, our profitability on such currentcontracts, if any, could decrease.

**ITEM 3 – QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK**

Commodity Prices

We areexposed to market risk from changes in commodity prices. If the price of steelincreases significantly, the cost of our products could increase. It isunlikely we will be able to pass on this cost under our current contracts. As aresult, if the cost of our raw materials increases, our profitability, if any,could decrease.

Foreign Currency

Themajority of our business is denominated in U.S. dollars and as such, movementin the foreign currency markets will have a minimal direct impact on ourbusiness.

Interest Rates

We havea Money Market account where excess cash is invested at LIBOR minus 40 bps.

Ourcurrent financing of debt is at a fixed rate, we are not currently directly atrisk of interest rate fluctuations. As our financing needs change in thefuture, interest rate risk may become a more significant issue for us.

Todate, we have not used any derivative financial instruments for the purpose ofreducing our exposure to adverse fluctuations in interest rates, foreigncurrency exchange, or commodity prices. We are not a party to leveragedderivatives nor do we hold or issue financial investments for speculativepurposes.

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**ITEM 4 – CONTROLS AND PROCEDURES**

Disclosure Controls andProcedures

Ourmanagement evaluated, with the participation of our Chief Executive Officer andour Chief Financial Officer, the effectiveness of our disclosure controls andprocedures as of the end of the period covered by this Quarterly Report onForm 10-Q. Based on this evaluation, our Chief Executive Officer and ourChief Financial Officer have concluded that our disclosure controls andprocedures are effective to ensure that information we are required to disclosein reports that we file or submit under the Securities Exchange Act of 1934(i) is recorded, processed, summarized and reported within the timeperiods specified in Securities and Exchange Commission rules and forms,and (ii) is accumulated and communicated to our management, including ourChief Executive Officer and our Chief Financial Officer, as appropriate toallow timely decisions regarding required disclosure. Our disclosure controlsand procedures are designed to provide reasonable assurance that suchinformation is accumulated and communicated to our management. Our disclosurecontrols and procedures include components of our internal control overfinancial reporting. Management’s assessment of the effectiveness of ourinternal control over financial reporting is expressed at the level ofreasonable assurance that the control system, no matter how well designed andoperated, can provide only reasonable, but not absolute, assurance that thecontrol system’s objectives will be met.

Changes in InternalControls over Financial Reporting

As ofthe beginning of 2007, we have an Audit Committee comprised of three outsideboard members. They, along with management interviewed and engaged an outsideaudit firm more appropriate for the size and growth of our Company. During thefirst quarter of 2007, our Interim Chief Financial Officer was replaced with apermanent Chief financial Officer along with the finalization of a more robustaccounting ERP system which is expected to be integrated during the secondquarter of the current fiscal year. These actions have had and are expected tohave a continued positive material affect over our financial reporting.

Code of Ethics

We haveadopted a Code of Ethics that applies to all executive officers and otheremployees. Our Code of Ethics is available for review on our website atwww.forceprotection.net.

**PART II — OTHER INFORMATION**

**ITEM1 — LEGAL PROCEEDINGS**

Therehave been no material changes with respect to this item from the disclosureincluded in our Annual Report on Form 10-K for the year ended December 31,2006.

**ITEM1A — RISK FACTORS**

Therehave been no material changes with respect to this item from the disclosureincluded in our Annual Report on Form 10-K for the year ended December 31,2006.

**ITEM2 — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OFPROCEEDS**

We donot have a formal stock compensation plan, however we have issued stock toemployees and non-employees from time to time as compensation for servicesrendered.

**ITEM3 — DEFAULTS UPON SENIOR SECURITIES**

None.

**ITEM4 — SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

Nomatters were submitted to security holders during the quarter ended March 31,2007.

**ITEM5 — OTHER INFORMATION**

Note regarding ourauditors

At ameeting of the Audit Committee held on November 10, 2006, the AuditCommittee approved the engagement of Elliott Davis, LLC to serve as our independentregistered accounting firm for the fiscal year ending December 31, 2007.In addition, the Audit Committee dismissed Jaspers + Hall, P.C. as our independent registered accounting firm effective upon completion of the auditof our consolidated financial statements as of and for the fiscal year endingDecember 31, 2006.

Duringthe years ended December 31, 2005 and 2004, and through November 16,2006, we did not consult Elliott Davis, LLC regarding the application ofaccounting principles to a specified transaction, either completed or proposed,the type of audit opinion that might be rendered on our financial statements orany matter that was either the subject of a disagreement (as defined inItem 304(a)(1)(iv) and the related instructions to Item 304 ofRegulation S-K) or a reportable event (as defined inItem 304(a)(1)(v) of

22

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Regulation S-K).

Werequested Jaspers + Hall, P.C. to furnish a letter addressed to the Securitiesand Exchange Commission stating whether or not it agrees with the above statements.A copy of such letter is filed as Exhibit 16.1 to the Form 8-K filed onNovember 16, 2006.

**ITEM 6 – EXHIBITS**

**EXHIBIT INDEX**
| NUMBER | ** ** | **DESCRIPTION**                                                                                                                                                                                                                                                                                                                                                                                |
|--------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |       |                                                                                                                                                                                                                                                                                                                                                                                           |
| 2.1    |       | Agreement and Plan of Merger (included as Attachment  A to exhibit 99.2 to the Form DEF 14A filed November 19, 2004, and  incorporated herein by reference).                                                                                                                                                                                                                         |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                           |
| 3.1    |       | Articles of Incorporation (included as Attachment B  to exhibit 99.2 to the Form DEF 14A filed November 19, 2004, and  incorporated herein by reference).                                                                                                                                                                                                                            |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                           |
| 3.2    |       | By-Laws (included as Attachment C to exhibit 99.2 to  the Form DEF 14A filed November 19, 2004, and incorporated herein  by reference).                                                                                                                                                                                                                                              |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                           |
| 3.3    |       | Amended Articles of Incorporation (included as  Attachment D to exhibit 99.2 to the Form DEF 14A filed November 19,  2004, and incorporated herein by reference).                                                                                                                                                                                                                    |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                           |
| 4.1    |       | Certificate of Designation for Series D  Convertible Preferred Stock, dated January 19, 2006 (included as exhibit  4.1 to the Form 8-K filed January 27, 2006, and incorporated herein  by reference).                                                                                                                                                                     |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                           |
| 4.2    |       | Form of Common Stock Purchase Warrant, dated  January 19, 2006, (included as Exhibit 4.2 to the Form 8-K  filed January 27, 2006, and incorporated herein by reference).                                                                                                                                                                                              |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                           |
| 4.3    |       | Securities Purchase Agreement, dated  January 19, 2006 (included as Exhibit 4.3 to the Form 8-K  filed January 27, 2006, and incorporated herein by reference).                                                                                                                                                                                                            |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                           |
| 4.4    |       | Registration Rights Agreement, dated  January 19, 2006 (included as Exhibit 4.4 to the Form 8-K  filed January 27, 2006, and incorporated herein by reference).                                                                                                                                                                                                            |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                           |
| 4.5    |       | Amended and Restated Certificate of Designation for  Series B Convertible Preferred Stock (included as exhibit 4.1 of the  Form 8-K filed February 15, 2006, and incorporated herein by  reference).                                                                                                                                                                            |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                           |
| 4.6    |       | Amended and Restated Certificate of Designation for  Series C Convertible Preferred Stock (included as exhibit 4.2 of the  Form 8-K filed February 15, 2006, and incorporated herein by  reference).                                                                                                                                                                            |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                           |
| 4.7    |       | Bridge Facility between the Company and GC Financial  Services, Inc., dated September 29, 2006 (included as  Exhibit 4.1 to the Form 8-K filed July 8, 2006, and  incorporated herein by reference).                                                                                                                                                                  |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                           |
| 4.8    |       | Demand Note between the Company and GC Financial  Services, Inc., dated September 29, 2006 (included as  Exhibit 4.2 to the Form 8-K filed July 8, 2006, and  incorporated herein by reference).                                                                                                                                                                      |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.1   |       | Series B Convertible Preferred Stock Purchase  Agreement between the Company and Ashford Capital, LLC, dated  December 27, 2001 (included as exhibit 10.1 to the Form 8-K filed  January 7, 2002, and incorporated herein by reference).                                                                                                                                   |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.2   |       | Series C Convertible Preferred Stock Purchase  Agreement between the Company and eFunds Capital Partners, LLC, dated  December 27, 2001 (included as exhibit 10.2 to the Form 8-K filed  on January 7, 2002, and incorporated herein by reference).                                                                                                                        |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.3   |       | Industrial Lease between the Company and  Aerospace/Defense, Inc., dated September 2, 2003 (included as  Exhibit 10.12 to the Form 10-QSB filed August 13, 2004, and  incorporated herein by reference).                                                                                                                                                              |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.4   |       | Modification of Business Asset Sale, License  Agreement & Assignment of Rights between the Company and Rockwell  Power Systems, Inc., dated September 15, 2003 (included as exhibit  2.3 to the Form 10-QSB filed November 18, 2003, and incorporated  herein by reference).                                                                                      |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.5   |       | Form of Subscription Agreement between the  Company and Gamma Opportunity Capital Partners, LP, Longview Fund, LP, Alpha  Capital Aktiengesellschaft, Domino International Ltd, Magellan International  Ltd, and Mountain Ridge Capital LLC, dated March 23, 2004 (included as  exhibit 4 to the Form 8-K filed on March 26, 2004, and incorporated  herein by reference). |

 

23

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| 10.6   |   | Royalty Agreement between the Company and J.J. van  Eck, dated April 1, 2004 (included as exhibit 10.13 to the Form 10-QSB  filed August 13, 2004, and incorporated herein by reference).                                                                             |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                 |
| 10.7   |   | Contract between the Company and the U.S. Marines,  dated April 21, 2004 (included as exhibit 10.14 to the 10-QSB filed  August 13, 2004, and incorporated herein by reference).                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                 |
| 10.8   |   | Term Sheet between the Company and GC Financial  Services, Inc., dated September 16, 2004 (included as exhibit 10.14  to the 10-QSB filed November 15, 2004, and incorporated herein by  reference).                                                                  |
|   |   |                                                                                                                                                                                                                                                                                 |
| 10.9   |   | Letter re: Industrial Lease Agreement between the  Company and Aerospace/Defense, Inc., dated July 13, 2004 (included  as Exhibit 10.11 to the Form 10-QSB filed August 13, 2004, and  incorporated herein by reference).                                   |
|   |   |                                                                                                                                                                                                                                                                                 |
| 10.10  |   | Letter Contract awarded to the Company by the  Department of the Army dated November 18, 2004 (as described in the  8-K filed November 24, 2004, and incorporated herein by reference).                                                                               |
|   |   |                                                                                                                                                                                                                                                                                 |
| 10.11  |   | Employment Agreement between the Company and Gordon  McGilton, dated January 27, 2005 (included as Exhibit 10.22 to the  Form 10-KSB/A filed April 22, 2005, and incorporated herein by  reference).                                                             |
|   |   |                                                                                                                                                                                                                                                                                 |
| 10.12  |   | Employment Agreement between the Company and Ted  McQuinn, dated February 4, 2005 (included as Exhibit 10.23 to the  Form 10-KSB/A filed April 22, 2005, and incorporated herein by  reference).                                                                 |
|   |   |                                                                                                                                                                                                                                                                                 |
| 10.13  |   | Order for Supplies or Services between the Company  and U.S. Department of Defense, dated May 13, 2005 (included as  Exhibit 10.1 to the Form 8-K filed May 18, 2005, and  incorporated herein by reference).                                                    |
|   |   |                                                                                                                                                                                                                                                                                 |
| 10.14  |   | Order for Supplies or Services between the Company  and U.S. Department of Defense, dated May 18, 2005 (included as  Exhibit 10.1 to the Form 8-K filed May 23, 2005, and  incorporated herein by reference).                                                    |
|   |   |                                                                                                                                                                                                                                                                                 |
| 10.15  |   | Order for Supplies or Services and Delivery Order  between the Company and U.S. Department of Defense, dated September 23,  2005 (included as Exhibit 10.1 to the Form 8-K filed  September 27, 2005, and incorporated herein by reference).                     |
|   |   |                                                                                                                                                                                                                                                                                 |
| 10.16  |   | Purchase and Sale Agreement the Company and GC  Financial Services, Inc., dated September 29, 2005 (included as  Exhibit 10.1 to the Form 8-K filed July 8, 2005, and  incorporated herein by reference).                                                   |
|   |   |                                                                                                                                                                                                                                                                                 |
| 10.17  |   | Security Agreement the Company and GC Financial  Services, Inc., dated September 29, 2005 (included as  Exhibit 10.2 to the Form 8-K filed July 8, 2005, and  incorporated herein by reference).                                                            |
|   |   |                                                                                                                                                                                                                                                                                 |
| 10.18  |   | Purchase Order between the Company and Ricardo  Engineering, dated September 29, 2005 (included as Exhibit 10.1 to  the Form 8-K filed July 19, 2005, and incorporated herein by  reference).                                                                    |
|   |   |                                                                                                                                                                                                                                                                                 |
| 10.19  |   | Solicitation/Contract/Order for Commercial Items and  Delivery Order between the Company and the United States Marine Corps, dated  September 7, 2005 (included as Exhibit 10.1 to the Form 8-K  filed September 9, 2005, and incorporated herein by reference). |
|   |   |                                                                                                                                                                                                                                                                                 |
| 10.20  |   | Engineering Services Agreement between the Company  and TecStar, dated August 22, 2005 (included as Exhibit 10.31 to the  Form 10-QSB filed November 11, 2005, and incorporated herein by reference).                                                                           |
|   |   |                                                                                                                                                                                                                                                                                 |
| 10.21  |   | Contract between the Company and the United States  Army (included as Exhibit 10.36 to the Form 10-K filed April 13, 2006, and  incorporated herein by reference).                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                 |
| 10.22  |   | Form of Common Stock Purchase Agreement, dated July  24, 2006 (included as exhibit 10.1 to the Form 8K filed on July 25, 2006, and  incorporated herein by reference).                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                 |
| 10.23  |   | Production License Agreement between the Company and  BAE Systems Land & Armaments, LP, dated June 13, 2006 (included as  Exhibit 10.1 to the Form 10-Q filed August 14, 2006, and incorporated herein  by reference).                                                           |
|   |   |                                                                                                                                                                                                                                                                                 |
| 10.24  |   | Logistic Support Agreement between the Company and  BAE Systems Land & Armaments, LP, dated June 13, 2006 (included as  Exhibit 10.2 to the Form 10-Q filed August 14, 2006, and incorporated herein  by reference).                                                             |
|   |   |                                                                                                                                                                                                                                                                                 |
| 10.25  |   | Contract between the Company and the British  Ministry of Defense, dated August 11, 2006 (included as Exhibit 10.1 to the  Form 8-K filed August 17, 2006, and incorporated herein by reference).                                                                                    |

 

24

----

 
| 10.26  |   | Memorandum of Agreement and Cooperation between the  Mechem, a division of Denel (PTY), Ltd., and the Company, dated September 28,  2006 (included as Exhibit 10.1 to the Form 8-K filed September 28, 2006, and  incorporated herein by reference).                                                              |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                              |
| 10.27  |   | Memorandum of Understanding between the Company and  General Dynamics Land Systems, Inc., dated November 9, 2006 (included as  Exhibit 10.1 to the Form 8-K filed November 17, 2006, and incorporated herein  by reference).                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                              |
| 10.28  |   | Memorandum of Understanding between the Company and  Stewart & Stevenson Tactical Vehicle Systems LP d/b/a Tactical Vehicle  Systems, a Division of Armor Holdings, Inc., dated November 10, 2006  (included as Exhibit 10.1 to the Form 8-K filed November 20, 2006, and  incorporated herein by reference). |
|   |   |                                                                                                                                                                                                                                                                                                              |
| 10.29  |   | Form of Securities Purchase Agreement, dated  December 20, 2006 (included as Exhibit 10.1 to the Form 8-K filed December  21, 2006, and incorporated herein by reference).                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                              |
| 10.30  |   | Certificate of the Company’s Corporate Secretary,  dated January 10, 2007 (included as Exhibit 10.2 to the Form S-8 filed  January 12, 2007, and incorporated herein by reference).                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                              |
| 10.31  |   | Common Stock Purchase Option issued by the Company  to Gordon McGilton, dated January 10, 2006 (included as Exhibit 10.2 to  the Form S-8 filed January 12, 2007, and incorporated herein by reference).                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                              |
| 10.32  |   | Common Stock Purchase Warrant issued by the Company  to Gordon McGilton, dated October 31, 2006 (included as Exhibit 10.3 to the  Form S-8 filed January 12, 2007, and incorporated herein by reference).                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                              |
| 10.33  |   | Letter contract issued to the Company by the U.S.  Marine Corps, dated January 11, 2007 (included as Exhibit 10.1 to the Form  8-K filed January 18, 2007, and incorporated herein by reference).                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                              |
| 10.34  |   | Employment Offer Letter between the Company and  Michael S. Durski, dated January 19, 2007 (included as Exhibit 10.1 to the  Form 8-K filed January 25, 2007, and incorporated herein by reference).                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                              |
| 10.35  |   | Letter Contract issued to the Company by the United  States Marine Corps, dated January 25, 2007 (included as Exhibit 10.1 to the  Form 8-K filed February 5, 2007, and incorporated herein by reference).                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                              |
| 10.36  |   | Letter Contract issued to the Company by the United  States Marine Corps dated February 14, 2007 (included as Exhibit 10.1 to the  Form 8-K filed February 20, 2007, and incorporated herein by reference).                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                              |
| 10.37  |   | Letter Contract issued to the Company by the U. S.  Marine Corps dated March 9, 2007 (included as Exhibit 10.1 to the Form 8-K  filed March 15, 2007, and incorporated herein by reference).                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                              |
| 10.38  |   | Purchase and Sale Agreement between the Company and  NEWTEC Services Group, Inc. dated March 9, 2007 (included as Exhibit 10.2 to  the Form 8-K filed March 15, 2007, and incorporated herein by reference).                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                              |
| 10.39  |   | Asset Purchase Agreement between Force Protection  Technologies, Inc. and Lati USA, Inc. dated March 22, 2007 (included as  Exhibit 10.1 to the Form 8-K filed March 28, 2007, and incorporated herein by  reference).                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                              |
| 10.40  |   | Assignment and Assumption Agreement between Force  Protection Technologies, Inc. and Lati USA, Inc. dated March 22, 2007  (included as Exhibit 10.2 to the Form 8-K filed March 28, 2007, and  incorporated herein by reference).                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                              |
| 10.41  |   | Post Closing Memorandum between Force Protection  Technologies, Inc. and Lati USA, Inc. dated March 22, 2007 (included as  Exhibit 10.3 to the Form 8-K filed March 28, 2007, and incorporated herein by  reference).                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                              |
| 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.                                                                                                                                                                   |

 

25

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**SIGNATURES**

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrantcaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.

**FORCE PROTECTION, INC.**
| Date: July 19, 2007      |   |                           |                |
|-------------------------------|--------|--------------------------------|---------------------|
|                          |   | By:                            | /s/ Gordon McGilton |   |
|                          |   | Gordon McGilton                |                |
|                          |   | Chief Executive Officer        |                |
|                          |   |                           |                |
|                          |   |                           |                |
| Date: July 19, 2007 |   | By:                            | /s/ Michael Durski  |   |
|                          |   | Michael Durski                 |                |
|                          |   | Chief Financial Officer        |                |
|                          |   | Principal Accounting   Officer |                |

 

26

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