**U.S. SECURITIES AND EXCHANGECOMMISSION**

**Washington,D.C. 20549**

 

**FORM 10-QSB**

 
| **ý**                                                                                                                                                                 | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934**  |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                       |                                                                                                     |
| **FOR THE  QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005**                                                                                                                |
|                                                                                                                                                                       |                                                                                                     |
| **OR**                                                                                                                                                                     |
|                                                                                                                                                                       |                                                                                                     |
| **o**                                                                                                                                                                      | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934** |
|                                                                                                                                                                       |                                                                                                     |
| **FOR THE  TRANSITION PERIOD  FROM           TO           ** |

 

**COMMISSIONFILE NUMBER: 000-22273**

 

**FORCE PROTECTION, INC.**

 
| **Nevada**                                                                                        | ** ** | **84-1383888** |
|---------------------------------------------------------------------------------------------------|------------|----------------|
| (State of Incorporation)                                                                          |       | (I.R.S. EIN)   |
|                                                                                              |       |           |
| **9801  Highway 78, Bldg #2**                                                                     |
| **Ladson,  South Carolina**                                                                       |
| **29456**                                                                                         |
| ** **                                                                                        |       |           |
| Issuer’s telephone number:  **(843) 740-7015**                                               |
| ** **                                                                                        |       |           |
| Securities registered  pursuant to Section 12(b) of the Act:   ** None** |

 

Securitiesregistered pursuant to Section 12(g) of the Act:**Common Stock par value $0.001 per share**

 

Check whether the issuer (1) filed all reportsrequired to be filed by Section 13 or 15(d) of the Exchange Actduring the past 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. **Yes****ý****     **No o

 

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  o**     No****ý**

 

**As of September 30, 2005, theIssuer had 35,355,047 shares of common stock issued and outstanding.**

 

Transitional Small Business Disclosure Format (checkone): Yes o**     No****ý**

 

 

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**Table ofContents**

 
| Part I : Financial Information |                                                                     |
|-------------------------------------|--------------------------------------------------------------------------|
|                                |                                                                     |   |   |
|                                | Item 1 - Financial Statements                                            |   |
|                                |                                                                     | Report  On Review By Independent Public Accountant |   |
|                                |                                                                     | Consolidated Balance Sheet As Of  September 30, 2005 |   |
|                                |                                                                     | Consolidated Statements Of  Operations For The Three and Nine Months Ended September 30, 2005 And  September 30, 2004 |   |
|                                |                                                                     | Consolidated Statements Of  Cash Flows For The Nine Months Ended September 30, 2005 And  September 30, 2004 |   |
|                                |                                                                     | Notes To Consolidated  Financial Statements |   |
|                                | Item 2 - Management’s  Discussion And Analysis Or Plan Of Operation |   |
|                                | Item 3 - Controls And Procedures                                         |   |
|                                |                                                                     |   |   |
| Part II : Other Information    |                                                                     |
|                                |                                                                     |   |   |
|                                | Item 1 - Legal Proceedings                                               |   |
|                                | 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 And Reports  On Form 8-K                          |   |

 

2

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**PART I – FINANCIAL INFORMATION**

 

**ITEM 1  - FINANCIAL STATEMENTS**

 

REPORT OF INDEPENDENTREGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors

Force Protection, Inc.and Subsidiary

 

We have reviewed theaccompanying consolidated balance sheet of Force Protection, Inc., andSubsidiaryas of September 30, 2005, and the related consolidated statement of operations forthe three month and nine monthperiodsended September 30, 2005 and consolidated statement of cash flows for the nine monthperiod endedSeptember 30, 2005. These financial statementsare the responsibility of the company’s management.

 

We conducted our reviewin accordance with the standards of the Public Company Accounting OversightBoard (United States). A review of interim financial information consists principallyof applying analytical procedures and making inquiries of persons responsiblefor financial and accounting matters. It is substantially less in scope than anaudit conducted in accordance with standards of the Public Company AccountingOversight Board (United States), the objective of which is the expression of anopinion regarding the financial statements taken as a whole. Accordingly, we donot express such an opinion.

 

Based on our review, weare not aware of any material modifications that should be made to theaccompanying interim financial statements referred to above for them to be inconformity with accounting principles generally accepted in the United Statesof America.

 

The accompanying financial statements havebeen prepared assuming that the Company will continue as a going concern.  As discussed in Note 18, conditions existwhich raise substantial doubt about the Company’s ability to continue as agoing concern.  The financial statementsdo not include any adjustments that might result from the outcome of thisuncertainty.

 

Wehave previously audited, in accordance with the standards of the Public CompanyAccounting Oversight Board (United States), the balance sheet as of December 31,2004, and the related statements of operations, stockholders’ equity and cashflows for the period January 1, 2004 to December 31, 2004  (not presented herein).  In our report dated March 18, 2005, weexpressed an unqualified opinion on those financial statements.  In our opinion, the information set forth inthe accompanying balance sheet as of September 30, 2005 is fairly statedin all material respects in relation to the balance sheet from which it hasbeen derived.

 

 
| /s/ Jaspers + Hall, PC |   |
|------------------------|--------|
| October 14,  2005 |

 

3

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**FORCE PROTECTION, INC.**

**CONSOLIDATED BALANCE SHEET**

**SEPTEMBER 30, 2005**

**(Unaudited)**

 
| ASSETS                                                                                                  |   |        |       |
|---------------------------------------------------------------------------------------------------------|--------|-------------|------------|
| Current  Assets                                                                                         |   |        |       |
| Cash                                                                                                    |   | $           | 1,248,688  |   |
| Accounts Receivable                                                                                     |   | 1,738,661   |       |
| Other Current Assets                                                                                    |   | 301,696     |       |
| Inventories – Net                                                                                  |   | 22,018,555  |       |
| Total Current Assets                                                                                    |   | $           | 25,307,600 |   |
|                                                                                                    |   |        |       |
| Other Assets                                                                                            |   |        |       |
| Fixed Assets – Net                                                                                 |   | 2,080,266   |       |
|                                                                                                    |   |        |       |
| TOTAL ASSETS                                                                                            |   | $           | 27,387,866 |   |
|                                                                                                    |   |        |       |
| LIABILITIES AND SHAREHOLDER EQUITY                                                                      |   |        |       |
| Current  Liabilities                                                                                    |   |        |       |
| Accounts Payable                                                                                        |   | $           | 9,856,853  |   |
| Accrued Payroll Taxes                                                                                   |   | 58,369      |       |
| Deferred Revenue                                                                                        |   | 1,533,264   |       |
| Other Accrued Liabilities                                                                               |   | 534,108     |       |
| Accrued Expenses                                                                                        |   | 2,658,523   |       |
| Total Current Liabilities                                                                               |   | $           | 14,641,117 |   |
|                                                                                                    |   |        |       |
| Long-Term  Liabilities                                                                                  |   | 3,145,084   |       |
|                                                                                                    |   |        |       |
| TOTAL LIABILITIES                                                                                       |   | $           | 17,786,201 |   |
|                                                                                                    |   |        |       |
| Shareholder’s Equity:                                                                              |   |        |       |
| Preferred Series D, $1,000 par value,  20,000 shares authorized: 13,004 issued and outstanding     |   | 13,004,000  |       |
| Common stock, $.001 par value; 300,000,000  shares authorized; 35,355,047 shares issued and outstanding |   | 35,355      |       |
| Additional paid-in capital                                                                              |   | 37,975,024  |       |
| Retained earnings                                                                                       |   | (41,412,714 | )          |
| TOTAL SHAREHOLDERS’ EQUITY                                                                         |   | 9,601,665   |       |
|                                                                                                    |   |        |       |
| TOTAL  LIABILITIES AND SHREHOLDER EQUITY                                                                |   | $           | 27,387,866 |   |

 

See Accountants’ Review Report

 

4

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**FORCEPROTECTION, INC.**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**(Unaudited)**

 
| ** **                                  | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended**  | ** ** |
|---------------------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                                  | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| ** **                                  | ** ** | **2005**               | ** ** | **2004**               | ** ** | **2005** | ** ** | **2004** | ** ** |
|                                        |       |                   |       |                   |       |   |   |   |   |
| Revenues                                    |       | $                      | 9,303,526  |                   | $          | 93,727 |   | $ | 33,452,306 |   | $ | 1,752,158 |   |
|                                        |       |                   |       |                   |       |   |   |   |   |
| Cost of Sales                               |       | 7,770,078              |       | 757,459                |       | 28,426,699 |   | 2,285,937 |   |
|                                        |       |                   |       |                   |       |   |   |   |   |
| Gross Profit                                |       | $                      | 1,533,448  |                   | $          | (663,732 | ) | $ | 5,025,607 |   | $ | (533,779 | ) |
|                                        |       |                   |       |                   |       |   |   |   |   |
| Operating  Expenses:                        |       |                   |       |                   |       |   |   |   |   |
| Selling, General & Administrative  |       | 4,780,232              |       | 2,406,902              |       | 11,705,347 |   | 5,706,937 |   |
|                                        |       |                   |       |                   |       |   |   |   |   |
| Total  Operating Expenses                   |       | 4,780,232              |       | 2,406,902              |       | 11,705,347 |   | 5,706,937 |   |
|                                        |       |                   |       |                   |       |   |   |   |   |
| Gain/(Loss)  from Operations                |       | $                      | (3,246,784 | )                      | (3,070,634 | ) | $ | (6,697,740 | ) | (6,240,716 | ) |
|                                        |       |                   |       |                   |       |   |   |   |   |
| Other Income/Expenses                       |       |                   |       |                   |       |   |   |   |   |
| Other Income                                |       | 18,797                 |       | 1,608                  |       | 86,821 |   | 38,352 |   |
| Interest  Expense                           |       | (364,235               | )          | (167,766               | )          | (844,993 | ) | (193,699 | ) |
| Non  recurring warranty expense             |       | (2,012,989             | )          | —                 |       | (2,012,989 | ) | — |   |
|                                        |       |                   |       |                   |       |   |   |   |   |
| Total Other  Income (Expense)               |       | (2,358,427             | )          | (166,158               | )          | (2,771,161 | ) | (155,347 | ) |
|                                        |       |                   |       |                   |       |   |   |   |   |
| Net  Gain/(Loss)                            |       | $                      | (5,605,211 | )                      | $          | (3,236,792 | ) | $ | (9,450,901 | ) | $ | (6,396,063 | ) |
|                                        |       |                   |       |                   |       |   |   |   |   |
| Basic  Gain/(Loss) per share                |       | $                      | (0.1636    | )                      | $          | (0.2389 | ) | $ | (0.2758 | ) | $ | (0.4721 | ) |
|                                        |       |                   |       |                   |       |   |   |   |   |
| Diluted  Gain/(Loss) per share              |       | $                      | (0.1262    | )                      | $          | (0.1268 | ) | $ | (0.2128 | ) | $ | (0.2505 | ) |
|                                        |       |                   |       |                   |       |   |   |   |   |
| Weighted  average common shares outstanding |       |                   |       |                   |       |   |   |   |   |
| Basic                                       |       | 34,267,811             |       | 13,547,611             |       | 34,267,811 |   | 13,547,611 |   |
| Diluted                                     |       | 44,421,503             |       | 25,531,433             |       | 44,421,503 |   | 25,531,433 |   |

 

See Accountants’ Review Report

 

5

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**FORCE PROTECTION, INC.CONSOLIDATED STATEMENTSOF CASH FLOWS(Unaudited)**

 
| ** **                                                                   | ** ** | **Nine Months Ended  September 30,  2005** | ** ** | **Nine Months Ended  September 30,  2004** | ** ** |
|------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|-------------------------------------------------|------------|
| **Cash  Flows from Operating Activities:**                                   |       |                                            |       |                                            |       |
| Net income                                                                   |       | $                                               | (9,450,901 | )                                               | $          | (6,396,063 | ) |
| Adjustments to reconcile net loss to net  cash used in operating activities: |       |                                            |       |                                            |       |
| Depreciation and amortization                                                |       | 272,633                                         |       | 117,180                                         |       |
| Common Stock issued for services                                             |       | —                                          |       | 470,841                                         |       |
| Warranty and royalties                                                       |       | 336,000                                         |       | (117,434                                        | )          |
| Inventory write off                                                          |       | 270,000                                         |       | —                                          |       |
| Changes in assets and liabilities:                                           |       |                                            |       |                                            |       |
| (Increase) decrease in accounts rec                                          |       | (684,688                                        | )          | (2,092,786                                      | )          |
| (Increase) in inventory                                                      |       | (13,258,642                                     | )          | (7,895,579                                      | )          |
| (Increase) in other assets                                                   |       | (59,786                                         | )          | (180,410                                        | )          |
| (Decrease) increase in accounts payable                                      |       | 7,989,490                                       |       | 1,725,254                                       |       |
| (Decrease) increase in payroll taxes  payable                                |       | 58,369                                          |       | 10,840                                          |       |
| (Decrease) in accrued expenses                                               |       | (293,090                                        | )          | —                                          |       |
| (Decrease) in deferred revenue                                               |       | (1,112,452                                      | )          | 6,274,105                                       |       |
| Increase in accrued expense                                                  |       | 1,526,367                                       |       | 730,000                                         |       |
| Net Cash  Used In Operating Activities                                       |       | (14,406,700                                     | )          | (7,354,052                                      | )          |
|                                                                         |       |                                            |       |                                            |       |
| **Cash  Flows from Investing Activities**                                    |       |                                            |       |                                            |       |
| Purchase of property and equipment                                           |       | (1,471,347                                      | )          | (893,267                                        | )          |
| Proceeds from sale of PPE                                                    |       | 155,442                                         |       | —                                          |       |
| Cash Flows  Used In Investing Activities                                     |       | (1,315,905                                      | )          | (893,267                                        | )          |
|                                                                         |       |                                            |       |                                            |       |
| **Cash  Flows from Financing Activities**                                    |       |                                            |       |                                            |       |
| Proceeds from issuance of common stock                                       |       | 233,510                                         |       | 7,672,457                                       |       |
| Proceeds from issuance of preferred stock                                    |       | 15,800,000                                      |       | —                                          |       |
| Proceeds from convertible debt - line of  credit                             |       | —                                          |       | 1,500,000                                       |       |
| Payments on short term debts                                                 |       | (360,975                                        | )          | (369,387                                        | )          |
| Payments on capitalized lease                                                |       | (110,732                                        | )          | (90,774                                         | )          |
| Payments on long-term liab                                                   |       | (854,916                                        | )          | (94,973                                         | )          |
| Notes payable - payments                                                     |       | —                                          |       | (100,000                                        | )          |
| Cash Flows  Provided By Financing Activities                                 |       | 14,706,887                                      |       | 8,517,323                                       |       |
|                                                                         |       |                                            |       |                                            |       |
| Net  (Decrease) Increase in Cash and Cash Equivalents                        |       | (1,015,718                                      | )          | 270,004                                         |       |
|                                                                         |       |                                            |       |                                            |       |
| Cash and  Cash Equivalents at Beginning of Period                            |       | 2,264,406                                       |       | 278,777                                         |       |
|                                                                         |       |                                            |       |                                            |       |
| Cash and  Cash Equivalents at End of Period                                  |       | $                                               | 1,248,688  |                                            | $          | 548,781 |   |

 

See Accountants’ ReviewReport and Accompanying Notes To These Financial Statements

 

6

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**FORCEPROTECTION, INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**September 30,2005**

(Unaudited)

 

**NOTE 1 -PRESENTATION OF INTERIM INFORMATION**

 

In the opinion of themanagement of Force Protection, Inc. and its wholly-owned subsidiaries,the accompanying unaudited consolidated financial statements include all normaladjustments considered necessary to present fairly the financial position as ofSeptember 30, 2005, and the results of operations and cash flows for thethree and nine months periods ended September 30, 2004 and 2005. Interimresults are not necessarily indicative of results for a full year.

 

The consolidated financialstatements and notes are presented as permitted by Form 10-QSB, and do notcontain certain information included in Force Protection Inc.’s auditedconsolidated financial statements and notes for the fiscal year ended December 31,2004.

 

**NOTE 2 -FINANCIAL STATEMENTS**

 

The consolidated financialstatements include the accounts of the Company and its wholly-ownedsubsidiaries. All significant inter-company balances, transactions, andstockholdings have been eliminated.

 

**NOTE 3 -INVENTORIES**

 

The Company is in the process of implementing amaterial resource planning system to improve the Company’s internal controlsover inventory.  This process is expectedto continue throughout 2005 and into 2006. Beginning July 2004, theCompany set up an inventory loss reserve of $10,000 per month which wasincreased beginning July 2005 to $50,000 per month. This will be adjustedaccording to physical inventory results scheduled for December 2005.  To date, the Company has a $270,000 reservebalance.

 

Inventories at September 30, 2005 consisted ofthe following:

 
| Raw materials and supplies |   | $          | 12,944,366 |   |
|----------------------------|--------|------------|------------|--------|
| Work in  process           |   | 9,344,189  |       |
| Total Gross Inventories:   |   | 22,288,555 |       |
| Less:  Provision for Loss  |   | (270,000   | )          |
|                       |   |       |       |
| Total Net  Inventories     |   | $          | 22,018,555 |   |

 

**NOTE 4 - PROPERTY AND EQUIPMENT**

 

Property and equipment at September 30, 2005consisted of the following:

 
| Furniture and fixtures              |   | $         | 387,443   |   |
|-------------------------------------|--------|-----------|-----------|--------|
| Machinery  and equipment            |   | 1,778,579 |      |
| Test Equipment                      |   | 16,790    |      |
| Manuals                             |   | 104,798   |      |
| Vehicles                            |   | 30,464    |      |
| Demo  vehicles                      |   | 425,845   |      |
| Less  depreciation and amortization |   | (663,653  | )         |
|                                |   |      |      |
| Net property  and equipment         |   | $         | 2,080,266 |   |

 

7

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Depreciation expense for thequarter ended September 30, 2005 was $89,779 as compared to $82,775 forthe same period in 2004.

 

**NOTE 5 - COMMITMENTS ANDCONTINGENCIES**

 

Leases

 

The Company leases space in three buildings inLadson, South Carolina for its principal executive offices and manufacturingfacilities.

 

The term of the lease for Building One is threeyears starting September 1, 2005, with an option to renew for anadditional five years.  Annual rent is$119,880 plus utilities, taxes and maintenance. The Company has 7,190 squarefeet of office space and 9,139 square feet of warehouse space in Building One.

 

The term of the lease for Building Two is five yearsstarting July 15, 2004, with an option to renew for an additional fiveyears. Annual rent is $439,500 for the first year plus utilities, taxes andmaintenance, and $439,500 base rental for the next four years, which may beadjusted by increases to the Consumer Price Factor by three to seven percent.

 

The term of the lease for Building Three is fiveyears starting October 15, 2003. Annual rent is $215,000 for the firstyear plus utilities, taxes and maintenance, and $258,000 base rental for thenext four years. The Company has 84,800 square feet of space in Building Three.

 

We have deposited $160,000 as security for such leases.

 

Royalty/Licensing Agreements

 

We are party to two long term intellectual propertyagreements covering technology used in the production of our ballistic andblast protected vehicles. One agreement is with the CSIR Defencetek, a divisionof the Council for Scientific and Industrial Research, a statutory councilestablished in accordance with the Laws of the Republic of South Africa, andthe other is with MECHAM, a division of Denel Pty Ltd, a company established inaccordance with the Laws of the Republic of South Africa. Under theseagreements, we pay a fixed royalty in exchange for the exclusive transfer toproduction of the South African technology used in certain of our products.

 

Compensation of ExecutiveOfficers & Directors

 

On January 27, 2005, the Company entered intoan agreement with Mr. Gordon McGilton to act as our Chief Quality Officer.Under the terms of such agreement, Mr. McGilton is to receive a basesalary of $180,000 plus an annual bonus of $180,000 and reimbursement fortravel, lodging and other out of pocket expenses incurred during employment. Wealso agreed to provide Mr. McGilton stock options once we adopt a stockoption plan.  Effective April 18,2005, the Company appointed Mr. McGilton as Chief Executive Officer.  Additionally, Mr. McGilton joined theboard of directors.  Mr. McGiltondoes not presently receive any compensation for his service as a director.

 

On February 4, 2005, the Company entered intoan agreement with Mr. Ted McQuinn to act as President of our subsidiaryForce Protection Industries, Inc. Under the terms of such agreement, Mr. McQuinnis to receive compensation of $180,000 per year, plus an annual grant (for aperiod of three years) of unregistered common stock valued at $100,000 and aone time grant of unregistered common stock valued at $20,000.

 

On November 15, 2004, the Company entered intoan employment agreement with Mr. R. Scott Ervin to act as our GeneralCounsel.  Under the terms of suchagreement, Mr. Ervin is to receive compensation of $118,000 per year, plusrelocation expenses of $15,000, plus a grant of unregistered common stockvalued at $108,000.  Effective January 1,2005 the annual compensation under such agreement was increased to $140,000. OnJanuary 27, 2005, Mr. Ervin was appointed by the Board to act asInterim Chief Executive Officer during our search for a Chief

 

8

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Executive Officer. Upon the appointment of the newCompany Chief Executive Officer on April 18, 2005, Mr. Ervin ceasedto serve as the Interim Chief Executive Officer but continues to serve asGeneral Counsel and a member of the board of directors. Mr. Ervin does notpresently receive any compensation for his service as a director.

 

On November 8, 2004 the Company entered into anemployment agreement with our Director Mr. Gale Aguilar to act as ourInterim Chief Executive Officer. Under the terms of such agreement, Mr. Aguilaris to receive compensation of $180,000 per year, plus a grant of unregisteredcommon stock, such stock to vest on January 1, 2005. This agreement wasterminated effective January 27, 2005. Mr. Aguilar does not presentlyreceive any compensation for his service as a director.

 

On March 31, 2003 the Company entered into anemployment agreement with Mr. Frank Kavanaugh to act as our Vice Presidentof Business Development. Under the terms of such agreement, Mr. Kavanaughis to receive compensation of $180,000 per year.  In addition, on December 31, 2004 Mr. Kavanaughreceived a one time grant of 10 Series C shares and 41,667 common sharesvalued at $180,000.  On May 14, 2005Mr. Kavanaugh resigned from his employment with the Company, but continuesto serve on the board of directors as Chairman. In connection with Mr. Kavanaugh’s resignation, the Company agreedto pay for 24 months of health coverage valued at $24,178.  Mr. Kavanaugh does not presently receiveany compensation for his service as a director.

 

Legal Proceedings

 

On May 12, 2005, Atlantis Partners, Inc.filed a complaint against us in the Circuit Court for the 15th JudicialCircuit, Palm Beach County Florida for alleged breach of terms related to afinder’s fee agreement dated March 28, 2003.  The complaint allegesdamages of at least$400,000in fees, plus costs and interest.  Wehave answered the complaint and intend to vigorously defend against AtlantisPartner’s claims.

 

Non-recurring Warranty Expense

 

Duringthe period ending September 30, 2005 the Company booked a non-recurringwarranty expense of $2,012,989 for the cost of rework to certain Cougar HEVvehicles delivered under Contract M67854-04-D-5099.  This rework is being undertaken to ensure thehighest level of operational readiness of our Cougar HEV vehicles currentlydeployed in Iraq.

 

**NOTE 6 - OTHER TRANSACTIONS**

 

During the three month period ending March 31,2005, we issued the following securities:

 

•                  57,186 restricted shares of common stockvalued at $100,076 as payment of the semi-annual dividend due to our Series DConvertible Preferred stockholders.

•                  116,172 restricted shares of our common stockas a result of the exercise of warrants issued pursuant to a private placementoffering dated April 10, 2002.  Wereceived $139,750 as consideration for the purchase of such stock pursuant tosuch warrants.

•                  59,717 restricted shares of common stockvalued at $153,472.69 as compensation due for services rendered to us bycertain consultants.

•                  14,876 restricted common shares valued at$38,700 as interest pursuant to the terms of our agreement with GC FinancialServices, Inc.

•                  152,404 common shares valued at $408,975pursuant to the terms of our agreement with Dutchess Private Equities Fund,L.P.

 

During the three month period ending June 30,2005, we issued the following securities:

 

•                  1,331,429 shares of our common stock pursuantto the conversion of 2,796 shares of our Series D Convertible Preferredstock.

 

9

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During the three month period ending September 30,2005, we issued the following securities:

 

•                  224,511 shares of our common stock valued at$321,939 as payment of the semi-annual dividend due to our Series DConvertible Preferred stockholders.

•                  9,950 shares of unregistered common stockvalued at $20,000 pursuant to the terms of our employment agreement with thePresident of Force Protection Industries, Inc.

 

**NOTE 7 - CONVERTIBLE PREFERREDSTOCK**

 

The board of directors has the authority to issuepreferred stock in one or more series, and fix for each series, the designationof, and number of shares to be included in each such series.  The board of directors is also authorized toset the powers, privileges, preferences, and relative participating, optionalor other rights, if any, of the shares of each such series and thequalifications, limitations or restrictions of the shares of each such series.

 

**Series B Convertible PreferredStock**

 

The board of directors has authorized twenty fiveshares of “Series B” Convertible Preferred Stock. As of September 30,2005, there were no shares of Series B preferred stock issued andoutstanding. Holders of the Series B preferred stock, have the right tovote, with the holders of common stock, on any matter to which the common stockholders are entitled to vote. Each holder of the Series B Stock isentitled to such number of votes as shall be equal to the aggregate number ofshares of Common Stock into which such holder’s shares of Series B Stockare convertible immediately after the close of business on the record datefixed for such meeting or the effective date of such written consent, plus suchnumber of votes that equals twenty percent of the number of votes to which theholders of other securities of the Company are entitled as of such datesmultiplied by the fraction obtained by dividing the number of Series Bshares held by each such owner by the total number of Series B Sharesissued and outstanding. If the Company is liquidated, distributes its assets,dissolves or winds-up, the holders of Series B preferred stock shallreceive the greater of (i) $2,500 per share of Series B preferredstock they hold at the time of such Liquidation, or (ii) their pro ratashare of the total value of our assets and funds to be distributed, assumingthe Series B preferred stock is converted to common stock.   On February 10, 2005 the Board ofDirectors approved a resolution adopting an Amended and Restated Certificate ofDesignation for Series B Convertible Preferred Stock.  The Board Resolution was ratified andapproved by a majority of the Series B shareholders.  The Amended and Restated Certificate ofDesignation permits the Board of Directors to convert the Series B stockinto common stock. The conversion rate for the Series B stock is 759,166shares of common stock for each share of Series B stock.

 

**Series C Convertible PreferredStock**

 

The board of directors has authorized one hundredfifty shares of “Series C” Convertible Preferred Stock. As of September 30,2005, there were no shares of Series C preferred stock outstanding.  The holders of the Series C Stock mayvote on any amendment, alteration, or repeal of any provision of the Articlesof Incorporation or Bylaws of the Corporation or any other action thatmaterially and adversely alters or changes the voting powers, preferences, orother special rights or privileges, or restrictions of the Series C Stock,subject to certain limitations, and any increase in the authorized number ofshares of Series C Stock.  In theevent of any voluntary or involuntary liquidation, distribution of assets(other than the payment of dividends), dissolution or winding-up of theCompany, Series C Stock shall have preferential rights to Series BStock whereby Series C Stock shall get a one hundred and fifty percentreturn on its capital, after which time Series B Stock and Series CStock shall participate, on a pro rata basis, based on the number of shares ofthe Company’s common stock into which the Series B Stock and the Series CStock are convertible at the time of the liquidation, distribution of assets,dissolution or winding-up.  On February 10,2005 the Board of Directors approved a resolution adopting an Amended andRestated Certificate of Designation for Series C Convertible PreferredStock. The Board Resolution was ratified and approved by a majority of the Series Cshareholders.  The Amended and RestatedCertificates of Designation permits the Board of Directors to

 

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convert the Series C stock into common stock.The conversion rate for Series C stock is 75,916 shares of common stockfor each share of Series C stock.

 

**Series D Convertible PreferredStock**

 

On January 20, 2005 the Company authorizedtwenty thousand shares of Series D 6% Convertible Preferred Stock. On January 21,2005, the Company issued 15,800 shares of Series D stock in a privateplacement.  As of September 30, 2005there were 13,004 shares of Series D stock outstanding.  Holders of the Series D stock areentitled to receive cumulative dividends at the rate per share of 6% per annum**,** payable semi-annually on March 1 andSeptember 1, beginning with the first such date after the original issuedate.  The Preferred Series D doesnot have voting rights.  Upon anyliquidation, dissolution or winding-up of the Corporation, whether voluntary orinvoluntary, the Holders of the Series D shall be entitled to receive outof the assets of the Company, whether such assets are capital or surplus, foreach share of Preferred Stock an amount equal to the Stated Value per shareplus any accrued and unpaid dividends thereon and any other fees or liquidateddamages owing thereon before any distribution or payment shall be made to theholders of any Junior Securities.  Eachshare of Series D Preferred Stock will convert into the number of sharesof the Company’s common stock equal to $1,000 divided by the conversion priceat the holder’s discretion.  The currentconversion price is $2.10.

 

**NOTE 8 – RECEIVABLES &FACTORING**

 

In June 2005 we entered into an agreement withGC Financial Services, Inc for a Bridge Facility and associated Demand Notewith a stated principal amount of $5,000,000. We can draw on such Facility upto the face value of the Note and are obligated to pay interests on any amountsoutstanding under such Facility at a fixed rate of 4% per month. Additionally,we entered into a Security Agreement covering our accounts, inventory,equipment, general intangibles, and certain other assets as collateral tosecure payment of the Demand Note. Finally, we entered into a Purchase and SaleAgreement (the “Factoring Agreement”) with GC Financial Services pursuant towhich we agreed to sell receivables under our Government Contract No. M67854-05-D-5091in an amount not to exceed $63,000,000. Under the terms of such agreement, wereceive 98.1% of the value of such receivables within 24-48 hours of deliveryto GC Financial.

 

**NOTE 9 - REVERSE STOCK SPLIT**

 

In January, 2005, the Board of Directors approved a1 (new)-for-12 (old) reverse stock split of the outstanding shares of commonstock. The reverse stock split became effective February 4, 2005.Shareholders approved the action at the Company’s annual meeting on December 30,2004. All references in the Company’s quarterly and annual reports are to postreverse split shares.

 

**NOTE 10 - MATERIAL COMMITMENTS**

 

As of September 30, 2005 the Company has issuedpurchase orders in the amount of $31,011,912 to secure components and materialsneeded for our manufacturing operations.

 

On July 26, 2005, the Company entered into aconsulting agreement with Partners Consulting Services to provide computersoftware integration services for our business operating system. The value ofsuch services could exceed $1,000,000, depending upon the scope of services werequest such consultants to perform.

 

On August 22, 2005, the Company entered into anengineering services agreement with TecStar LP to provide engineering servicesto support our manufacturing operations, including the development of workinstructions, control plans, router, key characteristics, inspectioninstructions, layout, fixturing, material plans, process flow diagrams, metricsand repair plans. The value of such agreement is $2,742,640.

 

On September 29, 2005, the Company entered intoan engineering services agreement with Ricardo, Inc. an internationalengineering firm. Under the terms of the contract, Ricardo will provide anintegrated bill of materials

 

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including chassis assemblies and subassemblies inthe Cougar product line, automated drawings and model updates, design releases,and vehicle validation tasks for the Joint EOD Rapid Response Vehicle. Thevalue of such services could exceed $1,600,000, depending upon the scope ofservices we request such consultants to perform.

 

**NOTE 11- STOCK COMPENSATION PLAN**

 

Currently, the Company does not have a formal stockcompensation plan.

 

**NOTE 12 - DEFERRED REVENUE**

 

The Company only recognizes revenue from the salesof our vehicles to our US Government customers upon formal acceptance by thecustomer, however the Company does receive performance based payments inaccordance with agreed milestones under our government contracts. The Companyrecords such performance based payments as deferred revenue and carries them onour balance sheet until formal acceptance by the customer. As of September 30,2005, the Company had $1,533,264 as deferred revenue resulting from threecontracts, one from the U.S. Army for our Buffalo vehicle, one from the U.S.Marine Corps for our Cougar (HEV) vehicles and one from a joint Department ofDefense contract for our Cougar (JERRV) vehicles.

 

**NOTE 13 - DEBT**

 

As of September 30, 2005,the Company had $3,145,084 total long-term debt, which includes long-termpayables with no effective or stated interest or maturity dates, and includes$3,000,000 outstanding balance due under the Bridge Facility with GC FinancialServices, Inc.

 

**NOTE 14 - CERTAIN RELATIONSHIPS ANDRELATED TRANSACTIONS**

 

Our Chief Executive Officer, Mr. McGilton, is aprinciple of APT Leadership, a consulting firm the Company has hired to providevarious business consulting services and certain business software.  As of September 30, 2005 APT Leadershiphas billed the Company $209,948 for such services and software.

 

**NOTE 15 – BUSINESS SEGMENT ANALYSIS**

 

The following table sets forth a business segmentanalysis of our financial results for the three months ended September 30,2005:

 
| ** **                     | ** ** | ** **          | ** ** | ** **   | ** ** | ** ** | ** ** |
|--------------------------------|------------|---------------------|------------|--------------|------------|------------|------------|
| **(000’s) (approximate)** | ** ** | **F.P. Industries** | ** ** | **F.P. Inc** | ** ** | **Total**  | ** ** |
| Sales                          |       | $                   | 9,304      |         |       |       | $          | 9,304 |   |
| Cost of  sales                 |       | 7,770               |       |         |       | 7,770      |       |
|                           |       |                |       |         |       |       |       |
| Gross profit                   |       | 1,534               |       |         |       | 1,534      |       |
| G.P.%                          |       | 16.5                | %          |         |       | 16.5       | %          |
| SG&A                       |       | 4,621               |       | 159          |       | 4,780      |       |
|                           |       |                |       |         |       |       |       |
| Segment  P&L               |       | $                   | (3,087     | )            | $          | (159       | )          | $ | (3,087 | ) |
|                                |            |                     |            |              |            |            |            |  |  |  |

 

Mine, ballistic and blast protected vehicles andspares provided 100% of the total sales and 100% of the total cost of goodssold.

 

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**NOTE 16 – STOCK OPTIONS**

 

We have issued options to purchase 647,833 shares ofour unregistered common stock to certain employees at a purchase price of $1.50per share.

 

**NOTE 17 – GOVERNMENT AUDITLIABILITY**

 

TheCompany receives revenue from various federal agencies under salescontracts.  Such contracts are subject toaudit by the U.S. Government, which could lead to requests for reimbursement tothe purchaser for expenditures not in compliance with the terms of thecontract. Based on Federal Accounting Regulations (FAR) we may be subject toreductions in overall contract award pricing due to potential rate changes inmanufacturing overhead, G&A, and margin. On September 9, 2005 the U.S.Army issued a unilateral modification to our Contract W909MY-05-C-0001 as partof the “definitization” of such contract, resulting in a contract price whichwas $1,300,000 less than the amount requested by the Company. The Companyintends to appeal such decision.

 

**NOTE 18 – GOING CONCERN**

 

Ourfinancial statements have been prepared on a going concern basis, whichcontemplates continuity of operations, realization of assets and liquidation ofliabilities in the normal course of business. The Company had recurring losses of $31,961,186 at December 31,2004 and negative cash flows during the nine month period ending September 30,2005 of $1,015,718. The ability of the Company to operate as a going concerndepends upon its ability to obtain outside sources of working capital and/orgenerate positive cash flow from operations. Management is aware of theserequirements and is implementing plans to secure sources of long termfinancing, increase sales revenues and optimize our operating margins.  Notwithstanding the foregoing, there can beno assurance that the Company will be successful in obtaining such financing,that it will have sufficient funds to execute its business plan or that it willgenerate positive operating results. The financial statements do not includeany adjustments relating to the recoverability and classification of assetcarrying amounts or the amount and classification of liabilities that mightresult should the Company be unable to continue as a going concern.

 

N**OTE 19 – RESEARCHAND DEVELOPMENT COST**

 

Research and development (R&D) cost are expensedas incurred. During the period ending September 30, 2005 we incurred$403,923 in R&D expenses.

 

**NOTE 20 - COMMON STOCK WARRANTS**

 

Asof September 30, 2005 the following warrants to purchase shares of theCompany’s common stock are outstanding:

 

•                  warrantsto purchase 6,250 shares of unregistered common stock at $2.40/share expiring April 1,2006

•                  warrantsto purchase 67,709 shares of unregistered common stock at $4.80/share expiring May 20,2006

•                  warrantsto purchase 284,376 shares of common stock at $3.75/share expiring January 19,2007

•                  warrantsto purchase 322,918 shares of unregistered common stock at $0.84/share expiringthrough November 15, 2008

•                  warrantsto purchase 2,633,333 shares of common stock at $3.75/share expiring January 19,2008

•                  warrantsto purchase 20,000 shares of unregistered common stock at $1.20/share expiring September 23,2008

 

Allof the foregoing warrants are immediately exercisable. The fair value of allthese warrants was insignificant at the issuance date.

 

**ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS**

 

**Cautionary Statement ConcerningForward-Looking Statements**

 

This Report contains forward-looking statements,including, without limitation, statements concerning possible or assumed futureresults of operations and those preceded by, followed by or that include thewords “believes,”

 

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“could,” “expects,” “intends,” “anticipates,” orsimilar expressions. Our actual results could differ materially from theseanticipated in the forward-looking statements for many reasons including ourability to raise capital when necessary; availability of parts and rawmaterials for our products; continued customer acceptance of our products;on-going success of our research and development efforts and other risksdescribed in our annual report on Form 10-KSB filed with the SEC andelsewhere in this report. Although we believe the expectations reflected in theforward-looking statements are reasonable, they relate only to events as of thedate on which the statements are made, and our future results, levels ofactivity, performance or achievements may not meet these expectations. We donot intend to update any of the forward-looking statements after the date ofthis document to conform these statements to actual results or to changes inour expectations, except as required by law.

 

**Summary of Significant AccountingPolicies**

 

The Securities and Exchange Commission, or SEC,issued Financial Reporting release No. 60, “Cautionary Advice RegardingDisclosure About Critical Accounting Policies,” or FRR 60, suggesting companiesprovide additional disclosure and commentary on their most critical accountingpolicies. In FRR 60, the SEC defined the most critical accounting policies asthe ones that are most important to the portrayal of a company’s financialcondition and operating results, and require management to make its mostdifficult and subjective judgments, often as a result of the need to makeestimates of matters that are inherently uncertain. The methods, estimates andjudgments we use in applying these most critical accounting policies have asignificant impact on the results we report in our financial statements.

 

The preparation of financial statements inconformity with generally accepted accounting principles requires management tomake estimates 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.

 

As a general rule, financial information isaccounted for and based on cost, not current market value. Revenues and gainsshould be matched using the accrual method with the expenses giving rise to therevenues and gains to determine earnings for the period. Expenses arenecessarily incurred to produce revenue. Expenses are then “matched” in thesame accounting period against the revenue generated. Revenues are recognizedwhen they are earned and expenses are recognized in the same period as therelated revenue (matching or using a systematic and rational allocation orexpensing in the period in which they expire), not necessarily in the period inwhich we receive or expend cash.

 

We believe the following critical accountingpolicies and procedures, among others, affect our more significant judgmentsand estimates used in the preparation of our consolidated financial statements:

 

•                       Revenue recognition;

•                       Inventory cost & AssociatedReserves; and

•                       Allocation of direct & indirect costof sales.

 

We recognize revenue upon formal acceptance ofvehicles by customers. We receive performance based payments from the U.S. Armyand U.S. Marines and record such payments as deferred revenue, carrying them onour balance sheet as such until acceptance by the customer.

 

In December 2004, FASB issued Statement No. 123(R),Share-Based Payment, 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 in the third quarter of 2005, SFAS 123(R) willrequire us to recognize the grant-date fair value of stock options and equitybased compensation issued to employees in the statement of operations. Thestatement also requires that such transactions be accounted for using thefair-value-based method, thereby eliminating use of the intrinsic method ofaccounting in APB No. 25, Accounting for Stock Issued to Employees, whichwas permitted under Statement 123, as originally issued. To date, we haveexpensed stock based compensation on the intrinsic method. We are currentlyevaluating the impact of Statement No. 123 (R) on our financial conditionand results of operations.

 

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In November 2004, the FASB issued Statement No. 151,Inventory Costs, to amend the guidance in Chapter 4, Inventory Pricing, of theFASB Accounting Research Bulletin No. 43, Restatement and Revision ofAccounting Research Bulletins, which will become effective for us in fiscalyear 2006. Statement No. 151 clarifies the accounting for abnormal amountsof idle facility expense, freight, handling costs, and wasted materials. TheStatement requires that those items be recognized as current-period charges.Additionally, Statement No. 151 requires that allocation of fixedproduction overhead to the costs of conversion be based on normal capacity ofthe production facility. We are currently following Statement No. 151 anddo not believe that Statement No. 151 will have a significant impact onour financial condition and results of operations.

 

Principles of Consolidation: The consolidated financial statementsinclude the accounts of Force Protection, Inc., and our two wholly ownedsubsidiaries, Force Protection Industries, Inc. (formerly TechnicalSolutions Group, Inc.) and TSG International, Inc. for the quarterended September 30, 2005. All inter-company balances and transactions areeliminated in consolidation.

 

Matching Principle:****As a general rule, financial information isaccounted for and based on cost, not current market value. Revenues and gainsshould be matched using the accrual method with the expenses giving rise to therevenues and gains to determine earnings for the period. Expenses arenecessarily incurred to produce revenue. Expenses are then “matched” in thesame accounting period against the revenue generated. Revenues are recognizedwhen they are earned and expenses are recognized in the same period as therelated revenue (matching or using a systematic and rational allocation orexpensing in the period in which they expire), not necessarily in the period inwhich we receive or expend the cash.

 

Cash Equivalents: For purposes of reporting cash flows, weconsider all highly liquid debt instruments purchased with maturity of threemonths or less to be cash equivalents. Cash equivalents consist primarily ofUnited States government securities.

 

Inventories:** **Inventories are stated at the lower of costor market. The cost is determined under the first-in, first-out, or FIFO, basevaluation method.

 

Property, Plant and Equipment:** **Property and equipment are stated at cost orat the value of the operating agreement. We capitalize additions andimprovements which include all material, labor and engineering cost to design,install or improve the asset. Routine repairs and maintenance are expensed asincurred. The capitalization threshold is $2,000 and a useful life greater thanone year. Depreciation and amortization are computed using the straight-linemethod over the following estimated useful lives:

 
| Building and improvements |   | 20 years |   |
|---------------------------|--------|----------|--------|
| Furniture  and fixtures   |   | 3 years  |   |
| Machinery  and equipment  |   | 7 years  |   |
| Tooling and  molds        |   | 7 years  |   |
| Vehicles                  |   | 5 years  |   |

 

Goodwill:****Under SFAS No. 142. Goodwill and otherIntangible Assets, all goodwill amortization ceased effective January 1,2002. Rather, goodwill is now subject to only impairment reviews. A fair-valuebased test is applied at the reporting level. This test requires variousjudgments and estimates. A goodwill impairment loss will be recorded for anygoodwill that is determined to be impaired. We follow SFAS 142, Goodwill andIntangible Assets, which requires us to test goodwill for potential impairmentannually. When the carrying value exceeds fair value, the impairment is thedifference between the carrying value of goodwill and the implied value. The impliedvalue of goodwill is the difference between the fair value for the unit as awhole and the value of individual assets and liabilities using an “as-if”purchase price.

 

Gain/Loss per Share:****We utilize SFAS No. 128, “Earnings perShare.” Basic gain/loss per share is computed by dividing gain/loss availableto common stockholders by the weighted-average number of common sharesoutstanding. Diluted gain/loss per share is computed similar to basic gain/lossper share except that the denominator is increased to include the number ofadditional common shares that would have been outstanding if the potentialcommon shares had been issued and if the additional common shares weredilutive.

 

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Estimates: The preparation of financial statements in conformity with generallyaccepted accounting principles requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financialstatements, as well as the reported amounts of revenues and expenses during thereporting period. Actual results could differ from those estimates.

 

Revenue Recognition: Our revenue is derived principally from thesale of our vehicles and associated spare parts and training services. Revenuefrom products and services is recognized at the time goods are shipped orservices are provided to the customer, with an appropriate provision forreturns and allowances. We receive performance based payments based oncompletion of specific milestones. These payments are recorded as DeferredRevenue and recognized on the profit and loss statement upon customeracceptance of the completed vehicle. It is our policy to not recognize revenueuntil customer acceptance. All advance payments are treated as “deferredrevenue”.

 

Dividend Policy: We have never declared or paid a cashdividend on our common stock, and we do not anticipate paying any cashdividends on our common stock in the foreseeable future. Any futuredetermination to pay cash dividends on our common stock will be at thediscretion of our board of directors and will depend upon our financialcondition, operating results, capital requirements, restrictions contained inour agreements and other factors which our board of directors deemsrelevant.  Under the terms of the Certificate of Designation for our Series DConvertible Preferred stock, we are obligated to pay a semi-annual 6% dividendin cash or shares of common stock on the outstanding shares of Series Dstock.

 

**Financial Condition and Results ofOperations**

 

Overview:  Our third quarter financialresults for 2005 show a net loss from operations, caused by a temporary declinein vehicle deliveries during this period. We expected this decline to occur, as we finished production of thebacklog from our 2004 contracts and continue to ramp up our processes toundertake production and delivery of the new JERRV vehicles under our ContractM67854-05-D-5091 with the United States Marine Corps.  During the quarter ending September 30,2005, vehicle sales together with associated spare parts, service, and traininggenerated gross revenue of $9,303,526, against which we incurred total costsand expenses of $14,908,737, resulting in a net loss from operations of$5,605,211.  The expenses incurred duringthis period, which include substantial amounts for materials and parts tosupport the JERRV contract and expenses associated with our infra-structurebuild up, will help us achieve our estimated production capacity of up to twovehicles per day by early 2006.

 

During this three month period we also announced anew order received from the U.S. Marine Corps for the purchase of four Buffalovehicles (with associated spares, service and training) for a total contractprice of $3,852,026.  We expect todeliver two of the Buffalo vehicles under such contract during 2005 and theremaining two in early 2006.

 

The following table sets forth our consolidatedstatements of operations for the three month period ended September 30 forthe years 2004 and 2005. The discussion and analysis that follows should beread in conjunction with our consolidated financial statements and relatednotes included elsewhere in this report.

 

**Consolidated Statement of Operations**

 
| ** **                      | ** ** | **Three Months ended September 30th** | ** ** |
|---------------------------------|------------|--------------------------------------------|------------|
| ** **                      | ** ** | **2005**                                   | ** ** | **2004** | ** ** |
|                            |       |                                       |       |   |   |
| Revenue                         |       | $                                          | 9,303,526  |   | $ | 93,727 |   |
| Cost of  sales                  |       | 7,770,078                                  |       | 757,459 |   |
|                            |       |                                       |       |   |   |
| Gross  profit/(loss)            |       | 1,533,448                                  |       | (663,732 | ) |
| SG&A                        |       | 4,780,232                                  |       | 2,406,902 |   |
|                            |       |                                       |       |   |   |
| Income/(Loss) from operations   |       |                                       | $          | (3,246,784 | ) | $ | (3,070,634 | ) |
|                            |       |                                       |       |   |   |
| Interest  expenses              |       | (364,235                                   | )          | (167,766 | ) |
| Non-recurring  Expense          |       | (2,012,989                                 | )          | — |   |
| Other income                    |       | 18,797                                     |       | 1,608 |   |
|                            |       |                                       |       |   |   |
| Total other income (expense)    |       |                                       | (2,358,427 | ) | (166,158 | ) |
|                            |       |                                       |       |   |   |
| Net  income/(loss)              |       | $                                          | (5,605,211 | ) | $ | (3,236,792 | ) |
|                            |       |                                       |       |   |   |
| Weighted-average  common shares |       |                                       |       |   |   |
| Basic                           |       |                                       | 34,267,811 |   | 13,547,611 |   |
| Diluted                         |       |                                       | 44,421,503 |   | 25,531,433 |   |
|                            |       |                                       |       |   |   |   |
| Profit/(Loss) per share         |       |                                       | $          | (.1636 | ) | $ | (.2389 | ) |
| Diluted Profit/(Loss) per share |       |                                       | $          | (.1262 | ) | $ | (.1268 | ) |

 

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Revenue: Revenue for the three month period ended September 30, 2005 was$9,303,526, representing an increase of $9,209,799 compared to the same periodin 2004. The increase during this period was mainly due to the increased levelof vehicle production we have achieved compared with last year.  Ourrevenue is derived from the sale of our Buffalo and Cougar vehicles and thesale of spare parts and other support services, however we do not record anyincome until our products are formally accepted by our customers.  Therevenue we received during this three month period thus reflects amounts wepreviously carried on our balance sheet as deferred revenue pending acceptanceof the final products by the U.S. Army and the U.S. Marines. During the threemonth period ending September 30, 2005, we received $8,168,355 fromvehicle sales and $1,135,171 from the sale of spare parts and other supportservices.  As predicted, the revenue fromthe sale of spare parts continues to increase, driven by the increasing numberof our vehicles delivered and deployed to areas of operations.  We intend to continue to develop this spareparts business as an increasingly important part of our revenue base.

 

Cost of Sales: Cost of sales (including vehicles and spareparts) for the three month period ended September 30, 2005 was $7,770,078representing an increase of $7,012,619 compared to the same period in2004.  The increase during this period was mainly due to the increased levelof vehicle production, and the corresponding increased cost of labor andmaterial associated with our manufacturing activities. The cost of sales forthe three month period ending September 30, 2005 was 84% of gross revenuesfor such month period, compared with 808% for the same period in 2004,representing an 89% decrease in our gross margin.  This decrease in our gross margin is theresult in part of increasing efficiency of our manufacturing operations. Costof sales for our spare parts was 57% of gross revenues for the three monthperiod ended September 30, 2005 compared to 57% for the same period in2004.  As we continue to expand our production capacity, we expect toachieve increased cost efficiency from volume purchasing, improvements in ourmanufacturing processes and the allocation of indirect costs across a broaderproduction base, resulting in a projected decrease in the cost of sales as apercentage of gross revenues.

 

Selling, General and Administrative Expenses: Selling, General and Administrativeexpenses for the three months ended September 30, 2005 were $4,780,232representing an increase of $2,373,330 compared to the same period in2004.  This increase included $403,923 research & developmentexpenditures, $156,915 commission and settlement related expenses, $263,635attributable to relocation and recruiting costs for new employees, $116,430 foremployee training and $125,984 associated with the cost of maintaining ourField Service Representatives in Iraq to ensure the highest level of supportfor our vehicles deployed with the U.S. Marine Corps.  We expect ourSelling, General and Administrative expenses to increase over time as wecontinue to expand our production capacity to meet increasing sales demand,however we expect the percentage of our Selling, General and Administrativeexpenses in relation to gross revenues to decrease as we achieve greaterefficiencies in our operations.

 

Non-recurring Warranty Expense: During the period ending September 30,2005 the Company booked a non-recurring warranty expense of $2,012,989 for thecost of rework to certain Cougar HEV vehicles delivered under Contract M67854-04-D-5099.  This rework is being undertaken to ensure thehighest level of operational readiness of our Cougar HEV vehicles currentlydeployed in Iraq, and reflects our commitment to providing the best possible

 

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product to our customers, however such one timeexpense has contributed to our predicted net loss for the three month periodending September 30, 2005.

 

Net Gain/(Loss): Net Loss for the three months ended September 30,2005 was $5,605,211 representing an increase of $2,368,419 as compared to thenet loss of $3,236,792 incurred during the same period in 2004.  Thisincrease reflects our expected temporary decline in production and deliverylevels resulting from the completion of our prior contract backlog and ourcontinuing build-up of materials and parts needed to support the JERRVprogram.  This increase also includes thenon-recurring expense of $2,012,989 for the cost of rework to certain CougarHEV vehicles discussed above. During this period, we continued to incurexpenses associated with our infrastructure expansion but have not been in aposition to fully realize revenue from new contract vehicle deliveries.  As such, we do not believe that the financialresults for this period are representative of our projected future results.

 

Backlog: On April 23, 2004 we announced a contract award to deliverCougar Hardened Engineer Vehicles (“HEV”) to the United States Marine Corps, ofwhich fourteen were initially funded under the contract. On March 8, 2005the US Marine Corp exercised its option to increase the number of HEV vehiclesby fourteen, for a total of twenty-eight vehicles. As of September 30,2005 we have delivered a total of twenty-three HEV vehicles, and have aremaining backlog of five Cougar HEV vehicles to be delivered under thiscontract. On May 17, 2004 we announced the award of a contract to delivertwenty-one Buffalo vehicles to the U.S. Army and in October 2004 we wereawarded a separate contract by the U.S. Army for an additional fifteen Buffalovehicles. Initial deliveries under these contracts began during the fourthquarter of 2004, and as of September 30, 2005 we have delivered allthirty-six Buffalo vehicles, leaving no backlog under these two contracts withthe US Army.  As of September 30, 2005 the value of our sales backlogfor the five Cougar HEV vehicles is approximately $2,000,000.  During thesecond quarter of 2005 we announced the award of a new contract by the U.S.Marine Corps for delivery of up to one hundred twenty two Cougar Joint EODRapid Response Vehicles (“JERRV”) to be delivered during 2005 and 2006, with atotal value (with associated spares parts and training) of approximately$93,000,000.  As of September 30,2005 we have delivered two JERRV vehicles and have a remaining backlog of onehundred twenty vehicles under the JERRV contract. During this three monthperiod ending September 30, 2005 we also announced a new order from the USMarine Corps for the purchase of four Buffalo vehicles (with associated spares,service and training) for a total contract price of $3,852,026.00.

 

Future Results: During the upcoming three month periodending December 31, 2005 we expect to have incurred the majority of ourpresently anticipated infra-structure expansion costs and to achieve asubstantially increased level of vehicle production capacity, resulting inincreased revenues and a return to profitability for that period.  Set out below is a table showing actual andprojected deliveries of our vehicles during 2004 and 2005, based on ourinternal estimates although our actual results may vary depending upon partsand material availability, actual production schedules, production efficienciesand other contingencies discussed in this report.

 

**Vehicle Deliveries 2004 - 2005**

 
| ** **                             | ** ** | **Actual  2004-Total** | ** ** | **Actual  Q1-2005** | ** ** | **Actual  Q2-2005** | ** ** | **Actual  Q3-2005** | ** ** | **Projected  Q4-2005** | ** ** | **Projected  2005-Total** | ** ** |
|----------------------------------------|------------|------------------------|------------|---------------------|------------|---------------------|------------|---------------------|------------|------------------------|------------|---------------------------|------------|
| Buffalo  (MRPV)                        |       | 9                      |       | 2                   |       | 22                  |       | 3                   |       | 4                      |       | 31                        |       |
| Cougar (HEV)                           |       | 5                      |       | 8                   |       | 2                   |       | 8                   |       | 3                      |       | 21                        |       |
| Cougar  (JERRV)                        |       | 0                      |       | 0                   |       | 0                   |       | 2                   |       | 21                     |       | 23                        |       |
| Total Vehicles                         |       | 14                     |       | 10                  |       | 24                  |       | 13                  |       | 28                     |       | 75                        |       |
| Vehicle  Revenue (Figures approximate) |       | $                      | 9.0        |                | 5.0        | M                   | 17.0       | M                   | 9.0        | M                      | 15.0       | M                         | 46.0       | M |
|                                        |            |                        |            |                     |            |                     |            |                     |            |                        |            |                           |            |  |

 

18

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**Trends, Risks and Uncertainties**

 

The results of our operations for the period ended September 30,2005 reflect the expected temporary decline in revenues as part of thepredicted growth of our Company.  During 2004 we were awarded contracts bythe US Army for a total of thirty six Buffalos and by the US Marines for twentyeight Cougars.  We commenced production during 2004 (delivering fourteenof these vehicles) and as of September 30, 2005 we have produced anddelivered all remaining Buffalos and the majority of the outstanding Cougar(HEV) vehicles.  As we completed thisbacklog, we have also undertaken to build substantially greater productioncapacity to meet the expected demand for our vehicles under the JERRV contractfor one hundred twenty-two Cougars (and for potential follow on orders). Whilethe JERRV contract reflects a broader, growing demand for our vehicles, wecontinue to face the challenge of expanding our manufacturing capacity to fullyexploit this opportunity.  During thethird quarter of 2005 we have moved aggressively to meet this challenge, hiringadditional workforce, expanding our facilities, improving our operating systemsand refining our manufacturing processes. These activities have required a significant commitment of short termresources, but we expect the long term benefits will be substantial.

 

We recognize there are risks associated with ouron-going expansion activities. In the event we are delayed in meeting thedelivery schedule under the JERRV contract, we may be obligated to payliquidated damages for any delayed vehicle, and in the event of any substantialfailure to perform, the customer could cancel the contract and/or claimadditional damages. Payment of liquidated damages could negatively impact ourfuture liquidity, and since we are incurring significant costs associated withour expansion program based on the expectation of future contract revenues,loss of the JERRV contract would have a dramatic impact on both our liquidityand our financial performance.  Wecurrently do not have reason to expect such outcome.

 

In the past, we have encountered some difficultiesin securing the necessary components for our vehicles, for example steel, truckchassis, axle sets and ballistic glass. To mitigate this risk, we haveidentified multiple vendors for certain components to ensure we have alternatesources of supply if necessary. Additionally, we have implemented a program ofadvance purchasing and stockpiling critical materials. For example, we currentlyhave pre-purchased steel and truck parts to ensure availability of materialneeded for current and potential future orders. While we do not currentlyexpect the potential non-availability of parts or raw materials to materiallyaffect our operations, there is a possibility that delays or increased costscould negatively impact our financial performance if circumstances change.Apart from the foregoing, the main uncertainty about our future operations iswhether we will continue to receive additional orders for our vehicles. It isimpossible to predict with certainty whether such future orders will be placedby existing or new customers. If we do not receive future orders, it isunlikely that our business will continue. However, we believe our vehicles provideproven blast and ballistic protection, and that for so long as there is a riskof bodily harm to service personnel from explosive blasts, there will be amarket for our products.

 

**Liquidity and Capital Resources**

 

Current Liquidity: For the nine month period ending September 30,2005, we had a starting cash balance of $2,264,406 and an ending cash balanceof $1,248,688, representing a decrease in our cash of $1,015,718.  Duringthe nine month period ended September 30, 2005, we incurred a net cashloss from operations of $9,450,901 (mostly the result of inventory purchasesand operational costs associated with our internal growth), we paid down$4,000,000 in short term debt outstanding under our credit facility, and weinvested $1,471,347 in equipment relating to our infrastructureexpansion.  To meet our cash needs during this period, we sold 15,800shares of our Series D Convertible Preferred Stock for $15,800,000 and weexercised the balance of $445,985 remaining under our Equity Line of Creditfacility originally entered into on September 20, 2003 with DutchessPrivate Equities Fund. In July 2005 we entered into a secured BridgeFacility Agreement with GC Financial Services, Inc. to provide short termfinancing up to a maximum amount of $5,000,000 (which amount may be increasedat the Lender’s option to $7,000,000). As of September 30, 2005 the outstanding balance under suchFacility was $3,000,000 leaving an unused balance of $2,000,000.

 

Future Liquidity: Our Current Assets exceed our CurrentLiabilities by $10,666,483 and we have $3,145,084 in long-term debt, however,we continue to be reliant on outside sources of capital and the receivablesfrom our vehicle sales to generate continuing cash flow to meet our operatingrequirements. The ability to factor our U.S. Government receivables under thePurchase & Sale Agreement with GC Financial Services, Inc. allowsus to receive payment within 24-48 hours of vehicle delivery and reduces theimpact of the government contract payment cycle on our short term liquidity.  However, we need to regularly manage our cashresources to maintain our liquidity and

 

19

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it is likely that we will need to secure additionalsources of financing to ensure adequate cash for operations during the upcomingfourth quarter. During the period ending December 31, 2005 we expect theinfra-structure expenses we have incurred in connection with our productionramp-up will begin to level off or decline and our vehicle and spare partssales revenues to increase as we increase vehicle deliveries under the JERRVcontract.  As our expenses level out andour revenues increase, we expect to achieve positive cash flow by the end ofthe fourth quarter of 2005 or early in the first quarter of 2006.

 

Uncertainties: The amount of working capital that we willrequire depends on several factors, including without limitation, the extentand timing of sales of our products, future inventory costs, the timing andcosts associated with the expansion of our manufacturing, development,engineering and customer support capabilities, the timing and cost of ourproduct development and enhancement activities and our operating results.  The realization of a major portion of the assetsshown on our balance sheet is dependent upon the success of such futureoperations.  By early 2006 we expect tobe able to generate cash flows from operations sufficient to satisfy our cashrequirements, but if were unable to do so, we may need to seek alternativesources of cash. Potential sources of such cash could include leasing capitalequipment, securing lines of credit, or making additional sales of oursecurities. If we raise funds through the sale of securities, the common stockcurrently outstanding could be diluted.  There is a risk that suchadditional financing may not be available, or may not be available onacceptable terms, and the inability to obtain additional financing or generatesufficient cash from operations could require us to reduce or eliminateexpenditures for capital equipment, research and development, production, ormarketing of our products, or otherwise curtail or discontinue our operations,which could have a material adverse effect on our business, financial conditionand results of operations.

 

On October 18, 2005 our former Chief FinancialOfficer resigned from the Company.  Wehave continued our search for a new Chief Financial Officer and will take thetime necessary to ensure we hire a candidate qualified to meet the demands ofour continued growth and expanded activities. We do not currently anticipate that the resignation of our former ChiefFinancial Officer will have a material impact upon on our operations.

 

Inflation & Material Cost

 

We do not believe that inflation has had or islikely to have any significant impact on our revenues, and we currently are notfacing any material shortages of material or parts. We currently have enoughsteel 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 - CONTROLS AND PROCEDURES**

 

**Disclosure Controls and Procedures**

 

Our management evaluated, with the participation ofour Chief Executive Officer and our Interim Chief Financial Officer, theeffectiveness of our disclosure controls and procedures as of the end of theperiod covered by this Quarterly Report on Form 10-QSB.  Based onthis evaluation, our Chief Executive Officer and our Interim Chief FinancialOfficer have concluded that our disclosure controls and procedures areeffective to ensure that information we are required to disclose in reportsthat we file or submit under the Securities Exchange Act of 1934 (i) isrecorded, processed, summarized and reported within the time periods specifiedin Securities and Exchange Commission rules and forms, and (ii) isaccumulated and communicated to our management, including our Chief ExecutiveOfficer and our Interim Chief Financial Officer, as appropriate to allow timelydecisions regarding required disclosure.  Our disclosure controls andprocedures are designed to provide reasonable assurance that such informationis 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.

 

20

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**Changes in Internal Controls overFinancial Reporting**

 

There were no changes in our internal control overfinancial reporting that occurred during our last fiscal quarter that havematerially affected, or are reasonably likely to materially affect, ourinternal control over financial reporting.

 

**Code of Ethics**

 

We have adopted a Code of Ethics that applies to allexecutive officers and other employees. Our Code of Ethics is available forreview on our website at www.forceprotectioninc.com.

 

**PART II – OTHER INFORMATION**

 

**ITEM 1 - LEGAL PROCEEDINGS**

 

On May 12, 2005, Atlantis Partners, Inc.filed a complaint against us in the Circuit Court for the 15th JudicialCircuit, Palm Beach County Florida for alleged breach of terms related to afinder’s fee agreement dated March 28, 2003.  The complaint allegesdamages of at least$400,000in fees, plus costs and interest.  Wehave answered the complaint and intend to vigorously defend against AtlantisPartner’s claims.

 

**ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES ANDUSE OF PROCEEDS**

 

None.

 

**STOCK OPTION PLAN**

 

We have issued options to purchase 647,833 shares ofour unregistered common stock to certain employees at a purchase price of $1.50per share.

 

**ITEM 3 - DEFAULTS UPON SENIOR SECURITIES**

 

Not applicable.

 

**ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS**

 

Not applicable.

 

**ITEM 5 - OTHER INFORMATION**

 

NOTE REGARDING OUR AUDITORS

 

During 2004, the accounting firm of Jaspers and Hall, PC purchased the assets of Michael Johnson and Company, LLC - our former independent auditors.  To maintain continuity in the audit procedure, we chose to use the services of Jaspers and Hall after such purchase, as the preceding company was familiar with our financial records. Our Board of Directors has confirmed the withdrawal of Michael Johnson & Co., LLC as our principal accountants and has ratified the appointment of Messrs Jaspers + Hall, PC to serve as our independent public accountants for the fiscal year ending December 31, 2005.

 

There have been no disagreements with Michael Johnson & Co. on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure which, if not resolved to Michael Johnson & Co.’s satisfaction, would have caused them to make reference to the subject matter of such disagreements in connection with their report on our consolidated financial statements for such year. Michael Johnson & Co.’s report on our consolidated financial statements for the fiscal year ended December 31, 2004 did not contain an adverse opinion or disclaimer of opinion, or was modified as to uncertainty, audit scope or accounting principles, however, they were modified to include an explanatory paragraph wherein they expressed substantial doubt about our ability to continue as a going concern.

 

21

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During the year ended December 31, 2004 and through the date hereof, we did not consult with Jaspers + Hall, PC with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements.

 

**ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K**

 

**Exhibits**

 

Exhibits included or incorporated by referenceherein are set forth in the attached Exhibit Index.

 

**Reports on Form 8-K**

 

On July 8, 2005, we filed an 8-K regardingentry into a material definitive agreement and creation of a direct financialobligation or an obligation under an off-balance sheet arrangement. We issued ademand note with a maximum principal amount of $5 million to GC FinancialServices, Inc.  The Demand Note will bear interest at a fixed rate of4% per month.

 

On July 19, 2005, we filed an 8-K regardingentry into a material definitive agreement. We entered into a services contact with Ricardo Engineering wherebyRicardo will provide an integrated bill of materials including Spartan Chassisassemblies and subassemblies in the Cougar product line, automated drawings andmodel updates, design releases, and vehicle validation tasks for the Joint EODRapid Response Vehicle.  Ricardo willreceive an estimated $1,682,000.00 for its services and materials as outlinedin the Purchase Order.

 

On August 22, 2005, we filed an 8-K regardingentry into a material definitive agreement. We entered into an Engineering Services agreement with TecStar wherebywe agreed to pay TecStar $2,742,640 in exchange for their engineering serviceswhich will include the development of Work Instructions, Control Plans, Router,Key Characteristics, Inspection Instructions, Layout, Fixturing, MaterialPlans, Process Flow Diagrams, Metrics and Repair Plans.

 

On September 9, 2005, we filed an 8-K regardingentry into a material definitive agreement. We agreed to provide the United States Marine Corps four Buffalos,associated spare parts, and a Field Service Representative in Iraq for whichthe Marines will pay us $3,852,026.

 

On October 20, 2005, we filed an 8-K regardingdeparture of directors or principle officers. The Board of Directors accepted the resignation of Thomas Thebes as ourChief Financial Officer.

 

OnOctober 27, 2005, we filed an 8-K regarding entry into a materialdefinitive agreement and creation of a direct financial obligation or anobligation under an off-balance sheet arrangement.  On October 21, 2005 the parties agreedto modify that certain Purchase and Sale Agreement with GC Financial ServicesInc dated June 2005 to provide: “GC Financial Services shall haveno obligation to purchase any Receivables from the Company from and afterthe date hereof under the terms of that certain Purchase and Sale Agreementdated June 2005 unless and until GC Financial Services shall, in itsdiscretion, determine otherwise.”

 

22

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**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, 2005 (included as exhibit  4.1 to the Form 8-K filed January 27, 2005, and incorporated herein  by reference).                                             |
|       |       |                                                                                                                                                                                                                                                                   |
| 4.2        |       | Form of Common Stock Purchase Warrant, dated  January 19, 2005, (included as Exhibit 4.2 to the Form 8-K  filed January 27, 2005, and incorporated herein by reference).                                                                      |
|       |       |                                                                                                                                                                                                                                                                   |
| 4.3        |       | Securities Purchase Agreement, dated  January 19, 2005 (included as Exhibit 4.3 to the Form 8-K  filed January 27, 2005, and incorporated herein by reference).                                                                                    |
|       |       |                                                                                                                                                                                                                                                                   |
| 4.4        |       | Registration Rights Agreement, dated  January 19, 2005 (included as Exhibit 4.4 to the Form 8-K  filed January 27, 2005, 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, 2005, 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, 2005, and incorporated herein by  reference).                                                    |
|       |       |                                                                                                                                                                                                                                                                   |
| 4.7        |       | Bridge Facility between the Company and GC  Financial Services, Inc., dated September 29, 2005 (included as  Exhibit 4.1 to the Form 8-K filed July 8, 2005, and  incorporated herein by reference).                                          |
|       |       |                                                                                                                                                                                                                                                                   |
| 4.8        |       | Demand Note between the Company and GC Financial  Services, Inc., dated September 29, 2005 (included as  Exhibit 4.2 to the Form 8-K filed July 8, 2005, and  incorporated herein by reference).                                              |
|       |       |                                                                                                                                                                                                                                                                   |
| 10.1       |       | Sonic Jet Corporation 2000 Stock Option  Plan & Advisory and Consulting Agreement, dated May 1, 2000  (included as Appendix A to the Form 14C filed September 30, 2000,  and incorporated herein by reference).                                |
|       |       |                                                                                                                                                                                                                                                                   |
| 10.2       |       | 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).           |
|       |       |                                                                                                                                                                                                                                                                   |
| 10.3       |       | Series C Convertible Preferred Stock Purchase  Agreement between the Company and eFund 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). |
|       |       |                                                                                                                                                                                                                                                                   |
| 10.4       |       | Letter Agreement between the Company and Ashford  Capital, LLC, dated April 15, 2003 (included as exhibit 4.9 to the  Form 10-QSB filed November 18, 2003, and incorporated herein by  reference).                                                      |
|       |       |                                                                                                                                                                                                                                                                   |
| 10.5       |       | 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).                                      |

 

23

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| 10.6   |   | 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).                                                                                      |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.7   |   | Non-Employee Directors and Consultants Retainer  Stock Plan, dated September 30, 2003 (included as exhibit 4 to the  Form S-8 filed November 7, 2003, and incorporated herein by  reference).                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.8   |   | Investment Agreement between the Company and  Dutchess Private Equities Fund, L.P., dated January 26, 2004 (included  as exhibit 10.8 to the SB-2 filed January 27, 2004, and incorporated  herein by reference).                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.9   |   | Registration Rights Agreement between the Company  and Dutchess Private Equities Fund, L.P., dated January 26, 2004  (included as exhibit 10.9 to the SB-2 filed January 27, 2004, and  incorporated herein by reference).                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.10  |   | Placement Agent Agreement between the Company,  Charleston Capital, LLC, and Dutchess Private Equities Fund, L.P., dated  January 27, 2004 (included as exhibit 10.10 to the SB-2 filed on  January 27, 2004, and incorporated herein by reference).                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.11  |   | 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). |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.12  |   | 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).                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.13  |   | 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).                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.14  |   | 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).                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.15  |   | Employment Agreement between the Company and  Thomas Thebes (included as Exhibit 10.10 to the Form 10-QSB filed  August 13, 2004, and incorporated herein by reference).                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.16  |   | 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).                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.17  |   | Employment Agreement between the Company and Garth  Barrett, dated August 12, 2004 (included as exhibit 10.16 to the 10-QSB  filed November 15, 2004, and incorporated herein by reference).                                                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.18  |   | Employment Agreement between the Company and Gale  Aguilar, dated November 8, 2004 (included as Exhibit 10.1 to the  Form 8-K/A filed November 10, 2004, and incorporated herein by  reference).                                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.19  |   | Employment Agreement between the Company and Frank  Kavanaugh, dated November 15, 2004 (included as exhibit 10.15 to the  10-QSB filed November 15, 2004, and incorporated herein by reference).                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.20  |   | 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).                                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.21  |   | Promissory Note between the Company and Dutchess  Private Equity Fund, II, LP dated December 3, 2004 (included as  Exhibit 10.1 to the Form 8-K filed December 8, 2004, and  incorporated herein by reference).                                                                                                                                                       |

 

24

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| 10.22  |   | 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).                                                              |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                  |
| 10.23  |   | 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).                                                                  |
|   |   |                                                                                                                                                                                                                                                                                  |
| 10.24  |   | 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).                                                     |
|   |   |                                                                                                                                                                                                                                                                                  |
| 10.25  |   | 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).                                                     |
|   |   |                                                                                                                                                                                                                                                                                  |
| 10.26  |   | 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).                      |
|   |   |                                                                                                                                                                                                                                                                                  |
| 10.27  |   | 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).                                                    |
|   |   |                                                                                                                                                                                                                                                                                  |
| 10.28  |   | 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).                                                             |
|   |   |                                                                                                                                                                                                                                                                                  |
| 10.29  |   | 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).                                                                     |
|   |   |                                                                                                                                                                                                                                                                                  |
| 10.30  |   | 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). |
|   |   |                                                                                                                                                                                                                                                                                  |
| 10.31  |   | Engineering Services Agreement between the Company  and TecStar, dated August 22, 2005 (filed herewith).                                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                  |
| 31.1   |   | Certification of the Chief Executive Officer  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                  |
| 31.2   |   | Certification of the Interim 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**

 

In accordance with the requirements of the ExchangeAct, the registrant caused this report to be signed on its behalf by theundersigned, thereunto duly authorized.

 
| **FORCE PROTECTION, INC.**      |                |
|---------------------------------|---------------------|
|                            |                |
| Date: November 15, 2005    |                |
|                            |                |
| By:                             | /s/ Gordon McGilton |   |
| Gordon McGilton                 |                |
| Chief Executive Officer         |                |
|                            |                |
|                            |                |
| Date: November 15, 2005    |                |
|                            |                |
| By:                             | /s/ R. Scott Ervin  |   |
| R. Scott Ervin                  |                |
| Interim Chief Financial Officer |                |
|                                 |                     |  |  |

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, this report has been signed below by the followingpersons on behalf of the registrant and in the capacities and on the datesindicated.

 

Signatures

 
| **Name**            | ** ** | **Title**                       | ** ** | **Date**               |
|---------------------|------------|---------------------------------|------------|------------------------|
|                |       |                            |       |                   |
| /s/ Frank Kavanaugh |       | Chairman, Board of Directors    |       | November 15, 2005 |
| Frank Kavanaugh     |       |                            |       |                   |
|                |       |                            |       |                   |
| /s/ Gordon McGilton |       | Director, and                   |       | November 15, 2005 |
| Gordon McGilton     |       | Chief Executive Officer         |       |                   |
|                |       |                            |       |                   |
| /s/ R. Scott Ervin  |       | Director, General Counsel and   |       | November 15, 2005 |
| R. Scott Ervin      |       | Interim Chief Financial Officer |       |                   |
|                |       |                            |       |                   |
| /s/ Gale Aguilar    |       | Director                        |       | November 15, 2005 |
| Gale Aguilar        |       |                            |       |                   |
|                     |            |                                 |            |                        |  |

 

26

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