U. S. SECURITIES AND EXCHANGE
COMMISSIONWashington, D.C. 20549

FORM 10-KSB----------------

{X} ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF
1934

For the fiscal year ended December 31, 2004

or

{   } TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIESEXCHANGE ACT OF 1934

For the transition period from 01-01-2004 to 12-31-2004

Commission File Number 0-22273

FORCE PROTECTION, INC.(Name of small business issuer in its
charter)

----------------

Nevada
84-1383888(State or other jurisdiction of
(I.R.S. Employerincorporation or organization)
Identification No.)




9801 Highway 78, Building No. 2, Ladson, SC  29456(Address of
principal executive offices) (Zip Code)

(843) 740-7015(Issuer’s telephone number)

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

Securities  registered  under Section 12(g) of the Act: Common Stock,  par
value $.001 per share

Check  whether the issuer (1) filed all reports  required to be filed by
Section13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days.Yes {X} No {   }Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  be
contained,  to the  best of  registrant’s  knowledge,  in  definitive
proxy  or information statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB. {   }Issuer’s revenues for fiscal year ending December 31, 2004 -
$10,243,389.The aggregate market value of the voting Common Stock held by non-affiliates of
the Issuer was  approximately  $61,168,570  (computed  using 226,550,262
non-affiliate shares of common stock outstanding at a closing price of $0.27
with an adjusted  close of $3.29 per share of common stock due to a reverse
stock split on December 31, 2004).As of December 31, 2004, the issuer had 232,295,262 shares of common stock
outstanding.Transitional Small Business Disclosure Format (check one): Yes
{   } No {X}







FORCE PROTECTION, INC.

FORM 10-KSB

TABLE OF CONTENTS

PagePart IItem 1.
Description of Business ...........................................
3Item 2.
Description of Property............................................
8Item 3.
Legal Proceedings..................................................
8Item 4.
Submission of Matters to a Vote of Security Holders................
8Part IIItem 5.
Market for Common Equity and Related Stockholder Matters...........
9Item 6.
Management’s Discussion and Analysis or Plan of Operation...........
10Item 7.
Financial Statements...............................................
16Item 8.
Changes In and Disagreements With Accountants onAccounting and Financial Disclosure............................
40Item 8A.
Control and Procedures............................................
40Item 8B.
Other Information
40Part IIIItem 9.
Directors, Executive Officers, Promoters and ControlPersons; Compliance With Section 16(a) of the Exchange Act.....
41Item 10.
Executive Compensation.............................................
43Item 11.
Security Ownership of Certain Beneficial Owners and Management.....
44Item 12.
Certain Relationships and Related Transactions.....................
45Part IVItem 13.
Exhibits and Reports on Form 8-K...................................
46Item 14.
Principal Accountant Fees and Services
48




2




PART I

ITEM 1.  DESCRIPTION OF BUSINESS

History

We organized under the laws of the State of Colorado in November 1996 as Boulder
Capital Opportunities III. Effective June 30, 1998, we acquired all assets and
assumed all liabilities of Sonic Jet Performance, LLC, a California limited
liability company in the business of producing and marketing recreational boats,
jet boats, trailers, and related accessories. On November 4, 1998, we changed
our name to Sonic Jet Performance, Inc. In 2000 and 2001, we emphasized building
recreational boats and generated gross revenues of approximately one million
dollars while sustaining operating losses. In 2002, we relocated our corporate
headquarters, assembly, and prototyping facility to Stanton, California and
shifted focus to design and production of fire and rescue boats.

In June 2002, we acquired the shares of Technical Solutions Group, Inc., a
development stage manufacturer of ballistic and blast protected vehicles based
in Charleston, South Carolina. Technical Solutions Group was originally formed
in 1997 in Nevada to supply specialty vehicles to military and law enforcement
agencies worldwide. The vehicles are used to transport personnel in hostile
areas that may include landmines, and to locate and remove landmines.

In July 2003, we shifted our principal focus to the production of armored
vehicles and moved our corporate headquarters to South Carolina.  In August
2003, we changed our name to Force Protection, Inc. to reflect our focus on
protected vehicles.  In October 2003, we negotiated and finalized an agreement
with investors to divest all assets related to our Fire Rescue Boat Business.
Effective January 1, 2005, we reincorporated from Colorado to Nevada.

Business Overview

We  are  headquartered  in Ladson, South Carolina and are a complete
design-to-manufacturing  organization,  creating  or  licensing  designs,  and
creating  tooling, and parts necessary to assemble the products in-house. We
manufacture our vehicles using proprietary technology derived from South African
vehicle development programs carried out from 1972 through 1994, and incorporate
design developments into the vehicles to improve their protection and
functionality.

Our common stock is publicly traded on the NASD “Over the Counter Bulletin
Board” under the ticker symbol "FRPT.OB."

How to Contact Us

Our address is 9801 Highway 78, Building No. 2, Ladson, SC  29456.  Our phone
number is (843) 740-7015.

Industry Overview

Mine Protected Vehicles were initially developed in Rhodesia and South Africa in
response to the landmine problems arising from the wars in Southern Africa. The
vehicles were designed to protect personnel during transport, removal of
unexploded ordnance, route clearance, humanitarian de-mining, and other missions
that require protection from landmines and hostile fire. The technology has been
developed and used in several parts of the world, principally Africa, over the
last 20 years in response to the intense use of landmines in that region. We
believe the world market for mine-protected vehicles is growing rapidly.
Landmines and Improvised Explosive Devices, or IEDs, are weapons of choice for
terrorists and insurgent groups because they are highly effective yet relatively
low cost. Rising populations in heavily mined regions and the need to utilize
and develop such areas means the problem can no longer be ignored. With
increasing world tensions, we believe there is a need for vehicles that can
provide a level of protection against these threats during a variety of
missions. Such missions include troop transport in and around Unexploded
Ordnance or mine threat areas as well as route clearance and humanitarian
de-mining - which require entrance into known mine fields or areas of known
terrorist activities.

3




Mine protected vehicles have been purchased worldwide, principally in Africa,
with additional purchases by several NATO allied countries. Troop movements in
overseas operations face a continuous threat because of the use of land mines or
the possibility of ambush and enemy fire. Vehicles that move troops or ordnance
economically and are afforded significant protection against ballistic,
incendiary, landmine hazards, and IEDs are useful in these situations.  This is
a pressing issue for the U.S. and its allies throughout the world. The recent
deaths of American and Allied personnel throughout Iraq, Afghanistan, and
earlier deaths in Kosovo of American solders while riding in an up-armored M998
High Mobility Multi-purpose Wheeled Vehicle, or HMMWV, highlights the need for
mine protected vehicles.  Personnel transport missions create the greatest
portion of demand for Mine Protected Vehicles. Various types of landmine and
Unexploded Ordnance clearance missions also generate demand. Embassies,
consulates, and other U.S. government agencies require vehicles to safely
transport personnel at low cost. Mine protected vehicles are used around the
world in mine problem areas by most military organizations. The current
“hot spots” in which the U.S. and other allied countries operate,
and the likely areas for the future in the “War on Terrorism”, are
all heavily mined. Currently we are not aware of technologies available to
detect mines effectively enough to avoid them, so mine protected vehicles are
valuable for the U.S. to protect its troops.

Products

We currently produce two blast-protected vehicle product lines.

The Buffalo is a heavy weight vehicle designed principally for mine clearing
activities.  The Buffalo integrates a blast resistant capsule with an
American-made truck engine and drive train. We believe that a key aspect of mine
protected vehicle design is the dispersion of hot gasses released by a mine
blast. The Buffalo is designed so that the  force of the blast is routed along
the Buffalo’s V-shaped hull and dissipated to the side of the vehicle so
that the vehicle is not lifted or severely damaged by the blast.  We believe it
is the absence of this V hull design that makes it virtually impossible to
properly protect a standard vehicle by retrofitting armor plates. We believe the
design must be undertaken from the beginning with mine protection as the primary
design criteria.

More than twenty Buffalos have been deployed since 2001 for service in
Afghanistan and Iraq. The U.S. Army conducted extensive testing of the Buffalo
at Aberdeen Proving Grounds where it was determined that the Buffalo blast
capsule protected both the occupants and the critical automotive components from
the effects of explosive blasts.  Real world experience in Iraq has also shown
the Buffalo can withstand blasts without injury to the occupants.  We believe
the Buffalo has filled a niche as a part of the U.S. Army’s new route
clearance systems and has no direct competition for such role.

We launched our second product line, the Cougar, in 2004.  The Cougar is
intended to serve a broader market than the Buffalo, because it can be
configured for a wide range of missions, including urban patrol, route clearance
support, utility transport and special unit activities.  Like the Buffalo, the
Cougar also uses the same V-Hull design principles, an armored steel capsule
provides the mine, blast and ballistic protection for the vehicle occupants and
the use of standard American automotive drive train and control components
allows the vehicle to be operated and serviced in much the same way as a
commercial truck.  The Cougar is new to market and relatively few have been
deployed in active theaters of operations, but we have received inquiries from a
variety of military sources.  Those inquiries may not develop into product
orders.  We have submitted a Cougar vehicle for testing at the Aberdeen Proving
Grounds and believe that such testing will validate the Cougar’s
competitive advantage in armor and blast protection.

We are developing a third vehicle, theLion.  The Lion will be the
smallest of our vehicles at approximately 7 tons and will be positioned for use
by security services or other agencies requiring a high level of protection for
personnel transport.  The initial Research and Development has been done on the
product and we will now focus on producing the first prototype vehicle to
validate the design and manufacturing processes.

4




In 2003, we produced a prototype vehicle called the Typhoon  in connection with
a Request for Quotation by the Israeli Ministry of Defense.  We received no
orders for this vehicle and we are not currently manufacturing this product. We
no longer market the Typhoon because our other products better meet the market
demand for this type of vehicle.

Customer Activity

In 2004, we depended on two principal customers.  In  the  twelve-months ended
December 31, 2004, approximately 90% of our revenues were derived directly or
indirectly from the U.S. Army and approximately 10% from the U.S. Marine Corps.
We expect to continue to depend upon contracts with governmental agencies and
their contractors for a substantial portion of our revenue for the foreseeable
future.

Government contracts and subcontracts typically involve long purchase and
payment cycles,  competitive bidding,  qualification requirements, delays or
changes in funding,  extensive  specification development,  price  negotiations
and  milestone  requirements. Each government agency  also  maintains  its own
rules and regulations with which we must comply and  which  can  vary
significantly  among agencies. Governmental agencies also often  retain  some
portion  of  fees payable upon completion of a project and collection of  these
fees may be delayed for several months or even years, in some  instances.

In  addition,  an  increasing  number  of  government  contracts are fixed price
contracts  which  may prevent us from recovering costs incurred in excess of our
budgeted costs.  Fixed price contracts require us to estimate the total project
cost  based  on  preliminary  projections  of  the  project’s
requirements. The financial viability of any given project depends in large part
on our ability to estimate  such  costs  accurately and complete the project on
a timely basis. In the  event actual costs exceed the fixed contractual cost, we
may not be able to recover  the  excess  costs.

Some  government  contracts  are also subject to termination or renegotiation at
the  convenience  of  the  government,  which could result in a large decline in
revenue in any given quarter.  Although government contracts have provisions
providing  for  the  reimbursement  of  costs  associated  with termination, the
termination  of  a  material contract at a time when our funded backlog does not
permit  redeployment  of  staff  could  result  in  reductions  of employees.
In addition,  the  timing  of payments from government contracts is also subject
to significant  fluctuation and potential delay, depending on the government
agency involved.  Any  such  delay  could  result  in  a  temporary shortage in
working capital.

The following chart illustrates our product deliveries in the last two calendar
years and our current backlog:

Product
Vehicles delivered in 2003
Vehicles delivered in 2004
Vehicle Backlog 2005Buffalo
10 to the U.S. Army
11 to the U.S. Army
25 to the U.S. ArmyCougar

8 to the U.S. Marines
19 to the U.S. Marines




Competitive Positioning



We  are  subject  to  significant competition from companies that market
products that perform similar functions to our products,  This competition could
harm our ability to win business  and  increase  the  price  pressure  on  our
products. The  firms we compete against  include  large, multinational vehicle,
defense and aerospace firms such as Alvis, Vickers, Australian Defense
Industries,  KMW  Industries, General Dynamics  and  Textron.  Most  of  our
competitors  have considerably greater financial, marketing and technological
resources than we do which  may  make  it  difficult  to  win new contracts and
we may not be able to compete  successfully.  Certain  competitors  operate
fabrication facilities and have  longer  operating  histories  and  presence  in
key markets, greater name recognition,  larger  customer  bases and
significantly greater financial, sales and  marketing, manufacturing,
distribution, technical and other resources, as a result,  these  competitors
may be able to adapt more quickly to new or emerging technologies  and  changes
in  customer  requirements. They may also be able to devote  greater  resources
to  the  promotion  and  sale  of  their  products.

5




We  believe  our  competitive  advantages  include:

|• | access to American commercial drive
train technology and after market support
system;                                     
|- | --------------------------------------------------------------------------------------------------------------------------
|• | our current and potential
customers wish to purchase  from an American
company;                                           
|• | access  to  low  cost,  heavy
manufacturing  facilities;
and                                                              
|• | exclusive rights to certain South
African blast-protection technology that could take time for our competitors to
develop.



We believe our products are superior to other vehicles currently in use by the
U.S. military for mine and blast protection.  Existing military vehicles include
Humvees and other non-armored utility support vehicles, or heavy-weight troop
transport and offensive armor such the Bradley Fighting Vehicle or the M1A1
Abrams Tank.  The un-armored utility vehicles offer a prime target for attack
and efforts to “up-armor” these vehicles have not been totally
successful due to the high costs associated with retrofitting armor into the
body and the increased mechanical wear caused by the weight of the armor.
Conventional armored vehicles such as the Bradley and the Abrams offer
protection from ballistic and blast threats, but are expensive, require
substantial resources to maintain, are large and difficult to maneuver in
crowded urban environments and are not well-suited to peace keeping missions due
to their intimidating offensive weapon systems.

As recent events has shown, there is also an increasing concern over death or
injury of U.S. military personnel during operations such as “Enduring
Freedom,” particularly to reservists and or civilian contractors who are
not expected to face front line combat, but who increasingly have become the
target of insurgents and terrorists.  These concerns have led the U.S. military
to adopt armor protection as a base requirements for many of its transport
vehicles and to look for ways to defeat the threat of IEDs and other booby trap
devices, including developing “route clearance” and other explosive
detection and removal teams.

Production

Our manufacturing process includes direct production and/or assembly of all
critical components of our vehicles as follows:

|• | We utilize proprietary technology
and skilled welders to create ballistic and blast protected vehicle capsules
which we believe are capable of withstanding the explosive effect of landmines,
Improvised Explosive Devices, or IEDs, and other blast threats encountered in
wars, insurgency and urban conflicts.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|• | We integrate commercial
American-made automotive drive-trains and other components onto the capsules to
produce vehicles that have a high level of commonality with the existing U.S.
military fleet and can be repaired and maintained by traditional truck
mechanics.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our Ladson facility has sufficient floor space, ample electrical and other
utilities and an abundance of existing crane capacity.  We have also secured
sufficient tools and equipment, and have access to a local pool of labor,
including many skilled welders.  We maintain a dedicated staff of engineers to
provide in-house engineering support and utilize various manufacturing
approaches to increase efficiency and product quality.  We source steel and
other raw materials from various key vendors in Europe and the United States,
and secure our automotive components from a variety of U.S. suppliers
including:

|• | Caterpillar;                             
|- | -----------------------------------------
|• | Mack
Trucks, a member of the Volvo
Group;
|• | Peterbilt Truck;
and                     
|• | Allison
Transmission.                    



Sales and Marketing:

Our employees, including senior management and the Vice President of Sales,
conduct our primary sales and marketing efforts.  Employees call on prospective
customers and foreign agents representing various governments and agencies who
could have an interest in our product offerings. Currently our primary sales
staff reside in the states of South Carolina and Connecticut.  On September 8,
2004 we entered into an agreement with an exclusive sales representative in
Israel.

6




We use independent referral sources who assist us in identifying opportunities
for our products and services. Any payments to referral sources are negotiated
on a case by case basis and are dependent on various factors including the
quality of the referral, the opportunity, the role of the referral sources in
the sale, and the potential revenues associated with a specific opportunity.
Many of these referral sources have been converted to consulting agreements and
the commissions eliminated.

We actively participate in shows involving countermine operations and
technology, military vehicle, law enforcement technology, and military force
protection. This includes the Association of the U.S. Army Annual Conference and
Winter Symposium, Marine Expo, and Tactical Wheeled Vehicle conferences.
Additionally, our marketing efforts include our web site, some advertising
focused on the military community and brochures.

In December 2004, we ended our non-exclusive agreement with U.S. Marketing Group
LLC to develop a commercial U.S. distribution channel for our Lion vehicle. The
initial purchase order was cancelled and the $20,000 deposit was returned. We no
longer have any external domestic marketing programs.

Research and Development

In 2003 we spent $102,439 on research and development.  None of these costs were
borne by any of our customers. In 2004 we spent $1,230,290 on research and
development, none of which was borne by any of our customers.



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



As of December 31, 2004, we had 182 employees in the U.S. and 3 consultants
located in South Africa and Israel. Employees can be broken down into 125 hourly
employees; 44 salaried employees; 11 contractors and 5 consultants. We are not a
party to any collective bargaining agreement and believe employee relations are
good. As of December 31, 2003, we had 29 employees in the U.S. and 4 consultants
located in the United Kingdom and South Africa.

Environmental Matters

We are subject to federal, state, local and foreign laws and regulations
regarding protection of the environment, including air, water, and soil. Our
manufacturing business involves the use, handling, storage, and contracting for
recycling or disposal of hazardous or toxic substances or wastes, including
environmentally sensitive materials, such as batteries, solvents, lubricants,
degreasing agents, gasoline and resin. We must comply with certain requirements
for the use, management, handling, and disposal of these materials. We, however,
do not maintain insurance for pollutant cleanup and removal. If we are found
responsible for any hazardous contamination, any fines or penalties we may be
required to pay, or any clean up we are required to perform, could be very
costly. Even if we are charged, and later found not responsible, for such
contamination or clean up, the cost of defending the charges could be high. If
either of the foregoing occurs, our business, results from operations and
financial condition could be materially adversely affected. We do not believe we
have any material environmental liabilities or that compliance with
environmental laws, ordinances, and regulations will, individually or in the
aggregate, have a material adverse effect on our business, financial condition,
or results of operations.

Other Regulatory Matters

Our operations and products are subject to extensive government regulation,
supervision, and licensing under various federal, state, local and foreign
statutes, ordinances and regulations. Certain governmental agencies such as the
Environmental Protection Agency, or EPA, and the Occupational Safety and Health
Administration, or OSHA, monitor our compliance with their regulations, require
us to file periodic reports, inspect our facilities and products, and may impose
substantial penalties for violations of the regulations.

7




While we believe that we maintain all requisite licenses and permits and are in
compliance with all applicable federal, state, local and foreign regulations,
there can be no assurance that we will be able to maintain all requisite
licenses and permits. The failure to satisfy those and other regulatory
requirements could have a material adverse effect on our business, financial
condition, and results of operations.

ITEM 2.  DESCRIPTION OF PROPERTY

We lease space in two buildings in Ladson, South Carolina for our principal
executive offices and manufacturing facilities. The term of the lease for
Building Three is five years starting October 15, 2003. Annual rent is $215,000
for the first year plus utilities, taxes and maintenance, and $258,000 base
rental for the next four years. We have 84,800 square feet of space in Building
Three.

The term of the lease for Building Two is five years starting July 15, 2004,
with an option to renew for another five years. Annual rent is $439,500 for the
first year plus utilities, taxes and maintenance, and $439,500 base rental for
the next four years, which may be adjusted by increases to the Consumer Price
Factor by three to seven percent. This additional lease of 142,500 square feet
gives us a stable base for future planning. We believe this space increases our
ability to qualify for and fulfill larger contracts for its mine-protected
vehicles.  We believe our existing leased space is sufficient for the next
twelve months.

ITEM 3.  LEGAL PROCEEDINGS

On June 17, 2003 the CSIR, a statutory council established in accordance with
the South African Research Council Act 46 of 1988, filed suit in the High Court
of South Africa (Transvaal Provincal Division) against us claiming a balance due
and owing under a Purchase Order for the design and supply of seven TMRP-6
protection kits with a total contract price of ZAR631,800. As of the date
hereof, we have paid all amounts due under the contract and are awaiting final
dismissal of the claim with prejudice.

In March 2005, we received a letter from H.C. Wainwright & Co., Inc.
threatening litigation.  The potential dispute relates to a letter agreement
between H.C. Wainwright & Co and us dated November 29, 2004.  This dispute
is too preliminary for us to determine a final outcome, however, if the matter
proceeds, we intend to vigorously defend against H.C. Wainwright &
Co.’s claims.

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

On December 30, 2004, we held our Annual Meeting of Stockholders.  As of the
close of business on the record date of October 15, 2004, there were 212,728,510
shares of common stock outstanding and entitled to vote and 18.5 shares of
Series B Preferred Convertible Stock outstanding and entitled to vote.  Each
share of Series B Stock was entitled to 6,753,286 votes and votes with the
Common Stock as a class.

At the Annual Meeting, the shareholders approved the following proposals:

|1. | The election of R. Scott Ervin, Frank
Kavanaugh, and Gale Aguilar as Directors until their respective successors shall
be elected and qualified;                                                                                                                                                  
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | Our
reincorporation from Colorado to Nevada;                                                                                                                                                                                                                                                      
|3. | The
changing of the stated value of our common and preferred stock from “No
Par Value” to the “Par Value of $0.001 Per Share”;
and,                                                                                                                                                               
|4. | The authorization of a reverse stock
split of our common stock in the range of 2:1 to 12:1, as determined in the sole
discretion of our Board of Directors, but such authority to be granted only if
Item No. 2 above - the proposal to reincorporate in Nevada - is approved by the
shareholders.



8




A summary of the voting is set forth below:

Results of VotingProposal

Total Votes
FOR
percent
AGAINST
percent
RESULT1
Director - Frank Kavanaugh

164,607,873
160,471,447
97.49%
1,587,022
0.96%
PASSEDDirector - Gale Aguilar

164,607,873
158,312,951
96.18%
3,745,518
2.28%
PASSEDDirector - R. Scott Ervin

164,607,873
158,762,951
96.45%
3,295,518
2.00%
PASSED2
Re-incorporation to Nevada
*
65,521,753
58,820,171
89.77%
6,701,582
10.23%
PASSED3
Change of Par Value
*
64,012,802
59,362,978
92.74%
4,649,824
7.26%
PASSED4
Discretion for Reverse Split
*
64,733,810
54,031,579
83.47%
10,702,231
16.53%
PASSED* Note - Broker non-votes not included




PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS

Market For Our Common Stock

Our common stock began trading on the OTC Bulletin Board on December 29, 1998
under the symbol “SJET.OB”. Our common stock currently trades on the
OTC Bulletin Board under the symbol “FRPT.OB”. Before our listing on
the OTC Bulletin Board none of our securities were traded in the public market.
Bid and ask quotations for our common shares are routinely submitted by
registered broker dealers who are members of the National Association of
Securities Dealers on the NASD Over-the-Counter Electronic Bulletin Board. These
quotations reflect inner-dealer prices, without retail mark-up, markdown or
commission and may not represent actual transactions.  The following table
shows, for the periods indicated, the high and low closing sales prices per
share of our common stock.

High
Low
High
Low2002First Quarter
$0.22
$0.08Second Quarter
$0.42
$0.06Third Quarter
$0.29
$0.07Fourth Quarter
$0.25
$0.102003First Quarter
$0.27
$0.10Second Quarter
$0.21
$0.12Third Quarter
$0.13
$0.07Fourth Quarter
$0.11
$0.072004
Pre reverse split
Restated for reverse split*First Quarter
$0.71
$0.07
$8.52
$0.84Second Quarter
$0.43
$0.13
$5.16
$1.56Third Quarter
$0.25
$0.13
$3.00
$1.56Fourth Quarter
$0.40
$0.14
$4.80
$1.68




*  Effective February 4, 2005, we had a reverse split of our common stock in the
ratio of 12:1.



As of December 31, 2004, there were 370 shareholders of record of our common
stock.

9




Dividend Policy

We have never declared or paid a cash dividend on our common stock. We currently
intend to retain all of our future earnings, if any, for use in our business and
therefore we do not anticipate paying any cash dividends on our common stock in
the foreseeable future. Any future determination to pay cash dividends will be
at the discretion of our board of directors and will depend upon our financial
condition, operating results, capital requirements, restrictions contained in
our agreements and other factors which our board of directors deems relevant.

On January 21, 2005 we issued 15,800 shares of Series D 6% Convertible Preferred
stock. Dividend payments are semi-annual due March 1 and September 1 and are
payable in cash or shares of common stock. On March 4, 2004 we issued 57,186
shares of restricted common stock as a dividend payment to the holders of the
Series D Stock.

Recent Sales of Unregistered Securities

During the three months ended December 31, 2004, we issued an aggregate of
300,000 restricted shares of common stock for the exercise of warrants
generating $30,000. The warrants were issued in a private placement dated April
10, 2002.

During the three months ended December 31, 2004, we issued an aggregate of
400,000 restricted shares of common stock for the exercise of warrants
generating $40,000. The warrants were issued as payment under an agreement with
a former employee.

During the three months ended December 31, 2004, warrants for common stock
totaling 7,288,700 shares were exercised at $0.24 generating $1,749,288 from the
private placement dated March 23, 2004.

During the three months ended December 31, 2004, we issued an aggregate of
14,998,052 shares of common stock at an average price of $0.203627 per share,
generating $3,054,015 pursuant to our Dutchess Equity Line agreement.

The sales set forth above were undertaken under Rule 506 of Regulation D under
the Securities Act of 1933, as amended, by the fact that:



|• | the sales were made to a
sophisticated or accredited investors, as defined in Rule
502;                                                                                                                                                                                                                               
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | we gave each purchaser the
opportunity to ask questions and receive answers concerning the terms and
conditions of the offering and to obtain any additional information which we
possessed or could acquire without unreasonable effort or expense that is
necessary to verify the accuracy of information
furnished;
|• | at a reasonable time prior
to the sale of securities, we advised each purchaser of the limitations on
resale in the manner contained in Rule
502(d)2;                                                                                                                                                                 
|• | neither we nor any person
acting on our behalf sold the securities by any form of general solicitation or
general advertising; and                                                                                                                                                                                    
|• | we exercised
reasonable care to assure that each purchaser of the securities is not an
underwriter within the meaning of Section 2(11) of the Securities Act of 1933 in
compliance with Rule 502(d).                                                                                                                  



ITEM
6.  MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Cautionary Statement Concerning Forward-Looking Statements

This  Report  on  Form  10-KSB  contains  forward-looking statements, including,
without  limitation, statements concerning possible or assumed future results of
operations  and  those  preceded  by,  followed  by  or  that  include the words
"believes," "could," "expects," "intends" "anticipates," or similar expressions.
Our  actual  results  could  differ  materially  from  these  anticipated in the
forward-looking  statements  for  many  reasons  including  the  risks described
in the Risk Factor section and  elsewhere  in this report. Although we believe
the expectations reflected in the forward-looking  statements are reasonable,
they relate only to events as of the date  on  which  the  statements  are
made,  and  our future results, levels of activity, performance or achievements
may not meet these expectations. We do not intend  to  update  any of the
forward-looking statements after the date of this document  to  conform  these
statements  to actual results or to changes in our expectations,  except  as
required  by  law.

10




Overview

During the three and twelve month periods ended December 31, 2004, we continued
to ramp up our business and facilities to fulfill our contracts with the U.S.
Marines and the U.S. Army valued at an aggregate of approximately twenty million
dollars. As of December 31, 2004, we had 182 employees, an increase of 153
employees from December 31, 2003. Additionally, as of December 31, 2004, we had
32 operational production cells to manufacture our products compared to 2 cells
at December 31, 2003. During the twelve months of the year ended 2004, we spent
$1,230,290 on Research and Development.

Going Concern

The accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. As shown in the financial
statements, during the year ended December 31, 2004, we incurred losses of
$10,245,833 but our Current Assets exceed our current liabilities by $5,783,200.
Realization of a major portion of the assets in the accompanying balance sheet
is dependent upon our continued operations, obtaining additional financing, and
the success of our future operations.

Critical Accounting Policies

The Securities and Exchange Commission issued Financial Reporting release No.
60, "Cautionary Advice Regarding Disclosure About Critical Accounting Policies,"
or FRR 60, suggesting companies provide additional disclosure and commentary on
their most critical accounting policies. In FRR 60, the SEC defined the most
critical accounting policies as the ones that are most important to the
portrayal of a company’s financial condition and operating results, and
require management to make its most difficult and subjective judgments, often as
a result of the need to make estimates of matters that are inherently uncertain.
The methods, estimates and judgments we use in applying these most critical
accounting policies have a significant impact on the results we report in our
financial statements.

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

As a general rule, financial information is accounted for and based on cost, not
current market value. Revenues and gains should be matched using the accrual
method with the expenses giving rise to the revenues and gains to determine
earnings for the period. Expenses are necessarily incurred to produce revenue.
Expenses are then "matched" in the same accounting period against the revenue
generated. Revenues are recognized when they are earned and expenses are
recognized in the same period as the related revenue (matching or using a
systematic and rational allocation or expensing in the period in which they
expire), not necessarily in the period in which the cash is received or expended
by the company.

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

|• | Revenue
recognition;     
|- | -------------------------
|• | Inventory Cost;
and      
|• | Stock based
compensation.



We  recognize  revenue  upon  formal acceptance of vehicles by customers.  We
have received  progress / performance based payments from the U.S. Army and
U.S.  Marines.  We  record  these  progress  / performance based payments as
deferred revenue and carry them on the balance sheet as such until shipment
acceptance.

11




In December 2004, FASB issued Statement No. 123 (R), Share-Based Payment,
which establishes accounting standards for transactions in which an entity
receives employee services in exchange for (a) equity instruments of the entity
or (b) liabilities that are based on the fair value of the entity’s equity
instruments or that may be settled by the issuance of equity instruments.
Effective in the third quarter of 2005, SFAS 123(R) will require us to recognize
the grant-date fair value of stock options and equity based compensation issued
to employees in the statement of operations.  The statement also requires that
such transactions be accounted for using the fair-value-based method, thereby
eliminating use of the intrinsic method of accounting in APB No. 25,
Accounting for Stock Issued to Employees,which was permitted under
Statement 123, as originally issued.  To date, we have expensed stock based
compensation on the intrinsic method. We currently are evaluating the impact of
Statement No. 123 (R) on our financial condition and results of operations.

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

Financial Condition and Results of Operations

The following discussion and analysis compares our results of operations for the
Twelve months ended December 31, 2004 to the same period in 2003. This
discussion and analysis should be read in conjunction with our consolidated
financial statements and related notes thereto included elsewhere in this
report.

Revenues. Revenues for the twelve month period ended December 31, 2004
were $10,272,757.  Revenues for the twelve month period ended December 31, 2004
increased $3,522,278 compared to the same period in 2003.  The increase in
revenues during the twelve month period was due to the timing of awarded
contracts and the beginning of our ramp up in production. Vendor part delivery
schedules hampered further revenues by extending the shipment schedule into
2005. Revenues were derived primarily from the shipment of Buffalos to the U.S.
Army and shipments of Cougars to the U.S. Marines.  We also earned revenues by
shipping spare parts for our products which accounted for $553,000 of revenue
during 2004. Shipments for both the U.S. Army and U.S. Marines’ contracts
began in October 2004.

Cost of Sales. Cost of sales for the twelve month period ended December
31, 2004 were $11,266,998. Cost of sales for the twelve month period ended
December 31, 2004 compared to the same period in 2003 increased by $6,824,580.
The increase in cost of sales can be attributed to increased revenues, increased
freight cost associated with air-freighting steel, and inefficiencies related to
the production ramp due to employee training, vendor deliveries, vendor product
quality issues and product documentation. We also recognized a $501,331
provision for loss on our contract with the U.S. Marine Corps because the
contract was scheduled to be completed by December 31, 2004.

Cost of sales was 109.7% of sales for the twelve month period ended December 31,
2004 compared to 71.1% for the same period in 2003. Manufacturing costs have
increased as a percentage of sales because, in 2004, we had increased freight
cost associated with air-freighting steel and inefficiencies related to the
production ramp. These inefficiencies were recognized as unproductive labor
cost.  The timing of the contract awards resulted in an almost 7 month
production ramp with very little revenue recognized during the ramp period yet
we were absorbing large amounts of indirect cost which is captured in Cost Of
Goods Sold, or COGS. Material scrap and contractual training cost for the
Marines accounted for an incremental 4.9% increase to COGS. The inclusion of the
provision for the loss on the Marine contract accounts for an incremental 4.4%
of COGS. Additionally, manufacturing costs increased substantially as we
increased spending in Engineering, Quality Control and Integrated Logistics
Support to begin to fulfill two government contracts.  Indirect cost accounted
for 20.1% of COGS during the year ended December 31, 2004 as compared to 5.6%
for the year ended December 31, 2003 reflecting the infrastructure ramp without
a complete year of supporting revenue.

12




Selling, General and Administrative expenses.  Selling, General and
Administrative expenses for the twelve months ended December 31, 2004 were
$9,136,372. As compared to the twelve month period ended December 31, 2003,
Selling, General and Administrative expenses increased $5,123,286. For the
twelve months ended December 31, 2004, excluding Research & Development
expenditures, Selling, General & Administrative spending was $7,138,974.
During 2004, we incurred and accrued $934,000 of stock based compensation paid
to eight employees and one consultant.  Fringe expense increased due to the
increase in headcount of 153 people since the start of the year.

Other Income/Expense. We had other expenses for the twelve months ended
December 31, 2004 of ($675,577). Interest expense for the twelve months ended
December 31, 2004 was $684,980 consisting of $672,937 factoring and loan
interest charges and $10,575 of other bank charges and $1,468 of penalties.

Net Loss. Net Loss for the twelve months ended December 31, 2004 the net
loss was $10,245,833 an increase of $4,924,209 as compared to the net loss of
$5,321,624 for the twelve months ended December 31, 2003. The increase in net
loss is attributed to the third and forth quarter production ramp up
inefficiencies to fulfill two government contracts and to build infrastructure
for future growth.

Backlog

On April 23, 2004 we announced an award of a contract to deliver up to 27
Cougars, of which 14 were initially funded under the contract, to the U.S.
Marine Corps. On March 8, 2005 we announced the follow-on order estimated at
more than $5 million. On May 17, 2004 we announced the award of a contract to
deliver 21 Buffalo vehicles to the U.S. Army. Initial deliveries began in
October 2004. We have received progress payments during production and expect to
receive final payments for each unit shipped within 45 days of acceptance by our
customer.  During 2004, we announced an additional order for the production of
15 Buffalos to be delivered during 2005. Our sales backlog was $21,961,000 at
December 31, 2004, but has increased with the follow-on Cougar order by
$5,000,000. It is possible that orders could be cancelled without notice, and
our customer could impose penalties for late deliveries.

Trends, Risks and Uncertainties

Overall, the expansion of our operations during 2004 has been part of a growth
trend that has carried us from a cramped facility in the old Charleston Navy
shipyards with capacity to produce only a single vehicle at a time, to our
present manufacturing plant with more than 200,000 square feet of production
area and a production capacity of approximately 6-8 vehicles a month. This
growth is consistent with our plan to position ourselves as the leading
manufacturer in the United States of blast and mine protected vehicles, and we
will continue to take appropriate steps to achieve this goal.

During the fourth quarter of 2004 we continued to expand our business operations
to meet the increased demand for our products resulting from the 2004 orders
placed by the U.S. Army for Buffalos, and the U.S. Marine Corps for Cougars.
During fiscal year 2004, we increased our workforce by approximately 435% and
increased the number of our production "cells" by 800%.  We believe these
infra-structure developments will assist in meeting our current obligations and
enhance our qualifications to bid on future projects. Our rapid expansion in
2004 created a number of challenges for us and caused us to be slower than our
originally anticipated projected delivery schedule for the Buffalos and the
Cougars.  . We recognized a $501,331 provision for loss on our contract with the
U.S. Marine Corps. during the fourth quarter of 2004 because the contract was
scheduled to be completed by December 31, 2004 We believe we are overcoming some
of the hurdles associated with our initial infrastructure ramp.  However, we
intend to continue to increase infrastructure ramp for future growth and
recognize that there are on-going risks associated with our continued growth.
Additionally, there is always some risk that an unforeseen event could interrupt
or negatively impact our production operations,  Under our current contract with
the U.S. Marines, liquidated damages can be assessed against us for delayed
delivery of Cougars.  We believe that we will be able to complete our current
orders according to a revised delivery schedule.

13




A major challenge facing us at present is satisfactory completion of our
existing orders. This is significant for two reasons; first, it will demonstrate
our ability to manufacture vehicles on a "production basis" i.e., multiple
vehicle sets built to a consistent specification, and according to a predictable
schedule and thus position us for future orders, possibility on a substantially
larger scale than we have received to date. Second, as discussed above, in
accordance with accepted accounting practice, we have treated progress payments
received on our two main contracts as "deferred income", which means that even
though we have actually received progress payments totaling $2,645,716 at year
end, the revenue is not stated on our income statement. As a result, our
financial results for the twelve month period ending December 31, 2004 show
revenues of $10,272,757 which excludes all deferred revenue, and a resulting
loss from operations of $10,245,833. When we complete and deliver the vehicles,
we will be able to move current deferred amounts from the "deferred revenue"
category and book it as direct revenue from operations.  Booking this revenue
may not cause our company to become or remain profitable.

In the past, we encountered some difficulties in securing the necessary
components for our vehicles, specifically steel and, from time-to-time, truck
chassis. In response, we have identified multiple vendors for certain components
so we have alternate sources of supply if necessary. Additionally, we have
implemented a program of advance purchasing and stockpiling critical materials.
For example, we currently have pre-purchased steel and truck parts to ensure
availability of material needed for current and potential future orders. It is
also possible that, even if we can continue to source our necessary raw
materials and parts, the price we pay will increase substantially, negatively
impacting our financial performance.

Apart from the risks mentioned above, the main uncertainty about our future
operations is whether we will continue to receive additional orders for our
vehicles. It is impossible to predict with certainty whether such future orders
will be placed by existing or new customers.  If we do not receive future
orders, it is unlikely that our business will continue.  However, we believe our
vehicles provide proven landmine and blast protection, and that for so long as
there is a risk of bodily harm to service personnel from such explosive blasts,
there will be a market for our products.

Liquidity And Capital Resources

As of December 31, 2004, our cash and cash equivalents were $2,264,406 compared
to $278,777 as of December 31, 2003; $3,210,136 as of March 31, 2004; $1,311,687
as of June 30, 2004 and $548,781 as of September 30, 2004. Our principal sources
of capital have been cash flow from operations as it relates to the receipt of
performance based payments, warrant exercises, borrowings from G.C. Financial
Services and the sale of common stock. To date we have not had any recent
borrowings from G.C. Financial Services.

We currently have sufficient cash resources for the next two reporting periods,
ending June 2005, excluding any major changes to our burn rate. We intend to
seek a short term line of credit or other financing alternatives as necessary
which may be required sooner if other large orders are secured.  If we accept an
additional contract, our cash resources will be depleted for the purchase of
materials, reducing our cash resources and shortening our cash resources to
cover only a few months.  We anticipate that we will require additional capital
funding to meet our needs, which will include expanding our workforce, funding
further development on our vehicle products and strengthening our internal
operations. Based on our current operating plan, we anticipate that additional
financing will be required to finance growth in operations and capital
expenditures in 2005 and in 2006.

Our currently anticipated levels of revenues and cash flow are subject to many
uncertainties. The amount of funds that we will require depends on many factors,
including without limitation, the extent and timing of sales of our products,
future inventory costs, the timing and costs associated with the establishment
and/or expansion, as appropriate, of our manufacturing, development, engineering
and customer support capabilities, the timing and cost of our product
development and enhancement activities and our operating results. Until we
generate cash flow from operations that will be sufficient to satisfy our cash
requirements, we will continue to seek alternative means for financing our
operations and capital expenditures and/or postpone or eliminate certain
investments or expenditures. Potential alternative means for financing may
include leasing capital equipment, lines of credit, or obtaining additional debt
or equity financing. When needed, additional financing may not be available, or
available on acceptable terms. The inability to obtain additional financing or
generate sufficient cash from operations could require us to reduce or eliminate
expenditures for capital equipment, research and development, production or
marketing of our products, or otherwise curtail or discontinue its operations,
which could have a material adverse effect on our business, financial condition
and results of operations. Furthermore, if we raise funds through the sale of
additional equity securities, the common stock currently outstanding will be
further diluted.

14




Operating Activities

The cash used by operating activities for the twelve months ended December 31,
2004 was $13,392,619, as compared to $4,371,480 for the twelve months ended
December 31, 2003. We used cash primarily to fund existing operations, purchase
inventory to manufacture our products for the second half of 2004 for the U.S.
Marine and U.S. Army contracts and Research and Development for future products.
During 2004, increased inventory consumed $8,082,015 of cash.



Our capital expenditures for the three months ended March 31, 2004 were $49,955
which consisted primarily of office and manufacturing equipment. Capital
expenditures for the three months ended June 30, 2004 were $186,144 which
consisted primarily of expenditures related to the ramp-up of our manufacturing
facilities. Capital expenditures for the three months ended September 30, 2004
were $539,988 which related to the support of additional headcount and the
completion of the first phase of the ramp up of our manufacturing facilities. We
anticipate that our capital expenditures during 2005 will increase significantly
due to increased headcount, and the ramp up of additional manufacturing
capacity. Short -term financing or the use of a line of credit might be
required.

Our capital expenditures for the twelve months December 31, 2004 were $822,532
as compared to $125,008 during 2003, related to investments in office and
manufacturing equipment and cell structure. We anticipate that our capital
expenditures during 2005 will increase because of costs associated with existing
contracts, and potential new opportunities.

Sale of Assets

Under an agreement dated July 1, 2003, modified on September 15, 2003, the
Company sold its right, title and interest in and to the tangible and intangible
assets of its Fire & Rescue Boat Division  to  Rockwell Power Systems Inc.
(“RPSI”), which subsequently merged with Xtreme, Inc., a publicly
traded company trading under the symbol XTME.OB on the Bulletin Board. As part
of the consideration for such sale, RPSI caused to be delivered to the Company
1/3 of Xtreme’s authorized common stock, which was then distributed to the
Company’s shareholders of record as at December 5, 2003.  In addition, the
Company is to receive 500 shares of Xtreme’s Series A Preferred stock,
each share having a face value of $1,000.  The Company has requested but not yet
received such Preferred shares.

Financing Activities

We completed the following financing activities during 2004.

On March 23, 2004, we closed on a private offering. This offering, sold to six
accredited investors, consisted of the following:

(a)     15,000,000 shares at
$0.20 per share;



(b) an "A" Warrant for each share purchased,
exercisable at   $0.24 per share. The "A" Warrants expire March 23, 2006;
and



(c) A "Green Shoe" warrant for each share purchased,
exercisable at $0.20 per share for a period of 180 days after the effective date
of the registration statement, commencing on the effective date of the
registration statement.



We received gross proceeds of $3,000,000 from this private placement.  In
addition, during 2004, through the exercise of “A” Warrants, and the
“Green Shoe” Warrants, we received additional gross proceeds of
$4,907,288.  Total 2004 commission and fees related to this placement totaled
$344,838.

During 2004, we exercised $3,054,015 of our financing facility originally
entered into on September 20, 2003 with Dutchess Private Equities Fund, also
referred to as an Equity Line of Credit, for $3,500,000 under the agreement, a
portion of which was advanced under a loan agreement. The balance was exercised
in early January 2005 and no further funds are available under the
agreement.

15


During 2004, Technical Solution Group, Inc. entered into an agreement with GC
Financial Service, Inc.  As of December 31, 2004 TSG had drawn approximately
$10,272,757 gross, all of which has been repaid at December 31, 2004. We renewed
our existing receivables agreement with GC Financial Services for financing on
July 28, 2004.  Receivables can be factored 2%. We also secured a line of credit
of up to $4,000,000 at a base rate of 4.1% per month, the balance of $4 million
was outstanding on December 31, 2004 but was paid in full in January of 2005.
We currently we have no remaining line of credit debt.

We intend to raise additional funds in 2005 and 2006.  The amount of funds we
need will depend upon many factors, including without limitation, the extent and
timing of sales of our products, future product costs including the cost of raw
materials, the timing and costs associated with the establishment and/or
expansion, as appropriate, of our manufacturing, development, engineering and
customer support capabilities, the timing and cost of our product development
and enhancement activities and our operating results. Until we generate cash
flow from operations that will be sufficient to satisfy our cash requirements,
we will need to seek alternative means for financing our operations and capital
expenditures and/or postpone or eliminate certain expenditures. Potential
alternative means for financing may include leasing capital equipment, or
obtaining additional debt, factoring receivables or equity financing. Additional
financing may not be available, or available on acceptable terms. The inability
to obtain additional financing or generate sufficient cash from operations could
require us to reduce or eliminate expenditures for capital equipment, research
and development, production or marketing of our products, or otherwise curtail
or discontinue our operations, which could have a material adverse effect on our
business, financial condition and results of operations. Furthermore, if we
raise funds through the sale of additional equity securities, the common stock
currently outstanding will be further diluted.

Inflation

We do not believe that inflation has had or is likely to have any significant
impact on our revenues.  However, there is currently a shortage of the type of
steel we use in our products. We currently have enough steel to manufacture to
our existing contracts. We continue to purchase steel anticipating future
requirements. If the price of steel increases significantly, the cost of our
products could increase. It is unlikely we will be able to pass on this cost
under our current contracts. As a result, if the cost of our raw materials
increases, our profitability, if any, could decrease.



As of December 31, 2004, we have one wholly-owned subsidiary, Technical
Solutions Group, Inc. On January 12, 2005 Technical Solutions Group was renamed
Force Protection Industries, Inc.

Contractual Obligations

We lease space in two buildings in Ladson, South Carolina for our principal
executive offices and manufacturing facilities. The term of the lease for
Building Three is five years starting October 15, 2003. Annual rent is $215,000
for the first year plus utilities, taxes and maintenance, and $258,000 base
rental for the next four years. We have 84,800 square feet of space in Building
Three.

The term of the lease for Building Two is five years starting July 15, 2004,
with an option to renew for another five years. Annual rent is $439,500 for the
first year plus utilities, taxes and maintenance, and $439,500 base rental for
the next four years, which may be adjusted by increases to the Consumer Price
Factor by three to seven percent. This additional lease of 142,500 square feet
gives us a stable base for future planning. The space substantially increases
our ability to qualify for and fulfill larger contracts for its mine-protected
vehicles.  We believe our facilities are adequate for our current operations and
that we can obtain additional leased space if needed.

On  July 15, 2004 our subsidiary entered into a 60 month option lease of
$952.71  per  month  with  Gregory  Poole Lift Systems for a new Caterpillar
forklift.

16


ITEM 7. FINANCIAL STATEMENTS

Independent Auditors’ Report

To the Board of Directors and Stockholders ofForce Protection, Inc. and
subsidiary

We have audited the accompanying consolidated balance sheet of Force Protection,
Inc., and subsidiary (formerly known as Sonic Jet Performance, Inc.) as of
December 31, 2004, and the related consolidated statements of operations,
stockholders’ equity (deficit) and cash flow for the year then ended.
These financial statements are the responsibility of the Company’s
management.  Our responsibility is to express an opinion on these financial
statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Force Protection, Inc, and
subsidiary, at December 31, 2004, and the results of their operations and their
cash flows for the year then ended, in conformity with accounting principles
generally accepted in the United States.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern.   As discussed in Note 1 to
the financial statements, the Company’s recurring losses from operations
and its difficulties in generating sufficient cash flow to meet its obligation
and sustain its operations raise substantial doubt about its ability to continue
as a going concern.  Management’s plans concerning these matters are also
described in Note 1.  The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

/s/ Jaspers + Hall, PCJaspers + Hall, PCDenver, ColoradoApril
8, 2005

17




FORCE PROTECTION INC. AND SUBSIDIARYCONSOLIDATED BALANCE SHEETSFor the
Period ending DECEMBER 31 2004, 2003 and 2002



2004

2003

2002ASSETSCurrent Assets:Cash
$
2,264,406
$
278,777
$
114,476Restricted cash
-
-
-Accounts receivable
1,053,973
144,932
166,242Inventories
22,920,212
827,337
186,463Other current assets

80,316

60,000

146,874Total Current Assets

26,318,907

1,311,046

644,055Property and equipment, net

1,038,589

309,068

336,523Other Assets:Licensing rights
-
-
200,000Goodwill

-

-

1,434,873Total Other Assets

-

-

1,634,873TOTAL ASSETS
$
27,357,496
$
1,620,114
$
2,615,451




The accompanying notes are an integral part of these financial
statements.

18




FORCE PROTECTION INC. AND SUBSIDIARYCONSOLIDATED BALANCE SHEETSFor the
Period ending DECEMBER 31 2004, 2003 and 2002

2004

2003

2002LIABILITIES AND SHAREHOLDERS’ EQUITYCurrent Liabilities:Account payable
$
1,867,363
$
715,066
$
873,544Accrued payroll taxes
-
13,826
38,690Other accrued liabilities
957,885
197,469
122,867Current portion of capitalizedlease obligations
-
-
-Loans payable
360,975
536,162
56,807General reserve
14,703,769
-
424,947Deferred Revenue

2,645,716

209,175Total Current Liabilities

20,535,707

1,617,698

1,516,855Long-term debt:
37,655Long-term accrued liabilities
4,101,078
176,961
277,414Note payable - long-term

-

32,461

67,732Total long-term

4,138,733

209,422

295,146TOTAL LIABILITIES

24,674,441

1,881,120

1,812,001Shareholders’ equity:Preferred stock: no par value, 10,000,000shares authorized, issued and outstandingSeries A convertible preferred
stockno shares issued and outstanding
-
-
-Series B convertible preferred
stock,19.5 shares issued and outstanding
1,508,000
25,000
25,000Series C convertible preferred
stock,no shares issued and outstanding,
-
1,294,000
340,000Common stock, 0.001 par value,
300,000,000shares authorized, issued and
outstanding146,024,945 and 232,295,262
respectively
20,922,574
19,403,349
15,985,256Warrants
1,500
689,726
692,226Shares committed to be issued
-
30,924
143,350Accumulated deficit
(31,961,813)
(21,704,005)
(16,382,382)Additional Paid-in Capital

12,212,795

-

-Total stockholders’ equity

2,283,055

(261,006)

803,450TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$
27,357,496
$
1,620,114
$
2,615,451




The accompanying notes are an integral part of these financial
statements.

19


FORCE PROTECTION INC. AND SUBSIDIARYCONSOLIDATED INCOME STATEMENTFor the
Period ending DECEMBER 31 2004, 2003 and 2002(in dollars)

2004

2003

2002NET SALES
$
10,272,757
$
6,247,285
$
2,606,634COST OF SALES

11,266,998

4,442,418

1,877,495GROSS PROFIT

(944,241)

1,804,867

729,139OPERATING EXPENSES:General and administrative
9,136,372
2,095,339
4,704,249Impairment losses - goodwill

-

1,917,747

1,400,000Total Operating Expenses

9,136,372

4,013,086

6,104,249Loss from operations

(10,130,613)

(2,208,219)

(5,375,110)OTHER INCOME (EXPENSE):Interest income
818
-
3,227Other income
568,942
41,668
41,435Interest expense
(684,980)
(222,894)
(42,929)Extraordinary loss

-

-

-Total Other Income (Expenses)

(115,220)

(181,226)

1,733NET LOSS
$
(10,245,833)
$
(2,389,445)
$
(5,373,377)Loss from Discontinued Operations
-
$
(2,932,179)
-Net Loss
$
(10,245,833)
$
(5,321,623)
$
(5,373,377)Basic loss per common share Pre R/S
$ (.04)
$ (0.05)
$ (0.13)Basic loss per common share Post R/S

$ (.53)

$ (0.65)

$ (1.58)Diluted loss per common share Pre R/S
$ (.02)
$ (0.03)
$ (0.09)Diluted loss per common share Post R/S

$ (.29)

$ (0.34)

$ (1.05)Weighted-average shares used to compute:Basic loss per share

232,295,262

98,221,830

40,697,802Diluted loss per share

421,608,457

186,760,559

61,421,885




The accompanying notes are an integral part of these financial
statements.

20




FORCE PROTECTION INC. AND SUBSIDIARYCONSOLIDATED STATEMENTS OF
SHAREHOLDERS’ EQUITYFor the year ended December 31,
2004

AdditionalPreferred Stock
Common Stock
Paid-InShares
Amount
Shares
Amount
Capital
WarrantsBalance, December 31, 1999
1,600
$
1,500,000
12,676,000
3,618,194
$
272,000
$
316,026Issuance of common stock forcash
-
-
348,767
710,583
-
-Capital changes due to debtfinancing
-
-
-
-
826,000
708,601Cumulative translation adjustment
-
-
-
-
-
-Net loss
-
-
-
-
-
-Balance, December 31, 2000
1,600
1,500,000
13,024,767
4,328,777
1,098,000
1,024,627Issuance of common stock forservices
-
-
4,841,969
6,186,938
(1,098,000)
(1,024,627)Conversion of preferred stockinto common stock
(1,600)
(1,500,000)
1,467,200
1,500,000Issuance of preferred stock
6
75,000
-
-
-
-Cumulative translation adjustments
-
-
-
-
-
-Net loss
-
-
-
-
-
-Balance, December 31, 2001
6
75,000
19,333,936
12,015,715
-
-Issuance of common stock forservices
-
-
47,086,879
3,858,083
-
-Issuance of preferred stock
31
310,000
-
-
-
-Conversion of preferred stockinto common stock
(2)
(20,000)
564,706
20,000
-
-Beneficial conversion feature
-
-
-
-
-
692,226Stock issued in lieu of debt
-
-
4,572,897
91,458
-
-Net loss
-
-
-
-
-
-Balance, December 31, 2002
35
$
365,000
71,558,418
$
15,985,256
$
-
$
692,226Issuance of common stock forservices
-
-
7,319,836
284,884
-
-Issuance of preferred stock
98
990,000
-
-
-
-Issuance of common stock forCash
42,151,984
3,045,709Conversion of preferred stockinto common stock
-
-
-
-Beneficial conversion feature
(3)
(36,000)
-
-
-
(2,500)Stock issued in lieu of debt
-
-
1,250,000
87,500
-
-Net loss
-
-
-
-
-
-Balance, December 31, 2003
130
$
1,319,000
122,280,238
19,403,349
$
-
$
689,726Issuance of common stock forservices
-
-
7,550,185
-
920,022
-Issuance of preferred stock
38
456,000
-
-
-
-Issuance of common stock forCash
70,199,324
1,519,225
11,292,773
-Conversion of preferred stockinto common stock
(73)
-
32,265,515
-
-
-Beneficial conversion feature
(75.5)
(267,000)
-
-
-
(688,226)Stock issued in lieu of debt
-
-
-
-
-
-Prior years retained earningsAdjustment
-
-
-
-
-
-Net loss
-
-
-
-
-
-Balance, December 31, 2004
19.5
$
1,508,000
232,295,262
$
20,922,574
$
12,212,795
$
1,500


21


FORCE PROTECTION INC. AND SUBSIDIARYCONSOLIDATED STATEMENTS OF
SHAREHOLDERS’ EQUITY (Continued)For the year ended December
31,2004



AccumulatedShares
OtherCommitted
Comprehensive
Accumulatedto be issued
Income
Deficit
TotalBalance, December 31, 1999
$
799,455
$
(4,943)
$
(2,132,207)
$
4,368,525-Issuance of common stock for

-cash
(655,583)
-
-
55,000Capital changes due to debtfinancing
-
-
-
1,534,601Cumulative translation adjustment
-
25,273
-
25,273Net loss

-

-

(7,458,046)

(7,458,046)Balance, December 31, 2000

143,872

20,330

(9,590,253)

(1,474,647)Issuance of common stock forservices
(50,667)
(20,330)
20,332
4,013,646Conversion of preferred stockinto common stock

-Issuance of preferred stock
-
-
-
75,000Cumulative translation adjustments
-
-
(1,266)
(1,266)Net loss

-

-

(1,437,818)

(1,437,818)Balance, December 31, 2001

93,205

-

(11,491,879)

1,174,915Issuance of common stock forservices
50,145
-
-
3,908,228Issuance of preferred stock
-
-
-
310,000Conversion of preferred stockinto common stock
-
-
-
-Beneficial conversion feature
-
-
-
692,226Stock issued in lieu of debt
-
-
-
91,458Net loss

-

-

(5,373,377)

(5,373,377)Balance, December 31, 2002
$
143,350
$
-
$
(16,382,382)
$
803,450Issuance of common stock forservices
(112,426)
-
-
172,458Issuance of common stock forcash
-
-
-
3,045,709Issuance of preferred stock
-
-
-
990,000Conversion of preferred stockinto common stock
-
-
-
-Beneficial conversion feature
-
-
-
(38,500)Stock issued in lieu of debt
-
-
-
87,500Net loss

-

-

(5,321,623)

(5,321,623)Balance, December 31, 2003
$
30,924
$
-
$
(21,704,005)
$
(261,006)Issuance of common stock forservices
-
-
-
-Issuance of preferred stock
-
-
-
-Issuance of common stock forcash
(30,924)
-
-
13,701,096Conversion of preferred stockinto common stock
-
-
-
-Beneficial conversion feature
-
-
-
(499,226)Stock issued in lieu of debt
-
-
-
-Prior years retained earningsAdjustment
-
-
(11,977)
(11,977)Net loss

-

-

(10,245,833)

(10,245,833)Balance, December 31, 2004
$
-
$
-
$
(31,961,815)
$
2,683,054


The accompanying notes are an integral part of these financial
statements.

22




FORCE PROTECTION INC. AND SUBSIDIARYCONSOLIDATED STATEMENTS OF CASH
FLOWSYEAR ENDED DECEMBER 31, 2004, 2003 AND 2002

2004

2003

2002CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
$
(10,245,833)
$
(2,389,445)
$
(5,373,377)Loss from discontinued operations
(2,932,179)Adjustments to reconcile net loss to net cash (used
in)provided by operating
activities:Depreciation and amortization
207,271
(343,511)
245,807Royalty
-
-
60,000Goodwill Impairment
-
1,917,747
1,400,000Restructuring Expense
-
(224,947)
-Deferred Revenue
2,436,541
209,175
-Write off of molds and tools on discontinued product
-
-
1,020,000Write off Dalian Sonic Jet Co, Ltd inventory
-
-
-Write off investment in Dalian Sonic Jet Co., Ltd
-
-
-Provision for China inventory and assets
-
-
368,492Common stock issued for services
-
284,884
528,834Common stock committed for services
-
-
-Stock issued in lieu of debt
-
87,500
(74,311)Decrease (Increase) in assets
(935,197)
-
1,400,000Bad debts
-
(57,950)
36,500Beneficial conversion feature - warrants
(688,226)
(2,500)
692,226Change in assets and liabilities:Decrease (increase) in accounts receivable
(909,041)
64,528
(206,650)Decrease (increase) in other receivable
-
27,714
-Decrease (increase) in inventories
(8,082,015)
(640,874)
(150,411)Decrease (increase) in due from related parties
2,814,290
-
-Decrease (increase) in other current assets
(106,000)
(54,000)
(139,143)Increase (decrease) in accounts payable
1,063,592
(173,598)
125,557Increase (decrease) in accrued payroll taxes
(27,652)
(24,864)
(32,246)Increase (decrease) from customers
-
-
50,000Increase (decrease) in other accrued liabilities

1,079,651

(119,160)

(49,462)NET CASH USED IN OPERATING ACTIVITIES

(13,392,619)

(4,371,480)

(1,498,184)CASH FLOWS FROM INVESTING ACTIVITIES:Restricted cash
-
-
201,004Purchase of property and equipment
-
(60,713)
-Proceeds from sale of assets
-
294,862
-Investment in Technical Solutions Group

11,464,547

(21,546)

(505,000)NET CASH USED IN INVESTING ACTIVITIES

11,464,547

212,603

(303,996)




The accompanying notes are an integral part of these financial
statements.

23


FORCE PROTECTION INC. AND SUBSIDIARYCONSOLIDATED STATEMENTS OF CASH
FLOWSYEAR ENDED DECEMBER 31, 2004, 2003 AND 2002

2004

2003

2002CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from convertible debt - related party
11,464,547
-
-Proceeds from (payments on) capitalized lease
-
-
(12,236)Issuance of common stock, net
(20,119,725)
3,045,709
1,425,825Issuance of preferred stock, net
(1,094,000)
954,000
290,000Proceeds from stock commitment
18,868,373
(112,426)
143,500Proceeds from loans

6,198,827

405,895

56,807NET CASH PROVIDED BY FINANCING ACTIVITIES

15,318,022

4,293,178

1,903,896NET (DECREASE) INCREASE IN CASH
1,985,629
134,301
101,716CASH - beginning of period

278,777

144,476

42,760CASH - end of period
$
2,264,406
$
278,777
$
144,476Supplemental disclosures of cash flow information:Interest paid  (includes factoring)
$
684,980
$
322,992
$
8,184Income taxes paid
$
0
$
0

800




Supplemental schedule of non-cash investing and
financingactivities:During the year ended December 31, 2003, the Company
issued4,019,836 restricted shares of common stock valued at
$297,134in connection with settlement agreements and
outstandingdebts owed by the Company under various loan
agreements.
$
297,134During the year ended December 31, 2002, the Company
issued9,972,020 restricted shares of common stock valued at
$963,626in connection with the settlement agreement of all
outstandingdebts owed by the Company under various loan
agreements.
$
963,626During the year ended December 31, 2001, the Company
issued6,309,169 restricted  shares of common stock valued at
$6,044,961in connection with the settlement  agreement of all
outstandingdebt owed by the Company under loan agreements,
agreementbetween the Company and Plaintiffs in "Wrongful death case"
andoutstanding amounts owed to employee and other
expenses.
$
6,044During the year ended December 31, 2001, the Company
recorded$93,205 for settlement with employees and consultants
bycommitting to issue shares, which represents the
Company’scommitted-to-issue 1,656,695 shares of common stock.
$
93,205During the year ended December 31, 2002, the Company
issued6,000,000 restricted shares of common stock valued at
$1,200,000in connection with the acquisition of Technical Solutions Group,
Inc.
$
1,200,000Cash from investing and financing activities exclude the effect
ofthe  acquisition of real property through the assumption of
debt.


The accompanying notes are an integral part of these financial
statements.

24




FORCE PROTECTION INC. AND SUBSIDIARYSTATEMENT OF CONSOLIDATED COMPREHENSIVE
INCOME (LOSS)For the period ending December 31, 2004(in dollars)

Net Income
-$(10,245,833)Other Comprehensive Income,Net of tax
-Comprehensive Income
$(10,245,833)




The accompanying notes are an integral part of these financial
statements.

25




Force Protection, Inc.(formerly Sonic Jet Performance, Inc.)Notes to
Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of the Business:

Force Protection, Inc. (the "Company) designs, manufactures and markets mine and
blast protected vehicles.

Recent Accounting Pronouncements

In December 2004, FASB issued Statement No. 123 (R), Share-Based Payment,
which establishes accounting standards for transactions in which an entity
receives employee services in exchange for (a) equity instruments of the entity
or (b) liabilities that are based on the fair value of the entity’s equity
instruments or that may be settled by the issuance of equity instruments.
Effective in the third quarter of 2005, SFAS 123(R) will require us to recognize
the grant-date fair value of stock options and equity based compensation issued
to employees in the statement of operations.  The statement also requires that
such transactions be accounted for using the fair-value-based method, thereby
eliminating use of the intrinsic method of accounting in APB No. 25,
Accounting for Stock Issued to Employees,which was permitted under
Statement 123, as originally issued.  To date, the Company has expensed stock
based compensation on the intrinsic method. The Company currently is evaluating
the impact of Statement No. 123 (R) on our financial condition and results of
operations.

In November 2004, the FASB issued Statement No. 151, Inventory Costs, to
amend the guidance in Chapter 4, Inventory Pricing, of the FASB
Accounting Research Bulletin No. 43, Restatement and Revision of Accounting
Research Bulletins, which will become effective for the Company in fiscal
year 2006.  Statement No. 151 clarifies the accounting for abnormal amounts of
idle facility expense, freight, handling costs, and wasted materials.  The
Statement requires that those items be recognized as current-period charges.
Additionally, Statement No. 151 requires that allocation of fixed production
overhead to the costs of conversion be based on normal capacity of the
production facility.  The Company is currently following Statement No. 151 and
does not believe that Statement No. 151 will have a significant impact on its
financial condition and results of operations.

Principles of Consolidation

The consolidated financial statements include the accounts of Force Protection,
Inc., and Technical Solution Group, Inc. for the year ended December 31, 2004.
All inter-company balances and transactions are eliminated in consolidation.

Going Concern

The accompanying consolidated financial statements have been prepare on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. As shown in the financial
statements, during the year ended December 31, 2004 the Company incurred losses
of $10,245,833 but its Current Assets exceed its Current Liabilities by
$1,756,794.

Realization of a major portion of the assets in the accompanying balance sheet
is dependent upon continued operations of the Company, obtaining additional
financing, and the success of its future operations.

Due to the nature of the business it is uncertain whether the Company will
receive orders impeding its cash situation and our ability to pay creditors.

26




General Statement

The Securities and Exchange Commission has issued Financial Reporting release
No. 60, "Cautionary Advice Regarding Disclosure About Critical Accounting
Policies," or FRR 60, suggesting companies provide additional disclosure and
commentary on their most critical accounting policies.  In FRR 60, the SEC
defined the most critical accounting policies as the ones that are most
important to the portrayal of a company’s financial condition and
operating results, and require management to make its most difficult and
subjective judgments, often as a result of the need to make estimates of matters
that are inherently uncertain.  The methods, estimates and judgments the Company
uses in applying these most critical accounting policies have a significant
impact on the results the Company reports in its financial statements.

Revenue Recognition

As a general rule, financial information is accounted for and based on cost, not
current market value.  Revenues and gains should be matched using the accrual
method with the expenses giving rise to the revenues and gains to determine
earnings for the period.   Expenses are necessarily incurred to produce revenue.
Expenses are then "matched" in the same accounting period against the revenue
generated. Revenues are recognized when they are earned and expenses are
recognized in the same period as the related revenue (matching or using a
systematic and rational allocation or expensing in the period in which they
expire), not necessarily in the period in which the cash is received or expended
by the Company.

Comprehensive Income (Loss)

Comprehensive loss is equal to net loss for the years ended December 31, 2000,
2001, 2002, 2003 and 2004.

Cash Equivalents

For purposes of reporting cash flows, the Company considers all highly liquid
debt instruments purchased with maturity of three months or less to be cash
equivalents. Cash equivalents consist primarily of United States government
securities.

Inventories

The Company intends  to  implement  a  material resource planning (MRP) system
during 2005, originally scheduled to be implemented during the fourth quarter of
2004, to further develop our internal control processes. Beginning July 2004,
the Company has set  up an inventory loss reserve of $10,000 per month. To date,
the Company has a $60,000  reserve  balance.

Inventories are stated at the lower of cost or market. The cost is determined
under the first-in-first-out method base (FIFO) valuation method.

Property, Plant and Equipment

Property and equipment are stated at cost or at the value of the operating
agreement. The Company capitalizes additions and improvements which include all
material, labor and engineering cost to design, install or improve the asset.
Routine repairs and maintenance are expensed as incurred.   Depreciation and
amortization are computed using the straight-line method over the following
estimated useful lives:

Building and improvements
20 yearsFurniture and fixtures
7 yearsMachinery and equipment
7 yearsTooling and molds
7 yearsVehicles
7 years




27




Impairment of Long-Lived Assets

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

Goodwill

Under SFAS No. 142. Goodwill and other Intangible Assets, all goodwill
amortization ceased effective Jan.1, 2002. Rather, goodwill is now subject to
only impairment reviews. A fair-value based test is applied at the reporting
level.  This test requires various judgments and estimates.   A goodwill
impairment loss will be recorded for any goodwill that is determined to be
impaired.  Goodwill is tested for impairment at least annually.

The Company acquired  Goodwill,  which represents the excess of purchase price
over fair value  of  net  assets, in the acquisition of Technical Solutions
Group, Inc. in June 2002. The Company follows SFAS 142, Goodwill and Intangible
Assets, which requires the Company to  test  goodwill  for  potential
impairment annually. When the carrying value exceeds  fair value, the impairment
is the difference between the carrying value of  goodwill  and  the  implied
value.  The  implied  value  of goodwill is the difference  between  the  fair
value  for  the unit as a whole and the value of individual  assets  and
liabilities  using  an  "as-if"  purchase  price.

Foreign Currency Transaction

Assets and liabilities in foreign currencies are translated at the exchange rate
prevailing at the balance sheet date. Revenues and expenses are translated at
the exchange rate prevailing at the transaction date, and the resulting gains
and losses are reflected in the statements of operations. Gains and losses
arising from translation of a subsidiary’s foreign currency financial
statements are shown as a component of stockholders’ equity (deficit) as
accumulated comprehensive income (loss).

Income Taxes

The Company uses the asset and liability method of accounting for income taxes.
The asset and liability method accounts for deferred income taxes by applying
enacted statutory rates in effect for periods in which the difference between
the book value and the tax bases of assets and liabilities are scheduled to
reverse. The resulting deferred tax asset or liability is adjusted to reflect
changes in tax laws or rates. Because the Company has incurred losses from
operations, no benefit is realized for the tax effect of the net operating loss
carry-forward due to the uncertainty of its realization.

Loss per Share

The Company utilizes SFAS No. 128, "Earnings per Share." Basic loss per share is
computed by dividing loss available to common stockholders by the
weighted-average number of common shares outstanding. Diluted loss per share is
computed similar to basic loss per share except that the denominator is
increased to include the number of additional common shares that would have been
outstanding if the potential common shares had been issued and if the additional
common shares were dilutive.

Estimates

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

28




Revenue Recognition

The Company’s revenues are derived principally from the sale of blast and
mine-protected vehicles. Revenue from products and services are recognized at
the time goods are shipped or services are provided to the customer, with an
appropriate provision for returns and allowances. The estimated sales value of
performance under fixed-price incentive contracts in process is recognized under
the percentage-of-completion method of accounting in which the estimated sales
value is determined on the basis of physical completion to date (the total
contract amount multiplied by percent of performance to date less sales value
recognized in previous periods) and cost (including general and administrative)
are expensed as incurred.  It is our policy to not recognize revenue until
customer acceptance and shipment to the customer.  All advance payments are
treated as "deferred revenue".

Research and Development

The Company expenses research and development cost as incurred.

NOTE 2 - FINANCIAL STATEMENTS

The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary. All significant inter-company balances,
transactions, and stockholdings have been eliminated.

NOTE 3 - INVENTORIES

The Company  intends  to  implement  a  material resource planning (MRP) system
during 2005 to further develop the Company’s internal control processes.
Beginning July 2004, the Company  set  up an inventory loss reserve of $10,000
per month. To date, the Company has a $60,000  reserve  balance.

Inventories at December 31, 2004 consisted of the following:

Raw materials and supplies
$5,268,797Work in process
3,756,921Finished goods - Demo
0Finished Goods
4,194Less: Provision
60,000Total Inventories
$8,969,912




NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment at December 31, 2004 consisted of the following:

Furniture and fixtures
$252,608Machinery and equipment
983,955Test Equipment
16 ,790Manuals
104,798Vehicles
10,110Demo vehicles
192,530Less depreciation and amortization
523,797Total property and equipment
$1,036,994




Depreciation expense for the year ended December 31, 2004 was $207,271 as
compared to $104,334 for 2003.

29


NOTE 5 - COMMITMENTS AND CONTINGENCIES

Leases:

The  Company  leases  space  in  two buildings in Ladson, South Carolina for its
principal executive offices and manufacturing facilities.  The term of the lease
for  Building  Three  is  five  years starting October 15, 2003.  Annual rent is
$215,000  for the first year plus utilities, taxes and maintenance, and $258,000
base  rental  for  the  next four years.  The Company has  84,800 square feet of
space  in  Building  Three.

The  term  of  the lease for Building Two is five years starting  July 15, 2004,
with  an option to renew for another five years. Annual rent is $439,500 for the
first  year  plus utilities, taxes and maintenance, and $439,500 base rental for
the  next  four  years, which may be adjusted by increases to the Consumer Price
Factor  by three to seven percent.  This additional lease of 142,500 square feet
gives  the  Company  a stable base for future planning.  The space substantially
increases  the Company’s ability to qualify for and fulfill larger
contracts for its  mine-protected  vehicles.

On  July 15, 2004 Technical Solutions Group (now Force Protection Industries,
Inc.) entered into a 60 month option lease of  $952.71  per  month  with
Gregory  Poole Lift Systems for a new Caterpillar forklift.

Royalty/Licensing Agreements

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

NOTE 6 - STOCK COMPENSATION PLAN

Currently, the Company does not have a stock compensation plan.

NOTE 7 - SALE OF ASSETS

Under an agreement dated July 1, 2003, modified on September 15, 2003, the
Company sold its right, title and interest in and to the tangible and intangible
assets of its Fire & Rescue Boat Division  to  Rockwell Power
Systems Inc. ("RPSI"), which subsequently merged with Xtreme, Inc, a publicly
traded company trading under the symbol XTME.OB on the Bulletin Board. As part
of the consideration for such sale, RPSI caused to be delivered to the Company
1/3 of Xtreme’s authorized common stock, which was then distributed to the
Company’s shareholders of record as at December 5, 2003.  In
addition, the Company is to receive 500 shares of Xtreme’s Series A
Preferred stock, each share having a face value of $1,000.  The Company has
requested but not yet received such Preferred shares.

NOTE 8 - OTHER TRANSACTIONS

Capital Stock Transactions

During the three months ended March 31, 2004, the Company issued an aggregate of
8,217,500  restricted  shares  of  its common stock for the exercise of warrants
generating  $743,750  per  a  private  placement  offering dated April 10,
2002.

During  the  period  of February 1, 2004 to March 31, 2004, the Company issued a
total  of  600,185  restricted  shares  of  common  stock to two consultants for
services  to  be  rendered  to  the  Company. The value for services rendered,
that was paid in stock was $112,022.

During  the  three  months  ended March 31, 2004, the Company issued 25 Series C
preferred  shares  in  exchange  for  settlement  of  long-term debt - $250,000,
finalizing  May  7,  2004.

30




On  March  23,  2004,  the Company closed on a private offering.  This offering,
sold  to  six  accredited  investors,  consisted  of  the  following:

(a)     15,000,000  shares  at $0.20 per share;
generating $2,670,000 net proceeds.

(b)     An  "A"  Warrant  for each share purchased,
exercisable at $0.24 per share.  The  "A"  Warrants  expire  March  23,  2006;
and

(c)     A  "Green  Shoe" warrant for each share
purchased, exercisable at $0.20 per share for a period of 180 days after the
effective date of the registration statement, commencing on the effective date
of the registration statement.

During  the  three  months ended March 31, 2004, 15 shares of Series C preferred
stock were converted into common stock and 225,000 common shares were
cancelled.

During  the three months ended June 30, 2004, the Company issued an aggregate of
3,188,275  restricted  shares  of  its common stock for the exercise of warrants
generating  $247,483  per  a private placement offering dated April 10, 2002.

During  the period of April 1, 2004 to June 30, 2004, the Company issued a total
of 1,012,016 restricted shares of common stock to three consultants for services
to  be  rendered to the Company related to the discontinued boat business valued
at  $70,841.

During  the  three  months  ended  June  30,  2004,  "Green  Shoe" warrants were
exercised  at  $0.20  generating  $2,600,000.  13,000,000  shares  were
issued.

During  the  three  months  ended  June 30, 2004, 9 shares of Series C preferred
stock  were issued and 1 Series B share was converted to 10 Series C shares.  25
series  C  shares  were  converted  into  common  and 725,000 common shares were
cancelled.

During  the  three  months  ended  September  30,  2004,  the  Company issued an
aggregate  of  175,000  restricted  shares  of  common stock for the exercise of
warrants  generating  $17,500.  The  warrants were issued in a private placement
that  closed  on  April  10,  2002.

During  the  three  months  ended  September  30,  2004,  4,650,000 "Green Shoe"
warrants  were  exercised  at  $0.12  generating  $558,000.  The  Company issued
4,650,000  shares  of  common  stock.

During  the  three months ended September 30, 2004, the Company issued 30 shares
of  Series  C  Preferred  Convertible  stock  and  cancelled 1 share of Series B
Preferred  Convertible  stock.  Additionally, the Company cancelled or converted
into  common  stock  20  shares  of  Series  C  Preferred  Convertible
stock.

During  the three months ended September 30, 2004, the Company issued a total of
2,800,000 restricted shares of common stock to three consultants.  The payments
were for a prior period payable valued at $120,000  and  for capital raising and
internet public relations valued  at  $280,000.

On  September  14, 2004, the Company issued Jeff Lesonsky a total of 75,000
warrants at $0.20 per share and 400,000 warrants at $0.10 per share for
marketing  consulting  work  performed.  Mr. Lesonsky exercised 400,000 warrant
shares at $0.10 generating net proceeds of $40,000 in December of 2004.

During  the  three  months  ended  December 31,  2004,  the  Company issued an
aggregate  of  300,000  restricted  shares  of  common stock for the exercise of
warrants  generating  $30,000.  The  warrants were issued in a private placement
that  closed  on  April  10,  2002. As part of employment agreements and bonus;
Mr. Thebes was awarded 1,500,000 shares of common stock and 4 Series C shares of
preferred  convertible  stock;  Mr. Ervin was awarded 500,000 shares of common
stock and 4 Series C shares of preferred convertible stock; Mr.  Watts  was
awarded  20  Series C shares of preferred  convertible  stock  and  1,000,000
shares of common stock.

During  the  three  months  ended  December 31,  2004,  7,288,700 "Green Shoe"
warrants  were  exercised  at  $0.24  generating  $1,749,288.  The  Company
issued 7,288,700 shares  of  common  stock.

31




During the three months ended December 31, 2004 the company issued an aggregate
of  14,998,052 common shares at an average price of $0.203627 per share,
generating $3,054,015 for the exercise of the Dutchess Equity agreement.

During  October,  2004 all outstanding shares of  Series C Preferred Convertible
stock  were  either  converted into Series B Preferred Convertible stock or into
shares of  common stock.  In total, 129 shares of Series C Preferred Convertible
stock  were redeemed for 18.5 shares of Series B Preferred Convertible stock and
14,032,200  shares of common stock.  As of November 2, 2004 there were no shares
of  Series  C  Preferred  Convertible stock outstanding. As of November 2, 2004,
there  were  18.5  shares  of  Series B Preferred Convertible stock
outstanding.

During the three months ended December 31, 2004 the company issued to Frank
Kavanaugh 10 Series C shares which were converted into 1 Series B share on
December 31, 2004.

Employment Agreements.

On February 4, 2005, the Company named Ted McQuinn President of Force Protection
Industries, Inc. Mr. McQuinn is to receive a base salary of $180,000 plus
$100,000 stock grant for 3 years. Sixty days after start of employment, Mr.
McQuinn is to be issued a $20,000 stock grant. Mr. McQuinn will be allowed to
participate in a Gain-Sharing Program yet to be adopted.

On January 27, 2005, the Company entered into an employee/consulting agreement
with Gordon McGilton to act as the Company’s Chief Quality Officer.  Mr.
McGilton is to receive a base salary of $180,000 plus a 180,000 bonus.  The
Company will also reimburse Mr. McGilton for travel, lodging and other out of
pocket expenses incurred during employment. Mr. McGilton is to be provided a
qualified stock option plan yet to be adopted.

Effective  October  26,  2004, the Company entered into an Agreement with Gale
Aguilar to receive  annual  cash  compensation of $15,000 per month plus stock
grants as the new Interim Chief Executive Officer. Effective January 27, 2005,
Mr. Aguilar stopped collecting his compensation. On January 27, 2005, Mr. R.
Scott Ervin replaced Mr. Aguilar as Interim Chief Executive Officer.

Acquisition of Technical Solutions Group, Inc.

Pursuant to a finder’s fee agreement entered into between Ashford Capital,
LLC and Sonic Jet Performance, Inc on February 1, 2002, Sonic Jet granted
Ashford Capital ten percent of the equity ownership of any referred party
acquired by Sonic Jet. As part of the purchase of Technical Solutions Group Inc.
in July 2002, Ashford Capital, LLC, an advisor to the transaction and a
shareholder of the Company, received a 10% interest of TSG International, Inc.
An agreement was reached in April of 2003 under which Ashford Capital, LLC could
exchange such interest for 50 shares of the Company’s Series C preferred
shares, by notifying the Company by October 15, 2003.

In September 2003, Ashford Capital, LLC and the Company’s CEO, Michael
Watts, reached an agreement under which the TSG International interest was
purchased by Mr. Watts in a private sale between the parties. On October 13,
2003 Mr. Watts exchanged such assigned interest for 50 shares of Company Series
C preferred stock effective October 15, 2003.

In September 2004, the Directors of TSGI agreed to exchange all shares held by
it of Technical Solutions Group Inc for the TSGI shares held by the Company, as
a result of which the Company reacquired 100% of the shares of Technical
Solutions Group as a wholly owned subsidiary

NOTE 9 - INCOME TAXES

There has been no provision for U.S. federal, state, or foreign income taxes for
any period because the Company has incurred losses in all periods and for all
jurisdictions.

32




Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
deferred tax assets are as follows as of December 31, 2002:



Deferred tax assets:Net operating loss carry forwards
$
11,954,500Future deduction for intangible assets
1,612,013Future deduction for reserves & others
1,880,682Less valuation allowance
(15,447,195)Net deferred tax assets
$
-




Realization of deferred tax assets is dependent upon future earnings, if any,
the timing and amount of which are uncertain. Accordingly, the net deferred tax
assets have been fully offset by a valuation allowance. As of December 31, 2002,
the Company had net operating loss carry forwards of approximately $11,954,500
for federal and state income tax purposes. These carry forwards, if not utilized
to offset taxable income begin to expire in 2007. Utilization of the net
operating loss may be subject to substantial annual limitation due to the
ownership change limitations provided by the Internal Revenue Code and similar
stat provisions. The annual limitation could result in the expiration of the net
loss before utilization.

NOTE 10-DISCONTINUED OPERATIONS

Discontinued operations follows SFAS no. 144.  The loss from discontinued
operations consist of impairment loss, the loss or gain from actual operations,
and the gain/loss on the disposal of assets.  All these accounts are included in
discontinued operations in the period in which they occur.

On October 1, 2003, Force Protection discontinued operations of its boat
division from its ongoing operations as the result of the asset disposal.  Force
Protection does not have any continuing involvement in the operations after the
disposal.

The Company anticipates "subsequent adjustments" in 2005 for settlement of
employee severance and any potential warranty claims.

Discontinued operations:Loss from operations includingImpairment loss
$2,932,179Income tax benefit
-Loss from Discontinued Operations
$2,932,179




NOTE 11 - CONTINGENCY LOSSES

The Company booked an estimated $501,331 contingency loss on the Cougar contract
at year end 2004. The contract completion was extended due to part supply issues
and availability.  The losses will not be recovered as this is a fixed price
contract.  This loss will be realized by June 2005.

NOTE 12 - RECEIVABLES

During 2003, the Company factored receivables at 3%. During 2004, the Company
factored receivables at 2%.

33




NOTE 13-  GOODWILL

The impairment expense for 2002 was $1,400,000. $482,874 was reclassified from
"Investment in TSG" to Goodwill during the 4th quarter. The goodwill
impairment expense for 2003 was $1,917,747.  There is no goodwill remaining on
the balance sheet as of December 31, 2003 or December 31, 2004.

NOTE 14  RESTRUCTURING EXPENSES - NET

The Company implemented restructuring actions to streamline operations and exit
the boat business. These actions include workforce reductions, rationalization
and the exit of the boat business. Charges and credits related to discontinued
operations are included in income (loss) from operations of discontinued
operations. As of December 31, 2003, there is no longer a restructuring reserve
on the balance sheet. Restructuring expense for 2003 was $224,947.

SFAS 146 requires that a liability for a cost associated with an exit or
disposal  activity be recognized and measured initially at fair value only when
the liability is incurred.  The adoption of SFAS 146 did not have a material
impact on the Company’s financial condition.

NOTE 15- DEBTS

As of December 31, 2004, the Company had $4,101,078 of total long term debt.
$4,000,000 of this debt is the line of credit at a 4.1% per month simple
interest rate, which was paid in full on January 22, 2005. The remaining
$101,078 are long-term payables with no effective or stated interest or maturity
dates.

NOTE  16  -  DEFERRED  REVENUE

The  Company  recognizes  revenue  upon  formal acceptance by the customer.  The
Company  has  received  progress / performance based payments from the U.S. Army
and  U.S.  Marines.  The  Company  records  these  progress  / performance based
payments as deferred revenue and carry them on the balance sheet as such until
shipment  acceptance.  As  of December 31, 2004, the Company had $2,645,716 as
deferred revenue resulting from two contracts, one from the U.S. Army (Buffalos)
and  one  from  the  U.S.  Marines.  (Cougars)

NOTE 17  -  STOCK BASED COMPENSATION

The Company used the issuance of stock as part of compensation to employees.
During 2004, the Company issued 38 Series C shares and issued 4,400,185
restricted common shares. The total dollar value associated with the issuances
of stock, which includes the 38 Series C shares, equated to $934,022.

During 2004, the Company issued 3,150,000 restricted common shares to
non-employees for services rendered in lieu of cash.  The value of these shares
equated to $442,000. During 2005, the Company will issue shares to GC Financial
in lieu of partial interest payments of $38,700. This is not compensation
expense, it is stock in lieu of cash to pay an interest expense.

NOTE 18 - MATERIAL COMMITMENTS

The Company has issued Purchase Orders to secure components and the steel needed
for production.  To date, the Company has $5,156,698 of material commitments.
These purchases are expected to be financed by existing cash, debt and cash
flows from operations.

34




NOTE 19 - CONVERTIBLE PREFERRED STOCK

Series B Convertible Preferred Stock

The Company has authorized twenty five shares of "Series B" Convertible
Preferred Stock. As of December 31, 2004, there were 19.5 shares of Series B
preferred stock issued and outstanding. Each share is convertible into two
percent of the shares of our common stock outstanding at the date of conversion.
Pursuant to an Amendment of the Certificate of Designation dated September 14,
2004, the shares shall convert at December 27, 2005, or such other time as may
be stipulated by the Board of Directors and agreed by the Series B shareholders.
The holder of the Series B preferred stock, has the right to vote, with the
holders of common stock, on any matter to which the common stock holders are
entitled to vote, the number of shares of common stock into which the Series B
preferred stock is convertible. If we are liquidated, distribute our assets,
dissolve or wind-up, the holders of Series B preferred stock shall receive the
greater of (i) $2,500 per share of Series B preferred stock they hold at the
time of such Liquidation, or (ii) their pro rata share of the total value of our
assets and funds to be distributed, assuming the Series B preferred stock is
converted to common stock.

Series C Convertible Preferred Stock

The Company has authorized one hundred fifty shares of "Series C"
Convertible Preferred Stock. As of December 31, 2004, there were zero (0) shares
of Series C preferred stock outstanding. Each share converts into .2% of the
outstanding shares at the time of conversion. Under the terms of the Certificate
of Designation for the Series C shares, the Series C shareholders are subject to
a mandatory conversion on December 27, 2004 unless the terms are modified by
mutual agreement of the parties. In the event of a liquidation, the holders of
Series C preferred stock shall be entitled to receive one hundred and fifty
percent (150%) of the amount of consideration paid for the Series C preferred
stock, after which time the holders of Series B preferred stock and Series C
preferred stock shall participate in such liquidation, on a pro rata basis,
based on the number of shares of the common stock into which the Series B
preferred stock and the Series C preferred stock are convertible at the time of
the liquidation. The holders of Series C preferred stock have no voting rights.
On September 30, 2002 the Series C shareholders and the Company agreed to amend
and restate the Certificate of Designation of Series C Convertible Preferred for
Sonic Jet Performance. Pursuant to the agreement and upon finalization of the
amendment of the Series C documents, the stock shall be voted equally with the
shares of the Common Stock of the Corporation and not as a separate class, at
any annual or special meeting of shareholders of the Corporation, and may act by
written consent in the same manner as the Common Stock, in either case upon the
following basis: the holder of the shares of Series C Stock shall be entitled to
such number of votes as shall be equal to the aggregate number of shares of
Common Stock into which such holder’s shares of Series C Stock are
convertible immediately after the close of business on the record date fixed for
such meeting or the effective date of such written consent. Furthermore, the
parties also agreed that each 10 shares of Series C stock shall be convertible
into two percent (2%) of the Company’s common stock outstanding at the
time of conversion. Also, amended was the Company’s power to redeem the
Series C Stock. On or after February 14, 2003, the Company may, at its sole
discretion, with 5 days notice, redeem some or all of the outstanding shares of
Series C Stock at a "Redemption Price" equal to $12,000 per share, during this
period the Series C shareholders may elect to convert their shares under the
conversion formula.

On September 14, 2004 the Company ratified and restated the Certificate of
Designation for the Series C Convertible Preferred Shares to provide the option
to all Series C shareholders to convert their Shares to the Company’s
Series B Preferred shares at a ratio of Ten Series C Shares to One Series B
Share; provided that such conversion results in a whole number of Series B
shares or a fraction that is equal to exactly one-half of a share (no other
fractional shares being permitted).  This action was ratified and approved
by a majority of the Series C and the Series B shareholders.  The restated
Certificate of Designation for the Series C Preferred stock was filed with the
Colorado Secretary of State on September 15, 2004.  Certain of the Series C
shareholders gave notice to the Company of their intention to exercise such
option and a total of 105 Series C shares were exchanged for a total of 10.5
Series B shares.  Because of the stipulated conversion factors for the
Series B and Series C preferred shares, there was no net increase or decrease in
the number of common shares to which such Preferred shares convert as a result
of such exchanges.

In October 2004, the Company gave notice to all remaining Series C shareholders
of its intention to exercise the right of redemption set forth in the
Certificate of Designation for the Series C preferred shares, whereby the
Company has the right at any time after February 14, 2003 upon written notice to
redeem each Series C share at a redemption price of $12,000 per share, provided
that each Series C shareholder could instead exercise his right to convert the
Series C shares to Common shares upon written notice to the Company. 
Certain of the Series C shareholders gave notice to the Company of their
intention to exercise the option of converting to common shares and a total of
28 Series C shares were exchanged for a total of 14,032,200 Common shares. 
As a result of such exchanges and redemptions, as of October 15, there were no
Series C shares issued and outstanding.

35




Series D Convertible Preferred Stock

On January 20, 2005 the Company authorized twenty thousand shares of "Series D"
Convertible Preferred Stock. As of December 31, 2004, there were zero (0) shares
of Series D preferred stock outstanding. On January 21, 2005 we issued 15,800
shares of Series D 6% Convertible Preferred stock. Our board of directors has
the authority to issue additional shares of preferred stock in one or more
series, and fix for each series, the designation of, and number of shares to be
included in, each such series. Our board of directors is also authorized to set
the powers, privileges, preferences, and relative participating, optional or
other rights, if any, of the shares of each such series and the qualifications,
limitations or restrictions of the shares of each such series. Unless our board
of directors provides otherwise, the shares of all series of preferred stock
will rank on a parity with respect to the payment of dividends and to the
distribution of assets upon liquidation. Any issuance by us of shares of our
preferred stock may have the effect of delaying, deferring or preventing a
change of our control or an unsolicited acquisition proposal. The issuance of
preferred stock also could decrease the amount of earnings and assets available
for distribution to the holders of common stock or could adversely affect the
rights and powers, including voting rights, of the holders of common stock.

NOTE 20 - REVERSE STOCK SPLIT

In January, 2005, the Board of Directors approved a 1(new)-for-12(old) reverse
stock split of the outstanding shares of common stock. The reverse stock split
became effective February 4, 2005. Shareholders approved the action at the
Company’s annual meeting on December 30, 2004.

RISK FACTORS

An  investment  in  our  common stock involves a high degree of risk. You should
carefully  consider  the  following  risk factors, other information included in
this  report on Form 10-KSB and information in our periodic reports filed with
the SEC. If any  of the following risks actually occur, our business, financial
condition or results  of  operations  could  be materially and adversely
affected and you may lose  some  or  all  of  your  investment.

Risks Related to Our Business

We had losses since our inception and expect losses to continue in the
future. We may never become profitable.We have historically generated
substantial losses, which, if continued, could make it difficult to fund our
operations or successfully execute our business plan, and could adversely affect
our stock price. We experienced net losses of $5,321,623 for the year ended
December 31, 2003, and $10,245,833 for the twelve-month period ended December
31, 2004. We have generated significant net losses in recent periods, and
experienced negative cash flows from operations in the amount of $4,371,480 for
the year4 ended December 31, 2003, and $13,392,619 for the twelve-month period
ended December 31, 2004. In recent years, some of the losses were incurred as a
result of investments in new product development and marketing costs. While we
have increased our investments, most notably $8 million in inventory, we
anticipate that we will continue to generate net losses and we may not be able
to achieve or sustain profitability on a quarterly or annual basis in the
future. In addition, because large portions of our expenses are fixed, we
generally are unable to reduce expenses significantly in the short-term to
compensate for any unexpected delay or decrease in anticipated revenues. As a
result, we may continue to experience net losses, which will make it difficult
to fund our operations and achieve our business plan, and could cause the market
price of our common stock to decline.

We have a limited operating history and may never achieve or sustain
profitable operations.We are an early stage production company. We acquired
our subsidiary, Technical Solutions Group, Inc. in July 2002.   We have
generated limited revenues from our current products and revenue of $10,273,575,
and $6,247,285 in years 2004, and 2003. In 2003 and 2004, the mine protected
vehicles division provided 100% of the sales, 100% of the cost of goods sold and
100% of the loss. Our ability to successfully commercialize our products will
depend on, among other things, successful completion of our ongoing development
activities, geo-political events, ability to manufacture and distribute the
products, and the relative cost to the customer of our system as compared to
alternative competitive products. Because we focus on emerging markets, market
reaction can be difficult to predict. Many of our planned products incorporate
technologies or approaches that have not yet achieved broad market acceptance.
In addition, we have a limited history of competing in the intensely competitive
defense industry. Our technology may not be successfully commercialized or
marketed. As a result, we may never achieve or sustain profitable
operations.

36




Our Independent Accountants have issued a Going Concern Opinion and if we do
not generate enough cash from operations to sustain our business we may have to
liquidate assets or curtail our operations.The accompanying financial
statements have been prepared assuming we will continue as a going concern.
During the year ended December 31, 2004, we incurred a net loss of $10,245,833.
During the year ended December 31, 2003, we incurred a net loss of $5,321,623.
Conditions exist which raise substantial doubt about our ability to continue
unless we are able to generate sufficient cash flows to meet our obligations and
sustain our operations. The financial statements do not include any adjustment
that might result from the outcome of this uncertainty.

If we can not access sufficient funds when needed, we may not be able to meet
our contractual obligations to deliver our products and our business may fail.We currently have sufficient cash resources for the next two reporting
periods, ending June 2005, excluding any major changes to our burn rate.  If we
accept an additional contract, our cash resources will be depleted for the
purchase of materials, reducing our cash resources and shortening our cash
resources to cover only a few months.  We will depend on external
financing to fund potential future contracts, if any, and our planned expansion
in 2005 and 2006. Until we generate cash flow from operations that will be
sufficient to satisfy our cash requirements, we will continue to seek
alternative means for financing our operations and capital expenditures and/or
postpone or eliminate certain investments or expenditures. Potential alternative
means for financing may include leasing capital equipment, lines of credit, or
obtaining additional debt or equity financing. When needed, additional financing
may not be available, or available on acceptable terms. The inability to obtain
additional financing or generate sufficient cash from operations could require
us to reduce or eliminate expenditures for capital equipment, research and
development, production or marketing of our products, or otherwise curtail or
discontinue its operations, which could have a material adverse effect on our
business, financial condition and results of operations. Furthermore, if we
raise funds through the sale of additional equity securities, the common stock
currently outstanding will be further diluted.

We depend on our suppliers and if we can not obtain certain components for
our products, we might have to develop alternative designs that could increase
our costs. We depend upon a number of suppliers for components of our
products. There is an inherent risk that certain components of our products will
be unavailable for prompt delivery or, in some cases, discontinued. We have only
limited control over any third-party manufacturer as to quality controls,
timeliness of production, deliveries and various other factors. Should the
availability of certain components be compromised, it could force us to develop
alternative designs using other components, which could add to the cost of goods
sold and compromise delivery commitments. If we are unable to obtain components
in a timely manner, at an acceptable cost, or at all, we may need to select new
suppliers, redesign or reconstruct process we use to build the hulls and/or the
vehicles, which management believes would take a minimum of one-year. We may not
be able to manufacture any vehicles for a period of time, which could materially
adversely affect our business, results from operations, and financial condition.

We market our products to a limited customer base and if we do not find
acceptance of our products within that customer base, our business may fail.
Our government business depends on a limited number of customers, and if any of
these customers terminate or reduce their contracts, or if we cannot obtain
additional government contracts in the future, our revenues will decline and our
results of operations will decrease. Because most of our consolidated revenues
were derived directly or indirectly from government contractors, this risk can
significantly affect our business, results of operations and financial
condition. In the twelve-months ended December 31, 2004, the majority of our
revenues were derived directly or indirectly from two governmental agencies, the
U.S. Army and the U.S. Marine Corps. We expect to continue to be dependent upon
contracts with governmental agencies and their contractors for a substantial
portion of revenue for the foreseeable future. Because we currently depend on
government contracts and subcontracts, we face certain risks, including budget
restraints and fixed price contracts. General political and economic conditions,
which are difficult to accurately predict, directly and indirectly affect the
quantity and allocation of expenditures by government agencies. Even the timing
of incremental funding commitments to existing, but partially funded, contracts
can be affected by these factors. Therefore, cutbacks or re-allocations in the
U.S. or other government budget could have a material adverse impact on our
results of operations as long as research and development contracts remain an
important element of the business. Obtaining government contracts may also
involve long purchase and payment cycles, competitive bidding, qualification
requirements, delays or changes in funding, budgetary constraints, political
agendas, extensive specification development, price negotiations and milestone
requirements. Each government agency also maintains its own rules and
regulations with which we must comply and which can vary significantly among
agencies. Governmental agencies also often retain some portion of fees payable
upon completion of a project and collection of these fees may be delayed for
several months or even years, in some instances. In addition, an increasing
number of government contracts are fixed price contracts which may prevent us
from recovering costs incurred in excess of its budgeted costs. Fixed price
contracts require us to estimate the total project cost based on preliminary
projections of the project’s requirements. The financial viability of any
given project depends in large part on our ability to estimate such costs
accurately and complete the project on a timely basis. In the event actual costs
exceed the fixed contractual cost, we may not be able to recover the excess
costs. Some government contracts are also subject to termination or
renegotiation at the convenience of the government, which could result in a
large decline in revenue in any given quarter. Although government contracts
have provisions providing for the reimbursement of costs associated with
termination, the termination of a material contract at a time when our funded
backlog does not permit redeployment of staff could result in reductions of
employees. In addition, the timing of payments from government contracts is also
subject to significant fluctuation and potential delay, depending on the
government agency involved. Any such delay could result in a temporary shortage
in working capital.

37




Some of our product components are manufactured in South Africa or other
foreign countries and if they become unstable or changes government regulations
our costs may increase or we may become unable to source certain parts.Some
of our product components are manufactured in South Africa and supplied from
other foreign countries. If import tariffs or taxes increase for any reason, our
cost of goods would increase. Our financial performance may be affected by
changes in political, social and economic environment. The role of the central
and local governments in the economy is significant. Policies toward economic
liberalization, and laws and policies affecting foreign companies, foreign
investment, currency exchange rates and other matters could change, resulting in
greater restrictions on our ability to do business with suppliers based in other
countries. The government could impose surcharges, increase tax rates, or
revoke, terminate or suspend operating licenses without compensating us. Also,
South Africa and other countries, from time to time, experience instances of
civil unrest and hostilities. Confrontations have occurred between the military,
insurgent forces, and civilians. If for these or any other reason, we lose our
ability to sub-contract or manufacture the components to its products, or the
cost of doing business increases, our business, financial condition, and results
of operations would be materially and adversely affected.

We may be subject to personal liability claims for our products and if our
insurance is not sufficient to cover such claims, our expenses may increase
substantially.We may be subject to personal liability claims and our
insurance, may not be adequate to cover such claims. As a result, a significant
lawsuit could adversely affect our business. We may be exposed to liability for
personal injury or property damage claims relating to the use of the products.
Any future claim against us for personal injury or property damage could
materially adversely affect the business, financial condition, and results of
operations and result in negative publicity. Even if we are not found liable,
the costs of defending a lawsuit can be high. We do not currently maintain
insurance for this type of liability. Additionally, even if we do purchase
insurance, we may experience legal claims outside of our insurance coverage, or
in excess of our insurance coverage, or that insurance will not cover.

We are subject to substantial competition and we must continue research and
development to remain competitive.We are subject to significant competition
that could harm our ability to win business and increase the price pressure on
our products. We face strong competition from a wide variety of firms, including
large, multinational vehicle, defense and aerospace firms. Most of our
competitors have considerably greater financial, marketing and technological
resources than we do which may make it difficult to win new contracts and we may
not be able to compete successfully. Certain competitors operate fabrication
facilities and have longer operating histories and presence in key markets,
greater name recognition, larger customer bases and significantly greater
financial, sales and marketing, manufacturing, distribution, technical and other
resources, as a result, these competitors may be able to adapt more quickly to
new or emerging technologies and changes in customer requirements. They may also
be able to devote greater resources to the promotion and sale of their products.
Moreover, we may not have sufficient resources to undertake the continuing
research and development necessary to remain competitive. Competitors may
attempt to independently develop similar designs or duplicate our products or
designs. We or our competitors may intentionally or unintentionally infringe
upon or misappropriate products or proprietary information. In the future,
litigation may be necessary to enforce intellectual property rights or to
determine the validity and scope of the proprietary rights of others. Any such
litigation could be time consuming and costly. Currently we have no patents. Any
patent or patents sub-licensed to us relating to current or future products may
be challenged, invalidated, or circumvented or the rights granted there-under
will may not be held valid if subsequently challenged. Our products are based on
technological innovation. Consequently, the life cycles of some of our products
can be relatively short. Our success depends significantly on our ability to
establish and maintain a competitive position in this field. Our products may
not remain competitive in light of technological developments by others. Our
competitors may succeed in discovering and developing technology before we do
that would render our technology, and hence our products, obsolete and
noncompetitive.

We must comply with environmental regulations or we may have to pay expensive
penalties or clean up costs.We are subject to federal, state, local and
foreign laws, and regulations regarding protection of the environment, including
air, water, and soil. Our manufacturing business involves the use, handling,
storage, and contracting for recycling or disposal of, hazardous or toxic
substances or wastes, including environmentally sensitive materials, such as
batteries, solvents, lubricants, degreasing agents, gasoline and resin. We must
comply with certain requirements for the use, management, handling, and disposal
of these materials. We do not maintain insurance for pollutant cleanup and
removal. If we are found responsible for any hazardous contamination, we may
have to pay expensive fines or penalties or perform costly clean-up. Even if we
are charged, and later found not responsible, for such contamination or clean
up, the cost of defending the charges could be high.  If we do not comply with
government regulations, we may be unable to ship our products or have to pay
expensive fines or penalties.  We are subject to regulation by county, state and
federal governments, governmental agencies, and regulatory authorities from
several different countries. If we fail to obtain regulatory approvals or suffer
delays in obtaining regulatory approvals, we may not be able to marketing our
products and services, and generate product and service revenues. Further, we
may not be able to obtain necessary regulatory approvals. Although we do not
anticipate problems satisfying any of the regulations involved, we cannot
foresee the possibility of new regulations, which could adversely affect our
business. Further our products are subject to export limitations and we may be
prevented from shipping our products to certain nations or
buyers.

38




We rely on Proprietary Designs and Rights and if we have to litigate those
rights, our expenses could substantially increase.Our success and ability
to compete depend, in part, on the protection of our designs and technology. In
addition, our technology could infringe on patents or proprietary rights of
others. We have not undertaken or conducted any comprehensive patent
infringement searches or studies. If any third parties hold any conflicting
rights, we may be required to stop making, using or selling our products or to
obtain licenses from and pay royalties to others. Further, in such event, we may
not be able to obtain or maintain any such licenses on acceptable terms, if at
all. We may need to engage in future litigation to enforce intellectual property
rights or the rights of customers, to protect trade secrets or to determine the
validity and scope of proprietary rights of others, including customers. This
litigation could result in substantial costs and diversion of resources and
could materially and adversely affect our results of operations.

Insiders can exert significant control over our policies and affairs and they
may assert control in a manner that does not favor minority shareholders.As
of March 31, 2005, our Directors and Executive Officers in the aggregate,
beneficially owned shares equal to 40.6% of our outstanding common stock. These
shareholders, if acting together, would be able to exert substantial influence
over all matters requiring shareholder approval, including amendments to our
Articles of Incorporation, fundamental corporate transactions such as mergers,
acquisitions, the sale of the company, and other matters involving the direction
of our business and affairs. As a result, although you may vote your shares, you
will have limited influence on our business and management.

We depend on management and other key personnel and we may not be able to
execute our business plan without their services.Our success and our
business strategy depends in large part on our ability to attract and retain key
management and operating personnel. Such individuals are in high demand and are
often subject to competing employment offers. We depend to a large extent on the
abilities and continued participation of our executive officers and other key
employees. We do not presently maintain "key man" insurance on any employees. We
believe that, as our activities increase and change in character, additional,
experienced personnel will be required to implement our business plan.
Competition for such personnel is intense and we may not be able to hire them
when required, or have the ability to attract and retain them.

Risks Related to Our Stock

"Penny Stock" rules may make buying or selling our securities difficult.Trading in our securities is subject to the Securities and Exchange
Commission’s "penny stock" rules and it is anticipated that trading in our
securities will continue to be subject to the penny stock rules for the
foreseeable future. The Securities and Exchange Commission has adopted
regulations that generally define a penny stock to be any equity security that
has a market price of less than $5.00 per share, subject to certain exceptions.
These rules require that any broker-dealer who recommends our securities to
persons other than prior customers and accredited investors must, prior to the
sale, make a special written suitability determination for the purchaser and
receive the purchaser’s written agreement to execute the transaction.
Unless an exception is available, the regulations require the delivery, prior to
any transaction involving a penny stock, of a disclosure schedule explaining the
penny stock market and the risks associated with trading in the penny stock
market. In addition, broker-dealers must disclose commissions payable to both
the broker-dealer and the registered representative and current quotations for
the securities they offer. The additional burdens imposed upon broker-dealers by
such requirements may discourage broker-dealers from recommending transactions
in our securities, which could severely limit the liquidity of our securities
and consequently adversely affect the market price for our securities.

Our securities have been thinly traded on the over-the-counter bulletin
board, which may not provide liquidity for our investors.Our securities are
quoted on the Over-the-Counter Bulletin Board. The Over-the-Counter Bulletin
Board is an inter-dealer, over-the-counter market that provides significantly
less liquidity than the NASDAQ Stock Market or national or regional exchanges.
Securities traded on the Over-the-Counter Bulletin Board are usually thinly
traded, highly volatile, have fewer market makers and are not followed by
analysts. The Securities and Exchange Commission’s order handling rules,
which apply to NASDAQ-listed securities, do not apply to securities quoted on
the Over-the-Counter Bulletin Board. Quotes for stocks included on the
Over-the-Counter Bulletin Board are not listed in newspapers. Therefore, prices
for securities traded solely on the Over-the-Counter Bulletin Board may be
difficult to obtain and holders of our securities may be unable to resell their
securities at or near their original acquisition price, or at any price.

Investors must contact a broker-dealer to trade over-the-counter bulletin
board securities. As a result, you may not be able to buy or sell our securities
at the times that you may wish.Even though our securities are quoted on the
Over-the-Counter Bulletin Board, the Over-the-Counter Bulletin Board may not
permit our investors to sell securities when and in the manner that they wish.
Because there are no automated systems for negotiating trades on the
Over-the-Counter Bulletin Board, they are conducted via telephone. In times of
heavy market volume, the limitations of this process may result in a significant
increase in the time it takes to execute investor orders. Therefore, when
investors place market orders an order to buy or sell a specific number of
shares at the current market price it is possible for the price of a stock to go
up or down significantly during the lapse of time between placing a market order
and its execution.

39




We do not intend to pay dividends in the foreseeable future; therefore, you
may never see a return on your investment.We do not anticipate the payment
of cash dividends on our common stock in the foreseeable future. We anticipate
that any profits from our operations will be devoted to our future operations.
Any decision to pay dividends will depend upon our profitability at the time,
cash available and other factors. Therefore, you may never see a return on your
investment. Investors who anticipate a need for immediate income from their
investment should not purchase the company’s securities.

Our stock price is volatile and you may not be able to sell your shares for
more than what you paid. Our stock price has been subject to significant
volatility, and you may not be able to sell shares of common stock at or above
the price you paid for them. The trading price of our common stock has been
subject to wide fluctuations in the past. Since January 2003, our common stock
has traded at prices as low as $0.06 per share and as high as $0.71 per share,
pre-reverse stock split. The market price of the common stock could continue to
fluctuate in the future in response to various factors, including, but not
limited to: quarterly variations in operating results; our ability to control
costs and improve cash flow; announcements of technological innovations or new
products by us or our competitors; changes in investor perceptions; and new
products or product enhancements by us or our competitors. The stock market in
general has continued to experience volatility which may further affect our
stock price. As such, you may not be able to resell your shares of common stock
at or above the price you paid for them.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING &
FINANCIAL DISCLOSURE

None.

ITEM 8A.  CONTROLS & PROCEDURES

DISCLOSURE CONTROLS AND PROCEDURES

Our  Interim Chief  Executive  Officer  and  Chief Financial Officer are
responsible for establishing and maintaining adequate internal controls over
financial reporting for  the  Company.  Our Interim  Chief  Executive  Officer
and  Chief Financial Officer evaluated  the effectiveness of our disclosure
controls and procedures as of the end  of  the  quarter  covered  by  this
Annual Report on Form 10-KSB. Our Interim Chief Executive  Officer  and  Chief
Financial  Officer concluded that our disclosure controls  and  procedures  are
currently  effective but may not continue to be effective  as  the  Company
grows. Based on this evaluation, the Interim Chief Executive Officer  and  Chief
Financial  Officer  will accelerate  plans  to  implement additional  operating
and financial reporting controls and procedures to ensure that information in
reports that we file or submit under the Securities Exchange Act  of  1934  are
recorded, processed, summarized and reported within the time periods  specified
in  Securities  and  Exchange Commission  rules  and forms.

Change in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that
occurred during our last fiscal year that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.  However, as discussed above we are committed to a process of change
and improvement throughout the enterprise intended to optimize our operations,
and this process will necessarily entail improvements to our financial controls
over the coming year.

ITEM 8B:  OTHER INFORMATION

The following events occurred after the fourth quarter.

On January 21, 2005 we issued 15,800 shares of Series D 6% Convertible Preferred
Stock for gross proceeds of $15.8 million.  On April 11, 2005 we paid $237,000
for liquidated damages because the registration statement was not filed within
the contractual period of the investment agreement..

On January 27, 2005 we hired Ted McQuinn as President of Force Protection
Industries.

On January 27, 2005 we named R. Scott Ervin as Interim CEO. Mr. Aguilar will
remain as Director.

On February 4, 2005 we hired Gordon McGilton as Chief Quality Officer.

On January 28, 2005 we sold our first non-military customer, Blackwater, a
Cougar prototype model.

40


PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTES AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT

Directors, Executive Officers, Promoters and Control Persons

The following table sets forth certain information about our directors and
executive officers.

Name
Age
PositionTed McQuinn
56
President, Force Protection IndustriesGordon McGilton
61
Chief Quality OfficerR. Scott Ervin
50
Interim Chief Executive Officer, Director, General CounselFrank Kavanaugh
44
Chairman of the BoardGale Aguilar
72
DirectorThomas H. Thebes
49
Vice President of Finance, Chief Financial Officer




Biographies of executive officers and directors

Ted McQuinn: - President, Force Protection Industries, Inc. Mr. McQuinn joined
us in February 2005 as President of the Operating Division. A veteran of
heavy-duty trucking and construction vehicle markets for both commercial and
military applications, Mr. McQuinn has more than three decades of experience in
operations, quality, engineering, and product planning. Prior to joining us and
from 2002, Mr. McQuinn served as Vice President of Quality and Managing Director
at Stewart & Stevenson Services, Inc. in the Tactical Vehicle Systems
Division. From 2000 through 2002, Mr. McQuinn worked as President and CEO of
Ryobi Die Casting USA, Inc. Mr. McQuinn also served as Chief Engineer and
Program Manager at GM’s Allison Transmission Division on the transmissions
used in Force Protection’s Cougar and Buffalo vehicles. Mr. McQuinn holds
a Bachelor of Mechanical Engineering degree in automotive design engineering
from GMI Engineering & Management Institute (now called Kettering
University) and a Master of Business Administration degree, with a specialty in
finance and marketing, from Indiana

Gordon McGilton: - Chief Quality Officer Mr. McGilton has served as a Senior
Executive for a multitude of organizations in manufacturing, medical devices,
and Education. He has extensive experience in manufacturing, and business
management.  He is a partner in a technology company, APT Leadership and teaches
business process seminars worldwide specializing in the creation of model
companies.  As a consultant, over the prior 5 years Mr. McGilton advised several
companies throughout the U.S. including JD Edwards, United States Navy, and
United Healthcare.

R. Scott Ervin: - Director, General Counsel Mr. Ervin acted initially as a
director from June through October 2001, and has served on the board
continuously since February 2002. He is an attorney, having graduated from
Boston College Law School (JD 1984) and is licensed to practice in New York and
Texas. From 1984 through 1991 Mr. Ervin was associated with the New York law
firm of Burlingham, Underwood and from 1991 through 1999 he practiced law with
the law offices of Dr. Abdelrahman Abbar, in Jeddah Saudi Arabia. Since 1999 Mr.
Ervin has been in private practice in Austin Texas. He is a director of
Interlex, Inc a Texas corporation and a director of The Behavioural Sciences
Foundation, a non-profit scientific research foundation. He also acts as trustee
for several private trusts.

Frank Kavanaugh: - Mr. Kavanaugh has worked for the Company since July of 2002
in our fire/rescue business, and in January of 2003 became responsible for
strategic and investment relationships. In December of 2003 he was appointed to
the board of directors. Over the last 8 years, as a principal in Ashford
Capital, LLC and its predecessor he has served in several executive positions
including operational management roles at NewGen Systems, and several portfolio
companies. He co founded and served as President of QuickStart Technologies and
held positions at Microsoft and Hewlett Packard. His education includes: a BS
degree in Information & Computer Science, from University of California,
Irvine and an MBA from Pepperdine University. He also serves on several
community boards including the Child Guidance Center of Orange County, and the
board of advisors at Chaprman University’s Leatherby
Center.

41




Gale Aguilar: - Director Mr. Aguilar has served as our director since October of
2003. Currently he is the President and a member of the Board of Directors at
MITEM Corporation which he joined in 1995. His experience includes SF2 Corp,
Stardent Corporation, and Prime Computer as Senior VP of Marketing, VP of Corp.
Strategy and Corp. Development he was a member of the operating committee. In
addition, he worked at IBM for 27 years in several positions including \
Director of Marketing and Service General Products Division, IBM Director of
Product Marketing, and Director of Systems Strategy. His experience includes
active duty in the Army 1951-53. He participates on several corporate and
charitable boards.

Thomas H. Thebes: - VP Finance, Chief Financial Officer     Mr. Thebes joined
the company in November 2003 as VP Finance, Chief Financial Officer. Prior to
joining us, Mr. Thebes served as Program Manager for Flextronics. From 2001
through 2003, Mr. Thebes was a Financial Consultant for ID Technologies and
GlaxoSmithKline. From 1999 to 2001, Mr. Thebes was the Controller, Manufacturing
and International Operations - Insilco      Technologies. Mr. Thebes has over 22
years of operational management and strategic business analysis in both the
federal sector and private industry. He has spent over 12 years conducting
Activity Based Management studies, business process reengineering, benchmarking
and strategic planning for Fortune 100 and Fortune 1000 companies. Mr. Thebes
holds an undergraduate degree from Miami University and an MBA from the
University of Toledo.

Compliance with Section 16(A) of the Exchange Act.

Section  16(a) of the Exchange Act, as amended, requires our executive officers,
directors  and persons who beneficially own more than 10% of our common stock to
file  reports of their beneficial ownership and changes in ownership (Forms 3, 4
and  5,  and any amendment thereto) with the SEC. Executive officers, directors,
and  greater-than-ten  percent holders are required to furnish us with copies of
all  Section  16(a)  forms they file. Based on our review of the activity of our
officers  and  directors for the fiscal year ended December 31, 2004, we believe
Forms  3,  4  or  5  were timely  filed.

Code of Ethics

We  have  adopted  a Code of Ethics that  applies to our principal executive
officer,  principal  financial  officer,  principal  accounting  officer  or
controller,  or  persons  performing  similar  functions.  Our Code of Ethics is
available for review on our website (www.forceprotectioninc.com).

Number and Election of Directors

We currently have three directors. Directors are elected according to a
staggered election cycle according to Class.  There are three classes: Class A
to be elected in 2005, for a period of three years, Class B to be elected in
2006 for a period of three years and Class C to be elected in 2007 for a period
of three years.

Audit Committee

We  do  not have a separate Audit Committee. Our Board of Directors performs the
functions  usually designated to an Audit Committee. Gale Aguilar qualifies as
an "audit committee financial expert" under  the  rules  of  the  Securities
and  Exchange Commission. We employee an outside  firm  to  advise  and  consult
management and the board on all matters relating  to  our  financial
statements.

42




ITEM 10. EXECUTIVE COMPENSATION

Summary Compensation Table

The  following  table  presents  a summary of the compensation paid to our Chief
Executive  Officer  and other highly compensated employees during the last three
fiscal years. Except as listed below, there are  no  bonuses,  other  annual
compensation, restricted stock awards or stock options/SARs  or  any  other
compensation  paid  to  executive  officers.  The  following  table  presents  a
summary of the compensation paid to our Chief Executive  Officer  and  other
highly compensated employees during the last four fiscal  years.  Except  as
listed  below,  there  are  no  bonuses,  other annual compensation,  restricted
stock  awards  or  stock  options/SARs  or  any other compensation  paid  to
executive  officers.



Long Term CompensationAnnual Compensation
Awards
PayoutsName and
Bonus
Other Annual
Restricted
Securities
LTIP
All OtherPosition
Salary

Compensation
Stock
Underlying
Payouts
CompensationYear
($)
($)
Award(s)($)
Options/SARs($)
Options/SARs (#)
($)
($)




Mike Watts
2002
4,500
0
0
0
2,250,000
0
77,000 (1)Force
2003
180,500
0
0
0
2,000,000
0
0Protection
2004
207,962

360,000
0
19,220,000
0
0CEO/PresidentGale Aguilar
2002
0
0
0
0
0
0
0Interim CEO
2003
0
0
0
0
0
0
0Director
2004
32,500
0
0
0
0
0
0Garth Barrett
2002
60,000
0
0
0
0
0
0President of
2003
120,000
0
120,000 (2)
0
2,250,000
0
0TSG
2004
133,846
0
0
0
0
0
0Frank Kavanaugh
2002
36,817
0
0
0
0
0
80,700VP of Business
2003
146,923
0
0
0
1,400,000
0
44.100Development
2004
187,769
0
180,000
0
9,610,000
0
0Murray HammickVP Programs
2004
117,573
0
0
0
0
0
0Michael Aldrich
2003
96,000
0
0
0
0
0
0VP Sales
2004
113,758
0
0
0
0
0
0Thomas Thebes
2003
7,916
0
0
0
0
0
0VP Finance, CFO
2004
112,885
50,0000
178,000
0
5,144,000
0
0




(1)  Mr. Watts received $77,000 as a consultant to the company prior to his
employment.  (2) Mr. Barrett received 10 Series C shares captured in "other
annual compensation".

43




Agreements with Key Persons

On February 4, 2005, we named Ted McQuinn as President of our subsidiary, Force
Protection Industries, Inc. Mr. McQuinn will receive a base salary of $180,000
plus an annual stock grant of $100,000 for 3 years. Sixty days after start of
employment, Mr. McQuinn is to be issued a $20,000 stock grant. Mr. McQuinn will
be allowed to participate in a Gain-Sharing Program yet to be adopted.

On January 27, 2005, we entered into an employee/consulting agreement with
Gordon McGilton to act as our Chief Quality Officer. Mr. McGilton will receive a
base salary of $180,000 plus an annual bonus of $180,000 and reimbursement for
travel, lodging and other out of pocket expenses incurred during employment. We
also agreed to provide Mr. McGilton stock options once we  adopt a stock option
plan.

Effective  October  26,  2004, the Company entered into an Agreement with Gale
Aguilar to receive  cash  compensation of $15,000 per month plus stock grants as
the new Interim Chief Executive Officer.. Effective January 27, 2005, Mr.
Aguilar stopped collecting his compensation.

On January 27, 2005, R. Scott Ervin became Interim CEO in addition to his duties
as General Counsel under the terms of his prior employment.  Under his
employment agreement dated November 15, 2004, he received an annual salary of
$118,000, relocation expenses of $15,000, 500,000 shares of common stock, and 4
Series C convertible preferred shares valued at $108,000 as compensation.
Effective January 27, 2005 the salary was adjusted to $140,000.

On September 30, 2004, Tom Thebes was awarded 500,000 shares of common stock and
4 Series C shares of preferred convertible stock and on October 30, 2004, was
awarded 1,000,000 shares of common stock valued at $228,000 as compensation.
Mr. Thebes receives a salary of $115,000.

On December 31, 2004, Frank Kavanaugh was awarded 500,000 shares of common
stock, 10 Series C shares of preferred convertible stock valued at $180,000 as
compensation.  Mr. Kavanaugh receives a salary of $180,000.

On September 30, 2004, Mike Watts was awarded 1,000,000 shares of common stock,
20 Series C shares of preferred convertible stock valued at $360,000 as
compensation.  Mr. Watts receives compensation through October of 2005 pursuant
to a consulting agreement of $18,000 per month.

Mike Aldrich receives a base salary of $96,000 plus commissions under an at will
agreement.

Murray Hammick receives a salary of $115,000 under an at will agreement.

Director Compensation

We currently reimburse Directors for travel expense associated with their work
for the company and have agreed to establish a compensation plan to be submitted
for approval by shareholders at our annual meeting in 2005. Until a plan is
established Directors will not be compensated.

Mr. R. Scott Ervin was awarded 600,000 shares during 2002 and 2003 for services
as director, and was granted 350,000 shares for legal services rendered before
employment during 2004.  At the time of the grant, Mr. Ervin was an outside
director.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Principal Shareholders

The following table sets forth, to our knowledge, certain information concerning
the beneficial ownership of our common stock as of March 31, 2005 by each
stockholder known by us to be (i) the beneficial owner of more than 5% of the
outstanding shares of common stock, (ii) each current director, (iii) each of
the executive officers named in the Summary Compensation Table who were serving
as executive officers at the end of the 2004 fiscal year and (iv) all of our
directors and current executive officers as a group.

44




Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting or investment power with
respect to shares beneficially owned. Shares of Common Stock subject to options
or warrants currently exercisable are deemed outstanding for computing the
percentage ownership of the person holding such options or warrants, but are not
deemed outstanding for computing percentage ownership of any other person.

Name of

Number of Shares
PercentageBeneficial Owner

Beneficially Owned
Ownership (1)Michael Watts (2)

5,548,728
16.0%Garth Barrett

946,668
2.7%Mike Aldrich

0
0.0%Thomas Thebes (3)

587,918
1.7%Scott Ervin

505,835
1.4%Frank Kavanaugh (4)

6,517,918
18.8%Ashford Capital, LLC (5)

5,717,084
16.5%Murray Hammick

0
0.0%Gale Aguilar

0
0.0%All Officer andDirectors as a Group

14,107,066
40.6%




(1) The number of shares of common stock outstanding as of March 31, 2004 is
34,519,095.



(2) Includes an option for 166,667 shares at $0.07 per share.  The option can be
exercised at any time and expires on August 31, 2005.



(3) Includes an option to purchase 83,334 shares at $0.07 per share.  The option
can be exercised at any time and expires on August 31, 2008.



(4) Mr. Kavanaugh is a principal in Ashford Capital, LLC and his total
beneficial share holdings include shares owned by Ashford Capital.



(5) The business address of Ashford Capital, LLC is 3419 Via Lido, #470, Newport
Beach, CA 92663.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

As part of the purchase of Technical Solutions Group, Inc in July 2002 Ashford
Capital, LLC, an advisor to the transaction and our shareholder received shares
equal to 10% of the equity ownership. An agreement was reached in April of 2003
under which Ashford Capital, LLC could exchange its equity ownership for 50
shares of our Series C preferred shares, by notifying us by October 15, 2003.
In 2004, Ashford Capital transferred its rights under the agreement to our CEO
at that time, Mike Watts.  In October of 2004, Mr. Watts notified the company
and exchanged his ownership for 50 shares of Series C preferred.  As a result,
we own 100% of Technical Solutions Group, Inc.

During 2003, Texbuild, a company owned by R. Scott Ervin, loaned us $50,000.
This note was repaid in January 2004 and we issued one share of Series C
Preferred stock to Mr. Ervin as interest according to the terms of the Loan
agreement.

In October of 2003, in connection with the restructuring of the company, Madhava
Rao Mankal resigned as Chief Executive Officer. He received a grant of 800,000
restricted shares of stock.  In addition, on December 31, 2003, Mr. Mankal was
paid 90 days termination based on his annual rate of salary of $64,800.

45




ITEM 13.  EXHIBITS.

NUMBER
DESCRIPTION3.1
Bylaws for Boulder Capital  Opportunities III, Inc., dated November 27, 1996
(included as exhibit 3.(ii) to the Form 10-SB filed March  24,  1997, and
incorporated herein by reference).3.2
Restated Articles of Incorporation, dated September 10, 2004 (included as
exhibit 3.1  to the Form 8-K filed September 17, 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).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 June
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).




46




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).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 June  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).10.22
Employment Agreement between the Company and Gordon McGilton, dated January 27,
200510.23
Employment Agreement between the Company and Ted McQuinn, dated February 4,
2005


47




31.1
Certification of the Interim Chief Executive Officer pursuant to Section 302 of
the Sarbanes- Oxley Act of 2002.31.2
Certification of the Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1
Certification of Officers pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.




ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

We paid our principal accountant $21,500 for audit fees in 2003.  In 2004, we
paid $44,000 in audit fees.

Audit-Related Fees

None.

Tax Fees

None.

Other Fees

None.

48




SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

FORCE PROTECTION, INC.

Date: April 14, 2005

By: /s/ R. Scott Ervin..R. Scott Ervin........Principal Executive
Officer

Date: April 14, 2005By: /s/ Thomas ThebesThomas ThebesChief
Financial Officer and Controller

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.



SignatureName
Title
Date/s/  R. Scott Ervin
Director, Interim Chief
April 14, 2005R. Scott Ervin
Executive Officer andGeneral Counsel/s/  Frank Kavanaugh
Chairman of
April 14, 2005Frank Kavanaugh
the  Board  of  Directors/s/  Gail Aguilar
Director
April 14, 2005Gale Aguilar




49




Exhibit 31.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT
TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, R. Scott Ervin certify that:

1. I have reviewed this annual report on Form 10-KSB of Force Protection,
Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such  Statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant’s other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant’s auditors and the audit
committee of registrant’s board of directors (or persons performing the
equivalent functions):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant’s ability to record, process,
summarize and report financial data and have identified for the
registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal
controls; and

6. The registrant’s other certifying officer and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: April 14, 2005

/s  R. Scott ErvinPrincipal Executive Officer

50




Exhibit 31.2



I, Thomas Thebes, certify that:

1. I have reviewed this annual report on Form 10-KSB of Force Protection,
Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;



3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant’s other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant’s auditors and the audit
committee of registrant’s board of directors (or persons performing the
equivalent functions):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant’s ability to record, process,
summarize and report financial data and have identified for the
registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal
controls; and

6. The registrant’s other certifying officer and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: April 14, 2005

/s/ Thomas ThebesThomas Thebes CFO, VP of
Finance

51




Exhibit 32.1

CERTIFICATIONS UNDER SECTION 906

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and
(b) of section 1350, chapter 63 of title 18, United States Code), each of the
undersigned officers of Force Protection, Inc., a Nevada corporation (the
"Company"), does hereby certify, to such officer’s knowledge, that:

The Annual Report for the year ended December 31, 2004 (the "Form 10-KSB") of
the Company fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934, and the information contained in the Form
10-KSB fairly presents, in all material respects, the financial condition and
results of operations of the Company.

Dated:  April 14,  2005/s/  R. Scott
Ervin--------------------R. Scott Ervin,  Interim Chief
Executive  OfficerDated:  April 14,  2005/s/  Thomas Thebes-----------------Thomas Thebes, Chief
Financial  Officer