Edgar Filing: ARMOR HOLDINGS INC

Filed Pursuant to Rule 424(b)(5)
Registration File No.: 333-113834

The information in this preliminary prospectus supplement is not complete and
may be changed. This preliminary prospectus supplement is not an offer to sell
nor does it seek an offer to buy these securities in any jurisdiction where an
offer or sale is not permitted.

Subject to Completion. Dated May 28, 2004.

Prospectus Supplement to Prospectus dated May 27, 2004.

4,000,000 Shares

[GRAPHIC OMITTED]
ARMOR HOLDINGS, INC.

Common Stock
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Armor Holdings, Inc. is offering 4,000,000 shares to be sold in the
offering.

The common stock is listed on the New York Stock Exchange under the symbol
"AH". The last reported sale price of the common stock on May 27, 2004 was
$37.70 per share.

See "Risk Factors" on page S-12 of this prospectus supplement and page 6
of the accompanying prospectus to read about factors you should consider before
buying shares of the common stock.

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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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Per Share Total
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Initial price to public .............................. $ $
Underwriting discount ................................ $ $
Proceeds, before expenses, to Armor Holdings ......... $ $

To the extent that the underwriters sell more than 4,000,000 shares of
common stock, the underwriters have the option to purchase up to an additional
600,000 shares from Armor Holdings and the selling stockholders identified
herein at the initial price to public less the underwriting discount. Armor
Holdings will not receive any of the proceeds from the sale of shares being
sold by the selling stockholders.

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The underwriters expect to deliver the shares against payment in New York,
New York on , 2004.

GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
WACHOVIA SECURITIES
JPMORGAN
FRIEDMAN BILLINGS RAMSEY
WM SMITH SECURITIES, INCORPORATED

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Prospectus Supplement dated , 2004.

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ARMOR HOLDINGS, INC.
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1. Chinook Sling Loading an M1114 Up [7 PHOTO OMITTED]
Armored HMMWV.

2. SAPI Plates

3. A PROTECH(TM) Intruder shield being
prepared for ballistic viewport at our
factory in Pittsfield, MA.

4. Cutting ballistic fabric for sewing
and assembly at American Body
Armor(TM) in Jacksonville, FL.

5. Testing a vehicle armored by us.

6. Simula's crashworth seating system.

7. M1114 UpArmored HMMWV during
up armoring assembly in our
Cincinnati, OH facility.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus supplement and the accompanying prospectus (including the
documents incorporated by reference) contain certain "forward-looking"
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
These statements may be identified by the use of "forward-looking" terminology
such as "anticipate," "believe," "continue," "could," "estimate," "expect,"
"intend," "may," "might," "plan," "potential," "predict," "should," or "will,"
or the negative thereof or other variations thereon or comparable terminology.
In particular, statements about our expectations, beliefs, plans, objectives,
assumptions or future events or performance contained in this prospectus
supplement and the accompanying prospectus (including the documents
incorporated by reference) are "forward-looking" statements.

We have based these "forward-looking" statements on our current
expectations, assumptions, estimates and projections. While we believe these
expectations, assumptions, estimates and projections are reasonable, such
"forward-looking" statements are only predictions and involve known and unknown
risks and uncertainties, many of which are beyond our control. These and other
important factors, including those discussed in this prospectus supplement and
the accompanying prospectus (including the documents incorporated by reference)
may cause our actual results, performance or achievements to differ materially
from any future results, performance or achievements expressed or implied by
these forward-looking statements. Some of the key factors that could cause
actual results to differ from our expectations are:

o reductions in military or law enforcement spending;

o suspension or cessation of orders under existing contracts between our
Aerospace & Defense Group and the U.S. military;

o increased competition or our inability to compete effectively;

o our inability to identify suitable acquisition candidates in the future or
to successfully integrate acquired operations;

o claims against us for product liability;

o an adverse determination in connection with the Zylon (Registered
Trademark) investigation being conducted by the U.S. Department of Justice
and certain state agencies and/or other Zylon (Registered
Trademark) -related litigation;

o our inability or failure to comply with applicable government regulations;

o interruptions to our supply or distribution networks or facilities;

o our inability to obtain adequate supplies of raw materials; and

o our inability to attract and retain additional management and key personnel.

Given these risks and uncertainties, you are cautioned not to place undue
reliance on these "forward-looking" statements. The forward-looking statements
included in or incorporated by reference in this prospectus supplement and the
accompanying prospectus are made only as of the date hereof and thereof,
respectively. We do not undertake and specifically decline any obligation to
update any of these statements or to publicly announce the results of any
revisions to any of these statements to reflect future events or developments.

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PROSPECTUS SUPPLEMENT SUMMARY

This summary only highlights information contained elsewhere in this
prospectus supplement and the accompanying prospectus. As a result, it does not
contain all of the information that you should consider before purchasing
shares of common stock. You should read the entire prospectus supplement,
including the accompanying prospectus and the documents incorporated by
reference, which are described under the caption "Where You Can Find More
Information." When used in this prospectus supplement, unless the context
requires otherwise, the terms "we," "our," "us," and the "Company" refer to
Armor Holdings, Inc. and its subsidiaries. Unless otherwise specified, any
reference to a "year" is to a fiscal year ended December 31.

THE COMPANY

We are a leading manufacturer and provider of personal protective
equipment and security products for law enforcement and military personnel,
armored military and commercial vehicles, armor kits for retrofit of military
vehicles, aircraft armor, aircraft safety products, survivability equipment
used by military aviators and other technologies used to protect humans in a
variety of life-threatening or catastrophic situations. Our products and
systems are used domestically and internationally by military, law enforcement,
security and corrections personnel, as well as governmental agencies,
multinational corporations and individuals. We have a broad portfolio of brand
name products that are well established in various niche markets in which we
compete. For example, we are the sole-source provider to the U.S. military of
the armor and blast protection systems ("up-armoring") for their M1114 High
Mobility Multi-purpose Wheeled Vehicles ("M1114 Up-Armored HMMWV," commonly
known as the Humvee). We have focused our business on several core
competencies, including our ability to manufacture and distribute high quality
security products, vehicle armoring systems, and human safety and survival
systems. For the 12 months ended March 31, 2004, our revenues were $446.3
million, an increase of 41.2% over the corresponding period ended March 31,
2003.

BUSINESS DIVISIONS

Effective in the first quarter of 2004, we instituted a new segment
reporting format to include three reportable business divisions: the Aerospace
& Defense Group, the Products Division and the Mobile Security Division. This
reporting change was made to better reflect management's approach to operating
and directing the businesses, and, in certain instances, to align financial
reporting with our market and customer segments.

Aerospace & Defense Group. ($156.8 million of our revenue and $38.6
million of our operating income for the 12 months ended March 31, 2004). The
Aerospace & Defense Group was formed upon the completion of our acquisition of
Simula, Inc. on December 9, 2003. The Aerospace & Defense Group is comprised of
Simula's business, the military business formerly included in our Mobile
Security Division (including armor and blast protection systems for M1114
Up-Armored HMMWVs and other military vehicle armor programs), and the small
arms protective insert ("SAPI") business produced by our Protech subsidiary in
Pittsfield, MA, previously reported as part of the Products Division. The
Aerospace & Defense Group has approximately 500 employees in 6 manufacturing
facilities located throughout the United States. Our U.S. federal government
customers provided $73.2 million, or 79.9%, of division revenue in 2003. Our
principal customer is the U.S. military.

Our Aerospace & Defense Group supplies human safety and survival systems
to the U.S. military and major aerospace and defense prime contractors. Our
core markets are military aviation safety, military personnel safety, and land
and marine safety. Under the brand name O'Gara-Hess & Eisenhardt, we are the
sole-source provider to the U.S. military of the armor and blast protection
systems for M1114 Up-Armored HMMWVs. We are also under contract with the U.S.
military to provide spare parts, logistics and ongoing field support services
for the currently installed base of

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4,968 M1114 Up-Armored HMMWVs. Additionally, we provide blast and ballistic
protection kits for the standard M1114 HMMWVs, which are installed on existing
equipment in the field. Our Aerospace & Defense Group is also subcontracted to
develop a ballistic and blast protected armored and sealed truck cab for the
High Mobility Artillery Rocket System ("HIMARS"), a program recently
transitioned by the U.S. Army and U.S. Marine Corps from developmental to a low
rate of initial production, deliveries of which commenced in 2003. Under the
brand name Simula we are under contract to design and produce 2,426 vehicle
armor kits for heavy tactical vehicles to be completed and fielded during 2004.
The vehicles include the Heavy Expanded Mobility Tactical Truck (HEMTT), the
Palletized Load System (PLS), the Heavy Equipment Transporters (HET) and the
M915 tractor. These vehicles are primarily off-road and on-road transporters
for heavy cargo. Additionally, we expect Simula to provide 1,500 vehicle armor
kits for HMMWVs, designed by O'Gara-Hess & Eisenhardt, to be completed and
fielded during 2004. Simula is also the sole supplier of the applique armor
packages used on the M1117 Guardian Armored Security Vehicle (ASV). The ASV is
a military police vehicle designed for combat situations and is in active use
in Baghdad today.

The U.S. armed forces have adopted ceramic body armor as a key element of
the protective ensemble worn by our troops in Iraq and Afghanistan. Simula was
the developer of this specialized product called Small Arms Protective Insert
("SAPI"), and continues to be a prominent supplier to the U.S. military. We
believe the Aerospace & Defense Group has supplied approximately 37% of all
SAPI plates manufactured to date. The latest generation of body armor worn by
U.S. Army and Marine Corps Forces is called "Interceptor." The Interceptor
system incorporates a soft Kevlar vest (similar to police vests) and two hard
armor SAPI plates. In 2004, we expect the combined production of Simula and
Protech to account for approximately 300,000 SAPI plates, which we estimate
will represent approximately 40% of SAPI plates produced this year.

The Aerospace & Defense Group enjoys a unique position as sole supplier of
armored seats for most military helicopters for the U.S. Department of Defense.
Examples include the pilot/copilot seats for the UH-60 Black Hawk and AH-64
Apache. The Aerospace & Defense Group also provides cockpit airbag systems for
military helicopters and a range of survival equipment worn by military
aviators such as emergency bailout parachutes, flotation collars, and survival
vests.

Products. ($203.8 million of our revenue and $31.9 million of our
operating income for the 12 months ended March 31, 2004). Our Products Division
manufactures and markets a broad range of high quality security products,
equipment and related consumable items. Our security products are marketed
under brand names that are well established in the military and law enforcement
communities. The Products Division has approximately 1,250 employees in 14
manufacturing facilities located throughout the United States, Canada, the
United Kingdom, and Mexico. We also provide training services predominantly in
connection with the use of our products; this training is a key part of our
marketing effort and helps our federal, state, and municipal clients safely and
appropriately use our products.

Our products are typically non-discretionary equipment and consumables,
often used in potentially harmful or life-threatening situations. We believe
that our reputation for high quality products and brands has helped us capture
leading market share positions in many of our target markets. We also benefit
from a long history and strong relationships with military and government
customers. The primary users of our security products are federal, state and
local law enforcement agencies; local police departments; state corrections
facilities; U.S. and allied militaries; highway patrol; and sheriffs'
departments. We market and deliver our products through an extensive network of
approximately 200 domestic distributors, 150 international distributors, and a
sales force of 34 representatives and specialists. As a result of our diverse
product line and customer base, the Products Division's ten largest customers
accounted for $56.6 million, or 29.2% of the division revenue in 2003. Our
largest single customer, the Department of Defense, accounted for 10.7% of the
Products Division's 2003 revenue.

Mobile Security. ($85.8 million of our revenue and $3.1 million of our
operating income for the 12 months ended March 31, 2004). The Mobile Security
Division manufactures and installs ballistic

S-2

and blast protection armoring systems for commercial vehicles to protect
against varying degrees of ballistic and blast threats. In 2003, we supplied
armor and protection systems for 1,125 commercial armored vehicles. We serve a
wide range of customers internationally with approximately 740 employees in ten
domestic and international armoring plants. Our customers include U.S. federal
law enforcement and intelligence agencies, foreign heads of state,
multinational corporations, as well as high net worth individuals. Mobile
Security's ten largest customers provided $22.9 million, or 28.8%, of division
revenue in 2003.

INDUSTRY OVERVIEW

Recent global events have led both the U.S. government and the private
sector to redefine their strategies to protect against, respond to and combat
terrorism. Significant steps, such as the creation of the Department of
Homeland Security and increased Department of Defense budgets, have been taken
to increase security at both domestic and international facilities, and to
better train personnel to respond in the event of a terrorist attack. One clear
example is the Bush Administration's fiscal 2004 budget request, which includes
$41.3 billion for homeland security spending, and $380 billion for defense
spending. These numbers include significant increases in the anticipated
spending for force protection equipment, including vehicle armor, body armor,
and aircraft armor.

Vehicle Armor Market. Recent conflicts, military actions, and protracted
involvement in peacekeeping missions around the globe have increased the demand
for rapidly deployable and highly mobile armored vehicles. The M1114 Up-Armored
HMMWV has proven its effectiveness in front-line combat action in Bosnia,
Kosovo, Afghanistan, and Iraq. U.S. military sources estimate that between 2003
and 2007, over $2.2 billion will be spent by the U.S. military for M1114 HMMWV
procurement and research and development efforts. The continuing terrorist
attacks on U.S. forces deployed in Iraq and Afghanistan have created
significant interest in providing armor protection for the full range of light,
medium and heavy vehicles. Congressional testimony provided by the U.S. Army
leadership has indicated a desire to procure armor kits for these vehicles that
can be installed on the vehicle at its deployed location. We believe that the
market for armored vehicles for the U.S. Army and Marine Corps is likely to
remain robust over at least the next three to five years. We believe the M1114
Up-Armored HMMWV and other variants of the HMMWV in Iraq and Afghanistan, as
well as other armored tactical vehicles in the medium and heavy fleets, are
being subjected to strenuous conditions and will likely need to be replaced.
Foreign governments and militaries are also investing in armored vehicle
technology, including the M1114 Up-Armored HMMWV, and other armored vehicle
alternatives. In addition, we believe that the use of lightly armored
commercial vehicles in countries with high levels of crime, terrorism and
violence ("high fright areas") around the world will continue to increase as
corporations, foreign governments and wealthy individuals re-evaluate their
personnel protection policies and procedures.

Military Personnel Body Armor Market. There is dramatic change in the type
and extent of protective body armor being provided to the U.S. forces. In 1998,
the U.S. Army and Marine Corps adopted a new body armor ensemble called
Interceptor. This ensemble is made up of a soft armor vest for fragmentation
protection (using similar materials and design concepts to law enforcement
vests) and hard, ceramic body armor plates inserted into the soft vest to
provide rifle protection over vital organs. The concept was first deployed in a
combat zone in Afghanistan with tremendous success measured in the reduction of
life-threatening chest wounds. During the invasion of Iraq, front line U.S.
forces were widely equipped with the Interceptor system, which we believe is
being extended to cover all deployed troops in the combat zone. Extensive
procurement actions by the U.S. Army and Marine Corps are underway to outfit
all active, Reserve and National Guard troops that could be deployed around the
world. The market is substantial and is straining the capacity of the industry
to support the need. The product has a limited life cycle and we expect there
will be a sizeable ongoing replacement market in the future.

Military Aviation Safety Market. The military aviation safety market is
comprised of three distinct market segments: crash safety, ballistic
survivability, and aviator safety equipment. The primary

S-3

market for crash safety is in military helicopters. The products include
crashworthy seats and cockpit airbag systems. The ballistic survivability
market is both for helicopters and fixed wing aircraft. While many front line
aircraft have some basic armor protection, there is a growing interest in new
protective solutions that can offer more complete ballistic protection within
the limited available weight on an aircraft. Foreign markets for crash safety
and ballistic survivability products are similar in size to the U.S. market,
although the types of aircraft and customer base are more fragmented. The
aviator safety equipment market includes equipment such as body armor, survival
vests and survival equipment, inflatable life preservers, parachutes, and
emergency oxygen systems. The market is experiencing some growth as new
ensembles incorporating lessons learned from combat are introduced and
replacement equipment is increased due to the increased pace of operations.

Law Enforcement Security Products Market. According to the most recent
data available from the Department of Justice, direct expenditures for police
protection services in the United States grew at a compound annual growth rate
of 7.3% from 1982 through 2001, to a total of $72.4 billion in 2001. We
currently believe that this growth rate will continue, as will the growth in
the number of police officers and other first responders in the United States.
The Bush Administration estimates that there are more than 2.0 million first
responders in the United States.

COMPETITIVE STRENGTHS

Valuable Brands with Leading Market Positions. Our products and brands are
well established and have developed a reputation for high quality and
dependability. Due to the life-protecting nature of many of our products,
customers prefer premium, well-recognized brands with quality reputations. We
believe that our strong brand recognition attracts customer loyalty and repeat
customer business and helps us establish leading market share positions with
many of our product offerings.

Broad Portfolio of Products. Our broad product portfolio and our ability
to offer that portfolio in both domestic and overseas markets result in a
balanced revenue mix. Our broad array of security products and armor systems
allows us to be a single-source provider of comprehensive solutions for our
customers' security needs. Cross selling among our products creates additional
business opportunities and increases the value of our client relationships. We
believe that we have superior technology and know-how which enhances our
efforts to develop new products.

Long-Term Relationships with Government and Military Customers. We derive
the majority of our revenues from domestic and foreign law enforcement,
government and military customers. Over many years, we have developed strong
relationships with military, law enforcement, security and corrections
customers both in the United States and overseas. We believe that our
reputation and longstanding relationships with customers support our continued
growth.

Sole-Source Provider of M1114 Up-Armored HMMWVs. We are the sole-source
provider of up-armoring and have developed and own the proprietary technology
for new M1114 Up-Armored HMMWVs procured by the U.S. military. Since August
2001, we have furnished the up-armoring for approximately 2,000 M1114
Up-Armored HMMWVs to the U.S. military. We are also currently under contract to
provide spare parts, logistics and ongoing field support services for the U.S.
military's M1114 Up-Armored HMMWV fleet. In addition, we have begun providing
up-armoring of M1114 HMMWVs to a number of foreign military customers including
Canada, Egypt and Israel.

Extensive Portfolio of Armor Kits for Military Trucks. The two predominant
developers and manufacturers of mine blast and ballistic protection kits for
military trucks over the last 10 years have been O'Gara-Hess & Eisenhardt and
Simula. With these two organizations together in our Aerospace & Defense Group,
we are able to provide a complete portfolio of kit designs for light, medium
and heavy trucks for the U.S. military and foreign militaries. We are also able
to provide the complete capability of armor technologies, from basic steel
armors to sophisticated ceramic/composite armor systems. Although this market
was not sizeable in the past, recent actions by the services and by Congress
indicate that substantial quantities of vehicles will be armored in the near
term and future vehicles will be designed to readily accept these kits.

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Sole-Source Provider of Aviation Safety Products. We are the sole-source
provider for the following military crew seating systems: UH-60A/L and UH-60M
Black Hawk helicopter, MH-60S and MH-60R Sea Hawk helicopter, AH-1Z Cobra Venom
attack helicopter, AH-64 Apache attack helicopter, UH-1Y Super Huey utility
helicopter and the V-22 Osprey tilt-rotor aircraft. We are the sole-source
provider for the C-17 centerline and side-wall fixed-wing military seating
systems and the sole-source supplier selected by the U.S. Air Force to develop
a common wall-mounted troop seat for its C-130, C-141 and KC-135 aircraft.
Additionally, we are sole-source provider of aircraft airbag systems for the
UH-60 Black Hawk helicopter and the OH-58 Kiowa Warrior helicopter.

Industry-leading Market Position in Body Armor. We manufacture body armor
for the law enforcement community. Within the Armor Holdings family of
companies resides industry-leading technology for the design and manufacturing
of soft body armor design to protect against handgun threats and, in some
cases, other threats encountered in the line of duty. By virtue of the volume
of soft armor produced by us, we have developed significant supply
relationships with fiber and material suppliers that enable us to manage our
costs and obtain proprietary materials, each of which gives us market
advantage. With the acquisition of Simula and evolving product lines at
Protech, we are well positioned in the hard body armor plates market. The hard
plates are known as SAPIs and are used as the primary body armor for the U.S.
Army, Marine Corps and some special police units to augment the soft armor vest
to provide rifle protection.

Extensive Distribution Network. We market and deliver our products through
an extensive network of approximately 200 domestic distributors, 150
international distributors and through a sales force of 34 representatives and
specialists. We believe that we have one of the largest distribution networks
of security products, which provides a foundation for our continued growth and
expansion. The diversity of the markets we serve and the strength of our
distribution relationships reduces our dependence on any particular product,
market, or customer.

Experienced Management Team. Our management team brings extensive
knowledge of our customers and a proven ability to effectively manage our
operations. The core of our management team has been together as a group since
1996. Since then the team has been augmented through acquisitions in the area
of engineering and R&D to provide the capability to develop a range of new
products. In addition, our management has a proven record of identifying,
executing and integrating strategic acquisitions into our business, including
our two largest acquisitions to date: Simula in 2003 and the O'Gara group of
companies in 2001.

BUSINESS STRATEGY

Focus on Core Competencies. Our primary strength lies in our ability to
manufacture and distribute high quality security products, vehicle armoring
systems and human safety and survival systems. We plan to leverage this core
strength by expanding our research and development efforts, developing new
products and acquiring businesses that complement our existing technical base
and manufacturing operations. We plan to continue to streamline our
manufacturing process, aggressively integrate acquisitions and pursue
additional operating efficiencies to maximize the profitability of our
business.

Expand Distribution Network and Product Offerings. We plan to leverage our
distribution network by investing in the development of new and enhanced
products that complement our existing offerings and by expanding our range of
branded law enforcement equipment through the acquisition of security products
manufacturers. We believe that a broader product line will further strengthen
our relationships with distributors and enhance our brand appeal with military,
law enforcement and other end users.

Increase Exposure to Military Programs. As the sole-source provider of
M1114 Up-Armored HMMWVs for the U.S. military's M1114 HMMWV fleet, we believe
that we are in a strong position to capture opportunities to provide armoring
of additional vehicles for the Department of Defense. We

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believe the proven success of M1114 Up-Armored HMMWVs in combat has led to
increased interest in up-armoring other vehicles. Examples include recent
successful efforts to develop and supply armor kits for various types of light
through heavy tactical trucks and the continued relationship with the original
equipment manufacturers to explore up-armoring opportunities for the U.S.
Army's tactical vehicle fleet. We believe that the cost and time required to
develop an alternative protection system increases the likelihood that we will
maintain our sole-source position on this program and capture additional
programs.

Capitalize on Increased Homeland Security Requirements. The creation of
the Department of Homeland Security has increased the U.S. government's focus
on strengthening the infrastructure of homeland security. Our Products Division
is well positioned to provide security equipment and materials required by
military, law enforcement, and security personnel to combat terrorism, respond
to attacks and counter homeland threats. Our Mobile Security Division is well
positioned to provide armored vehicles for federal, state and local government
agencies.

Pursue Strategic Acquisitions. Since January 1, 1999, we have completed 16
acquisitions and integrated the acquired businesses into our Aerospace &
Defense Group, Products Division, and Mobile Security Division. We will
continue to seek opportunities to make value-based acquisitions that complement
our business operations or expand our product offerings, improve our
technology, provide access to new geographic markets or provide additional
distribution channels and new customer relationships. We have historically
taken a disciplined value-based approach to evaluating acquisition
opportunities, driven by a prudent use of our capital, rigorous due diligence
standards and a targeted expected return on our investment.

RECENT DEVELOPMENTS

Zylon (Registered Trademark) Investigation and Litigation

In September 2003, Second Chance Body Armor, Inc. ("Second Chance"), a
body armor manufacturer and competitor to Armor Holdings, notified its
customers of a potential safety issue with its Ultima (Registered Trademark)
and Ultimax (Registered Trademark) models. Second Chance has claimed that
Zylon (Registered Trademark) fiber, which is made by Toyobo, a Japanese
corporation, and used in the ballistic fabric construction of those two models,
degraded more rapidly than originally anticipated. Second Chance has also
stated that the Zylon (Registered Trademark) degradation problem affects the
entire body armor industry, not just its products. Both private claimants and
State Attorneys General have already commenced legal action against Second
Chance based upon its Ultima (Registered Trademark) and Ultimax (Registered
Trademark) model vests.

We use Zylon (Registered Trademark) fiber in a number of concealable body
armor models for law enforcement, but our vest design and construction are
different from Second Chance. We have been testing our Zylon (Registered
Trademark) -based vests since their 2000 introduction and to date these tests
show no unanticipated degradation in ballistic performance. In addition, to our
knowledge, no other body armor manufacturer has reported or experienced
problems with Zylon (Registered Trademark) -based vests similar to those cited
by Second Chance. The National Institute of Justice ("NIJ") tests and has
certified each of our body armor designs before we begin to produce or sell any
particular model.

In the Fall of 2003, following the assertions made by Second Chance,
several law enforcement associations raised this issue to the U.S. Attorney
General ("USAG"), who then asked the U.S. Department of Justice ("DOJ") through
the NIJ to investigate these concerns and attempt to clarify the issues. We
have and continue to support the Attorney General's directive and
investigation.

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NIJ specifically warned against the misuse and misinterpretation of these
results, emphasizing that the data produced so far is preliminary in nature,
applies to a very small sample size and therefore it is not possible to draw
any definitive conclusions from these results. The NIJ will continue to conduct
further testing and analyze these issues in order to determine if any
conclusions can be reached as to the performance and reliability of aged vests.
We have requested the NIJ to provide us with its testing data, and we intend to
evaluate and review the NIJ's results upon our receipt of such data in our
continuing effort to assist the NIJ in developing uniform standards for
certification of new vests and the testing of used vests.

In April 2004, two class action complaints were filed in Florida state
court by police organizations and individual police officers, alleging, among
other things, that our vests do not have the qualities and performance
characteristics as warranted, thereby breaching express warranty, implied
warranty of merchantability, implied warranty of fitness for a particular
purpose and duty to warn. The complaints allege no specific amount, although it
has been publicly stated that they are seeking $77 million in compensatory
damages. We disagree with the allegations set forth in these complaints and are
vigorously defending these lawsuits. We will be seeking to dismiss the claims
asserted against us, however, any adverse resolution of these matters could
have a material adverse effect on our business, financial condition, results of
operations and liquidity. We have also received investigative demands from
state agencies in Texas and Connecticut to which we have complied, as well as
letters from two private attorneys threatening potential litigation.

It should be stressed that our vests are certified by the NIJ, have never
suffered any penetration in the field and continue to save lives and protect
officers from injury. In fact, neither of the two recently commenced lawsuits
allege personal injuries of any kind, but instead speculate that our vests
which contain Zylon (Registered Trademark) are defective without any reliable
evidence of any defect.

Second Chance licenses from Simula a certain patented technology, which is
used in some of the body armor it manufactures, but to our knowledge, no
lawsuit has yet been brought against Second Chance based upon this licensed
technology. Although Simula may be impacted by the pending suits filed against
Second Chance, the licensed technology is not specifically related to the use
of Zylon (Registered Trademark) fiber, however, any adverse resolution of
these matters could have a material adverse effect on our business, financial
condition, results of operations and liquidity.

Tax Matters

The Internal Revenue Service ("IRS") examined our U.S. federal income tax
returns for the taxable years 2000 and 2001 and its examination concluded in
April 2004. The IRS' examination of our tax returns for the taxable years 2000
and 2001 did not result in any material adverse effect on our business,
financial condition, results of operations and liquidity.

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

Our executive offices are located at 1400 Marsh Landing Parkway, Suite
112, Jacksonville, FL 32250. Our telephone number is (904) 741-5400 and our
website address is www.armorholdings.com. Information contained on our website
is not part of this prospectus supplement and is not incorporated by reference.

S-7

THE OFFERING

Common stock offered by Armor
Holdings...................... 4,000,000 shares.(1)

Common stock to be outstanding
immediately after
this offering................. 32,626,377 shares.(1)

Use of proceeds............... We intend to use the net proceeds from this
offering to fund future acquisitions, to take
advantage of business development
opportunities, and for general corporate and
working capital purposes, including the funding
of capital expenditures. Until we use the
proceeds from this offering in such manner, we
intend to invest the proceeds in short-term
taxable investment grade obligations, bank
deposits, U.S. Government Securities or similar
instruments. We will not receive any proceeds
from any sale of shares by the selling
stockholders.

Risk factors.................. See "Risk Factors" beginning on page S-12 of
this prospectus supplement and page 6 of the
accompanying prospectus for a discussion of
factors you should carefully consider before
deciding to invest in shares of our common
stock.
New York Stock
Exchange Symbol............... AH
----------
(1) Does not include up to 600,000 additional shares that the underwriters
have the option to purchase from us and the selling stockholders.

The number of shares of our common stock that will be outstanding after
this offering is based on 28,626,377 shares of common stock outstanding as of
May 19, 2004. The number of shares outstanding after this offering does not
include 3,874,724 shares of common stock issuable upon the exercise of stock
options outstanding as of May 19, 2004, having a weighted average exercise
price of $18.22 per share.

S-8

SUMMARY CONSOLIDATED FINANCIAL INFORMATION

The following summary consolidated financial information is derived from
our audited consolidated financial statements as of December 31, 2003 and
December 31, 2002, and for each of the three years ended December 31, 2003,
which were audited by PricewaterhouseCoopers LLP. The summary consolidated
financial information as of, and for each of the three months ended March 31,
2004 and March 31, 2003 are derived from our unaudited consolidated financial
statements. The unaudited consolidated financial statements include all
adjustments, consisting of normal recurring accruals, which we consider
necessary for a fair presentation of our financial position and the results of
operations for these periods.

Operating results for the fiscal quarter ended March 31, 2004 and the year
ended December 31, 2003 are not necessarily indicative of the results that may
be expected for the entire year ending December 31, 2004 or for any other
future period. You should read the information set forth in the table below in
conjunction with our consolidated financial statements and the related notes
thereto and other financial data contained elsewhere or incorporated by
reference in the accompanying prospectus.

THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------- ---------------------
2001 2002 2003 2003 2004
------------ ------------ ------------ ---------- ----------
(UNAUDITED)
(DOLLARS IN THOUSANDS)

INCOME STATEMENT DATA:
Revenues:
Aerospace & Defense ....................... $ 18,145 $ 59,318 $ 91,673 $ 15,910 $ 81,008
Products .................................. 149,868 179,946 193,960 44,007 53,840
Mobile Security ........................... 29,087 65,853 79,539 20,557 26,780
--------- --------- -------- -------- --------
Total Revenues ............................ 197,100 305,117 365,172 80,474 161,628
Costs and Expenses:
Cost of sales ............................. 126,330 210,745 253,586 57,162 114,068
Operating expenses ........................ 38,659 49,836 62,795 14,004 23,251
Amortization(1) ........................... 2,142 245 489 60 980
Integration and other charges(2) .......... 3,296 5,926 12,573 422 681
--------- --------- -------- -------- --------
Operating Income ........................... 26,673 38,365 35,729 8,826 22,648
Interest expense, net ..................... 3,864 923 4,012 379 1,728
Other (income) expense, net... ............ (82) 51 508 69 115
--------- --------- -------- -------- --------
Income from continuing operations before
provision for income taxes ................ 22,891 37,391 31,209 8,378 20,805
Provision for income taxes ................. 8,207 16,054 14,203 3,133 8,177
--------- --------- -------- -------- --------
Income from continuing operations .......... 14,684 21,337 17,006 5,245 12,628
--------- --------- -------- -------- --------
(Loss) from discontinued operations, net of
income tax benefit (provision)(3) ......... (4,556) (39,026) (6,120) (158) (138)
--------- --------- -------- -------- --------
Net income (loss) .......................... $ 10,128 $ (17,689) $ 10,886 $ 5,087 $ 12,490
========= ========= ======== ======== ========
BALANCE SHEET DATA (AT THE END OF PERIOD):
Cash and cash equivalents .................. $ 53,719 $ 16,551 $111,926 $ 21,599 $ 76,218
Working capital(4) ......................... 142,723 100,591 168,644 101,440 179,387
Total assets ............................... 388,057 367,753 585,626 375,222 587,901
Total debt ................................. 8,085 8,188 191,030 27,830 160,664
Net debt(5). ............................... (45,634) (8,363) 79,104 6,231 84,446
Stockholders' equity. ...................... 326,019 288,077 295,365 271,110 312,345

S-9

THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------- -------------------------
2001 2002 2003 2003 2004
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)

OTHER FINANCIAL DATA:
EBITDA from continuing operations(6)(10) .......... $ 31,931 $ 43,562 $ 42,545 $ 10,407 $ 25,811
EBITDA margin for continuing
operations(6)(10) ................................ 16.2% 14.3% 11.7% 12.9% 16.0%
EBITDA from continuing operations before
integration and other charges(2)(6)(10) .......... $ 35,227 $ 49,488 $ 55,118 $ 10,829 $ 26,492
EBITDA margin for continuing operations
before integration and other
charges(2)(6)(10) ................................ 17.9% 16.2% 15.1% 13.5% 16.4%
Capital expenditures for continuing operations..... $ 5,644 $ 5,902 $ 8,684 $ 1,727 $ 3,814
Interest expense for continuing operations ........ $ 4,002 $ 1,302 $ 4,800 $ 397 $ 2,067
Depreciation and amortization for continuing
operations ....................................... $ 5,258 $ 5,197 $ 6,816 $ 1,581 $ 3,163
Ratio of net debt to EBITDA from continuing
operations(6)(7)(8)(9) ........................... -- -- 1.9x -- --
Ratio of earnings to fixed charges(9) ............. 5.7x 14.9x 6.3x 13.3x 9.8x

----------
(1) Effective January 1, 2002, we adopted Statement of Financial Accounting
Standard No. 142, "Goodwill and Other Intangible Assets" (SFAS 142).
Amortization of goodwill, including goodwill recorded in past business
combinations, ceased upon adoption of this statement. In addition, this
statement requires that goodwill be tested for impairment at least
annually at the reporting unit level.

(2) Includes charges and certain non-capitalized expenses relating to the
acquisition and integration of acquired businesses, stock-based
compensation for certain key executives, severance charges and direct
expenses associated with due diligence efforts for acquisitions not
completed, integration of sales, marketing, distribution and
manufacturing operations, as well as relocation and lease termination
expenses.

(3) As described in Note 2 of our fiscal 2003 audited financial statements,
included elsewhere in this prospectus supplement, we recorded net
impairment charges of $12.4 million and $30.3 million in fiscal 2003 and
2002, respectively, for the Services Division. The 2003 impairment
charges consisted of a non-cash goodwill reduction. The fiscal 2002
impairment charges consisted of approximately $6.1 million in estimated
disposal costs and a $24.2 million non-cash goodwill reduction. In fiscal
2001, we recorded a pre-tax restructuring charge of $10.3 million for the
Services Division as a result of an approved restructuring plan to close
its U.S. investigations businesses, realign the Division's organization,
eliminate excess facilities and reduce overhead in its businesses
worldwide. Operating results for 2001 through the first three months of
fiscal 2004 ended March 31, 2004 reflect the reclassification of the
Services Division as discontinued operations. Cyconics International
Training Services, Inc., a subsidiary providing certain training
services, formerly reported as a part of the Services Division, is not
included in the amounts classified as assets held for sale. The assets
and liabilities as well as the operating results of Cyconics
International Training Services, Inc. have been reclassified to the Armor
Holdings Products Division where management oversight currently resides.

(4) Working capital is defined as current assets less current liabilities.

(5) Net debt consists of total debt less cash and cash equivalents.

(6) The following are not financial measures calculated in accordance with
generally accepted accounting principles:

S-10

o EBITDA from continuing operations, which we define as operating income
from continuing operations, plus interest and other expenses (net),
provision (benefit) for income taxes for continuing operations and
depreciation and amortization for continuing operations;

o EBITDA margin from continuing operations, which is EBITDA from
continuing operations divided by total revenues;

o EBITDA from continuing operations before integration and other charges,
which we define as EBITDA from continuing operations plus integration and
other charges; and

o EBITDA margin from continuing operations before integration and other
charges, which is EBITDA from continuing operations before integration and
other charges divided by total revenues;

Although our management may use these measures from time to time to track
our cash flow or
availability under our revolving credit facility, we do not intend any of
these measures to be used as indicators of our operating performance or
liquidity for the referenced period or for future periods.

(7) The ratio of net debt to EBITDA is not a financial measure calculated in
accordance with generally accepted accounting principles and is not
intended as an indicator of our operating performance or liquidity for
the referenced period or for future periods.

(8) For fiscal 2001 and 2002, the ratio was negative and therefore not
meaningful. In these periods, cash and cash equivalents exceeded total
debt. This ratio is not meaningful in quarterly periods.

(9) For purposes of computing the ratio of earnings to fixed charges,
earnings consist of income from continuing operations before provision
for income tax, plus fixed charges. Fixed charges consist of interest
expense for continuing and discontinued operations, amortization of debt
issuance cost and one-third of our rental expense for continuing and
discontinued operations. Management believes that one-third is
representative of the interest component of such rental expense.

(10) The following table shows the reconciliation of our net income (loss) as
reported to operating income from continued operations, EBITDA from
continuing operations and EBITDA from continuing operations before
integration and other charges:

THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------- ----------------------
2001 2002 2003 2003 2004
---------- ------------- ---------- --------- ----------
(UNAUDITED)
(DOLLARS IN THOUSANDS)

Net income (loss) as reported ....................... $10,128 $ (17,689) $10,886 $ 5,087 $12,490
Plus: Loss from discontinued operations ............. 4,556 39,026 6,120 158 138
Plus: Provision for income taxes from
continuing operations .............................. 8,207 16,054 14,203 3,133 8,177
Plus: Other (expense) income, net ................... (82) 51 508 69 115
Plus: Interest expense, net ......................... 3,864 923 4,012 379 1,728
------- --------- ------- ------- -------
Operating income from continuing operations ......... 26,673 38,365 35,729 8,826 22,648
Plus: Depreciation and amortization ................. 5,258 5,197 6,816 1,581 3,163
------- --------- ------- ------- -------
EBITDA from continuing operations ................... 31,931 43,562 42,545 10,407 25,811
Plus: Integration and other charges ................. 3,296 5,926 12,573 422 681
------- --------- ------- ------- -------
EBITDA from continuing operations before
integration and other charges ...................... $35,227 $ 49,488 $55,118 $10,829 $26,492
======= ========= ======= ======= =======

S-11

RISK FACTORS

Before you invest in our common stock, you should be aware of various
risks, including those described below. You should carefully consider these
risk factors, together with all of the other information included or
incorporated by reference in this prospectus supplement and the accompanying
prospectus, before you decide whether to purchase our common stock. The risks
set out below are not the only risks we face. Interested persons should
carefully consider the risks described below in evaluating our company and our
business, financial condition, and results of operations. Additional risks and
uncertainties not presently known to us, or that we currently consider to be
immaterial, may also impair our business and financial situation.

If any of the following risks occur, our business, financial condition and
results of operations could be materially adversely affected. In such case, the
trading price of our common stock could decline, and you may lose all or part
of your investment.

RISKS RELATED TO OUR INDUSTRY

THE PRODUCTS WE SELL ARE INHERENTLY RISKY AND COULD GIVE RISE TO PRODUCT
LIABILITY AND OTHER CLAIMS.

The products that we manufacture are typically used in applications and
situations that involve high levels of risk of personal injury. Failure to use
our products for their intended purposes, failure to use or care for them
properly, or their malfunction could result in serious bodily injury or death.
Given this potential risk of injury, proper maintenance of our products is
critical. Our products include: body armor and plates designed to protect
against ballistic and sharp instrument penetration; less-lethal products such
as less-lethal munitions, pepper sprays, distraction devices and flameless
expulsion grenades; various models of police batons; rotary and fixed-wing
aircraft seating systems; parachutes; vehicle and hard armoring systems; and
police duty gear.

Claims have been made and are pending against certain of our subsidiaries,
involving permanent physical injury and death caused by self-defense sprays and
other munitions intended to be less-lethal. In addition, the manufacture and
sale of certain less-lethal products may be the subject of product liability
claims arising from the design, manufacture or sale of such goods. If these
claims are decided against us and we are found to be liable, we may be required
to pay substantial damages and our insurance costs may increase significantly
as a result. Also, a significant or extended lawsuit, such as a class action,
could also divert significant amounts of management's time and attention. We
cannot assure you that our insurance coverage would be sufficient to cover the
payment of any potential claim. In addition, we cannot assure you that this or
any other insurance coverage will continue to be available or, if available,
that we will be able to obtain it at a reasonable cost. Our cost of obtaining
insurance coverage has risen substantially since September 11, 2001. Any
material uninsured loss could have a material adverse effect on our business,
financial condition and results of operations. In addition, the inability to
obtain product liability coverage would prohibit us from bidding for orders
from certain governmental customers since, at present, many bids from
governmental entities require such coverage, and any such inability would have
a material adverse effect on our business, financial condition, results of
operations and liquidity.

Both private claimants and State Attorneys General have already commenced
legal action against Second Chance Body Armor, Inc. ("Second Chance"), a body
armor manufacturer and competitor to Armor Holdings, based upon its Ultima
(Registered Trademark) and Ultimax (Registered Trademark) model vests. Second
Chance licenses from Simula, one of our indirect subsidiaries, a certain
patented technology which is used in some of the body armor it manufactures,
but to our knowledge, no lawsuit has yet been brought against Second Chance
based upon this licensed technology, although a letter was received by Simula
from an attorney representing a police officer who was injured while wearing a
Second Chance vest alleging potential liability against Simula. In addition,
the U.S. Attorney General has asked the U.S. Department of Justice to
investigate the claims regarding the Zylon (Registered Trademark) vests. As
Simula has licensed its technology to Second Chance, it may be impacted by the
pending claims against Second Chance and the investigation being conducted by
the U.S. Department of Justice. If Simula

S-12

is included in the claims pending against Second Chance and the investigation
being conducted by the U.S. Department of Justice, we cannot assure you that
any judgment, settlement or resolution against Simula will not have a material
adverse effect on Simula's business, financial condition, results of operations
and liquidity.

As a result of the USAG's and DOJ's initiative, the NIJ commenced an
inquiry and investigation regarding the protocol for testing used vests, as
well as the reliability of Zylon (Registered Trademark) and other ballistic
fibers. We have consulted and continue to cooperate fully with the NIJ in this
endeavor. To date, the NIJ has embarked only in its first phase of testing,
which entails vests that have been heavily worn or exposed to adverse
conditions, and which utilized the ballistic testing standard applicable to new
vests. Although some of the vests tested, including ours, experienced some
level of penetration, the NIJ specifically warned against the misuse and
misinterpretation of these results, emphasizing that the data produced so far
is preliminary in nature, applies to a very small sample size and therefore it
is not possible to draw any definitive conclusions from these results. The NIJ
will continue to conduct further testing and analyze these issues in order to
determine if any conclusions can be reached as to the performance and
reliability of aged vests. We have requested the NIJ to provide us with its
testing data, and we intend to evaluate and review the NIJ's results upon our
receipt of such data in our continuing effort to assist the NIJ in developing
uniform standards for certification of new vests and the testing of used vests.

WE ARE SUBJECT TO EXTENSIVE GOVERNMENT REGULATION AND OUR FAILURE OR INABILITY
TO COMPLY WITH THESE REGULATIONS COULD MATERIALLY RESTRICT OUR OPERATIONS AND
SUBJECT US TO SUBSTANTIAL PENALTIES.

We are subject to federal licensing requirements with respect to the sale
in foreign countries of certain of our products. In addition, we are obligated
to comply with a variety of federal, state and local regulations, both
domestically and abroad, governing certain aspects of our operations and
workplace, including regulations promulgated by, among others, the U.S.
Departments of Commerce, State and Transportation, the Federal Aviation
Administration, the U.S. Environmental Protection Agency and the U.S. Bureau of
Alcohol, Tobacco and Firearms. The U.S. Bureau of Alcohol, Tobacco, and
Firearms also regulates us as a result of our manufacturing of certain
destructive devices and by the use of ethyl alcohol in certain products. We
also ship hazardous goods, and in doing so, must comply with the regulations of
the U.S. Department of Transportation for packaging and labeling. Additionally,
the failure to obtain applicable governmental approval and clearances could
adversely affect our ability to continue to service the government contracts we
maintain. Furthermore, we have material contracts with governmental entities
and are subject to rules, regulations and approvals applicable to government
contractors. We are also subject to routine audits to assure our compliance
with these requirements. We have become aware that we are not in full
compliance with certain regulations governing the export of equipment and
related technology used for military purposes that are applicable to certain of
our products. We have made a voluntary disclosure to the Office of Defense
Trade Controls Compliance and have undertaken steps to comply with these
regulations and to help ensure compliance in the future. We do not believe that
such noncompliance

S-13

will have a material adverse effect on our business. In addition, a number of
our employees involved with certain of our federal government contracts are
required to obtain specified levels of security clearances. Our business may
suffer if we or our employees are unable to obtain the security clearances that
are needed to perform services contracted for the Department of Defense, one of
our major customers. Our failure to comply with these contract terms, rules or
regulations could expose us to substantial penalties, including the loss of
these contracts and disqualification as a U.S. government contractor.

Like other companies operating internationally, we are subject to the
Foreign Corrupt Practices Act and other laws which prohibit improper payments
to foreign governments and their officials by U.S. and other business entities.
We operate in countries known to experience endemic corruption. Our extensive
operations in such countries creates risk of an unauthorized payment by one of
our employees or agents which would be in violation of various laws including
the Foreign Corrupt Practices Act. Violations of the Foreign Corrupt Practices
Act may result in severe criminal penalties which could have a material adverse
effect on our business, financial condition, results of operations and
liquidity.

WE HAVE SIGNIFICANT INTERNATIONAL OPERATIONS AND ASSETS, AND THEREFORE, ARE
SUBJECT TO ADDITIONAL FINANCIAL AND REGULATORY RISKS.

We sell our products in foreign countries and seek to increase our level
of international business activity. Our overseas operations are subject to
various risks, including: U.S.-imposed embargoes of sales to specific countries
(which could prohibit sales of our products there); foreign import controls
(which may be arbitrarily imposed and enforced and which could interrupt our
supplies or prohibit customers from purchasing our products); exchange rate
fluctuations; dividend remittance restrictions; expropriation of assets; war,
civil uprisings and riots; government instability; the necessity of obtaining
government approvals for both new and continuing operations; and legal systems
of decrees, laws, taxes, regulations, interpretations and court decisions that
are not always fully developed and that may be retroactively or arbitrarily
applied.

One component of our strategy is to expand our operations into selected
international markets. Military procurement, for example, has traditionally had
a large international base. Countries in which we are actively marketing
include Germany, Canada, France, Italy, the United Kingdom, Norway, Japan,
India, Korea and Australia. We, however, may be unable to execute our business
model in these markets or new markets. Further, foreign providers of competing
products and services may have a substantial advantage over us in attracting
consumers and businesses in their country due to earlier established businesses
in that country, greater knowledge with respect to the cultural differences of
consumers and businesses residing in that country and/or their focus on a
single market. We expect to continue to experience higher costs as a percentage
of revenues in connection with the development and maintenance of international
products and services. In pursuing our international expansion strategy, we
face several additional risks, including:

o foreign laws and regulations, which may vary country by country, that
may impact how we conduct our business;

o higher costs of doing business in foreign countries, including different
employment laws;

o potential adverse tax consequences if taxing authorities in different
jurisdictions worldwide disagree with our interpretation of various tax
laws or our determinations as to the income and expenses attributable to
specific jurisdictions, which could result in our paying additional taxes,
interest and penalties;

o technological differences that vary by marketplace, which we may not be
able to support;

o longer payment cycles and foreign currency fluctuations;

o economic downturns; and

o revenue growth outside of the United States may not continue at the same
rate if it is determined that we have already launched our products and
services in the most significant markets.

S-14

We may also be subject to unanticipated income taxes, excise duties,
import taxes, export taxes or other governmental assessments. In addition, a
percentage of the payments to us in our international markets are often in
local currencies. Although most of these currencies are presently convertible
into U.S. dollars, we cannot be sure that convertibility will continue. Even if
currencies are convertible, the rate at which they convert is subject to
substantial fluctuation. Our ability to transfer currencies into or out of
local currencies may be restricted or limited. Any of these events could result
in a loss of business or other unexpected costs which could reduce revenue or
profits and have a material adverse effect on our business, financial
condition, results of operations and liquidity.

We routinely operate in areas where local government policies regarding
foreign entities and the local tax and legal regimes are often uncertain,
poorly administered and in a state of flux. We cannot, therefore, be certain
that we are in compliance with, or will be protected by, all relevant local
laws and taxes at any given point in time. A subsequent determination that we
failed to comply with relevant local laws and taxes could have a material
adverse effect on our business, financial condition, results of operations and
liquidity.

One or more of these factors could adversely affect our future
international operations and, consequently, could have a material adverse
effect on our business, financial condition, results of operation and
liquidity.

RISKS RELATED TO OUR BUSINESS

MANY OF OUR CUSTOMERS HAVE FLUCTUATING BUDGETS WHICH MAY CAUSE SUBSTANTIAL
FLUCTUATIONS IN OUR RESULTS OF OPERATIONS.

Customers for our products include federal, state, municipal, foreign and
military, law enforcement and other governmental agencies. Government tax
revenues and budgetary constraints, which fluctuate from time to time, can
affect budgetary allocations for these customers. Many domestic and foreign
government agencies have in the past experienced budget deficits that have led
to decreased spending in defense, law enforcement and other military and
security areas. Our results of operations may be subject to substantial
period-to-period fluctuations because of these and other factors affecting
military, law enforcement and other governmental spending. For example, we
attribute part of the decline in our Products Division revenue during the first
quarter of 2001 with the timing of the Bulletproof Vest Partnership Act, which
provides federal matching funds to law enforcement agencies purchasing bullet
resistant vests. We believe that many agencies delayed their purchasing
decisions during the first quarter of 2001 until such federal funds were fully
allocated. A reduction of funding for federal, state, municipal, foreign and
other governmental agencies could have a material adverse effect on sales of
our products and our business, financial condition, results of operations and
liquidity.

THE LOSS OF, OR A SIGNIFICANT REDUCTION IN, U.S. MILITARY BUSINESS WOULD HAVE
A MATERIAL ADVERSE EFFECT ON US.

U.S. military contracts account for a significant portion of our business.
The U.S. military funds these contracts in annual increments. These contracts
require subsequent authorization and appropriation that may not occur or that
may be greater than or less than the total amount of the contract. Changes in
the U.S. military's budget, spending allocations, and the timing of such
spending could adversely affect our ability to receive future contracts. None
of our contracts with the U.S. military have a minimum purchase commitment and
the U.S. military generally has the right to cancel its contracts unilaterally
without prior notice. We are the sole-source provider to the U.S. military for
up-armoring of the U.S. military's High Mobility Multipurpose Wheeled Vehicles
("HMMWVs"). The HMMWVs are manufactured by AM General Corporation under
separate U.S. military contracts. Should production or deliveries of HMMWVs be
significantly interrupted, or should other single source suppliers
significantly interrupt deliveries of our components for up-armoring the
HMMWVs, we will not be able to deliver such up-armoring systems for the HMMWVs
to the U.S. military on schedule, which could have a material adverse effect on
our business, financial condition, results of

S-15

operations and liquidity. We also manufacture for the U.S. military helicopter
seating systems, aircraft and land vehicle armor systems, protective equipment
for military personnel and other technologies used to protect soldiers in a
variety of life-threatening or catastrophic situations. The loss of, or a
significant reduction in, U.S. military business for our helicopter seating
systems, aircraft and land vehicle armor systems and other protective equipment
could have a material adverse effect on our business, financial condition,
results of operations and liquidity.

WE MAY LOSE MONEY OR GENERATE LESS THAN EXPECTED PROFITS ON OUR FIXED-PRICE
CONTRACTS.

Some of our government contracts provide for a predetermined, fixed price
for the products we make regardless of the costs we incur. Therefore,
fixed-price contracts require us to price our contracts by forecasting our
expenditures. When making proposals for fixed-price contracts, we rely on our
estimates of costs and timing for completing these projects. These estimates
reflect management's judgments regarding our capability to complete projects
efficiently and timely. Our production costs may, however, exceed forecasts due
to unanticipated delays or increased cost of materials, components, labor,
capital equipment or other factors. Therefore, we may incur losses on fixed
price contracts that we had expected to be profitable, or such contracts may be
less profitable than expected, which could have a material adverse effect on
our business, financial condition, results of operations and liquidity.

OUR BUSINESS IS SUBJECT TO VARIOUS LAWS AND REGULATIONS FAVORING THE U.S.
GOVERNMENT'S CONTRACTUAL POSITION, AND OUR FAILURE TO COMPLY WITH SUCH LAWS
AND REGULATIONS COULD HARM OUR OPERATING RESULTS AND PROSPECTS.

As a contractor to the U.S. government, we must comply with laws and
regulations relating to the formation, administration and performance of the
federal government contracts that affect how we do business with our clients
and may impose added costs on our business. These rules generally favor the
U.S. government's contractual position. For example, these regulations and laws
include provisions that subject contracts we have been awarded to:

o protest or challenge by unsuccessful bidders; and

o unilateral termination, reduction or modification by the government.

The accuracy and appropriateness of certain costs and expenses used to
substantiate our direct and indirect costs for the U.S. government under both
cost-plus and fixed-price contracts are subject to extensive regulation and
audit by the Defense Contract Audit Agency, an arm of the U.S. Department of
Defense. Responding to governmental audits, inquiries or investigations may
involve significant expense and divert management's attention. Our failure to
comply with these or other laws and regulations could result in contract
termination, suspension or debarment from contracting with the federal
government, civil fines and damages and criminal prosecution and penalties, any
of which could have a material adverse effect on our business, financial
condition, results of operations and liquidity.

OUR MARKETS ARE HIGHLY COMPETITIVE, AND, IF WE ARE UNABLE TO COMPETE
EFFECTIVELY, WE WILL BE ADVERSELY AFFECTED.

The markets in which we operate include a large number of competitors
ranging from small businesses to multinational corporations and are highly
competitive. Competitors who are larger, better financed and better known than
us may compete more effectively than we can. In order to stay competitive in
our industry, we must keep pace with changing technologies and client
preferences. If we are unable to differentiate our services from those of our
competitors, our revenues may decline. In addition, our competitors have
established relationships among themselves or with third parties to increase
their ability to address client needs. As a result, new competitors or
alliances among competitors may emerge and compete more effectively than we
can. There is also a significant industry trend towards consolidation, which
may result in the emergence of companies which are better able to compete
against us.

S-16

THERE ARE LIMITED SOURCES FOR SOME OF OUR RAW MATERIALS WHICH MAY
SIGNIFICANTLY CURTAIL OUR MANUFACTURING OPERATIONS.

The raw materials that we use in manufacturing ballistic resistant
garments, SAPI plates and up-armored vehicles include: ceramic; steel;
SpectraShield, a patented product of Honeywell, Inc.; Z-Shield, a patented
product of Honeywell, Inc.; Zylon (Registered Trademark) , a patented product
of Toyobo Co., Ltd.; Kevlar, a patented product of E.I. du Pont de Nemours Co.,
Inc., or DuPont; and Twaron, a patented product of Akzo-Nobel Fibers, B.V. We
purchase these materials in the form of woven cloth from five independent
weaving companies. In the event Du Pont or its licensee in Europe cease, for
any reason, to produce or sell Kevlar to us, we would utilize these other
ballistic resistant materials as a substitute. However, none of SpectraShield,
Twaron, Z-Shield or Zylon (Registered Trademark) is expected to become a
complete substitute for Kevlar in the near future. We enjoy a good relationship
with our suppliers of Kevlar, SpectraShield, Twaron, Z-Shield and Zylon
(Registered Trademark) . The use of Zylon (Registered Trademark) and Z-Shield
in the design of ballistic resistant vests is a recent technological
advancement that is subject to continuing development and study, including
ongoing review by the NIJ. Toyobo is the only producer of Zylon (Registered
Trademark) , and Honeywell is the only producer of Z-Shield. Should these
materials become unavailable for any reason, we would be unable to replace them
with materials of like weight and strength. We use a variety of ceramic
materials in the production of SAPI plates and a variety of steels in armoring
vehicles. Although we have a number of suppliers that we deal with in obtaining
both ceramic and steel supplies, the industry generally, including our
operations, is experiencing a limited supply of these materials, which is
affecting the quantity of product that we can complete in any given period. In
addition, SpectraShield, the ballistic fiber backing used in a variety of our
ballistic applications, including SAPI plates, is currently being rationed by
the U.S. Department of Commerce, which could limit the quantity of SAPI plates
that we produce in any given period. Thus, if our supply of any of these
materials were materially reduced or cut off or if there was a material
increase in the prices of these materials, our manufacturing operations could
be adversely affected and our costs increased, and our business, financial
condition, results of operations and liquidity could be materially adversely
affected.

WE MAY BE UNABLE TO COMPLETE OR INTEGRATE ACQUISITIONS EFFECTIVELY, IF AT ALL,
AND AS A RESULT MAY INCUR UNANTICIPATED COSTS OR LIABILITIES OR OPERATIONAL
DIFFICULTIES.

We intend to grow through the acquisition of businesses and assets that
will complement our current businesses. We cannot be certain that we will be
able to identify attractive acquisition targets, obtain financing for
acquisitions on satisfactory terms or successfully acquire identified targets.
Furthermore, we may have to divert our management's attention and our financial
and other resources from other areas of our business. Our inability to
implement our acquisition strategy successfully may hinder the expansion of our
business. Because we depend in part on acquiring new businesses and assets to
develop and offer new products, failure to implement our acquisition strategy
may also adversely affect our ability to offer new products in line with
industry trends.

We may not be successful in integrating acquired businesses into our
existing operations. Integration may result in unanticipated liabilities or
unforeseen operational difficulties, which may be material, or require a
disproportionate amount of management's attention. Acquisitions may result in
us incurring additional indebtedness or issuing preferred stock or additional
common stock. Competition for acquisition opportunities in the industry may
rise, thereby increasing our cost of making acquisitions or causing us to
refrain from making further acquisitions. In addition, the terms and conditions
of our senior credit facility and the indenture governing our 81/4% notes
impose restrictions on us that, among other things, restrict our ability to
make acquisitions.

OUR RESOURCES MAY BE INSUFFICIENT TO MANAGE THE DEMANDS IMPOSED BY OUR GROWTH.

We have rapidly expanded our operations, and this growth has placed
significant demands on our management, administrative, operating and financial
resources. The continued growth of our customer base, the types of services and
products offered and the geographic markets served can be expected to continue
to place a significant strain on our resources. In addition, we cannot easily

S-17

identify and hire personnel qualified both in the provision and marketing of
our security services and products. Our future performance and profitability
will depend in large part on our ability to attract and retain additional
management and other key personnel; our ability to implement successful
enhancements to our management, accounting and information technology systems;
and our ability to adapt those systems, as necessary, to respond to growth in
our business.

WE DEPEND ON INDUSTRY RELATIONSHIPS.

A number of our products are components in our customers' final products.
Accordingly, to gain market acceptance, we must demonstrate that our products
will provide advantages to the manufacturers of final products, including
increasing the safety of their products, providing such manufacturers with
competitive advantages or assisting such manufacturers in complying with
existing or new government regulations affecting their products. There can be
no assurance that our products will be able to achieve any of these advantages
for the products of our customers. Furthermore, even if we are able to
demonstrate such advantages, there can be no assurance that such manufacturers
will elect to incorporate our products into their final products, or if they
do, that our products will be able to meet such customers' manufacturing
requirements. Additionally, there can be no assurance that our relationships
with our manufacturer customers will ultimately lead to volume orders for our
products. The failure of manufacturers to incorporate our products into their
final products could have a material adverse effect on our business, financial
condition, results of operations and liquidity.

WE MAY BE UNABLE TO PROTECT OUR PROPRIETARY TECHNOLOGY, INCLUDING THE
TECHNOLOGIES WE USE TO FURNISH THE UP-ARMORING OF HMMWVS.

We depend upon a variety of methods and techniques that we regard as
proprietary trade secrets. We also depend upon a variety of trademarks, service
marks and designs to promote brand name development and recognition. We rely on
a combination of trade secret, copyright, patent, trademark, unfair competition
and other intellectual property laws as well as contractual agreements to
protect our rights to such intellectual property. Due to the difficulty of
monitoring unauthorized use of and access to intellectual property, however,
such measures may not provide adequate protection. It is possible that our
competitors may access our intellectual property and proprietary information
and use it to their advantage. In addition, there can be no assurance that
courts will always uphold our intellectual property rights, or enforce the
contractual arrangements that we have entered into to protect our proprietary
technology. Any unenforceability or misappropriation of our intellectual
property could have a material adverse effect on our business, financial
condition and results of operations. Furthermore, we cannot assure you that any
pending patent application or trademark application made by us will result in
an issued patent or registered trademark, or that, if a patent is issued, it
will provide meaningful protection against competitors or competitor
technologies. In addition, if we bring or become subject to litigation to
defend against claimed infringement of our rights or of the rights of others or
to determine the scope and validity of our intellectual property rights, such
litigation could result in substantial costs and diversion of our resources
which could have a material adverse effect on our business, financial
condition, results of operations and liquidity. Unfavorable results in such
litigation could also result in the loss or compromise of our proprietary
rights, subject us to significant liabilities, require us to seek licenses from
third parties on unfavorable terms, or prevent us from manufacturing or selling
our products, any of which could have a material adverse effect on our
business, financial condition, results of operations and liquidity.

TECHNOLOGICAL ADVANCES, THE INTRODUCTION OF NEW PRODUCTS, AND NEW DESIGN AND
MANUFACTURING TECHNIQUES COULD ADVERSELY AFFECT OUR OPERATIONS UNLESS WE ARE
ABLE TO ADAPT TO THE RESULTING CHANGE IN CONDITIONS.

Our future success and competitive position depend to a significant extent
upon our proprietary technology. We must make significant investments to
continue to develop and refine our technologies. We will be required to expend
substantial funds for and commit significant resources to the conduct of
continuing research and development activities, the engagement of additional

S-18

engineering and other technical personnel, the purchase of advanced design,
production and test equipment, and the enhancement of design and manufacturing
processes and techniques. Our future operating results will depend to a
significant extent on our ability to continue to provide design and
manufacturing services for new products that compare favorably on the basis of
time to introduction, cost and performance with the design and manufacturing
capabilities. The success of new design and manufacturing services depends on
various factors, including utilization of advances in technology, innovative
development of new solutions for customer products, efficient and
cost-effective services, timely completion and delivery of new product
solutions and market acceptance of customers' end products. Because of the
complexity of our products, we may experience delays from time to time in
completing the design and manufacture of new product solutions. In addition,
there can be no assurance that any new product solutions will receive or
maintain customer or market acceptance. If we are unable to design and
manufacture solutions for new products of our customers on a timely and
cost-effective basis, such inability could have a material adverse effect on
our business, financial condition, results of operations and liquidity.

WE MAY BE ADVERSELY AFFECTED BY APPLICABLE ENVIRONMENTAL LAWS AND REGULATIONS.

We are subject to federal, state, local and foreign laws and regulations
governing the protection of the environment and human health, including those
regulating discharges to the air and water, the management of wastes, and the
control of noise and odors. We cannot assure you that we are at all times in
complete compliance with all such requirements. Like all companies in our
industry, we are subject to potentially significant fines or penalties if we
fail to comply with environmental requirements. Environmental requirements are
complex, change frequently, and could become more stringent in the future.
Accordingly, we cannot assure you that these requirements will not change in a
manner that will require material capital or operating expenditures or will
otherwise have a material adverse effect on us in the future. In addition, we
are also subject to environmental laws requiring the investigation and clean-up
of environmental contamination. We may be subject to liability, including
liability for clean-up costs, if contamination is discovered at one of our
current or former facilities, in some circumstances even if such contamination
was caused by a third party such as a prior owner. We also may be subject to
liability if contamination is discovered at a landfill or other location where
we have disposed of wastes, notwithstanding that its historic disposal
practices may have been in accordance with all applicable requirements. We use
Orthochlorabenzalmalononitrile and Chloroacetophenone chemical agents in
connection with our production of tear gas, and these chemicals are hazardous
and could cause environmental damage if not handled and disposed of properly.
Moreover, private parties may bring claims against us based on alleged adverse
health impacts or property damage caused by our operations. The amount of
liability for cleaning up contamination or defending against private party
claims could be material.

RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK

DELAWARE LAW MAY LIMIT POSSIBLE TAKEOVERS.

Our certificate of incorporation makes us subject to the anti-takeover
provisions of Section 203 of the General Corporation Law of the State of
Delaware. In general, Section 203 prohibits publicly-held Delaware corporations
to which it applies from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. This provision could
discourage others from bidding for our shares and could, as a result, reduce
the likelihood of an increase in our stock price that would otherwise occur if
a bidder sought to buy our stock.

OUR CERTIFICATE OF INCORPORATION AUTHORIZES THE ISSUANCE OF SHARES OF BLANK
CHECK PREFERRED STOCK.

Our certificate of incorporation provides that our board of directors will
be authorized to issue from time to time, without further stockholder approval,
up to 5,000,000 shares of preferred stock in

S-19

one or more series and to fix or alter the designations, preferences, rights
and any qualifications, limitations or restrictions of the shares of each
series, including the dividend rights, dividend rates, conversion rights,
voting rights, terms of redemption, including sinking fund provisions,
redemption price or prices, liquidation preferences and the number of shares
constituting any series or designations of any series. Such shares of preferred
stock could have preferences over our common stock with respect to dividends
and liquidation rights. We may issue additional preferred stock in ways which
may delay, defer or prevent a change in control of us without further action by
our stockholders. Such shares of preferred stock may be issued with voting
rights that may adversely affect the voting power of the holders of our common
stock by increasing the number of outstanding shares having voting rights, and
by the creation of class or series voting rights.

THE MARKET PRICE FOR OUR COMMON STOCK IS VOLATILE.

The market price for our common stock may be highly volatile. We believe
that a variety of factors, including announcements by us or our competitors,
quarterly variations in financial results, trading volume, general market
trends and other factors, could cause the market price of our common stock to
fluctuate substantially. Additionally, due to our relatively modest size, our
winning or losing a large contract may have the effect of distorting our
overall financial results.

WE MAY ISSUE A SUBSTANTIAL AMOUNT OF OUR COMMON STOCK IN CONNECTION WITH
FUTURE ACQUISITIONS AND THE SALE OF THOSE SHARES COULD ADVERSELY AFFECT OUR
STOCK PRICE.

As part of our acquisition strategy, we anticipate issuing additional
shares of common stock as consideration for such acquisitions. To the extent
that we are able to grow through acquisitions and issue our shares of common
stock as consideration, the number of outstanding shares of common stock that
will be eligible for sale in the future is likely to increase substantially.
Persons receiving shares of our common stock in connection with these
acquisitions may be more likely to sell large quantities of their common stock
that may influence the price of our common stock. In addition, the potential
issuance of additional shares in connection with anticipated acquisitions could
lessen demand for our common stock and result in a lower price than would
otherwise be obtained.

OUR STOCK PRICE MAY BE ADVERSELY AFFECTED WHEN ADDITIONAL SHARES ARE SOLD.

If our stockholders sell substantial amounts of our common stock in the
public market, the market price of our common stock could fall. These sales
might make it more difficult for us to sell equity or equity-related securities
in the future at a time and price that we deem appropriate and may require us
to issue greater amounts of our common stock to finance future acquisitions.
Additional shares sold to finance acquisitions may dilute our earnings per
share if the new operations' earnings are disappointing.

OUR DEBT AGREEMENTS RESTRICT OUR ABILITY TO PAY DIVIDENDS OR MAKE OTHER
DISTRIBUTIONS TO OUR STOCKHOLDERS.

Our debt agreements, such as the indenture governing the 81/4% notes and
the senior credit facility, contain certain financial and other covenants that
limit, under certain circumstances, our ability to pay dividends or make other
distributions to our stockholders. We are permitted to pay dividends and make
other distributions to stockholders to the extent we satisfy the conditions,
including the financial and other covenants, contained in such documents.

WE HAVE A HIGH LEVEL OF DEBT.

Our high level of debt could have important consequences to you and to us.
For example:

o No payment of any kind may be made to our common stockholders without
first meeting our obligations under our senior credit facility and the
indenture governing our 81/4% notes;

o We may become more vulnerable to general adverse economic and industry
conditions and adverse changes in governmental regulations;

S-20

o We may have to dedicate a substantial portion of our cash flow from
operations to make payments required under our senior credit facility and
the 81/4% notes, reducing the availability of cash flow to fund future
capital expenditures, working capital, execution of our growth strategy,
research and development costs and other general corporate requirements;

o We may have limited flexibility in planning for, or reacting to, changes
in our business and our industry, which may place us at a competitive
disadvantage compared with competitors that have less debt or more
financial resources;

o We may have limited ability to borrow additional funds, even when
necessary to maintain adequate liquidity; and

o The terms of our senior credit facility and the indenture governing the
8 1/4% notes will allow us to incur substantial amounts of additional debt,
subject to certain limitations. We might incur additional debt for various
reasons, including to pay for additional acquisitions that we may make and
assuming debt of companies that we may acquire.

S-21

USE OF PROCEEDS

We estimate that the net proceeds from the sale of the common stock will
be $142.3 million after deducting underwriting commissions and discounts and
our estimated offering expenses. Our net proceeds estimate is based on an
assumed initial price to the public of $37.70 per share, which was the last
reported sale price of our common stock on the New York Stock Exchange on May
27, 2004. We intend to use the proceeds from this offering to fund future
acquisitions, to take advantage of business development opportunities, and for
general corporate and working capital purposes, including the funding of
capital expenditures. As part of our business model, we expect to continue our
strategy of growth through acquisitions. We believe that attractive acquisition
opportunities exist in the United States and abroad. We have evaluated and
expect to continue to evaluate possible acquisition transactions on an ongoing
basis and, at any given time, may be engaged in discussions with respect to
possible acquisitions or other business combinations. Certain of these
transactions, if consummated, may be material to our operations and financial
condition. Until we use the proceeds from this offering in the manner described
above, we intend to invest the proceeds in taxable short-term investment grade
obligations, bank deposits, U.S. government securities or similar instruments.
We will not receive any proceeds from any sale of shares by the selling
stockholders.

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

Our common stock is currently traded on the New York Stock Exchange under
the symbol "AH." The high and low sales prices as reported on the New York
Stock Exchange Composite Tape for the periods indicated are set forth in the
table below.

PRICE RANGE
-------------------------
HIGH LOW
----------- -----------

Fiscal 2001
First Quarter. .............................. $ 17.75 $ 14.60
Second Quarter .............................. $ 19.25 $ 11.00
Third Quarter ............................... $ 23.50 $ 14.20
Fourth Quarter .............................. $ 27.60 $ 19.25
Fiscal 2002
First Quarter. .............................. $ 28.25 $ 20.45
Second Quarter .............................. $ 29.55 $ 22.00
Third Quarter ............................... $ 25.50 $ 12.00
Fourth Quarter .............................. $ 16.50 $ 12.50
Fiscal 2003
First Quarter. .............................. $ 14.60 $ 9.40
Second Quarter .............................. $ 14.95 $ 9.91
Third Quarter ............................... $ 17.80 $ 12.83
Fourth Quarter .............................. $ 27.35 $ 16.46
Fiscal 2004
First Quarter ............................... $ 33.45 $ 24.80
Second Quarter through May 27, 2004 ......... $ 39.50 $ 31.60

On May 27, 2004, the last reported sale price of the common stock on the
New York Stock Exchange was $37.70 per share. As of May 26, 2004, there were
356 holders of record of our common stock.

We have not previously paid dividends to our stockholders and we have no
plans to pay dividends in the immediate future. However, we reevaluate our
position from time to time and may change our policy in the future. The payment
of any future dividends will be at the sole discretion of our board of
directors and will depend upon, among other things, our future earnings, our
capital requirements and our general financial condition. Our debt agreements,
such as the indenture governing our 8 1/4% senior subordinated notes and the
senior credit facility, allow us to pay dividends and to make other
distributions to our stockholders, subject to certain limitations contained
therein.

S-22

CAPITALIZATION

The following table sets forth, as of March 31, 2004, our cash and cash
equivalents and capitalization on an actual basis and as adjusted to reflect
our issuance of 4,000,000 shares of our common stock in this offering and the
anticipated application of our estimated net proceeds of $142.3 million, as
described under "Use of Proceeds," assuming no exercise of the underwriters
option to purchase additional shares. You should read the information set forth
in the table below in conjunction with our consolidated financial statements
and the related notes thereto and other financial data contained elsewhere in
this prospectus supplement or incorporated by reference in the accompanying
prospectus.

AS OF MARCH 31, 2004
------------------------------------
ACTUAL OFFERING AS ADJUSTED
------------ ---------- ------------
(UNAUDITED, IN THOUSANDS EXCEPT FOR
SHARE DATA)

Cash and cash equivalents .......................... $ 76,218 $142,254 $ 218,472
========= ======== =========
Debt including current installments:
Credit facility (1) ............................... $ -- $ -- $ --
Senior subordinated notes ......................... 147,662 -- 147,662
Other debt ........................................ 3,040 -- 3,040
Fair value of interest rate swaps ................. 9,340 -- 9,340
--------- -------- ---------
Total debt ...................................... 160,042 -- 160,042
--------- -------- ---------
Stockholders' equity:
Preferred stock, $.01 par value; 5,000,000 shares
authorized; no shares issued and outstanding .... -- -- --
Common stock, $.01 par value; 50,000,000(2) shares
authorized; 34,646,849 issued and 28,586,627
outstanding, actual; and 38,646,849 issued and
32,586,627 outstanding, as adjusted ............. 347 40 387
Additional paid-in capital ........................ 323,275 142,214 465,489
Retained earnings ................................. 57,432 -- 57,432
Accumulated other comprehensive income ............ 3,608 -- 3,608
Treasury stock .................................... (72,317) -- (72,317)
--------- -------- ---------
Total stockholders' equity ...................... 312,345 142,254 454,599
--------- -------- ---------
Total capitalization ............................ $ 472,387 $142,254 $ 614,641
========= ======== =========

----------
(1) Subject to outstanding letters of credit, if any, we have the ability to
borrow up to $60 million under our secured revolving credit facility, all
of which will be senior debt.

(2) We are seeking to amend our Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), to increase the number of shares of our
authorized common stock from 50,000,000 to 75,000,000 shares. As the
amendment to our Certificate of Incorporation requires the approval by a
majority of our stockholders under Delaware law, we included a proposal
in our Proxy Statement for our 2004 Annual Meeting of Stockholders
relating to the amendment of the Certificate of Incorporation and
recommended to our stockholders that they approve the proposal. Our
Annual Meeting of Stockholders is scheduled for June 22, 2004.

S-23

SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA

The following selected consolidated financial information is derived from
our audited consolidated financial statements as of December 31, 2003, 2002,
2001 and 2000, and for each of the four years ended December 31, 2003, which
were audited by PricewaterhouseCoopers LLP. The information as of December 31,
1999 and for the year ended December 31, 1999 was derived from our consolidated
financial statements audited by PricewaterhouseCoopers LLP and subsequently
adjusted by management on an unaudited basis to reflect the presentation
required for discontinued operations as a result of our decision in July of
2002 to sell our Services Division. The selected consolidated financial
information as of, and for each of the three months ended March 31, 2004 and
March 31, 2003 are derived from our unaudited consolidated financial
statements. The unaudited consolidated financial statements include all
adjustments, consisting of normal recurring accruals, which we consider
necessary for a fair presentation of our financial position and the results of
operations for these periods.

THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------------------------- ---------------------
1999 2000 2001 2002 2003 2003 2004
----------- ---------- ---------- ------------ ---------- ---------- ----------
(UNAUDITED)
(DOLLARS IN THOUSANDS)

INCOME STATEMENT DATA:
Revenues:
Aerospace & Defense .................. $ -- $ -- $ 18,145 $ 59,318 $ 91,673 $15,910 $ 81,008
Products ............................. 96,706 139,904 149,868 179,946 193,960 44,007 53,840
Mobile Security ...................... -- -- 29,087 65,853 79,539 20,557 26,780
------- -------- -------- --------- -------- ------- --------
Total Revenues ...................... 96,706 139,904 197,100 305,117 365,172 80,474 161,628
Costs and Expenses:
Cost of sales ........................ 56,304 85,457 126,330 210,745 253,586 57,162 114,068
Operating expenses ................... 21,933 30,286 38,659 49,836 62,795 14,004 23,251
Amortization (1) ..................... 1,329 1,704 2,142 245 489 60 980
Integration and other charges(2) ..... 2,014 2,588 3,296 5,926 12,573 422 681
------- -------- -------- --------- -------- ------- --------
Operating Income ...................... 15,126 19,869 26,673 38,365 35,729 8,826 22,648
Interest expense, net ................ 137 1,849 3,864 923 4,012 379 1,728
Other (income) expense, net .......... (811) (67) (82) 51 508 69 115
------- -------- -------- --------- -------- ------- --------
Income from continuing operations
before provision for income
taxes ................................ 15,800 18,087 22,891 37,391 31,209 8,378 20,805
Provision for income taxes ............ 6,472 7,240 8,207 16,054 14,203 3,133 8,177
------- -------- -------- --------- -------- ------- --------
Income from continuing
operations ........................... 9,328 10,847 14,684 21,337 17,006 5,245 12,628
------- -------- -------- --------- -------- ------- --------
Income (loss) from discontinued
operations, net of income tax
benefit (provision) (3) .............. 3,868 6,201 (4,556) (39,026) (6,120) (158) (138)
------- -------- -------- --------- -------- ------- --------
Net income (loss) ..................... $13,196 $ 17,048 $ 10,128 $ (17,689) $ 10,886 $ 5,087 $ 12,490
======= ======== ======== ========= ======== ======= ========

S-24

THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------------------- -------------------------
1999 2000 2001 2002 2003 2003 2004
----------- ------------ ------------ ------------- ------------- ------------ ------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)

BALANCE SHEET DATA (AT END OF
PERIOD):
Cash and cash equivalents ........... $ 13,246 $ 7,257 $ 53,719 $16,551 $ 111,926 $ 21,599 $ 76,218
Working capital (4) ................. 54,281 67,937 142,723 100,591 168,644 101,440 179,387
Total assets ........................ 178,922 225,957 388,057 367,753 585,626 375,222 587,901
Total debt .......................... 4,623 40,517 8,085 8,188 191,030 27,830 160,664
Net debt (5) ........................ (8,623) 33,260 (45,634) (8,363) 79,104 6,231 84,446
Stockholders' equity ................ 157,883 166,771 326,019 288,077 295,365 271,110 312,345
OTHER FINANCIAL DATA:
EBITDA from continuing operations
(6)(11) ............................ $ 17,732 $ 23,331 $ 31,931 $43,562 $ 42,545 $ 10,407 $ 25,811
EBITDA margin for continuing
operations (6)(11) ................. 18.3% 16.7% 16.2% 14.3% 11.7% 12.9% 16.0%
EBITDA from continuing operations
before integration and other
charges (2)(6)(11) ................. $ 19,746 $ 25,919 $ 35,227 $49,488 $ 55,118 $ 10,829 $ 26,492
EBITDA margin for continuing
operations before integration and
other charges (2)(6)(11) ........... 20.4% 18.5% 17.9% 16.2% 15.1% 13.5% 16.4%
Capital expenditures for continuing
operations ......................... $ 4,748 $ 4,063 $ 5,644 $ 5,902 $ 8,684 $ 1,727 $ 3,814
Interest expense for continuing
operations ......................... $ 310 $ 1,952 $ 4,002 $ 1,302 $ 4,800 $ 397 $ 2,067
Depreciation and amortization for
continuing operations .............. $ 2,606 $ 3,462 $ 5,258 $ 5,197 $ 6,816 $ 1,581 $ 3,163
Ratio of net debt to EBITDA from
continuing operations (6)(7)(9)(10) -- 1.4x -- -- 1.9x -- --
Ratio of earnings to fixed
charges (10) ....................... 23.8x 7.6x 5.7x 14.9 x 6.3x 13.3x 9.8x
ADDITIONAL DATA FOR DISCONTINUED
OPERATIONS:
EBITDA from discontinued
operations (8)(12) ................. $ 6,637 $ 9,914 $ 6,524 $(9,896) $ 7,658 $ 153 $ 48
EBITDA margin for discontinued
operations (8)(12) ................. 11.1% 12.2% 6.9% (10.1)% 8.1% 0.6% 6.7%
EBITDA from discontinued
operations before integration and
other charges (8)(12) .............. $ 7,224 $ 10,616 $ 7,300 $(7,273) $ 8,434 $ 195 $ 48
EBITDA margin for discontinued
operations before integration and
other charges (8)(12) .............. 12.0% 13.1% 7.7% ( 7.4)% 8.9% 0.8% 6.7%

S-25

(3) As described in Note 2 of our fiscal 2003 audited financial statements,
included elsewhere in this prospectus supplement, we recorded net
impairment charges of $12.4 million and $30.3 million in fiscal 2003 and
2002, respectively, for the Services Division. The 2003 impairment
charges consisted of a non-cash goodwill reduction. The fiscal 2002
impairment charges consisted of approximately $6.1 million in estimated
disposal costs and a $24.2 million non-cash goodwill reduction. In fiscal
2001, we recorded a pre-tax restructuring charge of $10.3 million for the
Services Division as a result of an approved restructuring plan to close
its U.S. investigations businesses, realign the Division's organization,
eliminate excess facilities and reduce overhead in its businesses
worldwide. Operating results for 1999 through the first three months of
fiscal 2004 ended March 31, 2004 reflect the reclassification of the
Services Division as discontinued operations. Cyconics International
Training Services, Inc., a subsidiary providing certain training
services, formerly reported as a part of the Services Division, is not
included in the amounts classified as assets held for sale. The assets
and liabilities as well as the operating results of Cyconics
International Training Services, Inc. have been reclassified to the Armor
Holdings Products Division where management oversight currently resides.

(4) Working capital is defined as current assets less current liabilities.

(5) Net debt consists of total debt less cash and cash equivalents.

(6) The following are not financial measures calculated in accordance with
generally accepted accounting principles:

o EBITDA margin from continuing operations, which is EBITDA from
continuing operations divided by total revenues;

o EBITDA from continuing operations before integration and other
charges, which we define as EBITDA from continuing operations plus
integration and other charges; and

o EBITDA margin from continuing operations before integration and other
charges, which is EBITDA from continuing operations before integration
and other charges divided by total revenues;

Although our management may use these measures from time to time to track
our cash flow or availability under our revolving credit facility, we do
not intend any of these measures to be used as indicators of our operating
performance or liquidity for the referenced period or for future periods.

(8) The following are not financial measures calculated in accordance with
generally accepted accounting principles:

o EBITDA from discontinued operations, which we define as operating
income from discontinued operations, plus interest and other expenses
(net), provision (benefit) for income taxes for discontinued operations
and depreciation and amortization for discontinued operations;

o EBITDA margin from discontinued operations, which is EBITDA from
discontinued operations divided by total revenues;

o EBITDA from discontinued operations before integration and other
charges, which we define as EBITDA from discontinued operations plus
integration and other charges; and

o EBITDA margin from discontinued operations before integration and
other charges, which is EBITDA from discontinued operations before
integration and other charges divided by total revenues.

S-26

Although our management may use these measures from time to time to track
our cash flow or availability under our revolving credit facility, we do
not intend any of these measures to be used as indicators of our operating
performance or liquidity for the referenced period or for future periods.

(9) For fiscal 1999, 2001 and 2002, the ratio was negative, and therefore,
not meaningful. In these periods, cash and cash equivalents exceeded
total debt. This ratio is not meaningful in quarterly periods.

(10) For purposes of computing the ratio of earnings to fixed charges,
earnings consist of income from continuing operations before provision
for income tax, plus fixed charges. Fixed charges consist of interest
expense for continuing and discontinued operations, amortization of debt
issuance cost and one-third of our rental expense for continuing and
discontinued operations. Management believes that one-third is
representative of the interest component of such rental expense.

(11) The following table shows the reconciliation of our net income (loss) as
reported to operating income from continued operations, EBITDA from
continuing operations and EBITDA from continuing operations before
integration and other charges:

THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------------------- ---------------------
1999 2000 2001 2002 2003 2003 2004
---------- ---------- ---------- ------------- ---------- --------- ----------
(UNAUDITED)
(DOLLARS IN THOUSANDS)

Net income (loss) as reported ......... $ 13,196 $ 17,048 $10,128 $ (17,689) $10,886 $ 5,087 $12,490
Plus: (income) loss from
discontinued operations .............. (3,868) (6,201) 4,556 39,026 6,120 158 138
Plus: Provision for income taxes
from continuing operations ........... 6,472 7,240 8,207 16,054 14,203 3,133 8,177
Plus: Other (expense) income,
net .................................. (811) (67) (82) 51 508 69 115
Plus: Interest expense, net ........... 137 1,849 3,864 923 4,012 379 1,728
-------- -------- ------- --------- ------- ------- -------
Operating income from
continuing operations ................ 15,126 19,869 26,673 38,365 35,729 8,826 22,648
Plus: Depreciation and
amortization ......................... 2,606 3,462 5,258 5,197 6,816 1,581 3,163
-------- -------- ------- --------- ------- ------- -------
EBITDA from continuing
operations ........................... 17,732 23,331 31,931 43,562 42,545 10,407 25,811
Plus: Integration and other
charges .............................. 2,014 2,588 3,296 5,926 12,573 422 681
-------- -------- ------- --------- ------- ------- -------
EBITDA from continuing
operations before integration
and other charges .................... $ 19,746 $ 25,919 $35,227 $ 49,488 $55,118 $10,829 $26,492
======== ======== ======= ========= ======= ======= =======

----------
(12) The following table shows the reconciliation of our net income (loss) as
reported to operating income from discontinued operations, EBITDA from
discontinued operations and EBITDA from discontinued operations before
integration and other charges (unaudited):

S-27

THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------------------- ----------------------
1999 2000 2001 2002 2003 2003 2004
--------- ----------- ------------ ------------- ------------ ---------- ----------
(UNAUDITED)
(DOLLARS IN THOUSANDS)

Net income (loss) as reported on
discontinued operations .......... $3,868 $ 6,201 $ (4,556) $ (39,026) $ (6,120) $ (158) $ (138)
Plus: Provision (benefit) for
income taxes on income from
discontinued operations .......... 1,531 2,102 (2,510) (2,442) (8,252) 212 (79)
Plus: Other expense (income),
net .............................. (575) (1,736) (218) 99 479 60 263
Plus: Interest (income) expense,
net .............................. (151) 47 143 346 16 38 2
------ -------- -------- --------- --------- ------ ------
Operating income (expense)
from discontinued operations ..... 4,673 6,614 (7,141) (41,023) (13,877) 152 48
Plus: Depreciation and
amortization ..................... 1,964 3,300 3,408 831 -- 1 --
Plus: Charge for impairment of
long-lived assets ................ -- -- -- 30,296 21,535 -- --
Plus: Restructuring and related
charges .......................... -- -- 10,257 -- -- -- --
------ -------- -------- --------- --------- ------ ------
EBITDA from discontinued
operations ....................... 6,637 9,914 6,524 (9,896) 7,658 153 48
Plus: Integration and other
charges .......................... 587 702 776 2,623 776 42 --
------ -------- -------- --------- --------- ------ ------
EBITDA from discontinued
operations before integration
and other charges ................ $7,224 $ 10,616 $ 7,300 $ 7,273 $ 8,434 $ 195 $ 48
====== ======== ======== ========= ========= ====== ======

S-28

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This prospectus supplement contains, in addition to historical
information, forwarding-looking statements. These forward-looking statements
involve risk and uncertainties that could cause our actual outcome to differ
materially from the results expressed or implied by the forward-looking
statements. See "Cautionary Note Regarding Forward-Looking Statements." You
should carefully consider all of the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus,
including the discussion under the captions "Risk Factors" in this prospectus
supplement and in the accompanying prospectus of specific risks involved in an
investment in our common stock.

This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Statements that are predictive in
nature, that depend upon or refer to future events or conditions or that
include words such as "expects", "anticipates", "intends", "plans", "believes",
"estimates", "could be" and similar expressions are forward-looking statements.
Although we believe that these statements are based upon reasonable
assumptions, we cannot assure you that we will achieve our goals. For more
information, see "Cautionary Note Regarding Forward-Looking Statements"
contained elsewhere in this prospectus supplement.

Our actual results may differ from those expressed or implied in
forward-looking statements. We believe that we are subject to a number of risk
factors, including, without limitation: the inherent unpredictability of
currency fluctuations; competitive actions, including pricing; the ability to
realize cost reductions and operating efficiencies, including the ability to
implement headcount reduction programs timely and in a manner that does not
unduly disrupt business operations and the ability to identify and to realize
other cost-reduction opportunities; general economic and business conditions;
our ability to successfully execute changes to operations, such as integration
of recent and future acquisitions and the move of our corporate headquarters
and certain of our manufacturing operations, without disrupting our operations;
and our ability to obtain supplies and raw materials without disruption.

Any forward-looking statements in this prospectus supplement, the
accompanying prospectus or any document incorporated by reference herein or
therein, should be evaluated in light of these and other important risk factors
listed in this Management's Discussion and Analysis of Financial Condition and
Results of Operations and elsewhere in this prospectus supplement including the
accompanying financial statements.

CONTINUING OPERATIONS

We are a leading manufacturer and provider of personal protective
equipment and security products for law enforcement and military personnel,
armored military and commercial vehicles, armor kits for retrofit of military
vehicles, aircraft armor, aircraft safety products, survivability equipment
used by military aviators and other technologies used to protect humans in a
variety of life-threatening or catastrophic situations. Our products and
systems are used domestically and internationally by military, law enforcement,
security and corrections personnel, as well as governmental agencies,
multinational corporations and individuals. Effective in the first quarter of
2004, we instituted a new segment reporting format to include three reportable
business divisions: Aerospace & Defense Group, Products Division, and Mobile
Security Division. The Aerospace & Defense Group was formed with our
acquisition of Simula, Inc. on December 9, 2003. The Aerospace & Defense Group
includes Simula's business, the military business formerly included in the
Mobile Security Division, including armor and blast protection systems for
M1114 Up-Armored HMMWVs, and the SAPI business of the Products Division. The
historical results of these businesses have been reclassified to the Aerospace
& Defense Group. This segment reporting change was made to better reflect
management's approach to operating and directing the businesses and to more
closely align financial and managerial reporting. Prior period segment data has
been restated to conform to the 2003 presentation.

S-29

Aerospace & Defense Group. Our Aerospace & Defense Group supplies human
safety and survival systems to the U.S. military, and major aerospace and
defense prime contractors. Our core markets are military aviation safety,
military personnel safety, and land and marine safety. Under the brand name
O'Gara-Hess & Eisenhardt, we are the sole-source provider to the U.S. military
of the armor and blast protection systems for M1114 Up-Armored HMMWVs. We are
also under contract with the U.S. Army to provide spare parts, logistics and
ongoing field support services for the currently installed base of 4,968 M1114
Up-Armored HMMWVs. Additionally, we provide blast and ballistic protection kits
for the standard M1114 HMMWVs, which are installed on existing equipment in the
field. Our Aerospace & Defense Group is also subcontracted to develop a
ballistic and blast protected armored and sealed truck cab for HIMARS, a
program recently transitioned by the U.S. Army and Marine Corps from
developmental to a low rate of initial production, deliveries of which
commenced in 2003. We also supply armor sub-systems for other tactical wheeled
vehicles. Through the Aerospace & Defense Group, we provide military helicopter
seating systems, helicopter cockpit airbag systems, aircraft and land vehicle
armor kits, body armor and other protective equipment for military personnel,
emergency bailout parachutes and survival ensembles worn by military aircrew.
The primary customers for our products are the U.S. Army, U.S. Marine Corps,
Boeing, and Sikorsky Aircraft. Most of the Aerospace & Defense Group's aviation
safety products are provided on a sole-source basis. The U.S. armed forces have
adopted ceramic body armor as a key element of the protective ensemble worn by
our troops in Iraq and Afghanistan. Simula was the developer of this
specialized product called SAPI, and continues to be a prominent supplier to
the U.S. military. We believe the Aerospace & Defense Group has supplied
approximately 37% of all SAPI plates. We also supply ceramic body armor from
our Protech subsidiary based in Pittsfield, Massachusetts.

Products. Our Products Division manufactures and sells a broad range of
high quality security products, equipment and related consumable items, such as
concealable and tactical body armor, hard armor, duty gear, less-lethal
munitions, anti-riot products, police batons, emergency lighting products,
forensic products, firearms accessories, weapon maintenance products, foldable
ladders and specialty gloves. Our products are marketed under brand names that
are well established in the military and law enforcement communities such as
AMERICAN BODY ARMOR (Trade Mark) , B-SQUARE (Registered Trademark) , BREAK FREE
(Registered Trademark) , CLEARGARD (Registered Trademark) , CLP (Registered
Trademark) , DEFENSE TECHNOLOGY/FEDERAL LABORATORIES (Registered Trademark) ,
DEF-TEC PRODUCTS (Registered Trademark) , DISTRACTION DEVICE (Registered
Trademark) , DURACHUTE (Registered Trademark) , FEDERAL LABORATORIES
(Registered Trademark) , FERRET (Registered Trademark) , FIRST DEFENSE
(Registered Trademark) , IDENTICATOR (Registered Trademark) , IDENTIDRUG
(Registered Trademark) , IMPAK (Trade Mark) , LIGHTNING POWDER (Registered
Trademark) , MONADNOCK (Registered Trademark) , NIK (Registered Trademark) ,
O'GARA-HESS & EISENHARDT ARMORING COMPANY (Registered Trademark) , PROTECH
(Trade Mark) , PROTECTING PEOPLE IN MOTION (Registered Trademark) , QUICKSHIELD
(Trade Mark) , QUIKSTEP LADDERS (Trade Mark) , REINVENTING THE TECHNOLOGY OF
SAFETY (Registered Trademark) , SAFARILAND and Design (Registered Trademark) ,
SIMULA SAFE (Trade Mark) , SIMULITE (Registered Trademark) , SPEEDFEED
(Registered Trademark) , 911EP and Design (Trade Mark) . We sell our products
through a network of over 350 distributors and sales agents, including
approximately 200 in the United States. Our extensive distribution capabilities
and commitment to customer service and training have enabled us to become a
leading provider of security equipment to law enforcement agencies.

Mobile Security. Our Mobile Security Division manufactures and installs
ballistic and blast protected armoring systems for commercial vehicles. Under
the brand name O'GARA-HESS & EISENHARDT ARMORING COMPANY (Registered
Trademark) , we armor a variety of privately owned commercial vehicles,
including limousines, sedans, sport utility vehicles, commercial trucks and
cash-in-transit vehicles, to protect against varying degrees of ballistic and
blast threats. Our customers in this business include international
corporations and high net worth individuals. In addition, we supply ballistic
and blast protected armoring systems to U.S. federal law enforcement and
intelligence agencies and foreign heads of state.

DISCONTINUED OPERATIONS

On April 17, 2003, we announced that we had completed the sale of our
ArmorGroup Integrated Systems business through the sale of 100% of the stock of
ArmorGroup Integrated Systems, Inc. and Low Voltage Systems Technologies, Inc.
to Aerwav Integration Systems, Inc. ("AIS"). AIS is a wholly owned subsidiary
of Aerwav Holdings, LLC. As consideration for the integrated systems business,
we received a $4.1 million collateralized note due in April 2005 and a warrant
for approximately 2.5% of

S-30

AIS. We received a $375,000 prepayment on the note in November 2003 and a
$100,000 prepayment in May 2004. We have recorded a loss of $366,000 on the
sale.

On November 26, 2003, we announced that we completed the sale of
ArmorGroup, our security service division, for $33,660,000 in consideration to
a group of private investors led by Granville Baird Capital Partners of London,
England and Management. We received $31,360,000 in cash at closing and are
scheduled to receive another $2,300,000 by the end of 2004, of which we have
collected $500,000 as of May 28, 2004. We have recorded a loss of $8.8 million
on the sale in the fourth quarter of 2003. In accordance with generally
accepted accounting principles, unrealized gains and losses, which are included
in equity as accumulated other comprehensive income or loss, are not recognized
until the period in which the related assets and liabilities are disposed of.

At March 31, 2004, our litigation support services subsidiary remains in
discontinued operations. This subsidiary specializes in providing computer
forensics consulting services, training and software tools to the civil
litigation market and to government agencies and Fortune 500 corporations.
Computer forensics is the preservation, identification, extraction and
documentation of computer evidence. We are actively attempting to sell this
business.

CRITICAL ACCOUNTING POLICIES

Our significant accounting policies are described in Note 1 to the
consolidated financial statements included elsewhere in this prospectus
supplement. We believe our critical accounting policies concerning revenue
recognition, the use of estimates, income taxes, impairment, discontinued
operations, comprehensive income and foreign currency translation, stock
options and grants, derivative instruments and hedging activities, and goodwill
to be the most critical in understanding the judgments involved in preparing
our financial statements and the uncertainties that could affect our results of
operations, financial condition and cash flow.

Revenue Recognition. We record products revenue at the time of shipment.
Returns are minimal and do not materially affect the financial statements.

We record revenue from our Aerospace & Defense Group and Mobile Security
Division when the product is shipped, except for larger commercial contracts
typically longer than four months in length and the contract for the delivery
of HMMWVs to the U.S. Government, which continues through 2008. Revenue from
such contracts is recognized on the percentage of completion, units-of-work
performed method. HMMWV units and most other major military products sold to
the U.S. Government are considered complete when the onsite Department of
Defense officer finishes the inspection of the HMMWV and approves it for
delivery. Should such contracts be in a loss position, the entire estimated
loss would be recognized for the balance of the contract at such time. Current
contracts are profitable.

We record service revenue as services are provided on a
contract-by-contract basis. Revenues from service contracts are recognized over
the term of the contract.

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 in the financial statements
and accompanying notes. Significant estimates inherent in the preparation of
the accompanying consolidated financial statements include periodic testing of
the carrying value of long-lived assets for impairment, valuation allowances
for receivables, inventories and deferred income tax assets, liabilities for
potential litigation claims and settlements, and contract contingencies and
obligations. Actual results could differ from those estimates.

S-31

applied to reduce reorganization value in excess of amounts allocable to
identifiable assets. At March 31, 2004 and December 31, 2003, our consolidated
foreign subsidiaries have unremitted earnings of approximately $5.1 million and
$9.0 million, respectively, on which we have not recorded a provision for
United States Federal income taxes since these earnings are considered to be
permanently reinvested. Such foreign earnings have been taxed according to the
regulations existing in the countries in which they were earned.

Impairment. Long-lived assets including certain identifiable intangibles,
and the goodwill related to those assets, are reviewed annually for impairment
whenever events or changes in circumstances indicate that the carrying amount
of the asset in question may not be recoverable including, but not limited to,
a deterioration of profits for a business segment that has long-lived assets,
and when other changes occur which might impair recovery of long-lived assets.
Management reviewed our long-lived assets and has taken an impairment charge of
$12.4 million in fiscal 2003 to reduce the carrying value of the Services
Division to estimated realizable value. The method used to determine the
existence of an impairment would generally be discounted operating cash flows
estimated over the remaining useful lives of the related long-lived assets for
continuing operations in accordance with SFAS No. 142, "Goodwill and Other
Intangible Assets." Impairment is measured as the difference between fair value
and unamortized cost at the date impairment is determined.

Discontinued Operations. In accordance with Statement of Financial
Accounting Standards No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" ("SFAS 144"), a component classified as held for sale is
reported in discontinued operations when the following conditions are met: (a)
the operations and cash flows of the component have been (or will be)
eliminated from the ongoing operations of the entity as a result of the
disposal transaction and (b) the entity will not have any significant
continuing involvement in the operations of the component after the disposal
transaction. In a period in which a component of an entity either has been
disposed of or is classified as held for sale, the income statement for current
and prior periods reports the results of operations of the component, including
any gain or loss recognized in accordance with SFAS 144, in discontinued
operations. The results of discontinued operations, less applicable income
taxes (benefit), is reported as a separate component of income before
extraordinary items and the cumulative effect of accounting changes (if
applicable). The assets and liabilities of a disposal group classified as held
for sale is presented separately in the asset and liability sections,
respectively, of the statement of financial position. See Note 2 to the
Unaudited Condensed Consolidated Financial Statements for the three months
ended March 31, 2004.

Comprehensive income and foreign currency translation. In accordance with
Statement of Financial Accounting Standard No. 130, "Reporting Comprehensive
Income" ("SFAS 130"), assets and liabilities denominated in a foreign currency
are translated into U.S. dollars at the current rate of exchange existing at
period-end and revenues and expenses are translated at the average monthly
exchange rates. In accordance with Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities,"
("SFAS 115") we record changes in the market value of available-for-sale
securities in the accumulated other comprehensive income caption of
stockholders' equity in the condensed consolidated balance sheet, until we
dispose of the securities. Once these securities are disposed of, either by
sale or maturity, the gain or loss is recognized in other income or expense.
The cumulative translation adjustment, which represents the effect of
translating assets and liabilities of our foreign operations and changes in
market value of available-for-sale securities is recorded as an increase of
equity of $3,608,000 and $3,936,000 as of March 31, 2004 and December 31, 2003,
respectively, and is classified as accumulated other comprehensive income. The
current year change in the accumulated amount is included as a component of
comprehensive income.

Stock options and Grants. Statement of Financial Accounting Standard No.
123, "Accounting for Stock-Based Compensation" ("SFAS 123"), as amended by SFAS
148, "Accounting for Stock-Based Compensation--Transition and Disclosure,"
establishes a fair value based method of accounting for stock-based employee
compensation plans; however, it also allows an entity to continue to measure
compensation cost for those plans using the intrinsic value based method of
accounting prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued

S-32

to Employees" ("APB 25"). Under the fair value based method, compensation cost
is measured at the grant date based on the value of the award and is recognized
over the service period, which is usually the vesting period. Under the
intrinsic value based method, compensation cost is the excess, if any, of the
quoted market price of the stock at the grant date or other measurement date
over the amount an employee must pay to acquire the stock. We have elected to
continue to account for our employee stock compensation plans under APB 25 with
pro forma disclosures of net earnings and earnings per share, as if the fair
value based method of accounting defined in SFAS 123 had been applied. If
compensation cost for stock option grants had been determined based on the fair
value on the grant dates for March 31, 2004 and 2003 consistent with the method
prescribed by SFAS 123, our net income and earnings per share would have been
adjusted to the pro forma amounts indicated below:

THREE MONTHS ENDED
----------------------------------
MARCH 31, 2004 MARCH 31, 2003
---------------- ---------------
(IN THOUSANDS, EXCEPT FOR PER SHARE
DATA)

Net income as reported: ................................. $ 12,490 $ 5,087
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all awards,
net of related tax effects ............................. (1,247) (1,158)
-------- --------
Pro forma income ........................................ $ 11,243 $ 3,929
======== ========
Earnings per share:
Basic--as reported ..................................... $ 0.44 $ 0.17
======== ========
Basic--pro forma ....................................... $ 0.39 $ 0.14
======== ========
Diluted--as reported ................................... $ 0.42 $ 0.17
======== ========
Diluted--pro forma ..................................... $ 0.38 $ 0.13
======== ========

Derivative Instruments and Hedging Activities. We account for derivative
instruments in accordance with Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities", as amended
by Statement of Financial Accounting Standards No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities--an Amendment of FAS
133", and Statement of Financial Accounting Standards No. 149 "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities" collectively
("SFAS 133"). All derivative instruments are recorded on the balance sheet at
fair value. Changes in the fair value of derivatives are recorded each period
in current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and, if it is,
depending on the type of hedge transaction. For fair-value hedge transactions
in which we hedge changes in an asset's, liability's, or firm commitment's fair
value, changes in the fair value of the derivative instrument will generally be
offset in the income statement by changes in the hedged item's fair value. We
do not hold or issue interest rate swap agreements or other derivative
instruments for trading purposes.

Changes in the fair value of the interest rate swap agreements offset
changes in the fair value of the fixed rate debt due to changes in the market
interest rate. Accordingly, other assets on the Condensed Consolidated Balance
Sheet as of March 31, 2004 increased by $3.5 million from December 31, 2003,
which reflected an increase in the fair value of the interest rate swap
agreements. The corresponding increase in the hedge liability was recorded in
long-term debt. The agreements are deemed to be a perfectly effective fair
value hedge and therefore qualify for the short-cut method of accounting under
SFAS 133. As a result, no ineffectiveness is expected to be recognized in our
earnings associated with the interest rate swap agreements.

Goodwill. Goodwill represents the excess of the purchase price over the
fair value of the net assets acquired in a purchase business combination.
Goodwill and other intangible assets are stated

S-33

on the basis of cost. The $124.8 million in goodwill resulting from
acquisitions made subsequent to June 30, 2001 was immediately subjected to the
non-amortization provisions of SFAS 142.

RESULTS OF OPERATIONS

Effective June 30, 2002, we decided to sell the ArmorGroup Services
Division (the sale was completed on November 26, 2003) through an organized and
formal auction managed by outside advisors. In accordance with SFAS144, the
assets and liabilities of our Services Division have been classified as held
for sale, with operating results reported as discontinued operations in our
statement of operations for all periods prior to the sale of this division. Our
US based training subsidiary, Cyconics International Training Services, Inc.,
previously reported under the Services Division but not included for sale, has
been reclassified to the Products Division.

The following table sets forth selected statement of operations data as a
percentage of total revenues for the periods indicated:

THREE MONTHS ENDED
-------------------------
FISCAL YEAR ENDED
MARCH 31, MARCH 31, -----------------------------------------
2004 2003 2003 2002 2001
----------- ----------- ------------ ------------ -----------

Revenue from continuing operations
Aerospace & Defense Group ................. 50.1 % 19.8 % 25.1 % 19.4 % 9.2 %
Products .................................. 33.3 % 54.7 % 53.1 % 59.0 % 76.0 %
Mobile Security ........................... 16.6 % 25.5 % 21.8 % 21.6 % 14.8 %
Total revenues from continuing
operations ................................ 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales .............................. 70.6 % 71.0 % 69.4 % 69.1 % 64.1 %
Operating expenses ......................... 14.4 % 17.4 % 17.2 % 16.3 % 19.6 %
Amortization ............................... 0.6 % 0.1 % 0.1 % 0.1 % 1.1 %
Integration and other charges .............. 0.4 % 0.5 % 3.4 % 1.9 % 1.7 %
Operating income ........................... 14.0 % 11.0 % 9.8 % 12.6 % 13.5 %
Interest expense, net ...................... 1.1 % 0.5 % 1.1 % 0.3 % 2.0 %
Other expense, net ......................... 0.1 % 0.1 % 0.1 % 0.0 % 0.0 %
Income from continuing operations
before provision for income taxes ......... 12.9 % 10.4 % 8.5 % 12.3 % 11.6 %
Provision for income taxes ................. 5.1 % 3.9 % 3.9 % 5.3 % 4.2 %
Income from continuing operations .......... 7.8 % 6.5 % 4.7 % 7.0 % 7.5 %
Loss from discontinued operations, net
of income tax benefit ..................... ( 0.1)% ( 0.2)% ( 1.7)% (12.8)% ( 2.3)%
Net income (loss) .......................... 7.7 % 6.3 % 3.0 % ( 5.8)% 5.1 %

THREE MONTHS ENDED MARCH 31, 2004 COMPARED TO THREE MONTHS ENDED MARCH 31,
2003.

Net income (loss). Net income increased $7.4 million, or 145.5%, to $12.5
million for the three months ended March 31, 2004 compared to $5.1 million for
the three months ended March 31, 2003. Net income for the three months ended
March 31, 2004, includes income from continuing operations of $12.6 million and
a loss from discontinued operations of $(138,000), compared to income from
continuing operations of $5.2 million and a loss from discontinued operations
of $(158,000) for the three months ended March 31, 2003.

CONTINUING OPERATIONS

Aerospace & Defense Group revenues. Aerospace & Defense Group revenues
increased $65.1 million, or 409.2%, to $81.0 million in the three months ended
March 31, 2004, compared to $15.9 million in the three months ended March 31,
2003. For the three months ended March 31, 2004, Aerospace & Defense Group
revenue increased 172.7% internally and 236.5% from acquisitions. Internal
growth was due to strong demand for the M1114 Up-Armored HWMMV and SAPI plates,
while acquired growth was a function of the Simula, Inc. acquisition on
December 9, 2003.

S-34

Products Division revenues. Products Division revenues increased $9.8
million, or 22.3%, to $53.8 million in the three months ended March 31, 2004,
compared to $44.0 million in the three months ended March 31, 2003. For the
three months ended March 31, 2004, Products Division revenue increased 14.8%
internally, including year over year changes in acquired businesses, and 7.5%
due to the acquisitions of Vector Associations, Inc. (dba ODV, Inc.), which was
completed during the first quarter of 2004, and Hatch Imports, Inc., which was
completed during the fourth quarter of 2003. Internal growth was due primarily
to strong sales of international body armor, and other soft armor and hard
armor sectors, providing protection to troops and private sector employees
within Iraq.

Mobile Security revenues. Mobile Security Division revenues increased $6.2
million, or 30.3%, to $26.8 million in the three months ended March 31, 2004,
compared to $20.6 million in the three months ended March 31, 2003, primarily
due to increased revenues from our Germany subsidiary Trasco-Bremen, which is
experiencing increased demand in the Middle East.

Cost of sales. Cost of sales increased $56.9 million, or 99.6%, to $114.1
million for the three months ended March 31, 2004, compared to $57.2 million
for the three months ended March 31, 2003. As a percentage of total revenues,
cost of sales decreased to 70.6% of total revenues for the three months ended
March 31, 2004, from 71.0% for the three months ended March 31, 2003.

Gross margins in the Aerospace & Defense Group were 32.1% for the three
months ended March 31, 2004, compared to 29.8% for the three months ended March
31, 2003, primarily due to the acquisition of Simula, Inc., which operated at
higher average gross margins than the M1114 Up-Armored HMMWV program for the
quarter, as well as improved gross margins for both HMMWVs and HMMWV spare
parts.

Gross margins in the Products Division were 31.5% for the three months
ended March 31, 2004, compared to 34.2% for the three months ended March 31,
2003. The decrease in Products Division gross margins resulted primarily from
product mix, certain large lower margin international and governmental orders
and certain additional inventory reserves provided for during the quarter.

Gross margins in the Mobile Security Division were 17.3% in the three
months ended March 31, 2004, compared to 17.2% for the three months ended March
31, 2003.

Operating expenses. Operating expenses increased $9.3 million, or 66.0%,
to $23.3 million (14.4% of total revenues) for the three months ended March 31,
2004 compared to $14.0 million (17.4% of total revenues) for the three months
ended March 31, 2003. The decrease as a percentage of revenues was largely a
function of increased revenues, and the Simula, Inc. acquisition, which
operates with lower operating expenses as a percent of revenues than the
Products Division and the Mobile Security Division.

Aerospace & Defense Group operating expenses increased $4.5 million, or
585.2%, to $5.3 million (6.5% of Aerospace & Defense Group revenues) for the
three months ended March 31, 2004, compared to $0.8 million (4.8% of Aerospace
& Defense Group revenues) for the three months ended March 31, 2003. The
increase in operating expenses is due primarily to the acquisition of Simula,
Inc. on December 9, 2003, as well as additional operating expenses in the M1114
Up-Armored HMMWV program as we increase production. The increase in operating
expense as a percentage of revenue was due to the fact that Simula incurs
higher operating expenses as a percentage of revenue than the other businesses
within the Aerospace & Defense Group.

Products Division operating expenses increased $3.0 million, or 38.0%, to
$10.9 million (20.3% of Products Division revenues) for the three months ended
March 31, 2004, compared to $7.9 million (18.0% of Products Division revenues)
for the three months ended March 31, 2003. This increase is due primarily to
acquisitions, increased research and development spending, higher sales
expenses as related to increased sales volumes, wage increases, higher
insurance cost, increased bad debt provisions, and bonus expenses that
previously were allocated to corporate operating expenses.

Mobile Security Division operating expenses increased $0.4 million, or
10.6%, to $3.6 million (13.3% of Mobile Security Division revenues) for the
three months ended March 31, 2004, compared

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to $3.2 million (15.6% of Mobile Security Division revenues) for the three
months ended March 31, 2003. This increase is due primarily to increased
operating expenses related to significant revenue growth and increased warranty
provisions.

Corporate operating expenses increased $1.4 million, or 66.4%, to $3.5
million (2.2% of total revenues) for the three months ended March 31, 2004,
compared to $2.1 million (2.6% of total revenues) for the three months ended
March 31, 2003. This increase in administrative expenses is associated with the
acquisition of Simula, our overall growth, and compliance with the
Sarbanes-Oxley Act requirements.

Amortization. Amortization expense increased $920,000, or 1,533.3% to
$980,000 for the three months ended March 31, 2004, compared to $60,000 for the
three months ended March 31, 2003, primarily due to the acquisitions of Simula
and Hatch in December 2003. SFAS 142, which we adopted on January 1, 2002,
eliminated amortization of intangible assets with indefinite lives and goodwill
for all acquisitions completed after July 1, 2001, as well as for all fiscal
years ending after January 1, 2002. Remaining amortization expense is related
to patents and trademarks with finite lives, and acquired amortizable
intangible assets that meet the criteria for recognition as an asset apart from
goodwill under SFAS 141.

Integration and other charges. Integration and other charges increased
$259,000, or 61.4%, to $681,000 for the three months ended March 31, 2004,
compared to $422,000 for the three months ended March 31, 2003. The integration
and other charges for the three months ended March 31, 2004 primarily related
to the integration of Simula, Inc., Hatch Imports, Inc., and ODV, Inc., all of
which were acquired subsequent to the first quarter of 2003.

Operating income. Operating income from continuing operations increased
$13.8 million, or 156.6%, to $22.6 million for the three months ended March 31,
2004, compared to $8.8 million in the three months ended March 31, 2003, due to
the factors discussed above.

Interest expense, net. Interest expense, net increased $1.3 million, or
355.9%, to $1.7 million for the three months ended March 31, 2004, compared to
$379,000 for the three months ended March 31, 2003. This increase was due
primarily to interest expense associated with the $150 million aggregate
principal amount of 8.25% senior subordinated notes due 2013 issued in August
2003. On September 2, 2003, we entered into interest rate swap agreements that
effectively exchanged the 8.25% fixed rate for a variable rate of six-month
LIBOR (1.16% at March 31, 2004), set in arrears, plus a spread of 2.735% to
2.75%.

Other expense, net. Other expense, net, was $115,000 for the three months
ended March 31, 2004, compared to other expense, net, of $69,000 for the three
months ended March 31, 2003.

Income from continuing operations before provision for income
taxes. Income from continuing operations before provision for income taxes
increased $12.4 million, or 148.3%, to $20.8 million for the three months ended
March 31, 2004, compared to $8.4 million for the three months ended March 31,
2003, due to the reasons discussed above.

Provision for income taxes. Provision for income taxes was $8.2 million
for the three months ended March 31, 2004, compared to $3.1 million for the
three months ended March 31, 2003. The effective tax rate was 39.3% for the
three months ended March 31, 2004, compared to 37.4% for the three months ended
March 31, 2003. The increased tax rate relates to an increased mix of
profitability generated by our Ohio, Arizona and Massachusetts locations, which
operate in higher-taxed jurisdictions.

Income from continuing operations. Income from continuing operations
increased $7.4 million to $12.6 million for the three months ended March 31,
2004, compared to $5.2 million for the three months ended March 31, 2003 due to
the factors discussed above.

DISCONTINUED OPERATIONS

On April 17, 2003, we announced that we had completed the sale of our
ArmorGroup Integrated Systems business through the sale of 100% of the stock of
ArmorGroup Integrated Systems, Inc. and

S-36

Low Voltage Systems Technologies, Inc. to AIS. AIS is a wholly owned subsidiary
of Aerwav Holdings, LLC. As consideration for the integrated systems business,
we received a $4.1 million collateralized note due in two years and a warrant
for approximately 2.5% of AIS. We have recorded a loss of $366,000 on the sale.

On November 26, 2003, we announced that we completed the sale of
ArmorGroup, our security service division, for $33.7 million in consideration
to a group of private investors led by Granville Baird Capital Partners of
London, England and Management. We received $31.4 million in cash at closing
and are scheduled to receive another $2.3 million by the end of 2004, of which
we have received $500,000 through May 10, 2004. We have recorded a loss of $8.8
million on the sale. In accordance with generally accepted accounting
principles, unrealized gains and losses, which are included in equity as
accumulated other comprehensive income or loss, are not recognized until the
period of disposition of the related assets and liabilities (which was a large
component of the loss).

At March 31, 2004, our litigation support services subsidiary remains our
only operating subsidiary in discontinued operations.

Services revenues. Services Division revenue decreased $25.1 million to
$720,000 for the three months ended March 31, 2004, compared to $25.8 million
for the three months ended March 31, 2003. Exclusive of ArmorGroup Integrated
Systems, which we sold on April 17, 2003, and ArmorGroup, which we sold on
November 26, 2003, revenue decreased $220,000, or 23.4%, to $720,000 for the
three months ended March 31, 2004, compared to $940,000 for the three months
ended March 31, 2003. This decrease was due to a delay in the release of
enhanced software tools.

Cost of sales. Cost of sales decreased $18.9 million to $236,000 for the
three months ended March 31, 2004, compared to $19.2 million for the three
months ended March 31, 2003. Exclusive of ArmorGroup Integrated Systems and
ArmorGroup, cost of sales decreased $105,000, or 30.8%, to $236,000 for the
three months ended March 31, 2004, compared to $341,000 for the three months
ended March 31, 2003. As a percentage of total revenue exclusive of ArmorGroup
Integrated Systems and ArmorGroup, cost of sales decreased to 32.8% of total
revenues for the three months ended March 31, 2004, from 36.3% for the three
months ended March 31, 2003.

Operating expenses. Operating expenses decreased $6.0 million to $436,000
(60.6% of Services revenues) for the three months ended March 31, 2004,
compared to $6.4 million (24.9% of Services revenues) for the three months
ended March 31, 2003. Exclusive of ArmorGroup Integrated Systems and
ArmorGroup, operating expenses decreased $51,000, or 10.5%, to $436,000 for the
three months ended March 31, 2004, compared to $487,000 for the three months
ended March 31, 2003. This decrease was due to a decline in revenues.

Integration and other charges. Integration and other charges decreased to
zero for the three months ended March 31, 2004, compared to $42,000 for the
three months ended March 31, 2003.

Operating income. Operating income was $48,000 for the three months ended
March 31, 2004, compared to operating income of $152,000 for the three months
ended March 31, 2003, due to the factors discussed above. Excluding ArmorGroup
Integrated Systems and ArmorGroup, the balance of the assets held for sale
generated operating income of $48,000 for the three months ended March 31,
2004, compared to operating income of $113,000 for the three months ended March
31, 2003, due to reasons discussed above.

Interest expense, net. Interest expense, net, decreased $36,000, or 94.7%,
to $2,000 for the three months ended March 31, 2004, compared to $38,000 for
the three months ended March 31, 2003, primarily due to the sale of ArmorGroup
Integrated Systems and ArmorGroup.

Other expense, net. Other expense, net, increased $203,000, or 338.3%, to
$263,000 for the three months ended March 31, 2004, compared to other expense,
net, of $60,000 for the three months ended March 31, 2003. The increase was due
to additional accounting fees incurred in connection with the sale of
ArmorGroup.

Income (loss) from discontinued operations before provision for income
taxes. Income (loss) from discontinued operations before provision for income
taxes was $(217,000) for the three months

S-37

ended March 31, 2004, compared to income of $54,000 for the three months ended
March 31, 2003, due to the reasons discussed above.

(Benefit) Provision for income taxes. Benefit for income taxes was $79,000
for the three months ended March 31, 2004 compared to a provision for income
taxes of $212,000 for the three months ended March 31, 2003. The effective tax
rate for the three months ended March 31, 2004 was a benefit of 36.4% compared
to a provision of 392.6% for the three months ended March 31, 2003. The large
provision of 392.6% for the three months ended March 31, 2003, was primarily
due to unrecognized potential deferred tax assets associated with foreign
subsidiaries, which recorded pretax losses in the first quarter of 2003. These
potential tax benefits were not recognized due to the uncertainty regarding the
specific subsidiary's ability to utilize the net operating loss carry-forwards
in future periods.

Loss from discontinued operations. Loss from discontinued operations was
$(138,000) for the three months ended March 31, 2004, compared to a loss from
discontinued operations of $(158,000) for the three months ended March 31,
2003, due to the factors discussed above.

FISCAL 2003 AS COMPARED TO FISCAL 2002

Net income (loss). Net income (loss) increased $28.6 million, or 161.5%,
to net income of $10.9 million for the year ended December 31, 2003 ("fiscal
2003") compared to a net loss of $(17.7) million for the year ended December
31, 2002 ("fiscal 2002"). Income from continuing operations and a loss from
discontinued operations were $17.0 million and $(6.1) million, respectively,
for fiscal 2003, compared to income from continuing operations and a loss from
discontinued operations of $21.3 million and $(39.0) million, respectively, for
fiscal 2002. The decrease in income from continuing operations relates
primarily to a $7.3 million non-cash, non-recurring charge for stock based
compensation in the fourth quarter of 2003, a $3.3 million (including a $2.1
million non-cash charge) severance charge related to the termination of our
former Chief Executive Officer in the second quarter of 2003, an increase in
interest expense relating to our $150.0 million subordinated debenture issued
on August 12, 2003, and increases in bonus expense, legal and accounting fees,
insurance and internal audit expenses.

CONTINUING OPERATIONS

Aerospace & Defense Group revenues. Our Aerospace & Defense Group revenues
increased $32.4 million, or 54.5%, to $91.7 million in fiscal 2003 compared to
$59.3 million in fiscal 2002. The Aerospace & Defense Group was created with
the acquisition of Simula on December 9, 2003. The Aerospace & Defense Group
also includes the military business of the Mobile Security Division, including
armor and blast protection systems for M1114 Up-Armored HMMWVs, and the SAPI
business generated from our Protech subsidiary. The historical results of these
businesses have been reclassified to the Aerospace & Defense Group. For fiscal
2003, Aerospace & Defense Group revenue increased 47.2% internally, including
year-over-year changes in acquired businesses, and 7.4% due to the acquisition
of Simula on December 9, 2003.

Products Division revenues. Our Products Division revenues increased $14.0
million, or 7.8%, to $194.0 million in fiscal 2003, compared to $179.9 million
in fiscal 2002. For fiscal 2003, Products Division revenue increased 4.9%
internally, including year-over-year changes in acquired businesses, and 2.9%
due to the acquisitions of Speedfeed, Inc., the Foldable Products Group,
Evi-Paq, Inc., B-Square, Inc. and 911 Emergency Products, Inc., all of which
were completed during 2002 and Hatch Imports, Inc., which was completed in the
fourth quarter of 2003. Products Division revenues include $20.7 million and
$16.8 million from Cyconics International Training Services, Inc., our US based
training company, for the years ended fiscal 2003 and fiscal 2002,
respectively. In our filings prior to June 30, 2002, we reported Cyconics
International Training Services, Inc. as a part of our Services Division. The
historical results of the SAPI business of the Products Division have been
reclassified to the Aerospace & Defense Group.

Mobile Security Division revenues. Our Mobile Security Division revenues
increased $13.7 million, or 20.8%, to $79.6 million in fiscal 2003, compared to
$65.9 million in fiscal 2002. Mobile

S-38

Security Division revenues for 2003 increased by $19.2 million due to the
acquisition of substantially all of the assets of Trasco-Bremen on September
24, 2002. Excluding the $19.2 million of 2003 revenue increase relating to
Trasco-Bremen, Mobile Security Division revenue decreased $5.5 million, or
8.7%, in fiscal 2003 compared to fiscal 2002. The historical results of the
military business of the Mobile Security Division have been reclassified to the
Aerospace & Defense Group.

Cost of sales. Cost of sales increased $42.8 million, or 20.3%, to $253.6
million for fiscal 2003 compared to $210.7 million for fiscal 2002. As a
percentage of total revenues, cost of sales increased to 69.4% of total
revenues for fiscal 2003 from 69.1% for fiscal 2002.

Gross margins in the Aerospace & Defense Group were 31.3% for fiscal 2003
compared to 28.3% for fiscal 2002. The increase in the Aerospace & Defense
Group gross margins was primarily attributable to: (1) favorable manufacturing
overhead cost absorption relating to increased manufacturing volumes at our
Cincinnati manufacturing facility, and (2) operational efficiencies at our
Cincinnati manufacturing facility. These improvements were slightly offset by
purchase accounting from the Simula acquisition, and the wrap up of a low
margin contract at Simula, which was acquired on December 9, 2003.

Gross margins in the Products Division were 34.8% for fiscal 2003 compared
to 36.4% for fiscal 2002. The decline in Product Division's gross margins
resulted primarily from: (1) an increase in low margin gas mask sales; (2) an
increase in lower margin international body armor sales produced overseas at
Armor Products International; (3) lower production volumes within our
less-lethal, automotive and hard armor product lines, which resulted in reduced
fixed cost absorption and certain labor inefficiencies; and (4) moving costs
and labor inefficiencies at Protech associated with the relocation of its
manufacturing facility. Excluding our Products training division subsidiary,
the Products Division gross margins were 37.1%, compared to 38.7% in 2002.

Gross margins in the Mobile Security Division were 19.4% in fiscal 2003,
compared to 18.3% for fiscal 2002. The increase in the Mobile Security gross
margins was primarily attributable to: (1) favorable manufacturing overhead
cost absorption relating to increased manufacturing volumes at our Cincinnati
manufacturing facility, and (2) operational efficiencies at our Cincinnati
manufacturing facility.

Operating expenses. Operating expenses increased $13.0 million, or 26.0%,
to $62.8 million (17.2% of total revenues) for fiscal 2003 compared to $49.8
million (16.3% of total revenues) for fiscal 2002.

Aerospace & Defense Group operating expenses increased $1.9 million, or
51.9%, to $5.6 million (6.2% of Aerospace & Defense Group revenues) compared to
$3.7 million (6.3% of Aerospace & Defense Group revenues) for fiscal 2002
primarily due to incremental operating expenses associated with the acquisition
of Simula on December 9, 2003.

Products Division operating expenses increased $1.8 million, or 5.7%, to
$33.1 million (16.6% of Products Division revenues) compared to $31.4 million
(17.4% of Products Division revenues) for fiscal 2002. This increase is
primarily due to the incremental operating expenses associated with acquired
businesses completed during or subsequent to 2002.

Mobile Security Division operating expenses increased $3.7 million, or
43.1%, to $12.3 million (15.4% of Mobile Security Division revenues) for fiscal
2003 compared to $8.6 million (13.0% of Mobile Security Division revenues) for
fiscal 2002. Excluding the increase in 2003 operating expenses resulting from
the acquisition of substantially all of the assets of Trasco-Bremen on
September 24, 2002, the operating expenses for fiscal 2003 increased $1.9
million versus fiscal 2002. Aside from the Trasco-Bremen acquisition, the
increase in operating expenses was primarily due to: (1) increased expenses
associated with the start-up of operations in Caracas, Venezuela; (2) increased
insurance costs; (3) the net effect of a weaker U.S. dollar against foreign
currencies, and (4) normal wage inflation.

Corporate operating expenses increased $5.6 million, or 89.9%, to $11.8
million (3.2% of total revenues) in fiscal 2003 compared to $6.2 million in
fiscal 2002 (2.0% of total revenues). This increase is due primarily to
increased bonus expense, legal and accounting fees, insurance and internal
audit expenses.

S-39

Amortization. Amortization expense increased $244,000, or 99.6%, to
$489,000 for fiscal 2003 compared to $245,000 for fiscal 2002. SFAS 142, which
we adopted on January 1, 2002, eliminated amortization of intangible assets
with indefinite lives and goodwill for all acquisitions completed after July 1,
2001, as well as for all fiscal years ending after January 1, 2002. Remaining
amortization expense is related to patents and trademarks with finite lives and
to amortization on intangible assets, other than goodwill, associated with the
Simula and Hatch Imports acquisitions in 2003.

Integration and other charges. Integration and other charges increased
$6.7 million, or 112.2%, to $12.6 million for fiscal 2003 compared to $5.9
million in fiscal 2002. The increase in integration and other charges is
primarily related to a $7.3 million non-cash charge for stock-based
compensation for a performance plan for certain key executives and a $3.3
million severance charge (including a $2.1 million non-cash charge) related to
the recent departure of our former Chief Executive Officer. Excluding these
charges, integration and other charges were $2.0 million for fiscal 2003, a
decrease of $3.9 million from fiscal 2002. This decrease was primarily due to
the elimination of expense associated with the 2001 acquisitions of O'Gara-Hess
& Eisenhardt and Identicator.

Operating income. Operating income from continuing operations decreased
$2.7 million, or 6.9%, to $35.7 million in fiscal 2003 compared to $38.4
million in fiscal 2002 due to the factors discussed above.

Interest expense, net. Interest expense, net increased $3.1 million, or
334.7%, to $4.0 million for fiscal 2003 compared to $923,000 for fiscal 2002.
This increase was due primarily to interest expense associated with the $150
million aggregate principal amount of 8.25% senior subordinated notes due 2013,
which were issued on August 12, 2003. On September 2, 2003, we entered into
interest rate swap agreements that effectively exchanged the 8.25% fixed rate
for a variable rate of six month LIBOR, set in arrears, plus a spread of 2.735%
to 2.75%. At December 31, 2003, the six-month LIBOR rate was 1.22%.

Other expense, net. Other expense, net, was $508,000 for fiscal 2003,
compared to $51,000 for fiscal 2002. The increase related primarily to foreign
exchange currency losses and a write-down of certain fixed assets.

Income from continuing operations before provision for income
taxes. Income from continuing operations before provision for income taxes
decreased $6.2 million, or 16.5%, to $31.2 million for fiscal 2003 compared to
$37.4 million for fiscal 2002 due to the reasons discussed above.

Provision for income taxes. Provision for income taxes on continuing
operations was $14.2 million for fiscal 2003 compared to $16.1 million for
fiscal 2002. The effective income tax rate was 45.5% for fiscal 2003 compared
to 42.9% for fiscal 2002 based on our annual income amounts and jurisdictions
in which such amounts were taxable. The 2003 effective income tax rate of 45.5%
is higher than the 37.4% estimated effective income tax rate that was utilized
in the first half of 2003 due to, among other things: (1) the non-tax
deductible nature of the non-cash, non-recurring stock based compensation that
was provided to certain key executives, and (2) a taxable gain that was
realized in the second half of 2003 when certain intellectual property utilized
in our discontinued operations was revalued in order to comply with tax code
provisions. The impact of the incremental tax associated with the revalued
intellectual property is recorded in continuing operations as required by
generally accepted accounting principles, and resulted in an incremental
non-cash tax expense, for which foreign tax credits are available to offset the
tax otherwise payable. The previously mentioned negative impacts on the 2003
tax rate were partially offset by some state level tax strategies, which
lowered the effective tax rate.

Income from continuing operations. Income from continuing operations
decreased $4.3 million to $17.0 million for fiscal 2003 compared to $21.3
million for fiscal 2002 due to the factors discussed above.

DISCONTINUED OPERATIONS

Many of the items listed below involve accounting estimates. The loss and
amounts below will be re-evaluated in the future for any changes which might be
appropriate.

S-40

On April 17, 2003, we announced that we had completed the sale of our
ArmorGroup Integrated Systems business through the sale of 100% of the stock of
ArmorGroup Integrated Systems, Inc. and Low Voltage Systems Technologies, Inc.
to AIS. AIS is a wholly owned subsidiary of Aerwav Holdings, LLC. As
consideration for the integrated systems business, we received a $4.1 million
collateralized note due in April 2005 two years and a warrant for approximately
2.5% of AIS. We have recorded a loss of $366,000 on the sale.

On November 26, 2003, we announced that we completed the sale of
ArmorGroup, our security service division, for $33,660,000 million in
consideration to a group of private investors led by Granville Baird Capital
Partners of London, England and Management. We received $31,360,000 million in
cash at closing and are scheduled to receive another $2,300,000 million by the
end of 2004. We have recorded a loss of $8.8 million on the sale. In accordance
with generally accepted accounting principles, unrealized gains and losses,
which were included in equity as accumulated other comprehensive income or
loss, were not recognized until the period of disposition of the related assets
and liabilities (which was a large component of the loss).

At December 31, 2003, our litigation support services subsidiary, remained
our only operating subsidiary in discontinued operations.

Note 2 of the consolidated financial statements contains comparative
information for our discontinued operations.

Services revenues. Services Division revenues decreased $3.1 million, or
3.2%, to $95.1 million for fiscal 2003 compared to $98.3 million for fiscal
2002 as fiscal 2003 reflects revenues from ArmorGroup only through November 26,
2003, and revenues from ArmorGroup Integrated Systems only through April 17,
2003, their respective dates of sale as opposed to a full year in 2002.
Exclusive of ArmorGroup Integrated Systems, revenue increased $8.5 million, or
10.3%, to $90.4 million for fiscal 2003 compared to $82.0 million for fiscal
2002. This increase was due to strong performance primarily in the Middle East
with strong growth coming from Iraq along with ongoing strong training revenues
from the Athens Olympics build up. The increase was tempered by weak revenues
in mine action business, investigations business and the Latin American
business and the lack of a full year's revenues in fiscal 2003.

Cost of sales. Cost of sales decreased $9.0 million, or 11.9%, to $66.8
million for fiscal 2003 compared to $75.8 million for fiscal 2002 as fiscal
2003 reflects cost of sales from ArmorGroup only through November 26, 2003, and
cost of sales from ArmorGroup Integrated Systems only through April 17, 2003,
their respective dates of sale. As a percentage of total revenue from
discontinued operations, cost of sales decreased to 70.2% of total revenues
from discontinued operations for fiscal 2003 from 77.1% for fiscal 2002. This
decrease is a result of the sale of the ArmorGroup Integrated Systems business
in April 2003, which has a comparatively low gross margin.

Exclusive of ArmorGroup Integrated Systems, cost of sales increased $3.9
million, or 6.8%, to $61.6 million for fiscal 2003 compared to $57.7 million
for fiscal 2002. Exclusive of ArmorGroup Integrated Systems, cost of sales as a
percentage of total revenue from discontinued operations decreased to 68.2% of
total revenues from discontinued operations for fiscal 2003 from 70.4% for
fiscal 2002. This decrease in cost of sales as a percentage of total revenue
from discontinued operations was primarily a result of the proportion of the
revenue growth coming from expatriate intensive security contracts in Iraq and
continued high margin training contracts.

Operating expenses. Operating expenses decreased $10.7 million, or 34.9%,
to $19.9 million (20.9% of total revenues from discontinued operations) for
fiscal 2003 compared to $30.6 million (31.1% of total revenues from
discontinued operations) for fiscal 2002 as fiscal 2003 reflects operating
expenses from ArmorGroup only through November 26, 2003, and operating expenses
from ArmorGroup Integrated Systems only through April 17, 2003, their
respective dates of sale. Exclusive of ArmorGroup Integrated Systems, operating
expenses decreased $7.6 million, or 28.1%, to $19.4 million for fiscal 2003
compared to $26.9 million for fiscal 2002. This decrease was due to reduced
foreign currency expenses, a reduction in salary costs as a result of the 2002
restructuring and the sale of ArmorGroup on November 26, 2003.

S-41

Charge for impairment of long-lived assets. Charge for impairment of
long-lived assets was $21.5 million for fiscal 2003 compared to $30.3 million
for fiscal 2002. The fiscal 2003 charge related to a $12.4 million reduction in
the carrying value of the Services division to its estimated realizable value,
the $8.8 million loss on the sale of ArmorGroup and the $366,000 loss on the
sale of ArmorGroup Integrated Systems. The 2002 charge was the result of $6.1
million in estimated disposal costs and a $24.2 million reduction in carrying
value of the Services Division to the estimated realizable value as required by
SFAS 144.

Integration and other charges. Integration and other charges decreased
$1.8 million, or 70.4%, to $776,000 for fiscal 2003 compared to $2.6 million
for fiscal 2002. This decrease is primarily due to severance payments to
certain personnel in the prior year.

Operating loss. Operating losses were $(4.7) million for fiscal 2003,
compared to an operating loss of $(41.0) million for fiscal 2002 due to the
factors discussed above. Operating loss from the ArmorGroup Integrated Systems
business was $(15.0) million for fiscal 2002 primarily due to the $11.9 million
charge for impairment of long-lived assets. Excluding the ArmorGroup Integrated
Systems business, the balance of the assets held for sale generated an
operating loss of $(3.7) million for fiscal 2003 compared to an operating loss
of $(26.9) million for fiscal 2002.

Interest expense, net. Interest expense, net decreased $330,000 or 95.4%,
to $16,000 for fiscal 2003 compared to $346,000 for fiscal 2002. This decrease
was due to decreased utilization of the Services Division's line of credit.

Other expense, net. Other expense, net, was $479,000 for fiscal 2003
compared to $99,000 for fiscal 2002 due primarily to an increase in foreign
currency fluctuation losses in fiscal 2003.

Loss from discontinued operations before benefit for income taxes. Loss
from discontinued operations before benefit for income taxes was $(14.4)
million for fiscal 2003 and $(41.5) million for fiscal 2002 due to the reasons
discussed above.

Benefit for income taxes. Income tax benefit was $8.3 million for fiscal
2003 compared to $2.4 million for fiscal 2002. The effective tax rate for
fiscal 2003 was a benefit of 57.4% compared to a benefit of 5.9% for fiscal
2002. The income tax benefit of 57.4% for fiscal 2003 was primarily due to a
taxable loss realized on the sale of ArmorGroup.

Loss from discontinued operations. Loss from discontinued operations was
$(6.1) million for fiscal 2003 compared to a loss from discontinued operations
of $(39.0) million for fiscal 2002 due to the factors discussed above.

FISCAL 2002 AS COMPARED TO FISCAL 2001

Net (loss) income. Net income decreased $27.8 million to a net loss of
$17.7 million for fiscal 2002 compared to net income of $10.1 million for the
year ended December 31, 2001 ("fiscal 2001"). Income from continuing operations
and the loss from discontinued operations was $21.3 million and $39.0 million
respectively for fiscal 2002, compared to income from continuing operations of
$14.7 million and a loss from discontinued operations of $4.6 million for
fiscal 2001. The increase in income from continuing operations relates
primarily to the inclusion of the Mobile Security Division for a full year in
2002 versus four months in 2001.

CONTINUING OPERATIONS

Aerospace & Defense Group revenues. Our Aerospace & Defense Group revenues
increased $41.2 million, or 226.9%, to $59.3 million in fiscal 2002, compared
to $18.1 million in fiscal 2001. The Aerospace & Defense Group was created with
the acquisition of Simula on December 9, 2003. The Aerospace & Defense Group
also includes the military business of the Mobile Security Division, including
armor and blast protection systems for M1114 Up-Armored HMMWVs, and the SAPI
business generated from our Protech subsidiary. The historical results of these
businesses have been reclassified to the Aerospace & Defense Group. Revenues
for fiscal 2001 included only four months of operations after the acquisitions
of O'Gara-Hess & Eisenhardt Armoring Company, The O'Gara Company, and O'Gara
Security Associates, Inc. in August 2001.

S-42

Products Division revenues. Our Products Division revenues increased $30.0
million, or 20.1%, to $179.9 million in fiscal 2002, compared to $149.9 million
in fiscal 2001. For fiscal 2002, Products Division revenue increased 14.4%
internally, including year over year changes in acquired businesses, and 5.7%
due to a series of small strategic "tuck-in" acquisitions including
Identicator, Inc., Guardian Personal Security Products, Inc., Speedfeed, Inc.,
the Foldable Products Group, Evi-Paq, Inc. B-Square, Inc. and 911 Emergency
Products. Products Division revenues include $16.8 million and $7.2 million
from Cyconics International Training Services, Inc., our US based training
company, for the years ended fiscal 2002 and fiscal 2001, respectively. In our
filings prior to June 30, 2002, we reported Cyconics International Training
Services, Inc. as a part of our Services Division.

Mobile Security Division revenues. Our Mobile Security Division revenues
increased $36.8 million, or 126.4% to $65.9 million in fiscal 2002, compared to
$29.1 million in fiscal 2001. Revenues for fiscal 2001 included only four
months of operations after the acquisitions of O'Gara-Hess & Eisenhardt
Armoring Company, The O'Gara Company, and O'Gara Security Associates, Inc. in
August 2001. Revenues in fiscal 2002 include $3.3 million related to the
acquisition of Trasco-Bremen in September 2002. On a pro forma basis, Mobile
Security Division revenue increased 17.7% internally from approximately $106.3
million during fiscal 2001.

Cost of sales. Cost of sales increased $84.4 million, or 66.8%, to $210.7
million for fiscal 2002 compared to $126.3 million for fiscal 2001. This
increase was due primarily to the acquisition of O'Gara as well as overall
revenue growth for fiscal 2002 compared to fiscal 2001. As a percentage of
total revenues, cost of sales increased to 69.1% of total revenues for fiscal
2002 from 64.1% for fiscal 2001. This increase as a percentage of total
revenues was partially due to the full year inclusion in 2002 of the O'Gara
acquisition, and partially to reduced Products Division margins as discussed
below. O'Gara operates at lower average gross margins than the Products
Division.

Gross margins in the Aerospace & Defense Group were 28.3% for fiscal 2002
compared to 26.6% for fiscal 2001 primarily due to production efficiencies
related to reduced labor hours and overhead costs on the M1114 Up-Armored HMMWV
program as well as higher margins on foreign sales of M1114 Up-Armored HMMWVs.

Gross margins in the Products Division were 36.4% compared to 39.3%
reported in the same period last year. The Products Division consists of a
portfolio of law enforcement products, each of which is manufactured and sold
at different margins. In any given period, the Products Division weighted
average gross margins will fluctuate based upon the relative volume of products
sold during the period. Lower gross margins during fiscal 2002 in the Products
Division were partially attributable to product mix, as well as to short term
increases in manufacturing costs and a raw material supply issue in the
division's body armor operations during the first half of 2002.

During late 2001 and 2002, the Products Division combined its
Jacksonville, Florida based body armor operation into its body armor
manufacturing facility in Ontario, California. During 2002, the Division
experienced difficulty in this combination resulting in capacity constraints
and increased manufacturing costs. However, during this time, we also
experienced interruptions in the supply of Zylon Shield, a certain ballistic
fiber used in our leading concealable ballistic vest. This particular supply
problem was related to the ballistic integrity of the fiber we received and not
the actual availability of the material. Nevertheless, our inability to receive
quality Zylon Shield during this period exacerbated our capacity constraints.

The Products Division gross margins also decreased because it realized
higher proportional revenue increases from its training division, which
operates at significantly lower overall gross margins than its manufacturing
segment.

Gross margins in the Mobile Security Division were 18.3% in fiscal 2002
compared to 24.2% in fiscal 2001, which included only four months since its
acquisition in August 2001. The decrease in gross margins in the Mobile
Security Division was primarily due to a less favorable mix of commercial
vehicle sales compared to the same period in the prior year, a heavier mix of
"lower margin" cash-in-transit vehicles in 2002 compared to 2001, and a larger
number of base unit sales included in revenue in fiscal 2002. Base units are
the unarmored OEM produced vehicle, which can either be

S-43

purchased directly by us and resold or purchased directly by our customer, in
which case the base unit cost is not included in our revenues.

Operating expenses. Operating expenses increased $11.2 million, or 28.9%,
to $49.8 million (16.3% of total revenues) for fiscal 2002 compared to $38.7
million (19.6% of total revenues) for fiscal 2001. This increase was primarily
due to the operating expenses associated with the operations of O'Gara,
acquired in August 2001, which were not included for the full year ended
December 31, 2001. Operating expenses also increased in the Products Division
primarily due to operating expenses associated with acquired companies and from
internal growth of the business. Operating expenses as a percentage of sales
decreased because the acquired O'Gara business operates with a lower level of
operating expenses as a percentage of sales than does the Products Division.

Amortization. Amortization expense decreased $1.9 million, or 88.6%, to
$0.2 million for fiscal 2002 compared to $2.1 million for fiscal 2001. This
decrease results from the implementation of SFAS 142, which eliminated goodwill
amortization for all acquisitions completed after July 1, 2001, as well as for
all fiscal years ending after January 1, 2002. Remaining amortization expense
is related to patents and trademarks with finite lives.

Integration and other charges. Integration and other charges increased
$2.6 million, or 79.8%, to $5.9 million for fiscal 2002 compared to $3.3
million in fiscal 2001. These charges relate primarily to the integration of
the Aerospace & Defense Group and Mobile Security Division, as well as other
acquisitions completed in 2001 and 2002. Fiscal 2002 integration and other
charges also included certain expenses related to the integration of our body
armor operations, as well as direct costs and expenses associated with
potential acquisitions that did not close.

Operating income. Operating income from continuing operations increased
$11.7 million to $38.4 million for fiscal 2002 compared to $ 26.7 million in
fiscal 2001 due to the factors discussed above. Cyconics International Training
Services, Inc. contributed operating income that was previously reported as a
part of the Services Division of $1.7 million and $1.2 million for the years
ended December 31, 2002 and 2001, respectively.

Interest expense, net. Interest expense, net decreased $2.9 million, or
76.1% to $0.9 million for fiscal 2002 compared to $3.9 million for fiscal 2001.
This decrease was due primarily to the repayment of long-term debt under our
revolving credit facility with the net proceeds of the secondary common stock
offering completed in December 2001.

Other expense (income), net. Other expense (income), net, was $51,000 for
fiscal 2002, compared to $(82,000) for fiscal 2001 due to a gain on sale of
fixed assets during 2001.

Income from continuing operations before provision for income
taxes. Income from continuing operations before provision for income taxes
increased by $14.5 million to $37.4 million for fiscal 2002 compared to $22.9
million for fiscal 2001 due to the reasons discussed above.

Provision for income taxes. Provision for income taxes was $16.1 million
for fiscal 2002 compared to $8.2 million for fiscal 2001. The provision for
income taxes for fiscal 2002 included charges of approximately $1.5 million
related to the establishment of valuation allowances for certain foreign
deferred tax assets of our discontinued operations. The effect of these charges
was to increase our effective tax rate for fiscal 2002 to 42.9% compared to
35.9% for fiscal 2001. Without these charges, our effective tax rate for fiscal
2002 would have been 39%. The increase in what our effective tax rate would
have been without the tax charges related to our discontinued operations is due
primarily to the higher percentage of income earned in the United States and
the impact of state income taxes on this income. Our expected effective tax
rate is not necessarily indicative of what our actual effective rate will be
due to the changing concentration and mix of income in the various countries in
which we continue to operate.

Income from continuing operations. Income from continuing operations
increased $6.6 million to $21.3 million for fiscal 2002 compared to $14.7
million for fiscal 2001 due to the factors discussed above.

S-44

DISCONTINUED OPERATIONS

Many of the items listed below involve accounting estimates. The loss and
amounts below will be re-evaluated in the future for any changes which might be
appropriate.

Note 2 of the consolidated financial statements contains comparative
information for our discontinued operations. Our ArmorGroup Services Division
revenues increased $3.3 million, or 3.5%, to $98.3 million for fiscal 2002
compared to $94.9 million for fiscal 2001. For fiscal 2002, revenue increased
6.7% due to the acquisition of International Training, Inc. ("ITI"), which was
acquired as part of the acquisition of our Mobile Security Division and was
included in the Services Division from the date of acquisition. The 3.4%
reduction in revenue exclusive of the ITI acquisition was a result of lower
revenues in the Integrated Systems business in the United States and the
Security consulting business both in Latin America and Russia due to the
completion of several large contracts.

Cost of sales. Cost of sales increased $10.8 million, or 16.5%, to $75.8
million for fiscal 2002 compared to $65 million for fiscal 2001. This increase
was due primarily to the acquisition of ITI. As a percentage of total revenue,
cost of sales increased to 77.1% of total revenues for fiscal 2002 from 68.5%
for fiscal 2001. This increase in cost of sales as a percentage of total
revenue was primarily due to the weakness in our Integrated Systems business
resulting in poor margins from increased inventory reserves, the loss of high
margin oil industry security consulting work in Latin America and the scaling
down of business in the Democratic Republic of Congo.

Operating expenses. Operating expenses increased $6.1 million, or 24.9%,
to $30.6 million (31.1% of total revenues) for fiscal 2002 compared to $24.5
million (25.8% of total revenues) for fiscal 2001. This increase was due
primarily to increased accounts receivable reserves, other asset write-downs,
and other charges in the Integrated Systems and Security consulting businesses,
as well as additional operating expenses associated with ITI's operations,
acquired in August 2001.

Amortization. Amortization expense decreased $1.5 million, or 100%, to $0
for fiscal 2002 compared to $1.5 million for fiscal 2001. This decrease was a
result of the implementation of SFAS 142, which eliminated goodwill
amortization for acquisitions completed after July 1, 2001 and for fiscal years
beginning on or after January 1, 2002.

Charge for impairment of long-lived assets. Charges for impairment of
long-lived assets was $30.3 million for fiscal 2002 compared to $0 for fiscal
2001. The impairment charge is the result of the $24.2 million reduction in
carrying value of the Services Division to the estimated realizable value as
required by SFAS 144.

Restructuring and related charges. In January 2001, our Board of Directors
approved a restructuring plan to close the Services Division's U.S.
investigative businesses, realign the Service Division's organization,
eliminate excess facilities and reduce overhead in its business worldwide. In
connection with this restructuring charge, the Services Division performed a
review of its long-lived assets to identify potential impairments. Pursuant to
this restructuring plan, we a) eliminated 26 employees, primarily from the
Services Division investigative business; b) eliminated an additional 24
employees from its security consulting business; c) incurred lease and other
exit costs as a result of the closure of the investigative businesses; and d)
wrote-down the value of both tangible and intangible assets as a result of the
impairment review.

As a result of the restructuring plan, we recorded a pre-tax charge of
$10.3 million. At December 31, 2002 we had a restructuring accrual of $270,000
compared to $354,000 at December 31, 2001 relating to lease termination and
other exit costs. This liability has been classified in accrued expenses and
other current liabilities on our discontinued operations balance sheet and will
be funded through cash provided by operating activities and our credit
facility.

Integration and other charges. Integration and other charges increased
$1.8 million, or 238.0%, to $2.6 million for fiscal 2002 compared to $776,000
for fiscal 2001. These charges reflect certain severance expenses, software
write-off costs and other expenses associated with preparing the division for
sale, as well as the expenses associated with integrating ITI into the Services
Division.

S-45

Operating loss. Operating losses were $41.0 million for fiscal 2002,
compared to an operating loss of $7.1 million for fiscal 2001 due to the
factors discussed above.

Interest expense, net. Interest expense, net increased $203,000 or 142%,
to $346,000 for fiscal 2002 compared to $143,000 for fiscal 2001. This increase
was due to increased utilization of the Services Division's line of credit.

Other (income) expense, net. Other expense, net, was $99,000 for fiscal
2002, compared to other income, net of $218,000 for fiscal 2001. The increase
expense in fiscal 2002 was a result of losses on the disposal of fixed assets
and other asset write-offs.

Loss from discontinued operations before provision for income taxes
(benefit). Loss from discontinued operations before provision for income taxes
(benefit) was $41.5 million for fiscal 2002 and $7.1 million for fiscal 2001
due to the reasons discussed above.

Provision for income taxes (benefit). Income tax benefit was $2.4 million
for fiscal 2002 compared to a benefit of $2.5 million for fiscal 2001. The
effective tax rate for fiscal 2002 was a benefit of 5.9% compared to a benefit
of 35.5% for fiscal 2001. The decrease in percentage benefit is primarily due
to the inclusion in taxable income of certain expenses not deductible for tax
purposes, including a $31.2 million charge for the impairment of long-lived
assets.

Loss from discontinued operations. Loss from discontinued operations was
$39.0 million for fiscal 2002 compared to a loss from discontinued operations
of $4.6 million for fiscal 2001 due to the factors discussed above.

QUARTERLY RESULTS

Set forth below are certain unaudited quarterly financial data for each of
our last eight quarters, including data expressed as a percentage of our
revenue for the respective quarters. The information has been derived from
unaudited financial statements that, in the opinion of our management, include
all adjustments (consisting only of normal recurring adjustments) necessary to
fairly present the quarterly information in accordance with generally accepted
accounting principles. The operating results for any quarter are not
necessarily indicative of the results to be expected for any future period.

S-46

THREE MONTHS ENDED
---------------------------------------------------
MAR 31, DEC 31, SEP 30, JUN 30,
2004 2003 2003 2003
----------- ------------- ------------ ------------
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA)

Revenues:
Aerospace & Defense ........... $81,008 $38,834 $ 21,136 $ 15,793
Products ...................... 53,840 50,802 49,804 49,347
Mobile Security ............... 26,780 22,521 19,942 16,519
------- ------- -------- --------
Total Revenue .................. 161,628 112,157 90,882 81,659
Operating income ............... 22,648 8,381 12,512 6,010
Interest expense, net .......... 1,728 1,721 1,475 437
Other expense (income), net..... 115 327 96 16
------- ------- -------- --------
Income from continuing
operations before taxes ....... 20,805 6,333 10,941 5,557
Provision for income taxes ..... 8,177 4,159 4,832 2,079
------- ------- -------- --------
Income from continuing
operations .................... 12,628 2,174 6,109 3,478
------- ------- -------- --------
(Loss) income from
discontinued operations,
net of (benefit) provision
for income taxes .............. (138) (7,103) 6 1,135
------- ------- -------- --------
Net (loss) income .............. $12,490 $(4,929) $ 6,115 $ 4,613
======= ======= ======== ========
Net income/(loss) per
common share--Basic
Income from continuing
operations .................... $ 0.44 $ 0.08 $ 0.22 $ 0.13
Loss from discontinued
operations .................... 0.00 ( 0.25) 0.00 0.04
------- ------- -------- --------
Basic (loss) earnings per
share ......................... $ 0.44 $ (0.17) $ 0.22 $ 0.17
======= ======= ======== ========
Net income/(loss) per
common share--Diluted
Income from continuing
operations .................... $ 0.42 $ 0.07 $ 0.22 $ 0.13
Loss from discontinued
operations .................... 0.00 ( 0.24) 0.00 0.04
------- ------- -------- --------
Diluted (loss) earnings per
share ......................... $ 0.42 $ (0.17) $ 0.22 $ 0.17
======= ======= ======== ========
Weighted average common
shares outstanding
Basic .......................... 28,472 28,195 27,811 27,555
Diluted ........................ 29,934 29,364 28,249 27,836
Revenues:
Aerospace & Defense ........... 50.1 % 34.6 % 23.3 % 19.4 %
Products ...................... 33.3 % 45.3 % 54.8 % 60.4 %
Mobile Security ............... 16.6 % 20.1 % 21.9 % 20.2 %
------- ------- -------- --------
Total revenue .................. 100.0 % 100.0 % 100.0 % 100.0 %
Operating income ............... 14.0 % 7.5 % 13.7 % 7.3 %
Interest expense, net .......... 1.1 % 1.5 % 1.6 % 0.5 %
Other expense (income), net..... 0.1 % 0.3 % 0.1 % 0.0 %
------- ------- -------- --------
Income from continuing
operations before taxes ....... 12.9 % 5.6 % 12.0 % 6.8 %
Provision for income taxes ..... 5.1 % 3.7 % 5.3 % 2.5 %
------- ------- -------- --------
Income from continuing
operations .................... 7.8 % 1.9 % 6.7 % 4.3 %
------- ------- -------- --------
(Loss) income from
discontinued operations ....... ( 0.1) % ( 6.3) % 0.0 % 1.4 %
------- ------- -------- --------
Net income (loss) .............. 7.7 % ( 4.4) % 6.7 % 5.7 %
======= ======= ======== ========

THREE MONTHS ENDED
-----------------------------------------------------
MAR 31, DEC 31, SEP 30, JUN 30,
2003 2002 2002 2002
----------- -------------- ------------- ------------
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA)

Revenues:
Aerospace & Defense ........... $15,910 $ 16,652 $ 16,889 $10,147
Products ...................... 44,007 48,897 49,047 43,057
Mobile Security ............... 20,557 17,802 14,621 18,401
------- -------- -------- -------
Total Revenue .................. 80,474 83,351 80,557 71,605
Operating income ............... 8,826 10,815 10,337 8,168
Interest expense, net .......... 379 254 343 284
Other expense (income), net..... 69 128 (13) --
------- -------- -------- -------
Income from continuing
operations before taxes ....... 8,378 10,433 10,007 7,884
Provision for income taxes ..... 3,133 2,451 7,043 3,060
------- -------- -------- -------
Income from continuing
operations .................... 5,245 7,982 2,964 4,824
------- -------- -------- -------
(Loss) income from
discontinued operations,
net of (benefit) provision
for income taxes .............. (158) (20,999) (17,671) (749)
------- -------- -------- -------
Net (loss) income .............. $ 5,087 $(13,017) $(14,707) $ 4,075
======= ======== ======== =======
Net income/(loss) per
common share--Basic
Income from continuing
operations .................... $ 0.18 $ 0.27 $ 0.10 $ 0.15
Loss from discontinued
operations .................... ( 0.01) ( 0.71) ( 0.60) ( 0.02)
------- -------- -------- -------
Basic (loss) earnings per
share ......................... $ 0.17 $ (0.44) $ (0.50) $ 0.13
======= ======== ======== =======
Net income/(loss) per
common share--Diluted
Income from continuing
operations .................... $ 0.18 $ 0.27 $ 0.10 $ 0.15
Loss from discontinued
operations .................... ( 0.01) ( 0.71) ( 0.59) ( 0.02)
------- -------- -------- -------
Diluted (loss) earnings per
share ......................... $ 0.17 $ (0.44) $ (0.49) $ 0.13
======= ======== ======== =======
Weighted average common
shares outstanding
Basic .......................... 28,964 29,456 29,708 31,193
Diluted ........................ 29,111 29,623 30,037 32,110
Revenues:
Aerospace & Defense ........... 19.8 % 20.0 % 21.0 % 14.2 %
Products ...................... 54.7 % 58.7 % 60.9 % 60.1 %
Mobile Security ............... 25.5 % 21.3 % 18.1 % 25.7 %
------- -------- -------- -------
Total revenue .................. 100.0 % 100.0 % 100.0 % 100.0 %
Operating income ............... 11.0 % 13.0 % 12.8 % 11.4 %
Interest expense, net .......... 0.5 % 0.3 % 0.4 % 0.4 %
Other expense (income), net..... 0.1 % 0.2 % 0.0 % 0.0 %
------- -------- -------- -------
Income from continuing
operations before taxes ....... 10.4 % 12.5 % 12.4 % 11.0 %
Provision for income taxes ..... 3.9 % 2.9 % 8.7 % 4.3 %
------- -------- -------- -------
Income from continuing
operations .................... 6.5 % 9.6 % 3.7 % 6.7 %
------- -------- -------- -------
(Loss) income from
discontinued operations ....... ( 0.2) % (25.2) % (21.9) % ( 1.0) %
------- -------- -------- -------
Net income (loss) .............. 6.3 % (15.6) % (18.3) % 5.7 %
======= ======== ======== =======

S-47

LIQUIDITY AND CAPITAL RESOURCES

On August 12, 2003, we terminated our prior credit facility and entered
into a new secured revolving credit facility (the "Credit Facility") with Bank
of America, N.A., Wachovia Bank, National Association and a syndicate of other
financial institutions arranged by Bank of America Securities, LLC. The new
Credit Facility consists of a five-year revolving credit facility and, among
other things, provides for (i) total maximum borrowings of $60 million, (ii) a
$25 million sub-limit for the issuances of standby and commercial letters of
credit, (iii) a $5 million sub-limit for swing-line loans, and (iv) a $5
million sub-limit for multi-currency borrowings. All borrowings under the
Credit Facility will bear interest at either (i) a rate equal to LIBOR, plus an
applicable margin ranging from 1.125% to 1.625%, (ii) an alternate base rate
which will be the higher of (a) the Bank of America prime rate and (b) the
Federal Funds rate plus 0.50%, or (iii) with respect to foreign currency loans,
a fronted offshore currency rate, plus an applicable margin ranging from 1.125%
to 1.625%, depending on certain conditions. The Credit Facility is guaranteed
by certain of our direct and indirect domestic subsidiaries and is
collateralized by, among other things, (i) a pledge of all of the issued and
outstanding shares of stock or other equity interests of certain of our
domestic subsidiaries, (ii) a pledge of 65% of the issued and outstanding
voting shares of stock or other voting equity interests of certain of our
direct and indirect foreign subsidiaries, (iii) a pledge of 100% of the issued
and outstanding nonvoting shares of stock or other nonvoting equity interests
of certain of our direct and indirect foreign subsidiaries, and (iv) a first
priority perfected security interest on certain of our domestic assets and
certain domestic assets of certain of our direct and indirect subsidiaries that
will become guarantors of our obligations under the new credit facility,
including, among other things, accounts receivable, inventory, machinery,
equipment, certain contract rights, intellectual property rights and general
intangibles. On January 9, 2004, we amended our Credit Facility to allow us to
make open market purchases of publicly-traded securities subject to certain
limitations contained in the Credit Facility. In addition, on March 29, 2004,
we also amended our Credit Facility to allow us to pay dividends subject to
certain limitations contained in the Credit Facility.

As of December 31, 2003 and March 31, 2004, we were in compliance with all
of our negative and affirmative covenants. As of December 31, 2003 and March
31, 2004, we had no amounts outstanding under the Credit Facility.

In May 2004, we filed with the Securities and Exchange Commission a shelf
registration statement on Form S-3 covering the issuance of up to an aggregate
of $500 million of securities in order to provide us with funding alternatives.
The shares of common stock being offered pursuant to this prospectus supplement
are a part of this shelf registration statement.

On August 12, 2003, we completed a private placement of $150 million
aggregate principal amount of 8.25% Senior Subordinated Notes due 2013 (the
"Notes"). The Notes are guaranteed by substantially all of our domestic
subsidiaries on a senior subordinated basis. The Notes have been sold to
qualified institutional investors in reliance on Rule 144A of the Securities
Act of 1933, as amended, and to non-U.S. persons in reliance on Regulation S
under the Securities Act of 1933, as amended. The Notes were rated B1/B+ by
Moody's Investors' Service and Standard & Poor's Rating Services, respectively.
During 2003, we used a portion of the funds to acquire Simula, Inc. and Hatch
Imports, Inc., and we intend to use the remaining proceeds of the offering to
fund acquisitions, repay a portion of our outstanding debt and for general
corporate and working capital purposes, including the funding of capital
expenditures. On March 29, 2004, we completed a registered exchange offer
relating to the Notes pursuant to which we exchanged all issued and outstanding
Notes for new Notes registered with the Securities and Exchange Commission.

On September 2, 2003, we entered into interest rate swap agreements,
designated as a fair value hedge as defined under SFAS 133 with a notional
amount totaling $150 million. The agreements were entered into to exchange the
fixed interest rate on the Notes for a variable interest rate equal to
six-month LIBOR, set in arrears, plus a spread ranging from 2.735% to 2.75%
fixed semi-annually on the fifteenth day of February and August. The agreements
are subject to other terms and conditions common to transactions of this type.
In accordance with SFAS 133, changes in the fair value of the interest rate
swap agreements offset changes in the fair value of the fixed rate

S-48

debt due to changes in the market interest rate. Accordingly, the other assets
on the Consolidated Balance Sheets as of December 31, 2003 increased by $5.9
million, which reflected an increase in the fair value of the interest rate
swap agreements. The corresponding increase in the hedge liability was recorded
in long-term debt. The agreements are deemed to be a perfectly effective fair
value hedge, and, therefore, qualify for the short-cut method of accounting
under SFAS 133. As a result, no ineffectiveness is expected to be recognized in
our earnings associated with the interest rate swap agreements.

In March 2002, our Board of Directors approved a stock repurchase program
authorizing the repurchase of up to a maximum 3.2 million shares of our common
stock. In February 2003, the Board of Directors increased this stock repurchase
program to authorize the repurchase, from time to time depending upon market
conditions and other factors, of up to an additional 4.4 million shares.
Through May 10, 2004, we repurchased 3.8 million shares of our common stock
under the stock repurchase program at an average price of $12.49 per share,
leaving us with the ability to repurchase up to an additional 3.8 million
shares of our common stock. Repurchases may be made in the open market, in
privately negotiated transactions or otherwise. As of May 19, 2004, we had
approximately 28.6 million shares of common stock outstanding. We have no
current plans to make additional repurchases of shares of our common stock
under the stock repurchase program. However, we reevaluate our position on
share repurchases from time to time and may make additional repurchases of our
common stock in the future.

We expect to continue our policy of repurchasing our common stock from
time to time, subject to the restrictions contained in our Credit Facility and
our indenture. Our Credit Facility permits us to repurchase shares of our
common stock with no limitation if our ratio of Consolidated Total Indebtedness
to Consolidated EBITDA (as such terms are defined in the Credit Facility) for
any rolling twelve-month period is less than 1.00 to 1. At ratios greater than
1.00 to 1, our credit agreement limits our ability to repurchase shares at
$15.0 million until such time as the ratio is less than 1.0 to 1 in any rolling
twelve-month period. In addition, our indenture governing our 8 1/4% senior
subordinated notes allows us to repurchase our common stock from time to time
so long as we comply with the financial and other conditions contained therein.

Working capital, excluding amounts relating to discontinued operations,
was $178.9 million, $168.5 million and $89.0 million as of March 31, 2004,
December 31, 2003, and December 31, 2002, respectively.

Our fiscal 2003 capital expenditures for continuing operations were $8.7
million. Our fiscal 2003 capital expenditures for discontinued operations were
$3.1 million. We expect our fiscal 2004 capital expenditures for continuing
operations to be approximately $13.9 million, of which we have spent
approximately $3.8 million through the three months ended March 31, 2004. These
expenditures include leasehold improvements, information technology and
communications infrastructure equipment and software, and manufacturing
machinery and equipment.

We anticipate that the cash generated from operations, proceeds from this
offering and the sale of discontinued operations, cash on hand and available
borrowings under the Credit Facility will enable us to meet liquidity, working
capital and capital expenditure requirements during the next 12 months. We may,
however, require additional financing to pursue our strategy of growth through
acquisitions. If such financing is required, we cannot assure you that it will
be available, or if available, that we can obtain it on terms favorable to us
or on a basis that is not dilutive to our stockholders.

RECENTLY ISSUED ACCOUNTING STANDARDS

In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 142 changes the accounting for goodwill from an amortization
method to an impairment-only approach. Amortization of goodwill, including
goodwill recorded in past business combinations, ceased upon adoption of this
statement. In addition, this statement requires that goodwill be tested for
impairment at least annually at the reporting unit level. We implemented SFAS
No. 142 on January 1, 2002. In connection with the adoption of SFAS 142, we
completed in the second quarter

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the transitional goodwill impairment test that compared the fair value of each
reporting unit to its carrying value and determined that no impairment existed.
The goodwill resulting from acquisitions made by us subsequent to June 30, 2001
was immediately subject to the non-amortization provisions of SFAS 142. Had we
been accounting for goodwill under SFAS 142 in 2001, our net income and
earnings per share would have been as follows:

DECEMBER 31, 2001
--------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Reported net income ................................ $ 10,128
Add back goodwill amortization, net of tax ......... 3,044
--------
Actual/pro forma adjusted net income .............. $ 13,172
========
Basic earnings per share
Reported basic income per share ................... $ 0.42
Goodwill amortization, net of tax ................. 0.13
--------
Actual/pro forma basic income per share ........... $ 0.55
========
Diluted earnings per share
Reported diluted income per share ................. $ 0.41
Goodwill amortization, net of tax ................. 0.12
--------
Actual/pro forma diluted income per share ......... $ 0.53
========

In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, and Interpretation of FASB Statements No.
5, 57 and 107 and Rescission of FASB Interpretation No. 34" ("FIN 45"). FIN 45
elaborates on the disclosures to be made by a guarantor in its interim and
annual financial statements about its obligations under certain guarantees that
it has issued. It also clarifies that a guarantor is required to recognize, at
the inception of a guarantee, a liability for the fair value of the obligation
undertaken in issuing the guarantee. The initial recognition and initial
measurement provisions of FIN 45 are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002, irrespective of the
guarantor's fiscal year-end. We adopted the provisions of this Statement on
January 1, 2003, which did not have a significant impact on our consolidated
financial statements.

In January 2003, the FASB issued FASB Interpretation No. 46,
"Consolidation of Variable-Interest Entities--an Interpretation of ARB No. 51
("FIN 46"). FIN 46 addresses consolidation by business enterprises of variable
interest entities, which have one or both of the following characteristics: (1)
the equity investment at risk is not sufficient to permit the entity to finance
its activities without additional subordinated financial support from other
parties, which is provided through other interests that will absorb some or all
of the expected losses of the entity and (2) the equity investors lack one or
more of the following essential characteristics of a controlling financial
interest:

o The direct or indirect ability to make decisions about the entity's
activities through voting rights or similar rights.

o The obligation to absorb the expected losses of the entity if they
occur, which makes it possible for the entity to finance its activities.

o The right to receive the expected residual returns of the entity if they
occur, which is the compensation for the risk of absorbing the expected
losses.

This Interpretation applies immediately to variable interest entities
created after January 31, 2003, and to variable interest entities in which an
enterprise obtains an interest after that date. It applies in the first fiscal
year or interim period beginning after June 15, 2003, to variable interest
entities in which an enterprise holds a variable interest that it acquired
before February 1, 2003. The adoption of FIN 46 did not have a significant
impact on our consolidated financial statements.

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In December 2003, the FASB issued FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities" (revised December 2003) (FIN
46(R)). The provisions of FIN 46(R) are as follows:

o Provides that the condition that would preclude an enterprise from
applying the scope exception of FIN 46 for certain entities that are
businesses if that enterprise and/or its related parties participated
significantly in the design or redesign of the entity should not apply if
the entity is a franchisee.

o An enterprise shall not consolidate a governmental organization and
shall not consolidate a financing entity established by a governmental
organization unless the financing entity (a) is not a governmental
organization and (b) is used by the business enterprise in a manner
similar to a variable interest entity in an effort to circumvent the
provisions of Interpretation 46(R).

o A troubled debt restructuring, as defined in paragraph 2 of FASB
Statement No. 15, Accounting by Debtors and Creditors for Troubled Debt
Restructurings, as amended, shall be accounted for in accordance with
that Statement and is not an event that requires the reconsideration of
whether the entity involved is a variable interest entity or whether an
enterprise with a variable interest in a variable interest entity is the
primary beneficiary of that entity.

o Provides that an enterprise with an interest in an entity to which the
provisions of FIN 46 have not been applied as of December 24, 2003, shall
apply FIN 46 or FIN 46(R) to that entity in accordance with the effective
date provisions of FIN 46(R) as described below.

o FIN 46(R) should be applied no later than the end of the first reporting
period that ends after March 15, 2004 (as of March 31, 2004 for the
Company). However, prior to the required application of FIN 46(R), the
Company must apply FIN 46 or FIN 46(R) to those entities that are
considered to be special-purpose entities no later than as of the end of
the first reporting period that ends after December 15, 2003 (as of
December 31, 2003 for the Company).

We do not have, nor have had, any interests in variable interest entities
that are subject to the provisions of FIN 46 or FIN 46(R).

In October 2001, the FASB issued SFAS 144. SFAS 144 establishes a
"primary-asset" approach to determine the cash flow estimation period for a
group of assets and liabilities that represents the unit of accounting for a
long-lived asset to be held and used. SFAS 144 requires that a long-lived asset
to be (1) abandoned, (2) exchanged for a similar productive asset, or (3)
distributed to owners in a spin-off be considered held and used until it is
abandoned, exchanged, or distributed. SFAS 144 requires (1) that spin-offs and
exchanges of similar productive assets be recorded at the lower of carrying
value or fair value, and that such assets be classified as held and used until
disposed of and (2) that any impairment loss resulting from a spin-off or
exchange of similar productive assets be recognized upon asset disposition.
SFAS 144 provides for total assets and total liabilities of discontinued
business segments to be presented in separate captions in assets and
liabilities and also provides that future losses, if any, of discontinued
business segments shall be reported as incurred. We adopted SFAS 144 effective
January 1, 2002. The reclassification of the Services Division to discontinued
operations and subsequent reduction in its carrying value was in accordance
with the provisions of SFAS 144.

In April 2002, the FASB issued Statement of Financial Accounting Standard
No. 145, "Rescission on FASB 4, 44 and 64, Amendment of FASB Statement No. 13
and Technical Corrections" ("SFAS 145"). Under SFAS 145, gains and losses
related to the extinguishment of debt should no longer be segregated on the
income statement from continuing operations. The provisions of SFAS 145 are
effective for fiscal years beginning after May 15, 2002.

In June 2002, the FASB issued Statement of Financial Accounting Standard
No. 146, "Accounting for Costs Associated with Exit or Disposal Activities"
("SFAS 146"). SFAS 146 addresses financial accounting and reporting for costs
associated with exit or disposal activities and nullifies Emerging Issues Task
Force Issue No. 94-3, "Liability Recognition for Certain Employee Termination

S-51

Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred
in a Restructuring)." SFAS 146 is effective for exit or disposal activities
initiated on or after December 31, 2002. The effects of adopting this standard
did not have a material effect on us.

In December 2002, the FASB issued Statement of Financial Accounting
Standard No. 148, "Accounting for Stock-Based Compensation--Transition and
Disclosure" ("SFAS 148"). SFAS 148 provides alternative methods of transition
for a voluntary change to the fair value based method of accounting for
stock-based employee compensation. In addition, SFAS 148 amends the disclosure
requirements of Statement of Financial Accounting Standard No. 123, "Accounting
for Stock-Based Compensation" ("SFAS 123"), to require prominent disclosure in
both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The disclosures required by SFAS 148 are included in this document.

In April 2003, the FASB issued Statement of Financial Accounting Standard
No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging
Activities" ("SFAS 149"). SFAS 149 amends and clarifies financial accounting
and reporting for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities under SFAS
133. SFAS 149 is effective for contracts entered into or modified and hedging
relationships designated after June 30, 2003, except for the provisions of SFAS
149 that relate to SFAS 133 Implementation Issues that have been effective for
fiscal quarters that began prior to June 15, 2003, which should continue to be
applied in accordance with their respective effective dates. Adoption of this
standard had no effect on us.

In May 2003, the FASB issued Statement of Financial Accounting Standard
No. 150, "Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity" ("SFAS 150"). SFAS 150 establishes standards for
how an issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability (or an
asset in some circumstances). Many of those instruments were previously
classified as equity. SFAS 150 is effective for financial instruments entered
into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003. Adoption
of this standard had no effect on us.

In May 2003, the FASB issued FASB Staff Position No. 146-1, "Determining
Whether a One-Time Termination Benefit Offered in Connection with an Exit or
Disposal Activity is, in Substance, an Enhancement to an Ongoing Benefit
Arrangement." This Staff Position states that in order to be considered an
enhancement to an ongoing benefit arrangement, the additional termination
benefits must represent a revision to the ongoing arrangement that is not
limited to a specified termination event or a specified future period.
Otherwise the additional termination benefits should be considered one-time
termination benefits accounted for under SFAS 146. The guidance in this Staff
Position is effective for exit or disposal activities initiated in interim or
annual reporting periods beginning after September 15, 2003. The adoption of
this Staff Position is not expected to have a material impact on our
consolidated financial statements.

INFLATION

We believe that the relatively moderate rates of inflation in recent years
have not had a significant impact on our revenue or profitability.
Historically, we have been able to offset any inflationary effects by either
increasing prices or improving cost efficiencies.

OFF BALANCE SHEET ARRANGEMENTS

We do not have any off balance sheet arrangements.

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TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

The following table presents our contractual obligations as of December
31, 2003:

PAYMENT DUE BY PERIOD
--------------------------------------------------------------
LESS THAN 1-3 3-5 MORE THAN
CONTRACTUAL OBLIGATIONS TOTAL 1 YEAR YEARS YEARS 5 YEARS
------------------------------------- ----------- ----------- --------- --------- ----------

Long-term debt obligations .......... $190,407 $32,107 $1,250 $ 1,307 $155,743
Operating lease obligations ......... 19,719 3,417 3,908 3,073 9,321
Other long-term liabilities ......... 10,208 -- 1,614 7,558 1,036
-------- ------- ------ ------- --------
Total ............................... $220,334 $35,524 $6,772 $11,938 $166,100
======== ======= ====== ======= ========

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a result of our global operating and financial activities, we are
exposed to changes in raw material prices, interest rates and foreign currency
exchange rates, which may adversely affect our results of operations and
financial position. In seeking to minimize the risks and/or costs associated
with such activities, we manage exposure to changes in raw material prices,
interest rates, and foreign currency exchange rates through our regular
operating and financing activities. We have entered into interest rate swap
agreements to reduce our overall interest expense. We do not utilize financial
instruments for trading purposes.

MARKET RATE RISK

The following discussion about our market rate risk involves
forward-looking statements. Actual results could differ materially from those
projected in the forward-looking statements. We are exposed to market risk
related to changes in interest rates, foreign currency exchange rates, and
equity security price risk.

Interest Rate Risk. Our exposure to market rate risk for changes in
interest rates relates primarily to borrowings under our $150 million senior
subordinated notes, our credit facilities and our short-term monetary
investments. To the extent that, from time to time, we hold short-term money
market instruments, there is a market rate risk for changes in interest rates
on such instruments. To that extent, there is inherent rollover risk in the
short-term money market instruments as they mature and are renewed at current
market rates. The extent of this risk is not quantifiable or predictable,
because of the variability of future interest rates and business financing
requirements. However, there is no risk of loss of principal in the short-term
money market instruments, only a risk related to a potential reduction in
future interest income.

On September 2, 2003, we entered into interest rate swap agreements in
which we effectively exchanged the $150 million fixed rate 8.25% interest on
our senior subordinated notes due 2013 for variable rates in the notional
amount of $80 million, $50 million, and $20 million at six-month LIBOR, set in
arrears, plus 2.75%, 2.75%, and 2.735%, respectively. The agreements involve
receipt of fixed rate amounts in exchange for floating rate interest payments
over the life of the agreement without an exchange of the underlying principal
amount. The variable interest rates are fixed semi-annually on the fifteenth
day of February and August. The six-month LIBOR rate was 1.57% on May 20, 2004.
The maturity dates of the interest rate swap agreements match those of the
underlying debt. Our objective for entering into these interest rate swaps was
to reduce our exposure to changes in the fair value of our senior subordinated
notes and to obtain variable rate financing at an attractive cost. Changes in
the six-month LIBOR would affect our earnings either positively or negatively.
An assumed 100 basis point increase in the six-month LIBOR would increase our
interest obligations under the interest rate swaps by approximately $750,000
for a six-month period.

In accordance with SFAS 133, we designated the interest rate swap
agreements as perfectly effective fair value hedges and, accordingly, use the
short-cut method of evaluating effectiveness. As permitted by the short-cut
method, the change in fair value of the interest rate swaps will be reflected
in earnings and an equivalent amount will be reflected as a change in the
carrying value of the

S-53

swaps, with an offset to earnings. There is no ineffectiveness to be recorded.
On March 31, 2004, we recorded the fair value of the interest rate swap
agreements of $9.3 million and recorded the corresponding fair value adjustment
to our 8.25% senior subordinated notes in other assets and long-term debt
sections of the Condensed Consolidated Balance Sheets, respectively.

We are exposed to credit-related losses in the event of nonperformance by
counterparties to these financial instruments. However, counterparties to these
agreements are major financial institutions and the risk of loss due to
nonperformance is considered by management to be minimal. We do not hold or
issue interest rate swap agreements or other derivative instruments for trading
purposes.

Foreign Currency Exchange Rate Risk. The majority of our business is
denominated in U.S. dollars. There are costs associated with our operations in
foreign countries that require payments in the local currency. Where
appropriate and to partially manage our foreign currency risk related to those
payments, we receive payment from customers in local currencies in amounts
sufficient to meet our local currency obligations. We do not use derivatives or
other financial instruments to hedge foreign currency risk.

RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS

We do business in numerous countries, including emerging markets in South
America. We have invested substantial resources outside of the United States
and plan to continue to do so in the future. Our international operations are
subject to the risk of new and different legal and regulatory requirements in
local jurisdictions, tariffs and trade barriers, potential difficulties in
staffing and managing local operations, potential imposition of restrictions on
investments, potentially adverse tax consequences, including imposition or
increase of withholding and other taxes on remittances and other payments by
subsidiaries, and local economic, political and social conditions. Governments
of many developing countries have exercised and continue to exercise
substantial influence over many aspects of the private sector. Government
actions in the future could have a significant adverse effect on economic
conditions in a developing country or may otherwise have a material adverse
effect on us and our operating companies. We do not have political risk
insurance in the countries in which we currently conduct business, but
periodically analyze the need for and cost associated with this type of
insurance policy. Moreover, applicable agreements relating to our interests in
our operating companies are frequently governed by foreign law. As a result, in
the event of a dispute, we may not be able to enforce our rights. Accordingly,
we may have little or no recourse upon the occurrence of any of these
developments.

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BUSINESS

COMPANY OVERVIEW

We are a leading manufacturer and provider of personal protective
equipment and security products for law enforcement and military personnel,
armored military and commercial vehicles, armor kits for retrofit of military
vehicles, aircraft armor, aircraft safety products, survivability equipment
used by military aviators and other technologies used to protect humans in a
variety of life-threatening or catastrophic situations. Our products and
systems are used domestically and internationally by military, law enforcement,
security and corrections personnel, as well as governmental agencies,
multinational corporations and individuals. Effective in the first quarter of
2004, we instituted a new segment reporting format to include three reportable
business divisions: the Aerospace & Defense Group, the Products Division and
the Mobile Security Division. The Aerospace & Defense Group was formed upon the
completion of our acquisition of Simula, Inc. on December 9, 2003. The
Aerospace & Defense Group also includes the military business, including armor
and blast protection systems for M1114 Up-Armored HMMWVs, and the other
military vehicle armor programs, which previously were included in the Mobile
Security Division. The Aerospace & Defense Group also includes the SAPI plate
produced by our Protech subsidiary in Pittsfield, Massachusetts, which was
previously reported as part of the Products Division. The historical results of
these businesses have been reclassified as part of the Aerospace & Defense
Group. This reporting change was made to better reflect management's approach
to operating and directing the businesses, and, in certain instances, to align
financial reporting with our market and customer segments.

Aerospace & Defense. Our Aerospace & Defense Group supplies human safety
and survival systems to the U.S. military, and major Aerospace & Defense prime
contractors. Our core markets are military aviation safety, military personnel
safety, and land and marine safety. Under the brand name O'Gara-Hess &
Eisenhardt, we are the sole-source provider to the U.S. military of the armor
and blast protection systems for M1114 Up-Armored HMMWVs. We are also under
contract with the U.S. military to provide spare parts, logistics and ongoing
field support services for the currently installed base of 4,968 Up-Armored
HMMWVs. Additionally, we provide blast and ballistic protection kits for the
standard HMMWVs, which are installed on existing equipment in the field. Our
Aerospace & Defense Group is also subcontracted to develop a ballistic and
blast protected armored and sealed truck cab for HIMARS, a program recently
transitioned by the U.S. Army and Marine Corps from developmental to a low rate
of initial production, deliveries of which commenced in 2003. We also supply
armor sub-systems for other tactical wheeled vehicles. Through Simula, we
provide military helicopter seating systems, helicopter cockpit airbag systems,
aircraft and land vehicle armor kits, body armor and other protective equipment
for military personnel, emergency bailout parachutes and survival ensembles
worn by military aircrew. The primary customers for our products are the U.S.
Army, Marine Corps, Boeing, and Sikorsky Aircraft. Most of Simula's aviation
safety products are provided on a sole-source basis. The U.S. armed forces have
adopted ceramic body armor as a key element of the protective ensemble worn by
our troops in Iraq and Afghanistan. Simula was the developer of this
specialized product called SAPI, and continues to be a prominent supplier to
the U.S. military. We believe the Aerospace & Defense Group has supplied
approximately 37% of all SAPI plates. We also provide ceramic body armor from
our Protech subsidiary based in Pittsfield, Massachusetts.

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MONADNOCK (Registered Trademark), NIK (Registered Trademark), O'GARA-HESS &
EISENHARDT ARMORING COMPANY (Registered Trademark), PROTECH (Trade Mark),
PROTECTING PEOPLE IN MOTION (Registered Trademark), QUIKSHIELD (Trade Mark),
QUIKSTEP LADDERS (Trade Mark), REINVENTING THE TECHNOLOGY OF SAFETY (Registered
Trademark), SAFARILAND and Design (Registered Trademark), SIMULA SAFE (Trade
Mark), SIMULITE (Registered Trademark), SPEEDFEED (Registered Trademark), 911EP
and Design (Trade Mark). We sell our products through a network of over 350
distributors and sales agents, including approximately 200 in the United States.
Our extensive distribution capabilities and commitment to customer service and
training have enabled us to become a leading provider of security equipment to
law enforcement agencies.

Mobile Security. Our Mobile Security Division manufactures and installs
ballistic and blast protected armoring systems for commercial vehicles as well
as some military vehicles for European based militaries. Under the brand name
O'GARA-HESS & EISENHARDT ARMORING COMPANY (Registered Trademark) , we armor a
variety of privately owned commercial vehicles, including limousines, sedans,
sport utility vehicles, commercial trucks and cash-in-transit vehicles, to
protect against varying degrees of ballistic and blast threats. Our customers
in this business include international corporations and high net worth
individuals. In addition, we supply ballistic and blast protected armoring
systems to U.S. federal law enforcement and intelligence agencies and foreign
heads of state.

MATERIAL DEVELOPMENTS

Sale of Services Division

Simula, Inc. Acquisition

On December 9, 2003, we completed our acquisition of Simula, an Arizona
corporation, pursuant to the Agreement and Plan of Merger, dated as of August
29, 2003, by and among Armor Holdings, AHI Bulletproof Acquisition Corp., a
wholly-owned subsidiary of Armor Holdings, and Simula. The consummation of the
merger followed the Special Meeting of Shareholders of Simula held on December
5, 2003, at which the requisite shareholder approval was obtained. In the
merger, we acquired all of the outstanding common stock of Simula and retired a
majority of Simula's outstanding indebtedness for $110.5 million in cash. Of
this amount, approximately $31 million principal amount of 8% debentures
remained outstanding for approximately 30 days at which time we repaid these
debentures, plus accrued interest, in their entirety. After payment of 100% of
the outstanding indebtedness and transaction expenses, the merger consideration
payable to Simula shareholders at closing pursuant to the merger agreement was
approximately $43.5 million or approximately $3.21 per share. The source of the
funds used in the acquisition was our working capital, which was derived from
proceeds received from our private placement of $150 million aggregate
principal amount of 8 1/4% Senior Subordinated Notes due 2013.

Hatch Imports, Inc. Acquisition

On December 16, 2003, we acquired all of the issued and outstanding common
stock of Hatch Imports, Inc. for $8.0 million in cash and $2.0 million in
deferred consideration payable in April 2005, subject to adjustments. Hatch
designs, imports and distributes a variety of specialty gloves and accessories,
including goggles, hoods, riot gear and bags for law enforcement, military,
corrections, medical, safety and other markets.

Zylon (Registered Trademark) Investigation and Litigation

In September 2003, Second Chance Body Armor, Inc. ("Second Chance"), a
body armor manufacturer and competitor to Armor Holdings, notified its
customers of a potential safety issue with

S-56

its Ultima (Registered Trademark) and Ultimax (Registered Trademark) models.
Second Chance has claimed that Zylon (Registered Trademark) fiber, which is
made by Toyobo, a Japanese corporation, and used in the ballistic fabric
construction of those two models, degraded more rapidly than originally
anticipated. Second Chance has also stated that the Zylon (Registered
Trademark) degradation problem affects the entire body armor industry, not
just its products. Both private claimants and State Attorneys General have
already commenced legal action against Second Chance based upon its Ultima
(Registered Trademark) and Ultimax (Registered Trademark) model vests.

S-57

Tax Matters

The IRS examined our U.S. federal income tax returns for the taxable years
2000 and 2001 and its examination concluded in April 2004. The IRS' examination
of our tax returns for the taxable years 2000 and 2001 did not result in any
material adverse effect on our business, financial condition, results of
operations and liquidity.

INDUSTRY OVERVIEW

We participate in the domestic and international markets for military and
commercial security products and armoring systems. Our Aerospace & Defense
Group is a provider of military helicopter seating systems, aircraft and land
vehicle armor systems, protective equipment for military personnel, and other
technologies used to protect humans in a variety of life-threatening or
catastrophic situations. Our Products Division manufactures security equipment
used by military, law enforcement, security and corrections personnel, and
other first responders (e.g., fire and rescue personnel). Our Mobile Security
Division provides armoring systems and mobile security systems used by
government agencies, law enforcement personnel, corporations and private
individuals. Increasingly, governments, militaries, businesses, and individuals
have recognized the need for security products to protect them from the risks
of terrorism, physical attacks and threats of violence.

The U.S. government has placed a high priority on fighting terrorism
overseas and securing the homeland from future terrorist attacks. This effort
has led many institutions within the government and private sector to redefine
their strategies to protect against, respond to, and combat terrorism. The
creation of the Department of Homeland Security is one significant step in a
reformed and reorganized effort to make our homeland more secure and better
able to respond in the event of an attack. The Bush Administration's fiscal
2004 budget request includes $41.3 billion for homeland security spending.
While it is impossible to quantify the effects that spending by the U.S.
government on homeland security will have on our businesses, we expect to
benefit to the extent that spending is allocated to increase the number of law
enforcement personnel, to purchase security equipment and consumables used in
equipping and training these personnel, and the armoring of vehicles.

Military Personnel Body Armor Market. There is dramatic change in the type
and extent of protective body armor being provided to U.S. forces. In 1998, the
U.S. Army and Marine Corps adopted a new body armor ensemble called
Interceptor. This ensemble is made up of a soft armor vest for fragmentation
protection (using similar materials and design concepts to law enforcement
vests) and hard, ceramic body armor plates inserted into the soft vest to
provide rifle protection over vital organs. The concept was first deployed in a
combat zone in Afghanistan with tremendous

S-58

success measured in the reduction of life-threatening chest wounds. During the
invasion of Iraq, front line U.S. forces were widely equipped with the
Interceptor system, which we believe is being extended to cover all deployed
troops in the combat zone. Extensive procurement actions by the U.S. Army and
Marine Corps are underway to outfit all active, Reserve and National Guard
troops that could be deployed around the world. The market is substantial and
is straining the capacity of the industry to support the need. The product has
a life cycle in use and we expect there will be a sizable ongoing replacement
market in the future.

Military Aviation Safety Market. The military aviation safety market is
comprised of three distinct market segments: crash safety, ballistic
survivability, and aviator safety equipment. The primary market for crash
safety is in military helicopters. The marketplace for these features is a
subset of the military helicopter market. The products include crashworthy
seats, airbags, landing gear, fuel systems, and structures. Demand for these
products is currently flat, although there is an expected upturn in the market
for upgrades to aircraft such as the U.S. Army's UH-60M Black Hawk and for
replacement of a wide range of U.S. military helicopters that have been damaged
in combat operations. The ballistic survivability market is both for
helicopters and fixed wing aircraft. Many front line aircraft have some basic
armor protection. There is a growing interest in new protective solutions that
can offer more complete ballistic protection within the limited available
weight on an aircraft. Foreign markets for crash safety and ballistic
survivability products are similar in size to the U.S. market, although the
types of aircraft and customer base are more fragmented. The aviator safety
equipment market includes equipment such as body armor, survival vests and
survival equipment, inflatable life preservers, parachutes, and emergency
oxygen. The market is experiencing some growth as new ensembles incorporating
lessons learned from combat are introduced and replacement equipment is
increased due to the increased pace of operations.

o Approximately 556,000 full-time employees in local police departments,
including about 436,000 sworn personnel.

o Approximately 291,000 full-time employees in sherriffs' offices,
including about 186,000 sworn personnel.

o Over 1 million firefighters, of which approximately 750,000 are
volunteers.

o Over 155,000 nationally registered emergency medical technicians.

INFORMATION CONCERNING BUSINESS SEGMENTS AND GEOGRAPHICAL SALES

For information concerning our business segments and geographical sales,
please refer to "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and Note 12 to our Consolidated Financial Statements
included elsewhere in this prospectus supplement.

COMPETITIVE STRENGTHS

We believe that the following strengths are critical to our success as a
leading provider of specialized security products, training and support
services, human safety and survival systems and vehicle armor systems.

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Broad Portfolio of Products. Our broad product portfolio and our ability
to offer that portfolio in both domestic and overseas markets result in a
balanced revenue mix. Our broad array of security products and armor systems
allows us to be a single-source provider of comprehensive solutions for our
customers' security needs. Cross selling among our products creates additional
business opportunities and increases the value of our client relationships. We
believe that our acquisition of Simula will increase our access to superior
technology and know-how and will enhance our efforts to develop new products.

Long-Term Relationships with Government and Military Customers. We derive
the majority of our sales from domestic and foreign law enforcement, government
and military customers. Over many years, we have developed strong relationships
with military, law enforcement, security and corrections customers both in the
United States and overseas. We believe that our solid reputation and
longstanding relationships with customers support our continued growth.

Sole-Source Provider of M1114 Up-Armored HMMWVs. We are the sole-source
provider of up-armoring for new M1114 Up-Armored HMMWVs procured by the U.S.
military. Since August 2001, we have furnished the up-armoring for
approximately 2,000 M1114 Up-Armored HMMWVs to the U.S. military. We are also
currently under contract to provide spare parts, logistics and ongoing field
support services for the U.S. military's M1114 Up-Armored HMMWV fleet. In
addition, we have begun providing up-armoring of M1114 HMMWVs to a number of
foreign military customers including Canada, Egypt and Israel.

Extensive Portfolio of Armor Kits for Military Trucks. The two predominant
developers and manufacturers of mine blast and ballistic protection kits for
military trucks over the last 10 years have been O'Gara-Hess & Eisenhardt and
Simula. The acquisition of Simula brings these two organizations together as
well as provides a very complete portfolio of kit designs for light, medium and
heavy trucks used by the U.S. military and foreign militaries. Although the
market has not been sizeable in the past, recent actions by the services and by
Congress indicate that substantial quantities of vehicles will be armored in
the near term and future vehicles will be designed to readily accept these
kits. The combined capabilities of O'Gara-Hess & Eisenhardt and Simula also
provide the complete capability of armor technologies from basic steel armors
to sophisticated ceramic/composite armor systems that will be used to armor the
fleet of trucks.

Sole-Source Provider of Aviation Safety Products. We are the sole-source
provider for the following military crew seating systems: UH-60L and UH-60M
Black Hawk helicopter, MH-60S and MH-60R Sea Hawk helicopter, AH-1Z Cobra Venom
attack helicopter, AH-64 Apache attack helicopter, UH-1Y Super Huey utility
helicopter and the V-22 Osprey tilt-rotor aircraft. We are the sole-source
provider for the C-17 centerline and side-wall fixed-wing military seating
systems and the sole-source supplier selected by the U.S. Air Force to develop
a common wall-mounted troop seat for its C-130, C-141 and KC-135 aircraft.
Additionally, we are sole-source provider of aircraft airbag systems for the
UH-60 Black Hawk helicopter and the OH-58 Kiowa Warrior helicopter. Our
reputation in these areas has enabled us to assume the systems integrator role
for our customer base and allows us access to a range of new technologies.

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networks of security products, which provides a foundation for our continued
growth and expansion. The diversity of the markets we serve and the strength of
our distribution relationships reduces our dependence on any particular
product, market, or customer.

BUSINESS STRATEGY

We believe the demand for law enforcement and military security products,
vehicle armor systems and human safety and survival systems will continue to
grow. We expect to address this growth by offering a comprehensive array of
high quality branded security products to meet the needs of law enforcement and
militaries around the globe. We also expect to continue to develop ballistic
and blast protection for high-end commercial vehicles, newly-manufactured
military vehicles, and kits to retrofit military vehicles that are deployed
around the world. We intend to enhance our leadership position through
additional strategic acquisitions by creating a broad portfolio of products and
services to satisfy all of our customers' increasingly complex security
products needs. The following elements define our growth strategy:

Expand Distribution Network and Product Offerings. We plan to leverage our
distribution network by expanding our range of branded law enforcement
equipment through the acquisition of security products manufacturers and by
investing in the development of new and enhanced products that complement our
existing offerings. We believe that a broader product line will further
strengthen our relationships with distributors and enhance our brand appeal
with military, law enforcement and other end users.

Increase Exposure to Military Programs. As the sole-source provider of
M1114 Up-Armored HMMWV for the U.S. military's HMMWVs, we believe that we are
in a strong position to capture opportunities to provide armoring of additional
vehicles for the Department of Defense. We believe the proven success of M1114
Up-Armored HMMWVs in combat has led to increased interest in up-armoring other
vehicles. Examples include recent successful efforts to develop and supply
armor kits for various types of light through heavy tactical trucks and the
continued relationship with the original equipment manufacturers to explore
up-armoring opportunities for the U.S. Army's tactical vehicle fleet. We have
developed and own the proprietary technology for the M1114 Up-Armored HMMWV. We
believe that the cost and time required to develop an alternative protection
system increases the likelihood that we will maintain our sole-source position
on this program and capture additional programs.

Pursue Strategic Acquisitions. Since January 1, 1999, we have completed 16
acquisitions and integrated the acquired businesses into our Aerospace &
Defense Group, Products Division, and

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Mobile Security Division. We will continue to seek opportunities to make
value-based acquisitions that complement our business operations or expand our
product offerings, improve our technology, provide access to new geographic
markets or provide additional distribution channels and new customer
relationships. We have historically taken a disciplined value-based approach to
evaluating acquisition opportunities, driven by a prudent use of our capital,
rigorous due diligence standards and a targeted expected return on our
investment. No assurances can be given that any such potential acquisitions
will be consummated or, if any such acquisition is consummated, as to the terms
of such acquisition, including price.

ACQUISITIONS

We pursue a strategy of growth through acquisition of businesses and
assets that complement our existing operations. We exercise a high degree of
financial discipline and strictly adhere to the following criteria to evaluate
prospective acquisitions, including whether the business to be acquired:

o broadens the scope of products we offer or the geographic areas we
serve;

o offers attractive margins;

o is accretive to earnings;

o offers opportunity to improve profitability by increasing the efficiency
of our operations;

o is managed in a manner consistent with our existing businesses; and

o complements our portfolio of existing businesses by increasing our
ability to meet our customers' needs.

We have completed 16 acquisitions since January 1, 1999. The following
table sets forth information regarding each of these acquired businesses and
their respective products:

YEAR OF
BUSINESS OR ASSETS ACQUIRED ACQUISITION SEGMENT PRIMARY PRODUCT CATEGORIES
----------------------------- ------------- ------------- ---------------------------------

Safariland 1999 Products Duty Gear
Break Free 2000 Products Weapons Maintenance Products
Lightning Powder 2000 Products Forensics
Monadnock Lifetime Products 2000 Products Police Batons
Guardian Products 2001 Products Less Lethal Products
O'Gara-Hess & Eisenhardt 2001 Aerospace & Military and Commercial Vehicles
Companies Defense and
Mobile
Security
Identicator 2001 Products Forensics
Speedfeed 2002 Products Firearm Accessories
Evi-Paq 2002 Products Forensics
Foldable Products Group 2002 Products Safety Products
B-Square 2002 Products Firearm Accessories
Trasco-Bremen 2002 Mobile Commercial Vehicles
Security
911 Emergency Products 2002 Products Warning and Emergency Lighting,
Safety Products
Simula 2003 Aerospace & Human Safety and Survival
Defense Systems
Hatch Imports 2003 Products Specialty Gloves and Accessories
ODV Holdings Corp. 2004 Products Narcotics Identification

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AEROSPACE & DEFENSE GROUP

We are a provider of military helicopter seating systems, aircraft and
land vehicle armor systems, protective equipment for military personnel,
ballistic and blast protection-armoring systems for military vehicles and other
technologies used to protect humans in a variety of life-threatening or
catastrophic situations.

Our products are deployed on a wide range of high-profile military
platforms such as the M1114 Up-Armored HMMWV, HIMARS, AH-64 Apache and the
UH-60 Black Hawk helicopters, the C-17 Globemaster III Transport Aircraft, the
M1117 Guardian Armored Security Vehicle, various versions of the HMMWV, and
body-worn equipment for personal protection of the United States Army, Marine
Corps, and Air Force Special Operations Forces. Primary Aerospace & Defense
customers include Boeing, Sikorsky, Bell Helicopter, Oshkosh Truck, General
Motors, the U.S. military, and the U.S. Coast Guard.

Military Products. We are the sole-source provider to the U.S. military
for up-armoring of the M1114 Up-Armored HMMWV. The HMMWV chassis is produced by
AM General Corporation and shipped directly to our facility in Fairfield, Ohio,
where up-armoring components are added. The M1114 Up-Armored HMMWVs provide
exterior protection against various levels of armor piercing ammunition,
overhead airburst protection and underbody blast protection against anti-tank
and anti-personnel mines. In addition, we install other features designed to
enhance crew safety, comfort and performance, such as air conditioning, weapon
turrets and mounts, door locks and shock absorbing seats. During 2003 and the
first quarter of 2004, the Aerospace & Defense Group shipped 873 and 518 M1114
Up-Armored HMMWVs, respectively. We also supply engineering design and
prototype services in support of the M1114 Up-Armored HMMWV program, and supply
spare parts and logistics and ongoing field support services. None of our
contracts with the U.S. military have a minimum purchase commitment and the
U.S. military generally has the right to cancel its contracts unilaterally, at
its convenience.

Our expertise in military vehicle safety systems focuses on two areas:
armor kits for tactical vehicles, and ballistic armor systems for combat
vehicles.

Our experience in high-performance, lightweight armor for aircraft has
enabled us to build a business around armoring thin-skinned vehicles for
priority missions during peacekeeping operations. Work in this area includes
ballistic and mine-blast kits for HMMWVs, 5-ton trucks, and large off-road
trucks such as the Heavy Expanded Mobility Tactical Truck ("HEMTT"). We have
responded to urgent armor requirements in most major conflicts involving U.S.
peacekeepers in the last 10 years. We are currently under contract to supply
armor kits for HMMWVs and for four heavy transport trucks. Our customers for
these kits are predominately the U.S. Army and Marine Corps.

Our ground vehicle armor business also includes production armor kits for
the M1117 Guardian Armored Security Vehicle ("ASV") for the U.S. Army. This
small armored personnel carrier is used by military police in a peacekeeping
role. The armor kits consist of an array of ceramic composite armor panels that
form the armor system with the vehicle hull and internal composite spall liner.
We have completed more than 90 kits, which represents all ASVs produced to
date. Simula has also provided similar ceramic composite armor kits for the
U.S. Army's first Stryker vehicle deployments.

We are serving as a subcontractor to Stewart & Stevenson Services which is
contracted with Lockheed Martin under a U.S. Army and Marine Corps program to
supply a ballistically armored and sealed truck cab for the HIMARS. The truck
is used to fire missiles that are a part of either the Multiple Launch Rocket
System or the Army Tactical Missile System. This program consisted of shipping
several prototypes in 2001 and 2002 for testing and evaluation by the U.S. Army
and Marine Corps, and has been transitioned to a low rate initial production in
2003.

We market armor sub-systems for other tactical wheeled vehicles, such as
medium and heavy military trucks. We also produce various armor systems as a
subcontractor to a number of large defense contractors. These products include
armor for containers for fuels and missile launchers and for pilot protection.
These specialized armoring products often involve the use of unique materials
or methods.

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Aviation Safety Systems. Our core capabilities and technologies in the
aircraft safety market include protective seating, inflatable restraints, and
armor.

We have been a major supplier of crash-resistant, energy-absorbing seating
systems for military helicopters and other military aircraft to various
branches of the United States military and its prime defense contractors, and
foreign customers for over 25 years. We currently supply a substantial portion
of the new and replacement crew seating systems for U.S. military helicopters.
The seating systems focus on reducing injury and increasing survivability in
aircraft crashes. Many of our seating systems incorporate our advanced armor
systems. We are the sole supplier of crew seats for 14 different helicopter
models and other variants of these aircraft. Military helicopters for which we
have designed and manufactured crew seat assemblies include the AH-64 Apache
attack helicopter, UH-60 Black Hawk utility helicopter, SH-60 Sea Hawk ASW
helicopter, ASW and Transport helicopters, Italy's EH101 MMI ASW and Transport
helicopters, Canada's CH-149 Cormorant Search-and-Rescue helicopter, and
Norway's Sea King Multi-role helicopter. Aircraft manufacturers in our customer
base include Boeing Helicopters, Sikorsky Aircraft Corporation, Bell
Helicopter, Textron, Inc., Kaman Aerospace, Kawasaki Heavy Industries,
Mitsubishi Heavy Industries, Hindustan Aeronautics, and Agusta Westland. We
also supply crew seats directly to various agencies of the U.S. Department of
Defense and various foreign militaries.

Our expertise in military seating systems also extends to troop seats for
both helicopters and fixed-wing aircraft. Simula is the sole-source provider of
troop seats for the C-17 Globemaster transport aircraft. We were selected as
the sole supplier by the U.S. Air Force to develop a common wall-mounted troop
seat for its C-130, C-141, and KC-135 aircraft. The common troop seat also has
application to a range of transport helicopters and various fixed-wing aircraft
flown by other U.S. services and foreign militaries.

Our expertise in helicopter crash safety led to the development of cockpit
airbag systems ("CABS") with U.S. Army funding over the last five years. Our
role has evolved into the position of system integrator, incorporating airbags,
gas generators, and complex three-dimensional crash sensors into helicopter
cockpits. In 2001, we were awarded the first ever production contracts for
aircraft airbag systems. These are currently being produced for the U.S. Army's
UH-60 Black Hawk and OH-58 Kiowa Warrior helicopters. We received one
production contract in 2002 and two production contracts in 2003, which
represent less than 5% of the potential world market for CABS. Thus we believe
there is substantial growth potential in this business area.

Military Personnel Safety Systems. Our core competencies and technologies
in personnel safety include ballistic body armor, emergency bailout parachutes,
flotation collars, survival vests, and integrated ensembles incorporating
multiple capabilities.

Simula Inc.'s body armor business includes a range of hard armor plates
used in conjunction with soft vests to minimize injury from handgun bullets,
rifle bullets and fragments from explosive warheads. The primary product in the
product line is the SAPI plate, developed by Simula in 1998 and which has now
become a standard product for all U.S. Army and Marine Corps ground troops.
Simula continues to be a prominent supplier of SAPI plates to the U.S.
military. In 2004, we expect the combined production of Simula and Protech to
account for approximately 300,000 SAPI plates, which we estimate will represent
approximately 40% of SAPI plates produced this year. We believe the Aerospace &
Defense Group has supplied approximately 37% of all SAPI plates manufactured to
date.

We have applied our technologies and overall knowledge of materials and
structures to develop a parachute system that solves numerous functional
problems attendant to traditional military bailout parachutes. Our Thin-Pack
Parachute ("TPP") incorporates patented environmental sealing technology, which
reduces repackaging and maintenance costs, and extends the service life of the
parachute without jeopardizing user safety. Through March 31, 2004, we supplied
over 5,000 TPPs to the U.S. Navy.

We have also developed a line of flotation collars that are designed to
provide additional buoyancy for a person that enters water in an emergency. The
basic configuration of the product,

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called the Low Profile Flotation Collar, can fit a wide range of applications.
For example, aviators that eject or bailout can use it over water, and rescue
swimmers, divers and naval personnel can utilize it as well. In addition, it
can be worn with a wide range of other equipment and clothing for ground troops
being ferried over water and also by commercial personnel who work around
water. The U.S. Navy, Marine Corps, and the U.S. Air Force have adopted our
system. Through March 31, 2004, we have supplied over 23,000 collars.

We have seen a trend among our customers to integrate various armor,
survival and flotation technologies in a common vest ensemble. We were selected
to develop the U.S. Army's new Air Warrior ensemble, which began shipping in
2004. The U.S. Army has a stated need for over 9,300 systems. The Air Warrior
ensemble may also be adopted by other services.

Technology Development and Licensing. An important part of our business is
a growing portfolio of licensed technologies. Our principal licenses include
soft armor and a patented family of transparent polymers. We currently license
our patented SIMULITE (Trade Mark) material technology to Second Chance, for
use in concealable personal body armor used by police forces.

Simula has developed a number of advanced transparent polymers,
trademarked as CLEARGARD (Trade Mark) , and has introduced these materials to a
variety of customers in numerous markets. These patented and proprietary
transparent plastics are high-strength, impact resistant, lightweight and dye
compatible materials, which possess the ability to withstand extreme
temperatures and chemical attack. Potential uses for such materials include
transparent armor, laser protective devices, aircraft canopies, high
performance windows for aircraft and automobiles, industrial and protective
lenses and visors, medical products and sun, sport and ophthalmic lenses. We
have taken steps to commercialize the transparent polymer material through our
own products and through licenses in other markets. We have licensed our
optical polymer for use in ophthalmic lenses with PPG Industries, Inc. and for
sun and sport lenses and motorcycle helmets with Intercast Europe. PPG
introduced Simula's polymer in 2001 under the tradename of TRIVEX (Trade
Mark) . Intercast introduced a product trade named NXT (Trade Mark) to the
sunglass market in early 2002. In 2002, we completed a license with the prime
contractor for the Joint Services General Purpose Gas Mask ("JSGPM") to develop
a Cleargard lens with chemical agent resistance and ballistic properties.

PRODUCTS

Body Armor. We manufacture and sell a wide array of armor products under
the leading brand names AMERICAN BODY ARMOR (Trade Mark) , SAFARILAND and
Design (Registered Trademark) and PROTECH (Trade Mark) that are designed to
protect against bodily injury caused by bullets, knives and explosive shrapnel.
Our principal armor products are ballistic resistant vests, sharp instrument
penetration armor, hard armor such as anti-riot gear, shields and upgrade armor
plates, and bomb protective gear. Our line of ballistic protective vests
provides varying levels of protection depending upon the configuration of
ballistic materials and the standards (domestic or international) to which the
armor is built. We primarily sell ballistic resistant vests, under the brand
names XTREME (Trade Mark) , AMERICAN BODY ARMOR (Trade Mark) , SAFARILAND and
Design (Registered Trademark) , PROTECH (Trade Mark) and ZERO-G (Registered
Trademark) . Our body armor products that are manufactured in the United States
are certified under guidelines established by the National Institute of
Justice. We also manufacture body armor in Manchester, England that is
certified under various international standards.

We offer two types of body armor, concealable armor and tactical armor.
Concealable armor, which generally is worn beneath the user's clothing, is our
basic line of body armor. These vests are often sold with a shock plate, which
is an insert designed to improve the protection of vital organs from sharp
instrument attack and to provide enhanced blunt trauma protection. Tactical
armor is typically worn externally and is designed to provide protection over a
wider area of a user's body and defeat higher levels of ballistic threats. The
vests, which are usually manufactured with hard armor ballistic plates that
provide additional protection against rifle fire, are designed to afford the
user maximum protection and may be purchased with enhanced protection against
neck and shoulder injuries. Tactical armor is offered in a variety of styles,
including tactical assault vests, tactical police jackets, floatation vests,
high coverage armor and flak jackets.

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Our sharp instrument penetration armor is designed primarily for use by
personnel in corrections facilities and by other law enforcement employees who
are primarily exposed to threats from knives and other sharp instruments. These
vests are constructed with special, blended fabrics, as well as flexible woven
fabrics and are available in both concealable and tactical models. In addition,
these vests can be combined with ballistic armor configurations to provide
"multi-threat protection" against both ballistic and sharp instrument
penetration.

We also distribute a variety of items manufactured by others, including
helmets, goggles, face shields and crowd management systems for protection from
blunt trauma.

Less-Lethal Products. Under the DEFENSE TECHNOLOGY/FEDERAL LABORATORIES
(Trade Mark) , FIRST DEFENSE (Registered Trademark) , MACE (Registered
Trademark) FOR LAW ENFORCEMENT and GUARDIAN (Trade Mark) brands, we
manufacture and sell a complete line of less-lethal, anti-riot and crowd
control products designed to assist law enforcement and military personnel in
handling situations that do not require the use of deadly force. These
products, which generally are available for use only by authorized public
safety agencies, include pepper sprays, tear gas, specialty impact munitions
and diversionary devices. We market and distribute Chemical Biological Agent
and Riot Control Agent rated Mine Safety Appliance Advantage 1000 and
Millennium model gas masks to law enforcement and public safety agencies in the
United States.

We hold an exclusive license to use the MACE (Registered Trademark) brand
in connection with the manufacturing and sale of MACE (Registered Trademark)
aerosol sprays to law enforcement entities worldwide. We also manufacture
pepper sprays containing the active ingredient Oleoresin Capsicum, a cayenne
pepper extract. Our pepper spray formula is patented and carries the trademark
name of First Defense (Trade Mark) . The products range from small "key-ring"
and hand held units to large volume canisters for anti-riot and crowd control
applications. Our tear gases are manufactured using
Orthochlorabenzalmalononitrile and Chloroacetophenone. These products are
packaged in hand held or launchable grenades, both pyrotechnic and
non-pyrotechnic, as well as in 37mm, 40mm and 12 gauge munitions. The munitions
include barricade rounds, blast dispersions and pyrotechnic canisters.

We manufacture a wide range of specialty impact munitions that can be used
against either individual targets or in anti-riot and crowd control situations.
These products, which range from single projectiles, such as bean bags, rubber
balls, sponge rounds, wood and rubber batons, to multiple projectile products
containing rubber pellets, rubber balls or foam, can be fired from standard 12
gauge shotguns, 37mm gas guns and 40mm launchers. We also manufacture a
patented and trademarked device that is used for dynamic entries by specially
trained forces where it is necessary to divert the attention of individuals
away from an entry area. This product, which carries the trademark name of
Distraction Device (Trade Mark) , emits a loud bang and brilliant flash of
light when used.

Duty Gear. We are a leading supplier of duty gear to law enforcement
personnel in the United States. Uniformed police officers require a wide
assortment of duty gear, which typically includes items such as belts, safety
holsters, handcuff and flashlight holders and related accessories. We
manufacture and sell duty gear and accessories under the widely recognized
brands SAFARILAND and Design (Registered Trademark) (SAFARI-LAMINATE (Trade
Mark) ) and NYLOK (Registered Trademark) (nylon). Duty gear represents a
market in which brand appeal, safety and quality dictate demand. Replacement
sales represent significant recurring demand for duty gear.

Tactical Products; Structural Armor Systems. We manufacture hard armor
products under the PROTECH (Trade Mark) brand name. PROTECH (Trade Mark)
products include ballistic shields and other personal protection accessories
and armor products for aircraft, automobiles and riot control vehicles.

Following the terrorist attacks of September 11, 2001, we partnered with
C&D Aerospace of California to produce armored commercial airline cockpit doors
certified by the U.S. Federal Aviation Administration ("FAA"). Through March
31, 2004, we have retrofitted 8,416 cockpit doors on commercial aircraft; we
expect any future orders to be associated with new aircraft production.

We also manufacture a variety of hard armor ballistic shields primarily
for use in tactical clearance applications and ballistic resistant enclosures
for use as guard booths, shacks and towers. These shields are manufactured
using a variety of ballistic fibers, polyethylene ballistic materials,

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ballistic steel, ballistic glass or a combination of these materials. Other
hard armor products include barrier shields and blankets. These products allow
tactical police officers to enter high-threat environments with maximum
ballistic protection.

Automotive Accessories. Through our Safariland subsidiary, we manufacture
and supply automotive accessories such as tire covers, seat covers, cargo
organizers and grill covers to automobile manufacturers, including Toyota,
Ford, Honda, Nissan, Mitsubishi, Kia and Subaru.

Forensic Products. We assemble and market a number of portable narcotic
identification kits under several well known brand names such as NIK
(Registered Trademark) brand name, NARCOTEST (Registered Trademark) brand,
and NARCOPOUCH (Registered Trademark) brand that are used in the field by law
enforcement personnel to identify a variety of controlled substances, including
Ecstasy, cocaine, marijuana, heroin and methamphetamine. We also assemble and
market evidence collection kits and evidence tape. We have the exclusive rights
to distribute Flex-Cuf (Registered Trademark) disposable restraints and hold a
license to use the Flex-Cuf (Registered Trademark) trademark. We believe we
have earned a reputation as one of the most responsive companies in the
forensic community.

We manufacture and distribute an extensive line of evidence collection
equipment under our brand name LIGHTNING POWDER (Registered Trademark) . These
products, such as fingerprint powders, dusting brushes, and lifting tape, are
used to collect latent fingerprints. We distribute other supplies for evidence
collection including bags, tapes, stone casting equipment and high powered,
distortion free magnifying glasses.

We design, manufacture and market proprietary cost-effective fingerprint
products for business, government and law enforcement agencies under the
IDENTICATOR (Trade Mark) brand name. These products are designed to deter
fraud and produce positive identification in many different applications, and
must be simple to operate, clean, and cost-effective. All products produce
non-smearing, instantly permanent, black prints acceptable to the FBI for
scanning, classification, search and retention. We also produce a variety of
specialized products for various investigative and evidence collection
applications under the brand name EVI-PAQ (Trade Mark) .

Batons. We manufacture batons of wood, alloy steel, acetate, aluminum and
polycarbonate products under our brand name MONADNOCK (Registered Trademark) .
Branded products include our patented Auto-Lock (Trade Mark) baton and our
Classic-Friction Lock (Trade Mark) baton. Our batons are manufactured in a
variety of lengths for different intended users, including patrol officers,
detectives, corrections officers and other law enforcement personnel in smaller
portable units and military and federal agencies. We believe that our
manufacturing specifications are among the highest in the marketplace.

Firearm Accessories. We manufacture non-destructive, non-gunsmith mounts
as well as synthetic stocks and for ends. Our Speedfeed high quality synthetic
stocks and for ends fit most makes and models. Our B-Square (Trade Mark)
subsidiary is a leading designer, manufacturer and marketer of quality aluminum
and steel sight mount, tools and accessories for the law enforcement, military
and sporting goods (hunting and target shooting) markets.

Weapon Maintenance Products. We manufacture synthetic based lubricants,
cleaners and preservative compounds for military weapon maintenance, law
enforcement, civilian firearms/sports equipment and industrial machinery. Our
flagship weapon maintenance product, Break Free CLP (Registered Trademark) ,
was specifically developed to provide reliable weapon lubrication in
battlefield conditions; remove firing residues, carbon deposits and other
firing contaminants; repel water and dirt and prevent corrosion; and keep
weapons combat ready and functional in a wide variety of climates.

Warning and Emergency Lighting; Safety Products. We manufacture emergency
lighting products using LED technology branded as 911EP (Registered
Trademark) . LED technology offers patrol car lighting systems that are energy
efficient, safe and durable for use in primary and secondary warning lights.
911EP (Registered Trademark) 's unique design utilizes the patrol vehicle's
existing 12-volt electrical system and consumes 70% less energy than
traditional strobe or halogen systems. We also manufacture strong, lightweight,
and compact ladders designed to be deployed quickly in emergency situations,
branded as Quikstep (Trade Mark) . Constructed with aluminum alloy and
stainless steel, our 12-foot ladder weighs only 31 pounds and folds up to a
briefcase size.

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We are the exclusive U.S. distributor to law enforcement of the
Thermal-Air (Trade Mark) Mask Engineered by Polar-Wrap. The Thermal-Air
products are manufactured with a patented heat exchange module that captures
the wearer's own breath and uses it to preheat cold air coming in the mouth and
helps keep the body core temperature at a higher level, increasing the time law
enforcement officers can effectively perform their duties outdoors, even in
cold temperatures.

Specialty Gloves & Protective Gear. The newly acquired Hatch is a leading
supplier of high quality gloves and other protective gear serving the law
enforcement, correctional, military, medical and industrial markets. We excel
at providing new, innovative products using proprietary materials and designs
to the law enforcement and military fields. Of note are our patented SOG
Operator (Trade Mark) Kevlar (Registered Trademark) and Kangaroo leather
series of gloves used by tactical personnel worldwide. The Exo-Tech (Trade
Mark) disturbance control suit along with the Centurion (Trade Mark) single
piece body protection provide law enforcement unrivaled protection for riots,
prisoner extraction and civil disturbance. Duty gloves range from those lined
with cut resistant Spectra (Registered Trademark) to Thinsulate (Registered
Trademark) insulated fine leather gloves. To provide users in the field with
optimum performance our high tech tactical products incorporate materials such
as Kevlar (Registered Trademark) , Nomex (Registered Trademark) , Kangaroo
leather, and Schoeller Dynamic Extreme (Trade Mark) textiles. In addition the
Boss (Trade Mark) line of tactical eyewear yields a goggle with a hybrid and
highly proprietary design. Hatch's Knee pads, elbow protection along with Nomex
(Registered Trademark) and Kevlar (Registered Trademark) hoods give SWAT and
other officers the protection they demand. Commercial offerings consist of the
shooting, dress, industrial safety anti-vibration, motorcycle and ergonomic
gloves.

MOBILE SECURITY

Commercial Products. We provide ballistic and blast protection-armoring
systems for a variety of vehicles, including limousines, sedans, sport utility
vehicles, commercial trucks and cash-in-transit vehicles, to protect against
varying degrees of ballistic and blast threats. The commercial vehicle armoring
process begins with the disassembly of a new base vehicle. This disassembly
normally involves the removal of the interior trim, seats, doors and windows.
The passenger compartment then is armored with both opaque and transparent
armor. Other features, such as run flat tires and non-exploding gas tanks, may
also be added. Finally, the vehicle is reassembled as close to its original
appearance as possible. The entire conversion process results in a low profile,
integrated ballistic protective system. Our relationship with various vehicle
manufacturers has been valuable in permitting us to armor certain vehicles
while allowing the customer to maintain the benefits of warranties issued by
the vehicle manufacturer. The Mobile Security Division shipped 1,125 commercial
armored vehicles in 2003 and 321 in the quarter ended March 31, 2004.

We produce fully armored vehicles and light armored vehicles. Fully
armored commercial vehicles, such as limousines, large sedans or sport utility
vehicles, typically are armored to protect against attacks from military
assault rifles such as AK-47s and M16s. These vehicles also can be blast
protected by enhancing the ballistic and underbody protection with proprietary
materials and installation methods that protect the occupants against a defined
blast threat. Blast protected vehicles defend against threats such as pipe
bombs attached to the exterior of the vehicle. Fully armored vehicles typically
sell for $70,000 to $250,000, exclusive of the cost of the base vehicle.

Fully armored vehicles also include parade cars, which are formal
limousines used predominantly for official functions by a president or other
head of state. These vehicles are usually customized based upon a commercially
available chassis, which we essentially rebuild completely. Because the threat
of organized assassination attempts is greater for heads of state, these
vehicles normally incorporate more advanced armor and sophisticated protection
features. These features can include supplemental air and oxygen systems, air
purification systems to protect against chemical or biological contamination,
underbody fire suppressant systems, tear gas launchers, anti-explosive
self-sealing fuel tanks, electric deadbolt door locks, gun ports and bomb
scanners. Parade cars normally sell for $300,000 to in excess of $1.0 million,
inclusive of the cost of the base vehicle.

Light armored vehicles are similar in all respects to fully armored
vehicles except that we add substantially less total weight to a light armored
vehicle. Therefore, it is possible to armor smaller vehicles such as the
Volkswagen Jetta and the General Motors Omega, as well as larger vehicles

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such as the Mercedes Benz S600 and the Jeep Grand Cherokee. Light armored
vehicles are designed to protect against attacks from handguns. The price of a
light armored vehicle ranges from $5,000 to $60,000, exclusive of the cost of
the base vehicle.

We also produce specialty vehicles and cash-in-transit vehicles. Specialty
vehicles are custom built for a specific mission. Examples of specialty
vehicles are escort cars, usually convertibles, and chase cars, usually closed
top vehicles, in which security personnel ride while in a head of state
motorcade. Cash-in-transit vehicles are used by banks or other businesses to
transport currency and other valuables. After starting with a van or small
truck, we modify the base vehicle to provide protection for the cargo and
passengers from ballistic and blast threats.

CUSTOMERS

Aerospace & Defense Group. In 2003, our Aerospace & Defense Group sold
more than 99.7% of its products in North America, with the balance sold
internationally. Sales of Aerospace & Defense Group products to all branches of
the United States military and its prime contractors such as Boeing and
Sikorsky Aircraft represented approximately 87% of the Aerospace & Defense
Group's revenue. The Aerospace & Defense Group's businesses have relied to a
great extent on relatively few major customers, although 2003 saw the
development of additional major users of Aerospace & Defense Group products
within their existing customer base (e.g. other users within the U.S. Army). We
believe that historical customers, such as the U.S. Army and other branches of
the United States military, to whom we have supplied products for approximately
25 years, will continue to be major customers. Current commercial and licensing
customers include Boeing, Bell Helicopter Textron, Second Chance Body Armor,
PPG Industries, Intercast Europe, and Avon Rubber Company. The loss of or
significant reduction in sales to a major customer could potentially have a
material adverse effect on our business, operations and financial condition.

The market for military hardware products is worldwide in scope, including
the U.S. military and foreign defense forces. The primary contract for delivery
of M1114 Up-Armored HMMWVs is with the U.S. military, although smaller
quantities are also sold overseas. We also serve as a subcontractor to provide
ballistically armored and sealed truck cabs for HIMARS for use by the U.S. Army
and the U.S. Marine Corps, a program recently transitioned to low rate initial
production.

Products Division. In 2003, the Products Division sold 86.1% of its
products in North America, with the balance sold internationally. The primary
end users of the Products Division's products are federal, state and local law
enforcement agencies, local police departments, state corrections facilities,
U.S. and allied militaries, highway patrols and sheriffs' departments. We reach
these customers through a distribution strategy that utilizes a worldwide
distribution network of approximately 200 domestic distributors and 150
international distributors, as well as approximately 25 domestic sales
representatives, three regional sales managers, and six technical sales
specialists, who promote the Products Division's products but refer customers
to a local distributor for purchasing.

Mobile Security Division. In 2003, the Mobile Security Division sold 21.5%
of its products in North America, with the balance sold internationally. The
Mobile Security Division's armored commercial vehicle customers include
governmental and private buyers and U.S. and foreign governmental buyers who
purchase both fully and light-armored vehicles. Governmental buyers and foreign
royalty also comprise the market for parade cars. Typically, governmental
buyers consist of ministries of foreign affairs, defense and internal affairs
and offices of presidential security. These customers are not constrained in
their purchasing decisions by considerations such as import duties and taxes
and are free to search globally for the best product available. The procurement
cycles of governmental buyers can range from relatively rapid, when the
vehicles are for the use of the head of state or in response to a particular
crisis, to prolonged highly documented bids and evaluations for normally
budgeted items. Private customers for armored commercial vehicles include
corporations and individuals. Private buyers tend to be more price-sensitive
and will often purchase locally manufactured vehicles to reduce taxes and avoid
import duties. Local servicing of the vehicle is also a critical concern to
private buyers. Customers for cash-in-transit vehicles are generally companies

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that provide cash-in-transit services to financial institutions. Purchasing
decisions for cash-in-transit vehicles depend on many criteria including
insurance, regulatory requirements and costs, and whether the financial
institution is private or governmental.

In fiscal 2003, 38.3% of our revenues were from our ten largest customers,
and 21.0% of our revenues came from U.S. military contracts. Our Aerospace &
Defense Group's ten largest customers accounted for 92.3% of Aerospace &
Defense Group revenues for fiscal 2003. The Products Division's ten largest
customers accounted for 29.2% of total revenues of the Products Division for
fiscal 2003. The Mobile Security Division's ten largest customers accounted for
28.8% of total revenues of the Mobile Security Division for fiscal 2003.
Military and governmental contracts generally are awarded on a periodic or
sporadic basis. If the Aerospace & Defense Group were to lose the M1114
Up-Armored HMMWV contract, which continues through June 2008, our financial
performance would experience a material adverse effect.

MARKETING AND DISTRIBUTION

Aerospace & Defense Group. Most of the Aerospace & Defense Group's
products are distributed as a component supplier to original equipment
manufacturers ("OEMs") or as a direct contractor to the U.S. Government. The
products are built to order. We do not directly serve mass consumer markets and
supply directly from manufacturing facilities. Thus, the distribution of the
Aerospace & Defense Group's products does not involve significant inventory,
warehousing or shipping methodologies.

Depending upon the product, we typically employ one of four methods for
marketing: (i) direct sales, (ii) technical teams, typically comprised of a
combination of sales personnel and engineers, (iii) strategic alliances with
OEMs and U.S. Government prime contractors, and (iv) responses to formal
request for proposals in bidding for government contracts.

In marketing our safety restraint and seating products, we endeavor to
maintain close relationships with existing customers and to establish new
customer relationships. Ongoing relationships and repeat customers are an
important source of business for our current and new products.

Our marketing and sales activities in the government sector focus
primarily upon identifying research and development contracts and other
contract opportunities with various agencies of the United States government or
with others acting as prime contractors on government projects. Key members of
our engineering and project management staffs maintain close working
relationships with representatives of the United States military and their
prime contractors. Through these relationships, we monitor needs, trends, and
opportunities within current military product lines.

The Aerospace & Defense Group emphasizes its ability to develop new
products, or product adaptations, quickly and more cost effectively than
traditional defense contractors. In marketing its products to the military, the
Aerospace & Defense Group places strong emphasis on its superior antitank and
antipersonnel mine protection for the occupants of tactical wheeled vehicles.
We market our military products through a combination of trade show
exhibitions, print advertising in military-related periodicals and direct
customer visits. We emphasize the cross-marketing of military and commercial
products, which we believe strengthens the image of each product group. We have
also entered into exclusive teaming and joint marketing agreements with various
prime contractors in connection with the Up-Armored HMMWV and up-armoring for
HIMARS and Family of Medium Tactical Vehicles ("FMTV") for sales in domestic
and international military and commercial areas. These agreements allow us to
benefit from the prime contractor's marketing network and save on certain
selling costs.

Our military sales activities are directed toward identifying contract bid
opportunities with various U.S. government agencies and prime contractors.
International sales are made through the Department of Defense's Foreign
Military Sales Program and directly to foreign military organizations. We have
three full time business development managers who are responsible for this
activity and have contractual arrangements with several outside consultants who
assist the business

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development managers in their activities. Proposal preparation and presentation
for government projects is done by a team, which normally consists of program
managers, a contracting officer, a cost accountant and various manufacturing
and engineering personnel.

Products Division. As a result of our history of providing high quality
and reliable concealable armor, tactical armor, hard armor, duty gear,
less-lethal munitions, anti-riot products and forensic products, we believe we
enjoy broad brand name recognition and a strong reputation in the law
enforcement equipment industry. The central element of our marketing strategy
is to capitalize on our brand name recognition and reputation among our
customers by positioning ourselves as an international provider of many of the
premier security risk management products that our customers require. By
positioning ourselves in this manner, we expect to capitalize on our existing
customer base and our extensive global distribution network, and to maximize
the benefits of our long history of supplying security related products around
the world.

We have designed comprehensive training programs to provide initial and
continuing training in the proper use of our various products. These training
programs, offered by The Training Academy for Technology and Tactics, are
typically conducted by trained law enforcement and military personnel that we
hire for such purposes. Training programs are an integral part of our customer
service strategy. In addition to enhancing customer satisfaction, we believe
that training also helps breed customer loyalty and brand awareness. Moreover,
many of our products are consumable and used in training, which generates
replacement orders. Our marketing efforts are further augmented by our
involvement with and support of several important law enforcement associations,
including the National Tactical Officer's Association, the International Law
Enforcement Firearms Instructors, the American Society of Law Enforcement
Trainers and the International Association of Chiefs of Police.

We further reinforce distributor loyalty by offering price discounts to
high volume distributors. We believe that we have strong relationships with our
distributors. The distributors benefit from their association with us due to
the quality of our products, the scope of our product line, the high degree of
service we provide and the distributor's opportunity to participate profitably
in the sale of our products. We continually seek to expand our distribution
network. As we identify and acquire businesses that fit strategically into our
existing product portfolio, we maximize our distribution network by offering
additional products, accessing new customers and penetrating new geographic
markets. We also sell a selected number of civilian products into mass
merchandise and sporting goods stores via a network of national sporting goods
wholesalers. These products include concealment holsters, hunting and sports
shooting accessories, cleaning equipment and pepper spray products.

In addition to our traditional distribution channels, we also sell our
products on the World Wide Web through a variety of sites. GSA-Buy.com contains
an on-line catalog and secured transaction platform for all Products Division
General Services Administration contracts targeting government agencies
exclusively. We also sell a small array of our concealable and competition
holsters to the consumer market on Holsters.com, limiting distribution of our
law enforcement equipment to law enforcement channels of distribution.

Mobile Security Division. On a worldwide basis, the Mobile Security
Division employs approximately 40 full-time sales professionals in connection
with its commercial sales. These employees operate out of Washington, D.C.;
Fairfield, Ohio; Sao Paulo, Brazil; Lamballe, France; Mexico City, Mexico;
Bogota, Colombia; Bremen, Germany, Geneva, Switzerland and Caracas, Venezuela.
All personnel have a geographic and/or product-specific responsibility. In most
cases, the sales personnel also recruit and maintain sales agents or
distributors. The agents or distributors have geographic and product specific
agreements, and compensation in most cases is based upon a commission
arrangement. Sales personnel use a consultative approach when offering
solutions to customers' security problems. Sales cycles for commercial physical
security products can range from several months to a matter of days, depending
upon the product and the urgency associated with the security problem being
addressed.

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PRODUCT MANUFACTURING AND RAW MATERIALS

The Aerospace & Defense Group's production and manufacturing consist
principally of the molding of armor and composite materials, ceramic tile
cutting and grinding, adhesive bonding, sewing, component fabrication, and
final assembly. The Aerospace & Defense Group outsources substantial quantities
of machining, metal fabrication and welding. Our manufacturing capability
features computer-integrated manufacturing programs which, among other things,
schedule and track production, update inventories, and issue work orders to the
manufacturing floor. All products manufactured must meet rigorous standards and
specifications for workmanship, process, raw materials, procedures, and
testing, and in some cases regulatory requirements. Products are functionally
tested on a sample basis as required by applicable contracts. Customers, and in
some cases the United States government as the end user, perform periodic
quality audits of the manufacturing process. Certain customers, including the
United States government, periodically send representatives to our facilities
to monitor quality assurance. The Aerospace & Defense Group's Simula operations
in Phoenix are certified to the ISO Standard by AS9001 and ISO 9001:2000 by
British Standards Institution, Inc. ("BSI"). The Aerospace & Defense Group's
O'Gara operations in Cincinnati are certified to the ISO Standard ISO 9001:2000
by DET NORSKE VERITAS (DNV).

We purchase other raw materials used in the manufacture of our various
products from a variety of sources and additional sources of supply of these
materials are readily available. We also own several molds, which are used
throughout our less-lethal product line.

We adhere to strict quality control standards and conduct extensive
product testing throughout our manufacturing processes. Raw materials are also
tested to ensure quality. We have obtained ISO 9001 certification for our
Wyoming manufacturing facility for less-lethal products, our facility in
Pittsfield, Massachusetts for hard armor products, and our facility in Ontario,
California for body armor and duty gear holsters and accessories. We have
obtained ISO 9002 certification for our Westhoughton, England manufacturing
facility for body armor and high visibility garments. ISO standards are
promulgated by the International Organization of Standardization and have been

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adopted by more than 100 countries worldwide. We obtain ISO certification by
successfully completing an audit certifying our compliance with a comprehensive
series of quality management and quality control standards.

We emphasize engineering excellence and have an extensive engineering
staff. Design engineers use two-dimensional and three-dimensional computer
aided design and engineering or CAD/CAE systems in conjunction with coordinate
measuring machines to develop electronic models, which generally are converted
to solid models or prototypes. Manufacturing engineers concentrate on
improvements in the production process and on overall cost reductions from
better methods, fewer components and less expensive materials with equal or
superior quality. Applying these techniques, we reduced both the time and cost
necessary to produce armored vehicles. Our ballistic engineers, in conjunction
with our design and manufacturing engineers, develop and test new ballistic and
blast protection systems that meet ever-changing threats.

BACKLOG

Aerospace & Defense Group. At December 31, 2003, our Aerospace & Defense
Group had unfilled customer orders of $257.1 million, and $70.4 million of
these orders were shipped in the first quarter of 2004.

Products Division. At December 31, 2003, the Products Division had
unfilled customer orders of $21.8 million, and $18.8 million of these orders
were shipped in the first quarter of 2004.

Mobile Security Division. At December 31, 2003, the Mobile Security
Division had unfilled customer orders of $25.7 million, and $20.6 million of
these orders were shipped in the first quarter of 2004.

COMPETITION

The market for our Aerospace & Defense Group's products and services are
highly competitive. Numerous suppliers compete for government defense contracts
as prime contractors or subcontractors. Competition relates primarily to
technical know-how, cost, and marketing efforts. The competition for government
contracts relates primarily to the award of contracts for the development of
proposed products. Contracts for supply of products primarily tends to follow
the development contracts because of the extensive investment necessary to
develop and qualify new products. Our principal competitors in the
crash-resistant military seating market are Martin-Baker (England) and Israeli
Aircraft Industries (Israel). Our military product lines in armor, parachutes,
and flotation collars have a number of competitors, with none dominating the
market. Our competitive strategy is to be a technology innovator and strategic
partner to first tier suppliers and OEMs. Our present or future products could
be rendered obsolete by technological advances by one or more of our
competitors or by future entrants into our markets. There are a large number of
companies that provide specific armoring packages for tactical wheeled
vehicles, helicopters and selected other military applications.

The market for our law enforcement products is highly competitive and we
compete with competitors ranging from small businesses to multinational
corporations. For example, in the body armor business, we compete by providing
superior design, engineering and production expertise in our line of
fully-integrated ballistic and blast protective wear. Our principal competitors
in this market niche include Point Blank Body Armor, Inc. and Second Chance
Body Armor, Inc. as well as several international competitors on a
region-by-region basis. In the less-lethal product industry, we compete by
providing a broad variety of less-lethal products with unique features and
formulations, which, we believe, afford us a competitive advantage over our
competitors. The principal competitive factors for all of our products are
quality of engineering and design, reputation in the industry, production
capability and capacity, price and ability to meet delivery schedules.

The markets for the Mobile Security Division's products and services are
also highly competitive. We compete in a variety of markets and geographic
regions, with competitors ranging from small businesses to multinational
corporations. We believe that the our design, engineering and production
expertise in providing fully integrated ballistic and blast protected vehicles
gives us a competitive advantage over those competitors who provide protection
against only selected ballistic threats.

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A number of complete vehicle armorers in Europe, the Middle East and Latin
America armor primarily locally manufactured automobiles. In the U.S.,
protected passenger automobile armorers include Scaletta Maloney, International
Armor and Square One Armoring Services. In each of the South American markets
in which we compete, we have a variety of different competitors. In the
high-end luxury sedan market we compete with a variety of OEMs, as well as a
variety of small independent automotive integrators such as Carat Du Chatelet
in Europe. The principal competitive factors are price, quality of engineering
and design, production capability and capacity, ability to meet delivery
schedules and reputation in the industry.

EMPLOYEES

As of March 31, 2004, we had a total of 2,529 employees in continuing
operations, of which 511 were employed in the Aerospace & Defense Group, 1,263
in the Products Division, 742 in the Mobile Security Division, and 13 in our
corporate headquarters.

Forty-eight employees in Armor Products International, our UK subsidiary,
are represented by the General Municipal Boilermaker and Allied Trade Union.
Thirty-two employees in O'Gara-Hess & Eisenhardt de Mexico, S.A. de C.V., our
Mexico subsidiary, are represented by a union. Twelve employees in O'Gara-Hess
& Eisenhardt France S.A., our France subsidiary, are represented by C.F.D.T.
One-hundred and eleven employees in Trasco-Bremen, our German subsidiary, are
represented by IG Metall, Bezirk Kuste. None of our remaining employees are
represented by unions or covered by any collective bargaining agreements. We
have not experienced any work stoppages or employee related slowdowns and
believe that the relationship with our employees is good.

RESEARCH AND DEVELOPMENT

We view our research and development efforts as critical to maintaining a
leadership position in the security products and vehicle armoring markets. Our
research and development occurs primarily under Company-sponsored efforts, as
well as fixed-price or cost-plus, government funded contracts. We seek to offer
superior quality and advanced products and systems to our customers at
competitive prices. To achieve this objective, we engage in ongoing
engineering, research and development activities to improve the reliability,
performance and cost-effectiveness of our existing products. We also design and
develop new products in an ongoing effort to anticipate and meet our customers'
evolving needs. We estimate that spending on research and development in 2004
will be approximately $13 million to $14 million.

We employ scientific, engineering and other personnel to improve our
existing product lines and to develop new products and technologies in the same
or related fields. We currently have approximately 70 employees engaged in
research and development.

PATENTS AND TRADEMARKS

We currently own numerous issued United States and foreign patents and
pending patent applications for inventions relating to our product lines as well
as several registered and unregistered trademarks and service marks relating to
our products and services. The registered trademarks include AMERICAN BODY ARMOR
(Trade Mark), B-SQUARE (Registered Trademark), BREAK FREE (Registered
Trademark), CLEARGARD (Registered Trademark), CLP (Registered Trademark),
DEFENSE TECHNOLOGY/FEDERAL LABORATORIES (Registered Trademark), DEF-TEC PRODUCTS
(Registered Trademark), DISTRACTION DEVICE (Registered Trademark), DURACHUTE
(Registered Trademark), FEDERAL LABORATORIES (Registered Trademark), FERRET
(Registered Trademark), FIRST DEFENSE (Registered Trademark), IDENTICATOR
(Registered Trademark), IDENTIDRUG (Registered Trademark), IMPAK (Trade Mark),
LIGHTNING POWDER (Registered Trademark), MONADNOCK (Registered Trademark), NIK
(Registered Trademark), O'GARA-HESS & EISENHARDT ARMORING COMPANY (Registered
Trademark), PROTECH (Trade Mark), PROTECTING PEOPLE IN MOTION (Registered
Trademark), QUICKSHIELD (Trade Mark), QUIKSTEP LADDERS (Trade Mark), REINVENTING
THE TECHNOLOGY OF SAFETY (Registered Trademark), SAFARILAND and Design
(Registered Trademark), SIMULA SAFE (Trade Mark), SIMULITE (Registered
Trademark), SPEEDFEED (Registered Trademark), 911EP and Design (Trade Mark). We
also have an exclusive license to use the MACE trademark in the law enforcement
market and a non-exclusive license to use the FLEX-CUF trademark. Although we do
not believe that our ability to compete in any of our product markets is
dependent solely on our patents and trademarks, we do believe that the
protection afforded by our intellectual property provides us with important
technological and marketing advantages over our competitors. Although we have
protected

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our technologies to the extent that we believe appropriate, the measures taken
to protect our proprietary rights may not deter or prevent unauthorized use of
our technologies. In other countries, our proprietary rights may not be
protected to the same extent as in the United States.

GOVERNMENT REGULATION

We are subject to federal export licensing and other licensing
requirements with respect to the sale in foreign countries of certain of our
products. In addition, we are obligated to comply with a variety of federal,
state and local regulations, both domestically and abroad, governing certain
aspects of our operations and workplace, including regulations promulgated by,
among others, the U.S. Departments of Commerce, State and Transportation, the
Federal Aviation Administration, the U.S. Environmental Protection Agency and
the U.S. Bureau of Alcohol, Tobacco and Firearms. The U.S. Bureau of Alcohol,
Tobacco, and Firearms also regulates us as a result of our manufacturing of
certain destructive devices and by the use of ethyl alcohol in certain
products. We also ship hazardous goods, and in doing so, must comply with the
regulations of the U.S. Department of Transportation for packaging and
labeling. Additionally, the failure to obtain applicable governmental approval
and clearances could adversely affect our ability to continue to service the
government contracts we maintain. Furthermore, we have material contracts with
governmental entities and are subject to rules, regulations and approvals
applicable to government contractors. We are also subject to routine audits to
assure our compliance with these requirements. We have become aware that we are
not in full compliance with certain regulations governing the export of
equipment and related technology used for military purposes that are applicable
to certain of our products. We have made a voluntary disclosure to the Office
of Defense Trade Controls Compliance and have undertaken steps to comply with
these regulations and to help ensure compliance in the future. We do not
believe that such noncompliance will have a material adverse effect on our
business. In addition, a number of our employees involved with certain of our
federal government contracts are required to obtain specified levels of
security clearances. Our business may suffer if we or our employees are unable
to obtain the security clearances that are needed to perform services
contracted for the Department of Defense, one of our major customers. Our
failure to comply with these contract terms, rules or regulations could expose
us to substantial penalties, including the loss of these contracts and
disqualification as a U.S. government contractor.

A number of our products are controlled under the International Traffic in
Arms Regulations ("ITAR"). Examples of the products covered under the ITAR
statutes are armored vehicles, armored kits for vehicles, body armor,
transparent armor, military aircraft seating systems, cockpit airbags, and
certain other crashworthiness technologies. Compliance with ITAR requires
licensing approval by the U.S. Department of State. The approval takes two
different forms depending upon the maturity of the program and/or technology. A
partnership with a foreign entity to develop and/or test a product
incorporating controlled technology requires approval for release of the
technology under a Technical Assistance Agreement ("TAA"). In the case where a
product is already developed and the international partnership is a product
sale, the approval takes the form of an Export License. The Contacts
Departments of each location of the Aerospace & Defense Group are tasked with
compliance and are trained to complete the necessary applications. The
applications often require the participation of the business unit leadership to
demonstrate the business use and application of the product to the State
Department. We currently have in force several Technical Assistance Agreements
and Export Licenses. We maintain policies and procedures designed to maintain
compliance with such licensing procedures.

Like other companies operating internationally, we are subject to the
Foreign Corrupt Practices Act and other laws which prohibit improper payments
to foreign governments and their officials by U.S. and other business entities.
We operate in countries known to experience endemic corruption. Our extensive
operations in these countries creates the risk of an unauthorized payment by
one of our employees or agents which would be in violation of various laws
including the Foreign Corrupt Practices Act. Violations of the Foreign Corrupt
Practices Act may result in severe criminal penalties which could have a
material adverse effect on our business, financial condition and results of
operations. We have procedures in place to ensure that all of our employees and
agents comply with

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the Foreign Corrupt Practices Act. These procedures include requiring
compliance with the Foreign Corrupt Practices Act by those employees and agents
holding representation agreements for foreign territories, incorporating the
Foreign Corrupt Practices Act directly into our agent agreements, conducting
periodic meetings to discuss compliance and training issues and oversight of
contracts and payments by our management and audit staff.

ENVIRONMENTAL LAWS AND REGULATIONS

We are subject to federal, state, and local and foreign laws and
regulations governing the protection of the environment and human health,
including those regulating discharges to the air and water, the management of
wastes, and the control of noise and odors. While we always strive to operate
in compliance with these requirements, we cannot assure you that we are at all
times in complete compliance with all such requirements. We are subject to
potentially significant fines or penalties if we fail to comply with
environmental requirements and we do not currently carry insurance for such
noncompliance events. Although we have made and will continue to make capital
expenditures in order to comply with environmental requirements, we do not
expect material capital expenditures for environmental controls in 2004.
However, environmental requirements are complex, change frequently, and could
become more stringent in the future. Accordingly, we cannot assure you that
these requirements will not change in a manner that will require material
capital or operating expenditures or will otherwise have a material adverse
effect on us in the future.

We are also subject to environmental laws requiring the investigation and
cleanup of environmental contamination. We may be subject to liability,
including liability for cleanup costs, if contamination is discovered at one of
our current or former facilities, in some circumstances even if the
contamination was caused by a third party such as a prior owner. We also may be
subject to liability if contamination is discovered at a landfill or other
location where we have disposed of wastes, notwithstanding that our historic
disposal practices may have been in accordance with all applicable
requirements. The amount of such liability could be material and we do not
currently carry insurance for such environmental cleanups should they be
required of us. We use Orthochlorabenzalmalononitrile and Chloroacetophenone
chemical agents in connection with our production of tear gas, and these
chemicals are hazardous and could cause environmental damage if not handled and
disposed of properly. Simula's principal environmental focus is the handling
and disposal of paints, solvents, and related materials in connection with
product finishes, welding and composite fabrication.

DISCONTINUED OPERATIONS

On April 17, 2003, we announced that we had completed the sale of our
ArmorGroup Integrated Systems business through the sale of 100% of the stock of
ArmorGroup Integrated Systems, Inc. and Low Voltage Systems Technologies, Inc.
to AIS. AIS is a wholly owned subsidiary of Aerwav Holdings, LLC. As
consideration for the integrated systems business, we received a $4.1 million
collateralized note due in two years and a warrant for approximately 2.5% of
AIS. We have recorded a loss of $366,000 on the sale.

On November 26, 2003, we announced that we completed the sale of
ArmorGroup, our security service division, for $33,660,000 in cash to a group
of private investors led by Granville Baird Capital Partners of London, England
and Management. We received $31,360,000 in cash at closing and are scheduled to
receive another $2,300,000 by the end of 2004, of which we have received
$500,000 through May 28, 2004. We have recorded a loss of $8.8 million on the
sale in the fourth quarter of 2003.

At March 31, 2004, our litigation support services subsidiary remains as
our only operating entity in discontinued operations. We are actively
attempting to sell this business.

S-76

PROPERTIES

The following table identifies and provides certain information regarding
our principal facilities.

CONTINUING OPERATIONS
ANNUAL OWNED/ PRODUCTS
LOCATION RENT LEASED APPROXIMATE SIZE MANUFACTURED
---------------------- ------------- -------- ------------------ --------------------------

Jacksonville, FL N/A Owned 14 Acres Body armor, forensic
70,000 sq. ft. products, weapon cleaning
lubricants
Jacksonville, FL $131,000 Leased 6,930 sq. ft. Corporate headquarters.
Casper, WY N/A Owned 66 Acres Tear gas, pepper spray,
72,234 sq. ft. less-lethal munitions
Westhoughton, N/A Owned 44,000 sq. ft. Body armor
England
Ontario, CA N/A Owned 117,500 sq. ft. Body armor, duty gear,
automotive accessories
Pittsfield, MA $ 79,000 Leased 16,000 sq. ft. Hard armor, vehicle armor
Pittsfield, MA N/A Owned 19,700 sq. ft. Hard armor, vehicle armor
Tijuana, Mexico $159,000 Leased 31,452 sq. ft. Duty gear, body armor,
automotive accessories
Fitzwilliam, NH $ 37,500 Leased 22,848 sq. ft. Police batons
El Segundo, CA $ 69,000 Leased 6,500 sq. ft. Fingerprint equipment
Fort Worth, TX $ 42,000 Leased 10,000 sq. ft. Scope mounts & rings
Oxnard, CA $147,000 Leased 25,000 sq. ft. Specialty gloves
St. Cloud, MN $ 60,000 Leased 10,000 sq. ft. LED light bars
Fort Worth, TX $ 19,000 Leased 5,000 sq. ft. Scope mounts & rings
Bremen, Germany N/A Owned 11 Acres Armored vehicles
(1) 161,500 sq. ft.
Fairfield, OH N/A Owned 130,000 sq. ft. Armored vehicles &
ballistic glass
Fairfield, OH $186,000 Leased 95,000 sq. ft. Armored vehicles
Fairfield, OH $139,000 Leased 40,000 sq. ft. Armored vehicles
Lamballe, France (2) $101,000 Leased 52,000 sq. ft. Armored vehicles
Sao Paulo, Brazil $224,000 Leased 56,000 sq. ft. Armored vehicles &
ballistic glass
Rio De Janeiro, $ 35,000 Leased 11,406 sq. ft. Armored vehicles
Brazil
Bogota, Colombia $ 77,500 Leased 35,000 sq. ft. Armored vehicles &
ballistic glass
Bogota, Colombia $ 22,200 Leased 6,823 sq. ft. Armored vehicles
Mexico City, Mexico $ 62,500 Leased 20,000 sq. ft. Armored vehicles
Mexico City, Mexico N/A Owned 5,380 sq. ft. Armored vehicles
Caracas, Venezuela $128,000 Leased 15,360 sq. ft. Armored vehicles
Plattsburgh, NY $ 42,000 Leased 3,000 sq. ft. Hard armor, vehicle armor
Champlain, NY $ 18,500 Leased 7,000 sq. ft. Hard armor, vehicle armor

S-77

CONTINUING OPERATIONS
ANNUAL OWNED/ PRODUCTS
LOCATION RENT LEASED APPROXIMATE SIZE MANUFACTURED
------------- ------------- -------- ------------------ --------------------------

Phoenix, AZ $1,165,000 Leased 188,140 sq. ft. Human safety and survival
systems
Phoenix, AZ $ 306,000 Leased 25,312 sq. ft. Commercial products

Note 1 -- For accounting purposes, the land underneath our owned facility in
Bremen, Germany is financed by a capital lease that is recorded as a liability
on our financial statements.

Note 2 -- For accounting purposes, the Lamballe, France facility is considered
owned and financed by a capital lease that is recorded as a liability on our
financial statements.

We believe our manufacturing, warehouse and office facilities are suitable
and adequate and afford sufficient manufacturing capacity for our current and
anticipated requirements. We believe we have adequate insurance coverage for
our properties and their contents.

DISCONTINUED OPERATIONS
ANNUAL OWNED/ SERVICES
LOCATION RENT LEASED APPROXIMATE SIZE PROVIDED
------------- ----------- -------- ------------------ ----------------------------

Gresham, OR $138,000 Leased 7,160 sq. ft. Litigation support services

LEGAL PROCEEDINGS

On January 16, 1998, our Services Division ceased operations in Angola and
subsequently became involved in various disputes with SHRM S.A. ("SHRM"), its
minority joint venture partner relating to the Angolan joint venture known as
Defense System International Africa ("DSIA"). On March 6, 1998, SIA (a
subsidiary of SHRM) filed a complaint against Defense Systems France, SA
("DSF") before the Commercial Court of Nanterre (Tribunal de Commerce de
Nanterre) seeking to be paid an amount of $577,286 corresponding to an alleged
debt of DSIA to SIA. In October 2002, the Commercial Court of Nanterre stayed
the proceedings before it, pending the decisions of the Court of Appeal and the
Paris Commercial Court. In February 2003, the Court of Appeal ruled against
SHRM and its parent entity, Compass Group, effectively ending all further
proceedings on the merits of Compass' claims. Compass has appealed the decision
before the French Court of Cassation, which reviews only matters of law.

In 1999 and prior to our acquisition of O'Gara-Hess & Eisenhardt Armoring
Company (which has been converted to a limited liability company and is now
known as O'Gara-Hess & Eisenhardt Armoring Company, L.L.C.) ("OHEAC") in 2001,
O'Gara-Hess & Eisenhardt Armoring de Brasil Ltda. ("OHE Brazil") was audited by
the Brazilian federal tax authorities and assessed over Ten Million Reals
(US$3.4 million based on the exchange rate as of December 31, 2003). OHE Brazil
has appealed the tax assessment and the case is pending. To the extent that
there may be any liability resulting from the 2001 audit, we believe that we
are entitled to indemnification from Kroll, Inc. under the terms of our
purchase agreement dated April 20, 2001, despite the denial by Kroll, Inc. of
any such liability, because the events occurred prior to our purchase of the
O'Gara Companies from Kroll, Inc. However, to the extent that the appeal
relating to 2001 activity results in an unfavorable ruling, we could be liable
for unpaid taxes incurred subsequent to the acquisition from Kroll.

In 1999 and prior to our acquisition of OHEAC in 2001, several of the
former employees of Kroll O'Gara Company de Mexico, S.A. de C.V. ("O'Gara
Mexico"), a subsidiary of OHEAC, commenced labor claims against O'Gara Mexico
seeking damages for unjustified termination. These cases are still pending
before the labor board in Mexico City. The terminated employees are seeking
back pay and benefits since the date of termination amounting to approximately
US $2.9 million, and accruing at approximately US $50,400 per month. To the
extent that there may be any liability, we believe that we are entitled to
indemnification from Kroll, Inc. under the terms of our purchase agreement
dated April 20, 2001, despite the denial by Kroll, Inc. of any such liability,
because the events occurred prior to our purchase of the O'Gara Companies from
Kroll, Inc. Although we do not have any insurance coverage for this matter, at
this time, we do not believe this matter will have a material impact on our
financial position, operations or liquidity.

S-78

In August 2001, Defense Technology Corporation of America ("DTC"), one of
our subsidiaries, received a civil subpoena from the United States
Environmental Protection Agency requesting information pursuant to Section
104(e) of the Comprehensive Environmental Response, Compensation and Liability
Act regarding the possible impact of the Casper, Wyoming tear gas facility on
the environment. DTC responded to the request, and to date the EPA has not
taken any further action with respect to the matter. At this time, we do not
believe this matter will have a material impact on our financial position,
operations or liquidity.

In December 2001, O'Gara-Hess & Eisenhardt France S.A. ("OHE France") sold
its industrial bodywork business operated under the name Labbe/Division de
O'Gara Hess & Eisenhardt France/ Carrosserie Industriells to SNC Labbe.
Subsequent to the sale, the Labbe Family Trust ("LFT"), owner of the leasehold
interest upon which the Carrosserie business is operated, sued OHE France and
SNC Labbe claiming that the transfer of the leasehold was not valid because the
LFT had not given its consent to the transfer as required under the terms of
the lease. Further, LFT seeks to have OHE France, as the sole tenant, maintain
and repair the leased building. The approximate cost of renovating the building
is estimated to be between US $3.2 and US $6.4 million, based on the exchange
rate as of December 31, 2003. The case is currently pending, and while we are
contesting the allegations vigorously, we are unable to predict the outcome of
this matter. Although we do not have any insurance coverage for this matter, at
this time, we do not believe this matter will have a material impact on our
financial position, operations or liquidity.

On or about March 22, 2002, OHEAC received a civil subpoena from the
Department of Defense ("DOD") requesting documents and information concerning
various quality control documentation regarding parts delivered by its
subcontractors and vendors in support of the HMMWVs armored at its Fairfield,
Ohio facility for the period October 1, 1999 through May 1, 2001. OHEAC has
complied fully with the subpoena. In early 2003, OHEAC was advised that the
Department of Justice ("DOJ") was also investigating separate claims against
OHEAC filed by individuals that involve the same time frame and issues covered
by the DOD subpoena. OHEAC has learned that the DOJ investigation relates to a
certain unidentified action filed under the federal False Claims Act pursuant
to which the United States government may intervene and recover damages. OHEAC
has fully responded to, and cooperated with, the government's questions and
investigation. The DOJ has since notified OHEAC that it has declined to
intervene in the case. On September 30, 2003, the action filed under the
federal False Claims Act was voluntarily withdrawn without prejudice.

In October 2002, we were sued in the United States District Court for the
District of Wyoming with respect to one of our subsidiaries' Casper, Wyoming
tear gas plant. The plaintiffs in the lawsuit asserted various state law tort
claims and federal environmental law claims under the Resource Conservation and
Recovery Act and the Clean Air Act stemming from the tear gas plant. In
February 2004, we agreed with the plaintiffs to settle the lawsuit for an
amount of money that is not material to us, and on April 19, 2004, the court
dismissed the lawsuit with prejudice.

S-79

In addition to the above, in the normal course of business, we are
subjected to various types of claims and currently have on-going litigations in
the areas of products liability and general liability. Our products are used in
a wide variety of law enforcement situations and environments. Some of our
products can cause serious personal or property injury or death if not
carefully and properly used by adequately trained personnel. We believe that we
have adequate insurance coverage for most claims that are incurred in the
normal course of business. In such cases, the effect on our financial
statements is generally limited to the amount of our insurance deductible or
self-insured retention. Our annual insurance premiums and self insurance
retention amounts have risen significantly over the past several years and may
continue to do so to the extent we are able to purchase insurance coverage. At
this time, we do not believe any such claims or pending litigation will have a
material impact on our financial position, operations and liquidity.

S-80

MANAGEMENT

The names and ages of all of our executive officers and directors and the
position and offices held by such persons as of May 28, 2004 are as follows:

NAME POSITION WITH THE COMPANY AGE
------------------------------ ---------------------------------------------------------------- ----

Warren B. Kanders ............ Chairman of the Board of Directors and Chief Executive Officer 46
Robert R. Schiller ........... President and Chief Operating Officer 41
Glenn J. Heiar ............... Chief Financial Officer 44
Stephen E. Croskrey .......... President and Chief Executive Officer--Products Division 44
Robert F. Mecredy ............ President--Aerospace & Defense Group 57
Burtt R. Ehrlich ............. Director 64
David R. Haas** .............. Director 62
Nicholas Sokolow ............. Director 54
Thomas W. Strauss* ........... Director 61
Alair A. Townsend* ........... Director 62
Deborah A. Zoullas* .......... Director 51

----------
* Member of the Audit Committee
** Chairman of the Audit Committee

Warren B. Kanders has served as the Chairman of our Board since January
1996 and as our Chief Executive Officer since April 9, 2003. Mr. Kanders has
served as Executive Chairman of the Board of Net Perceptions, Inc. since April
21, 2004. Mr. Kanders has served as a member of the Board of Directors of
Clarus Corporation since June 2002 and as the Executive Chairman of Clarus
Corporation's Board of Directors since December 2002. From October 1992 to May
1996, Mr. Kanders served as Vice Chairman of the board of Benson Eyecare
Corporation. From June 1992 to March 1993, Mr. Kanders served as the President
and a director of Pembridge Holdings, Inc. Mr. Kanders received a B.A. degree
in Economics from Brown University in 1979.

Robert R. Schiller has served as our President since January 1, 2004 and
Chief Operating Officer since April 2003. Mr. Schiller has also held other
positions at Armor Holdings and has served as an Executive Vice President from
November 2000 to April 2003, Chief Financial Officer and Secretary from
November 2000 to March 2004, as Executive Vice President and Director of
Corporate Development from January 1999 to October 2000, and as Vice President
of Corporate Development from July 1996 to December 1998. Mr. Schiller
graduated with a B.A. in Economics from Emory University in 1985 and received a
M.B.A. from Harvard Business School in 1991.

Glenn J. Heiar has served as our Chief Financial Officer since March 2004,
Chief Accounting Officer since March 2003 and Chief Financial Officer of our
Mobile Security Division since February 2002. From 1996 until 2001, Mr. Heiar
was a Vice President and the Chief Financial Officer of Pirelli Cables and
Systems, North America. From 1987 to 1996, Mr. Heiar worked for Alcatel Alsthom
as a Financial Vice President and in various other financial positions. Mr.
Heiar graduated with a B.B.A. in Accounting from the University of Wisconsin in
1982 and received a M.B.A. from the University of North Carolina in 1992. Mr.
Heiar is a certified public accountant and a certified management accountant.

Stephen E. Croskrey has served as President and Chief Executive
Officer--Armor Holdings Products Division since February 1999. From 1998 to
February 1999, Mr. Croskrey served as Director of Sales for Allied Signal,
Inc.'s global fibers business. From 1988 to 1998, Mr. Croskrey served in
various positions for Mobil Oil, most recently as its Central Regional Manager
for its Industrial Lubricant division. Mr. Croskrey graduated with a B.S. in
Engineering from the United States Military Academy at West Point and received
an M.M. from Kellogg School of Management at Northwestern University in 1998.

Robert F. Mecredy has served as President of our Aerospace & Defense Group
since December 2003 and Corporate Vice President for Government Affairs since
October 2001. From 1991 to 2001,

S-81

Mr. Mecredy worked at Firearms Training Systems, Incorporated, holding
positions ranging from Director of U.S. Military Marketing and Sales through
Chief Executive Officer, President and Director. From 1988 to 1990, Mr. Mecredy
served as the Director of Army and Marine Corps programs for Raytheon's
Washington, D.C. Office. Mr. Mecredy graduated Summa Cum Laude from Park
University with a B.S. in Economics in 1974 and received a M.B.A. from Webster
University in 1980.

Burtt R. Ehrlich has served as one of our directors since January 1996.
Mr. Ehrlich has served as a member of the Board of Directors of Clarus
Corporation since June 2002 and as Chairman of the Board of Directors of
Langer, Inc. since February 2001. Mr. Ehrlich served as Chairman and Chief
Operating Officer of Ehrlich Bober Financial Corp. (the predecessor of Benson
Eyecare Corporation) from December 1986 until October 1992, and as a director
of Benson Eyecare Corporation from October 1992 until November 1995.

David R. Haas has served as one of our directors since April 2004. Mr.
Haas has served as a member of the Board of Directors of Information Holdings,
Inc. since July 1998. Since 1995, Mr. Haas has been a private investor and a
financial consultant specializing in financial planning and financing in
varying industries. From 1990 until 1994, Mr. Haas was Senior Vice President
and Controller of Time Warner, Inc., a leading media and entertainment company.
Prior to Warner Communications Inc.'s merger with Time Inc. in 1990, Mr. Haas
held various senior financial positions with Warner Communications Inc.

Nicholas Sokolow has served as one of our directors since January 1996.
Mr. Sokolow has served as a member of the Board of Directors of Clarus
Corporation since June 2002. Mr. Sokolow has been a partner in the law firm of
Sokolow, Dunaud, Mercadier & Carreras since 1994. From June 1973 until October
1994, Mr. Sokolow was an associate and partner in the law firm of Coudert
Brothers.

Thomas W. Strauss has served as one of our directors since May 1996. Mr.
Strauss has served as a member of the Board of Directors of Langer, Inc. since
June 2002. Since 1995, Mr. Strauss has been a principal with Ramius Capital
Group, a privately held investment management firm. From June 1993 until July
1995, Mr. Strauss was co-chairman of Granite Capital International Group, an
investment banking firm. From 1963 to 1991, Mr. Strauss served in various
capacities with Salomon Brothers Inc, an investment banking and brokerage firm,
including President and Vice-Chairman.

Alair A. Townsend has served as one of our directors since December 1996.
Since February 1989, Ms. Townsend has been publisher of Crain's New York
Business, a business periodical. Ms. Townsend was a former governor of the
American Stock Exchange. Ms. Townsend served as New York City's Deputy Mayor
for Finance and Economic Development from February 1985 to January 1989.

Deborah A. Zoullas has served as one of our directors since July 2002. Ms.
Zoullas is a private investor. From December 1998 until December 2000, Ms.
Zoullas served as the Executive Vice President of Sotheby's Holdings, Inc. and
during 2000 served on its Board of Directors. From 1974 until 1996, Ms. Zoullas
worked in various capacities within the Investment Banking Division of Morgan
Stanley & Co. Incorporated. Ms. Zoullas is an Advisory Director of Morgan
Stanley, a member of the Advisory Board of The Stanford Business School, a
Director of the Helena Rubinstein Foundation and a member of the Executive
Committee of The Projects Committee of Memorial Sloan Kettering.

S-82

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth as of May 19, 2004 the information
regarding the ownership of shares of our common stock owned by (i) each person
known to us to beneficially own five percent or more of our common stock, (ii)
each of our directors and nominees for director, (iii) each of our executive
officers, (iv) our executive officers and directors and nominees for director
as a group, and (v) each selling stockholder. Shares listed under the column
"Shares Being Offered" represent the number of shares that may be sold by each
selling stockholder pursuant to this prospectus supplement if the underwriters
exercise in full their option to purchase additional shares. Unless otherwise
indicated, each of the stockholders shown in the table below has sole voting
and investment power with respect to the shares beneficially owned. Unless
otherwise indicated, the address of each person named in the table below is c/o
Armor Holdings, Inc., 1400 Marsh Landing Parkway, Suite 112, Jacksonville,
Florida 32250.

BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
BEFORE OFFERING AFTER OFFERING (4)
----------------------------- -----------------------
SHARES BEING
NAME OFFERED (1) AMOUNT (2) PERCENTAGE (3) AMOUNT PERCENTAGE
------------------------------------------- ------------- ------------ ---------------- ----------- -----------

T. Rowe Price Associates, Inc. (5) ........ -- 2,901,100 10.1% 2,901,100 8.7%
Warren B. Kanders and Kanders
Florida Holdings, Inc. (6) ............... 184,659 2,515,655 8.7% 2,330,996 7.0%
FleetBoston Financial
Corporation (7) .......................... -- 2,065,005 7.2% 2,065,005 6.2%
Wellington Management
Company, LLP (8) ......................... -- 1,496,250 5.2% 1,496,250 4.5%
Robert R. Schiller (9) .................... 184,659 283,005 * 98,346 *
Stephen E. Croskrey (10) .................. 61,000 258,005 * 197,005 *
Nicholas Sokolow (11) ..................... 28,409 212,450 * 184,041 *
Burtt R. Ehrlich (12) ..................... 28,409 150,025 * 121,616 *
Thomas W. Strauss (13) .................... 28,409 141,500 * 113,091 *
Alair A. Townsend (14) .................... -- 112,716 * 112,716 *
Glenn J. Heiar (15) ....................... 31,818 51,500 * 19,682 *
Deborah A. Zoullas (16) ................... 14,206 19,000 * 4,794 *
David R. Haas ............................. -- -- -- -- --
Robert F. Mecredy (17) .................... -- 17,878 * 17,878 *
Gary Allen (18) ........................... 38,431 45,132 * 6,701 *
All directors and executive officers as
a group (11 persons) (19) ................ 561,569 3,761,734 12.5% 3,200,165 9.4%
Selling stockholders as a group (20)....... 600,000 3,676,272 12.3% 3,076,272 9.1%

----------
* Less than 1%.
(1) These shares will not be sold by the selling stockholders unless the
underwriters exercise their option to purchase additional shares.

(2) As used in this table, a beneficial owner of a security includes any
person who, directly or indirectly, through contract, arrangement,
understanding, relationship or otherwise has or shares (a) the power to
vote, or direct the voting of, such security or (b) investment power
which includes the power to dispose, or to direct the disposition of,
such security. In addition, a person is deemed to be the beneficial owner
of a security if that person has the right to acquire beneficial
ownership of such security within 60 days.

(3) Percent is based on 28,626,377 shares of common stock outstanding as of
May 19, 2004.

(4) Assumes exercise in full of the underwriters' option to purchase
additional shares.

(5) This information has been provided to us by T. Rowe Price Associates,
Inc. in a letter dated March 19, 2004. We have assumed that, as of April
1, 2004, there has been no change in the number of shares of our common
stock held by T. Rowe Price Associates, Inc. The address of T. Rowe Price
Associates, Inc. is 100 E. Pratt Street, Baltimore, Maryland 21202.

S-83

(6) Of such shares, Kanders Florida Holdings, Inc., of which Mr. Kanders is
the sole stockholder and sole director, owns 2,098,395 shares. Includes
options to purchase 412,500 shares of common stock. Excludes unvested
restricted stock awards of 124,288 shares and vested deferred restricted
stock awards of 200,000 shares granted to Mr. Kanders over which Mr.
Kanders does not have voting or dispositive power and unvested options to
purchase 935,000 shares of common stock. Also includes 4,760 shares held
for the benefit of Mr. Kanders' children.

(7) This information has been obtained from the Schedule 13G filed by
FleetBoston Financial Corporation on February 13, 2004. The address of
FleetBoston Financial Corporation is 100 Federal Street, Boston, MA
02110.

(8) This information has been obtained from Schedule 13G/A filed by
Wellington Management Company, LLP on February 12, 2004. The amount
reported consists of shares of common stock owned by clients of
Wellington Management. The address of Wellington Management is 75 State
Street, Boston, MA 02109.

(9) Includes options to purchase 275,000 shares of common stock. Excludes
unvested restricted stock awards of 112,144 shares and vested deferred
performance stock awards of 150,000 shares granted to Mr. Schiller over
which Mr. Schiller does not have voting or dispositive power and unvested
options to purchase 350,000 shares of common stock.

(10) Includes options to purchase 220,000 shares of common stock. Excludes
unvested options to purchase 100,000 shares of common stock and unvested
restricted stock awards of 4,940 shares granted to Mr. Croskrey over
which Mr. Croskrey does not have voting or dispositive power.

(11) Includes options to purchase 131,250 shares of common stock. Excludes
unvested options to purchase 3,750 shares of common stock. Also includes
60,000 shares owned by S.T. Investors Fund, LLC, a limited liability
company of which Mr. Sokolow is a member, 10,000 shares owned by Mr.
Sokolow's profit sharing plan and 11,200 shares held for the benefit of
Mr. Sokolow's children and of which Mr. Sokolow disclaims beneficial
ownership.

(12) Includes options to purchase 55,125 shares of common stock. Excludes
unvested options to purchase 3,375 shares of common stock. Also includes
5,000 shares owned by Mr. Ehrlich's children and 6,500 shares in trust
for the benefit of his children, of which Mr. Ehrlich's spouse is
trustee, of which he disclaims beneficial ownership. Also includes 400
shares owned by Mr. Ehrlich's spouse's individual retirement account of
which Mr. Ehrlich disclaims beneficial ownership.

(13) Includes options to purchase 129,000 shares of common stock. Excludes
unvested options to purchase 3,000 shares of common stock.

(14) Includes options to purchase 109,000 shares of common stock. Excludes
unvested options to purchase 3,000 shares of common stock.

(15) Includes options to purchase 40,000 shares of common stock. Excludes
unvested options to purchase 150,000 shares of common stock and unvested
restricted stock awards of 5,020 over which Mr. Heiar does not have
voting or dispositive power.

(16) Includes options to purchase 19,000 shares of common stock. Excludes
unvested options to purchase 23,000 shares of common stock.

(17) Includes options to purchase 16,666 shares of common stock. Excludes
unvested restricted stock awards of 6,100 shares over which Mr. Mecredy
does not have voting or dispositive power. Excludes unvested options to
acquire 108,334 shares of common stock.

(18) Includes options to purchase 41,666 shares of common stock. Excludes
unvested options to purchase 33,334 shares of common stock and unvested
restricted stock awards to purchase 29,500 shares of common stock over
which Mr. Allen does not have voting or dispositive power.

(19) See footnotes (6) and (9) through (17).

(20) See footnotes (6), (9) through (13), (15), (16) and (18).

S-84

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Effective as of January 1, 2002, Kanders & Company, Inc. ("Kanders &
Co."), a corporation controlled by Warren B. Kanders, the Executive Chairman of
our Board and our Chief Executive Officer, entered into an agreement with us to
provide certain investment banking, financial advisory and related services for
a five year term that expires on December 31, 2006. Kanders & Co. will receive
a mutually agreed upon fee on a transaction by transaction basis during the
term of this agreement. The aggregate fees under this agreement will not exceed
$1,575,000 during any calendar year. We also agreed to reimburse Kanders & Co.
for reasonable out-of-pocket expenses including Kanders & Co.'s expenses for
office space, an executive assistant, furniture and equipment, travel and
entertainment, reasonable fees and disbursements of counsel, and consultants
retained by Kanders & Co.

In April 2003, in connection with Mr. Kanders being appointed Chief
Executive Officer of Armor Holdings, Armor Holdings and Kanders & Co. agreed to
terminate the agreement pursuant to which Kanders & Co. provided certain
services to Armor Holdings. We paid Kanders & Co. $143,000 for investment
banking services during fiscal 2003 (through and including April 2003 only). We
also reimbursed Kanders & Co. for out-of-pocket expenses in the aggregate
amount of $61,000 during the fiscal year ended December 31, 2003 (through and
including April 2003 only).

Effective as of January 1, 2003, we entered into a Transportation Services
Agreement with Kanders Aviation, LLC, an entity controlled by Mr. Kanders.
Pursuant to the terms of the Transportation Services Agreement and upon our
request, Kanders Aviation may, in its sole discretion, provide us with air
transportation services via certain aircraft. The Transportation Services
Agreement will remain in effect indefinitely until terminated by written notice
by either party thereto to the other party thereto. During the term of the
Transportation Services Agreement, we will reimburse Kanders Aviation in an
amount equal to the fair market value of the air transportation services
provided by Kanders Aviation to us and any additional expenses incurred by
Kanders Aviation in connection with such air transportation services.

Nicholas Sokolow, one of our directors, is a member of the law firm
Sokolow, Carreras & Associates located in Paris, France. We have retained
Sokolow, Carreras & Associates during the fiscal year ended December 31, 2003
and may retain Sokolow, Carreras & Associates during the fiscal year ending
December 31, 2004. During the fiscal year ended December 31, 2003, we paid
Sokolow, Carreras & Associates $124,000 for legal services in connection with
our French operations.

S-85

DESCRIPTION OF CAPITAL STOCK

The following brief description of our capital stock does not purport to
be complete and is subject in all respects to applicable Delaware law and to
the provisions of our Certificate of Incorporation and Amended and Restated
Bylaws, copies of which have been filed with the Securities and Exchange
Commission.

COMMON STOCK

We have authorized 50,000,000 shares of common stock, par value $.01 per
share. As of May 19, 2004, there were 28,626,377 shares of common stock
outstanding. Holders of common stock are entitled to such dividends as may be
declared by the Board of Directors out of funds legally available therefore
after payment of dividends on any outstanding preferred stock and are entitled
to one vote for each share of common stock held by them with respect to all
matters upon which they are entitled to vote. We are seeking to amend our
Certificate of Incorporation to increase the number of shares of our authorized
common stock to 75,000,000. As the amendment to our Certificate of
Incorporation requires the approval by a majority of our stockholders under
Delaware law, we included a proposal in our Proxy Statement for our 2004 Annual
Meeting of Stockholders relating to the amendment of the Certificate of
Incorporation and recommended to our stockholders that they approve the
proposal. Our Annual Meeting of Stockholders is scheduled for June 22, 2004.

PREFERRED STOCK

We have authorized 5,000,000 shares of preferred stock, par value $.01 per
share. At present, there are no shares of preferred stock outstanding. The
Board of Directors, without further action by our stockholders, is authorized
to designate and issue, in series, preferred stock and to fix as to any series
the dividend rate, redemption prices, preferences on dissolution, the terms of
any sinking fund, conversion rights, voting rights, and any other preferences
or special rights and qualifications.

Any preferred stock so issued may rank senior to the common stock with
respect to the payment of dividends or amounts upon liquidation, dissolution or
winding up, or both. In addition, any such shares of preferred stock may have
class or series voting rights. Issuances of preferred stock, while providing us
with flexibility in connection with general corporate purposes, may, among
other things, have an adverse effect on the rights of holders of common stock.

COVENANT RESTRICTIONS

Our current bank credit facility and indenture governing our 8 1/4% Senior
Subordinated Notes contain financial and operating covenants, including
restrictions on our ability to, among other things, incur additional debt or
create, incur or permit the existence of certain liens, and requires us to
achieve and maintain certain financial ratios, including minimum net worth,
maximum leverage ratio and minimum fixed charge coverage ratio. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources." These covenants could restrict us
or prevent us from paying dividends.

CERTAIN CHARTER AND AMENDED AND RESTATED BYLAW PROVISIONS

Certain provisions of the Certificate of Incorporation, as amended, and
Amended and Restated Bylaws could have an anti-takeover effect. These
provisions are intended to enhance the likelihood of continuity and stability
in the composition of the Board of Directors and in the policies formulated by
the Board and to discourage an unsolicited takeover of Armor Holdings if the
Board determines that such takeover is not in the best interests of the company
and its stockholders. However, these provisions could have the effect of
discouraging certain attempts to acquire Armor Holdings or remove incumbent
management even if some or a majority of stockholders deemed such an attempt to
be in their best interests.

The provisions in the Certificate of Incorporation, as amended, and the
Amended and Restated Bylaws include: (1) a procedure which requires
stockholders to nominate directors in advance of a

S-86

meeting to elect such directors; and (2) the authority to issue additional
shares of common stock or preferred stock without stockholder approval.

DGCL Anti-Takeover Provisions. The Delaware General Corporation Law (the
"DGCL") contains statutory "anti-takeover" provisions, including Section 203
of the DGCL which applies automatically to a Delaware corporation unless that
corporation elects to opt-out as provided in Section 203. We, as a Delaware
corporation, have not elected to opt-out of Section 203 of the DGCL. Under
Section 203 of the DGCL, a stockholder acquiring more than 15% of the
outstanding voting shares of a corporation (an "Interested Stockholder") but
less than 85% of such shares may not engage in certain business combinations
with the corporation for a period of three years subsequent to the date on
which the stockholder became an Interested Stockholder unless prior to such
date, the board of directors of the corporation approves either the business
combination or the transaction which resulted in the stockholder becoming an
Interested Stockholder or the business combination is approved by the board of
directors and by the affirmative vote of at least 662/3% of the outstanding
voting stock that is not owned by the Interested Stockholder.

TRANSFER AGENT AND REGISTRAR

American Stock Transfer and Trust Company is the transfer agent and
registrar for the common stock.

S-87

UNDERWRITING

Armor Holdings, the selling stockholders and the underwriters named below
have entered into an underwriting agreement with respect to the shares being
offered. Subject to certain conditions, each underwriter has severally agreed
to purchase the number of shares indicated in the following table. Goldman,
Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Wachovia
Capital Markets, LLC, J.P. Morgan Securities Inc., Friedman, Billings, Ramsey &
Co., Inc. and Wm Smith Securities, Incorporated are the representatives of the
underwriters.

Underwriters Number of Shares
--------------------------------------------------- -----------------

Goldman, Sachs & Co. ...........................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated .................... ..........
Wachovia Capital Markets, LLC ..................
J.P. Morgan Securities Inc. ....................
Friedman, Billings, Ramsey & Co., Inc. .........
Wm Smith Securities, Incorporated ..............
-----------------
Total ......................................... 4,000,000
=================

The underwriters are committed to take and pay for all of the shares being
offered, if any are taken.

If the underwriters sell more shares than the total number set forth in
the table above, the underwriters have an option to buy up to an additional
600,000 shares from Armor Holdings and the selling stockholders to cover such
sales. They may exercise that option for 30 days. If any shares are purchased
pursuant to this option, the underwriters will severally purchase shares in
approximately the same proportion as set forth in the table above.

The following table shows the per share and total underwriting discounts
and commissions to be paid to the underwriters by Armor Holdings and the
selling stockholders. Such amounts are shown assuming both no exercise and full
exercise of the underwriters' option to purchase 600,000 additional shares.

Paid by Armor Holdings
------------------------------------------------
No Exercise Full Exercise
------------- --------------

Per Share ......... $ $
Total ............. $ $

Paid by Selling Stockholders
------------------------------------------------
No Exercise Full Exercise
------------- --------------

Per Share ......... $ $
Total ............. $ $

Shares sold by the underwriters to the public will initially be offered at
the initial price to public set forth on the cover of this prospectus
supplement. Any shares sold by the underwriters to securities dealers may be
sold at a discount of up to $ per share from the initial price to public. Any
such securities dealers may resell any shares purchased from the underwriters
to certain other brokers or dealers at a discount of up to $ per share from
the initial price to public. If all the shares are not sold at the initial
price to public, the representatives may change the offering price and the
other selling terms.

Armor Holdings, its executive officers and directors and the selling
stockholders have agreed with the underwriters not to dispose of or hedge any
of their common stock or securities convertible into or exchangeable for shares
of common stock during the period from the date of this prospectus supplement
continuing through the date 90 days (or in the case of Ms. Townsend, 60 days)
after the date of this prospectus supplement, except with the prior written
consent of the representatives. This agreement does not apply to any existing
employee benefit plans.

S-88

In connection with the offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering. "Covered"
short sales are sales made in an amount not greater than the underwriters'
option to purchase additional shares from Armor Holdings and the selling
stockholders in the offering. The underwriters may close out any covered short
position by either exercising their option to purchase additional shares or
purchasing shares in the open market. In determining the source of shares to
close out the covered short position, the underwriters will consider, among
other things, the price of shares available for purchase in the open market as
compared to the price at which they may purchase additional shares pursuant to
the option granted to them. "Naked" short sales are any sales in excess of such
option. The underwriters must close out any naked short position by purchasing
shares in the open market. A naked short position is more likely to be created
if the underwriters are concerned that there may be downward pressure on the
price of the common stock in the open market after pricing that could adversely
affect investors who purchase in the offering. Stabilizing transactions consist
of various bids for or purchases of common stock made by the underwriters in
the open market prior to the completion of the offering.

The underwriters may also impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares
sold by or for the account of such underwriter in stabilizing or short covering
transactions.

Purchases to cover a short position and stabilizing transactions may have
the effect of preventing or retarding a decline in the market price of Armor
Holdings' common stock, and together with the imposition of the penalty bid,
may stabilize, maintain or otherwise affect the market price of the common
stock. As a result, the price of the common stock may be higher than the price
that otherwise might exist in the open market. If these activities are
commenced, they may be discontinued at any time. These transactions may be
effected on the NYSE, in the over-the-counter market or otherwise.

Each underwriter has represented, warranted and agreed that: (i) it has
not offered or sold and, prior to the expiry of a period of six months from the
closing date, will not offer or sell any shares to persons in the United
Kingdom except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which have not
resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995; (ii) it
has only communicated or caused to be communicated and will only communicate or
cause to be communicated any invitation or inducement to engage in investment
activity (within the meaning of section 21 of the Financial Services and
Markets Act 2000 ("FSMA")) received by it in connection with the issue or sale
of any shares in circumstances in which section 21(1) of the FSMA does not
apply to Armor Holdings; and (iii) it has complied and will comply with all
applicable provisions of the FSMA with respect to anything done by it in
relation to the shares in, from or otherwise involving the United Kingdom.

The shares may not be offered or sold, transferred or delivered, as part
of their initial distribution or at any time thereafter, directly or
indirectly, to any individual or legal entity in The Netherlands other than to
individuals or legal entities who or which trade or invest in securities in the
conduct of their profession or trade, which includes banks, securities
intermediaries, insurance companies, pension funds, other institutional
investors and commercial enterprises which, as an ancillary activity, regularly
trade or invest in securities.

The shares may not be offered or sold by means of any document other than
to persons whose ordinary business is to buy or sell shares or debentures,
whether as principal or agent, or in circumstances which do not constitute an
offer to the public within the meaning of the Companies Ordinance (Cap. 32) of
Hong Kong, and no advertisement, invitation or document relating to the shares
may be issued, whether in Hong Kong or elsewhere, which is directed at, or the
contents of

S-89

which are likely to be accessed or read by, the public in Hong Kong (except if
permitted to do so under the securities laws of Hong Kong) other than with
respect to shares which are or are intended to be disposed of only to persons
outside Hong Kong or only to "professional investors" within the meaning of the
Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made
thereunder.

This prospectus has not been registered as a prospectus with the Monetary
Authority of Singapore. Accordingly, this prospectus and any other document or
material in connection with the offer or sale, or invitation or subscription or
purchase, of the shares may not be circulated or distributed, nor may the
shares be offered or sold, or be made the subject of an invitation for
subscription or purchase, whether directly or indirectly, to persons in
Singapore other than under circumstances in which such offer, sale or
invitation does not constitute an offer or sale, or invitation for subscription
or purchase, of the shares to the public in Singapore.

Each underwriter has acknowledged and agreed that the shares have not been
registered under the Securities and Exchange Law of Japan and are not being
offered or sold and may not be offered or sold, directly or indirectly, in
Japan or to or for the account of any resident of Japan, except (i) pursuant to
an exemption from the registration requirements of the Securities and Exchange
Law of Japan and (ii) in compliance with any other applicable requirements of
Japanese law.

Armor Holdings and the selling stockholders estimate that the total
expenses of the offering, excluding underwriting discounts and commissions,
will be approximately $1.0 million.

Armor Holdings and the selling stockholders have agreed to indemnify the
several underwriters against certain liabilities, including liabilities under
the Securities Act of 1933.

Certain of the underwriters and their respective affiliates have, from
time to time, performed, and may in the future perform, various financial
advisory and investment banking services for Armor Holdings and its affiliates,
for which they received or will receive customary fees and expenses.

S-90

VALIDITY OF COMMON STOCK

The validity of the shares of common stock being offered by this
prospectus supplement will be passed upon for us by Kane Kessler, P.C., New
York, New York and for the underwriters by Sullivan & Cromwell LLP, New York,
New York.

EXPERTS

The consolidated financial statements of Armor Holdings and subsidiaries
included in this prospectus supplement, have been audited by
PricewaterhouseCoopers LLP, independent auditors, as set forth in their report
thereon included herein in reliance upon such report given on the authority of
such firm as experts in accounting and auditing.

The consolidated financial statements of Simula, Inc. and subsidiaries as
of December 31, 2002 and for each of the three years in the period ended
December 31, 2002 appearing in our Current Report on Form 8-K/A, filed January
22, 2004, have been audited by Deloitte & Touche LLP, independent auditors, as
set forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, as well as proxy statements
and other information with the SEC. You may read and copy any document we file
with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You may obtain further information about the operation
of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our SEC
filings are also available to the public over the Internet at the SEC's web
site at http://www.sec.gov, which contains reports, proxy statements and other
information regarding registrants like us that file electronically with the
SEC. In addition, similar information can be inspected at the New York Stock
Exchange, 20 Broad Street, New York, New York 10005.

This prospectus supplement is part of a registration statement on Form S-3
filed by us with the SEC under the Securities Act. As permitted by SEC rules,
this prospectus supplement and the accompanying prospectus do not contain all
of the information included in the registration statement and the accompanying
exhibits filed with the SEC. You may refer to the registration statement and
its exhibits for more information.

The SEC allows us to "incorporate by reference" into the accompanying
prospectus the information we file with the SEC. This means that we can
disclose important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of the
accompanying prospectus. If we subsequently file updating or superseding
information in a document that is incorporated by reference into the
accompanying prospectus, the subsequent information will also become part of
this prospectus supplement and will supersede the earlier information.

We are incorporating by reference the following documents that we have
filed with the SEC.

(a) Our annual report on Form 10-K for the fiscal year ended December 31,
2003;

(b) Our annual report on Form 10-K/A for the fiscal year ended December 31,
2003;

(d) Our quarterly report on Form 10-Q for the period ended March 31, 2004;

(e) Our current report on Form 8-K/A, Date of Event--December 9, 2003,
filed on January 22, 2004;

(f) Our current report on Form 8-K, Date of Event--March 22, 2004, filed on
March 22, 2004;

(g) Our definitive proxy statement on Schedule 14A filed on April 29, 2004;
and

S-91

(h) The description of our common stock contained in our registration
statement on Form 8-A filed on April 29, 1999, including any amendments
or reports filed for the purpose of updating that description.

We are also incorporating by reference into this prospectus supplement all
of our future filings with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934, as amended, until this offering has been
completed.

You may obtain a copy of any of our filings which are incorporated by
reference, at no cost, by writing to or telephoning us at the following
address:

Armor Holdings, Inc.
1400 Marsh Landing Parkway, Suite 112
Jacksonville, Florida 32250
Attention: Secretary
Telephone: (904) 741-5400

You should rely only on the information provided in this prospectus
supplement or in the accompanying prospectus or information incorporated by
reference. We have not authorized anyone to provide you with different
information. You should not assume that the information in this prospectus
supplement is accurate as of any date other than the date on the first page of
the prospectus supplement. We are not making this offer of securities in any
state or country in which the offer or sale is not permitted.

S-92

INDEX TO FINANCIAL STATEMENTS

Audited Financial Statements of Armor Holdings, Inc.
Report of Independent Certified Public Accountants .................................... F-2
Consolidated Balance Sheets as of December 31, 2003 and December 31, 2002. ............ F-3
Consolidated Statements of Operations for the years ended December 31, 2003, 2002,
and 2001 ............................................................................ F-4
Consolidated Statements of Stockholders' Equity and Comprehensive Income (Loss) for
the years ended December 31, 2003, 2002, and 2001 ................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002,
and 2001. ........................................................................... F-6
Notes to the Consolidated Financial Statements ........................................ F-7
Unaudited Interim Financial Statements of Armor Holdings, Inc.
Condensed and Consolidated Balance Sheets as of March 31, 2004 and December 31,
2003 ................................................................................ F-49
Condensed and Consolidated Statements of Operations for the three months ended
March 31, 2004 and 2003 ............................................................. F-51
Condensed and Consolidated Statements of Cash Flows for the three months ended
March 31, 2004 and 2003 ............................................................. F-52
Notes to Condensed and Consolidated Unaudited Financial Statements .................... F-53

F-1

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of Armor Holdings, Inc.:

In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, stockholders' equity and
comprehensive income (loss), and cash flows present fairly, in all material
respects, the financial position of Armor Holdings, Inc. and its subsidiaries
(the "Company") at December 31, 2003 and 2002, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2003 in conformity with accounting principles generally accepted
in the United States of America. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

As discussed in Note 1 to the consolidated financial statements, effective
January 1, 2002, the Company changed its method of accounting for goodwill
following adoption of Statement of Financial Accounting standard No. 142
"Goodwill and Other Intangible Assets."

As discussed in Note 12 to the consolidated financial statements, the
Company has restated its consolidated financial statements for each of the
three years in the period ended December 31, 2003 to reflect their new segment
reporting format.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Jacksonville, Florida
February 20, 2004, except as to Notes 12 and 20, for which the date is April
19, 2004

F-2

ARMOR HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2003 AND DECEMBER 31, 2002
(IN THOUSANDS, EXCEPT FOR SHARE DATA)

DECEMBER 31, DECEMBER 31,
2003 2002
-------------- -------------

ASSETS
Current assets:
Cash and cash equivalents .................................................. $ 111,850 $ 12,913
Restricted cash ............................................................ 2,600 --
Accounts receivable (net of allowance for doubtful accounts of $1,673 and
$1,428)................................................................... 72,635 58,513
Costs and earned gross profit in excess of billings ........................ -- 234
Inventories ................................................................ 80,527 62,330
Prepaid expenses and other current assets .................................. 22,032 12,212
Current assets of discontinued operations (Note 2) ......................... 753 28,825
--------- ---------
Total current assets ........................................................ 290,397 175,027
Property and equipment (net of accumulated depreciation of $19,046 and
$12,919).................................................................... 57,576 47,136
Goodwill (net of accumulated amortization of $4,024 and $4,024).............. 175,707 98,736
Patents, licenses and trademarks (net of accumulated amortization of $2,627
and $2,169)................................................................. 44,174 7,521
Long-term assets of discontinued operations (Note 2) ........................ 1,603 30,285
Other assets ................................................................ 16,169 9,048
--------- ---------
Total assets ................................................................ $ 585,626 $ 367,753
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt .......................................... $ 32,107 $ 1,813
Short-term debt ............................................................ 498 599
Accounts payable ........................................................... 30,304 23,770
Accrued expenses and other current liabilities ............................. 58,218 25,116
Income taxes payable ....................................................... -- 5,913
Current liabilities of discontinued operations (Note 2) .................... 626 17,225
--------- ---------
Total current liabilities ................................................... 121,753 74,436
Long-term debt, less current portion ........................................ 158,300 5,072
Other long-term liabilities ................................................. 10,208 --
Long-term liabilities of discontinued operations (Note 2) ................... -- 168
--------- ---------
Total liabilities ........................................................... 290,261 79,676

Commitments and contingencies (Note 11)

Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized; no
shares issued and outstanding ............................................ -- --
Common stock, $.01 par value; 50,000,000 shares authorized;
34,337,034 and 33,593,977 issued; 28,276,812 and 29,456,692
outstanding at December 31, 2003 and December 31, 2002,
respectively ............................................................. 344 336
Additional paid-in capital ................................................. 318,460 307,487
Retained earnings .......................................................... 44,942 34,056
Accumulated other comprehensive income (loss) .............................. 3,936 (4,169)
Treasury stock ............................................................. (72,317) (49,633)
--------- ---------
Total stockholders' equity ............................................... 295,365 288,077
--------- ---------
Total liabilities and stockholders' equity .................................. $ 585,626 $ 367,753
========= =========

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

F-3

ARMOR HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

DECEMBER 31, DECEMBER 31, DECEMBER 31,
2003 2002 2001
-------------- -------------- -------------

REVENUES:
Aerospace & Defense ....................... $ 91,673 $ 59,318 $ 18,145
Products .................................. 193,960 179,946 149,868
Mobile Security ........................... 79,539 65,853 29,087
-------- --------- --------
Total Revenues ............................ 365,172 305,117 197,100
-------- --------- --------
COSTS AND EXPENSES:
Cost of sales ............................. 253,586 210,745 126,330
Operating expenses ........................ 62,795 49,836 38,659
Amortization .............................. 489 245 2,142
Integration and other charges ............. 12,573 5,926 3,296
-------- --------- --------
OPERATING INCOME ........................... 35,729 38,365 26,673
Interest expense, net ..................... 4,012 923 3,864
Other expense (income), net ............... 508 51 (82)
-------- --------- --------
INCOME FROM CONTINUING OPERATIONS BEFORE
PROVISION FOR INCOME TAXES ................ 31,209 37,391 22,891
PROVISION FOR INCOME TAXES ................. 14,203 16,054 8,207
-------- --------- --------
INCOME FROM CONTINUING OPERATIONS .......... 17,006 21,337 14,684
DISCONTINUED OPERATIONS (NOTE 2):
LOSS FROM DISCONTINUED OPERATIONS, NET OF
INCOME TAX BENEFIT ........................ (6,120) (39,026) (4,556)
-------- --------- --------
NET INCOME (LOSS) .......................... $ 10,886 $ (17,689) $ 10,128
======== ========= ========
NET INCOME (LOSS) PER COMMON SHARE -- BASIC

INCOME FROM CONTINUING OPERATIONS .......... $ 0.61 $ 0.70 $ 0.61
LOSS FROM DISCONTINUED OPERATIONS .......... (0.22) (1.28) (0.19)
-------- --------- --------
BASIC INCOME (LOSS) PER SHARE .............. $ 0.39 $ (0.58) $ 0.42
======== ========= ========
NET INCOME (LOSS) PER COMMON SHARE --
DILUTED
INCOME FROM CONTINUING OPERATIONS .......... $ 0.59 $ 0.69 $ 0.59
LOSS FROM DISCONTINUED OPERATIONS .......... (0.21) (1.26) (0.18)
-------- --------- --------
DILUTED INCOME (LOSS) PER SHARE ............ $ 0.38 $ (0.57) $ 0.41
======== ========= ========
WEIGHTED AVERAGE SHARES -- BASIC ........... 28,175 30,341 23,932
======== ========= ========
WEIGHTED AVERAGE SHARES -- DILUTED ......... 28,954 30,957 24,768
======== ========= ========

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

F-4

ARMOR HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE
INCOME (LOSS)
YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS)

COMMON STOCK
--------------------- ADDITIONAL
PAR PAID-IN
SHARES VALUE CAPITAL
---------- ---------- ------------

Balance, December 31, 2000 ................ 25,064 $250 $150,254
Exercise of stock options and
distribution of stock awards ............. 1,063 11 10,101
Tax benefit from exercises of options ..... 3,116
Issuance of treasury shares for
exercises of options ..................... (119) (1) (123)
Issuance of common stock .................. 5,765 58 117,969
Issuance of stock for acquisitions and
additional consideration for earnouts..... 1,293 13 20,678
Repurchase of stock .......................
Comprehensive income:
Net income ................................
Foreign currency translation
adjustments, net of taxes of $713.........
Total comprehensive income ................
------ ----- --------
Balance, December 31, 2001 ................ 33,066 331 301,995
Exercise of stock options and
distribution of stock awards ............. 528 5 4,135
Tax benefit from exercises of options ..... 832
Sale of put options ....................... 525
Repurchase of stock .......................
Comprehensive loss:
Net loss ..................................
Foreign currency translation
adjustments, net of taxes of $364.........
Total comprehensive loss ..................
------ ----- --------
Balance, December 31, 2002 ................ 33,594 336 307,487
Exercise of stock options and
distribution of stock awards ............. 743 8 9,028
Tax benefit from exercises of stock
options .................................. 1,136
Extension of stock options related to
termination of former Chief Executive
Officer .................................. 809
Repurchase of stock .......................
Comprehensive income:
Net income ................................
Sale of ArmorGroup ........................
Foreign currency translation
adjustments ..............................
Total comprehensive income ................
------ ----- --------
Balance, December 31, 2003 ................ 34,337 $344 $318,460
====== ===== ========

ACCUMULATED
OTHER
RETAINED COMPREHENSIVE TREASURY
EARNING (LOSS) INCOME STOCK TOTAL
------------ --------------- ------------- -----------

Balance, December 31, 2000 ................ $ 43,663 $ (1,684) $ (25,712) $ 166,771
Exercise of stock options and
distribution of stock awards ............. 10,112
Tax benefit from exercises of options ..... 3,116
Issuance of treasury shares for
exercises of options ..................... (2,046) 2,856 686
Issuance of common stock .................. 118,027
Issuance of stock for acquisitions and
additional consideration for earnouts..... 20,691
Repurchase of stock ....................... (723) (723)
---------
Comprehensive income:
Net income ................................ 10,128 10,128
Foreign currency translation
adjustments, net of taxes of $713......... (2,789) (2,789)
---------
Total comprehensive income ................ 7,339
---------- -------- --------- ---------
Balance, December 31, 2001 ................ 51,745 (4,473) (23,579) 326,019
Exercise of stock options and
distribution of stock awards ............. 4,140
Tax benefit from exercises of options ..... 832
Sale of put options ....................... 525
Repurchase of stock ....................... (26,054) (26,054)
---------
Comprehensive loss:
Net loss .................................. (17,689) (17,689)
Foreign currency translation
adjustments, net of taxes of $364......... 304 304
---------
Total comprehensive loss .................. (17,385)
---------- -------- --------- ---------
Balance, December 31, 2002 ................ 34,056 (4,169) (49,633) 288,077
Exercise of stock options and
distribution of stock awards ............. 9,036
Tax benefit from exercises of stock
options .................................. 1,136
Extension of stock options related to
termination of former Chief Executive
Officer .................................. 809
Repurchase of stock ....................... (22,684) (22,684)
---------
Comprehensive income:
Net income ................................ 10,886 10,886
Sale of ArmorGroup ........................ 3,231 3,231
Foreign currency translation
adjustments .............................. 4,874 4,874
---------
Total comprehensive income ................ 18,991
---------- -------- --------- ---------
Balance, December 31, 2003 ................ $ 44,942 $ 3,936 $ (72,317) $ 295,365
========== ======== ========= =========

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

F-5

ARMOR HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS)

YEAR ENDED
-------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
2003 2002 2001
-------------- -------------- -------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations ............................................. $ 17,006 $ 21,337 $ 14,684
Adjustments to reconcile income from continuing operations to cash provided by
operating activities: ........................................................
Depreciation and amortization ................................................ 7,608 5,580 5,614
Loss on disposal of fixed assets ............................................. 327 200 191
Deferred income taxes ........................................................ 5,025 359 (373)
Non-cash termination charge .................................................. 2,093 -- --
Non-cash restricted stock unit award ......................................... 7,266 -- --
Changes in operating assets and liabilities, net of acquisitions:
Increase in accounts receivable .............................................. (995) (2,554) (14,880)
Increase in inventories ...................................................... (2,501) (9,381) (3,948)
(Increase) decrease in prepaid expenses and other assets ..................... (2,381) (2,246) 1,049
Increase (decrease) in accounts payable, accrued expenses and other current
liabilities ................................................................. 17,043 (3,754) 7,181
Increase in income taxes payable ............................................. 361 6,745 6,667
--------- --------- ----------
Net cash provided by operating activities .................................... 50,852 16,286 16,185
--------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of patents and trademarks ........................................... (185) (69) --
Purchase of property and equipment ........................................... (8,684) (5,902) (5,644)
Increase in restricted cash .................................................. (2,600) -- --
Additional consideration for purchased businesses ............................ (1,026) (9,375) (3,270)
Proceeds from sale of equity securities ...................................... -- -- 843
Proceeds from sale of business ............................................... 31,361 -- --
Purchase of businesses, net of cash acquired ................................. (90,512) (8,818) (39,365)
--------- --------- ----------
Net cash used in investing activities ........................................ (71,646) (24,164) (47,436)
--------- --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of common stock ................................... -- -- 117,979
Proceeds from the exercise of stock options .................................. 8,471 4,227 10,160
Repurchases of treasury stock ................................................ (22,684) (26,054) (723)
Proceeds from the sale of put options ........................................ -- 525 --
Proceeds from issuance of treasury shares for the exercise of stock options .. -- -- 686
Cash paid for deferred loan costs ............................................ -- -- (545)
Cash paid for financing costs ................................................ (4,599) (326) --
Borrowings of long-term debt ................................................. 148,278 -- --
Repayments of long-term debt ................................................. (1,688) (730) (676)
Repayments of debt assumed in acquisitions ................................... -- -- (1,315)
Borrowings under line of credit .............................................. 31,830 32,372 98,286
Repayments under line of credit .............................................. (32,098) (32,447) (130,981)
--------- --------- ----------
Net cash provided by (used in) financing activities .......................... 127,510 (22,433) 92,871
Effect of exchange rate changes on cash and cash equivalents ................. 833 (126) (1,459)
Net cash used in discontinued operations ..................................... (8,612) (4,139) (14,336)
--------- --------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ......................... 98,937 (34,576) 45,825
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ............................... 12,913 47,489 1,664
--------- --------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD ..................................... $ 111,850 $ 12,913 $ 47,489
========= ========= ==========
CASH AND CASH EQUIVALENTS, END OF PERIOD
CONTINUING OPERATIONS ....................................................... $ 111,850 $ 12,913 $ 47,489
DISCONTINUED OPERATIONS ..................................................... 76 3,638 6,230
--------- --------- ----------
$ 111,926 $ 16,551 $ 53,719
========= ========= ==========

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

F-6

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company and nature of business.Armor Holdings, Inc. (the "Company" or
"Armor") is a leading manufacturer and provider of specialized security
products; training and support services related to these products; vehicle
armor systems; military helicopter seating systems, aircraft and land vehicle
armor systems; protective equipment for military personnel; and other
technologies used to protect humans in a variety of life-threatening or
catastrophic situations. Our products, vehicle armor systems and human safety
and survival systems are used domestically and internationally by military, law
enforcement, security and corrections personnel, as well as governmental
agencies, multinational corporations and individuals. Effective in the first
quarter 2004, we instituted a new segment reporting format to include three
reportable business divisions: Aerospace & Defense Group, the Products Division
and the Mobile Security Division. The Aerospace & Defense Group was formed upon
the completion of our acquisition of Simula, Inc. on December 9, 2003, and
results have been included herein since the acquisition date. The Aerospace &
Defense Group also includes the military business, including armor and blast
protection systems for M1114 Up-Armored HMMWVs, and other military vehicle
armor programs, which previously were included in the Mobile Security Division.
The Aerospace & Defense Group also includes the SAPI plate produced by our
Protech subsidiary in Pittsfield, Massachusetts, which was previously reported
as part of the Products Division. The historical results of these businesses
have been reclassified as part of the Aerospace & Defense Group. This reporting
change was made to better reflect management's approach to operating and
directing the businesses, and, in certain instances, to align financial
reporting with our market and customer segments. Prior period segment data has
been restated to conform to the 2003 presentation. ArmorGroup Services has been
classified as discontinued operations. The amounts disclosed in the footnotes
are related to continuing operations unless otherwise indicated.

CONTINUING OPERATIONS

Aerospace & Defense. Our Aerospace & Defense Group supplies human safety
and survival systems to the U.S. military, and major Aerospace & Defense prime
contractors. Our core markets are military aviation safety, military personnel
safety, and land and marine safety. Under the brand name O'Gara-Hess &
Eisenhardt, we are the sole-source provider to the U.S. military of the armor
and blast protection systems for M1114 Up-Armored HMMWVs. We are also under
contract with the U.S. Army to provide spare parts, logistics and ongoing field
support services for the currently installed base of approximately 4,415
Up-Armored HMMWVs. Additionally, we provide blast and ballistic protection kits
for the standard HMMWVs, which are installed on existing equipment in the
field. Our Aerospace & Defense Group is also subcontracted to develop a
ballistic and blast protected armored and sealed truck cab for the High
Mobility Artillery Rocket System (HIMARS), a program recently transitioned by
the U.S. Army and U.S. Marine Corps from developmental to a low rate of initial
production, deliveries of which commenced in 2003. We also supply armor
sub-systems for other tactical wheeled vehicles. Through Simula, we provide
military helicopter seating systems, helicopter cockpit airbag systems,
aircraft and land vehicle armor kits, body armor and other protective equipment
for military personnel, emergency bailout parachutes and survival ensembles
worn by military aircrew. The primary customers for our products are the U.S.
Army, U.S. Marine Corps, Boeing, and Sikorsky Aircraft. Most of Simula's
aviation safety products are provided on a sole source basis. The U.S. armed
forces have adopted ceramic body armor as a key element of the protective
ensemble worn by our troops in Iraq and Afghanistan. Simula was the developer
of this specialized product called SAPI, and is the largest supplier to U.S.
forces.

F-7

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

military and law enforcement communities such as AMERICAN BODY ARMORTM, B-SQUARE
(Registered Trademark), BREAK FREE (Registered Trademark), CLP (Registered
Trademark), DEFENSE TECHNOLOGY/FEDERAL LABORATORIES (Registered Trademark),
DEF-TEC PRODUCTS (Registered Trademark), DISTRACTION DEVICE (Registered
Trademark), FEDERAL LABORATORIES (Registered Trademark), FERRET (Registered
Trademark), FIRST DEFENSE (Registered Trademark), IDENTICATOR (Registered
Trademark), IDENTIDRUG (Registered Trademark), IMPAKTM, LIGHTNING POWDER
(Registered Trademark), MONADNOCK (Registered Trademark), NIK (Registered
Trademark), O'GARA-HESS & EISENHARDT ARMORING COMPANY (Registered Trademark),
PROTECHTM, QUIKSTEP LADDERSTM, SAFARILAND DESIGN (Registered Trademark),
SPEEDFEED (Registered Trademark), and 911EP and DESIGNTM. We sell our products
through a network of over 350 distributors and sales agents, including
approximately 200 in the United States. Our extensive distribution capabilities
and commitment to customer service and training have enabled us to become a
leading provider of security equipment to law enforcement agencies.

Mobile Security. Our Mobile Security Division manufactures and installs
ballistic and blast protected armoring systems for privately owned vehicles. We
armor a variety of privately owned commercial vehicles, including limousines,
sedans, sport utility vehicles, commercial trucks and cash-in-transit vehicles,
to protect against varying degrees of ballistic and blast threats. Our
customers in this business include international corporations and high net
worth individuals. In addition, we supply ballistic and blast protected
armoring systems to U.S. federal law enforcement and intelligence agencies and
foreign heads of state.

DISCONTINUED OPERATIONS

On November 26, 2003, we announced that we completed the sale of
ArmorGroup, our security service division, for $33,660,000 in consideration to
a group of private investors led by Granville Baird Capital Partners of London,
England and Management. We received $31,360,000 in cash at closing and are
scheduled to receive another $2,300,000 by the end of 2004, of which $375,000
has been received through March 6, 2004. We have recorded a loss of $8.8
million on the sale in the fourth quarter of 2003. In accordance with generally
accepted accounting principles, unrealized gains and losses, which are included
in equity as accumulated other comprehensive income or loss, are not recognized
until the period in which the related assets and liabilities are disposed of.

At December 31, 2003, our litigation support services subsidiary remains
as our only operating discontinued operations subsidiary. We are actively
attempting to sell this business.

ACCOUNTING POLICIES

Principles of consolidation. The consolidated financial statements include
the accounts of the Company and its wholly owned subsidiaries. In
consolidation, all material inter-company balances and transactions have been
eliminated. Results of operations of companies acquired in transactions
accounted for under the purchase method of accounting are included in the
financial statements from the date of the acquisition.

Cash and cash equivalents. We consider all highly liquid investments
purchased with maturities of three months or less, at date of purchase, to be
cash equivalents.

Restricted cash. Restricted cash includes $2.6 million held in trust for
the benefit of the Ontario Industrial Development Authority Variable Rate
Demand Industrial Development Revenue Bonds, Series 1989 bondholders. On
January 2, 2004, the restrictions were released and the funds were used to pay
off the bonds in full.

F-8

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Concentration of credit risk. Financial instruments that potentially
subject the Company to concentrations of credit risk consist primarily of cash
and cash equivalents and trade accounts receivable. The Company maintains its
cash and cash equivalents with what it believes to be various high quality
banks. Amounts held in individual banks may periodically exceed, for brief time
periods, federally insured amounts. Our accounts receivable consist of amounts
due from customers and distributors located throughout the world. International
product sales generally require cash in advance or confirmed letters of credit
on United States ("U.S.") banks. We maintain reserves for potential credit
losses. As of December 31, 2003 and 2002, management believes that we have no
significant concentrations of credit risk excluding the U.S. military.

Inventories. Inventories are stated at the lower of cost or market
determined on the first-in, first-out ("FIFO") method.

Fair value of financial instruments. The carrying value of cash and cash
equivalents, accounts receivable, other receivables, accounts payable, and
short and long-term debt approximates fair value at December 31, 2003 and 2002.

Derivative Instruments and Hedging Activities. We account for derivative
instruments and hedging activities in accordance with Statement of Financial
Accounting Standard No. 133, "Accounting for Derivative Instruments and Hedge
Activities" (SFAS 133) as amended. All derivative instruments are recorded on
the balance sheet at fair value. Changes in the fair value of derivatives are
recorded each period in current earnings or other comprehensive income,
depending on whether a derivative is designated as part of a hedge transaction
and, if it is, depending on the type of hedge transaction. For fair-value hedge
transactions in which we hedge changes in an asset's, liability's, or firm
commitment's fair value, changes in the fair value of the derivative instrument
will generally be offset in the income statement by changes in the hedged
item's fair value. We adopted SFAS 133 in the first quarter of 2001. However,
we had no derivatives to be measured at the time of adoption. We do not hold or
issue interest rate swap agreements or other derivative instruments for trading
purposes.

Changes in the fair value of the interest rate swap agreements offset
changes in the fair value of the fixed rate debt due to changes in the market
interest rate. Accordingly, the other assets on the Condensed Consolidated
Balance Sheet as of December 31, 2003 increased by $5.9 million, which
reflected an increase in the fair value of the interest rate swap agreements.
The corresponding increase in the hedge liability was recorded in long-term
debt. The agreements are deemed to be a perfectly effective fair value hedge
and therefore qualify for the short-cut method of accounting under SFAS 133. As
a result, no ineffectiveness is expected to be recognized in our earnings
associated with the interest rate swap agreements.

Property and equipment. Property and equipment are carried at cost less
accumulated depreciation. Upon disposal of property and equipment, the
appropriate accounts are reduced by the related cost and accumulated
depreciation. The resulting gains and losses are reflected in consolidated
earnings. Depreciation is computed using the straight-line method over the
estimated lives of the related assets as follows:

Buildings and improvements ......... 5 -- 39 years
Machinery and equipment ............ 3 -- 7 years

Goodwill. Goodwill represents the excess of the purchase price over the
fair value of the net assets acquired in a purchase business combination.
Goodwill and other intangible assets are stated on the basis of cost. The
$122.9 million in goodwill resulting from acquisitions made by the Company
subsequent to June 30, 2001 was immediately subjected to the non-amortization
provisions of SFAS 142. See also Impairment and Recent Accounting
Pronouncements which follows.

F-9

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Patents, licenses and trademarks. Patents, licenses and trademarks were
primarily acquired through acquisitions accounted for by the purchase method of
accounting. Such assets are amortized on a straight-line basis over their
remaining lives useful lives.

Impairment. Long-lived assets, including certain identifiable intangibles
and goodwill, are reviewed for impairment annually or whenever events or
changes in circumstances indicate that the carrying amount of the asset in
question may not be recoverable including, but not limited to, a deterioration
of profits for a business segment that has long-lived assets, and when other
changes occur which might impair recovery of long-lived assets. Management has
reviewed our long-lived assets and has taken impairment charges of $12.4
million in fiscal 2003 and $30.3 million in fiscal 2002 to reduce the carrying
value of the Services Division to estimated realizable value. The method used
to determine the existence of an impairment would be generally by undiscounted
operating cash flows estimated over the remaining useful lives of the related
long-lived assets or estimated realizable amounts on assets of discontinued
operations. Impairment is measured as the difference between fair value and
unamortized cost at the date impairment is determined.

Research and development. We engage in ongoing engineering, research and
development activities to improve the reliability, performance and
cost-effectiveness of our existing products. We also design and develop new
products in an ongoing effort to anticipate and meet our customers' evolving
needs. Research and development costs are included in operating expenses as
incurred and for the years ended December 31, 2003, 2002 and 2001, approximated
$4,015,000, $2,968,000 and $2,353,000, respectively.

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 in the financial statements
and accompanying notes. Significant estimates inherent in the preparation of
the accompanying consolidated financial statements include the carrying value
of long-lived assets, valuation allowances for receivables, inventories and
deferred income tax assets, liabilities for potential litigation claims and
settlements, and contract contingencies and obligations. Actual results could
differ from those estimates.

Income taxes. We account for income taxes pursuant to Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes".
Under the asset and liability method specified thereunder, deferred taxes are
determined based on the difference between the financial reporting and tax
bases of assets and liabilities. Deferred tax liabilities are offset by
deferred tax assets relating to net operating loss carryforwards and deductible
temporary differences. Future benefits obtained either from utilization of net
operating loss carryforwards or from the reduction in the income tax asset
valuation allowance existing on September 20, 1993 have been and will be
applied to reduce reorganization value in excess of amounts allocable to
identifiable assets. At December 31, 2003 and 2002, our consolidated foreign
subsidiaries have unremitted earnings of approximately $9.0 million and $3.0
million, respectively, on which we have not recorded a provision for United
States Federal income taxes since these earnings are considered to be
permanently reinvested. Such foreign earnings have been taxed according to the
regulations existing in the countries in which they were earned.

Revenue recognition. We record products revenue at the time of shipment.
Returns are minimal and do not materially affect the financial statements.

We record Aerospace & Defense Group revenue related to government
contracts which results principally from fixed price contracts and is
recognized when persuasive evidence of an arrangement exists, delivery has
occurred, the fee is fixed and determinable and collectibility is probable.
Generally, all of these conditions are met when the Company ships products to
its customers. M1114 Up-Armored HMMWV units sold to the U.S. Government are
considered sold when the onsite Department of Defense officer finishes the
inspection of the M1114 Up-Armored HMMWV and approves it for delivery. Revenues
related to nonrefundable license fees that are payable at the

F-10

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

initiation of a licensing agreement are recognized immediately in income when
received or when collectibility is reasonably assured, provided that there are
no future obligations or performance requirements. Non-refundable license fees
that are in essence, a prepayment of future royalties, are recognized as
revenue on a straight-line basis over the term of the initial license.

We record revenue of the Aerospace & Defense Group and Mobile Security
Division when the vehicle is shipped, except for larger commercial contracts
typically longer than four months in length and the contract for the delivery
of M1114 Up-Armored HMMWVs to the U.S. Government, which continues through
2005. Revenue from such contracts is recognized on the percentage of
completion, units-of-work performed method. Should such contracts be in a loss
position, the entire estimated loss would be recognized for the balance of the
contract at such time. Current contracts are profitable.

We record service revenue as services are provided on a
contract-by-contract basis. Revenues from service contracts are recognized over
the term of the contract.

Advertising. We expense advertising costs as expense in the period in
which they are incurred.

Earnings per share. Basic earnings per share is computed by dividing net
income by the weighted-average number of common shares outstanding. Diluted
earnings per share is computed by dividing net income by the weighted-average
number of common shares outstanding compounding the effects of all potentially
dilutive common stock equivalents, principally options, except in cases where
the effect would be anti-dilutive.

Comprehensive income and foreign currency translation. In accordance with
SFAS No. 130, "Reporting Comprehensive Income", assets and liabilities
denominated in a foreign currency are translated into U.S. dollars at the
current rate of exchange existing at year-end and revenues and expenses are
translated at the average monthly exchange rates. The cumulative translation
adjustment, net of tax, which represents the effect of translating assets and
liabilities of our foreign operations is recorded as an increase of equity of
$3,936,000 and a reduction of equity of $(4,169,000) for the years ended
December 31, 2003 and 2002, respectively, and is classified as accumulated
other comprehensive loss. The current year change in the accumulated amount,
net of tax, is included as a component of comprehensive income.

Stock options and grants. SFAS No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123") establishes a fair value based method of accounting
for stock-based employee compensation plans; however, it also allows an entity
to continue to measure compensation cost for those plans using the intrinsic
value based method of accounting prescribed by Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees." Under the
fair value based method, compensation cost is measured at the grant date based
on the value of the award and is recognized over the service period, which is
usually the vesting period. Under the intrinsic value based method,
compensation costs is the excess, if any, of the quoted market price of the
stock at the grant date or other measurement date over the amount an employee
must pay to acquire the stock. We have elected to continue to account for its
employee stock compensation plans under APB Opinion No. 25 with pro forma
disclosures of net earnings and earnings per share, as if the fair value based
method of accounting defined in SFAS No. 123 had been applied.

F-11

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

If compensation cost for stock option grants had been determined based on
the fair value on the grant dates for 2003, 2002 and 2001 consistent with the
method prescribed by SFAS No. 123, the Company's net earnings and earnings per
share would have been adjusted to the pro forma amounts indicated below:

2003 2002 2001
---------- ------------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Net income as reported ............ $ 10,886 $ (17,689) $ 10,128
Deduct: Total stock-based employee
compensation expense determined
under fair value based method for
all awards, net of related tax
effects ......................... (4,157) (5,053) (2,435)
-------- --------- --------
$ 6,729 $ (22,742) $ 7,693
======== ========= ========

Earnings per share:
Basic -- as reported ............ $ 0.39 $ (0.58) $ 0.42
======== ========= ========
Basic -- pro forma .............. $ 0.24 $ (0.75) $ 0.32
======== ========= ========

Diluted -- as reported .......... $ 0.38 $ (0.57) $ 0.41
======== ========= ========
Diluted -- pro forma ............ $ 0.23 $ (0.74) $ 0.31
======== ========= ========

Reclassifications. Certain reclassifications have been made to the 2002
and 2001 financial statements in order to conform to the presentation adopted
for 2003. These reclassifications had no effect on net income or retained
earnings.

Recent accounting pronouncements. In June 2001, the Financial Accounting
Standards Board issued SFAS No. 142, "Goodwill and Other Intangible Assets."
SFAS No. 142 changes the accounting for goodwill from an amortization method to
an impairment-only approach. Amortization of goodwill, including goodwill
recorded in past business combinations, ceased upon adoption of this statement.
In addition, this statement requires that goodwill be tested for impairment at
least annually at the reporting unit level. We implemented SFAS No. 142 on
January 1, 2002. In connection with the adoption of SFAS 142, we completed in
the second quarter of 2002 the transitional goodwill impairment test that
compared the fair value of each reporting unit to its carrying value and
determined that no impairment existed. The goodwill resulting from acquisitions
made by us subsequent to June 30, 2001, was immediately subject to the
non-amortization provisions of SFAS 142.

F-12

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Had we been accounting for goodwill under SFAS 142 for 2001, our net
income and earnings per share would have been as follows:

DECEMBER 31, 2001
--------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Reported net income ................................ $ 10,128
Add back goodwill amortization, net of tax ......... 3,044
--------
Actual/pro forma adjusted net income ............... $ 13,172
========
Basic earnings per share
Reported basic income per share .................... $ 0.42
Goodwill amortization, net of tax .................. 0.13
--------
Actual/pro forma basic income per share ............ $ 0.55
========
Diluted earnings per share
Reported diluted income per share .................. $ 0.41
Goodwill amortization, net of tax .................. 0.12
--------
Actual/pro forma diluted income per share .......... $ 0.53
========

In January 2003, the FASB issued FASB Interpretation No. 46,
"Consolidation of Variable-Interest Entities -- an Interpretation of ARB No.
51" ("FIN 46"). FIN 46 addresses consolidation by business enterprises of
variable interest entities, which have one or both of the following
characteristics: (1) the equity investment at risk is not sufficient to permit
the entity to finance its activities without additional subordinated financial
support from other parties, which is provided through other interests that will
absorb some or all of the expected losses of the entity and (2) the equity
investors lack one or more of the following essential characteristics of a
controlling financial interest:

o The direct or indirect ability to make decisions about the entity's
activities through voting rights or similar rights

o The obligation to absorb the expected losses of the entity if they
occur, which makes it possible for the entity to finance its activities

o The right to receive the expected residual returns of the entity if they
occur, which is the compensation for the risk of absorbing the expected
losses.

In December 2003, the FASB issued FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities" (revised December 2003) ("FIN
46(R)"). The provisions of FIN 46(R) are as follows:

F-13

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

We do not have, nor have had, any interests in variable interest entities
that are subject to the provisions of FIN 46 or FIN 46(R).

In October 2001, the FASB issued Statement of Financial Accounting
Standard No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" (SFAS 144). SFAS 144 establishes a "primary-asset" approach to
determine the cash flow estimation period for a group of assets and liabilities
that represents the unit of accounting for a long-lived asset to be held and
used. SFAS 144 requires that a long-lived asset to be (1) abandoned, (2)
exchanged for a similar productive asset, or (3) distributed to owners in a
spin-off be considered held and used until it is abandoned, exchanged, or
distributed. SFAS 144 requires (1) that spin-offs and exchanges of similar
productive assets be recorded at the lower of carrying value or fair value, and
that such assets be classified as held and used until disposed of and (2) that
any impairment loss resulting from a spin-off or exchange of similar productive
assets be recognized upon asset disposition. SFAS 144 provides for total assets
and total liabilities of discontinued business segments to be presented in
separate captions in assets and liabilities and also provides that future
losses, if any, of discontinued business segments shall be reported as
incurred. We adopted SFAS 144 effective January 1, 2002. The reclassification
of the Services Division to discontinued operations and subsequent reduction in
its carrying value was in accordance with the provisions of SFAS 144.

In April 2002, the FASB issued Statement of Financial Accounting Standard
No. 145, "Rescission on FASB 4, 44 and 64, Amendment of FASB Statement No. 13
and Technical Corrections" (SFAS 145). Under SFAS 145, gains and losses related
to the extinguishment of debt should no longer be segregated on the income
statement from continuing operations. The provisions of SFAS 145 are effective
for fiscal years beginning after May 15, 2002.

In June 2002, the FASB issued Statement of Financial Accounting Standard
No. 146, "Accounting for Costs Associated with Exit or Disposal Activities"
(SFAS 146). SFAS 146 addresses financial accounting and reporting for costs
associated with exit or disposal activities and nullifies

F-14

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring)." SFAS 146 is effective for exit or
disposal activities initiated on or after December 31, 2002. The effects of
adopting this standard did not have a material effect on us.

In December 2002, the FASB issued Statement of Financial Accounting
Standard 148, "Accounting for Stock-Based Compensation -- Transition and
Disclosure" (SFAS 148). SFAS 148 provides alternative methods of transition for
a voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, SFAS 148 amends the disclosure requirements
of Statement of Financial Accounting Standard 123, "Accounting for Stock-Based
Compensation" (SFAS 123), to require prominent disclosures in both annual and
interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results.
The disclosures required by SFAS 148 are included in this document.

In April 2003, the FASB issued Statement of Financial Accounting Standard
No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging
Activities" (SFAS 149). SFAS 149 amends and clarifies financial accounting and
reporting for derivative instruments, including certain derivative instruments
embedded in other contracts and for hedging activities under Statement of
Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS 133). SFAS 149 is effective for contracts entered
into or modified and hedging relationships designated after June 30, 2003,
except for the provisions of SFAS 149 that relate to SFAS 133 Implementation
Issues that have been effective for fiscal quarters that began prior to June
15, 2003, which should continue to be applied in accordance with their
respective effective dates. Adoption of this standard had no effect on us.

In May 2003, the FASB issued Statement of Financial Accounting Standard
No. 150, "Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity" (SFAS 150). SFAS 150 establishes standards for how
an issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability (or an
asset in some circumstances). Many of those instruments were previously
classified as equity. SFAS 150 is effective for financial instruments entered
into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003, except for
mandatorily redeemable financial instruments of nonpublic entities. Adoption of
this standard had no effect on us.

2. DISCONTINUED OPERATIONS

In January 2001, our management approved a restructuring plan to close its
U.S. investigative businesses, realign the division's organization, eliminate
excess facilities and reduce overhead in its businesses worldwide. In
connection with this restructuring plan, the division performed a review of its
long-lived assets to identify potential impairments. Pursuant to this
restructuring plan, ArmorGroup i) eliminated 26 employees, primarily from its
investigative businesses, ii) eliminated an additional 24

F-15

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

employees from its security business, iii) incurred lease and other exit costs
as a result of the closure of its investigative businesses, and iv) wrote-down
the value of both tangible and intangible assets as a result of the impairment
review. All of the significant actions contemplated by the restructuring plan
have been completed.

As a result of the restructuring plan, we recorded a pre-tax charge of
$10.3 million. As of December 31, 2003, we had a remaining liability of
$140,000 after fiscal year 2003 utilization of $130,000 relating to lease
termination costs. The remaining liability has been classified in accrued
expenses and current liabilities of discontinued operations on the consolidated
balance sheet.

On July 15, 2002, we announced plans to sell the Services division and the
retention of Merrill Lynch & Company to assist in the sale. In accordance with
Statement of Accounting Standards 144, Accounting for Impairment or Disposal of
Long-Lived Assets, the assets and liabilities of the Services division have
been classified as held for sale, with its operating results in the current and
prior periods reported in discontinued operations for the year ended December
31, 2003, 2002 and 2001. Cyconics International Training Services, Inc., a
subsidiary providing certain training services, formerly reported as a part of
the Services Division is not included in the amounts classified as assets held
for sale. The assets and liabilities as well as the operating results of
Cyconics International Training Services, Inc. have been reclassified to the
Products Division where management oversight currently resides.

Based upon our analysis and discussions with our advisors regarding the
estimated realizable value, net of selling costs, of the Services Division, we
reduced its carrying value and recorded net impairment charges of $12.4 million
and $30.3 million in fiscal 2003 and 2002, respectively. The 2003 impairment
charges consisted of a non-cash goodwill reduction. The fiscal 2002 impairment
charges consisted of approximately $6.1 million in estimated disposal costs and
a $24.2 million non-cash goodwill reduction. The benefit for income taxes for
discontinued operations was $8.3 million and $2.4 million for fiscal 2003 and
2002, respectively. The reductions in the carrying value of the Services
Division were management's best estimate based upon the information currently
available, including discussions with our investment bankers.

On November 26, 2003, we announced that we completed the sale of
ArmorGroup, our security service division, for $33,660,000 in total
consideration to a group of private investors led by Granville Baird Capital
Partners of London, England and Management. We received $31,360,000 in cash at
closing and are scheduled to receive another $2,300,000 by the end of 2004, of
which we have received $375,000 through March 6, 2004. We recorded a loss of
$8.8 million on the sale in the fourth quarter of 2003. In accordance with
generally accepted accounting principles, unrealized gains and losses, which
are included in equity as accumulated other comprehensive income or loss, are
not recognized until the period in which the related assets and liabilities are
disposed of.

At December 31, 2003, our litigation support services subsidiary remains
in discontinued operations. The actual proceeds from the disposal of this
business may differ materially from our current estimates and therefore could
result in either a gain or a loss upon final disposal. We are actively
attempting to sell this business.

F-16

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following is a summary of the operating results of the discontinued
operations for the years ended December 31, 2003, 2002 and 2001.

DECEMBER 31, DECEMBER 31, DECEMBER 31,
2003 2002 2001
-------------- -------------- -------------
(IN THOUSANDS)

Revenue ................................... $ 95,124 $ 98,263 $ 94,928
Cost of sales ............................. 66,780 75,779 65,021
--------- --------- --------
Gross profit .............................. 28,344 22,484 29,907
Operating expenses ........................ 19,910 30,588 24,496
Amortization expense ...................... -- -- 1,519
Charge for impairment of long-lived
assets ................................... 21,535 30,296 --
Restructuring and related charges ......... -- -- 10,257
Integration and other charges ............. 776 2,623 776
--------- --------- --------
Operating loss ............................ (13,877) (41,023) (7,141)
Interest expense, net ..................... 16 346 143
Other expense (income), net ............... 479 99 (218)
--------- --------- --------
Loss from discontinued operations
before benefit for income taxes .......... (14,372) (41,468) (7,066)
Benefit for income taxes (a) .............. (8,252) (2,442) (2,510)
--------- --------- --------
Loss from discontinued operations ......... $ (6,120) $ (39,026) $ (4,556)
========= ========= ========

a) Fiscal 2002 income taxes exclude additional expense of $1,475,000 per
paragraphs 26 and 27 of SFAS No. 109 included in income from continuing
operations on a consolidated basis. See Note 13.

F-17

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following is a summary of the assets and liabilities of our
discontinued operations:

DECEMBER 31, DECEMBER 31,
2003 2002
-------------- -------------
(IN THOUSANDS)

Assets
Cash and cash equivalents .............................. $ 76 $ 3,638
Accounts receivable, net ............................... 549 16,228
Other current assets ................................... 128 8,959
------ -------
Total current assets .................................. 753 28,825
Property and equipment, net ............................ 1,206 12,481
Goodwill, net .......................................... 356 12,995
Other assets............................................ 41 4,809
------ -------
Total assets of discontinued operations ................ $2,356 $59,110
====== =======

Liabilities
Current portion of long-term debt ...................... $ 125 $ 186
Short-term debt ........................................ -- 350
Accounts payable ....................................... 5 2,405
Accrued expenses and other current liabilities ......... 496 14,284
------ -------
Total current liabilities ............................. 626 17,225
Long-term debt ......................................... -- 168
------ -------
Total liabilities of discontinued operations ............. $ 626 $17,393
====== =======

3. COMPREHENSIVE INCOME

The components of comprehensive income (loss), net of tax benefits of
zero, $364,000 and $713,000 for the years ended December 31, 2003, 2002 and
2001, are listed below:

DECEMBER 31, DECEMBER 31, DECEMBER 31,
2003 2002 2001
-------------- -------------- -------------
(IN THOUSANDS)

Net income (loss) ..................... $10,886 $ (17,689) $ 10,128
Other comprehensive income (loss):

Sale of ArmorGroup .................. 3,231 -- --
Foreign currency translations, net of
tax ................................ 4,874 304 (2,789)
------- --------- --------
Comprehensive income (loss) ........... $18,991 $ (17,385) $ 7,339
======= ========= ========

In accordance with generally accepted accounting principles, unrealized
gains and losses, which are included in equity as accumulated other
comprehensive income or loss, are not recognized until the period in which the
related assets and liabilities are disposed of.

F-18

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. BUSINESS COMBINATIONS

We have completed numerous purchase business combinations for cash and/or
shares of our common stock and assumption of liabilities in certain cases. In
the three years in the period ended December 31, 2003, the following
acquisitions were completed:

TOTAL SHARES VALUE OF
CONSIDERATION ISSUED SHARES
--------------- ------------ ---------
(IN THOUSANDS, EXCEPT SHARES ISSUED)

2003
----
Aggregate 2003 acquisitions (1) ......... $90,512 -- --
Additional purchase price paid/issued
for deferred consideration ............ 1,026 -- --
------- -- --
$91,538 -- --
======= ========= =======
2002
----
Aggregate 2002 acquisitions (2) ......... $ 8,818 -- --
Additional purchase price paid/issued
for acquisition earnouts .............. 9,375 -- --
------- -- --
$18,193 -- --
======= ========= =======
2001
----
Aggregate 2001 acquisitions (3) ......... $59,887 1,224,302 $19,604
Additional purchase price paid/issued
for acquisition earnouts .............. 3,904 68,888 1,087
------- --------- -------
$63,791 1,293,190 $20,691
======= ========= =======

(1) Includes Simula, Inc. and Hatch Imports, Inc.

(2) Includes Speedfeed, Inc., Foldable Products Group, B-Square, Inc.,
Evi-Paq, Inc., Trasco Bremen and 911 Emergency Products.

(3) Includes O'Gara-Hess & Eisenhardt Companies, Guardian and
Identicator.

On December 9, 2003, we acquired all of the outstanding stock of Simula,
for approximately $84.8 million in cash including transaction costs. Simula is
a safety technology company that supplies human safety and survival systems to
all branches of the United States military, major aerospace and defense prime
contractors. Its core markets are military aviation safety, military personnel
safety, and land and marine safety. Simula is a provider of military helicopter
seating systems, aircraft and land vehicle armor systems, protective equipment
for military personnel and technologies used to protect humans in a variety of
life-threatening or catastrophic situations.

As a result of the acquisition, we expect to: (1) strengthen our position
as a leading mid-tier defense and security industry consolidator through
increased scale and scope; (2) increase our relevance to Department of Defense
customers and programs; (3) diversify our business mix by adding fixed-wing and
rotorcraft crashworthy seating; (4) combine body armor capabilities of Simula
and PROTECH, one of our subsidiaries, supplementing our position in the SAPI
market; (5) achieve cross-selling opportunities by leveraging our global sales
force and relationships; and (6) offer opportunities for cost reduction through
integration savings and rationalization of operations.

F-19

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The acquisition was accounted for as a purchase business combination, and
accordingly, the results of operations were included in our financial
statements after December 9, 2003. The cost to acquire Simula has been
allocated to the assets acquired and liabilities assumed according to their
estimated fair values at the time of the acquisition as follows:

(IN THOUSANDS)
---------------

Working capital ........................ $ 5,027
Property and equipment ................. 5,360
Other long-term assets ................. 434
Assumed note payable ................... (31,135)
Assumed long-term liabilities .......... (1,704)
Customer-related intangible ............ 25,140
Technology-related intangible .......... 8,814
Goodwill (Deductible) .................. 72,816
---------
$ 84,752
=========

The customer-related intangible asset relates to acquired customer
relationships and is being amortized over a 14-year weighted-average useful
life on a straight-line basis. The technology-related intangible asset relates
to certain acquired technology and is being amortized over an eight-year
weighted-average useful life on a straight-line basis.

During 2002, we completed the acquisition of Speedfeed, Inc., Foldable
Products Group, B-Square, Inc., Evi-Paq, Inc., Trasco Bremen and 911 Emergency
Products.

On August 23, 2001, we completed our acquisition of Security Products and
Services Group of the Kroll-O'Gara Company, including the O'Gara-Hess &
Eisenhardt subsidiary ("O'Gara"). O'Gara is the prime contractor to the U.S.
Military for the supply of armoring and blast protection for HMMWVs and armors
a variety of vehicles, including limousines, sedans, sport utility vehicles,
and money transport vehicles, to protect against varying degrees of ballistic
and blast threats.

Businesses acquired are included in consolidated results from the date of
acquisition. Pro forma results of the 2003 acquisition of Hatch Imports, Inc.
and the 2002 acquisitions are not presented, as they would not differ by a
material amount from actual results. The following unaudited pro forma
consolidated results are presented to show the results on a pro forma basis as
if the 2003 acquisition of Simula had been made as of January 1, 2002:

2003 2002
------------- -------------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)

Revenues from continuing operations .................... $ 443,881 $ 379,521
Net income from continuing operations .................. $ 20,212 $ 19,935
Basic earnings per share from continuing operations..... $ 0.72 $ 0.66
Diluted earnings per share from continuing
operations ............................................ $ 0.70 $ 0.64
Weighted average shares -- basic ....................... 28,175 30,341
Weighted average shares -- diluted ..................... 28,954 30,957

F-20

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The changes in the carrying amount of goodwill for the year ended December
31, 2003, are as follows:

AEROSPACE & MOBILE
DEFENSE PRODUCTS SECURITY TOTAL
------------- ---------- ---------- ----------
(IN THOUSANDS)

Balance at January 1, 2003 ............ $ -- $60,143 $38,593 $ 98,736
Goodwill acquired during year ......... 72,816 4,262 (107) 76,971
------- ------- ------- --------
Balance at December 31, 2003 .......... $72,816 $64,405 $38,486 $175,707
======= ======= ======= ========

5. INVENTORIES

The components of inventory as of December 31, 2003 and 2002 are as
follows:

2003 2002
---------- ----------
(IN THOUSANDS)

Raw materials ........... $40,397 $30,211
Work-in-process ......... 25,422 15,733
Finished goods .......... 14,708 16,386
------- -------
$80,527 $62,330
======= =======

6. PROPERTY AND EQUIPMENT

Property and equipment as of December 31, 2003 and 2002 are summarized as
follows:

2003 2002
------------ ------------
(IN THOUSANDS)

Land ............................... $ 5,940 $ 5,557
Buildings and improvements ......... 29,776 23,964
Machinery and equipment ............ 40,906 30,534
--------- ---------
Total .............................. 76,622 60,055
Accumulated depreciation ........... (19,046) (12,919)
--------- ---------
$ 57,576 $ 47,136
========= =========

Depreciation expense for the years ended December 31, 2003, 2002 and 2001
was approximately $5,719,000, $4,953,000 and $3,031,000 respectively. In the
statement of operations of continuing operations for the years ended December
31, 2003, 2002 and 2001, depreciation expense has been reduced by $130,000 in
each year for the amortization of the proceeds received under an economic
development grant received from the Department of Housing and Urban
Development.

F-21

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities as of December 31, 2003 and
2002 are summarized as follows:

2003 2002
---------- ----------
(IN THOUSANDS)

Accrued expenses ................................ $40,787 $16,988
Customer deposits ............................... 14,651 6,302
Deferred consideration for acquisitions ......... 2,780 1,826
------- -------
$58,218 $25,116
======= =======

8. DEBT

2003 2002
------------ -----------
(IN THOUSANDS)

Credit facility (a) ........................................ $ -- $ --
Senior Subordinated Notes (b) .............................. 147,600 --
Senior Subordinated Convertible Notes (c) .................. 31,135 --
Ontario Industrial Development Authority Variable
Rate Demand Industrial Development Revenue
Bonds, Series 1989 payable in annual installments
of $200 to $300, through August 1, 2014, with
interest paid monthly at varying rates ................... 2,600 2,800
Note payable in scheduled installments through
2013, with an interest rate of 5%. ....................... 1,508 1,582
Economic Development Revenue Bonds, payable in
scheduled installments through September 2016,
with a variable interest rate approximating 85% of
the bond equivalent yield of the 13-week U.S.
Treasury bills (not to exceed 12%) which
approximated 1.5% at December 31, 2002. .................. -- 1,075
Note to former officer payable in monthly principal
and interest installments of $7 through December
31, 2009 with an imputed interest rate of 9.25% .......... 359 399
Minimum guaranteed royalty to former officer payable
in monthly principal and interest installments of $4
through August 2005, with an imputed interest rate
of 9.2% .................................................. 73 114
Minimum guaranteed royalty to former officer payable
in monthly principal and interest installments of
$36 through April 2005, with an imputed interest
rate of 7.35% ............................................ 542 915
Note payable in schedule installments through 2008,
with an interest rate of 3% .............................. 739 --
Plus fair value of interest rate swaps (d) ................. 5,851 --
--------- --------
$ 190,407 $ 6,885
Less current portion ....................................... (32,107) (1,813)
--------- --------
$ 158,300 $ 5,072
========= ========

F-22

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(a) Credit Facility -- On August 12, 2003, we terminated our existing
credit facility and entered into a new collateralized revolving credit facility
with Bank of America, N.A., Wachovia Bank, N.A. and Key Bank, N.A. The new
credit facility is a five-year revolving credit facility and, among other
things, provides for: 1) total maximum borrowings of $60 million; 2) a $25
million sub-limit for the issuances of standby and commercial letters of
credit; 3) a $5 million sub-limit for swing-line loans; and 4) a $5 million
sub-limit for multi-currency borrowings. All borrowings under the new credit
facility will bear interest at either 1) a rate equal to LIBOR, plus an
applicable margin ranging from 1.125% to 1.625%; 2) an alternate base rate
which will be the higher of (a) the Bank of America prime rate and (b) the
Federal Funds rate plus 0.50%; or 3) with respect to foreign currency loans, a
fronted offshore currency rate, plus an applicable margin ranging from 1.125%
to 1.625%, depending on certain conditions.

The Credit Facility is guaranteed by certain of our direct and indirect
domestic subsidiaries and is collateralized by, among other things, (i) a
pledge of all of the issued and outstanding shares of stock or other equity
interests of certain of our domestic subsidiaries, (ii) a pledge of 65% of the
issued and outstanding voting shares of stock or other voting equity interests
of certain of our direct and indirect foreign subsidiaries, (iii) a pledge of
100% of the issued and outstanding nonvoting shares of stock or other nonvoting
equity interests of certain of our direct and indirect foreign subsidiaries,
and (iv) a first priority perfected security interest on certain of our
domestic assets and certain domestic assets of certain of our direct and
indirect subsidiaries that will become guarantors of our obligations under the
new credit facility, including, among other things, accounts receivable,
inventory, machinery, equipment, certain contract rights, intellectual property
rights and general intangibles.

(b) Senior Subordinated Notes -- On August 12, 2003, we completed a
private placement of $150 million aggregate principal amount of 8.25% senior
subordinated notes due 2013 (the "Notes"). The Notes are guaranteed by all of
our domestic subsidiaries, except Cyconics International Training Services,
Inc., on a senior subordinated basis (see Note 20). The Notes have been sold to
qualified institutional buyers in reliance on Rule 144A of the Securities Act
of 1933, as amended, and to non-U.S. persons in reliance on Regulation S under
the Securities Act of 1933, as amended. The Notes were rated B1/B+ by Moody's
Investors' Service and Standard & Poor's Rating Services, respectively. During
2003, we used a portion of the funds to acquire Simula, Inc. and Hatch Imports,
Inc., and we intend to use the remaining proceeds of the offering to fund
acquisitions, repay a portion of our outstanding debt and for general corporate
and working capital purposes, including the funding of capital expenditures.
Interest on the Notes is payable semiannually on the fifteenth of February and
August of each year. The Notes were issued at a discount of approximately $2.5
million to investors. The Notes may be redeemed at our option in whole or in
part on a pro-rata basis, on and after August 15, 2008, at certain specified
redemption prices plus accrued interest payable to the redemption date.

(c) Senior Subordinated Convertible Notes -- On December 9, 2003, we
purchased Simula. In 1997, Simula completed a public offering of $34.5 million
of 8% Senior Subordinated Convertible Notes (the "8% Notes"). On January 5,
2004, the 8% Notes were paid-in-full. The balance of these notes is included in
the current portion of long-term debt.

(d) Fair Value of Interest Rate Swaps -- On September 2, 2003, we entered
into interest rate swap agreements, designated as a fair value hedge as defined
under Statement of Financial Accounting Standard No. 133, "Accounting for
Derivative Instruments and Hedge Activities," (SFAS 133) with an aggregate
notional amount totaling $150 million. The agreements were entered to exchange
the fixed interest rate on the Notes for a variable interest rate equal to
six-month LIBOR, set in arrears, plus a spread ranging from 2.735% to 2.75%
fixed semi-annually on the fifteenth day of February and August. At December
31, 2003, the six-month LIBOR was 1.22%. The agreements are subject to other
terms and conditions common to transactions of this type. In accordance with
SFAS 133, changes in the fair value of the interest rate swap agreements offset
changes in the fair

F-23

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

value of the fixed rate debt due to changes in the market interest rate. The
fair value of the interest rate swap agreements was approximately $5.9 million
at December 31, 2003. The agreements are deemed to be a perfectly effective
fair value hedge and therefore qualify for the short-cut method of accounting
under SFAS 133. As a result, no ineffectiveness is expected to be recognized in
earnings associated with the interest rate swap agreements on the Notes.

Maturities of long-term debt are as follows:

YEAR ENDED (IN THOUSANDS)
--------------------------------- ---------------

2004 .......................... $ 32,107
2005 .......................... 701
2006 .......................... 549
2007 .......................... 665
2008 .......................... 642
Thereafter .................... 155,743
--------
$190,407
========

9. DERIVATIVE FINANCIAL INSTRUMENTS

We account for derivative instruments in accordance with SFAS 133, which
requires all freestanding and embedded derivative instruments to be measured at
fair value and recognized on the balance sheet as either assets or liabilities.
In addition, all derivative instruments used in hedging relationships must be
designated, reassessed and accounted for as either fair value hedges or cash
flow hedges pursuant to the provisions of SFAS 133.

We hedge the fair value of our Notes using interest rate swaps. We enter
into these derivative contracts to manage fair value changes that could be
caused by our exposure to interest rate changes. On September 2, 2003, we
entered into interest rate swap agreements, designated as fair value hedges as
defined under SFAS 133, with an aggregate notional amount totaling $150
million. The interest rate swaps mature on August 15, 2013. The agreements were
entered into to exchange the fixed interest rate of 8.25% on the Notes for a
variable interest rate equal to six-month LIBOR, set in arrears, plus a spread
ranging from 2.735% to 2.75% fixed semi-annually on the fifteenth of February
and August. The six-month LIBOR rate at December 31, 2003, was 1.22%. The
agreements are subject to other terms and conditions common to transactions of
this type. These fair value hedges qualify for hedge accounting using the
short-cut method since the swap terms match the critical terms of the Notes.
Accordingly, changes in the fair value of the interest rate swap agreements
offset changes in the fair value of the Notes due to changes in the market
interest rate. As a result, no ineffectiveness is expected to be recognized in
our earnings associated with the interest rate swap agreements on the Notes.

The fair values of our interest rate swap agreements are obtained from our
counter-parties and represent the estimated amount we would receive or pay to
terminate the agreement, taking into consideration the difference between the
contract rate of interest and rates currently quoted for agreements of similar
terms and maturities.

10. INTEGRATION AND OTHER CHARGES

We incurred integration and other charges of approximately $12.6 million,
$5.9 million and $3.3 million for the years ending December 31, 2003, 2002 and
2001, respectively. The charges for the year ended December 31, 2003 includes a
$7.3 million non-cash charge for stock-based compensation for a performance
plan for certain key executives and a $3.3 million (including a $2.1 million
non-cash charge) severance charge related to the departure of our former Chief
Executive Officer. The remaining charges relate to the relocation of assets and
personnel, severance costs, systems integration, domestic and international tax
restructuring as well as integrating the sales and marketing functions for
acquired companies.

F-24

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. COMMITMENTS AND CONTINGENCIES

Employment contracts. We are party to several employment contracts as of
December 31, 2003 with certain members of management. Such contracts are for
varying periods and include restrictions on competition after termination.
These agreements provide for salaries, bonuses and other benefits and also
specify and delineate the granting of various stock options.

Legal/litigation matters.

In 1997 we terminated several agreements with a Dutch company, Airmunition
International, B.V. ("AMI"), and with a British company, Crown Limited
("Crown"). AMI and Crown started an action against us before the Netherlands
Arbitration Institute in Rotterdam, Holland claiming breach of contract,
unauthorized use of confidential information, inducing an AMI employee to leave
to work for us in competition with plaintiffs and further inducing him to
breach his confidentiality agreements with plaintiffs. Plaintiffs sought
damages of $20.5 million. On April 29, 2003, the Tribunal rendered an interim
award in our favor on the first three counts. However, it reserved the
opportunity for Plaintiffs to provide proof of damages noting that any damages
AMI/Crown may have suffered on this remaining issue would be "limited" based on
the facts. On March 4, 2004, the arbitrators found that the plaintiffs had
failed to offer any evidence of damages, and therefore, they dismissed all of
the claims against us. Further the arbitrators directed AMI/Crown to pay us our
costs. Unfortunately, AMI and Crown have filed for bankruptcy protection from
creditors so recovery of our costs is doubtful.

F-25

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

April 20, 2001, despite the denial by Kroll, Inc. of any such liability,
because the events occurred prior to our purchase of the O'Gara Companies from
Kroll, Inc. Although we do not have any insurance coverage for this matter, at
this time, we do not believe this matter will have a material impact on our
financial position, operations or liquidity.

On or about March 22, 2002, OHEAC received a civil subpoena from the
Department of Defense ("DOD") requesting documents and information concerning
various quality control documentation regarding parts delivered by its
subcontractors and vendors in support of the High Mobility Multipurpose Wheeled
Vehicles ("HMMWVs") armored at its Fairfield, Ohio facility for the period
October 1, 1999 through May 1, 2001. OHEAC has complied fully with the
subpoena. In early 2003, OHEAC was advised that the Department of Justice
("DOJ") was also investigating separate claims against OHEAC filed by
individuals that involve the same time frame and issues covered by the DOD
subpoena. OHEAC has learned that the DOJ investigation relates to a certain
unidentified action filed under the federal False Claims Act pursuant to which
the United States government may intervene and recover damages. OHEAC has fully
responded to, and cooperated with, the government's questions and
investigation. The DOJ has since notified OHEAC that it has declined to
intervene in the case. On September 30, 2003, the action filed under the
federal False Claims Act was voluntarily withdrawn without prejudice.

On October 18, 2002, we were notified by the Internal Revenue Service that
our tax return for the tax year ended December 31, 2000 had been selected for
examination. Further, on January 30, 2003 we were notified that our tax return
for the tax year ended December 31, 2001 had been selected for examination. The
examinations are currently pending, and at this time we are unable to predict
the outcome of these matters. However, we do not believe this matter will have
a material impact on our financial position, operations or liquidity.

In October 2002, we were sued in the United States District Court for the
District of Wyoming with respect to one of our subsidiaries' Casper, Wyoming
tear gas plant. The plaintiffs in the lawsuit asserted various state law tort
claims and federal environmental law claims under the Resource Conservation and
Recovery Act and the Clean Air Act stemming from the tear gas plant. In
February 2004, we agreed with the plaintiffs to settle the lawsuit for an
amount of money that is not material to us and the plaintiffs have agreed to
dismiss their lawsuit with prejudice.

F-26

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In September 2003, Second Chance Body Armor, Inc., a body armor
manufacturer and one of our competitors, has notified its customers of a
potential safety issue with its Ultima (Registered Trademark) and Ultimax
(Registered Trademark) models. Second Chance Body Armor has claimed that Zylon
(Registered Trademark) fiber, which is made by Toyobo, a Japanese corporation,
and used in the ballistic fabric construction of its Ultima (Registered
Trademark) and Ultimax (Registered Trademark) models, degraded more rapidly
than originally anticipated. Second Chance Body Armor has also stated that the
Zylon (Registered Trademark) degradation problem affects the entire body armor
industry, not just its products. Both private claimants and State Attorneys
General have already commenced legal action against Second Chance Body Armor
based upon its Ultima (Registered Trademark) and Ultimax (Registered
Trademark) model vests and we have received investigative demands from state
agencies in Texas and Connecticut. Second Chance Body Armor licenses from
Simula a certain patented technology which is used in the body armor it
manufactures, but to our knowledge, no lawsuit has yet been brought against
Second Chance Body Armor based upon this licensed technology, although a letter
was received by Simula from an attorney representing a police officer who was
injured while wearing a Second Chance Body Armor vest alleging potential
liability against Simula. In addition, the U.S. Attorney General has asked the
U.S. Department of Justice to investigate the claims regarding the use of Zylon
(Registered Trademark) in bulletproof vests, which we use in the manufacturing
of certain of our body armor models for law enforcement personnel.

As Simula has licensed its technology to Second Chance Body Armor, it may
be impacted by the pending claims against Second Chance Body Armor and the
investigation being conducted by the U.S. Department of Justice. If Simula is
included in the claims pending against Second Chance Body Armor and the
investigation being conducted by the U.S. Department of Justice, we cannot
assure you that any judgment, settlement or resolution against Simula will not
have a material impact on Simula's financial position, operations or liquidity.

The National Institute of Justice (NIJ) is engaged in an ongoing inquiry
and investigation of bullet-resistant vests and the protocol for testing used
vests, as well as the reliability of Zylon and other fibers. We have consulted
with and cooperated fully with the NIJ in this endeavor. To date, the NIJ has
embarked only in its first phase of testing, which entails vests that have been
heavily worn or exposed to adverse conditions, and which involves the ballistic
standard applicable to new vests. Although some of the vests tested, including
ours, experienced some level of penetration, the NIJ specifically warned
against the misuse and misinterpretation of these results, emphasizing that the
data produced so far is preliminary in nature, applies to a very small sample
size and therefore it is not possible to draw any statistically-based
conclusions from these results. The NIJ will continue to conduct further
testing and analyze these issues in order to determine if any conclusions can
be reached as to the performance and reliability of aged vests. We have
requested the NIJ to provide us with its testing data, and we intend to
evaluate and review the NIJ results in our continuing effort to assist the NIJ
in developing uniform standards for certification of new vests and the testing
of used vests. The NIJ continues to encourage law enforcement officers to wear
body armor, in light of the fact that "the lives of more than 2,700 law
enforcement officers have been saved by the use of bullet-resistant body armor
over the past 30 years."

F-27

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12. INFORMATION CONCERNING BUSINESS SEGMENTS AND GEOGRAPHICAL SALES

We are a leading manufacturer and provider of specialized security
products; training and support services related to these products; vehicle
armor systems; military helicopter seating systems, aircraft and land vehicle
safety systems; protective equipment for military personnel; and other
technologies used to protect humans in a variety of life-threatening or
catastrophic situations. Our products and systems are used domestically and
internationally by military, law enforcement, security and corrections
personnel, as well as governmental agencies, multinational corporations and
individuals. Effective in the first quarter 2004, we instituted a new segment
reporting format to include three reportable business divisions: Aerospace &
Defense Group, the Products Division and the Mobile Security Division. The
Aerospace & Defense Group was formed upon the completion of our acquisition of
Simula, Inc. on December 9, 2003, and results have been included herein since
the acquisition date. The Aerospace & Defense Group also includes the military
business, including armor and blast protection systems for M1114 Up-Armored
HMMWVs, and other military vehicle armor programs, which previously were
included in the Mobile Security Division. The Aerospace & Defense Group also
includes the SAPI plate produced by our Protech subsidiary in Pittsfield,
Massachusetts, which was previously reported as part of the Products Division.
The historical results of these businesses have been reclassified as part of
the Aerospace & Defense Group. This reporting change was made to better reflect
management's approach to operating and directing the businesses, and, in
certain instances, to align financial reporting with our market and customer
segments. Our Services division has been classified as discontinued operations
and is no longer included in this presentation (See Note 2).

Aerospace & Defense Group. Our Aerospace & Defense Group supplies human
safety and survival systems to the U.S. military, and major aerospace and
defense prime contractors. Our core markets are military aviation safety,
military personnel safety, and land and marine safety. Under the brand name
O'Gara-Hess & Eisenhardt, we are the sole-source provider to the U.S. military
of the armor and blast protection systems for M1114 Up-Armored HMMWVs. We are
also under contract with the U.S. Army to provide spare parts, logistics and
ongoing field support services for the currently installed base of
approximately 4,415 Up-Armored HMMWVs. Additionally, we provide blast and
ballistic protection kits for the standard HMMWVs, which are installed on
existing equipment in the field. Our Aerospace & Defense Group is also
subcontracted to develop a ballistic and blast protected armored and sealed
truck cab for the HIMARS, a program recently transitioned by the U.S. Army and
U.S. Marine Corps from developmental to a low rate of initial production,
deliveries of which commenced in 2003. We also supply armor sub-systems for
other tactical wheeled vehicles. Through Simula, we provide military helicopter
seating systems, helicopter cockpit airbag systems, aircraft and land vehicle
armor kits, body armor and other protective equipment for military personnel,
emergency bailout parachutes and survival ensembles worn by military aircrew.
The primary customers for our products are the U.S. Army, U.S. Marine Corps,
Boeing, and Sikorsky Aircraft. Most of Simula's aviation safety products are
provided on a sole source basis. The U.S. armed forces have adopted ceramic
body armor as a key element of the protective ensemble worn by our troops in
Iraq and Afghanistan. Simula was the developer of this specialized product
called SAPI, and is the largest supplier to U.S. forces.

Armor Holdings Products. Our Armor Holdings Products division manufactures
and sells a broad range of high quality equipment marketed under brand names
that are well known and respected in the military and law enforcement
communities. Products manufactured by this division include concealable and
tactical body armor, hard armor, duty gear, less-lethal munitions, anti-riot
products, police batons, emergency lighting products, forensic products
firearms accessories, weapon maintenance products, foldable ladders, and
specialty gloves. Cyconics International Training Services, Inc., a small
subsidiary providing certain training services formerly reported as a part of
the

F-28

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Services division, is not included in the amounts classified as assets held for
sale or discontinued operations and has been reclassified to our Armor Holdings
Products division where management oversight currently resides.

Armor Mobile Security. Our Armor Mobile Security division manufactures and
installs ballistic and blast protection armoring systems for a variety of
commercial vehicles including limousines, sedans, sport utility vehicles,
commercial trucks and cash-in-transit vehicles, to protect against varying
degrees of ballistic and blast threats. Our customers in this business include
international corporations and high net worth individuals. In addition, we
supply ballistic and blast protected armoring systems to U.S. federal law
enforcement and intelligence agencies and foreign heads of state.

We have invested substantial resources outside of the United States and
plan to continue to do so in the future. The Armor Mobile Security division has
invested substantial resources in Europe and South America. These operations
are subject to the risk of new and different legal and regulatory requirements
in local jurisdictions, tariffs and trade barriers, potential difficulties in
staffing and managing local operations, currency risks, potential imposition of
restrictions on investments, potentially adverse tax consequences, including
imposition or increase of withholding and other taxes on remittances and other
payments by subsidiaries, and local economic, political and social conditions.
Governments of many developing countries have exercised and continue to
exercise substantial influence over many aspects of the private sector.
Government actions in the future could have a significant adverse effect on
economic conditions in a developing country or may otherwise have a material
adverse effect on us and our operating companies. We do not have political risk
insurance in the countries in which we currently conduct business. Moreover,
applicable agreements relating to our interests in our operating companies are
frequently governed by foreign law. As a result, in the event of a dispute, it
may be difficult for us to enforce our rights. Accordingly, we may have little
or no recourse upon the occurrence of any of these developments.

Revenues, operating income and total assets for each of our continuing
segments are as follows:

2003 2002 2001
------------ ------------ ------------
(IN THOUSANDS)

Revenues:
Aerospace & Defense ............. $ 91,673 $ 59,318 $ 18,145
Products ........................ 193,960 179,946 149,868
Mobile Security ................. 79,539 65,853 29,087
--------- -------- --------
Total revenues ................. $ 365,172 $305,117 $197,100
========= ======== ========
Operating income:
Aerospace & Defense ............. $ 22,775 $ 12,833 $ 3,052
Products ........................ 33,054 30,978 26,845
Mobile Security ................. 2,538 1,542 3,621
Corporate ....................... (22,638) (6,988) (6,845)
--------- -------- --------
Total operating income ......... $ 35,729 $ 38,365 $ 26,673
========= ======== ========
Total assets:
Aerospace & Defense ............. $ 209,834 $ 47,746 $ 23,963
Products ........................ 183,972 179,367 147,313
Mobile Security ................. 63,161 57,700 78,164
Corporate ....................... 126,303 23,830 49,950
--------- -------- --------
Total assets ................... $ 583,270 $308,643 $299,390
========= ======== ========

F-29

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Financial information with respect to revenues, operating income from
continuing operations (geographic operating income from continuing operations
before amortization expense and integration and other charges) and total assets
to principal geographic areas is as follows:

2003 2002 2001
----------- ----------- -----------
(IN THOUSANDS)

Revenues:
North America ............ $275,529 $225,365 $144,981
South America ............ 15,007 19,879 6,449
Africa ................... 1,420 1,219 582
Europe/Asia .............. 73,216 58,654 45,088
-------- -------- --------
$365,172 $305,117 $197,100
======== ======== ========
Geographic operating income:

North America ............ $ 38,674 $ 34,032 $ 23,290
South America ............ 882 1,702 473
Africa ................... 345 428 192
Europe/Asia .............. 8,890 8,374 8,156
-------- -------- --------
$ 48,791 $ 44,536 $ 32,111
======== ======== ========
Total assets:
North America ............ $523,954 $264,767 $268,019
South America ............ 6,433 5,456 5,811
Africa ................... -- -- --
Europe/Asia .............. 52,883 38,420 25,560
-------- -------- --------
$583,270 $308,643 $299,390
======== ======== ========

A reconciliation of consolidated geographic operating income from
continuing operations to consolidated operating income from continuing
operations follows:

2003 2002 2001
------------ ---------- ----------
(IN THOUSANDS)

Consolidated geographic
operating income ......... $ 48,791 $ 44,536 $ 32,111
Amortization ............... (489) (245) (2,142)
Integration and other
charges .................. (12,573) (5,926) (3,296)
--------- -------- --------
Operating income ........... $ 35,729 $ 38,365 $ 26,673
========= ======== ========

F-30

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. INCOME TAXES

Income tax expense (benefit) from continuing operations for the years
ended December 31, 2003, 2002, and 2001 consisted of the following:

2003 2002 2001
---------- ---------- ---------
(IN THOUSANDS)

Current
Domestic .................................. $10,387 $13,306 $7,017
Foreign ................................... 403 2,389 1,563
------- ------- ------
Total current ............................ 10,790 15,695 8,580
------- ------- ------
Deferred ....................................
Domestic .................................. 2,006 (25) (319)
Foreign ................................... 1,407 384 (54)
------- ------- ------
Total deferred ........................... 3,413 359 (373)
------- ------- ------
Total provision for income taxes ......... $14,203 $16,054 $8,207
======= ======= ======

Significant components of our net deferred tax asset related to continuing
operations as of December 31, 2003 and 2002 are as follows:

2003 2002
------------ ---------
(IN THOUSANDS)

Deferred tax assets:
Reserves not currently deductible .................... $ 3,527 $2,697
Capital loss ......................................... 11,320 --
Operating loss carryforwards ......................... 2,811 1,769
Patents .............................................. 22 --
Accrued expenses ..................................... 954 220
Foreign tax credits .................................. 912 2,939
Research and development and other credits ........... 150 206
Tax on unremitted foreign earnings ................... -- 1,255
--------- ------
19,696 9,086
Deferred tax asset valuation allowance ................. (11,395) (75)
--------- ------
Deferred tax asset, net of valuation allowance ......... 8,301 9,011
Deferred tax liability:
Goodwill not amortized for financial
statement purposes under SFAS 142 ................... (2,418) (954)
Property and equipment ............................... (2,970) (475)
--------- ------
Net deferred tax asset ................................. $ 2,913 $7,582
========= ======

Recognition of deferred tax assets is based on management's belief that it
is more likely than not that the tax benefit associated with temporary
differences and operating and capital loss carryforwards will be utilized. A
valuation allowance is recorded for those deferred tax assets for which it is
more likely than not that the realization will not occur.

Our valuation allowance at December 31, 2003, consisted of $11,320,000 for
a capital loss carryforward and $75,000 in net operating loss carryforwards.

As of December 31, 2003, we have federal, state, and foreign NOLs
providing a tax effected benefit of $2,811,000. The NOLs expire in varying
amounts in fiscal years 2006 and 2022. At

F-31

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

December 31, 2003, we also have tax credits of $150,000 subject to certain
limitations due to the acquisition of Safariland, Ltd. We also have
approximately $912,000 of foreign tax credits expiring in 2006.

We are subject to periodic review by federal, foreign, state, and local
tax jurisdictions in the ordinary course of business. During 2002, we were
notified by the Internal Revenue Service (IRS) that certain prior year income
tax returns would be examined. As of December 31, 2003, the IRS exam has not
been concluded nor do we believe that it will have any material impact on the
financial statements.

US taxes have not been provided for on unremitted foreign earnings of
approximately $9.0 million from continuing operations. These earnings are
considered to be permanently reinvested in non-US operations.

Net deferred tax assets described above have been included in the
accompanying consolidated balance sheets as follows:

2003 2002
----------- ---------

Other current assets ................. $ 4,151 $2,697
Other assets.......................... -- 4,885
Other long-term liabilities .......... (1,238) --
-------- ------
Total deferred tax assets ............ $ 2,913 $7,582
======== ======

The following reconciles the income tax expense computed at the Federal
statutory income tax rate to the provision for income taxes recorded in the
income statement for the years ended December 31, 2003, 2002 and 2001:

2003 2002 2001
---------- ---------- ----------

Provision for income taxes at statutory
federal rate ........................ 35.0% 35.0% 35.0%
State and local income taxes, net of
Federal benefit ..................... (0.5%) 3.8% 3.2%
Compensation subject to IRC Section
162(m) .............................. 8.6% -- --
Foreign income taxes .................. 2.1% 0.7% (0.1%)
Valuation allowances from discontinued
operations .......................... -- 3.8% --
Other permanent items ................. 0.3% ( .4%) (2.2%)
---- ---- ----
45.5% 42.9% 35.9%
==== ==== ====

14. STOCKHOLDERS' EQUITY

Preferred stock. On July 16, 1996, our stockholders authorized a series of
preferred stock with such rights, privileges and preferences as the Board of
Directors shall from time to time determine. We have not issued any of this
preferred stock.

Stock options and grants. In 1994, we implemented an incentive stock plan
and an outside directors' stock plan. These plans collectively provide for the
granting of options to certain key employees as well as providing for the grant
of common stock to outside directors and to all full time employees. Pursuant
to such plans, 1,050,000 shares of common stock were reserved and made
available for distribution. The option prices of stock that may be purchased
under the incentive stock plan are not less than the fair market value of
common stock on the dates of the grants. Effective January 19, 1996, all stock
grants awarded under the 1994 incentive stock plan were accelerated and
considered fully vested.

F-32

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In 1996, we implemented an incentive stock plan and an outside directors'
stock plan. These plans collectively provide for the granting of options to
certain key employees and directors. Pursuant to such plans, as amended,
2,200,000 shares of common stock were reserved and made available for
distribution. The option prices of stock that may be purchased under the
incentive stock plan are not less than the fair market value of common stock on
the dates of the grants.

During 1998, we implemented a new non-qualified stock option plan.
Pursuant to the new plan, 725,000 shares of common stock were reserved and made
available for distribution. On January 1, 1999, we distributed all 725,000
shares allocated under the plan. In 1999, we implemented the 1999 Stock
Incentive Plan (the "1999 Plan"). We reserved 2,000,000 shares of our common
stock for the 1999 Plan. The 1999 Plan provides for the granting of options to
employees, officers, directors, consultants, independent contractors and
advisors of the Company. The option prices of stock which may be purchased
under the 1999 Plan are not less than the fair market value of common stock on
the dates of the grants.

During 2002, we implemented two new stock option plans. The 2002 Stock
Incentive Plan authorizes the issuance of up to 2,700,000 shares of our common
stock upon the exercise of stock options or in connection with the issuance of
restricted stock and stock bonuses. The 2002 Stock Incentive Plan authorizes
the granting of stock options, restricted stock and stock bonuses to employees,
officers, directors and consultants, independent contractors and advisors of
Armor Holdings and its subsidiaries. The 2002 Executive Stock Plan provides for
the grant of a total of 470,000 stock options and stock awards to our key
employees. The terms and provisions of the 2002 Executive Stock Plan are
substantially the same as the 2002 Stock Incentive Plan, except that we may
only grant non-qualified stock options under the 2002 Executive Stock Plan. The
2002 Executive Stock Plan was adopted on March 13, 2002 and all shares
available for grant under the 2002 Executive Stock Plan were granted to our
executive officers on March 13, 2002.

Under SFAS 123, the fair value of each option grant is estimated on the
date of grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions for the years ended December 31, 2003, 2002 and
2001:

2003 2002 2001
---------- ---------- ----------

Expected life of option .......... 4 yrs 4 yrs 4 yrs
Dividend yield ................... 0% 0% 0%
Volatility ....................... 49.8% 52.2% 44.7%
Risk free interest rate .......... 2.51% 3.94% 4.52%

The increase in volatility from fiscal 2001 to fiscal 2003 is primarily
due to the increased demand for the stock, which drove up the price and
increased the volatility.

The weighted average fair value of options granted during 2003, 2002 and
2001 are as follows:

2003 2002 2001
---------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Fair value of each option
granted ......................... $ 6.21 $ 10.08 $ 6.17
Total number of options
granted ......................... 898 1,895 892
Total fair value of all options
granted ........................ $5,576 $19,098 $5,501

Outstanding options, generally consisting of ten-year incentive and
non-qualified stock options, generally vest and become exercisable over a
three-year period from the date of grant. The outstanding options generally
expire ten years from the date of grant or upon retirement from the Company,
and are contingent upon continued employment during the applicable ten-year
period.

F-33

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A summary of the status of stock option grants as of December 31, 2003 and
changes during the years ending on those dates is presented below:

WEIGHTED AVERAGE
OPTIONS EXERCISE PRICE
--------------- -----------------

Outstanding at December 31, 2000 ................. 3,294,839 $ 9.91
Granted .......................................... 892,159 $ 15.24
Exercised ........................................ (1,173,227) $ 9.37
Forfeited ........................................ (29,737) $ 15.51
----------

Outstanding at December 31, 2001 ................. 2,984,034 $ 11.60
Granted .......................................... 1,894,660 $ 22.96
Exercised ........................................ (507,868) $ 8.41
Forfeited ........................................ (86,168) $ 16.75
----------

Outstanding at December 31, 2002 ................. 4,284,658 $ 7.81
Granted .......................................... 898,347 $ 16.62
Exercised ........................................ (724,934) $ 11.83
Forfeited ........................................ (567,150) $ 21.52
----------
Outstanding at December 31, 2003 ................. 3,890,921 $ 17.00
==========
Options exercisable at December 31, 2003 ......... 2,036,417 $ 15.21
==========

The following table summarizes information about stock options outstanding
at December 31, 2003:

12/31/2003 REMAINING
OPTIONS OPTIONS LIFE IN
EXERCISE PRICE RANGE OUTSTANDING EXERCISABLE YEARS
----------------------------- ------------- ------------- ----------

0.97 -- 3.75 ........... 75,166 75,166 2.0
7.50 -- 9.94 ........... 230,084 230,084 3.8
10.00 -- 10.63 ......... 17,836 17,836 5.5
11.00 -- 11.63 ......... 340,008 340,008 5.0
13.19 -- 14.00 ......... 335,500 228,665 6.8
14.17 -- 14.70 ......... 811,161 370,538 8.6
15.05 -- 15.90 ......... 362,590 203,240 8.1
16.31 -- 16.50 ......... 26,002 6,000 7.0
17.00 -- 17.54 ......... 368,072 46,392 9.3
21.75 -- 21.75 ......... 125,000 41,666 8.1
23.09 -- 23.93 ......... 649,502 315,156 8.4
24.07 -- 25.80 ......... 550,000 161,666 8.5
------- -------
Total .................. 3,890,921 2,036,417
========= =========

Remaining non-exercisable options as of December 31, 2003 become
exercisable as follows:

2004 ................... 932,642
2005 ................... 441,522
2006 ................... 480,340

F-34

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Earnings per share. The following details the earnings per share
computations on a basic and diluted basis for the years ended December 31,
2003, 2002 and 2001:

2003 2002 2001
------------ ------------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Numerator for basic and diluted earnings
per share:
Net income (loss) available to common
shareholders ........................... $ 10,886 $ (17,689) $ 10,128
-------- --------- --------
Denominator:
Basic earnings per share
weighted-average shares
outstanding .......................... 28,175 30,341 23,932
Effect of dilutive securities:
Effect of shares issuable under stock
option and stock grant plans, based
on the treasury stock method ......... 779 616 836
-------- --------- --------
Diluted earnings per share
Adjusted weighted-average shares
outstanding ............................ 28,954 30,957 24,768
-------- --------- --------
Basic earnings (loss) per share ........... $ 0.39 $ (0.58) $ 0.42
======== ========= ========
Diluted earnings (loss) per share ......... $ 0.38 $ (0.57) $ 0.41
======== ========= ========

15. SUPPLEMENTAL CASH FLOW INFORMATION:

2003 2002 2001
--------- --------- ---------
(IN THOUSANDS)

Cash paid during the year for:

Interest ................................ $1,245 $ 527 $3,878
====== ====== ======
Income taxes ............................ $7,886 $5,753 $4,656
====== ====== ======

2003 2002 2001
------------ ------------ ------------
(IN THOUSANDS)

Acquisitions of businesses, net of cash
acquired:
Fair value of assets acquired ......... $ 72,132 $ 16,134 $ 57,932
Goodwill .............................. 76,802 8,478 37,578
Liabilities assumed ................... (58,422) (15,794) (36,541)
Stock issued .......................... -- -- (19,604)
--------- --------- ---------
Total cash paid ....................... $ 90,512 $ 8,818 $ 39,365
========= ========= =========

F-35

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

16. QUARTERLY RESULTS (UNAUDITED)

The following table presents summarized unaudited quarterly results of
operations for the Company for fiscal 2003 and 2002. We believe all necessary
adjustments have been included in the amounts stated below to present fairly
the following selected information when read in conjunction with the
Consolidated Financial Statements and Notes thereto included elsewhere herein.
Future quarterly operating results may fluctuate depending on a number of
factors. Results of operations for any particular quarter are not necessarily
indicative of results of operations for a full year or any other quarter.

FISCAL 2003
--------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------------ ------------ ------------ -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Revenue from continuing operations..... $ 80,474 $ 81,659 $ 90,882 $112,157
Gross profit from continuing
operations ........................... $ 23,312 $ 24,378 $ 28,929 $ 34,967
Net income (loss) ..................... $ 5,087 $ 4,613 $ 6,115 $ (4,929)
Basic earnings per share .............. $ 0.17 $ 0.17 $ 0.22 $ (0.17)
Diluted earnings per share ............ $ 0.17 $ 0.17 $ 0.22 $ (0.17)

FISCAL 2002
-----------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------------ ------------ ------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Revenue from continuing operations..... $ 69,604 $ 71,605 $ 80,557 $ 83,351
Gross profit from continuing
operations ........................... $ 21,974 $ 22,701 $ 24,610 $ 25,087
Net income (loss) ..................... $ 5,960 $ 4,075 $ (14,707) $ (13,017)
Basic earnings (loss) per share ....... $ 0.19 $ 0.13 $ (0.50) $ (0.44)
Diluted earnings (loss) per share ..... $ 0.19 $ 0.13 $ (0.49) $ (0.44)

17. EMPLOYEE BENEFITS PLAN

In October 1997, we formed a 401(k) plan, (the "Plan") which provides for
voluntary contributions by employees and allows for a discretionary
contribution by us in the form of cash. We made contributions of approximately
$332,000, $395,500 and $272,700 to the Plan in 2003, 2002 and 2001
respectively.

We acquired Simula's noncontributory defined benefit pension plan (the
"Pension Plan") for employees on December 9, 2003. The Pension Plan was
originally adopted as of November 1, 1980. Contributions were made to the
Pension Plan based upon actuarially determined amounts. Effective July 1, 1999,
Simula froze the Plan for new participants. Effective December 8, 2003, prior
to our acquisition of the Pension Plan, Simula froze the Pension Plan for
future service for all participants. We have elected to payout the Supplemental
Retirement Plan of Simula, which represents $1,067,000 of the net amount
recognized. This amount was paid out on February 25, 2004.

F-36

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Pension Plan's funded status and amounts recognized in our balance
sheet at December 31 are as follows:

2003
(IN THOUSANDS)
---------------

Actuarial present value of benefit obligation:

Accumulated benefit obligation ............... $ 8,810
Effect of projected future compensation
increases .................................. --
--------
Projected benefit obligation ................. 8,810
Pension Plan assets at fair value ............ (6,169)
Contributions after measurement date ......... (183)
--------
Unfunded status .............................. 2,458
Unrecognized prior service cost .............. --
Unrecognized loss ............................ --
Unrecognized transition liability ............ --
--------
Accrued benefit cost ......................... 2,458
Additional minimum liability ................. --
--------
Accrued benefit liability .................... 2,458
Intangible asset ............................. --
Accumulated other comprehensive income
adjustments ................................ --
--------
Net amount recognized ...................... $ 2,458
========

Reconciliation of the Pension Plan's projected benefit obligation is as
follows:

2003
---------

Projected benefit obligation at beginning of
year........................................ $8,774
Service Cost ................................ --
Interest Cost ............................... 56
Actuarial gain .............................. --
Benefits paid ............................... (20)
------
Projected benefit obligation at end of year .. $8,810
======

Reconciliation of the fair value of plan assets is as follows:

2003
---------

Fair value of plan assets at beginning of
year ..................................... $6,006
Employer contributions ..................... 183
Actual loss ............................... --
Benefits paid ............................. (20)
------
Fair value of plan assets at end of year .... $6,169
======

F-37

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Net periodic pension cost includes the following:

2003
-----

Service Cost ................................. $--
Interest Cost ................................ 56
Expected loss on assets ...................... --
Transition asset recognition ................. --
Prior service cost ........................... --
Net loss recognition ......................... --
---
Net periodic pension cost .................... $56
===

Assumptions at December 31 used in the accounting for the Pension Plan
were as follows:

2003
----

Discount or settlement rate .................. 6.00%
Rate of increase in compensation levels ...... 3.25%
Expected long-term rate of return on Plan
assets ................................... 8.00%

The Pension Plan's assets consist of money market accounts and investments
in common stocks, bonds and mutual funds.

18. RELATED PARTY TRANSACTIONS

Effective as of January 1, 2002, Kanders & Company, Inc. ("Kanders &
Co."), a corporation controlled by Warren B. Kanders, the Chairman of our Board
of Directors and our Chief Executive Officer, entered into an agreement with us
to provide certain investment banking, financial advisory and related services
for a five year term that expires on December 31, 2006. Kanders & Co. will
receive a mutually agreed upon fee on a transaction-by-transaction basis during
the term of this agreement. The aggregate fees under this agreement will not
exceed $1,575,000 during any calendar year. We also agreed to reimburse Kanders
& Co. for reasonable out-of-pocket expenses including Kanders & Co.'s expenses
for office space, an executive assistant, furniture and equipment, travel and
entertainment, reasonable fees and disbursements of counsel, and consultants
retained by Kanders & Co. In April 2003, in connection with Mr. Kanders being
appointed Chief Executive Officer of Armor Holdings, Armor Holdings and Kanders
& Co. agreed to terminate the agreement pursuant to which Kanders & Co.
provided certain services to Armor Holdings. We paid Kanders & Co. $143,000 for
investment banking services during fiscal 2003 (through and including April
2003 only). We also reimbursed Kanders & Co. for out-of-pocket expenses in the
aggregate amount of $61,000 during the fiscal years ended December 31, 2003
(through and including April 2003 only).

Effective as of January 1, 2003, we entered into a Transportation Services
Agreement with Kanders Aviation, LLC, an entity controlled by Mr. Kanders, our
Chairman of the Board and Chief Executive Officer. Pursuant to the terms of the
Transportation Services Agreement and upon our request, Kanders Aviation may,
in its sole discretion, provide us with airport to airport air transportation
services via certain aircraft. The Transportation Services Agreement will
remain in effect indefinitely until terminated by written notice by either
party thereto to the other party thereto. During the term of the Transportation
Services Agreement, we will reimburse Kanders Aviation in an amount equal to
the fair market value of the air transportation services provided by Kanders
Aviation to us and any additional expenses incurred by Kanders Aviation in
connection with such air transportation services.

Nicholas Sokolow, one of our directors, is a member of the law firm
Sokolow, Dunaud, Mercadier & Carreras located in Paris, France. We have
retained Sokolow, Dunaud, Mercadier & Carreras

F-38

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

during the fiscal year ended December 31, 2003 and may retain Sokolow, Dunaud,
Mercadier & Carreras during the fiscal year ending December 31, 2004. During
the fiscal year ended December 31, 2003, we paid Sokolow, Dunaud, Mercadier &
Carreras $124,000 for legal services in connection with various acquisitions.

19. OPERATING LEASES

We are party to certain real estate, equipment and vehicle leases. Several
leases include options for renewal and escalation clauses. In most cases,
management expects that in the normal course of business leases will be renewed
or replaced by other leases. Approximate total future minimum annual lease
payments under all non-cancelable leases of continuing operations are as
follows:

YEAR (IN THOUSANDS)
--------------------------------- ---------------

2004 .......................... $ 3,417
2005 .......................... 2,249
2006 .......................... 1,659
2007 .......................... 1,593
2008 .......................... 1,480
Thereafter .................... 9,321
-------
$19,719
=======

We incurred rent expense of approximately $1,467,000, $1,200,000 and
$765,000 during the years ended December 31, 2003, December 31, 2002 and
December 31, 2001, respectively.

20. GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS

On August 12, 2003 we sold $150 million of Senior Subordinated Notes in
private placements pursuant to Rule 144A and Regulation S. The Senior
Subordinated Notes are uncollateralized obligations and rank junior in right of
payment to our existing and future senior debt. The Senior Subordinated Notes
are guaranteed, jointly and severally on a senior subordinated and
uncollateralized basis, by all of our domestic subsidiaries except Cyconics
International Training Services, Inc.

The following consolidating financial information presents the
consolidating balance sheets as of December 31, 2003 and 2002 and the related
statements of income and cash flows for each of the three years in the period
ended December 31, 2003 for:

o Armor Holdings, Inc., the parent,

o the guarantor subsidiaries,

o the nonguarantor subsidiaries, and

o Armor Holdings, Inc. on a consolidated basis

The information includes elimination entries necessary to consolidate
Armor Holdings, Inc., the parent, with the guarantor and nonguarantor
subsidiaries.

Investments in subsidiaries are accounted for by the parent using the
equity method of accounting. The guarantor and nonguarantor subsidiaries are
presented on a combined basis. The principal elimination entries eliminate
investments in subsidiaries and intercompany balances and transactions.
Separate financial statements for the guarantor and nonguarantor subsidiaries
are not presented because management believes such financial statements would
not be meaningful to investors.

F-39

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ARMOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS

DECEMBER 31, 2003
-------------------------------------------------------------------------
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------------ -------------- ---------------- -------------- -------------
(IN THOUSANDS)

ASSETS
Current Assets:
Cash and cash equivalents ..................... $ 90,764 $ 11,084 $ 10,002 $ -- $ 111,850
Restricted cash ............................... 2,600 -- -- 2,600
Accounts receivable, net ...................... 1,201 59,470 11,964 -- 72,635
Costs and earned gross profit in excess
of billings .................................. -- -- -- -- --
Intercompany receivables ...................... 60,974 2,600 38,352 (101,926) --
Inventories ................................... -- 61,494 19,033 -- 80,527
Prepaid expenses and other current
assets ....................................... 20,241 1,844 2,600 (2,653) 22,032
Current assets of discontinued operations...... -- 753 -- 753
--------- --------- --------- ---------- ---------
Total Current Assets ......................... 175,780 137,245 81,951 (104,579) 290,397
Property and equipment, net .................... 2,122 34,853 20,601 -- 57,576
Goodwill, net .................................. -- 173,640 2,067 -- 175,707
Patents, licenses and trademarks, net .......... -- 43,991 183 -- 44,174
Long-term assets of discontinued
operations .................................... -- 1,603 -- -- 1,603
Other assets ................................... 14,092 1,924 153 -- 16,169
Investment in subsidiaries ..................... 320,034 10,038 -- (330,072) --
--------- --------- --------- ---------- ---------
Total Assets ................................... $ 512,028 $ 403,294 $ 104,955 $ (434,651) $ 585,626
========= ========= ========= ========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt ............. $ -- $ 31,960 $ 147 $ -- $ 32,107
Short-term debt ............................... -- -- 498 -- 498
Accounts payable .............................. 1,584 20,941 7,779 -- 30,304
Accrued expenses and other current
liabilities .................................. 12,403 27,113 18,702 -- 58,218
Income taxes payable .......................... -- -- -- -- --
--------- --------- --------- ---------- ---------
Intercompany payables ......................... 44,251 47,073 9,933 (101,257) --
Current liabilities of discontinued
operations ................................... -- (35,714) 37,009 (669) 626
--------- --------- --------- ---------- ---------
Total Current Liabilities .................... 58,238 91,373 74,068 (101,926) 121,753
Long-term debt, less current portion ........... 153,452 4,257 591 -- 158,300
Other long-term liabilities .................... 4,973 4,008 1,227 -- 10,208
Long-term liabilities of discontinued
operations .................................... -- 2,653 -- (2,653) --
Total Liabilities .............................. 216,663 102,291 75,886 (104,579) 290,261
Stockholders' Equity:
Preferred stock ............................... -- 1,450 -- (1,450) --
Common stock .................................. 344 4,143 7,854 (11,997) 344
Additional paid in capital .................... 318,460 191,781 46,095 (237,876) 318,460
Retained earnings (accumulated deficit) ....... 44,942 103,629 (24,880) (78,749) 44,942
Accumulated other comprehensive
income ....................................... 3,936 -- -- -- 3,936
Treasury stock ................................ (72,317) -- -- -- (72,317)
--------- --------- --------- ---------- ---------
Total Stockholders' Equity ..................... 295,365 301,003 29,069 (330,072) 295,365
--------- --------- --------- ---------- ---------
Total Liabilities and Stockholders' Equity ..... $ 512,028 $ 403,294 $ 104,955 $ (434,651) $ 585,626
========= ========= ========= ========== =========

F-40

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ARMOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS

DECEMBER 31, 2002
-------------------------------------------------------------------------
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------------ -------------- ---------------- -------------- -------------
(IN THOUSANDS)

ASSETS
Current Assets:
Cash and cash equivalents ..................... $ 7,152 $ 3,556 $ 2,205 $ -- $ 12,913
Restricted cash ............................... -- -- -- -- --
Accounts receivable, net ...................... -- 44,864 13,649 -- 58,513
Costs and earned gross profit in excess
of billings .................................. -- 234 -- -- 234
Intercompany receivables ...................... 123,744 33,165 3,800 (160,709) --
Inventories ................................... -- 46,591 15,739 -- 62,330
Prepaid expenses and other current
assets ....................................... 12,490 21,999 2,368 (24,645) 12,212
Current assets of discontinued operations...... -- 10,351 18,474 -- 28,825
-------- -------- -------- --------- --------
Total Current Assets ......................... 143,386 160,760 56,235 (185,354) 175,027
-------- -------- -------- --------- --------
Property and equipment, net .................... 2,456 27,250 17,430 -- 47,136
Goodwill, net .................................. -- 96,903 1,833 -- 98,736
Patents, licenses and trademarks, net .......... -- 7,326 195 -- 7,521
Other assets ................................... 916 6,872 1,260 -- 9,048
Long-term assets of discontinued
operations .................................... -- 6,910 23,375 -- 30,285
Investment in subsidiaries ..................... 161,805 10,078 -- (171,883) --
-------- -------- -------- --------- --------
Total Assets ................................... $308,563 $316,099 $100,328 $(357,237) $367,753
======== ======== ======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt ............. $ -- $ 1,813 $ -- $ -- $ 1,813
Short-term debt ............................... -- -- 599 -- 599
Accounts payable .............................. 828 15,751 7,191 -- 23,770
Accrued expenses and other current
liabilities .................................. 1,790 11,324 12,002 -- 25,116
Income taxes payable .......................... 4,831 (148) 1,230 -- 5,913
Intercompany payables ......................... 13,037 115,658 10,434 (139,129) --
Current liabilities of discontinued
operations ................................... -- 14,267 24,538 (21,580) 17,225
-------- -------- -------- --------- --------
Total Current Liabilities ..................... 20,486 158,665 55,994 (160,709) 74,436
Long-term debt, less current portion ........... -- 5,072 -- -- 5,072
Other long-term liabilities .................... -- -- -- -- --
Long-term liabilities of discontinued
operations .................................... -- 13,022 11,791 (24,645) 168
-------- -------- -------- --------- --------
Total Liabilities .............................. 20,486 176,759 67,785 (185,354) 79,676
Stockholders' Equity:
Preferred stock ............................... -- 1,450 -- (1,450) --
Common stock .................................. 336 5,681 26,318 (31,999) 336
Additional paid in capital .................... 307,487 73,836 10,016 (83,852) 307,487
Retained earnings (accumulated deficit) ....... 34,056 58,373 (3,791) (54,582) 34,056
Accumulated other comprehensive loss .......... (4,169) -- -- -- (4,169)
Treasury stock ................................ (49,633) -- -- -- (49,633)
-------- -------- -------- --------- --------
Total Stockholders' Equity ..................... 288,077 139,340 32,543 (171,883) 288,077
-------- -------- -------- --------- --------
Total Liabilities and Stockholders' Equity ..... $308,563 $316,099 $100,328 $(357,237) $367,753
======== ======== ======== ========= ========

F-41

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ARMOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2003
-------------------------------------------------------------------------
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------------ -------------- ---------------- -------------- -------------
(IN THOUSANDS)

REVENUES:
Aerospace & Defense .................................. $ -- $ 91,673 $ -- $ -- $ 91,673
Products ............................................. -- 157,984 35,976 -- 193,960
Mobile Security ...................................... -- 15,029 62,853 1,657 79,539
--------- -------- --------- --------- --------
Total revenues ....................................... -- 264,686 98,829 1,657 365,172
--------- -------- --------- --------- --------

COSTS AND EXPENSES:
Cost of sales ........................................ -- 172,089 79,840 1,657 253,586
Operating expenses ................................... 11,602 40,598 10,595 -- 62,795
Amortization ......................................... -- 478 11 -- 489
Integration and other charges ........................ 10,886 1,687 -- -- 12,573
Related party management fees (income), net .......... 12,823 -- 7,598 (20,421) --
--------- -------- --------- --------- --------

OPERATING (LOSS) INCOME (35,311) 49,834 785 20,421 35,729
Interest expense, net ................................ 3,313 497 202 -- 4,012
Other expense, net ................................... -- 117 391 -- 508
Equity in losses (earnings) of subsidiaries .......... (42,600) 38,790 -- 3,810 --
Related party interest expense (income), net ......... 16 (255) -- 239 --
--------- -------- --------- --------- --------

(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE
PROVISION FOR INCOME TAXES ........................... 3,960 10,685 192 16,372 31,209
(BENEFIT) PROVISION FOR INCOME TAXES .................. (6,926) 18,399 2,730 -- 14,203
--------- -------- --------- --------- --------
(LOSS) INCOME FROM CONTINUING OPERATIONS .............. 10,886 (7,714) (2,538) 16,372 17,006
DISCONTINUED OPERATIONS:
NET INCOME (LOSS) FROM DISCONTINUED
OPERATIONS, NET OF INCOME TAX BENEFIT ............... -- 34,882 (20,820) (20,182) (6,120)
--------- -------- --------- --------- --------
NET INCOME (LOSS) ..................................... $ 10,886 $ 27,168 $ (23,358) $ (3,810) $ 10,886
========= ======== ========= ========= ========

F-42

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ARMOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2002
------------------------------
GUARANTOR
PARENT SUBSIDIARIES
--------------- --------------

REVENUES:
Aerospace & Defense ................................. $ -- $ 59,318
Products ............................................ -- 154,466
Mobile Security ..................................... -- 15,958
-------- ----------
Total revenues ...................................... -- 229,742
-------- ----------

COSTS AND EXPENSES:
Cost of sales ....................................... -- 148,208
Operating expenses .................................. 6,034 36,161
Amortization ........................................ -- 243
Integration and other charges ....................... 800 5,126
Related party management fees (income), net ......... 2,487 (171)
-------- ----------

OPERATING (LOSS) INCOME (9,321) 40,175
Interest expense, net ............................... 450 275
Other (income) expense, net ......................... (2) (22)
Equity in losses (earnings) of subsidiaries ......... 8,237 (1,220)
Related party interest income, net .................. -- (239)
---------- ----------

(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE
PROVISION FOR INCOME TAXES .......................... (18,006) 41,381
(BENEFIT) PROVISION FOR INCOME TAXES ................. (317) 14,313
---------- ----------
(LOSS) INCOME FROM CONTINUING OPERATIONS ............. (17,689) 27,068
DISCONTINUED OPERATIONS:
NET LOSS FROM DISCONTINUED OPERATIONS, NET OF
INCOME TAX BENEFIT ................................. -- (16,894)
---------- ----------
NET (LOSS) INCOME .................................... $(17,689) $ 10,174
========== ==========

YEAR ENDED DECEMBER 31, 2002
---------------------------------------------
NONGUARANTOR CONSOLIDATED
SUBSIDIARIES ELIMINATIONS TOTAL
---------------- -------------- -------------
(IN THOUSANDS)

REVENUES:
Aerospace & Defense ................................. $ -- $ -- $ 59,318
Products ............................................ 25,480 -- 179,946
Mobile Security ..................................... 49,895 -- 65,853
--------- --------- ---------
Total revenues ...................................... 75,375 -- 305,117
--------- --------- ---------

COSTS AND EXPENSES:
Cost of sales ....................................... 62,537 -- 210,745
Operating expenses .................................. 7,641 -- 49,836
Amortization ........................................ 2 -- 245
Integration and other charges ....................... -- -- 5,926
Related party management fees (income), net ......... (616) (1,700) --
--------- --------- ---------

OPERATING (LOSS) INCOME 5,811 1,700 38,365
Interest expense, net ............................... 198 -- 923
Other (income) expense, net ......................... 75 -- 51
Equity in losses (earnings) of subsidiaries ......... -- (7,017) --
Related party interest income, net .................. -- 239 --
--------- --------- ---------

(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE
PROVISION FOR INCOME TAXES .......................... 5,538 8,478 37,391
(BENEFIT) PROVISION FOR INCOME TAXES ................. 2,058 -- 16,054
--------- --------- ---------
(LOSS) INCOME FROM CONTINUING OPERATIONS ............. 3,480 8,478 21,337
DISCONTINUED OPERATIONS:
NET LOSS FROM DISCONTINUED OPERATIONS, NET OF
INCOME TAX BENEFIT ................................. (20,671) (1,461) (39,026)
--------- --------- ---------
NET (LOSS) INCOME .................................... $ (17,191) $ 7,017 $ (17,689)
========= ========= =========

F-43

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ARMOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2001
------------------------------------------------------------------------
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
----------- -------------- ---------------- -------------- -------------
(IN THOUSANDS)

REVENUES:
Aerospace & Defense .......................... $ -- $ 18,145 $ -- $ -- $ 18,145
Products ..................................... -- 134,006 15,862 -- 149,868
Mobile Security .............................. -- 7,076 22,011 -- 29,087
--------- -------- -------- --------- --------
Total revenues ............................... -- 159,227 37,873 -- 197,100
--------- -------- -------- --------- --------

COSTS AND EXPENSES:
Cost of sales ................................ -- 95,831 30,499 -- 126,330
Operating expenses ........................... 5,451 30,418 2,790 -- 38,659
Amortization ................................. -- 2,059 83 -- 2,142
Integration and other charges ................ 1,205 2,079 12 -- 3,296
Related party management income, net ......... (47) -- (1,112) 1,159 --
--------- -------- -------- --------- --------

OPERATING (LOSS) INCOME (6,609) 28,840 5,601 (1,159) 26,673
Interest expense, net ........................ 3,452 360 52 -- 3,864
Other income, net ............................ -- (28) (54) -- (82)
Equity in earnings of subsidiaries ........... (14,269) (1,513) -- 15,782 --
Related party interest income, net ........... -- (1,310) -- 1,310 --
--------- -------- -------- --------- --------

INCOME FROM CONTINUING OPERATIONS BEFORE
PROVISION FOR INCOME TAXES ................... 4,208 31,331 5,603 (18,251) 22,891
(BENEFIT) PROVISION FOR INCOME TAXES .......... (5,920) 12,215 1,912 -- 8,207
--------- -------- -------- --------- --------
INCOME FROM CONTINUING OPERATIONS ............. 10,128 19,116 3,691 (18,251) 14,684
DISCONTINUED OPERATIONS:
NET LOSS FROM DISCONTINUED OPERATIONS, NET OF
INCOME TAX BENEFIT .......................... -- (1,890) (5,135) 2,469 (4,556)
--------- -------- -------- --------- --------
NET INCOME (LOSS) ............................. $ 10,128 $ 17,226 $ (1,444) $ (15,782) $ 10,128
========= ======== ======== ========= ========

F-44

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ARMOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF CASH FLOWS

YEAR ENDED DECEMBER 31, 2003
-----------------------------------------------------------------------
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------------ -------------- -------------- -------------- -------------
(IN THOUSANDS)

CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) from continuing operations: ............. $ 10,886 $ (7,714) $ (2,538) $ 16,372 $ 17,006
Adjustments to reconcile income from continuing
operations to cash provided by (used in)
operating activities:
Depreciation and amortization ........................ 1,326 4,270 2,012 -- 7,608
Deferred income taxes ................................ (3,008) 5,389 2,644 -- 5,025
Loss on disposal of fixed assets ..................... -- 68 259 -- 327
Non-cash termination charge .......................... 2,093 -- -- -- 2,093
Non-cash restricted stock unit award ................. 7,266 -- -- -- 7,266
Changes in operating assets and liabilities, net of
acquisitions:
(Increase) decrease in accounts receivable ........... -- (2,680) 1,685 -- (995)
Decrease (increase) in intercompany
receivables & payables .............................. 83,092 (78,887) 15,977 (20,182) --
Decrease (increase) in inventory ..................... -- 793 (3,294) -- (2,501)
Decrease (increase) in prepaid expenses and
other assets ........................................ 12,267 (13,758) (890) -- (2,381)
Increase (Decrease) in accounts payable,
accrued expenses and other current
liabilities ......................................... 10,775 (1,020) 7,288 -- 17,043
(Decrease) increase in income taxes payable .......... (22,583) 23,826 (882) -- 361
---------- --------- --------- --------- ---------
Net cash provided by (used in) operating
activities ........................................... 102,114 (69,713) 22,261 (3,810) 50,852
---------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment .................... (200) (5,894) (2,590) -- (8,684)
Purchase of patents and trademarks .................... -- (185) -- -- (185)
Increase in restricted cash ........................... (2,600) -- -- -- (2,600)
Additional consideration for purchased
businesses ........................................... -- (1,026) -- -- (1,026)
Investment in subsidiaries ............................ (85,243) 45,403 36,030 3,810 --
Proceeds from the sale of business .................... 31,361 -- -- -- 31,361
Purchase of businesses, net of cash acquired .......... (90,512) -- -- -- (90,512)
---------- --------- --------- --------- ---------
Net cash (used in) provided by investing
activities: .......................................... (147,194) 38,298 33,440 3,810 (71,646)
---------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options ............... 8,471 -- -- -- 8,471
Cash paid for financing costs ......................... (4,599) -- -- -- (4,599)
Repurchase of treasury stock .......................... (22,684) -- -- -- (22,684)
Borrowings of long-term debt .......................... 147,504 -- 774 -- 148,278
Repayments of long-term debt .......................... -- (1,688) -- -- (1,688)
Borrowings under lines of credit ...................... 30,406 -- 1,424 -- 31,830
Repayments under lines of credit ...................... (30,406) (114) (1,578) -- (32,098)
---------- --------- --------- --------- ---------
Net cash provided by (used in) financing
activities ........................................... 128,692 (1,802) 620 -- 127,510
---------- --------- --------- --------- ---------
Effect of exchange rate on cash and cash
Equivalents .......................................... -- 3,890 (3,057) -- 833
Net cash provided by (used in) discontinued
operations ........................................... -- 36,855 (45,467) -- (8,612)
---------- --------- --------- --------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS ............. 83,612 7,528 7,797 -- 98,937
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD ............................................... 7,152 3,556 2,205 -- 12,913
---------- --------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD .............. $ 90,764 $ 11,084 $ 10,002 $ -- $ 111,850
========== ========= ========= ========= =========

F-45

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ARMOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF CASH FLOWS

YEAR ENDED DECEMBER 31, 2002
----------------------------
GUARANTOR
PARENT SUBSIDIARIES
------------- --------------
(IN THOUSANDS)

CASH FLOWS FROM OPERATING ACTIVITIES:
(Loss) income from continuing operations: ................ $ (17,689) $ 27,068
Adjustments to reconcile (loss) income from
continuing operations to cash (used in) provided by
operating activities:
Depreciation and amortization ........................... 854 3,583
Deferred income taxes ................................... (364) 321
Loss on disposal of fixed assets ........................ -- 66
Changes in operating assets and liabilities, net of
acquisitions:
(Increase) decrease in accounts receivable .............. -- (3,829)
Decrease (increase) in intercompany receivables &
payables ............................................... 6,151 (5,266)
Increase in inventory ................................... -- (5,125)
Decrease (increase) in prepaid expenses and
other assets ........................................... 492 (2,459)
(Decrease) increase in accounts payable, accrued
expenses and other current liabilities ................. (1,405) 7,215
Increase (decrease) in income taxes payable ............. 5,663 (148)
--------- ----------
Net cash (used in) provided by operating activities...... (6,298) 21,426
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment ....................... (506) (3,671)
Purchase of patents and trademarks ....................... -- (69)
Additional consideration for purchased businesses ........ -- (9,375)
Investment in subsidiaries ............................... (3,347) 1,643
Purchase of businesses, net of cash acquired ............. -- (8,818)
--------- ----------
Net cash (used in) provided by investing activities: ..... (3,853) (20,290)
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options .................. 4,227 --
Proceeds from sale of put options ........................ 525 --
Cash paid for financing costs ............................ (326) --
Repurchase of treasury stock ............................. (26,054) --
Repayments of long-term debt ............................. -- (620)
Borrowings under lines of credit ......................... 32,372 --
Repayments under lines of credit ......................... (32,372) (75)
--------- ----------
Net cash used in financing activities .................... (21,628) (695)
--------- ----------
Effect of exchange rate on cash and cash
equivalents ............................................. 304 342
Net cash used in discontinued operations ................. -- (2,763)
--------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS ................ (31,475) (1,980)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD .................................................. 38,627 5,536
--------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD ................. $ 7,152 $ 3,556
========= ==========

YEAR ENDED DECEMBER 31, 2002
-------------------------------------------
NONGUARANTOR CONSOLIDATED
SUBSIDIARIES ELIMINATIONS TOTAL
-------------- -------------- -------------
(IN THOUSANDS)

CASH FLOWS FROM OPERATING ACTIVITIES:
(Loss) income from continuing operations: ................ $ 3,480 $ 8,478 $ 21,337
Adjustments to reconcile (loss) income from
continuing operations to cash (used in) provided by
operating activities:
Depreciation and amortization ........................... 1,143 -- 5,580
Deferred income taxes ................................... 402 359
Loss on disposal of fixed assets ........................ 134 -- 200
Changes in operating assets and liabilities, net of
acquisitions:
(Increase) decrease in accounts receivable .............. 1,275 -- (2,554)
Decrease (increase) in intercompany receivables &
payables ............................................... 576 (1,461) --
Increase in inventory ................................... (4,256) -- (9,381)
Decrease (increase) in prepaid expenses and
other assets ........................................... (279) -- (2,246)
(Decrease) increase in accounts payable, accrued
expenses and other current liabilities ................. (9,564) -- (3,754)
Increase (decrease) in income taxes payable ............. 1,230 -- 6,745
--------- --------- ----------
Net cash (used in) provided by operating activities...... (5,859) 7,017 16,286
--------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment ....................... (1,725) -- (5,902)
Purchase of patents and trademarks ....................... -- -- (69)
Additional consideration for purchased businesses ........ -- -- (9,375)
Investment in subsidiaries ............................... 8,721 (7,017) --
Purchase of businesses, net of cash acquired ............. -- -- (8,818)
--------- --------- ----------
Net cash (used in) provided by investing activities: ..... 6,996 (7,017) (24,164)
--------- --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options .................. -- -- 4,227
Proceeds from sale of put options ........................ -- -- 525
Cash paid for financing costs ............................ -- -- (326)
Repurchase of treasury stock ............................. -- -- (26,054)
Repayments of long-term debt ............................. (110) -- (730)
Borrowings under lines of credit ......................... -- -- 32,372
Repayments under lines of credit ......................... -- -- (32,447)
--------- --------- ----------
Net cash used in financing activities .................... (110) -- (22,433)
--------- --------- ----------
Effect of exchange rate on cash and cash
equivalents ............................................. (772) -- (126)
Net cash used in discontinued operations ................. (1,376) -- (4,139)
--------- --------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS ................ (1,121) -- (34,576)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD .................................................. 3,326 -- 47,489
--------- --------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD ................. $ 2,205 $ -- $ 12,913
========= ========= ==========

F-46

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ARMOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF CASH FLOWS

YEAR ENDED DECEMBER 31, 2001
----------------------------
GUARANTOR
PARENT SUBSIDIARIES
------------- --------------
(IN THOUSANDS)

CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations: ....................... $ 10,128 $ 19,116
Adjustments to reconcile income from continuing
operations to cash (used in) provided by operating
activities:
Depreciation and amortization ........................... 694 4,578
Deferred income taxes ................................... 76 (407)
Loss on disposal of fixed assets ........................ -- 21
Changes in operating assets and liabilities, net of
acquisitions:
Increase in accounts receivable ......................... -- (11,880)
(Increase) decrease in intercompany receivables &
payables ............................................... (67,323) 62,878
(Increase) decrease in inventory ........................ -- (12,044)
Decrease (increase) in prepaid expenses and
other assets ........................................... 162 (92)
Increase (decrease) in accounts payable, accrued
expenses and other current liabilities ................. 4,632 6,317
Increase (decrease) in income taxes payable ............. 6,667 272
----------- ----------
Net cash (used in) provided by operating activities ...... (44,964) 68,759
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment ....................... (1,140) (3,984)
Proceeds from sale of equity investment .................. 843 --
Additional consideration for purchased businesses ........ (1,913) (1,357)
Investment in subsidiaries ............................... (6,739) (15,360)
Purchase of businesses, net of cash acquired ............. -- (39,365)
----------- ----------
Net cash (used in) provided by investing activities: ..... (8,949) (60,066)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options .................. 10,160 --
Proceeds from issuance of common stock ................... 117,979 --
Cash paid for deferred loan costs ........................ (545) --
Repurchase of treasury stock ............................. (723) --
Proceeds from issuance of treasury shares for stock
options ................................................. 686 --
Repayments of long-term debt ............................. -- (676)
Repayments of debt assumed in acquisitions ............... -- (1,315)
Borrowings under lines of credit ......................... 98,000 --
Repayments under lines of credit ......................... (130,981) --
----------- ----------
Net cash provided by (used in) financing activities ...... 94,576 (1,991)
----------- ----------
Effect of exchange rate on cash and cash
equivalents ............................................. (2,789) 2,703
Net cash used in discontinued operations ................. -- (3,453)
----------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS ................ 37,874 5,952
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ........... 753 (416)
----------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD ................. $ 38,627 $ 5,536
=========== ==========

YEAR ENDED DECEMBER 31, 2001
-------------------------------------------
NONGUARANTOR CONSOLIDATED
SUBSIDIARIES ELIMINATIONS TOTAL
-------------- -------------- -------------
(IN THOUSANDS)

CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations: ....................... $ 3,691 $ (18,251) $ 14,684
Adjustments to reconcile income from continuing
operations to cash (used in) provided by operating
activities:
Depreciation and amortization ........................... 342 -- 5,614
Deferred income taxes ................................... (42) (373)
Loss on disposal of fixed assets ........................ 170 -- 191
Changes in operating assets and liabilities, net of
acquisitions:
Increase in accounts receivable ......................... (3,000) -- (14,880)
(Increase) decrease in intercompany receivables &
payables ............................................... 1,976 2,469 --
(Increase) decrease in inventory ........................ 8,096 -- (3,948)
Decrease (increase) in prepaid expenses and
other assets ........................................... 979 -- 1,049
Increase (decrease) in accounts payable, accrued
expenses and other current liabilities ................. (3,768) -- 7,181
Increase (decrease) in income taxes payable ............. (272) -- 6,667
---------- --------- -----------
Net cash (used in) provided by operating activities ...... 8,172 (15,782) 16,185
---------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment ....................... (520) -- (5,644)
Proceeds from sale of equity investment .................. -- -- 843
Additional consideration for purchased businesses ........ -- -- (3,270)
Investment in subsidiaries ............................... 6,317 15,782 --
Purchase of businesses, net of cash acquired ............. -- -- (39,365)
---------- --------- -----------
Net cash (used in) provided by investing activities: ..... 5,797 15,782 (47,436)
---------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options .................. -- -- 10,160
Proceeds from issuance of common stock ................... -- -- 117,979
Cash paid for deferred loan costs ........................ -- -- (545)
Repurchase of treasury stock ............................. -- -- (723)
Proceeds from issuance of treasury shares for stock
options ................................................. -- -- 686
Repayments of long-term debt ............................. -- -- (676)
Repayments of debt assumed in acquisitions ............... -- -- (1,315)
Borrowings under lines of credit ......................... 286 -- 98,286
Repayments under lines of credit ......................... -- -- (130,981)
---------- --------- -----------
Net cash provided by (used in) financing activities ...... 286 -- 92,871
---------- --------- -----------
Effect of exchange rate on cash and cash
equivalents ............................................. (1,373) -- (1,459)
Net cash used in discontinued operations ................. (10,883) -- (14,336)
---------- --------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS ................ 1,999 -- 45,825
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ........... 1,327 -- 1,664
---------- --------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD ................. $ 3,326 $ -- $ 47,489
========== ========= ===========

F-47

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

21. SUBSEQUENT EVENTS

On January 2, 2004, the Ontario Industrial Development Authority Variable
Rate Demand Industrial Development Revenue Bonds, Series 1989 was paid-in full
with restricted cash of $2.6 million.

On January 5, 2004, $31.1 million of 8% Senior Subordinated Convertible
Notes plus accrued interest was paid-in full.

On February 25, 2004, we paid $1,067,000 to fully satisfy the Supplemental
Retirement Plan of Simula, Inc., which we acquired on December 9, 2003 with the
acquisition of Simula.

On March 5, 2004, we acquired a majority of the assets and assumed certain
liabilities of Vector Associations, Inc. (dba ODV, Inc.), a leading
manufacturer and distributor of field drug test kits and crime scene products.
The purchase price was $3,289,000 including $2,739,000 in cash at closing, an
additional $275,000 plus interest payable on December 31, 2004, subject to
certain adjustments and an additional $275,000 plus interest payable on April
30, 2005, subject to certain adjustments.

Effective in the first quarter 2004, we instituted a new segment reporting
format to include three reportable business divisions: Aerospace & Defense
Group, the Products Division and the Mobile Security Division. The Aerospace &
Defense Group was formed upon the completion of our acquisition of Simula, Inc.
on December 9, 2003, and results have been included herein since the
acquisition date. The Aerospace & Defense Group also includes the military
business, including armor and blast protection systems for M1114 Up-Armored
HMMWVs, and other military vehicle armor programs, which previously were
included in the Mobile Security Division. The Aerospace & Defense Group also
includes the SAPI plate produced by our Protech subsidiary in Pittsfield,
Massachusetts, which was previously reported as part of the Products Division.
The historical results of these businesses have been reclassified as part of
the Aerospace & Defense Group. This reporting change was made to better reflect
management's approach to operating and directing the businesses, and, in
certain instances, to align financial reporting with our market and customer
segments.

F-48

ARMOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

MARCH 31, 2004 DECEMBER 31, 2003*
---------------- -------------------
(UNAUDITED)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents ..................................... $ 75,835 $111,850
Restricted cash ............................................... -- 2,600
Accounts receivable (net of allowance for
doubtful accounts of $2,126 and $1,673)...................... 89,196 72,635
Costs and earned gross profit in excess of billings ........... 860 --
Inventories ................................................... 92,903 80,527
Prepaid expenses and other current assets ..................... 24,994 22,032
Current assets of discontinued operations (Note 2) ............ 857 753
-------- --------
Total current assets ........................................ 284,645 290,397
======== ========
PROPERTY AND EQUIPMENT (net of
accumulated depreciation of $21,137 and
$19,046)....................................................... 58,667 57,576
GOODWILL (net of accumulated amortization
of $4,024 and $4,024).......................................... 176,146 175,707
PATENTS, LICENSES AND TRADEMARKS
(net of accumulated amortization of $3,601 and $2,627)......... 46,073 44,174
OTHER ASSETS ................................................... 20,653 16,169
LONG-TERM ASSETS OF DISCONTINUED OPERATIONS
(Note 2) ...................................................... 1,717 1,603
-------- --------
TOTAL ASSETS ................................................... $587,901 $585,626
======== ========

----------
* Condensed from audited financial statements.

See notes to condensed consolidated financial statements.

F-49

ARMOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS--CONTINUED
(IN THOUSANDS, EXCEPT FOR SHARE DATA)

MARCH 31, 2004 DECEMBER 31, 2003*
---------------- -------------------
(UNAUDITED)

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt ............................... $ 778 $ 32,107
Short-term debt ................................................. 622 498
Accounts payable ................................................ 42,081 30,304
Accrued expenses and other current liabilities .................. 57,584 58,218
Income taxes payable ............................................ 3,849 --
Current liabilities of discontinued operations (Note 2) ......... 344 626
--------- ---------
Total current liabilities ..................................... 105,258 121,753
LONG-TERM LIABILITIES:
Long-term debt, less current portion ............................ 159,264 158,300
Other long-term liabilities ..................................... 11,034 10,208
--------- ---------
Total liabilities ............................................... 275,556 290,261
COMMITMENTS AND CONTINGENCIES (NOTE 11)
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 5,000,000 shares
authorized; no shares issued and outstanding .................. -- --
Common stock, $.01 par value; 50,000,000 shares
authorized; 34,646,849 and 34,337,034 issued and
28,586,627 and 28,267,812 outstanding at
March 31, 2004 and December 31, 2003,
respectively .................................................. 347 344
Additional paid-in capital ...................................... 323,275 318,460
Retained earnings ............................................... 57,432 44,942
Accumulated other comprehensive income .......................... 3,608 3,936
Treasury stock .................................................. (72,317) (72,317)
--------- ---------
Total stockholders' equity .................................... 312,345 295,365
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ....................... $ 587,901 $ 585,626
========= =========

----------
* Condensed from audited financial statements.

See notes to condensed consolidated financial statements.

F-50

ARMOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

THREE MONTHS ENDED
--------------------------------
MARCH 31, 2004 MARCH 31, 2003
---------------- ---------------

REVENUES:
Aerospace & Defense .................................. $ 81,008 $15,910
Products ............................................. 53,840 44,007
Mobile Security ...................................... 26,780 20,557
-------- -------
Total Revenues ....................................... 161,628 80,474
-------- -------
COSTS AND EXPENSES:
Cost of sales ........................................ 114,068 57,162
Operating expenses ................................... 23,251 14,004
Amortization ......................................... 980 60
Integration and other charges ........................ 681 422
-------- -------
OPERATING INCOME ...................................... 22,648 8,826
Interest expense, net ................................ 1,728 379
Other expense, net ................................... 115 69
-------- -------
INCOME FROM CONTINUING OPERATIONS BEFORE PROVISION
FOR INCOME TAXES ..................................... 20,805 8,378
PROVISION FOR INCOME TAXES ............................ 8,177 3,133
-------- -------
INCOME FROM CONTINUING OPERATIONS ..................... 12,628 5,245
DISCONTINUED OPERATIONS (NOTE 2):
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX ......... (138) (158)
-------- -------
NET INCOME ............................................ $ 12,490 $ 5,087
======== =======
NET INCOME PER COMMON SHARE -- BASIC
INCOME FROM CONTINUING OPERATIONS ..................... $ 0.44 $ 0.18
LOSS FROM DISCONTINUED OPERATIONS ..................... 0.00 (0.01)
-------- -------
BASIC EARNINGS PER SHARE .............................. $ 0.44 $ 0.17
======== =======
NET INCOME PER COMMON SHARE -- DILUTED
INCOME FROM CONTINUING OPERATIONS ..................... $ 0.42 $ 0.18
LOSS FROM DISCONTINUED OPERATIONS ..................... 0.00 (0.01)
-------- -------
DILUTED EARNINGS PER SHARE ............................ $ 0.42 $ 0.17
======== =======
WEIGHTED AVERAGE SHARES -- BASIC ...................... 28,472 28,964
======== =======
WEIGHTED AVERAGE SHARES -- DILUTED .................... 29,934 29,111
======== =======

See notes to condensed consolidated financial statements.

F-51

ARMOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)

THREE MONTHS ENDED
--------------------------------
MARCH 31, 2004 MARCH 31, 2003
---------------- ---------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations .................................... $ 12,628 $ 5,245
Adjustments to reconcile income from continuing operations to cash
provided by operating activities:
Depreciation and amortization ...................................... 3,414 1,702
Loss on disposal of fixed assets ................................... 6 8
Deferred income taxes .............................................. (438) 199
Changes in operating assets and liabilities, net of acquisitions:
(Increase) decrease in accounts receivable ......................... (17,173) 2,878
(Increase) decrease in inventories ................................. (12,232) 1,082
(Increase) in prepaid expenses and other assets .................... (5,222) (3,143)
Increase (decrease) in accounts payable, accrued
expenses and other current liabilities ............................ 12,395 (1,900)
Increase (decrease) in income taxes payable ........................ 7,221 (1,662)
--------- ---------
Net cash provided by operating activities .......................... 599 4,409
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment ................................... (3,814) (1,727)
Purchase of patents and trademarks ................................... (49) --
Purchase of equity investment ........................................ (1,374) --
Collection of note receivable ........................................ 375 --
Decrease in restricted cash .......................................... 2,600 --
Additional consideration for purchased businesses .................... (1,832) --
Purchase of business, net of cash acquired ........................... (2,729) --
--------- ---------
Net cash used in investing activities ................................ (6,823) (1,727)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the exercise of stock options .......................... 4,488 --
Repurchases of treasury stock ........................................ -- (15,684)
Repayments of long-term debt ......................................... (33,897) (239)
Borrowings under lines of credit ..................................... 5,449 22,916
Repayments under lines of credit ..................................... (5,327) (2,887)
--------- ---------
Net cash (used in) provided by financing activities .................. (29,287) 4,106
--------- ---------
Effect of exchange rate changes on cash and cash equivalents ......... 134 (55)
NET CASH USED IN DISCONTINUED OPERATIONS ............................. (638) (3,636)
--------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ................. (36,015) 3,097
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ....................... 111,850 12,913
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD ............................. $ 75,835 $ 16,010
========= =========
CASH AND CASH EQUIVALENTS, END OF PERIOD
CONTINUING OPERATIONS .............................................. $ 75,835 $ 16,010
DISCONTINUED OPERATIONS ............................................ 383 5,589
--------- ---------
$ 76,218 $ 21,599
========= =========

See notes to condensed consolidated financial statements.

F-52

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1 -- BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of
Armor Holdings, Inc. and its wholly-owned subsidiaries (the "Company", "we",
"our", "us") have been prepared in accordance with generally accepted
accounting principles for interim information and the instructions to Form 10-Q
and Rule 10-01 of Regulation S-X, and do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
only of normal recurring accruals and the elimination of all material
intercompany accounts and transactions) considered necessary by management to
present a fair presentation have been included. The results of operations for
the three-month period is not necessarily indicative of the results to be
expected for the full year and should be read in conjunction with the
consolidated financial statements and notes thereto included in our Annual
Report on Form 10-K for the year ended December 31, 2003. The amounts disclosed
in the footnotes are related to continuing operations unless otherwise
indicated.

Effective in the first quarter 2004, we instituted a new segment reporting
format to include three reportable business divisions: Aerospace & Defense
Group, the Products Division (Armor Holdings Products), and the Mobile Security
Division (Armor Mobile Security). The Aerospace & Defense Group was formed upon
the completion of our acquisition of Simula, Inc. on December 9, 2003, and
results have been included since the acquisition date. The Aerospace & Defense
Group also includes the military business, including armor and blast protection
systems for M1114 Up-Armored High Mobility Multi-Purpose Wheeled Vehicles
(HMMWVs), and other military vehicle armor programs, which previously were
included in the Mobile Security Division. The Aerospace & Defense Group also
includes the small arms protective insert (SAPI) plate produced by our Protech
subsidiary in Pittsfield, Massachusetts, which was previously reported as part
of the Products Division. The historical results of these businesses have been
reclassified as part of the Aerospace & Defense Group. This reporting change
was made to better reflect management's approach to operating and directing the
businesses, and, in certain instances, to align financial reporting with our
market and customer segments.

As discussed in Note 2 below, in 2003 we sold the majority of our
ArmorGroup Services Division (the "Services Division"). The assets and
liabilities of the Services Division have been classified as assets and
liabilities of discontinued operations on our balance sheets and the results of
their operations classified as income from discontinued operations in the
accompanying unaudited condensed consolidated statement of operations.

NOTE 2 -- DISCONTINUED OPERATIONS

On November 26, 2003, we announced that we completed the sale of
ArmorGroup, our security service division, for $33,660,000 in total
consideration to a group of private investors led by Granville Baird Capital
Partners of London, England and Management. We received $31,360,000 in cash at
closing and are scheduled to receive another $2,300,000 by the end of 2004, of
which we have received $500,000 through May 10, 2004. We recorded a loss of
$8.8 million on the sale in the fourth quarter of 2003. In accordance with
generally accepted accounting principles, unrealized gains and losses, which
are included in equity as accumulated other comprehensive income or loss, are
not recognized until the period in which the related assets and liabilities are
disposed of.

F-53

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

At March 31, 2004, our litigation support services subsidiary remains in
discontinued operations. The actual proceeds from the disposal of this business
may differ materially from our current estimates, and, therefore, could result
in either a gain or a loss upon final disposal.

A summary of the operating results of the discontinued operations for the
three months ended March 31, 2004 and 2003 is as follows.

THREE MONTHS ENDED
----------------------------------
MARCH 31, 2004 MARCH 31, 2003
---------------- ---------------
(IN THOUSANDS)

Revenue ......................................... $ 720 $25,788
Cost of sales ................................... 236 19,182
Operating expenses .............................. 436 6,412
Integration and other charges ................... -- 42
------ -------
Operating income ................................ 48 152
Interest expense, net ........................... 2 38
Other expense, net .............................. 263 60
------ -------
(Loss) income from discontinued operations before
(benefit) provision for income taxes .......... (217) 54
(Benefit) provision for income taxes ............ (79) 212
------ -------
(Loss) from discontinued operations ............. $ (138) $ (158)
====== =======

The following is a summary of the assets and liabilities of our
discontinued operations:

MARCH 31, 2004 DECEMBER 31, 2003
---------------- ------------------
(IN THOUSANDS)

Assets
Cash and cash equivalents ..................... $ 383 $ 76
Accounts receivable, net ...................... 257 549
Other current assets .......................... 217 128
------ ------
Total current assets .......................... 857 753
Property and equipment, net ................... 1,320 1,206
Goodwill, net ................................. 356 356
Other assets................................... 41 41
------ ------
Total assets of discontinued operations ....... $2,574 $2,356
====== ======
Liabilities
Current portion of long-term debt ............. $ -- $ 125
Accounts payable .............................. 50 5
Accrued expenses and other current liabilities 294 496
------ ------
Total current liabilities .................... 344 626
------ ------
Total liabilities of discontinued operations .... $ 344 $ 626
====== ======

F-54

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

Based upon our analysis and discussions with our advisors regarding the
estimated realizable value, net of selling costs, of the Services Division, we
reduced its carrying value and recorded net impairment charges of $12.4 million
in the third quarter of fiscal 2003. The 2003 impairment charges consisted of a
non-cash goodwill reduction. The benefit for income taxes for discontinued
operations was $8.3 million for fiscal 2003. The reductions in the carrying
value of the Services Division were management's best estimate based upon the
information currently available, including discussions with our investment
bankers.

NOTE 3 -- COMPREHENSIVE INCOME

The components of comprehensive income, net of tax provision of $20,000
and $96,000 for the three months ended March 31, 2004 and 2003, respectively,
are listed below:

THREE MONTHS ENDED
----------------------------------
MARCH 31, 2004 MARCH 31, 2003
---------------- ---------------
(IN THOUSANDS)

Net income .................. $12,490 $5,087
Other comprehensive income:
Unrealized gain on equity
securities, net of tax .. 37 --
Foreign currency
translations ............ (365) 369
------- ------
Comprehensive income ........ $12,162 $5,456
======= ======

NOTE 4 -- INVENTORIES

Inventories are stated at the lower of cost or market using the first-in,
first-out (FIFO) method and are summarized as follows:

MARCH 31, 2004 DECEMBER 31, 2003
---------------- ------------------
(IN THOUSANDS)

Raw material ................ $49,927 $40,397
Work-in-process ............. 26,170 25,422
Finished goods .............. 16,806 14,708
------- -------
Total inventories ......... $92,903 $80,527
======= =======

NOTE 5 -- ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities are summarized as follows:

MARCH 31, 2004 DECEMBER 31, 2003
---------------- ------------------
(IN THOUSANDS)

Accrued expenses and other
current liabilities ......... $42,012 $40,787
Deferred consideration for
acquisitions ................ 3,403 2,780
Customer deposits ............. 12,169 14,651
------- -------
Total accrued expenses and
other current liabilities . $57,584 $58,218
======= =======

F-55

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

NOTE 6 -- DERIVATIVE FINANCIAL INSTRUMENTS

We account for derivative instruments in accordance with Statement of
Financial Accounting Standards No. 133, " Accounting for Derivative Instruments
and Hedging Activities," as amended by Statement of Financial Accounting
Standards No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities - an Amendment of FAS 133", and Statement of Financial
Accounting Standards No. 149 "Amendment of Statement 133 on Derivative
Instruments and Hedging Activities" (collectively "SFAS 133"). SFAS 133
requires all freestanding and embedded derivative instruments to be measured at
fair value and recognized on the balance sheet as either assets or liabilities.
In addition, all derivative instruments used in hedging relationships must be
designated, reassessed and accounted for as either fair value hedges or cash
flow hedges pursuant to the provisions of SFAS 133.

We hedge the fair value of our 8.25% $150 million Senior Subordinated
Notes due 2013 using interest rate swaps. We enter into these derivative
contracts to manage fair value changes which could be caused by our exposure to
interest rate changes. On September 2, 2003, we entered into interest rate swap
agreements, designated as fair value hedges as defined under SFAS 133 with an
aggregate notional amount totaling $150 million. The agreements were entered
into to exchange the fixed interest rate on the Notes for a variable interest
rate equal to six-month LIBOR (1.16% at March 31, 2004), set in arrears, plus a
spread ranging from 2.735% to 2.75% fixed semi-annually on the fifteenth of
February and August. The agreements are subject to other terms and conditions
common to transactions of this type. These fair value hedges qualify for hedge
accounting using the short-cut method since the swap terms match the critical
terms of the Notes. Accordingly, changes in the fair value of the interest rate
swap agreements offset changes in the fair value of the Notes due to changes in
the market interest rate. As a result, no ineffectiveness is expected to be
recognized in our earnings associated with the interest rate swap agreements on
the Notes. The fair value of the interest rate swap agreements was
approximately $9.3 million at March 31, 2004 and is included in other assets
and long-term debt on the accompanying condensed consolidated balance sheet.

NOTE 7 -- INFORMATION CONCERNING BUSINESS SEGMENTS AND GEOGRAPHICAL SALES

We are a leading manufacturer and provider of specialized security
products; training and support services related to these products; vehicle
armor systems; military helicopter seating systems; aircraft and land vehicle
safety systems; protective equipment for military personnel; and other
technologies used to protect humans in a variety of life-threatening or
catastrophic situations. Our products and systems are used domestically and
internationally by military, law enforcement, security and corrections
personnel, as well as governmental agencies, multinational corporations and
individuals. We are organized and operated under three business divisions:
Aerospace & Defense Group, Armor Holdings Products, also referred to as our
Products Division, and Armor Mobile Security, also referred to as our Mobile
Security Division. The Aerospace & Defense Group was formed with our
acquisition of Simula, Inc. on December 9, 2003, and results have been included
since the acquisition date. The Aerospace & Defense Group also includes the
military business formerly in the Mobile Security Division, including armor and
blast protection systems for M1114 Up-Armored HMMWVs, and the SAPI business
produced by our Protech subsidiary in Pittsfield, Massachusetts, which was
previously reported as part of the Products Division. The historical results of
these businesses have been reclassified to the Aerospace & Defense Group. Our
Services division has been classified as discontinued operations and is no
longer included in this presentation (See Note 2).

F-56

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

Aerospace & Defense Group. Our Aerospace & Defense Group supplies human
safety and survival systems to the U.S. military, and major aerospace and
defense prime contractors. Our core markets are military aviation safety,
military personnel safety, and land and marine safety. Under the brand name
O'Gara-Hess & Eisenhardt, we are the sole-source provider to the U.S. military
of the armor and blast protection systems for M1114 Up-Armored HMMWVs. We are
also under contract with the U.S. Army to provide spare parts, logistics and
ongoing field support services for the currently installed base of
approximately 4,933 Up-Armored HMMWVs. Additionally, we provide blast and
ballistic protection kits for the standard HMMWVs, which are installed on
existing equipment in the field. Our Aerospace & Defense Group is also
subcontracted to develop a ballistic and blast protected armored and sealed
truck cab for the HIMARS, a program recently transitioned by the U.S. Army and
U.S. Marine Corps from developmental to a low rate of initial production,
deliveries of which commenced in 2003. We also supply armor sub-systems for
other tactical wheeled vehicles. Through Simula, we provide military helicopter
seating systems, helicopter cockpit airbag systems, aircraft and land vehicle
armor kits, body armor and other protective equipment for military personnel,
emergency bailout parachutes and survival ensembles worn by military aircrew.
The primary customers for our products are the U.S. Army, U.S. Marine Corps,
Boeing, and Sikorsky Aircraft. Most of Simula's aviation safety products are
provided on a sole source basis. The U.S. armed forces have adopted ceramic
body armor as a key element of the protective ensemble worn by our troops in
Iraq and Afghanistan. Simula was the developer of this specialized product
called SAPI, and is the largest supplier to U.S. forces.

Armor Holdings Products. Our Armor Holdings Products division manufactures
and sells a broad range of high quality equipment marketed under brand names
that are well known and respected in the military and law enforcement
communities. Products manufactured by this division include concealable and
tactical body armor, hard armor, duty gear, less-lethal munitions, anti-riot
products, police batons, emergency lighting products, forensic products,
firearms' accessories, weapon maintenance products, foldable ladders, and
specialty gloves.

Armor Mobile Security. Our Armor Mobile Security division manufactures and
installs ballistic and blast protection armoring systems for a variety of
commercial vehicles including limousines, sedans, sport utility vehicles,
commercial trucks and cash-in-transit vehicles, to protect against varying
degrees of ballistic and blast threats. Our customers in this business include
the US and foreign governments, international corporations, non-government
organizations and high net worth individuals. In addition, we supply ballistic
and blast protected armoring systems to U.S. federal law enforcement and
intelligence agencies and foreign heads of state.

We have invested substantial resources outside of the United States and
plan to continue to do so in the future. The Armor Mobile Security Division has
invested substantial resources in Europe and South America. These operations
are subject to the risk of new and different legal and regulatory requirements
in local jurisdictions, tariffs and trade barriers, potential difficulties in
staffing and managing local operations, currency risks, potential imposition of
restrictions on investments, potentially adverse tax consequences, including
imposition or increase of withholding and other taxes on remittances and other
payments by subsidiaries, and local economic, political and social conditions.
Governments of many developing countries have exercised and continue to
exercise substantial influence over many aspects of the private sector.
Government actions in the future could have a significant adverse effect on
economic conditions in a developing country or may otherwise have a material
adverse effect on us and our operating companies. We do not have political risk
insurance in the countries in which we currently conduct business. Moreover,
applicable agreements relating to our interests in our operating companies are
frequently governed by foreign law. As a result, in the event of a dispute, it
may be difficult for us to enforce our rights. Accordingly, we may have little
or no recourse upon the occurrence of any of these developments.

F-57

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

Revenues, operating income and total assets for each of our continuing
operating segments are as follows (net of intercompany eliminations):

THREE MONTHS ENDED
----------------------------------
MARCH 31, 2004 MARCH 31, 2003
---------------- ---------------
(IN THOUSANDS)

Revenues:
Aerospace & Defense ............. $ 81,008 $ 15,910
Products ........................ 53,840 44,007
Mobile Security ................. 26,780 20,557
-------- --------
Total revenues ................. $161,628 $ 80,474
======== ========
Operating income (loss):
Aerospace & Defense ............. $ 19,479 $ 3,625
Products ........................ 5,685 6,861
Mobile Security ................. 1,073 519
Corporate ....................... (3,589) (2,179)
-------- --------
Total operating income ......... $ 22,648 $ 8,826
======== ========

MARCH 31, 2004 DECEMBER 31, 2003
---------------- ------------------
(IN THOUSANDS)

Total assets:
Aerospace & Defense ............. $230,729 $209,834
Products ........................ 190,261 183,972
Mobile Security ................. 70,373 63,161
Corporate ....................... 93,964 126,303
-------- --------
Total assets ................... $585,327 $583,270
======== ========

F-58

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

The following unaudited information with respect to revenues, operating
income from continuing operations (geographic operating income from continuing
operations before amortization expense and integration and other charges) and
total assets to principal geographic areas are as follows:

THREE MONTHS ENDED
----------------------------------
MARCH 31, 2004 MARCH 31, 2003
---------------- ---------------
(IN THOUSANDS)

Revenues:
North America .............................. $131,351 $56,624
South America .............................. 3,476 3,427
Africa ..................................... 1,206 485
Europe/Asia ................................ 25,595 19,938
-------- -------
Total revenue ............................. $161,628 $80,474
======== =======
Geographic operating income:
North America .............................. $ 21,638 $ 6,953
South America .............................. 231 54
Africa ..................................... 99 98
Europe/Asia ................................ 2,341 2,203
-------- -------
Total geographic operating income ......... $ 24,309 $ 9,308
======== =======

MARCH 31, 2004 DECEMBER 31, 2003
---------------- ------------------
(IN THOUSANDS)

Total assets:
North America .............................. $536,269 $523,954
South America .............................. 6,674 6,433
Africa ..................................... -- --
Europe/Asia ................................ 42,384 52,883
-------- --------
Total assets .............................. $585,327 $583,270
======== ========

A reconciliation of consolidated geographic operating income from
continuing operations to consolidated operating income from continuing
operations follows:

THREE MONTHS ENDED
----------------------------------
MARCH 31, 2004 MARCH 31, 2003
---------------- ---------------
(IN THOUSANDS)

Consolidated geographic operating income ......... $24,309 $9,308
Amortization ..................................... (980) (60)
Integration and other charges .................... (681) (422)
------- ------
Operating income ................................. $22,648 $8,826
======= ======

F-59

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

NOTE 8 -- EARNINGS PER SHARE

The following details the numerators and denominators of the basic and
diluted earnings per share computations for net income from continuing
operations:

THREE MONTHS ENDED
---------------------------------
MARCH 31, 2004 MARCH 31, 2003
---------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)

Numerator for basic and diluted earnings per share:

Income from continuing operations ...................... $ 12,628 $ 5,245
======== ========
Denominator for basic earnings per share -- weighted
average shares outstanding: .......................... 28,472 28,964
Effect of shares issuable under stock option and
stock grant plans, based on the treasury stock
method ............................................... 1,462 147
-------- --------
Denominator for diluted earnings per share --
adjusted weighted average shares outstanding ......... 29,934 29,111
======== ========
Basic earnings per share from continuing operations..... $ 0.44 $ 0.18
======== ========
Diluted earnings per share from continuing
operations ........................................... $ 0.42 $ 0.18
======== ========

NOTE 9 -- NEW ACCOUNTING PRONOUNCEMENTS

In April 2004, the FASB issued FASB Staff Position No. 129-1, Disclosure
Requirements under FASB Statement No. 129, "Disclosure of Information about
Capital Structure," relating to contingently convertible securities ("FSP
129-1"). The purpose of FSP 129-1 is to interpret how the disclosure provisions
of FASB Statement No. 129 apply to contingently convertible securities and to
their potentially dilutive effects on earnings per share. The guidance in this
FSP is effective April 2004 and applies to all existing and newly created
securities.

NOTE 10 -- STOCKHOLDERS' EQUITY

Statement of Financial Accounting Standard No. 123, "Accounting for
Stock-Based Compensation" (SFAS 123), as amended by SFAS 148, "Accounting for
Stock-Based Compensation -- Transition and Disclosure," establishes a fair
value based method of accounting for stock-based employee compensation plans;
however, it also allows an entity to continue to measure compensation cost for
those plans using the intrinsic value based method of accounting prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25). Under the fair value based method, compensation cost is
measured at the grant date based on the value of the award and is recognized
over the service period, which is usually the vesting period. Under the
intrinsic value based method, compensation cost is the excess, if any, of the
quoted market price of the stock at the grant date or other measurement date
over the amount an employee must pay to acquire the stock. We have elected to
continue to account for our employee stock compensation plans under APB 25 with
pro forma disclosures of net earnings and earnings per share, as if the fair
value based method of accounting defined in SFAS 123 had been applied. If

F-60

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

compensation cost for stock option grants had been determined based on the fair
value on the grant dates for the three-month periods ended March 31, 2004 and
2003 consistent with the method prescribed by SFAS 123, our net earnings and
earnings per share would have been adjusted to the pro forma amounts indicated
below:

THREE MONTHS ENDED
--------------------------------
MARCH 31, 2004 MARCH 31, 2003
---------------- ---------------
(IN THOUSANDS, EXCEPT FOR PER
SHARE AMOUNTS)

Net income as reported ..................................... $ 12,490 $ 5,087
Deduct: Total stock-based employee compensation
expense determined under fair value based
method for all awards, net of related tax effects ......... (1,247) (1,158)
-------- --------
Pro forma net income ....................................... $ 11,243 $ 3,929
======== ========
Earnings per share:
Basic -- as reported ...................................... $ 0.44 $ 0.17
======== ========
Basic -- pro forma ........................................ $ 0.39 $ 0.14
======== ========
Diluted -- as reported .................................... $ 0.42 $ 0.17
======== ========
Diluted -- pro forma ...................................... $ 0.38 $ 0.13
======== ========

NOTE 11 -- LEGAL PROCEEDINGS

In September 2003, Second Chance Body Armor, Inc., a body armor
manufacturer and one of our competitors, has notified its customers of a
potential safety issue with its Ultima (Registered Trademark) and Ultimax
(Registered Trademark) models. Second Chance Body Armor has claimed that Zylon
(Registered Trademark) fiber, which is made by Toyobo, a Japanese corporation,
and used in the ballistic fabric construction of its Ultima (Registered
Trademark) and Ultimax (Registered Trademark) models, degraded more rapidly
than originally anticipated. Second Chance Body Armor has also stated that the
Zylon (Registered Trademark) degradation problem affects the entire body armor
industry, not just its products. Both private claimants and State Attorneys
General have already commenced legal action against Second Chance Body Armor
based upon its Ultima (Registered Trademark) and Ultimax (Registered
Trademark) model vests and we have received investigative demands from state
agencies in Texas and Connecticut. Second Chance Body Armor licenses from
Simula a certain patented technology which is used in some of the body armor it
manufactures, but to our knowledge, no lawsuit has yet been brought against
Second Chance Body Armor based upon this licensed technology, although a letter
was received by Simula from an attorney representing a police officer who was
injured while wearing a Second Chance Body Armor vest alleging potential
liability against Simula. In addition, the U.S. Attorney General has asked the
U.S. Department of Justice to investigate the claims regarding the use of Zylon
(Registered Trademark) in bulletproof vests, which we use in the manufacturing
of certain of our body armor models for law enforcement personnel. As Simula
has licensed its technology to Second Chance Body Armor, it may be impacted by
the pending claims against Second Chance Body Armor and the investigation being
conducted by the U.S. Department of Justice. If Simula is included in the
claims pending against Second Chance

F-61

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

Body Armor and the investigation being conducted by the U.S. Department of
Justice, we cannot assure you that any judgment, settlement or resolution
against Simula will not have a material impact on Simula's financial position,
operations or liquidity.

The National Institute of Justice ("NIJ") is engaged in an ongoing inquiry
and investigation of bullet-resistant vests and the protocol for testing used
vests, as well as the reliability of Zylon (Registered Trademark) and other
fibers. We have consulted with and cooperated fully with the NIJ in this
endeavor. To date, the NIJ has embarked only in its first phase of testing,
which entails vests that have been heavily worn or exposed to adverse
conditions, and which involves the ballistic standard applicable to new vests.
Although some of the vests tested, including ours, experienced some level of
penetration, the NIJ specifically warned against the misuse and
misinterpretation of these results, emphasizing that the data produced so far
is preliminary in nature, applies to a very small sample size, and, therefore,
it is not possible to draw any statistically-based conclusions from these
results. The NIJ will continue to conduct further testing and analyze these
issues in order to determine if any conclusions can be reached as to the
performance and reliability of aged vests. We have requested but not yet
received the NIJ to provide us with its testing data, and we intend to evaluate
and review the NIJ results upon receipt in our continuing effort to assist the
NIJ in developing uniform standards for certification of new vests and the
testing of used vests. The NIJ continues to encourage law enforcement officers
to wear body armor, in light of the fact that "the lives of more than 2,700 law
enforcement officers have been saved by the use of bullet-resistant body armor
over the past 30 years."

In April 2004, two class action complaints were filed in Florida state
courts by police organizations and individual police officers, alleging that
our vests do not have the qualities and performance characteristics as
warranted, thereby breaching express warranty, implied warranty of
merchantability, implied warranty of fitness for a particular purpose and duty
to warn. We strenuously disagree with the allegations set forth in these
complaints and intend to present a vigorous defense. By letter dated April 14,
2004, an attorney representing the Ohio State Troopers Association, Inc. wrote
to us demanding a full refund of the purchase price for our vests containing
Zylon (Registered Trademark) purchased by Ohio Highway Patrol Troopers. We
have responded by denying his demand for a refund and explaining that there
have been no incidents of injury related to our vests, that our vests meet the
NIJ certification standards and that there exists no reliable evidence to show
that our vests are sub-standard or inappropriate for their intended use.

Except for the updates noted above, please see footnote 11 Commitments and
Contingencies Legal/Litigation Matters in our Annual Report on Form 10-K for
the fiscal year ended December 31, 2003, for a description of other legal
proceedings.

F-62

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

NOTE 12 -- GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS

On August 12, 2003 we sold $150 million of Senior Subordinated Notes in
private placements pursuant to Rule 144A and Regulation S. The Senior
Subordinated Notes are uncollateralized obligations and rank junior in right of
payment to our existing and future senior debt. The Senior Subordinated Notes
are guaranteed, jointly and severally on a senior uncollateralized basis, by
certain domestic subsidiaries.

The following consolidating condensed financial information presents the
consolidating condensed balance sheets as of March 31, 2004 and December 31,
2003, the related condensed statements of operations for each of the three
month periods ended March 31, 2004 and March 31, 2003 and the related condensed
statements of cash flows for the three month periods ended March 31, 2004 and
March 31, 2003 for:

a) Armor Holdings, Inc., the parent,

b) the guarantor subsidiaries,

c) the nonguarantor subsidiaries, and

d) Armor Holdings, Inc. on a consolidated basis

The information includes elimination entries necessary to consolidate
Armor Holdings, Inc., the parent, with the guarantor and nonguarantor
subsidiaries.

F-63

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

ARMOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS

MARCH 31, 2004
-------------------------------------------------------------------------
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------------ -------------- ---------------- -------------- -------------
(IN THOUSANDS)

ASSETS
Current Assets:
Cash and cash equivalents ......................... $ 58,030 $ 6,325 $ 11,480 $ -- $ 75,835
Accounts receivable, net .......................... 989 74,854 13,353 -- 89,196
Costs and earned gross profit in excess of
billings ......................................... -- 860 -- -- 860
Intercompany receivables .......................... 64,093 52,197 38,352 (154,642) --
Inventories ....................................... -- 73,555 19,348 -- 92,903
Prepaid expenses and other current assets.......... 4,160 20,744 2,743 (2,653) 24,994
Current assets of discontinued operations ......... -- 41,216 6,235 (46,594) 857
--------- -------- --------- ---------- ---------
Total Current Assets ............................. 127,272 269,751 91,511 (203,889) 284,645

Property and equipment, net ........................ 2,238 36,851 19,578 -- 58,667
Goodwill, net ...................................... -- 174,051 2,095 -- 176,146
Patents, licenses and trademarks, net .............. -- 45,893 180 -- 46,073
Other assets ....................................... 18,361 2,133 159 -- 20,653
Long-term assets of discontinued operations ........ -- 1,717 -- -- 1,717
Investment in subsidiaries ......................... 418,148 9,858 -- (428,006) --
--------- -------- --------- ---------- ---------
Total Assets ....................................... $ 566,019 $540,254 $ 113,523 $ (631,895) $ 587,901
========= ======== ========= ========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt ................. $ -- $ 635 $ 143 $ -- $ 778
Short-term debt ................................... -- -- 622 -- 622
Accounts payable .................................. 916 34,975 6,190 -- 42,081
Accrued expenses and other current
liabilities ...................................... 7,078 30,016 20,490 -- 57,584
Income taxes payable .............................. (10,237) 13,561 525 -- 3,849
Intercompany payables ............................. 93,713 49,309 10,314 (153,336) --
Current liabilities of discontinued operations..... -- 5,001 43,243 (47,900) 344
--------- -------- --------- ---------- ---------
Total Current Liabilities ........................ 91,470 133,497 81,527 (201,236) 105,258

Long-term debt, less current portion ............... 157,002 1,725 537 -- 159,264
Other long-term liabilities ........................ 5,202 4,622 1,210 -- 11,034
Long-term liabilities of discontinued
operations ........................................ -- 2,653 -- (2,653) --
--------- -------- --------- ---------- ---------
Total Liabilities .................................. 253,674 142,497 83,274 (203,889) 275,556
Stockholders' Equity:
Preferred stock ................................... -- 1,450 -- (1,450) --
Common stock ...................................... 347 4,393 7,854 (12,247) 347
Additional paid in capital ........................ 323,275 273,326 46,095 (319,421) 323,275
Retained earnings (accumulated deficit) ........... 57,432 118,588 (23,700) (94,888) 57,432
Accumulated other comprehensive loss .............. 3,608 -- -- -- 3,608
Treasury stock .................................... (72,317) -- -- -- (72,317)
--------- -------- --------- ---------- ---------
Total Stockholders' Equity ......................... 312,345 397,757 30,249 (428,006) 312,345
--------- -------- --------- ---------- ---------
Total Liabilities and Stockholders' Equity ......... $ 566,019 $540,254 $ 113,523 $ (631,895) $ 587,901
========= ======== ========= ========== =========

F-64

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

ARMOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS

ASSETS
Current Assets:
Cash and cash equivalents ......................... $ 90,764 $ 11,084 $ 10,002 $ -- $ 111,850
Restricted cash ................................... 2,600 -- -- -- 2,600
Accounts receivable, net .......................... 1,201 59,470 11,964 -- 72,635
Costs and earned gross profit in excess of
billings ......................................... -- -- -- -- --
Intercompany receivables .......................... 60,974 2,600 38,352 (101,926) --
Inventories ....................................... -- 61,494 19,033 -- 80,527
Prepaid expenses and other current assets.......... 20,241 1,844 2,600 (2,653) 22,032
Current assets of discontinued operations ......... -- 753 -- -- 753
--------- --------- --------- ---------- ---------
Total Current Assets ............................. 175,780 137,245 81,951 (104,579) 290,397

Property and equipment, net ........................ 2,122 34,853 20,601 -- 57,576
Goodwill, net ...................................... -- 173,640 2,067 -- 175,707
Patents, licenses and trademarks, net .............. -- 43,991 183 -- 44,174
Other assets ....................................... 14,092 1,924 153 -- 16,169
Long-term assets of discontinued operations ........ -- 1,603 -- -- 1,603
Investment in subsidiaries ......................... 320,034 10,038 -- (330,072) --
--------- --------- --------- ---------- ---------
Total Assets ....................................... $ 512,028 $ 403,294 $ 104,955 $ (434,651) $ 585,626
========= ========= ========= ========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt ................. $ -- $ 31,960 $ 147 $ -- $ 32,107
Short-term debt ................................... -- -- 498 -- 498
Accounts payable .................................. 1,584 20,941 7,779 -- 30,304
Accrued expenses and other current
liabilities ...................................... 12,403 27,113 18,702 -- 58,218
Income taxes payable .............................. -- -- -- -- --
Intercompany payables ............................. 44,251 47,073 9,933 (101,257) --
Current liabilities of discontinued operations..... -- (35,714) 37,009 (669) 626
--------- --------- --------- ---------- ---------
Total Current Liabilities ........................ 58,238 91,373 74,068 (101,926) 121,753

Long-term debt, less current portion ............... 153,452 4,257 591 -- 158,300
Other long-term liabilities ........................ 4,973 4,008 1,227 -- 10,208
Long-term liabilities of discontinued
operations ........................................ -- 2,653 -- (2,653) --
--------- --------- --------- ---------- ---------
Total Liabilities .................................. 216,663 102,291 75,886 (104,579) 290,261
Stockholders' Equity:
Preferred stock ................................... -- 1,450 -- (1,450) --
Common stock ...................................... 344 4,143 7,854 (11,997) 344
Additional paid in capital ........................ 318,460 191,781 46,095 (237,876) 318,460
Retained earnings (accumulated deficit) ........... 44,942 103,629 (24,880) (78,749) 44,942
Accumulated other comprehensive loss .............. 3,936 -- -- -- 3,936
Treasury stock .................................... (72,317) -- -- -- (72,317)
--------- --------- --------- ---------- ---------
Total Stockholders' Equity ......................... 295,365 301,003 29,069 (330,072) 295,365
--------- --------- --------- ---------- ---------

Total Liabilities and Stockholders' Equity ......... $ 512,028 $ 403,294 $ 104,955 $ (434,651) $ 585,626
========= ========= ========= ========== =========

F-65

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

ARMOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2004
----------------------------------------------------------------------
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
----------- -------------- -------------- -------------- -------------
(IN THOUSANDS)

REVENUES:
Aerospace & Defense ............... $ -- $ 81,008 $ -- $ -- $ 81,008
Products .......................... -- 44,249 9,591 -- 53,840
Mobile Security ................... -- 5,367 21,932 (519) 26,780
--------- -------- ------- --------- --------
Total revenues .................... -- 130,624 31,523 (519) 161,628
--------- -------- ------- --------- --------

COSTS AND EXPENSES:
Cost of sales ..................... -- 88,350 26,237 (519) 114,068
Operating expenses ................ 3,502 16,387 3,362 -- 23,251
Amortization ...................... -- 977 3 -- 980
Integration and other charges ..... 90 591 -- -- 681
Related party management
(income) fees ................... 16 (17) 1 -- --
--------- -------- ------- --------- --------

OPERATING (LOSS) INCOME ............ (3,608) 24,336 1,920 -- 22,648
Interest expense, net ............. 1,656 32 40 -- 1,728
Other expense (income), net ....... 50 16 49 -- 115
Equity in (earnings) losses of
subsidiaries .................... (16,321) 182 -- 16,139 --
--------- -------- ------- --------- --------

INCOME FROM CONTINUING
OPERATIONS BEFORE PROVISION
(BENEFIT) FOR INCOME TAXES ........ 11,007 24,106 1,831 (16,139) 20,805
PROVISION (BENEFIT) FOR INCOME
TAXES ............................. (1,483) 9,009 651 -- 8,177
--------- -------- ------- --------- --------
INCOME FROM CONTINUING
OPERATIONS ........................ 12,490 15,097 1,180 (16,139) 12,628
DISCONTINUED OPERATIONS:
(Loss) from discontinued
operations, net of tax .......... -- (138) -- -- (138)
--------- -------- ------- --------- --------
NET INCOME ......................... $ 12,490 $ 14,959 $ 1,180 $ (16,139) $ 12,490
========= ======== ======= ========= ========

F-66

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

ARMOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2003
----------------------------------------------------------------------
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
----------- -------------- -------------- -------------- -------------
(IN THOUSANDS)

REVENUES:
Aerospace & Defense ............... $ -- $15,910 $ -- $ -- $15,910
Products .......................... -- 36,684 7,323 -- 44,007
Mobile Security ................... -- 4,089 16,468 -- 20,557
-------- ------- ------- -------- -------
Total revenues .................... -- 56,683 23,791 -- 80,474
-------- ------- ------- -------- -------

COSTS AND EXPENSES:
Cost of sales ..................... -- 37,220 19,942 -- 57,162
Operating expenses ................ 2,072 9,302 2,630 -- 14,004
Amortization ...................... -- 57 3 -- 60
Integration and other charges ..... 76 346 -- -- 422
-------- ------- ------- -------- -------

OPERATING (LOSS) INCOME ............ (2,148) 9,758 1,216 -- 8,826
Interest expense, net ............. 228 70 81 -- 379
Other expense, net ................ -- -- 69 -- 69
Equity in (earnings) losses of
subsidiaries .................... (6,664) 282 -- 6,382 --
-------- ------- ------- -------- -------

INCOME FROM CONTINUING
OPERATIONS BEFORE PROVISION
(BENEFIT) FOR INCOME TAXES 4,288 9,406 1,066 (6,382) 8,378
PROVISION (BENEFIT) FOR INCOME
TAXES ............................. (799) 3,560 372 -- 3,133
-------- ------- ------- -------- -------
INCOME FROM CONTINUING
OPERATIONS ........................ 5,087 5,846 694 (6,382) 5,245
DISCONTINUED OPERATIONS:
(Loss) income from discontinued
operations, net of tax .......... -- (447) 289 -- (158)
-------- ------- ------- -------- -------
NET INCOME ......................... $ 5,087 $ 5,399 $ 983 $ (6,382) $ 5,087
======== ======= ======= ======== =======

F-67

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

ARMOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2004
-----------------------------------------------------------------------
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------------ -------------- -------------- -------------- -------------
(IN THOUSANDS)

CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations .............. $ 12,490 $ 15,097 $ 1,180 $ (16,139) $ 12,628
Adjustments to reconcile income from
continuing operations to cash provided by
(used in) operating activities:
Depreciation and amortization ................ 348 2,275 791 -- 3,414
Loss on disposal of fixed assets ............. -- -- 6 -- 6
Deferred income taxes ........................ 104 (521) (21) -- (438)
Changes in operating assets & liabilities,
net of acquisitions:
Decrease (increase) in accounts
receivable .................................. 212 (15,996) (1,389) -- (17,173)
Decrease (increase) in intercompany
receivables & payables ...................... 46,016 (46,396) 380 -- --
Increase in inventory ........................ -- (11,917) (315) -- (12,232)
(Increase) decrease in prepaid expenses &
other assets ................................ (3,611) (1,814) 203 -- (5,222)
Increase (decrease) in accounts payable,
accrued expenses and other current
liabilities ................................. (5,663) 17,859 199 -- 12,395
Increase (decrease) in income taxes
payable ..................................... 8,651 (1,607) 177 -- 7,221
--------- --------- -------- --------- ---------
Net cash provided by (used in) operating
activities ................................... 58,547 (43,020) 1,211 (16,139) 599
--------- --------- -------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment ............. (254) (3,246) (314) -- (3,814)
Purchase of patents and trademarks ............. -- (49) -- -- (49)
Purchase of equity investment .................. -- (1,374) -- -- (1,374)
Collection of note receivable .................. -- 375 -- -- 375
Decrease in restricted cash .................... 2,600 -- -- -- 2,600
Additional consideration for purchased
businesses ................................... -- (1,832) -- -- (1,832)
Investment in subsidiaries ..................... (98,115) 81,976 -- 16,139 --
Purchase of businesses net of cash
acquired ..................................... -- (2,729) -- -- (2,729)
--------- --------- -------- --------- ---------
Net cash (used in) provided by investing
activities ................................... (95,769) 73,121 (314) 16,139 (6,823)
--------- --------- -------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options ........ 4,488 -- -- -- 4,488
Repayments of long-term debt ................... -- (33,863) (34) -- (33,897)
Borrowings under lines of credit ............... 5,303 -- 146 -- 5,449
Repayments under lines of credit ............... (5,303) -- (24) -- (5,327)
--------- --------- -------- --------- ---------
Net cash provided by (used in) financing
activities ................................... 4,488 (33,863) 88 -- (29,287)
--------- --------- -------- --------- ---------
Effect of exchange rate on cash and cash
equivalents .................................. -- (359) 493 -- 134
Net cash used in discontinued operations ....... -- (638) -- -- (638)
--------- --------- -------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS .................................... (32,734) (4,759) 1,478 -- (36,015)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD ......................................... 90,764 11,084 10,002 -- 111,850
--------- --------- -------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD ........ $ 58,030 $ 6,325 $ 11,480 $ -- $ 75,835
========= ========= ======== ========= =========

F-68

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

ARMOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations ................ $ 5,087 $ 5,846 $ 694 $ (6,382) $ 5,245
Adjustments to reconcile income from
continuing operations to cash provided by
operating activities:
Depreciation and amortization .................... 257 988 457 -- 1,702
Loss on disposal of fixed assets ................. -- -- 8 -- 8
Deferred taxes ................................... (1,264) 413 1,050 -- 199
Changes in operating assets & liabilities, net
of acquisitions:
Decrease in accounts receivable .................. -- 2,852 26 -- 2,878
(Increase) decrease in intercompany
receivables & payables ......................... (624) (15) 639 -- --
(Increase) decrease in inventory ................. -- (60) 1,142 -- 1,082
Increase in prepaid expenses & other
assets ......................................... (1,335) (807) (1,001) -- (3,143)
Increase (decrease) in accounts payable,
accrued expenses and other current
liabilities .................................... 654 (2,103) (451) -- (1,900)
Increase (decrease) in income taxes
payable ........................................ (2,076) 148 266 -- (1,662)
--------- -------- -------- -------- ---------
Net cash provided by operating activities ........ 699 7,262 2,830 (6,382) 4,409
--------- -------- -------- -------- ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment ............... (62) (1,255) (410) -- (1,727)
Investment in subsidiaries ....................... (6,661) 414 (135) 6,382 --
--------- -------- -------- -------- ---------
Net cash used in investing activities ............ (6,723) (841) (545) 6,382 (1,727)
--------- -------- -------- -------- ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchases of treasury stock .................... (15,684) -- -- -- (15,684)
Repayments of long-term debt ..................... -- (239) -- -- (239)
Borrowings under lines of credit ................. 22,740 -- 176 -- 22,916
Repayments under lines of credit ................. (2,740) -- (147) -- (2,887)
--------- -------- -------- -------- ---------
Net cash provided by (used in) financing
activities ..................................... 4,316 (239) 29 -- 4,106
--------- -------- -------- -------- ---------
Effect of exchange rate on cash and cash
equivalents .................................... 369 (52) (372) -- (55)
Net cash used in discontinued operations ......... -- (2,428) (1,208) -- (3,636)
--------- -------- -------- -------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS ...................................... (1,339) 3,702 734 -- 3,097
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD ........................................... 7,152 3,556 2,205 -- 12,913
--------- -------- -------- -------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD .......... $ 5,813 $ 7,258 $ 2,939 $ -- $ 16,010
========= ======== ======== ======== =========

F-69

ARMOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

NOTE 13 -- CREDIT AGREEMENT AMENDMENT

On March 29, 2004, we amended our credit agreement to allow us to pay
dividends subject to certain limitations.

NOTE 14 -- ACQUISITION

F-70

PROSPECTUS

ARMOR HOLDINGS, INC.

$500,000,000

DEBT SECURITIES, COMMON STOCK,
PREFERRED STOCK AND WARRANTS
----------------
We may, from time to time, sell up to $500,000,000 aggregate initial
offering price of:

o our debt securities, in one or more series, which may be either senior
debt securities, senior subordinated debt securities, subordinated debt
securities or debt securities with any other ranking;

o shares of our common stock, par value $0.01 per share;

o shares of our preferred stock, par value $0.01 per share, in one or more
series;

o warrants to purchase our debt or equity securities; or

o any combination of the foregoing.

This prospectus also covers guarantees, if any, of our payment obligations
under any debt securities, which may be given by certain of our subsidiaries,
on terms to be determined at the time of the offering. We will provide the
specific terms of these securities in supplements to this prospectus. The
prospectus supplements may also add, update or change information contained in
this prospectus. Before you invest, you should carefully read this prospectus,
any prospectus supplement, the documents incorporated or deemed to be
incorporated by referenced in this prospectus and the additional information
described under "Where You Can Find More Information."

This prospectus also covers the sale by the selling stockholders of up to
1,000,000 shares of our common stock.

This prospectus provides a general description of the securities we or the
selling stockholders may offer. The specific terms of the securities offered by
this prospectus will be set forth in a supplement to this prospectus and will
include, among other things:

o in the case of common stock, the number of shares, purchase price, and
terms of the offering and sale thereof;

o in the case of preferred stock, the number of shares, purchase price,
the designation and relative rights, preferences, limitations and
restrictions, and the terms of the offering and sale thereof;

o in the case of debt securities, the specific designation, aggregate
principal amount, purchase price, maturity, interest rate, time of
payment of interest, terms (if any) for the subordination or redemption
thereof, and any other specific terms of the debt securities; and

o in the case of warrants, the title, aggregate number, price at which it
will be issued, exercise price, and designation, aggregate principal
amount and terms of the securities issuable upon exercise of the
warrants.

We and any selling stockholder may sell these securities directly, through
agents, dealers or underwriters as designated from time to time, or through a
combination of these methods. We and the selling stockholders reserve the sole
right to accept, and together with our agents, dealers and underwriters reserve
the right to reject, in whole or in part any proposed purchase of securities to
be made directly or through agents, underwriters or dealers. If our agents or
any dealers or underwriters are involved in the sale of the securities, the
applicable prospectus supplement will set forth any applicable commissions or
discounts.

Under the shelf registration process, the selling stockholders listed
herein may sell up to a total of 1,000,000 shares of common stock under this
prospectus. The number of shares of common stock to be offered by each of the
selling stockholders is set forth in the section of this prospectus titled
"Selling Stockholders." We will not receive any proceeds from the sale of any
shares by the selling stockholders.

THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF SECURITIES UNLESS
ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.

Our common stock trades on the New York Stock Exchange under the symbol
"AH." On May 25, 2004, the last reported sale price of our shares on the New
York Stock Exchange was $37.85 per share.
----------------
PLEASE REFER TO "RISK FACTORS" BEGINNING ON PAGE 6 OF THIS PROSPECTUS AND
IN ANY PROSPECTUS SUPPLEMENT FOR A DESCRIPTION OF THE RISKS YOU SHOULD CONSIDER
WHEN EVALUATING THIS INVESTMENT.
----------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR ANY OTHER PROSPECTUS SUPPLEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

`
THE DATE OF THIS PROSPECTUS IS MAY 27, 2004.

TABLE OF CONTENTS

PAGE
-----

SUMMARY 4

RISK FACTORS 6

Risks Related to Our Industry 6

The products we sell are inherently risky and could give rise to product liability and
other claims 6

We are subject to extensive government regulation and our failure or inability to
comply with these regulations could materially restrict our operations and
subject us to substantial penalties 7

We have significant international operations and assets, and therefore, are
subject to additional financial and regulatory risks 8

Risks Related to Our Business 9

Many of our customers have fluctuating budgets which may cause substantial
fluctuations in our results of operations 9

The loss of, or a significant reduction in, U.S. military business would have a
material adverse effect on us 9

We may lose money or generate less than expected profits on our fixed-price contracts 10

Our business is subject to various laws and regulations favoring the U.S. government's
contractual position, and our failure to comply with such laws and regulations
could harm our operating results and prospects 10

Our markets are highly competitive, and, if we are unable to compete effectively, we
will be adversely affected 10

There are limited sources for some of our raw materials which may significantly
curtail our manufacturing operations 11

We may be unable to complete or integrate acquisitions effectively, if at all, and as a
result may incur unanticipated costs or liabilities or operational difficulties 11

Our resources may be insufficient to manage the demands imposed by our growth 11

We depend on industry relationships 12

We may be unable to protect our proprietary technology, including the technologies we
use to furnish the up-armoring of HMMWVS 12

Technological advances, the introduction of new products, and new design and
manufacturing techniques could adversely affect our operations unless we
are able to adapt to the resulting change in conditions 12

We may be adversely affected by applicable environmental laws and regulations 13

Risks Related to Ownership of Our Common Stock 13

Delaware law may limit possible takeovers 13

Our certificate of incorporation authorizes the issuance of shares of blank check
preferred stock 13

The market price for our common stock is volatile 14

PAGE
-----

We may issue a substantial amount of our common stock in connection with future
acquisitions and the sale of those shares could adversely affect our stock price 14

Our stock price may be adversely affected when additional shares are sold 14

Our debt agreements restrict our ability to pay dividends or make other distributions
to our stockholders 14

We have a high level of debt 14

Risks Relating to the Debt Securities 16

Our significant indebtedness could adversely affect our financial health, and prevent
us from fulfilling our obligations under any debt securities we issue 16

Not all of our subsidiaries may guarantee our obligations under any debt securities we
issue, and the assets of the non-guarantor subsidiaries may not be available to
make payments on any debt securities we issue 16

We will require a significant amount of cash to service our indebtedness and our
ability to generate cash depends on many factors beyond our control 16

Covenants in our debt agreements restrict our activities and could adversely affect our
business 17

A public market for the debt securities may not develop 18

Federal and state statutes allow courts, under specific circumstances, to void
guarantees and require holders of debt securities to return payments received
from guarantors 18

THE COMPANY 19

RECENT DEVELOPMENTS 20

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 21

FORWARD-LOOKING STATEMENTS 22

USE OF PROCEEDS 24

RATIO OF EARNINGS TO FIXED CHARGES 24

DESCRIPTION OF THE DEBT SECURITIES 24

DESCRIPTION OF CAPITAL STOCK 27

DESCRIPTION OF WARRANTS 28

DESCRIPTION OF SENIOR INDEBTEDNESS 29

DESCRIPTION OF SENIOR SUBORDINATED NOTES 29

SELLING STOCKHOLDERS 31

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 32

PLAN OF DISTRIBUTION 33

WHERE YOU CAN FIND MORE INFORMATION 34

EXPERTS 35

LEGAL MATTERS 35

SUMMARY

This prospectus is part of a registration statement that Armor Holdings,
Inc. and the co-registrants (collectively, the "registrants") filed with the
Securities and Exchange Commission (the "Commission") utilizing a "shelf"
registration process pursuant to the Securities Act of 1933, as amended (the
"Securities Act"). Under this shelf registration process, the registrants may,
from time to time, sell any combination of debt securities, common stock,
preferred stock and warrants, as described in this prospectus, in one or more
offerings up to a total dollar amount of $500,000,000 or the equivalent thereof
on the date of issuance in one or more foreign currencies, foreign currency
units or composite currencies. The selling stockholders listed herein may sell
up to a total of 1,000,000 shares of common stock under this prospectus. The
number of shares of common stock to be offered by each of the selling
stockholders is set forth in the section of this prospectus titled "Selling
Stockholders." This prospectus provides you with a general description of the
securities the registrants may offer. Each time the registrants sell
securities, the registrants will provide a prospectus supplement that will
contain specific information about the terms of that offering. To understand
the terms of our securities, you should carefully read this document with the
applicable prospectus supplement, which may add, update, or change information.
Together, these documents will give the specific terms of the securities we are
offering. You should also read the documents we have incorporated by reference
in this prospectus and in any prospectus supplement as well as the additional
information described under "Where You Can Find More Information."

We have not authorized any person to give any information or to make any
representation in connection with this offering other than those contained or
incorporated by reference in this prospectus, and, if given or made, such
information or representation must not be relied upon as having been so
authorized. This prospectus does not constitute an offer to sell or a
solicitation of an offer to buy by anyone in any jurisdiction in which such
offer to sell is not authorized, or in which the person is not qualified to do
so or to any person to whom it is unlawful to make such offer or solicitation.
Neither the delivery of this prospectus nor any sale hereunder shall, under any
circumstances, create any implication that there has been no change in our
affairs since the date hereof, that the information contained herein is correct
as of any time subsequent to its date, or that any information incorporated by
reference herein is correct as of any time subsequent to its date.

THE SECURITIES WE MAY OFFER

DEBT SECURITIES

The terms of each series of debt securities will be detailed or determined
in the manner provided in an indenture. The particular terms of each series of
debt securities will be described in a prospectus supplement relating to the
series, including any pricing supplement. We will set forth in a prospectus
supplement (including any pricing supplement) relating to any series of debt
securities being offered, among other things, the initial offering price, the
aggregate principal amount, the price or prices at which we will sell the debt
securities, any limit on the aggregate principal amount of the debt securities,
the date or dates on which we will pay the principal on the debt securities,
and the rate or rates at which the debt securities will bear interest. We have
summarized general features of our debt securities under the section entitled
"Description of the Debt Securities" contained in this prospectus.

COMMON STOCK

We may issue common stock, par value $0.01 per share. Each holder of
common shares is entitled to one vote per share. The holders of common shares
have no preemptive or cumulative voting rights. Holders of our common stock are
entitled to receive dividends when declared by our board of directors, subject
to the rights of holders of our preferred shares, if any, and the terms of our
senior credit facility and indenture governing our 8 1/4% senior subordinated
notes due 2013 (the "81/4% notes"). Our senior credit facility and indenture
governing the 8 1/4% notes contain certain financial and other covenants that
limit, under certain circumstances, our ability to pay dividends or

make other distributions to our stockholders. We are permitted to pay dividends
and make other distributions to stockholders to the extent we satisfy the
conditions, including the financial and other covenants, contained in the
senior credit facility and the indenture governing the 8 1/4% notes.

PREFERRED STOCK

We may issue preferred stock, par value $0.01 per share, in one or more
series. Subject to the terms of our governing documents and applicable Delaware
law, our board of directors will determine the dividend, voting, conversion and
other rights and preferences of the series of preferred stock being offered.

WARRANTS

We may issue warrants for the purchase of debt securities, preferred stock
or common stock either independently or together with other securities. Each
warrant will entitle the holder to purchase the principal amount of our debt
securities, or the number of shares of preferred stock or common stock, at the
exercise price set forth in, or calculable as set forth in, the applicable
prospectus supplement.

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

The mailing address and telephone number of our principal executive
offices are 1400 Marsh Landing Parkway, Suite 112, Jacksonville, Florida 32250,
(904) 741-5400.

RISK FACTORS

Before you invest in any of our securities, you should be aware of various
risks, including those described below. You should carefully consider these
risk factors, together with all of the other information included or
incorporated by reference in this prospectus and in the prospectus supplement,
before you decide whether to purchase any of our securities. The risks set out
below are not the only risks we face. Interested persons should carefully
consider the risks described below in evaluating our company and our business,
financial condition, and results of operations. Additional risks and
uncertainties not presently known to us, or that we currently consider to be
immaterial, may also impair our business and financial situation.

If any of the following risks occur, our business, financial condition and
results of operations could be materially adversely affected. In such case, the
trading price of our securities could decline, and you may lose all or part of
your investment.

RISKS RELATED TO OUR INDUSTRY

THE PRODUCTS WE SELL ARE INHERENTLY RISKY AND COULD GIVE RISE TO PRODUCT
LIABILITY AND OTHER CLAIMS.

The products that we manufacture are typically used in applications and
situations that involve high levels of risk of personal injury. Failure to use
our products for their intended purposes, failure to use or care for them
properly, or their malfunction, could result in serious bodily injury or death.
Given this potential risk of injury, proper maintenance of our products is
critical. Our products include: body armor and plates designed to protect
against ballistic and sharp instrument penetration; less-lethal products such
as less-lethal munitions, pepper sprays, distraction devices and flameless
expulsion grenades; various models of police batons; rotary and fixed-wing
aircraft seating systems; parachutes; vehicle and hard armoring systems; and
police duty gear.

Both private claimants and State Attorneys General have already commenced
legal action against Second Chance Body Armor, Inc. ("Second Chance") a body
armor manufacturer and competitor to Armor Holdings, based upon its Ultima
(Registered Trademark) and Ultimax (Registered Trademark) model vests. Second
Chance licenses from Simula, one of our indirect subsidiaries, a certain
patented technology which is used in some of the body armor it manufactures,
but to our knowledge, no lawsuit has yet been brought against Second Chance
based upon this licensed technology, although a letter was received by Simula
from an attorney representing a police officer who was injured while wearing a
Second Chance vest alleging potential liability against Simula. In addition,
the U.S. Attorney General has asked the U.S. Department of Justice to
investigate the claims regarding the Zylon (Registered Trademark) vests. As
Simula has licensed its technology to Second Chance, it may be impacted by the
pending claims against Second Chance and the investigation being conducted by
the U.S. Department of Justice. If Simula

WE ARE SUBJECT TO EXTENSIVE GOVERNMENT REGULATION AND OUR FAILURE OR INABILITY
TO COMPLY WITH THESE REGULATIONS COULD MATERIALLY RESTRICT OUR OPERATIONS AND
SUBJECT US TO SUBSTANTIAL PENALTIES.

WE HAVE SIGNIFICANT INTERNATIONAL OPERATIONS AND ASSETS, AND THEREFORE, ARE
SUBJECT TO ADDITIONAL FINANCIAL AND REGULATORY RISKS.

o foreign laws and regulations, which may vary country by country, that
may impact how we conduct our business;

o higher costs of doing business in foreign countries, including different
employment laws;

o technological differences that vary by marketplace, which we may not be
able to support;

o longer payment cycles and foreign currency fluctuations;

o economic downturns; and

o revenue growth outside of the United States may not continue at the same
rate if it is determined that we have already launched our products and
services in the most significant markets.

One or more of these factors could adversely effect our future
international operations and, consequently, could have a material adverse
effect on our business, financial condition, results of operations and
liquidity.

RISKS RELATED TO OUR BUSINESS

MANY OF OUR CUSTOMERS HAVE FLUCTUATING BUDGETS WHICH MAY CAUSE SUBSTANTIAL
FLUCTUATIONS IN OUR RESULTS OF OPERATIONS.

THE LOSS OF, OR A SIGNIFICANT REDUCTION IN, U.S. MILITARY BUSINESS WOULD HAVE A
MATERIAL ADVERSE EFFECT ON US.

WE MAY LOSE MONEY OR GENERATE LESS THAN EXPECTED PROFITS ON OUR FIXED-PRICE
CONTRACTS.

OUR BUSINESS IS SUBJECT TO VARIOUS LAWS AND REGULATIONS FAVORING THE U.S.
GOVERNMENT'S CONTRACTUAL POSITION, AND OUR FAILURE TO COMPLY WITH SUCH LAWS AND
REGULATIONS COULD HARM OUR OPERATING RESULTS AND PROSPECTS.

o protest or challenge by unsuccessful bidders; and

o unilateral termination, reduction or modification by the government.

OUR MARKETS ARE HIGHLY COMPETITIVE, AND, IF WE ARE UNABLE TO COMPETE
EFFECTIVELY, WE WILL BE ADVERSELY AFFECTED.

THERE ARE LIMITED SOURCES FOR SOME OF OUR RAW MATERIALS WHICH MAY SIGNIFICANTLY
CURTAIL OUR MANUFACTURING OPERATIONS.

WE MAY BE UNABLE TO COMPLETE OR INTEGRATE ACQUISITIONS EFFECTIVELY, IF AT ALL,
AND AS A RESULT MAY INCUR UNANTICIPATED COSTS OR LIABILITIES OR OPERATIONAL
DIFFICULTIES.

OUR RESOURCES MAY BE INSUFFICIENT TO MANAGE THE DEMANDS IMPOSED BY OUR GROWTH.

WE DEPEND ON INDUSTRY RELATIONSHIPS.

WE MAY BE UNABLE TO PROTECT OUR PROPRIETARY TECHNOLOGY, INCLUDING THE
TECHNOLOGIES WE USE TO FURNISH THE UP-ARMORING OF HMMWVS.

WE MAY BE ADVERSELY AFFECTED BY APPLICABLE ENVIRONMENTAL LAWS AND REGULATIONS.

RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK

DELAWARE LAW MAY LIMIT POSSIBLE TAKEOVERS.

OUR CERTIFICATE OF INCORPORATION AUTHORIZES THE ISSUANCE OF SHARES OF BLANK
CHECK PREFERRED STOCK.

Our certificate of incorporation provides that our board of directors will
be authorized to issue from time to time, without further stockholder approval,
up to 5,000,000 shares of preferred stock in

THE MARKET PRICE FOR OUR COMMON STOCK IS VOLATILE.

WE MAY ISSUE A SUBSTANTIAL AMOUNT OF OUR COMMON STOCK IN CONNECTION WITH FUTURE
ACQUISITIONS AND THE SALE OF THOSE SHARES COULD ADVERSELY AFFECT OUR STOCK
PRICE.

OUR STOCK PRICE MAY BE ADVERSELY AFFECTED WHEN ADDITIONAL SHARES ARE SOLD.

OUR DEBT AGREEMENTS RESTRICT OUR ABILITY TO PAY DIVIDENDS OR MAKE OTHER
DISTRIBUTIONS TO OUR STOCKHOLDERS.

Our debt agreements, such as the indenture governing the 8 1/4% notes and
the senior credit facility, contain certain financial and other covenants that
limit, under certain circumstances, our ability to pay dividends or make other
distributions to our stockholders. We are permitted to pay dividends and make
other distributions to stockholders to the extent we satisfy the conditions,
including the financial and other covenants, contained in such documents.

WE HAVE A HIGH LEVEL OF DEBT.

Our high level of debt could have important consequences to you and to us.
For example:

o No payment of any kind may be made to our common stockholders without
first meeting our obligations under our senior credit facility and the
indenture governing our 8 1/4% notes;

o We may become more vulnerable to general adverse economic and industry
conditions and adverse changes in governmental regulations;

o We may have to dedicate a substantial portion of our cash flow from
operations to make payments required under our senior credit facility and
the 8 1/4% notes, reducing the availability of cash flow to fund future
capital expenditures, working capital, execution of our growth strategy,
research and development costs and other general corporate requirements;

o We may have limited ability to borrow additional funds, even when
necessary to maintain adequate liquidity; and

o The terms of our senior credit facility and the indenture governing the
8 1/4% notes will allow us to incur substantial amounts of additional
debt, subject to certain limitations. We might incur additional debt for
various reasons, including to pay for additional acquisitions that we may
make and assuming debt of companies that we may acquire.

RISKS RELATING TO THE DEBT SECURITIES

OUR SIGNIFICANT INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH,
AND PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER ANY DEBT SECURITIES WE
ISSUE.

We have a significant amount of indebtedness. Our significant indebtedness
could:

o make it more difficult for us to satisfy our obligations with respect to
any debt securities we issue;

o increase our vulnerability to general adverse economic and industry
conditions;

o require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, thereby reducing the
availability of our cash flow to fund working capital, capital
expenditures, acquisitions and investments and other general corporate
purposes;

o limit our flexibility in planning for, or reacting to, changes in our
business and the markets in which we operate;

o place us at a competitive disadvantage compared to our competitors that
have less debt; and

o limit, among other things, our ability to borrow additional funds.

The terms of the indenture governing the 8 1/4% notes and the senior
credit facility allow us to issue and incur additional debt upon satisfaction
of certain conditions. See "Description of Senior Subordinated Notes" for a
description of our 8 1/4% notes and the related indenture and "Description of
Senior Indebtedness" for a description of our senior credit facility. If new
debt is added to current debt levels, the related risks described above could
increase.

NOT ALL OF OUR SUBSIDIARIES MAY GUARANTEE OUR OBLIGATIONS UNDER ANY DEBT
SECURITIES WE ISSUE, AND THE ASSETS OF THE NON-GUARANTOR SUBSIDIARIES MAY NOT
BE AVAILABLE TO MAKE PAYMENTS ON ANY DEBT SECURITIES WE ISSUE.

Not all of our present and future subsidiaries may guarantee the debt
securities. Payments on the debt securities may only required to be made by us
and our subsidiary guarantors, if any. Our non-guarantor subsidiaries are
separate and distinct legal entities and have no obligation, contingent or
otherwise, to pay any amounts due pursuant to the debt securities or the
guarantees or to make any funds available therefor, whether by dividends,
loans, distributions or other payments. Any right that we or our subsidiary
guarantors have to receive any assets of any of the non-guarantor subsidiaries
upon the liquidation or reorganization of those subsidiaries, and the
consequent rights of the holders of debt securities to realize proceeds from
the sale of any of those subsidiaries' assets, will be effectively subordinated
to the claims of those subsidiaries' creditors, including trade creditors and
holders of debt of those subsidiaries.

In the event of a bankruptcy, liquidation or reorganization of any of the
non-guarantor subsidiaries, holders of their liabilities, including their trade
creditors, will be entitled to payment of their claims from the assets of those
subsidiaries before any assets are made available for distribution to us. As a
result, the debt securities will be effectively subordinated to all
indebtedness and other liabilities of the non-guarantor subsidiaries.

WE WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH TO SERVICE OUR INDEBTEDNESS AND
OUR ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS BEYOND OUR CONTROL.

Our ability to make payments on or refinance our debt, including any debt
securities we issue, will depend largely upon our future operating performance
and cash flow. Our future operating performance and cash flow are subject to
many factors, including general economic, financial, competitive, legislative,
regulatory and other factors that are beyond our control.

We cannot assure you that our business will generate cash flow from
operations in an amount sufficient to enable us to pay the interest and
principal on our debt, including any debt securities we issue, or to fund our
other liquidity needs. If we are unable to meet our debt service requirements,

we may have to renegotiate the terms of our debt. We cannot assure you that we
will be able to renegotiate or refinance any of our debt on commercially
reasonable terms or at all. In addition, prior to the repayment of any debt
securities we issue, we will be required to repay or refinance our senior
credit facility and, perhaps, any other senior debt we incur. Any new debt we
incur may have a shorter maturity than the debt securities. Payment of such
debt will reduce the amount of funds available for us to make payments on any
debt securities we issue.

If we are unable to refinance our debt or obtain new financing we would
have to consider other options, such as sales of certain assets to meet our
debt service obligations or diverting cash, if available, that would have been
used for other business purposes. These options may not be feasible or prove
adequate, and may also adversely affect our operations or the implementation of
our business plans. Our senior credit facility, the indenture governing the
8 1/4% notes, and the indenture governing any debt securities we issue may
restrict, or market or business conditions may limit, our ability to obtain
cash via asset sales or other financing transactions. Non-payment or other
non-compliance with our senior credit facility, the indenture governing the
8 1/4% notes or the indenture or the instruments governing any other debt we
issue could result in an event of default under our senior credit facility, the
indenture governing the 8 1/4% notes or the indenture or the instruments
governing any other debt we issue, which could also trigger an event of default
under the debt securities.

COVENANTS IN OUR DEBT AGREEMENTS RESTRICT OUR ACTIVITIES AND COULD ADVERSELY
AFFECT OUR BUSINESS.

Our debt agreements, such as the indenture governing the 8 1/4% notes and
the new senior credit facility, contain various covenants that limit our
ability and the ability of our restricted subsidiaries to engage in a variety
of transactions under certain circumstances, including:

o incurring additional debt;

o issuing preferred stock;

o paying dividends or making other distributions on, and redeeming or
repurchasing, capital stock;

o making investments or other restricted payments;

o entering into transactions with affiliates;

o engaging in sale and leaseback transactions;

o issuing stock of restricted subsidiaries;

o selling assets;

o creating liens on assets to secure debt; or

o effecting a consolidation or merger.

These covenants limit our operational flexibility and could prevent us
from taking advantage of business opportunities as they arise, growing our
business or competing effectively. In addition, our new senior credit facility
requires us to maintain specified financial ratios and satisfy other financial
condition tests. Our ability to meet these financial ratios and tests can be
affected by events beyond our control, and we cannot assure you that we will
meet these tests.

A breach of any of these covenants or other provisions in any of our debt
agreements could result in an event of default under that agreement, which if
not cured or waived, could result in such debt becoming immediately due and
payable. This, in turn, could cause our other debt to become due and payable as
a result of cross-acceleration provisions contained in the agreements governing
such other debt. In the event that some or all of our debt is accelerated and
becomes immediately due and payable, we may not have the funds to repay, or the
ability to refinance, all or any of such debt. In addition, in the event that
the debt securities become immediately due and payable, as a result of the
subordination provisions of any debt securities we issue, the holders of such

subordinated debt securities would not be entitled to receive any payment in
respect of such subordinated debt securities until all of our senior debt has
been paid in full.

A PUBLIC MARKET FOR THE DEBT SECURITIES MAY NOT DEVELOP.

There can be no assurance that a public market for any debt securities we
issue will develop or, if such a market develops, as to the liquidity of the
market. If a market were to develop, the debt securities could trade at prices
that may be higher or lower than their principal amount. We may not apply for
listing of any debt securities we issue on any securities exchange or for
quotation of such debt securities on any automated quotation system. If an
active public market does not develop or continue, the market price and
liquidity of any debt securities we issue may be adversely affected.

In addition, the liquidity of the trading market in the debt securities,
and the market price quoted for any debt securities we issue, may be adversely
affected by changes in the overall market for debt securities and by changes in
our financial performance or prospects or in the prospects for companies in our
industry generally. As a result, you cannot be sure that an active trading
market will develop for any debt securities we issue.

FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES, TO VOID
GUARANTEES AND REQUIRE HOLDERS OF DEBT SECURITIES TO RETURN PAYMENTS RECEIVED
FROM GUARANTORS.

If a bankruptcy case or lawsuit is initiated by unpaid creditors of any
guarantor, any debt represented by guarantees entered into by the guarantors
may be reviewed under the Federal bankruptcy law and comparable provisions of
state fraudulent transfer laws. Under these laws, a guarantee could be voided,
or claims in respect of the guarantee could be subordinated to certain
obligations of a guarantor if, among other things, the guarantor, at the time
it entered into the guarantee:

o received less than reasonably equivalent value or fair consideration for
entering into the guarantee; and

o either:

o was insolvent or rendered insolvent by reason of entering into a
guarantee; or

o was engaged in a business or transaction for which the guarantor's
remaining assets constituted unreasonably small capital; or

o intended to incur, or believed that it would incur, debts or contingent
liabilities beyond its ability to pay them as they become due.

In addition, any payment by a guarantor could be voided and required to be
returned to the guarantor or to a fund for the benefit of the guarantor's
creditors under those circumstances.

If a guarantee of a subsidiary were voided as a fraudulent conveyance or
held unenforceable for any other reason, holders of the debt securities would
be solely creditors of our company and creditors of our other subsidiaries that
have validly guaranteed any debt securities we issue. The debt securities then
would be effectively subordinated to all liabilities of the subsidiary whose
guarantee was voided.

The measures of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied in any proceeding to determine whether
a fraudulent transfer has occurred. Generally, however, a guarantor would be
considered insolvent if:

o the sum of its debts, including contingent liabilities, is greater than
the fair saleable value of all of its assets; or

o the present fair saleable value of its assets is less than the amount
that would be required to pay its probable liability on its existing
debts, including contingent liabilities, as they become absolute and
mature; or

o it could not pay its debts or contingent liabilities as they become due.

If the claims of the holders of any debt securities we issue against any
subsidiary were subordinated in favor of other creditors of the subsidiary, the
other creditors would be entitled to be paid in full before any payment could
be made on the debt securities. If one or more of the guarantees is voided or
subordinated, we cannot assure you that after providing for all prior claims
there would be sufficient assets remaining to satisfy the claims of the holders
of these debt securities.

Based upon financial and other information, we believe that any guarantees
will be incurred for proper proposes and in good faith and that we, and our
subsidiaries that will be guarantors, on a consolidated basis, will continue to
be solvent, will have sufficient capital for carrying on our business after the
issuance of any debt securities and will be able to pay our debts as they
mature. We cannot assure you, however, as to the standard a court would apply
in making these determinations or that a court would agree with our conclusions
in this regard.

THE COMPANY

We are a leading manufacturer and provider of personal protective
equipment and security products for law enforcement and military personnel,
armored commercial vehicles used by various government and civilian
organizations, armored military vehicles, armor kits for retrofit of military
vehicles, aircraft armor, aircraft safety products, survivability equipment
used by military aviators, and other technologies used to protect humans in a
variety of life-threatening or catastrophic situations. Our products and
systems are used domestically and internationally by military, law enforcement,
security and corrections personnel, as well as governmental agencies,
multinational corporations and individuals. Effective in the first quarter of
2004, we instituted a new segment reporting format to include three reportable
business divisions: the Aerospace & Defense Group, the Products Division and
the Mobile Security Division. The Aerospace & Defense Group was formed upon the
completion of our acquisition of Simula, Inc. on December 9, 2003. The
Aerospace & Defense Group also includes the military business, including armor
and blast protection systems for M1114 Up-Armored High Mobility Multi-Purpose
Wheeled Vehicles ("M1114 Up-Armored HMMWVs"), and other military vehicle armor
programs, which previously were included in the Mobile Security Division. The
Aerospace & Defense Group also includes the small arms protective insert
("SAPI") plate produced by our Protech subsidiary in Pittsfield, Massachusetts,
which was previously reported as part of the Products Division. The historical
results of these businesses have been reclassified as part of the Aerospace &
Defense Group. This reporting change was made to better reflect management's
approach to operating and directing the businesses, and, in certain instances,
to align financial reporting with our market and customer segments.

Aerospace & Defense. Our Aerospace & Defense Group supplies human safety
and survival systems to the U.S. military, and major Aerospace & Defense prime
contractors. Our core markets are military aviation safety, military personnel
safety, and land and marine safety. Under the brand name O'Gara-Hess &
Eisenhardt, we are the sole-source provider to the U.S. military of the armor
and blast protection systems for M1114 Up-Armored HMMWVs. We are also under
contract with the U.S. Army to provide spare parts, logistics and ongoing field
support services for the currently installed base of M1114 Up-Armored HMMWVs.
Additionally, we provide blast and ballistic protection kits for the standard
High Mobility Multi-Purpose Wheeled Vehicles, which are installed on existing
equipment in the field. Our Aerospace & Defense Group is also subcontracted to
develop a ballistic and blast protected armored and sealed truck cab for the
High Mobility Artillery Rocket System, a program recently transitioned by the
U.S. Army and U.S. Marine Corps from developmental to a low rate of initial
production, deliveries of which commenced in 2003. We also supply armor
sub-systems for other tactical wheeled vehicles. Through Simula, one of our
wholly-owned subsidiaries, we provide military helicopter seating systems,
helicopter cockpit airbag systems, aircraft and land vehicle armor kits, body
armor and other protective equipment for military personnel, emergency bailout
parachutes and survival ensembles worn by military aircrew. The primary
customers for our products are the U.S. Army, U.S. Marine Corps, Boeing, and
Sikorsky Aircraft. Most of Simula's aviation safety products are provided on a
sole source basis. The U.S. armed forces have adopted ceramic body armor as a
key element of the protective ensemble worn by our troops in Iraq and

Afghanistan. Simula was the developer of this specialized product called SAPI,
and continues to be a prominent supplier to the U.S. military. We believe the
Aerospace & Defense Group has supplied approximately 37% of all SAPI plates. We
also provide ceramic body armor from our Protech subsidiary based in
Pittsfield, Massachusetts.

Products. Our Products Division manufactures and sells a broad range of
high quality security products, equipment and related consumable items, such as
concealable and tactical body armor, hard armor, duty gear, less-lethal
munitions, anti-riot products, police batons, emergency lighting products,
forensic products, firearms accessories, weapon maintenance products, foldable
ladders and specialty gloves. Our products are marketed under brand names that
are well established in the military and law enforcement communities such as
AMERICAN BODY ARMOR, B-SQUARE (Registered Trademark), BREAK FREE (Registered
Trademark), CLP (Registered Trademark), DEFENSE TECHNOLOGY/FEDERAL LABORATORIES
(Registered Trademark), DEF-TEC PRODUCTS (Registered Trademark), DISTRACTION
DEVICE (Registered Trademark), FEDERAL LABORATORIES (Registered Trademark),
FERRET (Registered Trademark), FIRST DEFENSE (Registered Trademark), IDENTICATOR
(Registered Trademark), IDENTIDRUG (Registered Trademark), LIGHTNING POWDER
(Registered Trademark), MONADNOCK (Registered Trademark), NIK (Registered
Trademark), PROTECH, QUIKSTEP LADDERS, PORTAL LADDERS, QUIKSHIELD, SAFARILAND
(Registered Trademark), SPEEDFEED (Registered Trademark), 911EP (Registered
Trademark) and DESIGN. We sell our products through a network of over 350
distributors and sales agents, including approximately 200 in the United States.
Our extensive distribution capabilities and commitment to customer service and
training have enabled us to become a leading provider of security equipment to
law enforcement agencies.

Mobile Security. Our Mobile Security Division manufactures and installs
ballistic and blast protected armoring systems for privately owned vehicles as
well as some military vehicles for European based militaries. Under the brand
name O'GARA-HESS & EISENHARDT ARMORING COMPANY (Registered Trademark) , we
armor a variety of privately owned commercial vehicles, including limousines,
sedans, sport utility vehicles, commercial trucks and cash-in-transit vehicles,
to protect against varying degrees of ballistic and blast threats. Our
customers in this business include international corporations and high net
worth individuals. In addition, we supply ballistic and blast protected
armoring systems to U.S. federal law enforcement and intelligence agencies and
foreign heads of state.

RECENT DEVELOPMENTS

ZYLON (Registered Trademark) INVESTIGATION AND LITIGATION

In the Fall of 2003, following the assertions made by Second Chance,
several law enforcement associations raised this issue to the U.S. Attorney
General ("USAG"), who then asked the U.S.

Department of Justice ("DOJ") through the NIJ to investigate these concerns and
attempt to clarify the issues. We have and continue to support the Attorneys
General's directive and investigation.

TAX MATTERS

On October 18, 2002, we were notified by the Internal Revenue Service
("IRS") that our tax return for the tax year ended December 31, 2000 had been
selected for examination. Further, on January 30, 2003 we were notified that
our tax return for the tax year ended December 31, 2001 had been selected for
examination. The IRS examined our U.S. federal income tax returns for the
taxable years 2000 and 2001 and its examination concluded in April 2004. The
IRS' examination of our tax returns for the taxable years 2000 and 2001 did not
result in any material adverse effect on our financial statements.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents heretofore filed by us with the Commission
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), are hereby incorporated by reference in this prospectus, except as
superseded or modified herein:

(a) Our annual report on Form 10-K for the fiscal year ended
December 31, 2003;

(b) Our annual report on Form 10-K/A for the fiscal year ended
December 31, 2003;

(d) Our quarterly report on Form 10-Q for the period ended March 31,
2004;

(e) Our current report on Form 8-K/A, Date of Event -- December 9,
2003, filed on January 22, 2004;

(f) Our current report on Form 8-K, Date of Event -- March 22, 2004,
filed on March 22, 2004;

(g) Our definitive proxy statement on Schedule 14A filed on April
29, 2004; and

(h) The description of our common stock contained in our
registration statement on Form 8-A filed on April 29, 1999,
including any amendments or reports filed for the purpose of
updating that description.

All of such documents are on file with the Commission. In addition, all
documents filed by Armor Holdings, Inc. pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act, subsequent to the date of this prospectus and
prior to termination of the offering are incorporated by reference in this
prospectus and are a part hereof from the date of filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this prospectus to the extent that a statement contained herein or in any
subsequently filed document that is also incorporated by reference herein
modifies or replaces such statement. Any statements so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this prospectus.

This prospectus incorporates herein by reference important business and
financial information about us that is not included in or delivered with this
prospectus. This information is available to you without charge upon written or
oral request. If you would like a copy of any of this information, please
submit your request to Armor Holdings, Inc., 1400 Marsh Landing Parkway, Suite
112, Jacksonville, Florida 32250, Attention: Corporate Secretary, or call (904)
741-5400.

FORWARD-LOOKING STATEMENTS

Certain statements we make in this prospectus or in the documents
incorporated by reference, and other written or oral statements by us or our
authorized officers on our behalf, may constitute "forward-looking statements"
within the meaning of the Federal securities laws. Forward-looking statements
include, without limitation, statements concerning our plans, objectives,
goals, strategies, future events, future revenues or performance, capital
expenditures, financing needs, plans or intentions relating to acquisitions,
our competitive strengths and weaknesses, our business strategy and the trends
we anticipate in the industry and economies in which we operate and other
information that is not historical information. Words or phrases such as
"estimates," "expects," "anticipates," "projects," "plans," "intends,"
"believes" and variations of such words or similar expressions are intended to
identify forward-looking statements. All forward-looking statements, including,
without limitation, our examination of historical operating trends, are based
upon our current expectations and various assumptions. Our expectations,
beliefs and projections are expressed in good faith, and we believe there is a
reasonable basis for them, but we cannot assure you that our expectations,
beliefs and projections will be realized.

Before you invest in the securities described in this prospectus and any
prospectus supplement hereto, you should be aware that the occurrence of the
events described in the above section captioned "Risk Factors" and otherwise
discussed elsewhere in this prospectus, a prospectus supplement hereto or in
materials incorporated in this prospectus by reference to our other filings
with the Commission, could have a material adverse affect on our business,
financial condition and results of operations.

The data included in this prospectus regarding markets and ranking,
including the size of certain markets and our position and the position of our
competitors within these markets, are based on

independent industry publications, reports of government agencies or other
published industry sources or our estimates based on management's knowledge and
experience in the markets in which we operate. Our estimates have been based on
information provided by customers, suppliers, trade and business organizations
and other contacts in the markets in which we operate. We believe these
estimates to be accurate as of the date of this prospectus. However, this
information may prove to be inaccurate because of the method by which we
obtained some of the data for our estimates or because this information cannot
always be verified with complete certainty due to the limits on the
availability and reliability of raw data, the voluntary nature of the data
gathering process and other limitations and uncertainties inherent in a survey
of market size. As a result, you should be aware that market, ranking and other
similar data included in this prospectus and any prospectus supplement hereto,
and estimates and beliefs based on that data, may not be reliable.

USE OF PROCEEDS

Unless we indicate otherwise in the applicable prospectus supplement, we
intend to use the net proceeds from the sale of the securities for general
corporate purposes, which may include, but are not limited to, working capital,
capital expenditures and other potential acquisitions. We will set forth in the
applicable prospectus supplement our intended use for the net proceeds received
from our sale of any securities. We will not receive any of the proceeds from
the sale of our common stock by the selling stockholders.

RATIO OF EARNINGS TO FIXED CHARGES

Our ratio of earnings to fixed charges for each of the five years in the
period ended
December 31, 2003 and for the quarter ended March 31, 2004 are set forth below:

FOR THE QUARTER
FOR THE YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------------------ ----------------
1999 2000 2001 2002 2003 2004
--------- -------- -------- --------- -------- ----------------

Ratio of earnings to fixed charges 23.8 7.6 5.7 14.9 6.3 9.8
==== === === ==== === ===

The ratios of earnings to fixed charges are calculated as follows:

(income before income taxes and minority interest) + (fixed charges) -
(capitalized interest)
--------------------------------------------------------------------------------
(fixed charges)

DESCRIPTION OF THE DEBT SECURITIES

This prospectus describes certain general terms and provisions of our debt
securities. When we offer to sell a particular series of debt securities, we
will describe the specific terms of the series in a supplement to this
prospectus. We will also indicate in the supplement whether the general terms
and provisions described in this prospectus apply to a particular series of
debt securities.

The debt securities are to be issued under an indenture which is subject
to and governed by the Trust Indenture Act of 1939, as amended (the "TIA"), and
may be supplemented or amended from time to time following its execution. The
indenture, and any supplemental indentures, will be subject to, and governed
by, the TIA. The form of indenture will be filed as an exhibit to a
pre-effective amendment to this prospectus. We have not yet executed an
indenture. Prior to issuing any debt securities, we will be required to select
a trustee for the indenture, qualify the trustee or trustees under the TIA, and
execute the indenture.

The form of the indenture will give us broad authority to set the
particular terms of each series of debt securities, including the right to
modify certain of the terms contained in the indenture. The particular terms of
a series of debt securities and the extent, if any, to which the particular
terms of the issue modify the terms of the form of indenture will be described
in the prospectus supplement relating to the debt securities.

The statements made hereunder relating to the indenture and the debt
securities to be issued thereunder are summaries of certain provisions thereof
and do not purport to be complete and are subject to, and are qualified in
their entirety by reference to, all provisions of the indenture (including
those terms made a part of the indenture by reference to the TIA) and such debt
securities.

GENERAL

The terms of each series of debt securities will be detailed or determined
in the manner provided in the indenture and any applicable supplemental
indenture. The particular terms of each series of debt securities will be
described in a prospectus supplement relating to the series, including any
pricing supplement.

We will set forth in a prospectus supplement (including any pricing
supplement) relating to any series of debt securities being offered, the
initial offering price, the aggregate principal amount and the following terms
of the debt securities, if applicable:

o the title of the debt securities;

o the price or prices (expressed as a percentage of the aggregate
principal amount) at which we will sell the debt securities;

o any limit on the aggregate principal amount of the debt securities;

o the date or dates on which we will pay the principal on the debt
securities;

o the rate or rates (which may be fixed or variable) per annum or the
method used to determine the rate or rates (including any commodity,
commodity index, stock exchange index or financial index) at which the
debt securities will bear interest, the date or dates from which interest
will accrue, the date or dates on which interest will commence and be
payable and any regular record date for the interest payable on any
interest payment date;

o the place or places where principal of, premium, and interest on the
debt securities will be payable;

o whether the debt securities rank as senior subordinated debt securities
or subordinated debt securities;

o the terms of any guarantee of any debt securities;

o the terms and conditions upon which we may redeem the debt securities;

o any obligation we have to redeem or purchase the debt securities
pursuant to any sinking fund or analogous provisions or at the option of
a holder of debt securities;

o the dates on which and the price or prices at which we will repurchase
the debt securities at the option of the holders of debt securities and
other detailed terms and provisions of these repurchase obligations;

o the denominations in which the debt securities will be issued, if other
than denominations of $1,000 and any integral multiple thereof;

o whether the debt securities will be issued in the form of certificated
debt securities or global debt securities;

o the portion of principal amount of the debt securities payable upon
declaration of acceleration of the maturity date, if other than the
principal amount;

o the currency of denomination of the debt securities;

o the designation of the currency, currencies or currency units in which
payment of principal of, premium and interest on the debt securities will
be made;

o if payments of principal of, premium or interest on the debt securities
will be made in one or more currencies or currency units other than that
or those in which the debt securities are denominated, the manner in
which the exchange rate with respect to these payments will be
determined;

o the manner in which the amounts of payment of principal of, premium or
interest on the debt securities will be determined, if these amounts may
be determined by reference to an index based on a currency or currencies
other than that in which the debt securities are denominated or
designated to be payable or by reference to a commodity, commodity index,
stock exchange index or financial index;

o whether, the ratio at which and the terms and conditions upon which, if
any, the debt securities will be convertible into or exchangeable for our
common stock or our other securities or securities of another person;

o any provisions relating to any security provided for the debt
securities;

o any addition to or change in the events of default described in this
prospectus or in the indenture with respect to the debt securities and
any change in the acceleration provisions described in this prospectus or
in the indenture with respect to the debt securities;

o any addition to or change in the covenants described in this prospectus
or in the indenture with respect to the debt securities;

o any other terms of the debt securities, which may modify or delete any
provision of the indenture as it applies to that series; and

o any depositaries, interest rate calculation agents, exchange rate
calculation agents or other agents with respect to the debt securities.

TRANSFER AND EXCHANGE

A holder will be able to transfer or exchange debt securities in
accordance with the indenture. The registrar and the trustee may require a
holder, among other things, to furnish appropriate endorsements and transfer
documents in connection with a transfer of debt securities. Holders may be
required to pay all taxes due on transfer.

AMENDMENT, SUPPLEMENT AND WAIVER

Subject to certain exceptions, the indenture and the debt securities may
be amended or supplemented with the consent of the holders of at least a
majority in principal amount of the series then outstanding (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for debt securities), and any existing default or compliance
with any provision of the indenture relating to a particular series of debt
securities may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding debt securities (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for, debt securities).

Without the consent of each holder affected, an amendment or waiver may
not, among other things, (with respect to any debt securities held by a
non-consenting holder):

o reduce the principal amount of debt securities whose holders must
consent to an amendment, supplement or waiver;

o reduce the principal of or change the stated maturity of any debt
security;

o reduce the rate of or change the time for payment of interest on any
debt security;

o waive a default in the payment of principal or interest on the debt
securities; and

o make any debt security in money other than that stated in the debt
security.

The right of any holder to participate in any consent required or sought
pursuant to any provision of the indenture (and our obligation to obtain any
such consent otherwise required from such holder) may be subject to the
requirement that such holder shall have been the holder of record of any debt
securities with respect to which such consent is required or sought as of a
date identified by the trustee in a notice furnished to holders in accordance
with the terms of the indenture.

EVENTS OF DEFAULT AND REMEDIES

An event of default with respect to any series of debt securities will be
defined in the indenture as being, among other things, default, after
applicable cure periods, if any, in payment of the principal of or premium, if
any, on any of the debt securities of such series; default, after applicable
cure periods, if any, in payment of any installment of interest on any debt
security of such series; default by us, after applicable cure periods, if any,
after notice in the observance or performance of other covenants in the
indenture relating to such series; and certain events involving our bankruptcy,
insolvency or reorganization.

Subject to certain limitations, the indenture will provide that the
holders of not less than a certain specified percentage in principal amount of
such series of debt securities then outstanding may, among other things, direct
the trustee in its exercise of any trust or power. However, the holders of a
majority in principal amount of the debt securities of such series then
outstanding by written notice to the trustee and us may waive any default with
respect to such series of debt securities.

DEFEASANCE OF INDENTURE

Subject to certain limitations, we may, at our option and at any time,
elect to have certain of our obligations discharged with respect to the
outstanding debt securities by, among other things, irrevocably depositing with
the trustee, in trust, for the benefit of the holders of the debt securities,
cash, United States government securities, or a combination of cash in U.S.
dollars and United States government securities, in amounts as will be
sufficient, in the opinion of an independent firm of certified public
accountants, to pay the principal of, and interest and premium, if any, on the
outstanding debt securities on the stated maturity or on the applicable
redemption date, as the case may be.

CONCERNING THE TRUSTEE

If the trustee becomes a creditor of Armor Holdings or any subsidiary
guarantor, the indenture will limit its right to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The trustee will be permitted to engage in
other transactions; however, if it acquires any conflicting interest it must
eliminate such conflict within an appropriate time period, apply to the
Commission for permission to continue or resign.

The holders of a majority in principal amount of the then outstanding debt
securities will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the trustee,
subject to certain exceptions. The indenture will provide that in case an event
of default occurs and is continuing, the trustee will be required, in the
exercise of its power, to use the degree of care of a prudent person in the
conduct of its own affairs. Subject to such provisions, the trustee will be
under no obligation to exercise any of its rights or powers under the indenture
at the request of any holder of debt securities, unless such holder has offered
to the trustee security and indemnity satisfactory to it against any loss,
liability or expense.

DESCRIPTION OF CAPITAL STOCK

COMMON STOCK

We have 50,000,000 shares of common stock, par value $0.01 per share,
authorized pursuant to our restated certificate of incorporation, as amended.
If our stockholders approve a proposed amendment to our Certificate of
Incorporation, as amended, at our next annual meeting of stockholders scheduled
to be held on June 22, 2004, we will increase the number of our authorized
shares of common stock from 50,000,000 shares to 75,000,000 shares, par value
$0.01 per share. The holders of our common stock are entitled to one vote for
each share on all matters voted on by our stockholders, including the election
of directors. No holders of common stock have any right to cumulative voting.
Subject to any preferential rights of any outstanding series of preferred stock
created by our board of directors and certain financial and other covenants
contained in our senior credit facility and indenture governing our 8 1/4%
notes, the holders of our common stock will be entitled to such dividends as
may be declared from time to time by our board of directors from funds legally
available therefor. We are permitted to pay dividends and make other
distributions to stockholders to the extent we satisfy the conditions,
including the financial and other covenants, contained in our senior credit
facility and indenture governing our 8 1/4% notes.

In the event of a liquidation, dissolution or winding up, the holders of
our common stock are entitled to share ratably in all assets remaining after
payment of liabilities and the liquidation preference and other amounts owed to
the holders of our preferred stock. Holders of common stock have no preemptive
rights or rights to convert their common stock into any other securities. There
are no redemption or sinking fund provisions applicable to the common stock.

Our common stock is listed on the New York Stock Exchange under the symbol
"AH."

PREFERRED STOCK

Our restated certificate of incorporation, as amended, authorizes our
board of directors to issue, without further stockholder action, up to
5,000,000 shares of preferred stock, in one or more series,

having a par value of $0.01 per share. The board of directors is authorized to
fix for each such series the designation and relative rights (including, if
any, conversion, participation, voting and dividend rights and stated
redemption and liquidation values), preferences, limitations and restrictions,
as are stated in the resolutions adopted by the board of directors and as are
permitted by General Corporation Law of the State of Delaware.

DESCRIPTION OF WARRANTS

We may issue warrants to purchase debt securities, shares of preferred
stock, or shares or common stock. We may issue warrants independently or
together with any other securities we offer pursuant to a prospectus supplement
and the warrants may be attached to or separate from the securities. We will
issue each series of warrants under a separate warrant agreement that we will
enter into with a bank or trust company, as warrant agent. We will set forth
additional terms of the warrants and the applicable warrant agreements in the
applicable prospectus supplement.

Each warrant will entitle the holder to purchase the principal amount of
debt securities or the number of shares of preferred stock or common stock at
the exercise price set forth in, or calculable as set forth in, the applicable
prospectus supplement. The exercise price may be subject to adjustment upon the
occurrence of certain events, as set forth in the applicable prospectus
supplement. After the close of business on the expiration date of the warrant,
unexercised warrants will become void. The place or places where, and the
manner in which, warrants may be exercised shall be specified in the applicable
prospectus supplement.

The applicable prospectus supplement will describe the following terms,
where applicable, of the warrants in respect of which this prospectus is being
delivered:

o the title of the warrants;

o the aggregate number of the warrants;

o the price or prices at which the warrants will be issued;

o the designation, aggregate principal amount and terms of the securities
issuable upon exercise of the warrants and the procedures and conditions
relating to the exercise of the warrants;

o the designation and terms of any related securities with which the
warrants will be issued, and the number of warrants that will be issued
with each security;

o the date, if any, on and after which the warrants and the related debt
securities will be separately transferable;

o the price at which the securities purchasable upon exercise of the
warrants may be purchased;

o the date on which the right to exercise the warrants will commence, and
the date on which the right will expire;

o the maximum or minimum number of warrants which may be exercised at any
time;

o a discussion of certain U.S. federal income tax considerations
applicable to the exercise of the warrants; and

o any other terms of the warrants and terms, procedures and limitations
relating to the exercise of the warrants.

Holders may exchange warrant certificates for new warrant certificates of
different denominations, and may exercise warrants at the corporate trust
office of the warrant agent or any other office indicated in the applicable
prospectus supplement. Prior to the exercise of their warrants, holders of
warrants will not have any of the rights of holders of the securities
purchasable upon the exercise and will not be entitled to payments of
principal, premium or interest on the securities purchasable upon the exercise.

DESCRIPTION OF SENIOR INDEBTEDNESS

On August 12, 2003, we terminated our prior credit facility and entered
into a new secured revolving credit facility with Bank of America, N.A.,
Wachovia Bank, National Association and a syndicate of other financial
institutions arranged by Banc of America Securities LLC. The new credit
facility consists of a five-year revolving credit facility and, among other
things, provides for (i) total maximum borrowings of $60 million, (ii) a $25
million sub-limit for the issuances of standby and commercial letters of
credit, (iii) a $5 million sub-limit for swing-line loans, and (iv) a $5
million sub-limit for multi-currency borrowings. All borrowings under the new
credit facility will bear interest at either (i) a rate equal to LIBOR, plus an
applicable margin ranging from 1.125% to 1.625%, (ii) an alternate base rate
which will be the higher of (a) the Bank of America prime rate and (b) the
Federal Funds rate plus .50%, or (iii) with respect to foreign currency loans,
a fronted offshore currency rate, plus an applicable margin ranging from 1.125%
to 1.625%, depending on certain conditions. The new credit facility is
guaranteed by certain of our direct and indirect domestic subsidiaries and is
secured by, among other things (i) a pledge of all of the issued and
outstanding shares of stock or other equity interests of certain of our direct
and indirect domestic subsidiaries, (ii) a pledge of 65% of the issued and
outstanding voting shares of stock or other voting equity interests of certain
of our direct and indirect foreign subsidiaries, (iii) a pledge of 100% of the
issued and outstanding nonvoting shares of stock or other nonvoting equity
interests of certain of our direct and indirect foreign subsidiaries, and (iv)
a first priority perfected security interest on certain of our domestic assets
and certain domestic assets of certain of our direct and indirect subsidiaries
that will become guarantors of our obligations under the new credit facility,
including, among other things, accounts receivable, inventory, machinery,
equipment, certain contract rights, intellectual property rights and general
intangibles. As of the date of this prospectus, we are in compliance with all
of our negative and affirmative covenants. On January 9, 2004, we amended our
credit facility to allow us to make open market purchases of publicly-traded
securities subject to certain limitations contained in the credit facility. In
addition, on March 29, 2004, we also amended our credit facility to allow us to
pay dividends subject to certain limitations contained in the credit facility.

DESCRIPTION OF SENIOR SUBORDINATED NOTES

On August 12, 2003 we closed a private placement of $150,000,000 aggregate
principal amount of the 8 1/4% notes. The 8 1/4% notes are guaranteed by all of
our domestic subsidiaries on a senior subordinated basis. If we create or
acquire a new domestic subsidiary, it will also guarantee the 8 1/4% notes
unless we designate the subsidiary as an "unrestricted subsidiary" under the
indenture governing the 8 1/4% notes. We received approximately $147.5 million
of net proceeds from the sale of the 8 1/4% notes. We used $15.0 million of the
net proceeds to repay all of the outstanding amounts under our Amended and
Restated Credit Agreement, dated as of August 22, 2001, $110.5 million of the
net proceeds to acquire Simula, Inc. and retire Simula's outstanding
indebtedness, and $7.5 million of the net proceeds to acquire Hatch Imports,
Inc. We intend to use the remaining net proceeds of the offering to fund future
acquisitions, repay a portion of our outstanding debt and for general corporate
purposes, including the funding of working capital and capital expenditures. On
March 29, 2004, we completed a registered exchange offer relating to the 8 1/4%
notes pursuant to which we exchanged all issued and outstanding 8 1/4% notes
for new 8 1/4% notes registered with the Commission.

The 8 1/4% notes are our unsecured senior subordinated obligations and
rank junior in right of payment to our existing and future senior debt. The
guarantees of the 8 1/4% notes, which are given by almost all of our domestic
subsidiaries, rank junior in right of payment to all existing and future senior
debt of such subsidiaries. In addition, the 8 1/4% notes are effectively
subordinated to all existing and future debt and other liabilities (including
trade payables) of our non-guarantor subsidiaries. The 8 1/4% notes and the
guarantees rank equal in right of payment with any of our and our subsidiary
guarantors' future senior subordinated debt. Neither we nor our subsidiary
guarantors currently have any senior subordinated debt outstanding other than
the 8 1/4% notes.

We may redeem some or all of the 8 1/4% notes at any time on or after
August 15, 2008, at redemption prices set forth in the indenture for the 8 1/4%
notes. In addition, at any time prior to

August 15, 2006, we may redeem up to 35% of the 8 1/4% notes from the proceeds
of certain sales of our equity securities at 108.25% of the principal amount,
plus accrued and unpaid interest, if any, to the date of redemption. We may
make that redemption only if, after the redemption, at least 65% of the
aggregate principal amount of the 8 1/4% notes remains outstanding and the
redemption occurs within 60 days of the closing of the equity offering.

Upon the occurrence of a change of control, we must offer to repurchase
the 8 1/4% notes at 101% of the principal amount of the notes, plus accrued and
unpaid interest to the date of repurchase.

The indenture governing the 8 1/4% notes contains certain covenants
limiting our ability and the ability of our restricted subsidiaries to, under
certain circumstances:

o incur additional debt;

o issued preferred stock;

o prepay subordinated indebtedness;

o pay dividends or make other distributions on, redeem or repurchase,
capital stock;

o make investments or other restricted payments;

o enter into transactions with affiliates;

o engage in sale and leaseback transactions;

o issue stock of restricted subsidiaries

o sell all, or substantially all, of our assets;

o create liens on assets to secure debt; or

o effect a consolidation or merger.

These covenants are subject to important exceptions and qualifications as
described in the indenture for the 8 1/4% notes.

SELLING STOCKHOLDERS

Up to 1,000,000 shares of our common stock being offered by this
prospectus may be offered by certain selling stockholders, named below.

The following table sets forth the names of selling stockholders who may
offer their common stock pursuant to this prospectus and their relationship to
Armor Holdings. If and when shares of common stock are to be offered and sold
by one or more selling stockholders, the relevant prospectus supplement will
identify the selling stockholders selling in that offering and their
relationship to Armor Holdings as well as the number of shares then owned, and
to be offered, by such selling stockholders, and the percentage of common stock
owned after the completion of the offering by each selling stockholder.

BENEFICIAL
OWNERSHIP
SHARES BEFORE BENEFICIAL OWNERSHIP
BEING OFFERING AFTER OFFERING
NAME OFFERED AMOUNT (1) PERCENTAGE (2) AMOUNT PERCENTAGE
--------------------------------- ------------ ------------ ---------------- ----------- -----------

Warren B. Kanders (3) 320,000 2,515,655 8.7% 2,195,655 7.1%
Robert R. Schiller (4) 320,000 283,005 1.0% 0 *
Stephen E. Croskrey (5) 100,000 258,005 * 158,005 *
Nicholas Sokolow (6) 30,000 212,450 * 182,450 *
Burtt R. Ehrlich (7) 30,000 150,025 * 120,025 *
Thomas W. Strauss (8) 30,000 141,500 * 111,500 *
Glenn J. Heiar (9) 50,000 51,500 * 1,500 *
Deborah A. Zoullas (10) 15,000 19,000 * 4,000 *
Robert F. Mecredy (11) 60,000 17,878 * 0 *
Gary Allen (12) 45,000 45,132 * 132 *
-------
Selling stockholders as a group 1,000,000

* Less than 1%.

(1) As used in this table, a beneficial owner of a security includes any
person who, directly or indirectly, through contract, arrangement,
understanding, relationship or otherwise has or shares (a) the power to
vote, or direct the voting of, such security or (b) investment power
which includes the power to dispose, or to direct the disposition of,
such security. In addition, a person is deemed to be the beneficial owner
of a security if that person has the right to acquire beneficial
ownership of such security within 60 days.

(2) Percent is based on 28,626,377 shares of common stock outstanding as of
May 19, 2004.

(3) Mr. Kanders is Chairman of the Board and Chief Executive Officer of Armor
Holdings, Inc. Of such shares, Kanders Florida Holdings, Inc., of which
Mr. Kanders is the sole stockholder and sole director, owns 2,098,395
shares. Includes options to purchase 412,500 shares of common stock.
Excludes unvested restricted stock awards of 124,288 shares and vested
deferred restricted stock awards of 200,000 shares granted to Mr. Kanders
over which Mr. Kanders does not have voting or dispositive power and
unvested options to purchase 935,000 shares of common stock. Also
includes 4,760 shares held for the benefit of Mr. Kanders' children.

(4) Mr. Schiller is President and Chief Operating Officer of Armor Holdings,
Inc. Includes options to purchase 275,000 shares of common stock.
Excludes unvested restricted stock awards of 112,144 shares and vested
deferred performance stock awards of 150,000 shares granted to Mr.
Schiller over which Mr. Schiller does not have voting or dispositive
power and unvested options to purchase 350,000 shares of common stock.

(5) Mr. Croskrey is President and Chief Executive Officer of Armor Holdings
Products Division. Includes options to purchase 220,000 shares of common
stock. Excludes unvested options to purchase 100,000 shares of common
stock and unvested restricted stock awards of 4,940 shares granted to Mr.
Croskrey over which Mr. Croskrey does not have voting or dispositive
power.

(6) Mr. Sokolow is a director of Armor Holdings, Inc. Includes options to
purchase 131,250 shares of common stock. Excludes unvested options to
purchase 3,750 shares of common stock. Also includes 60,000 shares owned
by S.T. Investors Fund, LLC, a limited liability company of which Mr.
Sokolow is a member, 10,000 shares owned by Mr. Sokolow's profit sharing
plan and 11,200 shares held for the benefit of Mr. Sokolow's children and
of which Mr. Sokolow disclaims beneficial ownership.

(7) Mr. Ehrlich is a director of Armor Holdings, Inc. Includes options to
purchase 55,125 shares of common stock. Excludes unvested options to
purchase 3,375 shares of common stock. Also includes 5,000 shares owned
by Mr. Ehrlich's children and 6,500 shares in trust for the benefit of
his children, of which Mr. Ehrlich's spouse is trustee, of which he
disclaims beneficial ownership. Also includes 400 shares owned by Mr.
Ehrlich's spouse's individual retirement account of which Mr. Ehrlich
disclaims beneficial ownership.

(8) Mr. Strauss is a director of of Armor Holdings, Inc. Includes options to
purchase 129,000 shares of common stock. Excludes unvested options to
purchase 3,000 shares of common stock.

(9) Mr. Heiar is Chief Financial Officer of Armor Holdings, Inc. Includes
options to purchase 40,000 shares of common stock. Excludes unvested
options to purchase 150,000 shares of common stock and unvested
restricted stock awards of 5,020 over which Mr. Heiar does not have
voting or dispositive power.

(10) Ms. Zoullas is a director of Armor Holdings, Inc. Includes options to
purchase 19,000 shares of common stock. Excludes unvested options to
purchase 23,000 shares of common stock.

(11) Mr. Mecredy is President of the Aerospace & Defense Group. Includes
options to purchase 16,666 shares of common stock. Excludes unvested
restricted stock awards of 6,100 shares over which Mr. Mecredy does not
have voting or dispositive power. Excludes unvested options to acquire
108,334 shares of common stock.

(12) Mr. Allen is the General Manager of the Mobile Security Division.
Includes options to purchase 41,666 shares of common stock. Excludes
unvested options to purchase 33,334 shares of common stock and unvested
restricted stock awards to purchase 29,500 shares of common stock over
which Mr. Allen does not have voting or dispositive power.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

PLAN OF DISTRIBUTION

We and any selling stockholder may sell securities to or through
underwriters and also may sell securities directly to purchasers or through
agents. We will name any underwriter or agent involved in the offer and sale of
securities in the applicable prospectus supplement.

We and any selling stockholder may distribute the securities from time to
time in one or more transactions:

o at a fixed price or prices, which may be changed;

o at market prices prevailing at the time of sale;

o at prices related to such prevailing market prices; or

o at negotiated prices.

We and any selling stockholder may also, from time to time, authorize
dealers, acting as our agents, to offer and sell securities upon the terms and
conditions set forth in the applicable prospectus supplement. In connection
with the sale of securities, we and any selling stockholder, or the purchasers
of securities for whom the underwriters may act as agents, may compensate
underwriters in the form of discounts, concessions or commissions. Underwriters
may sell the securities to or through dealers, and those dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters and/or commissions from the purchasers for whom they may act as
agent. Underwriters, dealers and agents participating in the distribution of
securities may be deemed to be underwriters under the Securities Act, and any
discounts or commissions they receive from us or any stockholder and any profit
they realize on resale of the securities may be deemed to be underwriting
discounts and commissions under the Securities Act. We will describe in the
applicable prospectus supplement any compensation we or any stockholder pay to
underwriters or agents in connection with the offering of securities, and any
discounts, concessions or commissions allowed by underwriters to participating
dealers.

We and any selling stockholder may enter into agreements to indemnify
underwriters, dealers and agents who participate in the distribution of
securities against certain liabilities, including liabilities under the
Securities Act.

To facilitate the offering of securities, certain persons participating in
the offering may engage in transactions that stabilize, maintain or otherwise
affect the price of the securities. This may include over-allotments or short
sales of the securities, which involve the sale by persons participating in the
offering of more securities than we sold to them. In these circumstances, these
persons would cover such over-allotments or short positions by making purchases
in the open market or by exercising their over-allotment option, if any. In
addition, these persons may stabilize or maintain the price of the securities
by bidding for or purchasing securities in the open market or by imposing
penalty bids,

whereby selling concessions allowed to dealers participating in the offering
may be reclaimed if securities sold by them are repurchased in connection with
stabilization transactions. The effect of these transactions may be to
stabilize or maintain the market price of the securities at a level above that
which might otherwise prevail in the open market. These transactions may be
discontinued at any time.

Certain of the underwriters, dealers or agents and their associates may
engage in transactions with and perform services for us in the ordinary course
of our business.

We may enter into derivative transactions with third parties, or sell
securities not covered by this prospectus to third parties in privately
negotiated transactions. If the applicable prospectus supplement indicates, in
connection with those derivatives, the third parties may sell securities
covered by this prospectus and the applicable prospectus supplement, including
short sale transactions. If so, the third party may use securities pledged by
us or borrowed from us or others to settle those sales or to close out any
related open borrowings of stock, and may use securities received from us in
settlement of those derivatives to close out any related open borrowings of
stock. The third party in such sale transactions will be an underwriter and, if
not identified in this prospectus, will be identified in the applicable
prospectus supplement (or a post-effective amendment).

WHERE YOU CAN FIND MORE INFORMATION

We are subject to the informational requirements of the Exchange Act, and
in accordance therewith we are required to file periodic reports, proxy
statements and other information with the Commission. Such reports, proxy
statements and other information filed by us can be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, as well as the Regional Offices of the
Commission at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, at the prescribed rates. The Commission also maintains a site
on the World Wide Web that contains reports, proxy and information statements
and other information regarding registrants that file electronically. The
address of such site is http://www.sec.gov. The telephone number of the Public
Reference Room of the Commission is 1-800-SEC-0330, and you may obtain
information on the operation of the Public Reference Room by calling the
Commission at such telephone number. In addition, similar information can be
inspected at the New York Stock Exchange, 20 Broad Street, New York, New York
10005.

With respect to the common stock, preferred stock, warrants, and debt
securities, this prospectus omits certain information that is contained in the
registration statement on file with the Commission, of which this prospectus is
a part. For further information with respect to us and our common stock,
preferred stock, warrants, and debt securities, reference is made to the
registration statement, including the exhibits incorporated therein by
reference or filed therewith. Statements herein contained concerning the
provisions of any document are not necessarily complete and, in each instance,
reference is made to the copy of such document filed as an exhibit or
incorporated by reference in the registration statement, each such statement,
each such statement being qualified in all respects by such reference. The
registration statement and the exhibits may be inspected without charge at the
offices of the Commission or copies thereof obtained at prescribed rates from
the public reference section of the Commission at the addresses set forth
above.

You should rely on the information contained in this prospectus and in the
registration statement as well as other information you deem relevant. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. This prospectus is an offer to sell, or a
solicitation of offers to buy, securities only in jurisdictions where offers
and sales are permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of the time of
delivery of this prospectus or any sale or exchange of securities, however, we
have a duty to update that information while this prospectus is in use by you
where, among other things, any facts or circumstances arise which, individually
or in the aggregate, represent a fundamental change in the information
contained in this prospectus or any material information with respect to the
plan of

distribution was not previously disclosed in the prospectus or there is any
material change to such information in the prospectus. This prospectus does not
offer to sell or solicit any offer to buy any securities other than the common
stock, preferred stock, warrants, and debt securities to which it relates, nor
does it offer to sell or solicit any offer to buy any of these securities in
any jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction.

EXPERTS

The consolidated financial statements of Armor Holdings, Inc. and
subsidiaries appearing in its Annual Report on 10-K/A for the year ended
December 31, 2003, have been audited by PricewaterhouseCoopers LLP, independent
auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given on the
authority of such firm as experts in accounting and auditing.

LEGAL MATTERS

The validity of the securities offered hereby will be passed upon for us
by Kane Kessler, P.C., New York, New York. Any underwriters will be advised
about the other issues relating to any offering by their own legal counsel.

[THIS PAGE INTENTIONALLY LEFT BLANK]

[PICTURE NO. 8] [PICTURE NO. 9]

[PICTURE NO. 10] [GRAPHIC OMITTED]
ARMOR HOLDINGS, INC

[PICTURE NO. 11] [PICTURE NO. 13]

[PICTURE NO. 12]

8. M1114 Up-Armored HMMWV in
hostile location.

9. Soft body armor manufactured by
American Body Armor(TM).

10. The Operator Glove by Hatch.

11. One of three Autoclave units in
Simula's Phoenix, AZ facility.

12. During testing, Simula's Cockpit Air
Bag Systems (CABS) are deployed.

13. The cab of the High Mobility
Artillery Rocket System is armored
by us.

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No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus
supplement or the accompanying prospectus. You must not rely on any
unauthorized information or representations. This prospectus supplement is an
offer to sell only the shares offered hereby, but only under circumstances and
in jurisdictions where it is lawful to do so. The information contained in this
prospectus supplement and the accompanying prospectus is current only as of its
date.
--------------------------------
TABLE OF CONTENTS
Prospectus Supplement

Page
-----

Cautionary Note Regarding
Forward-Looking Statements .......... i
Prospectus Supplement Summary .......... S-1
Risk Factors ........................... S-12
Use of Proceeds ........................ S-22
Price Range of Common Stock and
Dividend Policy ..................... S-22
Capitalization ......................... S-23
Selected Consolidated Historical
Financial Data ...................... S-24
Management's Discussion and Analysis
of Financial Condition and Results of
Operations .......................... S-29
Business ............................... S-55
Management ............................. S-81
Principal and Selling Stockholders ..... S-83
Certain Relationships and Related
Transactions ........................ S-85
Description of Capital Stock ........... S-86
Underwriting ........................... S-88
Validity of Common Stock ............... S-91
Experts ................................ S-91
Where You Can Find More Information..... S-91
Index to Financial Statements .......... F-1

Prospectus
Summary ................................ 4
Risk Factors ........................... 6
The Company ............................ 19
Recent Developments .................... 20
Incorporation of Certain Documents by
Reference ........................... 21
Forward-Looking Statements ............. 22
Use of Proceeds ........................ 24
Ratio of Earnings to Fixed Charges ..... 24
Description of the Debt Securities ..... 24
Description of Capital Stock ........... 27
Description of Warrants ................ 28
Description of Senior Indebtedness ..... 29
Description of Senior Subordinated
Notes ............................... 29
Selling Stockholders ................... 31
Certain Relationships and Related
Transactions ........................ 32
Plan of Distribution ................... 33
Where You Can Find More Information..... 34
Experts ................................ 35
Legal Matters .......................... 35

4,000,000 Shares

[GRAPHIC OMITTED]

Common Stock

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

PROSPECTUS SUPPLEMENT

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

GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
WACHOVIA SECURITIES
JPMORGAN
FRIEDMAN BILLINGS RAMSEY
WM SMITH SECURITIES, INCORPORATED

Representatives of the Underwriters

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