SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

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

                                    FORM 10-Q
             -------------------------------------------------------

(Mark One)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2004, or

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                   FOR THE TRANSITION PERIOD FROM     TO      .

                         COMMISSION FILE NUMBER 0-18863


                              ARMOR HOLDINGS, INC.
             -------------------------------------------------------

             (Exact name of registrant as specified in its charter)

             DELAWARE                                           59-3392443
(State or other jurisdiction of                                (IRS Employer
incorporation or organization)                               Identification No.)

1400 MARSH LANDING PARKWAY, SUITE 112
      JACKSONVILLE, FLORIDA                                          32250
(Address of principal executive offices)                          (Zip Code)

       Registrant's telephone number, including area code: (904) 741-5400

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


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]


Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]


The number of shares outstanding of the registrant's Common Stock as of July 16,
2004 is 32,758,987.

                                       1






                              ARMOR HOLDINGS, INC.

                                    FORM 10-Q

                                      INDEX

                                                                            Page
PART I  - FINANCIAL INFORMATION

         ITEM 1.    FINANCIAL STATEMENTS.................................    3

         ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                    FINANCIAL CONDITION AND RESULTS OF OPERATIONS........    34

         ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES
                    ABOUT MARKET RISK....................................    56

         ITEM 4.    CONTROLS AND PROCEDURES..............................    58

PART II - OTHER INFORMATION

         ITEM 1.    LEGAL PROCEEDINGS....................................    59

         ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY
                    HOLDERS..............................................    64

         ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K.....................    65

SIGNATURES                                                                   66


                                       2




                         PART I - FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS

         The accompanying unaudited condensed consolidated financial statements
of Armor Holdings, Inc. and its wholly-owned subsidiaries include all
adjustments (consisting only of normal recurring accruals and the elimination of
all material intercompany accounts and transactions) which management considers
necessary for a fair presentation of operating results and financial position as
of June 30, 2004 and for the three-month and six-months periods ended June 30,
2004 and June 30, 2003.

         These unaudited condensed consolidated financial statements should be
read in conjunction with the financial statements included in our Annual Report
on Form 10-K/A for the fiscal year ended December 31, 2003.

                                       3







ARMOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)



                                                              JUNE 30, 2004        DECEMBER 31, 2003
                                                               (UNAUDITED)                *
                                                              -------------        -----------------
                                                                                 
ASSETS

CURRENT ASSETS:
    Cash and cash equivalents                                    $229,083              $111,850
    Restricted cash                                                  --                   2,600
    Accounts receivable (net of allowance for
      doubtful accounts of $2,358 and $1,673)                     110,821                72,635
    Costs and earned gross profit in excess of billings               834                  --
    Inventories                                                   112,523                80,527
    Prepaid expenses and other current assets                      27,198                22,032
    Current assets of discontinued operations (Note 2)              1,096                   753
                                                                 --------              --------
        Total current assets                                      481,555               290,397

PROPERTY AND EQUIPMENT (net of
  accumulated depreciation of $22,562 and
  $19,046)                                                         59,780                57,576

GOODWILL (net of accumulated amortization
  of $4,024 and $4,024)                                           176,169               175,707

PATENTS, LICENSES AND TRADEMARKS
  (net of accumulated amortization of $4,575 and $2,627)           45,127                44,174

OTHER ASSETS                                                       12,811                16,169

LONG-TERM ASSETS OF DISCONTINUED OPERATIONS (Note 2)                  458                 1,603
                                                                 --------              --------

TOTAL ASSETS                                                     $775,900              $585,626
                                                                 ========              ========




                 * Condensed from audited financial statements.
            See notes to condensed consolidated financial statements.


                                       4






ARMOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS - CONTINUED
(IN THOUSANDS, EXCEPT FOR SHARE DATA)



                                                              JUNE 30, 2004        DECEMBER 31, 2003
                                                               (UNAUDITED)                *
                                                              -------------        -----------------
                                                                                 
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
    Current portion of long-term debt                            $     717              $  32,107
    Short-term debt                                                  1,274                    498
    Accounts payable                                                49,701                 30,304
    Accrued expenses and other current liabilities                  62,537                 58,218
    Income taxes payable                                            12,741                   --
    Current liabilities of discontinued operations (Note 2)            554                    626
                                                                 ---------              ---------

        Total current liabilities                                  127,524                121,753

LONG-TERM LIABILITIES:
    Long-term debt, less current portion                           151,542                158,300
    Other long-term liabilities                                      4,619                 10,208
                                                                 ---------              ---------

   Total liabilities                                               283,685                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; 75,000,000 and
            50,000,000 shares authorized; 38,815,098 and
            34,337,034 issued and 32,754,876 and
            28,267,812 outstanding at June 30, 2004
           and December 31, 2003, respectively                         389                    344
    Additional paid-in capital                                     485,512                318,460
    Retained earnings                                               75,253                 44,942
    Accumulated other comprehensive income                           3,378                  3,936
    Treasury stock                                                 (72,317)               (72,317)
                                                                 ---------              ---------
       Total stockholders' equity                                  492,215                295,365
                                                                 ---------              ---------


TOTAL LIABILITIES AND STOCKHOLDERS'
   EQUITY                                                        $ 775,900              $ 585,626
                                                                 =========              =========




                 * Condensed from audited financial statements.
            See notes to condensed consolidated financial statements.



                                       5




ARMOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



                                                            THREE MONTHS ENDED                  SIX MONTHS ENDED
                                                     JUNE 30, 2004     JUNE 30, 2003     JUNE 30, 2004    JUNE 30, 2003
                                                     -------------     -------------     -------------    -------------
                                                                                                
REVENUES:

  Aerospace & Defense                                  $ 129,773         $  15,793        $ 210,781         $  31,703
  Products                                                65,743            49,347          119,583            93,354
  Mobile Security                                         28,188            16,519           54,968            37,076
                                                       ---------         ---------        ---------         ---------
  Total Revenues                                         223,704            81,659          385,332           162,133
                                                       ---------         ---------        ---------         ---------

COSTS AND EXPENSES:
  Cost of sales                                          157,246            57,281          271,314           114,443
  Operating expenses                                      23,386            14,524           46,637            28,528
  Amortization                                               973                69            1,953               129
  Integration and other charges                            8,123             3,775            8,804             4,197
                                                       ---------         ---------        ---------         ---------

OPERATING INCOME                                          33,976             6,010           56,624            14,836

  Interest expense, net                                    2,057               437            3,785               816
  Other (income) expense, net                               (390)               16             (275)               85
                                                       ---------         ---------        ---------         ---------

INCOME FROM CONTINUING OPERATIONS BEFORE
PROVISION FOR INCOME TAXES                                32,309             5,557           53,114            13,935
PROVISION FOR INCOME TAXES                                14,588             2,079           22,765             5,212
                                                       ---------         ---------        ---------         ---------
INCOME FROM CONTINUING OPERATIONS                         17,721             3,478           30,349             8,723
DISCONTINUED OPERATIONS (NOTE 2):
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET
OF TAX                                                       100             1,135              (38)              977
                                                       ---------         ---------        ---------         ---------
NET INCOME                                             $  17,821         $   4,613        $  30,311         $   9,700
                                                       =========         =========        =========         =========

NET INCOME PER COMMON SHARE - BASIC
INCOME FROM CONTINUING OPERATIONS                      $    0.60         $    0.13        $    1.04         $    0.31
INCOME FROM DISCONTINUED OPERATIONS                         0.00              0.04             0.00              0.03
                                                       ---------         ---------        ---------         ---------
BASIC EARNINGS PER SHARE                               $    0.60         $    0.17        $    1.04         $    0.34
                                                       =========         =========        =========         =========


            See notes to condensed consolidated financial statements.

                                       6




ARMOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



                                                 THREE MONTHS ENDED                    SIX MONTHS ENDED
                                           JUNE 30, 2004     JUNE 30, 2003      JUNE 30, 2004    JUNE 30, 2003
                                           -------------     -------------      -------------    -------------
                                                                                       
NET INCOME PER COMMON SHARE - DILUTED
INCOME FROM CONTINUING OPERATIONS            $     0.57        $     0.13        $     0.99        $     0.31
INCOME FROM DISCONTINUED OPERATIONS                0.00              0.04              0.00              0.03
                                             ----------        ----------        ----------        ----------
DILUTED EARNINGS PER SHARE                   $     0.57        $     0.17        $     0.99        $     0.34
                                             ==========        ==========        ==========        ==========

WEIGHTED AVERAGE SHARES - BASIC                  29,670            27,555            29,236            28,255
                                             ==========        ==========        ==========        ==========

WEIGHTED AVERAGE SHARES - DILUTED                31,008            27,836            30,469            28,511
                                             ==========        ==========        ==========        ==========



            See notes to condensed consolidated financial statements.


                                       7




ARMOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)



                                                                                          SIX MONTHS ENDED
                                                                                   --------------------------------
                                                                                   JUNE 30, 2004      JUNE 30, 2003
                                                                                   -------------      -------------
                                                                                                 
CASH FLOWS FROM OPERATING ACTIVITIES:
  Income from continuing operations                                                  $  30,349         $   8,723
  Adjustments to reconcile income from continuing operations to cash provided
     by operating activities:
     Depreciation and amortization                                                       6,603             3,468
     Loss on disposal of fixed assets                                                      115                39
     Deferred income taxes                                                                (197)            1,713
     Non-cash charge for acceleration of performance-based
         restricted stock awards                                                         5,913              --
     Non-cash impairment charge                                                          1,408              --
     Non-cash termination charge                                                          --               2,093
  Changes in operating assets and liabilities, net of acquisitions:
      (Increase) in accounts receivable                                                (38,772)             (753)
      (Increase) decrease in inventories                                               (31,997)            1,332
      (Increase) in prepaid expenses and other assets                                   (8,881)           (4,170)
      Increase in accounts payable, accrued expenses
          and other current liabilities                                                 27,649             3,971
      Increase (decrease) in income taxes payable                                       17,475            (3,648)
                                                                                     ---------         ---------
      Net cash provided by operating activities                                          9,665            12,768
                                                                                     ---------         ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment                                                   (7,104)           (3,918)
   Purchase of patents and trademarks                                                      (77)              (38)
   Purchase of equity investment                                                        (5,275)             --
   Proceeds from sale of equity investment                                               5,823              --
   Collection of note receivable                                                           375              --
   Decrease in restricted cash                                                           2,600              --
   Additional consideration for purchased businesses                                    (1,855)             (243)
   Purchase of business, net of cash acquired                                           (2,729)             --
                                                                                     ---------         ---------
   Net cash used in investing activities                                                (8,242)           (4,199)
                                                                                     ---------         ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from the exercise of stock options                                           8,310               136
   Proceeds from the issuance of common stock                                          142,500              --
   Cash paid for common stock offering costs                                            (1,057)             --
   Repurchases of treasury stock                                                          --             (22,684)
   Repayments of long-term debt                                                        (34,052)             (362)
   Borrowings under lines of credit                                                      8,885            30,205
   Repayments under lines of credit                                                     (8,122)          (15,009)
                                                                                     ---------         ---------
   Net cash provided by (used in) financing activities                                 116,464            (7,714)
                                                                                     ---------         ---------

   Effect of exchange rate changes on cash and cash equivalents                             63               467
   Net cash used in discontinued operations                                               (717)           (3,394)
                                                                                     ---------         ---------
   NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                117,233            (2,072)
   CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                      111,850            12,913
                                                                                     ---------         ---------
   CASH AND CASH EQUIVALENTS, END OF PERIOD                                          $ 229,083         $  10,841
                                                                                     =========         =========

   CASH AND CASH EQUIVALENTS, END OF PERIOD
       CONTINUING OPERATIONS                                                         $ 229,083         $  10,841
       DISCONTINUED OPERATIONS                                                             157             1,916
                                                                                     ---------         ---------
                                                                                     $ 229,240         $  12,757
                                                                                     =========         =========



            See notes to condensed consolidated financial statements.



                                       8


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
and six 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/A 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 segments: 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. The reporting change had no
impact on consolidated revenues, gross profit, operating income or net income.

         As discussed in Note 2, 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 condensed consolidated balance sheets and the results of their
operations classified as income (loss) from discontinued operations in the
accompanying unaudited condensed consolidated statements of operations.



                                       9



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



NOTE 2 - 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 two years and a warrant for
approximately 2.5% of AIS. $475,000 of the balance due was paid in advance
through June 2004. In accordance with Statement of Financial Accounting
Standards No. 144, we recorded a loss of $366,000 on the sale in the second
quarter of 2003.

         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 July 23, 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 foreign currency
translation 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.

         On June 30, 2004, our litigation support services subsidiary, New
Technologies Armor, Inc. ("NTI"), was the last remaining business in
discontinued operations. On July 2, 2004, we sold the security consulting
division of NTI. The remaining division in NTI, consisting primarily of training
services, will be included as part of the Products Division segment. In the
second quarter of 2004, we recorded an impairment charge of $1.4 million in
integration and other charges in continuing operations to reduce the carrying
value of remaining portion of NTI to its estimated fair value.



                                       10


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



         A summary of the operating results of the discontinued operations for
the three months and six months ended June 30, 2004 and 2003 is as follows.



                                               THREE MONTHS ENDED               SIX MONTHS ENDED
                                         -----------------------------   ------------------------------
                                         JUNE 30, 2004   JUNE 30, 2003   JUNE 30, 2004    JUNE 30, 2003
                                         -------------   -------------   -------------    -------------
                                                 (IN THOUSANDS)                  (IN THOUSANDS)

                                                                                 
Revenue                                      $ 1,013         $23,911         $ 1,733         $49,699
Cost of sales                                    461          16,187             697          35,369
Operating expenses                               385           5,005             821          11,417
Integration and other charges                   --               452            --               494
                                             -------         -------         -------         -------
Operating income                                 167           2,267             215           2,419
Interest expense, net                           --                15               2              53
Other expense, net                                10             392             273             452
                                             -------         -------         -------         -------
Income (loss) from discontinued
operations before provision (benefit)
for income taxes                                 157           1,860             (60)          1,914
 Provision (benefit) for
income taxes                                      57             725             (22)            937
                                             -------         -------         -------         -------
Income (loss) from discontinued
operations                                   $   100         $ 1,135         $   (38)        $   977
                                             =======         =======         =======         =======




                                       11



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


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



                                                     JUNE 30, 2004   DECEMBER 31, 2003
                                                     -------------   -----------------
                                                             (IN THOUSANDS)
                                                                    
Assets
  Cash and cash equivalents                              $  157           $   76
  Accounts receivable, net                                  806              549
  Other current assets                                      133              128
                                                         ------           ------
      Total current assets                                1,096              753
  Property and equipment, net                               437            1,206
  Goodwill, net                                            --                356
  Other assets                                               21               41
                                                         ------           ------
 Total assets of discontinued operations                 $1,554           $2,356
                                                         ======           ======

Liabilities
  Current portion of long-term debt                      $ --             $  125
   Accounts payable                                         142                5
   Accrued expenses and other current liabilities           412              496
                                                         ------           ------
       Total current liabilities                            554              626
                                                         ------           ------
Total liabilities of discontinued operations             $  554           $  626
                                                         ======           ======



         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 available at the time, including discussions with our investment
bankers.


                                       12



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


NOTE 3 - COMPREHENSIVE INCOME

         The components of comprehensive income, net of tax provision of zero
and $128,000 for the three months ended June 30, 2004 and 2003, respectively,
and zero and $224,000 for the six months ended June 30, 2004 and 2003,
respectively, are listed below:




                                                THREE MONTHS ENDED                 SIX MONTHS ENDED
                                          ------------------------------    -----------------------------
                                          JUNE 30, 2004    JUNE 30, 2003    JUNE 30, 2004   JUNE 30, 2003
                                          -------------    -------------    -------------   -------------
                                                 (IN THOUSANDS)                     (IN THOUSANDS)
                                                                                  
Net income                                   $ 17,821         $  4,613        $ 30,311        $  9,700
Other comprehensive income (loss):
   Foreign currency translations, net
   of tax                                        (230)           1,861            (558)          2,230
                                             --------         --------        --------        --------
Comprehensive income:                        $ 17,591         $  6,474        $ 29,753        $ 11,930
                                             ========         ========        ========        ========



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:


                                        JUNE 30, 2004   DECEMBER 31, 2003
                                        -------------  -------------------
                                                (IN THOUSANDS)
Raw material                              $ 67,500           $ 40,397
Work-in-process                             28,367             25,422
Finished goods                              16,656             14,708
                                          --------           --------
    Total inventories                     $112,523           $ 80,527
                                          ========           ========


NOTE 5 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

         Accrued expenses and other current liabilities are summarized as
follows:




                                                           JUNE 30, 2004   DECEMBER 31, 2003
                                                           -------------  -------------------
                                                                   (IN THOUSANDS)
                                                                            
Accrued expenses and other current liabilities                 $43,539            $40,787
Deferred consideration for acquisitions                          3,403              2,780
Customer deposits                                               15,595             14,651
                                                               -------            -------

   Total accrued expenses and other current liabilities        $62,537            $58,218
                                                               =======            =======





                                       13


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 SFAS 133", and Statement of Financial
Accounting Standards No. 149 "Amendment of SFAS 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 (the "Notes") 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 (1.94% at June 30, 2004), set in
arrears, plus a spread ranging from 2.735% to 2.75% fixed semi-annually on the
fifteenth of February and August each year through maturity. 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 $1.7 million and $5.9 million at June 30, 2004
and December 31, 2003, respectively, and is included in other assets and long-
term debt on the accompanying condensed consolidated balance sheet.

         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.


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 segments: Aerospace & Defense Group,
Armor

                                       14

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


Holdings Products, also referred to as our Products Division, and Armor
Mobile Security, also referred to as our Mobile Security Division. 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
5,862 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.

         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

                                       15


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

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
operating segments are as follows (net of intercompany eliminations):



                                       THREE MONTHS ENDED                    SIX MONTHS ENDED
                                  -------------------------------     ------------------------------
                                  JUNE 30, 2004     JUNE 30, 2003     JUNE 30, 2004    JUNE 30, 2003
                                  -------------     -------------     -------------    -------------
                                          (IN THOUSANDS)                     (IN THOUSANDS)
                                                                              
Revenues:
   Aerospace & Defense              $ 129,773         $  15,793         $ 210,781         $  31,703
   Products                            65,743            49,347           119,583            93,354
   Mobile Security                     28,188            16,519            54,968            37,076
                                    ---------         ---------         ---------         ---------
      Total revenues                $ 223,704         $  81,659         $ 385,332         $ 162,133
                                    =========         =========         =========         =========

Operating income (loss):
   Aerospace & Defense              $  31,552         $   4,051         $  51,031         $   7,676
   Products                            11,259             7,798            16,944            14,659
   Mobile Security                      3,847               (58)            4,920               461
   Corporate                          (12,682)           (5,781)          (16,271)           (7,960)
                                    ---------         ---------         ---------         ---------
      Total operating income        $  33,976         $   6,010         $  56,624         $  14,836
                                    =========         =========         =========         =========


                                                                      JUNE 30, 2004  DECEMBER 31, 2003
                                                                      -------------  -----------------
                                                                               (IN THOUSANDS)
Total assets:
   Aerospace & Defense                                                  $ 264,862         $ 209,834
   Products                                                               194,278           183,972
   Mobile Security                                                         80,014            63,161
   Corporate                                                              235,192           126,303
                                                                        ---------         ---------
      Total assets                                                      $ 774,346         $ 583,270
                                                                        =========         =========





                                       16


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 from continuing operations to principal geographic areas are as
follows:



                                       THREE MONTHS ENDED                    SIX MONTHS ENDED
                                  -------------------------------     ------------------------------
                                  JUNE 30, 2004     JUNE 30, 2003     JUNE 30, 2004    JUNE 30, 2003
                                  -------------     -------------     -------------    -------------
                                          (IN THOUSANDS)                     (IN THOUSANDS)
                                                                              
Revenues:
   North America                        $188,654        $ 61,206        $320,005        $117,830
   South America                           4,185           2,664           7,661           6,091
   Africa                                    475             319           1,681             804
   Europe/Asia                            30,390          17,470          55,985          37,408
                                        --------        --------        --------        --------
      Total revenues                    $223,704        $ 81,659        $385,332        $162,133
                                        ========        ========        ========        ========

Geographic operating income:
   North America                        $ 37,745        $  7,707        $ 59,383        $ 14,660
   South America                             387              51             618             105
   Africa                                    107              96             206             194
   Europe/Asia                             4,833           2,000           7,174           4,203
                                        --------        --------        --------        --------
      Total geographic operating
       income                           $ 43,072        $  9,854        $ 67,381        $ 19,162
                                        ========        ========        ========        ========

                                                                      JUNE 30, 2004  DECEMBER 31, 2003
                                                                      -------------  -----------------
                                                                               (IN THOUSANDS)
Total assets:
   North America                                                        $703,476        $523,954
   South America                                                           7,728           6,433
   Africa                                                                     --              --
   Europe/Asia                                                            63,142          52,883
                                                                        --------        --------
      Total assets                                                      $774,346        $583,270
                                                                        ========        ========


         A reconciliation of consolidated geographic operating income from
continuing operations to consolidated operating income from continuing
operations follows:



                                       THREE MONTHS ENDED                    SIX MONTHS ENDED
                                  -------------------------------     ------------------------------
                                  JUNE 30, 2004     JUNE 30, 2003     JUNE 30, 2004    JUNE 30, 2003
                                  -------------     -------------     -------------    -------------
                                          (IN THOUSANDS)                     (IN THOUSANDS)
                                                                              
Consolidated geographic operating
    income                             $ 43,072         $  9,854         $ 67,381         $ 19,162
Amortization                               (973)             (69)          (1,953)            (129)
Integration and other charges            (8,123)          (3,775)          (8,804)          (4,197)
                                       --------         --------         --------         --------
Operating income                       $ 33,976         $  6,010         $ 56,624         $ 14,836
                                       ========         ========         ========         ========





                                       17


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            SIX MONTHS ENDED
                                                       ----------------------------  ----------------------------
                                                       JUNE 30, 2004  JUNE 30, 2003  JUNE 30, 2004  JUNE 30, 2003
                                                       -------------  -------------  -------------  -------------
                                                                  (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                                                                            
Numerator for basic and diluted earnings per share:
Income from continuing operations                          $17,721        $ 3,478        $30,349        $ 8,723
                                                           -------        -------        -------        -------

Denominator for basic earnings per share -
weighted average shares outstanding:                        29,670         27,555         29,236         28,255

Effect of shares issuable under stock
option and stock grant plans, based on the
treasury stock method                                        1,338            281          1,233            256
                                                           -------        -------        -------        -------

Denominator for diluted earnings per share-
Adjusted weighted average shares outstanding                31,008         27,836         30,469         28,511
                                                           =======        =======        =======        =======

Basic earnings per share from
continuing operations                                      $  0.60        $  0.13        $  1.04        $  0.31
                                                           =======        =======        =======        =======

Diluted earnings per share from
continuing operations                                      $  0.57        $  0.13        $  0.99        $  0.31
                                                           =======        =======        =======        =======



NOTE 9 - NEW ACCOUNTING PRONOUNCEMENT

         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 FSP
129-1 is effective April 2004 and applies to all existing and newly created
securities. This pronouncement has no effect on the Company.




                                       18


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


NOTE 10 - STOCKHOLDERS' EQUITY

         On June 15, 2004, we sold 4,000,000 shares of common stock at a price
of $37.50 per share, raising $142.5 million of net proceeds after deducting the
underwriter discounts and commissions. In addition, certain of our directors and
officers granted the underwriters a 30-day option to purchase up to 600,000
shares. The 30-day option expired unexercised on July 15, 2004. We intend to use
the net proceeds from the 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. Funds
that are not immediately used are invested in money market funds, certificates
of deposits, and other investment grade securities until needed.

         On June 22, 2004, our stockholders approved an amendment to our
Certificate of Incorporation that increased the number of shares of our
authorized common stock to 75,000,000. The amendment was filed with the
Secretary of State of the State of Delaware and became effective on July 22,
2004.

         On July 15, 2004, our stockholders approved the increase in number of
shares in our 2002 stock incentive plan by 4,000,000, however, we will not issue
more than 2,000,000 of these shares without additional stockholder approval.

         Statement of Financial Accounting Standard No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), as amended by Statement of Financial
Accounting Standard No. 148, "Accounting for Stock-Based Compensation -
Transition and Disclosure," ("SFAS 148") 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 compensation cost
for stock option grants had been determined based on the fair value on the grant
dates for the three and six month periods ended June 30, 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:



                                       19


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



                                                          THREE MONTHS ENDED                SIX MONTHS ENDED
                                                 -------------------------------     -------------------------------
                                                 JUNE 30, 2004     JUNE 30, 2003     JUNE 30, 2004     JUNE 30, 2003
                                                 -------------     -------------     -------------     -------------
                                                             (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                                            
Net income as reported:                             $ 17,821          $ 4,613          $ 30,311         $   9,700

Deduct:  Total stock-based employee
compensation expense determined under fair
value based method for all awards, net of
related tax effects                                   (1,290)          (1,156)           (2,533)           (2,314)

Add:  Employee compensation expense for
modification of stock option awards included
in reported net income, net of income taxes               57              506                57               506
                                                    --------          -------          --------         ---------

Pro-forma net income                                $ 16,588          $ 3,963          $ 27,835         $   7,892
                                                    ========          =======          ========         =========


Earnings per share:
         Basic - as reported                        $   0.60          $  0.17          $   1.04         $    0.34
                                                    ========          =======          ========         =========
         Basic - pro-forma                          $   0.56          $  0.14          $   0.95         $    0.28
                                                    ========          =======          ========         =========
         Diluted - as reported                      $   0.57          $  0.17          $   0.99         $    0.34
                                                    ========          =======          ========         =========
         Diluted - pro-forma                        $   0.53          $  0.14          $   0.91         $    0.28
                                                    ========          =======          ========         =========


NOTE 11 - 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.

                                       20


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


("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.

         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 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. In April 2004, we reached an agreement with the Internal Revenue
Service regarding our tax returns for the years ended December 31, 2000 and 2001
that did not 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

                                       21


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


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.

         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(R) and Ultimax(R) models. Second
Chance has claimed that Zylon(R) 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(R) 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(R)
and Ultimax(R) model vests.

         We use Zylon(R) fiber in a number of concealable body armor models for
law enforcement, but our vest design and construction are different from Second
Chance. In addition, to our knowledge, no other body armor manufacturer has
reported or experienced problems with Zylon(R)-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 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.

         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(R) 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 a 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.

         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, are
vigorously defending these lawsuits and have moved to dismiss the claims
asserted against us. However, any adverse resolution of these matters could have
a material adverse effect on our business,

                                       22

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


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(R) 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(R) fiber, however, any adverse resolution of these matters could have a
material adverse effect on our business, financial condition, results of
operations and liquidity.

         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 unable 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.

         Except for the updates noted above, please see footnote 11 Commitments
and Contingencies Legal/Litigation Matters in our Annual Report on Form 10-K/A
for the fiscal year ended December 31, 2003, for a description of other legal
proceedings.


                                       23

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 subordinated and
uncollateralized basis, by certain domestic subsidiaries.

         The following condensed consolidating financial information presents
the condensed consolidating balance sheets as of June 30, 2004 and December 31,
2003, the related condensed consolidating statements of operations for each of
the three and six-month periods ended June 30, 2004 and June 30, 2003 and the
related condensed consolidating statements of cash flows for the six month
periods ended June 30, 2004 and June 30, 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.

         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.


                                       24


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


                      ARMOR HOLDINGS, INC. AND SUBSIDIARIES
                     CONDENSED CONSOLIDATING BALANCE SHEETS



                                                                                     JUNE 30, 2004
                                                     -------------------------------------------------------------------------------
                                                                     GUARANTOR        NONGUARANTOR                      CONSOLIDATED
                                                     PARENT         SUBSIDIARIES      SUBSIDIARIES     ELIMINATIONS         TOTAL
                                                     ------         ------------      ------------     ------------     ------------
                                                                             (IN THOUSANDS)
                                                                                                            
                   ASSETS
Current Assets:
   Cash and cash equivalents                        $ 213,065         $   2,108        $  13,910         $    --          $ 229,083
   Accounts receivable, net                              --              96,296           14,525              --            110,821
   Costs and earned gross profit in excess
   of billings                                           --                 834             --                --                834
   Intercompany receivables                            62,608            44,475           38,352          (145,435)            --
   Inventories                                           --              89,252           23,271              --            112,523
   Prepaid expenses and other current assets            3,809            22,383            3,659            (2,653)          27,198
   Current assets of discontinued operations             --              41,455            6,235           (46,594)           1,096
                                                    ---------         ---------        ---------         ---------        ---------
      Total Current Assets                            279,482           296,803           99,952          (194,682)         481,555

Property and equipment, net                             2,741            37,857           19,182              --             59,780
Goodwill, net                                            --             174,094            2,075              --            176,169
Patents, licenses and trademarks, net                    --              44,950              177              --             45,127
Other assets                                           10,546             2,107              158              --             12,811
Long-term assets of discontinued operations              --                 458             --                --                458
Investment in subsidiaries                            440,257            10,672             --            (450,929)            --
                                                    ---------         ---------        ---------         ---------        ---------
Total Assets                                        $ 733,026         $ 566,941        $ 121,544         $(645,611)       $ 775,900
                                                    =========         =========        =========         =========        =========

    LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:

   Current portion of long-term debt                $    --           $     574        $     143         $    --          $     717
   Short-term debt                                       --                --              1,274              --              1,274
   Accounts payable                                     1,245            41,624            6,832              --             49,701
   Accrued expenses and other current
   liabilities                                          8,786            33,740           20,011              --             62,537
   Income taxes payable                                (2,735)           13,559            1,917              --             12,741
   Intercompany payables                               85,984            46,444           13,029          (145,457)            --
   Current liabilities of discontinued
   operations                                            --               3,883           43,243           (46,572)             554
                                                    ---------         ---------        ---------         ---------        ---------
      Total Current Liabilities                        93,280           139,824           86,449          (192,029)         127,524

Long-term debt, less current portion                  149,382             1,663              497              --            151,542
Other long-term liabilities                            (1,851)            5,263            1,207              --              4,619
Long-term liabilities of discontinued
operations                                               --               2,653             --              (2,653)            --
                                                    ---------         ---------        ---------         ---------        ---------
Total Liabilities                                     240,811           149,403           88,153          (194,682)         283,685

Stockholders' Equity:
   Preferred stock                                       --               1,450             --              (1,450)            --
   Common stock                                           389             4,392            7,854           (12,246)             389
   Additional paid in capital                         485,512           265,598           46,095          (311,693)         485,512
   Retained earnings (accumulated deficit)             75,253           146,098          (20,558)         (125,540)          75,253
   Accumulated other comprehensive loss                 3,378              --               --                --              3,378
   Treasury stock                                     (72,317)             --               --                --            (72,317)
                                                    ---------         ---------        ---------         ---------        ---------
Total Stockholders' Equity                            492,215           417,538           33,391          (450,929)         492,215
                                                    ---------         ---------        ---------         ---------        ---------

Total Liabilities and Stockholders' Equity          $ 733,026         $ 566,941        $ 121,544         $(645,611)       $ 775,900
                                                    =========         =========        =========         =========        =========


                                       25

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


                      ARMOR HOLDINGS, INC. AND SUBSIDIARIES
                     CONDENSED CONSOLIDATING BALANCE SHEETS



                                                                             DECEMBER 31, 2003
                                              --------------------------------------------------------------------------------
                                                             GUARANTOR        NONGUARANTOR                       CONSOLIDATED
                                                PARENT       SUBSIDIARIES     SUBSIDIARIES      ELIMINATIONS        TOTAL
                                              ----------     ------------    ---------------    -------------    -------------
                   ASSETS                                                    (IN THOUSANDS)
                                                                                                    
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
                                              ==========     ============    ===============    =============    =============


                                       26

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 JUNE 30, 2004
                                                  ----------------------------------------------------------------------------------
                                                                   GUARANTOR       NONGUARANTOR                        CONSOLIDATED
                                                   PARENT         SUBSIDIARIES     SUBSIDIARIES       ELIMINATIONS         TOTAL
                                                  ----------      ------------    --------------      -------------    -------------
                                                                                   (IN THOUSANDS)
                                                                                                           
REVENUES:
   Aerospace & Defense                            $    --           $ 129,773         $    --           $    --           $ 129,773
   Products                                            --              53,367            12,376              --              65,743
   Mobile Security                                     --               6,216            22,604              (632)           28,188
                                                  ---------         ---------         ---------         ---------         ---------
   Total revenues                                      --             189,356            34,980              (632)          223,704
                                                  ---------         ---------         ---------         ---------         ---------

COSTS AND EXPENSES:
   Cost of sales                                       --             130,793            27,085              (632)          157,246
   Operating expenses                                 5,246            15,252             2,888              --              23,386
   Amortization                                        --                 970                 3              --                 973
   Integration and other charges                      7,431               692              --                --               8,123
   Related party management (income) fees              --                  (1)                1              --                --
                                                  ---------         ---------         ---------         ---------         ---------

OPERATING (LOSS) INCOME:                            (12,677)           41,650             5,003              --              33,976
   Interest expense, net                              1,890               144                23              --               2,057
   Other expense, net                                   (23)             (338)              (29)             --                (390)
   Equity in (earnings) losses of
   subsidiaries                                     (29,840)             (812)             --              30,652              --
                                                  ---------         ---------         ---------         ---------         ---------

INCOME FROM CONTINUING OPERATIONS BEFORE
(BENEFIT) PROVISION FOR INCOME TAXES                 15,296            42,656             5,009           (30,652)           32,309
(BENEFIT) PROVISION FOR INCOME TAXES                 (2,525)           15,246             1,867              --              14,588
                                                  ---------         ---------         ---------         ---------         ---------
INCOME FROM CONTINUING OPERATIONS                    17,821            27,410             3,142           (30,652)           17,721

DISCONTINUED OPERATIONS:
   Income from discontinued operations,
   net of tax                                          --                 100              --                --                 100
                                                  ---------         ---------         ---------         ---------         ---------
NET INCOME                                        $  17,821         $  27,510         $   3,142         $ (30,652)        $  17,821
                                                  =========         =========         =========         =========         =========





                                       27


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 JUNE 30, 2003
                                               -----------------------------------------------------------------------------
                                                             GUARANTOR      NONGUARANTOR                       CONSOLIDATED
                                                 PARENT      SUBSIDIARIES   SUBSIDIARIES      ELIMINATIONS        TOTAL
                                               ----------    -----------    ------------      -------------    -------------
                                                                                                  
                                                                           (IN THOUSANDS)
REVENUES:

   Aerospace & Defense                          $   --          $ 15,793       $   --           $   --           $ 15,793
   Products                                         --            39,069         10,278             --             49,347
   Mobile Security                                  --             2,980         13,539             --             16,519
                                                --------        --------       --------         --------         --------
   Total revenues                                   --            57,842         23,817             --             81,659
                                                --------        --------       --------         --------         --------

COSTS AND EXPENSES:
   Cost of sales                                    --            37,938         19,343             --             57,281
   Operating expenses                              2,470           9,485          2,569             --             14,524
   Amortization                                     --                67              2             --                 69
   Integration and other charges                   3,273             502           --               --              3,775
                                                --------        --------       --------         --------         --------

OPERATING (LOSS) INCOME:                          (5,743)          9,850          1,903             --              6,010
   Interest expense, net                             267             121             49             --                437
   Other expense, net                               --                 2             14             --                 16
   Equity in earnings of subsidiaries             (8,421)           (119)          --              8,540             --
   Related parting interest expense
   (income), net                                      16             (16)          --               --               --
                                                --------        --------       --------         --------         --------

INCOME FROM CONTINUING OPERATIONS BEFORE
(BENEFIT) PROVISION FOR INCOME TAXES               2,395           9,862          1,840           (8,540)           5,557
(BENEFIT) PROVISION FOR INCOME TAXES              (2,218)          3,703            594             --              2,079
                                                --------        --------       --------         --------         --------
INCOME FROM CONTINUING OPERATIONS                  4,613           6,159          1,246           (8,540)           3,478

DISCONTINUED OPERATIONS:
   (Loss) income from discontinued
   operations, net of tax                           --                (6)         1,141             --              1,135
                                                --------        --------       --------         --------         --------
NET INCOME                                      $  4,613        $  6,153       $  2,387         $ (8,540)        $  4,613
                                                ========        ========       ========         ========         ========



                                       28

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



                      ARMOR HOLDINGS, INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS



                                                                    SIX MONTHS ENDED JUNE 30, 2004
                                                ----------------------------------------------------------------------------------
                                                                  GUARANTOR        NONGUARANTOR                      CONSOLIDATED
                                                  PARENT         SUBSIDIARIES      SUBSIDIARIES     ELIMINATIONS        TOTAL
                                                ----------       ------------      ------------     ------------     -------------
                                                                                  (IN THOUSANDS)
                                                                                                         
REVENUES:

   Aerospace & Defense                           $    --           $ 210,781         $    --          $    --           $ 210,781
   Products                                           --              97,616            21,967             --             119,583
   Mobile Security                                    --              11,583            44,536           (1,151)           54,968
                                                 ---------         ---------         ---------        ---------         ---------
   Total revenues                                     --             319,980            66,503           (1,151)          385,332
                                                 ---------         ---------         ---------        ---------         ---------

COSTS AND EXPENSES:
   Cost of sales                                      --             219,143            53,322           (1,151)          271,314
   Operating expenses                                8,748            31,639             6,250             --              46,637
   Amortization                                       --               1,947                 6             --               1,953
   Integration and other charges                     7,521             1,283              --               --               8,804
   Related party management (income) fees               16               (18)                2             --                --
                                                 ---------         ---------         ---------        ---------         ---------

OPERATING (LOSS) INCOME                            (16,285)           65,986             6,923             --              56,624
   Interest expense, net                             3,546               176                63             --               3,785
   Other expense (income), net                          27              (322)               20             --                (275)
   Equity in (earnings) losses of
   subsidiaries                                    (46,161)             (630)             --             46,791              --
                                                 ---------         ---------         ---------        ---------         ---------

INCOME FROM CONTINUING OPERATIONS BEFORE
PROVISION (BENEFIT) FOR INCOME TAXES                26,303            66,762             6,840          (46,791)           53,114
PROVISION (BENEFIT) FOR INCOME TAXES                (4,008)           24,255             2,518             --              22,765
                                                 ---------         ---------         ---------        ---------         ---------
INCOME FROM CONTINUING OPERATIONS                   30,311            42,507             4,322          (46,791)           30,349

DISCONTINUED OPERATIONS:
   (Loss) from discontinued operations,
   net of tax                                         --                 (38)             --               --                 (38)
                                                 ---------         ---------         ---------        ---------         ---------
NET INCOME                                       $  30,311         $  42,469         $   4,322        $ (46,791)        $  30,311
                                                 =========         =========         =========        =========         =========




                                       29



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


                      ARMOR HOLDINGS, INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS



                                                                       SIX MONTHS ENDED JUNE 30, 2003
                                             -----------------------------------------------------------------------------------
                                                                 GUARANTOR        NONGUARANTOR                      CONSOLIDATED
                                                 PARENT         SUBSIDIARIES      SUBSIDIARIES     ELIMINATIONS        TOTAL
                                              ------------      ------------      ------------     -------------    -------------
                                                                             (IN THOUSANDS)
                                                                                                        
REVENUES:

   Aerospace & Defense                          $    --           $  31,703         $    --          $    --           $  31,703
   Products                                          --              75,753            17,601             --              93,354
   Mobile Security                                   --               7,069            30,007             --              37,076
                                                ---------         ---------         ---------        ---------         ---------
   Total revenues                                    --             114,525            47,608             --             162,133
                                                ---------         ---------         ---------        ---------         ---------

COSTS AND EXPENSES:
   Cost of sales                                     --              75,158            39,285             --             114,443
   Operating expenses                               4,542            18,787             5,199             --              28,528
   Amortization                                      --                 124                 5             --                 129
   Integration and other charges                    3,349               848              --               --               4,197
                                                ---------         ---------         ---------        ---------         ---------

OPERATING (LOSS) INCOME:                           (7,891)           19,608             3,119             --              14,836
   Interest expense, net                              495               191               130             --                 816
   Other expense, net                                --                   2                83             --                  85
   Equity in earnings of subsidiaries             (15,085)              163              --             14,922              --
   Related parting interest expense
   (income), net                                       16               (16)             --               --                --
                                                ---------         ---------         ---------        ---------         ---------

INCOME FROM CONTINUING OPERATIONS BEFORE
(BENEFIT) PROVISION FOR INCOME TAXES                6,683            19,268             2,906          (14,922)           13,935
(BENEFIT) PROVISION FOR INCOME TAXES               (3,017)            7,263               966             --               5,212
                                                ---------         ---------         ---------        ---------         ---------
INCOME FROM CONTINUING OPERATIONS                   9,700            12,005             1,940          (14,922)            8,723

DISCONTINUED OPERATIONS:
   (Loss) income from discontinued
   operations, net of tax                            --                (453)            1,430             --                 977
                                                ---------         ---------         ---------        ---------         ---------
NET INCOME                                      $   9,700         $  11,552         $   3,370        $ (14,922)        $   9,700
                                                =========         =========         =========        =========         =========






                                       30


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



                                                                      SIX MONTHS ENDED JUNE 30, 2004
                                                   ---------------------------------------------------------------------------------
                                                                      GUARANTOR       NONGUARANTOR                     CONSOLIDATED
                                                      PARENT        SUBSIDIARIES      SUBSIDIARIES      ELIMINATIONS      TOTAL
                                                   ------------     ------------      ------------      ------------   -------------
                                                                                      (IN THOUSANDS)
                                                                                                         
CASH FLOWS FROM OPERATING ACTIVITIES:
   Income from continuing operations                $   30,311       $  42,507         $   4,322         $ (46,791)     $  30,349
   Adjustments to reconcile income from
   continuing operations to cash
   provided by (used in) operating
   activities:

   Depreciation and amortization                           556           4,735             1,312              --            6,603

   Loss on disposal of fixed assets                       --               106                 9              --              115

   Deferred income taxes                                   492            (665)              (24)             --             (197)
   Non-cash charge for acceleration of
   performance-based restricted stock awards             5,913            --                --                --            5,913
   Non-cash impairment charge                            1,408            --                --                --            1,408
   Changes in operating assets & liabilities,
   net of acquisitions:
   Decrease (increase) in accounts receivable            1,201         (37,412)           (2,561)             --          (38,772)
   Decrease (increase) in intercompany
   receivables & payables                               38,134         (41,229)            3,095              --             --
   Increase in inventory                                  --           (27,759)           (4,238)             --          (31,997)
   (Increase) decrease in prepaid expenses
    & other assets                                      (3,678)         (4,491)             (712)             --           (8,881)
   (Decrease) increase in accounts payable,
   accrued expenses and other current
   liabilities                                          (1,153)         28,440               362              --           27,649
   Increase (decrease) in income taxes
   payable                                              17,515          (1,609)            1,569              --           17,475
                                                     ---------       ---------         ---------         ---------      ---------
   Net cash provided by (used in) operating
   activities                                           90,699         (37,377)            3,134           (46,791)         9,665
                                                     ---------       ---------         ---------         ---------      ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment                     (902)         (5,570)             (632)             --           (7,104)
   Purchase of patents and trademarks                     --               (77)             --                --              (77)
   Purchase of equity investment                          --            (5,275)             --                --           (5,275)
   Proceeds from sale of equity investment                --             5,823              --                --            5,823
   Collection of note receivable                           375            --                --                --              375
   Decrease in restricted cash                           2,600            --                --                --            2,600
   Additional consideration for purchased
   businesses                                             --            (1,855)             --                --           (1,855)
   Investment in subsidiaries                         (120,224)         73,433              --              46,791           --
   Purchase of businesses net of cash
   acquired                                               --            (2,729)             --                --           (2,729)
                                                     ---------       ---------         ---------         ---------      ---------
   Net cash (used in) provided by investing
   activities                                         (118,151)         63,750              (632)           46,791         (8,242)
                                                     ---------       ---------         ---------         ---------      ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from exercise of stock options               8,310            --                --                --            8,310
   Proceeds from the issuance of common
   stock                                               142,500            --                --                --          142,500
   Cash paid for common stock offering costs            (1,057)           --                --                --           (1,057)
   Repayments of long-term debt                           --           (33,981)              (71)             --          (34,052)
   Borrowings under lines of credit                      8,083            --                 802              --            8,885
   Repayments under lines of credit                     (8,083)           --                 (39)             --           (8,122)
                                                     ---------       ---------         ---------         ---------      ---------
   Net cash provided by (used in) financing
   activities                                          149,753         (33,981)              692              --          116,464
                                                     ---------       ---------         ---------         ---------      ---------
   Effect of exchange rate on cash and cash
   equivalents                                            --              (651)              714              --               63
   Net cash used in discontinued operations               --              (717)             --                --             (717)
                                                     ---------       ---------         ---------         ---------      ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS                                            122,301          (8,976)            3,908              --          117,233

CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD                                                  90,764          11,084            10,002              --          111,850
                                                     ---------       ---------         ---------         ---------      ---------

CASH AND CASH EQUIVALENTS, END OF PERIOD             $ 213,065       $   2,108         $  13,910         $    --        $ 229,083
                                                     =========       =========         =========         =========      =========



                                       31


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



                                                                      SIX MONTHS ENDED JUNE 30, 2003
                                                   ---------------------------------------------------------------------------------
                                                                      GUARANTOR       NONGUARANTOR                     CONSOLIDATED
                                                      PARENT        SUBSIDIARIES      SUBSIDIARIES      ELIMINATIONS      TOTAL
                                                   ------------     ------------      ------------      ------------   -------------
                                                                                    (IN THOUSANDS)
                                                                                                         
CASH FLOWS FROM OPERATING ACTIVITIES:
   Income from continuing operations                 $  9,700         $ 12,005         $  1,940         $(14,922)        $  8,723
   Adjustments to reconcile income from
   continuing operations to cash used in
   operating activities
   Depreciation and amortization                          514            2,005              949             --              3,468
   Deferred income taxes                               (5,330)           5,912            1,131             --              1,713
   (Gain) loss on disposal of fixed assets               --                 (3)              42             --                 39
   Non-cash termination charge                          2,093             --               --               --              2,093
   Changes in operating assets & liabilities,
   net of acquisitions
   Decrease (increase) in accounts receivable            --                350           (1,103)            --               (753)
   Decrease (increase) in intercompany
   receivables & payables                              11,697          (12,294)             597             --               --
   Decrease in inventory                                 --                679              653             --              1,332
   Increase in prepaid expenses & other
   assets                                              (2,107)            (933)          (1,130)            --             (4,170)
   Increase (decrease) in accounts payable,
   accrued expenses and other current
   liabilities                                          3,252           (1,505)           2,224             --              3,971
   (Decrease) increase in income taxes
   payable                                             (3,998)             148              202             --             (3,648)
                                                     --------         --------         --------         --------         --------
   Net cash provided by operating activities           15,821            6,364            5,505          (14,922)          12,768
                                                     --------         --------         --------         --------         --------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment                     (81)          (2,176)          (1,661)            --             (3,918)
   Purchase of patents and trademarks                    --                (38)            --               --                (38)
   Additional consideration for purchased
   businesses                                            --               (243)            --               --               (243)
   Investment in subsidiaries                         (14,735)             (52)            (135)          14,922             --
                                                     --------         --------         --------         --------         --------
   Net cash used in investing activities              (14,816)          (2,509)          (1,796)          14,922           (4,199)
                                                     --------         --------         --------         --------         --------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from exercise of options                      136             --               --               --                136
   Repurchase of treasury stock                       (22,684)            --               --               --            (22,684)
   Repayments of long-term debt                          --               (362)            --               --               (362)
   Borrowings under lines of credit                    29,809             --                396             --             30,205
   Repayments under lines of credit                   (14,809)            --               (200)            --            (15,009)
                                                     --------         --------         --------         --------         --------
   Net cash (used in) provided by financing
   activities                                          (7,548)            (362)             196             --             (7,714)
                                                     --------         --------         --------         --------         --------
   Effect of exchange rate on cash and cash
   equivalents                                          2,230             (323)          (1,440)            --                467
   Net cash used in discontinued operations              --             (3,777)             383             --             (3,394)
                                                     --------         --------         --------         --------         --------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS                                            (4,313)            (607)           2,848             --             (2,072)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD                                                  7,152            3,556            2,205             --             12,913
                                                     --------         --------         --------         --------         --------
CASH AND CASH EQUIVALENTS, END OF PERIOD             $  2,839         $  2,949         $  5,053         $   --           $ 10,841
                                                     ========         ========         ========         ========         ========



                                       32



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.




                                       33



ARMOR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

         The following is a discussion of the results of operations and analysis
of financial condition for the three months and six months ended June 30, 2004.
The results of operations for purchase business combinations are included since
their effective acquisition dates. The following discussion may be understood
more fully by reference to the consolidated financial statements, notes to the
consolidated financial statements, and management's discussion and analysis
contained in our Annual Report on Form 10-K/A for the year ended December 31,
2003, as filed with the Securities and Exchange Commission.

CRITICAL ACCOUNTING POLICIES (INCLUDING NEW ACCOUNTING PRONOUNCEMENTS):

         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 vehicle 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 2005. Revenue
from such contracts is recognized on the percentage of completion, units-of-work
performed method. HMMWV units 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.

         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 is recorded as an
increase of equity of $3,378,000 and $3,936,000 as of June 30, 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. SFAS 123, as amended by SFAS 148, establishes
a fair value based method of accounting for stock-based employee compensation
plans; however, it also allows an entity to continue to measure

                                       34



ARMOR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED


compensation cost for those plans using the intrinsic value based method of
accounting prescribed by 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.


                                       35



ARMOR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED

         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 June 30, 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               SIX MONTHS ENDED
                                               ----------------------------   -----------------------------
                                               JUNE 30, 2004  JUNE 30, 2003   JUNE 30, 2004   JUNE 30, 2003
                                               -------------  -------------   -------------   -------------
                                                          (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                                                                     
Net income as reported:                           $ 17,821        $ 4,613        $ 30,311        $   9,700

Deduct:  Total stock-based employee
compensation expense determined under fair
value based method for all awards, net of
related tax effects                                 (1,290)        (1,156)         (2,533)          (2,314)

Add:  Employee compensation expense for
modification of stock option awards
included in reported net income, net of
income taxes                                            57            506              57              506
                                                  --------        -------        --------        ---------

Pro-forma net income                              $ 16,588        $ 3,963        $ 27,835        $   7,892
                                                  ========        =======        ========        =========

Earnings per share:
    Basic - as reported                           $   0.60        $  0.17        $   1.04        $    0.34
                                                  ========        =======        ========        =========
    Basic - pro-forma                             $   0.56        $  0.14        $   0.95        $    0.28
                                                  ========        =======        ========        =========
    Diluted - as reported                         $   0.57        $  0.17        $   0.99        $    0.34
                                                  ========        =======        ========        =========
    Diluted - pro-forma                           $   0.53        $  0.14        $   0.91        $    0.28
                                                  ========        =======        ========        =========



         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,

                                       36



ARMOR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED


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
Condensed and Consolidated Financial Statements included in this report.

         Derivative Instruments and Hedging Activities. We account for
derivative instruments in accordance with 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 June 30, 2004 decreased by $4.2 million from December 31, 2003,
which reflected a decrease 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 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.

         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 condensed 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.

         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

                                       37


ARMOR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED


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.

         On June 30, 2004, our litigation support services subsidiary, New
Technologies Armor, Inc. ("NTI"), was the last remaining business in
discontinued operations. On July 2, 2004, we sold the security consulting
division of NTI. The remaining division in NTI, consisting primarily of training
services, will be included as part of the Products Division segment. In the
second quarter of 2004, we recorded an impairment charge of $1.4 million in
integration and other charges in continuing operations to reduce the carrying
value of remaining portion of NTI to its estimated fair value.




                                       38


ARMOR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED

NEW ACCOUNTING PRONOUNCEMENT:

         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 FSP
129-1 is effective April 2004 and applies to all existing and newly created
securities. This pronouncement has no effect on the Company.



                                       39


ARMOR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED


RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2004 COMPARED TO THREE MONTHS ENDED JUNE 30, 2003.

          Net income. Net income increased $13.2 million, or 286.3%, to $17.8
million for the three months ended June 30, 2004, compared to $4.6 million for
the three months ended June 30, 2003. Net income for the three months ended June
30, 2004, includes income from continuing operations of $17.7 million and income
from discontinued operations of $100,000, compared to income from continuing
operations of $3.5 million and income from discontinued operations of $1.1
million for the three months ended June 30, 2003.

CONTINUING OPERATIONS

         Total revenues. Total revenues increased $142.0 million, or 173.9%, to
$223.7 million in the three months ended June 30, 2004, compared to $81.7
million in the three months ended June 30, 2003. For the three months ended June
30, 2004, total revenue increased 116.4% internally, including year over year
changes in acquired businesses, and 57.5% due to acquisitions.

         Aerospace & Defense Group revenues. Aerospace & Defense Group revenues
increased $114.0 million, or 721.7%, to $129.8 million in the three months ended
June 30, 2004, compared to $15.8 million in the three months ended June 30,
2003. For the three months ended June 30, 2004, Aerospace & Defense Group
revenue increased 277.1% internally, including year over year changes in
acquired businesses, and 444.6% 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.

         Products Division revenues. Products Division revenues increased $16.4
million, or 33.2%, to $65.7 million in the three months ended June 30, 2004,
compared to $49.3 million in the three months ended June 30, 2003. For the three
months ended June 30, 2004, Products Division revenue increased 25.4%
internally, including year over year changes in acquired businesses, and 7.8%
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 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 as well
as strong military and international sales within duty gear.

         Mobile Security revenues. Mobile Security Division revenues increased
$11.7 million, or 70.6%, to $28.2 million in the three months ended June 30,
2004, compared to $16.5 million in the three months ended June 30, 2003,
primarily due to increased demand in the Middle East. All of Mobile Security
Division's 70.6% revenue growth was internal.

         Cost of sales. Cost of sales increased $100.0 million, or 174.5%, to
$157.2 million for the three months ended June 30, 2004, compared to $57.3
million for the three months ended June 30, 2003. As a percentage of total
revenues, cost of sales increased to 70.3% of total revenues for the three
months ended June 30, 2004, from 70.1% for the three months ended June 30, 2003.

                                       40


ARMOR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED


         Gross margins in the Aerospace & Defense Group were 29.0% for the three
months ended June 30, 2004, compared to 30.2% for the three months ended June
30, 2003, primarily due to a lower margin product mix, which included a large
number of crew protection kits.

         Gross margins in the Products Division were 33.5% for the three months
ended June 30, 2004, compared to 33.1% for the three months ended June 30, 2003.
The increase in Products Division gross margins resulted primarily from product
mix.

         Gross margins in the Mobile Security Division were 24.2% in the three
months ended June 30, 2004, compared to 19.9% for the three months ended June
30, 2003. The margin improvement was primarily due to improved fixed cost
absorption associated with increased manufacturing volumes, and a richer sales
mix of high-end, higher margin vehicles.

         Operating expenses. Operating expenses increased $8.9 million, or
61.0%, to $23.4 million (10.5% of total revenues) for the three months ended
June 30, 2004, compared to $14.5 million (17.8% of total revenues) for the three
months ended June 30, 2003. The decrease as a percentage of revenues was largely
a function of increased revenues, and the acquisition of Simula, which operates
with lower operating expenses as a percentage of revenues than the Products
Division and the Mobile Security Division.

         Aerospace & Defense Group operating expenses increased $4.0 million, or
563.8%, to $4.7 million (3.6% of Aerospace & Defense Group revenues) for the
three months ended June 30, 2004, compared to $710,000 (4.5% of Aerospace &
Defense Group revenues) for the three months ended June 30, 2003. The increase
in operating expenses is due primarily to the acquisition of Simula on December
9, 2003, as well as additional operating expenses in the M1114 Up-Armored HMMWV
program as we increase production.

         Products Division operating expenses increased $2.4 million, or 29.0%,
to $10.5 million (15.9% of Products Division revenues) for the three months
ended June 30, 2004, compared to $8.1 million (16.4% of Products Division
revenues) for the three months ended June 30, 2003. This increase is due
primarily to acquisitions, higher sales expenses as related to increased sales
volumes, wage increases, higher insurance cost, and bonus expenses that
previously were allocated to corporate operating expenses.

         Mobile Security Division operating expenses decreased $0.2 million, or
7.4%, to $3.0 million (10.5% of Mobile Security Division revenues) for the three
months ended June 30, 2004, compared to $3.2 million (19.4% of Mobile Security
Division revenues) for the three months ended June 30, 2003. This decrease in
operating expenses as a percentage of revenue is due primarily to increased
sales volumes and management's ability to scale its business.

         Corporate operating expenses increased $2.7 million, or 109.4%, to $5.2
million (2.3% of total revenues) for the three months ended June 30, 2004,
compared to $2.5 million (3.1% of total revenues) for the three months ended
June 30, 2003. This increase in administrative expenses is associated with the
overall growth of the Company, increased legal expenses for Zylon litigation,
and Sarbanes-Oxley requirements.


                                       41



ARMOR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED


         Amortization. Amortization expense increased $904,000, or 1,310.1% to
$973,000 for the three months ended June 30, 2004, compared to $69,000 for the
three months ended June 30, 2003, primarily due to the acquisitions of Simula
and Hatch Imports 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
$4.3 million, or 115.2%, to $8.1 million for the three months ended June 30,
2004, compared to $3.8 million for the three months ended June 30, 2003
primarily due to a non-cash charge of $5.9 million for the acceleration of
performance based, long-term restricted stock awards granted to certain
executives in 2002. In the second quarter of 2004, we recorded an impairment
charge of $1.4 million in integration and other charges in continuing operations
to reduce the carrying value of remaining portion of NTI to its estimated fair
value. The remaining integration and other charges in the second quarter of 2004
were primarily for the integration of Simula, Inc., Hatch Imports, Inc., and
ODV, Inc., which were all acquired subsequent to the second quarter of fiscal
year 2003.

         Operating income. Operating income from continuing operations increased
$28.0 million, or 465.3%, to $34.0 million for the three months ended June 30,
2004, compared to $6.0 million in the three months ended June 30, 2003, due to
the factors discussed above.

         Interest expense, net. Interest expense, net increased $1.6 million, or
370.7%, to $2.1 million for the three months ended June 30, 2004, compared to
$437,000 for the three months ended June 30, 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 (1.94% at June 30, 2004), set in arrears, plus a spread of 2.735% to
2.75%.

         Other (income) expense, net. Other (income), net, was $(390,000) for
the three months ended June 30, 2004, compared to other expense, net, of $16,000
for the three months ended June 30, 2003. The increase in other (income)
expense, net, was a result of the realization of a gain on the sale of a certain
equity investment.

         Income from continuing operations before provision for income taxes.
Income from continuing operations before provision for income taxes increased
$26.8 million, or 481.4%, to $32.3 million for the three months ended June 30,
2004, compared to $5.6 million for the three months ended June 30, 2003, due to
the reasons discussed above.

         Provision for income taxes. Provision for income taxes was $14.6
million for the three months ended June 30, 2004, compared to $2.1 million for
the three months ended June 30, 2003. The effective tax rate was 45.2% for the
three months ended June 30, 2004, compared to 37.4% for the three months ended
June 30, 2003. The increased tax rate relates primarily to an increased mix of
profitability generated by our Ohio, Arizona and Massachusetts locations, which
operate in higher-taxed jurisdictions,

                                       42


ARMOR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED


and the non-tax deductible charge due to the accelerated vesting of performance
based, long-term restricted stock awards.

         Income from continuing operations. Income from continuing operations
increased $14.2 million, or 409.5%, to $17.7 million for the three months ended
June 30, 2004, compared to $3.5 million for the three months ended June 30,
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 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. Through June 30, 2004, we have received $475,000 in prepayments on the note
receivable. We have previously recorded a loss of $366,000 on the sale during
the second quarter of 2003.

         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 July 23, 2004. We have previously recorded a loss of
$8.8 million on the sale in the fourth quarter of 2003. In accordance with
generally accepted accounting principles, foreign currency translation
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).

         On June 30, 2004, our litigation support services subsidiary, New
Technologies Armor, Inc. ("NTI"), was the last remaining business in
discontinued operations. On July 2, 2004, we sold the security consulting
division of NTI. The remaining division in NTI, consisting primarily of training
services, will be included as part of the Products Division segment. In the
second quarter of 2004, we recorded an impairment charge of $1.4 million in
integration and other charges in continuing operations to reduce the carrying
value of remaining portion of NTI to its estimated fair value.

         Services revenues. Services Division revenue decreased $22.9 million to
$1.0 million for the three months ended June 30, 2004, compared to $23.9 million
for the three months ended June 30, 2003. Exclusive of ArmorGroup Integrated
Systems, which we sold on April 17, 2003, and ArmorGroup, which we sold on
November 26, 2003, revenue increased $438,000, or 76.2%, to $1.0 million for the
three months ended June 30, 2004, compared to $575,000 for the three months
ended June 30, 2003. This increase was due to a significant consulting
engagement that began in June 2004.

         Cost of sales. Cost of sales decreased $15.7 million to $461,000 for
the three months ended June 30, 2004, compared to $16.2 million for the three
months ended June 30, 2003. Exclusive of ArmorGroup Integrated Systems and
ArmorGroup, cost of sales increased $211,000, or 84.4%, to $461,000 for the
three months ended June 30, 2004, compared to $250,000 for the three months
ended

                                       43



ARMOR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED


June 30, 2003. This increase was due to a significant consulting engagement that
began in June 2004. As a percentage of total revenue exclusive of ArmorGroup
Integrated Systems and ArmorGroup, cost of sales increased to 45.5% of total
revenues for the three months ended June 30, 2004, from 43.5% for the three
months ended June 30, 2003.

         Operating expenses. Operating expenses decreased $4.6 million to
$385,000 (38.0% of Services revenues) for the three months ended June 30, 2004,
compared to $5.0 million (20.9% of Services revenues) for the three months ended
June 30, 2003. Exclusive of ArmorGroup Integrated Systems and ArmorGroup,
operating expenses decreased $4,000, or 1.0%, to $385,000 for the three months
ended June 30, 2004, compared to $389,000 for the three months ended June 30,
2003.

         Integration and other charges. Integration and other charges decreased
to zero for the three months ended June 30, 2004, compared to $452,000 for the
three months ended June 30, 2003. Excluding ArmorGroup Integrated Systems and
ArmorGroup, there were no integration and other charges for the three months
ended June 30, 2003.

         Operating income. Operating income was $167,000 for the three months
ended June 30, 2004, compared to operating income of $2.3 million for the three
months ended June 30, 2003, due to the factors discussed above. Excluding the
ArmorGroup Integrated Systems and ArmorGroup, the balance of the assets held for
sale generated an operating income of $167,000 for the three months ended June
30, 2004, compared to an operating loss of ($67,000) for the three months ended
June 30, 2003, due to the reasons discussed above.

         Interest expense, net. Interest expense, net, decreased $15,000, or
100%, to zero for the three months ended June 30, 2004, compared to $15,000 for
the three months ended June 30, 2003, primarily due to the sale of ArmorGroup
Integrated Systems and ArmorGroup. All interest bearing liabilities in
discontinued operations have been repaid.

         Other expense, net. Other expense, net, decreased $382,000, or 97.4%,
to $10,000 for the three months ended June 30, 2004, compared to other expense,
net, of $392,000 for the three months ended June 30, 2003 primarily due to the
sale of ArmorGroup Integrated Systems and ArmorGroup. Excluding ArmorGroup
Integrated Systems and ArmorGroup, there was no significant change in other
expense, net.

         Income from discontinued operations before provision for income taxes.
Income from discontinued operations before provision for income taxes was
$157,000 for the three months ended June 30, 2004, compared to income of $1.9
million for the three months ended June 30, 2003, due to the reasons discussed
above. Excluding ArmorGroup Integrated Systems and ArmorGroup, the balance of
the assets held for sale generated income (loss) from discontinued operations
before provision for income taxes of $157,000 for the three months ended June
30, 2004, compared to ($62,000) for the three months ended June 30, 2003, due to
reasons discussed above.

         Provision for income taxes. Provision for income taxes was $57,000 for
the three months ended June 30, 2004 compared to a provision for income taxes of
$725,000 for the three months ended June 30, 2003. The effective tax rate for
the three months ended June 30, 2004 was 36.3% compared to 39.0% for the three
months ended June 30, 2003. Excluding the ArmorGroup Integrated Systems and

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ARMOR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED


ArmorGroup, the balance of the assets held for sale provision was $57,000 for
the three months ended June 30, 2004, compared to a benefit of ($18,000) for the
three months ended June 30, 2003.

         Income from discontinued operations. Income from discontinued
operations was $100,000 for the three months ended June 30, 2004, compared to
income from discontinued operations of $1.1 million for the three months ended
June 30, 2003, due to the factors discussed above. Excluding ArmorGroup
Integrated Systems and ArmorGroup, the balance of the assets held for sale
generated income (loss) from discontinued operations of $100,000 for the three
months ended June 30, 2004, compared to ($44,000) for the three months ended
June 30, 2003, due to the reasons discussed above.



                                       45


ARMOR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED


SIX MONTHS ENDED JUNE 30, 2004 COMPARED TO SIX MONTHS ENDED JUNE 30, 2003.

          Net income. Net income increased $20.6 million, or 212.5%, to net
income of $30.3 million for the six months ended June 30, 2004, compared to net
income of $9.7 million for the six months ended June 30, 2003. Net income for
the six months ended June 30, 2004, includes income from continuing operations
of $30.3 million and loss from discontinued operations of ($38,000), compared to
income from continuing operations of $8.7 million and net income from
discontinued operations of $977,000 for the six months ended June 30, 2003.

CONTINUING OPERATIONS

         Total revenues. Total revenues increased $223.2 million, or 137.7%, to
$385.3 million in the six months ended June 30, 2004, compared to $162.1 million
in the six months ended June 30, 2003. For the six months ended June 30, 2004,
total revenue increased 92.2% internally, including year over year changes in
acquired businesses, and 45.5% due to the acquisitions.

         Aerospace & Defense Group revenues. Aerospace & Defense Group revenues
increased $179.1 million, or 564.9%, to $210.8 million in the six months ended
June 30, 2004, compared to $31.7 million in the six months ended June 30, 2003.
For the six months ended June 30, 2004, Aerospace & Defense Group revenue
increased 228.7% internally, including year-over-year changes in acquired
businesses, and 336.2% from acquisitions. Internal growth was due to strong
demand for the M1114 Up-Armored HMMWV, SAPI plates, and armored kits; while
acquired growth was a function of the Simula, Inc. acquisition on December 9,
2003.

         Products Division revenues. Products Division revenues increased $26.2
million, or 28.1%, to $119.6 million in the six months ended June 30, 2004,
compared to $93.4 million in the six months ended June 30, 2003. For the six
months ended June 30, 2004, Products Division revenue increased 20.4%
internally, including year-over-year changes in acquired businesses, and 7.7%
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 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 as well
as strong military and international sales within duty gear.

         Mobile Security revenues. Mobile Security Division revenues increased
$17.9 million, or 48.3%, to $55.0 million in the six months ended June 30, 2004,
compared to $37.1 million in the six months ended June 30, 2003. All of the
revenue growth was generated internally, primarily as a result of increased
demand in the Middle East.

         Cost of sales. Cost of sales increased $156.9 million, or 137.1%, to
$271.3 million for the six months ended June 30, 2004, compared to $114.4
million for the six months ended June 30, 2003. As a percentage of total
revenues, cost of sales decreased to 70.4% of total revenues for the six months
ended June 30, 2004, from 70.6% for the six months ended June 30, 2003.

         Gross margins in the Aerospace & Defense Group were 30.2% for the six
months ended June 30, 2004, compared to 30.0% for the six months ended June 30,
2003.


                                       46


ARMOR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED


         Gross margins in the Products Division were 32.6% for the six months
ended June 30, 2004, compared to 33.6% for the six months ended June 30, 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 first quarter.

         Gross margins in the Mobile Security Division were 20.8% in the six
months ended June 30, 2004, compared to 18.4% for the six months ended June 30,
2003. The increase in the Mobile Security Divisions gross margins resulted
primarily from improved fixed-cost absorption benefits associated with increased
manufacturing volumes, and a richer sales mix of high-end, higher margin
vehicles.

         Operating expenses. Operating expenses increased $18.1 million, or
63.5%, to $46.6 million (12.1% of total revenues) for the six months ended June
30, 2004, compared to $28.5 million (17.6% of total revenues) for the six months
ended June 30, 2003. The decrease as a percentage of revenues was largely a
function of increased revenues, and the acquisition of Simula, 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 $8.2 million, or
450.9%, to $10.0 million (4.7% of Aerospace & Defense Group revenues) for the
six months ended June 30, 2004, compared to $1.8 million (5.7% of Aerospace &
Defense Group revenues) for the six months ended June 30, 2003. The increase in
operating expenses is due primarily to the acquisition of Simula on December 9,
2003, as well as additional operating expenses in the M1114 Up-Armored HMMWV
program as we increased production. The decrease in operating expense as a
percentage of revenue was due to leveraging of the operating expenses over a
much larger revenue base.

         Products Division operating expenses increased $5.4 million, or 33.5%,
to $21.4 million (17.9% of Products Division revenues) for the six months ended
June 30, 2004, compared to $16.0 million (17.2% of Products Division revenues)
for the six months ended June 30, 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
7.2%, to $6.5 million (11.9% of Mobile Security Division revenues) for the six
months ended June 30, 2004, compared to $6.1 million (16.4% of Mobile Security
Division revenues) for the six months ended June 30, 2003. This increase is due
primarily to increased operating expenses related to significant revenue growth
and increased warranty provisions. The decrease in operating expense as a
percentage of revenue was due to leveraging the operating expenses over larger
revenue base and management's ability to scale its business.

         Corporate operating expenses increased $4.1 million, or 89.8%, to $8.8
million (2.3% of total revenues) for the six months ended June 30, 2004,
compared to $4.6 million (2.8% of total revenues) for the six months ended June
30, 2003. This increase in administrative expenses is associated with the
overall growth of the Company, increased legal expenses for Zylon litigation,
and Sarbanes-Oxley requirements.

                                       47


ARMOR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED


         Amortization. Amortization expense increased $1.8 million, or 1,414.0%
to $2.0 million for the six months ended June 30, 2004, compared to $129,000 for
the six months ended June 30, 2003, primarily due to the acquisitions of Simula
and Hatch Imports 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
$4.6 million, or 109.8%, to $8.8 million for the six months ended June 30, 2004,
compared to $4.2 million for the six months ended June 30, 2003 primarily due to
a non-cash charge of $5.9 million for the acceleration of performance based,
long-term restricted stock awards granted to certain executives in 2002. In the
second quarter of 2004, we recorded an impairment charge of $1.4 million in
integration and other charges in continuing operations to reduce the carrying
value of remaining portion of NTI to its estimated fair value. $1.5 million of
the integration and other charges in the six months ended June 30, 2004, were
primarily for the integration of Simula, Inc., Hatch Imports, Inc., and ODV,
Inc., which were all acquired subsequent to the second quarter of fiscal year
2003.

         Operating income. Operating income from continuing operations increased
$41.8 million, or 281.7%, to $56.6 million for the six months ended June 30,
2004, compared to $14.8 million in the six months ended June 30, 2003, due to
the factors discussed above.

         Interest expense, net. Interest expense, net increased $3.0 million, or
363.8%, to $3.8 million for the six months ended June 30, 2004, compared to
$816,000 for the six months ended June 30, 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 (1.94% at
June 30, 2004), set in arrears, plus a spread of 2.735% to 2.75%.

         Other (income) expense, net. Other (income) expense, net, was
($275,000) for the six months ended June 30, 2004, compared to other expense,
net, of $85,000 for the six months ended June 30, 2003. The income for the six
months ended June 30, 2004, was a result of the realization of a gain on the
sale of a certain equity investment.

         Income from continuing operations before provision for income taxes.
Income from continuing operations before provision for income taxes increased
$39.2 million, or 281.2%, to $53.1 million for the six months ended June 30,
2004, compared to $13.9 million for the six months ended June 30, 2003, due to
the reasons discussed above.

         Provision for income taxes. Provision for income taxes was $22.8
million for the six months ended June 30, 2004, compared to $5.2 million for the
six months ended June 30, 2003. The effective tax rate was 42.9% for the six
months ended June 30, 2004, compared to 37.4% for the six months ended June 30,
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,

                                       48


ARMOR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED

and the non-tax deductible charge due to the accelerated vesting of performance
based, long-term restricted stock awards.

         Income from continuing operations. Income from continuing operations
increased $21.6 million, or 247.9%, to $30.3 million for the six months ended
June 30, 2004, compared to $8.7 million for the six months ended June 30, 2003
due to the factors discussed above.


                                       49


ARMOR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED


DISCONTINUED OPERATIONS

         Services revenues. Services Division revenue decreased $48.0 million to
$1.7 million for the six months ended June 30, 2004, compared to $49.7 million
for the six months ended June 30, 2003. Exclusive of ArmorGroup Integrated
Systems, which we sold on April 17, 2003, and ArmorGroup, which we sold on
November 26, 2003, revenue increased $218,000, or 14.4%, to $1.7 million for the
six months ended June 30, 2004, compared to $1.5 million for the six months
ended June 30, 2003. This increase was due to a significant consulting
engagement that began in June 2004.

         Cost of sales. Cost of sales decreased $34.7 million to $697,000 for
the six months ended June 30, 2004, compared to $35.4 million for the six months
ended June 30, 2003. Exclusive of ArmorGroup Integrated Systems and ArmorGroup,
cost of sales increased $106,000, or 17.9%, to $697,000 for the six months ended
June 30, 2004, compared to $591,000 for the six months ended June 30, 2003. This
increase was due to a significant consulting engagement that began in June 2004.
As a percentage of total revenue exclusive of ArmorGroup Integrated Systems and
ArmorGroup, cost of sales increased to 40.2% of total revenues for the six
months ended June 30, 2004, from 39.0% for the six months ended June 30, 2003.

         Operating expenses. Operating expenses decreased $10.6 million to
$821,000 (47.4% of Services revenues) for the six months ended June 30, 2004,
compared to $11.4 million (23.0% of Services revenues) for the six months ended
June 30, 2003. Exclusive of ArmorGroup Integrated Systems and ArmorGroup,
operating expenses decreased $55,000, or 6.3%, to $821,000 for the six months
ended June 30, 2004, compared to $876,000 for the six months ended June 30,
2003. This decrease was due to a decline in revenues.

         Integration and other charges. Integration and other charges decreased
to zero for the six months ended June 30, 2004, compared to $494,000 for the six
months ended June 30, 2003. Excluding ArmorGroup Integrated Systems and
ArmorGroup, there were no integration and other charges for the six months ended
June 30, 2003.

         Operating income. Operating income was $215,000 for the six months
ended June 30, 2004, compared to operating income of $2.4 million for the six
months ended June 30, 2003, due to the factors discussed above. Excluding the
ArmorGroup Integrated Systems and ArmorGroup, the balance of the assets held for
sale generated operating income of $215,000 for the six months ended June 30,
2004, compared to operating income of $46,000 for the six months ended June 30,
2003, due to the reasons discussed above.

         Interest expense, net. Interest expense, net, decreased $51,000, or
96.2%, to $2,000 for the six months ended June 30, 2004, compared to $53,000 for
the six months ended June 30, 2003, primarily due to the sale of ArmorGroup
Integrated Systems and ArmorGroup. All interest bearing liabilities in
discontinued operations have been repaid.

         Other expense, net. Other expense, net, decreased $179,000, or 39.6%,
to $273,000 for the six months ended June 30, 2004, compared to other expense,
net, of $452,000 for the six months ended June 30, 2003. Excluding the
ArmorGroup Integrated Systems and ArmorGroup, the balance of the assets held for
sale generated other expense, net, from discontinued operations of $273,000 for
the six months ended

                                       50


ARMOR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED


June 30, 2004, compared to other income, net, of ($7,000) for the three months
ended June 30, 2003, due to additional accounting fees incurred in connection
with the sale of ArmorGroup.

         (Loss) income from discontinued operations before (benefit) provision
for income taxes. Loss from discontinued operations before provision for income
taxes was ($60,000) for the six months ended June 30, 2004, compared to income
of $1.9 million for the six months ended June 30, 2003, due to the reasons
discussed above. Excluding the ArmorGroup Integrated Systems and ArmorGroup, the
balance of the assets held for sale generated a loss from discontinued
operations before provision for income taxes of ($60,000) for the six months
ended June 30, 2004, compared to income of $48,000 for the three months ended
June 30, 2003, due to the reasons discussed above.

         (Benefit) Provision for income taxes. Benefit for income taxes was
($22,000) for the six months ended June 30, 2004 compared to a provision for
income taxes of $937,000 for the six months ended June 30, 2003. The effective
tax rate for the three months ended June 30, 2004 was a benefit of 36.7%
compared to a provision of 49.0% for the six months ended June 30, 2003.
Excluding the ArmorGroup Integrated Systems and ArmorGroup, the balance of the
assets held for sale benefit was ($22,000) for the six months ended June 30,
2004, compared to a provision of $28,000 for the six months ended June 30, 2003.

         (Loss) income from discontinued operations. Loss from discontinued
operations was ($38,000) for the six months ended June 30, 2004, compared to
income from discontinued operations of $977,000 for the six months ended June
30, 2003, due to the factors discussed above. Excluding the ArmorGroup
Integrated Systems and ArmorGroup, the balance of the assets held for sale
generated a loss from discontinued operations ($38,000) for the six months ended
June 30, 2004, compared to income of $20,000 for the six months ended June 30,
2003, due to the reasons discussed above.


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ARMOR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED


LIQUIDITY AND CAPITAL RESOURCES

         On June 22, 2004, our stockholders approved an amendment to our
Certificate of Incorporation, as amended that increased the number of shares of
our authorized capital stock to 80,000,000, 75,000,000 shares of which are
common stock and 5,000,000 of which are preferred stock.

         On June 12, 2004, we sold 4,000,000 primary shares of common stock at a
price of $37.50 per share, raising $142.5 million of net proceeds after
deducting the underwriter discounts and commissions. In addition, certain of our
directors and officers granted the underwriters a 30-day option to purchase up
to 600,000 shares. The 30-day option expired unexercised on July 15, 2004. We
intend to use the net proceeds from the 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.
Funds that are not immediately used are invested in money market funds,
certificates of deposits, and other investment grade securities until needed.

         On September 2, 2003, we entered into interest rate swap agreements,
which have been designated as fair value hedges 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 debt due to
changes in the market interest rate. Accordingly, other assets on the
Consolidated Balance Sheet as of June 30, 2004 decreased by $4.2 million from
December 31, 2003, which reflected a decrease 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.

         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,
excluding Cyconics International Training Services, Inc. (formally known as
Advanced Training Solutions, Inc. which was formally known as USDS, Inc.), 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 initially rated B1/B+ by Moody's Investors'
Service and Standard & Poor's Rating Services, respectively. We used a portion
the funds to repay debt, acquire Simula, Inc., Hatch Imports, Inc., and ODV,
Inc. and we intend to use the remaining proceeds of the offering to fund
acquisitions, for general corporate and working capital purposes, including the
funding of capital expenditures. On March 29, 2004, we completed a registered
exchange offer for the Notes and exchanged the Notes for new Notes that were
registered under the Securities Act of 1933, as amended.

         On August 12, 2003, in concert with our high yield note offering, we
entered into a new secured revolving credit facility (the "Credit Facility")
with Bank of America, N.A., Wachovia Bank, National

                                       52


ARMOR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED


Association and a syndicate of other financial institutions arranged by Bank of
America Securities, LLC. The 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 Credit Facility, including,
among other things, accounts receivable, inventory, machinery, equipment,
certain contract rights, intellectual property rights and general intangibles.
On March 29, 2004, we amended our credit agreement to allow us to pay dividends
subject to certain limitations.

         As of June 30, 2004, we were in compliance with all of our negative and
affirmative covenants contained in the Credit Facility and the indenture
governing the Notes.

         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 July 23, 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. At June 30, 2004, we had 32.8 million
shares of common stock outstanding.

         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
the indenture governing the Notes. 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. This basket resets to $0 each time the ratio is less
than 1.00 to 1. Our indenture governing the Notes also permits us to repurchase
shares of our common stock, subject to certain limitations, as long as we
satisfy the conditions to such repurchase contained therein.

         Working capital for continuing operations was $353.5 million and $168.5
million as of June 30, 2004, and December 31, 2003, respectively.

                                       53


ARMOR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED

         Our fiscal 2004 capital expenditures for continuing operations are
expected to be approximately $13.9 million, of which we have spent approximately
$7.1 million through the six months ended June 30, 2004. Such 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, 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, there are no assurances
that it will be available, or if available, that it can be obtained on terms
favorable to us or on a basis that is not dilutive to our stockholders.

         See Part II Item 1 Legal Proceedings regarding outstanding legal
matters.


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ARMOR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED

FORWARD LOOKING AND CAUTIONARY STATEMENTS

         Except for the historical information and discussions contained herein,
statements contained in this Form 10-Q may constitute "forward looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements involve a number of risks, uncertainties and other
factors that could cause actual results to differ materially, including, but not
limited to, our failure to continue to develop and market new and innovative
products and services and to keep pace with technological change; competitive
pressures; failure to obtain or protect intellectual property rights; the
ultimate effect of various domestic and foreign political and economic issues on
our business, financial condition or results of operations; quarterly
fluctuations in revenues and volatility of stock prices; contract delays; cost
overruns; our ability to attract and retain key personnel; currency and customer
financing risks; dependence on certain suppliers, customers and availability of
raw materials; changes in the financial or business condition of our
distributors or resellers; our ability to successfully manage acquisitions,
alliances and integrate past and future business combinations; regulatory,
legal, political and economic changes; an adverse determination in connection
with the Zylon(R) investigation being conducted by the U.S. Department of
Justice and certain state agencies and/or other Zylon(R)-related litigation; and
other risks, uncertainties and factors inherent in our business and otherwise
discussed elsewhere in this Form 10-Q and in our other filings with the
Securities and Exchange Commission or in materials incorporated therein by
reference.


                                       55



ARMOR HOLDINGS, INC. AND SUBSIDIARIES
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 3.  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 only a remote risk of loss of principal in the
short-term money market instruments. The main risk is 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 the
senior notes 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 each
year through maturity. The six-month LIBOR rate was 1.89% on July 16, 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 senior 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 swaps, with an offset to earnings. There is no ineffectiveness to
be recorded. On June 30, 2004, we recorded the fair value of the interest rate
swap agreements of $1.7 million and recorded the corresponding fair value

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ARMOR HOLDINGS, INC. AND SUBSIDIARIES
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - CONTINUED


adjustment to the 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 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, 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.



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ARMOR HOLDINGS, INC. AND SUBSIDIARIES

ITEM 4.  CONTROLS AND PROCEDURES

         As of the end of the period covered by this report, we evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures. Our disclosure controls and procedures are designed to provide
reasonable assurance that the information that we must disclose in our reports
filed under the Securities Exchange Act of 1934, as amended, is communicated and
processed in a timely manner. Warren B. Kanders, Chairman and Chief Executive
Officer, and Glenn J. Heiar, Chief Financial Officer, participated in this
evaluation.

         Based on such evaluation, Mr. Kanders and Mr. Heiar concluded that, as
of the end of the period covered by this report, our disclosure controls and
procedures were effective. During the period covered by this report, there have
not been any significant changes in our internal controls over financial
reporting or in other factors that could significantly affect those controls.


                                       58


ARMOR HOLDINGS, INC. AND SUBSIDIARIES

                                     PART II

ITEM 1.  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.

         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

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ARMOR HOLDINGS, INC. AND SUBSIDIARIES

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 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. In April 2004, we reached an agreement with the Internal Revenue
Service regarding our tax returns for the years ended December 31, 2000 and 2001
that did not have a material impact on our financial position, operations or
liquidity.


                                       60


ARMOR HOLDINGS, INC. AND SUBSIDIARIES


         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.

         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(R) and Ultimax(R) models. Second
Chance has claimed that Zylon(R) 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(R) 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(R)
and Ultimax(R) model vests.

         We use Zylon(R) fiber in a number of concealable body armor models for
law enforcement, but our vest design and construction are different from Second
Chance. In addition, to our knowledge, no other body armor manufacturer has
reported or experienced problems with Zylon(R)-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 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.

         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(R) 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

                                       61

ARMOR HOLDINGS, INC. AND SUBSIDIARIES


exposed to adverse conditions, and which utilized the ballistic testing standard
applicable to new vests. Although some of the vests tested, including ours,
experienced a 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.

         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, are
vigorously defending these lawsuits and have moved 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(R) 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(R) fiber, however, any adverse resolution of these matters could have a
material adverse effect on our business, financial condition, results of
operations and liquidity.

         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 unable 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.

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ARMOR HOLDINGS, INC. AND SUBSIDIARIES

         Reference is made to Part I, Item 3, Legal Proceedings, in our Annual
Report on Form 10-K/A for the fiscal year ended December 31, 2003, for a
description of other legal proceedings.

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ARMOR HOLDINGS, INC. AND SUBSIDIARIES

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

            We held our annual meeting of stockholders on June 22, 2004 for the
purpose of (i) electing directors, (ii) approving an increase in the number of
shares of authorized capital stock to 80,000,000 shares, 75,000,000 shares of
which will be common stock and 5,000,000 shares of which will be preferred
stock, and (iii) approving an increase, by 4,000,000 shares, of the total number
of shares of common stock that may be awarded under the Armor Holdings, Inc.
2002 Stock Incentive Plan, as amended (the "2002 Stock Incentive Plan").

            The increase in the number of shares of our authorized capital stock
as set forth above was approved with the number of votes set forth below:


For                  Against             Abstentions           Broker Non-Votes
---                  -------             -----------           ----------------
25,808,352           1,355,209           10,929                      --


            We adjourned our annual meeting until 10:00 A.M. on July 15, 2004.
The adjournment of the annual meeting was approved with the number of votes set
forth below:


For                  Against              Abstentions          Broker Non-Votes
---                  -------              -----------          ----------------
25,808,352           1,355,209            10,929                     --


            The annual meeting of stockholders was reconvened on July 15, 2004
for the purpose of electing directors and approving an increase, by 4,000,000
shares, of the total number of shares of common stock that may be awarded under
the 2002 Stock Incentive Plan. In connection with the stockholder vote relating
to the increase of the total number of shares of common stock that may be
awarded under the 2002 Stock Incentive Plan, we will not issue more than
2,000,000 of the 4,000,000 additional shares of common stock that may be awarded
under our 2002 Stock Incentive Plan, as proposed to be amended, without further
stockholder approval.

            Each of our nominees for directors, as listed in the proxy
statement, was elected with the number of votes set forth below.

                                  FOR                   WITHHELD
                                  ---                   --------

Warren B. Kanders                 27,082,802              858,938
Burtt R. Ehrlich                  29,955,486              986,254
David R. Haas                     26,671,296            1,270,444
Nicholas Sokolow                  24,940,014            3,001,726
Thomas W. Strauss                 26,940,748            1,000,992
Deborah A. Zoullas                26,940,742            1,000,998

         The increase in the total number of shares of common stock that may be
awarded under the 2002 Stock Incentive Plan as described above was approved with
the number of votes set forth below:

For                    Against           Abstentions         Broker Non-Votes
---                    -------           -----------         ----------------
15,252,317             6,792,387         35,889                 5,861,147


                                       64


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits

         The following exhibits are filed as part of this quarterly report on
Form 10-Q.

              3.1     Certificate of Amendment of the Certificate of
                      Incorporation of Armor Holdings, Inc., as amended.

              31.1    Certification of Principal Executive Officer Pursuant to
                      Rule 13a-14(a) (17 CFR 240.13a-14(a)).

              31.2    Certification of Principal Financial Officer Pursuant to
                      Rule 13a-14(a) (17 CFR 240.13a-14(a)).

              32.1    Certification of Principal Executive Officer Pursuant to
                      Rule 13a-14(b) (17 CFR 240.13a-14(b)) and Section 1350 of
                      Chapter 63 of Title 18 of the United States Code (18
                      U.S.C. 1350).

              32.2    Certification of Principal Financial Officer Pursuant to
                      Rule 13a-14(b) (17 CFR 240.13a-14(b)) and Section 1350 of
                      Chapter 63 of Title 18 of the United States Code (18
                      U.S.C. 1350).

(b)      Reports on Form 8-K.

Form 8-K filed on May 10, 2004, relating to a press release issued on May 10,
2004, announcing our earnings for the fiscal quarter ended March 31, 2004.

Form 8-K filed on June 2, 2004 pursuant to which we filed a preliminary
prospectus supplement to the shelf registration statement, as amended, filed
with the Securities and Exchange Commission on May 26, 2004.

Form 8-K filed on June 2, 2004, relating to a press release, issued on June 1,
2004, announcing revised earnings per share guidance for the quarter ending June
30, 2004.

Form 8-K filed on June 25, 2004, relating to, among other things, our proposed
increase in the number of shares available under our 2002 Stock Incentive Plan.





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ARMOR HOLDINGS, INC. AND SUBSIDIARIES


                                   SIGNATURES

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


                        ARMOR HOLDINGS, INC.

                        /S/ Warren B. Kanders
                        ----------------------------------
                        Warren B. Kanders
                        Chairman and Chief Executive Officer
                        Dated:  July 26, 2004


                        /S/ Glenn J. Heiar
                        -------------------------------------
                        Glenn J. Heiar
                        Chief Financial Officer
                        Dated: July 26, 2004

                                       66