<HTML>
<HEAD>
<TITLE>FORM S-1</TITLE>
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>As filed with the Securities and Exchange Commission on
June&nbsp;3, 2005</B>
</DIV>

<DIV align="right" style="font-size: 10pt;">
<B>Registration
No.&nbsp;333-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>
</DIV>

<DIV align="center" style="font-size: 5pt;">
<DIV style="width: 100%; border-top: 2.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 14pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>UNITED STATES</B>
</DIV>

<DIV align="center" style="font-size: 14pt;">
<B>SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>Washington,&nbsp;D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>FORM S-1</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Colt Defense Inc.</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>(Exact name of registrant as specified in its charter)</I>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="33%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="27%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B>Delaware</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>3490</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>20-2902260</B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <I>(State or other jurisdiction of<BR>
    incorporation or organization)</I></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <I>(Primary Standard Industrial<BR>
    Classification Code Number)</I></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <I>(I.R.S. Employer<BR>
    Identification No.)</I></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Colt Defense Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>547 New Park Avenue</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>West Hartford, Connecticut 06110</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(860)&nbsp;232-4489</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>(Address, including zip code, and telephone number, including
area code, of registrant&#146;s principal executive offices)</I>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>William M. Keys</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Colt Defense Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>President and Chief Executive Officer</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>547 New Park Avenue</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>West Hartford, Connecticut 06110</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(860)&nbsp;232-4489</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>(Name, address, including zip code, and telephone number,
including area code, of agent for service)</I>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>copies to:</I></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="32%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="31%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="31%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B>Robert G. Robison,&nbsp;Esq.<BR>
    Morgan, Lewis&nbsp;&#38; Bockius LLP<BR>
    101 Park Avenue<BR>
    New York, New York 10178<BR>
    Telephone: (212)&nbsp;309-6000<BR>
    Facsimile: (212)&nbsp;309-6001</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>Carlton S. Chen,&nbsp;Esq.<BR>
    Colt Defense Inc.<BR>
    547 New Park Avenue<BR>
    West Hartford, Connecticut 06110<BR>
    Telephone: (860) 232-4489<BR>
    Facsimile: (860) 244-1475</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>Richard D. Truesdell,&nbsp;Jr.,&nbsp;Esq.<BR>
    Davis Polk&nbsp;&#38; Wardwell<BR>
    450 Lexington Avenue<BR>
    New York, New York 10017<BR>
    Telephone: (212) 450-4000<BR>
    Facsimile: (212) 450-3800</B></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
<B>Approximate date of commencement of proposed sale to
public:</B> As soon as practicable after the effective date
hereof.
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule&nbsp;415 under the Securities Act, check the following
box.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
If this Form is filed to register additional securities for an
offering pursuant to Rule&nbsp;462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
If this Form is a post-effective amendment filed pursuant to
Rule&nbsp;462(c) under the Securities Act, check the following
box and list the Securities Act registration number of the
earlier effective registration statement for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
If this Form is a post-effective amendment filed pursuant to
Rule&nbsp;462(d) under the Securities Act, check the following
box and list the Securities Act registration number of the
earlier effective registration statement for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
If delivery of the Prospectus is expected to be made pursuant to
Rule&nbsp;434, please check the following
box.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CALCULATION OF REGISTRATION FEE</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="32%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="28%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="32%">&nbsp;</TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Title of Each Class of Securities</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Proposed Maximum Aggregate</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Amount of</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>to be Registered</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Offering Price<SUP style="font-size: 85%; vertical-align: text-top">(1)(2)</SUP></B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Registration Fee</B></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common Stock, par value per share $0.01 (including preferred
    stock purchase
    rights)<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></DIV>
    </TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    $86,250,000</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    $10,151.63</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Estimated solely for the purpose of calculating the amount of
    the registration fee pursuant to Rule&nbsp;457(o) under the
    Securities Act of 1933.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Includes shares subject to the underwriters&#146; over-allotment
    option.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Rights initially will trade together with the common stock. The
    value attributable to the rights, if any, is reflected in the
    market price of the common stock.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
<B>THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON
SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE
DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL
THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION&nbsp;8(A)
OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION&nbsp;8(A), MAY DETERMINE.</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 4pt;">
<DIV style="width: 100%; border-top: 2.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" cellpadding="5" style="border: 3pt double #000000; margin-bottom: 6pt; font-size: 10pt"><TR><TD>
<FONT style="font-size: 9pt" color="#D81E05" face="helvetica,arial">The
information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities and we are not soliciting an offer to buy these
securities in any state where the offer or sale is not
permitted.</FONT><FONT style="font-size: 9pt" face="helvetica,arial">
<BR>


</FONT>
</TD></TR></TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 1pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<FONT color="#D81E05">SUBJECT TO COMPLETION, DATED JUNE&nbsp;3,
2005
</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Prospectus
</DIV>

<DIV align="center" style="font-size: 15pt;">
<B><FONT face="helvetica,arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares</FONT></B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y09554y0955400.gif" alt="(COLT LOGO)">
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><FONT face="helvetica,arial">Colt Defense Inc.</FONT></B>
</DIV>

<DIV align="center" style="font-size: 15pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><FONT face="helvetica,arial">Common Stock</FONT></B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 37%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This is our initial public offering of common stock and no
public market currently exists for our common stock. All of
the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock are being sold by us. We intend to use
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
the net proceeds from the sale of shares in this offering to
repay outstanding indebtedness under our credit facility and
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to
repay indebtedness to certain of our existing stockholders. We
currently expect the initial public offering price of our common
stock to be between
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. After the offering, the market price for our shares may
be outside this range.
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 37%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have applied to have our common stock listed on the New York
Stock Exchange under the symbol &#147;CLT&#148;.
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 37%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Investing in our common stock involves a high degree of risk.
See &#147;Risk Factors&#148; beginning on page&nbsp;9.</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Per Share</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Offering price</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Discounts and commissions to underwriters</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Offering proceeds to us, before expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have granted the underwriters the right to purchase up
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
shares of common stock to cover any over-allotments. We intend
to use the net proceeds we receive from any shares sold pursuant
to the underwriters&#146; over-allotment option to make
additional payments to our existing stockholders. The
underwriters can exercise the right at any time within
30&nbsp;days after the offering. The underwriters expect to
deliver the shares of common stock to investors on or
about &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 16pt;">

<TR>
    <TD width="50%"></TD>
    <TD width="50%"></TD>
</TR>

<TR valign="top">
    <TD align="left"><B><FONT face="helvetica,arial">Banc of America Securities LLC</FONT></B></TD>
    <TD align="right"><B><FONT face="helvetica,arial">SG Cowen&nbsp;&#38; Co.</FONT></B></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="50%"></TD>
    <TD width="50%"></TD>
</TR>

<TR valign="top">
    <TD align="left"><I><FONT face="helvetica,arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sole Book-Running Manager</FONT></I></TD>
    <TD align="right"><I><FONT face="helvetica,arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Joint Lead Manager&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></I></TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 37%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 14pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><FONT face="helvetica,arial">Friedman Billings
Ramsey</FONT></B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 37%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 9pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
, 2005
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
<B>You should rely only on the information contained in this
prospectus. We have not, and the underwriters have not,
authorized anyone to provide you with different information. We
are not making an offer of these securities in any jurisdiction
where the offer or sale is not permitted. You should assume that
the information contained in this prospectus is accurate as of
the date on the front of this prospectus only. Our business,
financial condition, results of operations and prospects may
have changed since that date.</B>
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
<B>Information contained in our web site does not constitute
part of this prospectus.</B>
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
<B>Colt Defense LLC, Colt Defense Inc., our logo and other
trademarks mentioned in this prospectus are the property of
their respective owners.</B>
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
<B>Market data and other statistical information used in this
prospectus are based on industry publications, government
publications, publicly available information or other published
industry sources. Although we believe these sources are
reliable, we have not independently verified their information
and cannot guarantee it.</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 37%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<!-- TOC -->
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 9pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>TABLE OF CONTENTS</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="75%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Page</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#101'>Prospectus Summary</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#102'>Risk Factors</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#103'>Forward-Looking Statements</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>19</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#104'>Use of Proceeds</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>20</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#105'>Dividend Policy</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>20</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#106'>Capitalization</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>22</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#107'>Dilution</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#108'>Internal Restructuring</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>25</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#109'>Unaudited Pro Forma Financial
    Information</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>28</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#110'>Notes to Unaudited Pro Forma Financial
    Information</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>32</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#111'>Selected Financial Data</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>34</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#112'>Management&#146;s Discussion and Analysis
    of Results of Operations and Financial Condition</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>37</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#113'>Business</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>54</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#114'>Management</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>72</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#115'>Certain Relationships and Related Party
    Transactions</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>80</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#116'>Principal Stockholders</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>86</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#117'>Description of Capital Stock</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>88</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#118'>Shares Eligible for Future Sale</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>96</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#119'>Underwriting</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>98</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#120'>Notice to Canadian Residents</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>101</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#121'>Legal Matters</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>102</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#122'>Experts</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>102</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#123'>Where You Can Find More Information</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>102</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#124'>Index to Consolidated Financial
    Statements</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>F-1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y09554exv10w9.txt">COLT DEFENSE LLC 2003 MANAGEMENT OPTION INCENTIVE PLAN</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y09554exv21w1.txt">LIST OF SUBSIDIARIES</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y09554exv23w2.txt">CONSENT OF ERNST & YOUNG LLP</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y09554exv99w1.txt">CONSENT OF GEN. THE LORD GUTHRIE OF CRAIGIEBANK</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y09554exv99w2.txt">CONSENT OF GORDON R. SULLIVAN</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y09554exv99w3.txt">CONSENT OF JOHN R. TORELL III</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y09554exv99w4.txt">CONSENT OF PHILIP A. WHEELER</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y09554exv99w5.txt">CONSENT OF WILLIAM M. KEYS</A></FONT></TD></TR>
</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;">
<!-- /TOC -->
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 37%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<P align="center" style="font-size: 10pt;">i
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PROSPECTUS SUMMARY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>While this summary highlights information about us and our
business that we believe is important for you to read and
consider, you should read this entire prospectus carefully,
including &#147;Risk Factors&#148; beginning on
page&nbsp;&nbsp;and our financial statements and the notes to
those financial statements beginning on page F-1, before you
decide to invest in our common stock.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Unless the context otherwise indicates, as used in this
prospectus, the terms &#147;Company,&#148; &#147;Colt,&#148;
&#147;Colt Defense,&#148; &#147;we,&#148; &#147;us&#148; and
&#147;our&#148; refer to (1)&nbsp;our predecessors with respect
to periods prior to November&nbsp;4, 2002, (2)&nbsp;Colt Defense
LLC and subsidiaries on a combined basis with respect to periods
on and after November&nbsp;4, 2002 until the completion of our
Internal Restructuring as defined and described below under
&#147;Internal Restructuring&#148; and (3)&nbsp;Colt Defense
Inc. and its consolidated subsidiaries with respect to periods
from and after the completion of our Internal Restructuring.</I>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>COLT DEFENSE</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are a leading designer, developer and manufacturer of small
arms and weapon systems for the U.S.&nbsp;military, its allies
and federal, state and local law enforcement agencies. Our
products include military rifles, such as the M4&nbsp;carbine
rifle and its predecessor, the M16&nbsp;rifle, auxiliary weapon
systems, such as the M203&nbsp;grenade launcher, and rifles for
law enforcement agencies around the world. We also refurbish,
recondition and repair these weapons, and produce spare parts
and component kits such as barrels, springs, screws, handguards,
upper and lower receivers and buttstocks. In addition, we
provide centralized procurement and training services. We have
produced for, and sold to (or have orders for), the U.S. and
allied militaries approximately seven million M16 and 340,000 M4
weapons. In 2004, we had net sales of $75.1&nbsp;million, EBITDA
(as defined) of $14.3&nbsp;million and net income of
$10.0&nbsp;million. Approximately&nbsp;54% of our 2004 sales
were to the U.S.&nbsp;government. As of April&nbsp;3, 2005, we
had a funded backlog of approximately $59&nbsp;million,
$44&nbsp;million of which is expected to be delivered by
December&nbsp;31, 2005. In addition to our funded backlog, we
have an IDIQ (indefinite delivery, indefinite quantity) contract
with the U.S.&nbsp;government for an additional $45&nbsp;million
that is expected to be ordered by July&nbsp;2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are the U.S.&nbsp;military&#146;s sole source supplier of the
M4&nbsp;carbine rifle. The M4 is the standard carbine for the
U.S.&nbsp;Army and the other services within the Department of
Defense and is currently the successor for the M16&nbsp;rifles
in use by the U.S.&nbsp;military. The M4&nbsp;carbine is one of
the U.S.&nbsp;military&#146;s critical weapon systems programs,
and it is already a combat proven &#147;weapon of choice.&#148;
The M4&nbsp;carbine is used broadly across the
U.S.&nbsp;military, from general purpose forces to elite units,
including the U.S.&nbsp;Navy Seals and Army Rangers and
Airborne. We are also the sole source supplier of small arms to
the Canadian military and the principal supplier of military
rifles to a number of NATO countries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We and our predecessors have been supplying small arms to the
U.S.&nbsp;military since 1847. Since the spin-off and
distribution of Colt Defense LLC from its prior parent,
Colt&#146;s Manufacturing Company, LLC (formerly Colt&#146;s
Manufacturing Company, Inc.), or Colt&#146;s Manufacturing, in
2002, Colt Defense has sold and marketed exclusively to the U.S.
and allied militaries and law enforcement agencies. Our products
enjoy outstanding brand name recognition and have proven
themselves under the most severe battle conditions&nbsp;&#151;
from the jungles of Vietnam to the deserts of the Middle East
and the mountains of Afghanistan. Our expertise in the design
and manufacture of advanced individual weapon systems enables us
to integrate new technologies and features into a large
installed base, introduce additional related products and
services at the point of sale, and retain our market leadership
as we invest in new technologies.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>RECENT ACQUISITION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We recently acquired Diemaco, a division of H&#233;roux-Devtek
Inc., a leading manufacturer of small caliber firearms and
weapon systems for the Canadian military and law enforcement and
other international militaries. The acquisition of Diemaco,
which we have renamed Colt Canada Corporation, or Colt Canada,
has broadened our market presence with additional scale and
critical mass. Colt Canada has been designated the center of
excellence for small arms for over 25&nbsp;years by the Canadian
government, and is the sole source
</DIV>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
supplier of the C7&nbsp;rifle and the C8&nbsp;carbine to the
Canadian Department of National Defence. In addition, Colt
Canada is the Canadian government&#146;s preferred source for
all other small arms and related parts and services. Nearly all
of Colt Canada&#146;s products are based on licensed Colt
technology and are similar to our products in many respects. For
example, Colt Canada&#146;s C8&nbsp;carbine is largely based on
M4&nbsp;technology, and its C7&nbsp;rifle is largely based on
M16&nbsp;technology. Thus, our discussions with respect to the
M4&nbsp;carbine also apply to the C8&nbsp;carbine. By acquiring
Colt Canada, we have enhanced our research and development
capabilities and diversified our customer base and channels of
distribution, adding customers and contracts in Canada and
various European countries. In addition, we have increased our
manufacturing capacity through the addition of a modern and
cost-effective second manufacturing facility.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>OUR COMPETITIVE STRENGTHS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that we have a strong competitive position
attributable to a number of factors, including:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Global Brand Name with Leading Market Share.</I> Colt is a
widely recognized global brand name associated with quality,
value and reliability. Over the past 40&nbsp;years, we and our
predecessors have sold over seven million military and law
enforcement weapons to over 80&nbsp;countries. We are the number
one provider of military rifles to the U.S. and Canadian
militaries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Sole Source Provider of the M4&nbsp;Carbine.</I> We are the
U.S.&nbsp;military&#146;s sole source supplier of the
M4&nbsp;carbine. As of April&nbsp;3, 2005, we have sold or have
orders for approximately 340,000 M4&nbsp;carbines, including
270,000 to the U.S.&nbsp;government. Our sole source agreement
with the U.S.&nbsp;government lasts until June&nbsp;30, 2009. If
the government seeks competitive bids after June&nbsp;2009, we
believe we are well-positioned to compete successfully for this
business. The M4&nbsp;carbine is only at the beginning of its
product life cycle and is the standard carbine for the
U.S.&nbsp;Army and the other services within the Department of
Defense. Currently, the M4 carbine is the successor for the
M16&nbsp;rifles in use by the U.S.&nbsp;military. We are also
the sole source supplier of small arms (including the
C8&nbsp;carbine) to the Canadian Department of National Defence.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Long-standing Customer Relationships.</I> We continue to
enjoy a successful long-term relationship with the
U.S.&nbsp;government (which includes the U.S.&nbsp;military and
federal agencies), our single largest customer and one of the
largest purchasers of firearms in the world. We interact
primarily with the U.S.&nbsp;Army, which acts as procurement
agent for the other military branches, and we also enjoy a
strong relationship with the Navy, Marines, Air&nbsp;Force,
Coast Guard and National Guard and Reserves. We have a variety
of international customers, as we provide small arms to allied
foreign governments, as well as U.S. and international law
enforcement agencies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Extensive Installed Base and Aftermarket. </I>Over seven
million of our M16 rifles and 340,000 M4 carbines have been sold
or ordered to date, with the majority of rifle sales being to
the U.S.&nbsp;military. While it is difficult to ascertain the
number of M16&nbsp;rifles and M4&nbsp;carbines still
operational, we estimate the worldwide military installed base
to be at least two&nbsp;million. We are expanding our business
opportunities in this extensive installed base with our
M4&nbsp;carbine and new weapon systems as well as aftermarket
products and services, including weapon upgrades, accessories,
spare parts, replacement kits, training and logistic support. In
2004, our aftermarket sales for spare parts were
$10.7&nbsp;million and our contract management sales were
$5.3&nbsp;million.
</DIV>

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<I>Ownership of the M4 and M16&nbsp;Technical Data Packages.
</I>We are a technical leader in the design of small arms and we
own the design, manufacturing know-how, patent and trademark
rights, and other proprietary and confidential data rights,
which we refer to as the technical data package, or TDP, to the
M4&nbsp;carbine and the M16&nbsp;rifle. We are the sole source
supplier of M4&nbsp;carbines and repair parts to the
U.S.&nbsp;military until June&nbsp;30, 2009. We have granted a
limited manufacturing license to the U.S.&nbsp;government to
make or have made M16&nbsp;rifles and critical components and,
after June&nbsp;30, 2009, M4&nbsp;carbines and critical
components for the U.S.&nbsp;military. Our continued development
and enhancements to our TDPs have strengthened our position as
the technical leader in small arms development.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Experienced Management Team.</I> The members of our
management team have an average of over 25&nbsp;years of
experience in the defense industry with strong and long-standing
market relationships with most
</DIV>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
of the principal buyers in the market. We believe these
relationships will allow us to continue to expand our presence
in the market. The team is led by our chief executive officer,
Lieutenant General William&nbsp;M. Keys, U.S.&nbsp;Marine Corps
(Ret.),&nbsp;who has over 40&nbsp;years of experience in the
defense industry.
</DIV>

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<I>Superior Manufacturing Capability.</I> We have two
manufacturing facilities where we can produce small arms
efficiently and effectively to meet U.S. and Canadian government
requirements, as well as the needs of other customers. Both of
our facilities are certified and registered ISO 9001:2000, a
widely recognized quality management standard set and monitored
by the International Organization for Standardization.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>OUR STRATEGY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The major elements of our strategy are:
</DIV>

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<I>Consolidate Dominant Position of the M4&nbsp;within the
Department of Defense.</I> Based on the M4&nbsp;carbine&#146;s
proven versatility and exceptional reliability in combat
operations in Iraq and Afghanistan, the M4 has become the
successor for the M16&nbsp;rifle. We have an installed base of
232,000 M4 carbines within the U.S.&nbsp;military. We will
continue to promote extensive use of the M4 carbine by all elite
and general purpose forces in the Department of Defense, with
the goal of having all required personnel in the
U.S.&nbsp;military upgraded to the M4 carbine.
</DIV>

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<I>Continue to Support Increased Operating Tempo of U.S. and
Allied Militaries.</I> The recent military operations in both
Iraq and Afghanistan have resulted in a higher level of
operational tempo for U.S. and allied militaries. The tactics
employed during these conflicts have been heavily dependent on
ground force deployment and have magnified the weapons needs of
the ground war fighter. There are approximately 387,000
U.S.&nbsp;troops currently deployed in 120 countries. Ground war
fighters need small arms that are lightweight, compact and
reliable, like the M4&nbsp;carbine. With Operation Iraqi Freedom
and Operation Enduring Freedom, new small arms contracts for all
services have increased. We believe we have significant
opportunities to grow our sales based on heightened
U.S.&nbsp;military requirements and the need to effectively arm
the ground war fighter.
</DIV>

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<I>Maintain Our Leading Market Position through Ongoing Research
and Development and the Introduction of Other Transformational
Small Arms to the Department of Defense.</I> We are one of the
leaders in the design and development of small arms due to our
focus on engineering excellence and highly skilled research and
development teams, which we believe will allow us to compete
effectively to supply next generation small arms and other
transformational technologies to the U.S.&nbsp;military. We have
a long-standing tradition of working closely with military
ground troops to improve our weapon systems to meet their
requirements. We have formed the Colt New Technologies
Laboratory to pursue the development of transformational
technology and products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Pursue International Opportunities. </I>As the sole source
supplier of the M4&nbsp;carbine to the U.S.&nbsp;military, we
are positioned to capitalize on growth from weapons
modernization efforts in various countries. We believe other
countries look to the United States when deciding upon new
weapon systems. Countries such as Brazil, Greece, Norway,
Portugal and Turkey are actively evaluating the replacement and
refurbishment of small arms due to aging and to meet NATO
standard caliber requirements. In addition, the acquisition of
Colt Canada has added new customers in Canada, Denmark, the
Netherlands and the United Kingdom, with incremental
opportunities in other countries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Expand Support and Outsourcing Capabilities.</I> We are in
the final stages of a project whereby we would establish a
facility at the U.S.&nbsp;Marine Corps depot, Albany, Georgia.
We intend to use this facility for the refurbishment and repair
of M16&nbsp;rifles and the conversion of M16&nbsp;rifles into
M4&nbsp;carbines and, in the future, for other Colt products. We
believe this capability will allow us to capture additional
aftermarket sales. We also intend to expand our international
sales by entering into additional coproduction programs to
enable certain foreign customers to engage in in-country
manufacture or assembly of our small arms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Pursue Horizontal Integration through Bundling Sales of
Accessories with M4&nbsp;Weapon Systems.</I> With approximately
340,000 M4&nbsp;carbines sold or ordered worldwide over the past
ten years, we believe that we
</DIV>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
have a significant opportunity to increase revenue by offering
additional accessories to enhance the capability and
functionality of the M4&nbsp;carbine.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Pursue Opportunities with Law Enforcement Agencies. </I>Law
enforcement agencies typically look to the U.S.&nbsp;military
when determining their weapon of choice. Because we have such a
strong presence within the U.S.&nbsp;military, we believe law
enforcement agencies will continue to look to us to provide them
with additional weapons, upgrades and spare parts. We have sold
approximately 55,000&nbsp;rifles, carbines and related weapon
systems to the Department of Homeland Security and a variety of
domestic law enforcement agencies over the past five years.
</DIV>

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<I>Pursue Strategic Acquisitions. </I>We intend to seek selected
domestic and international acquisition opportunities. In
evaluating acquisition candidates, we intend to focus on
companies that have a complementary product line or
technological competencies, as well as those we believe will
enhance our ability to implement our business strategy.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SCIENS CAPITAL MANAGEMENT</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Sciens Management&nbsp;LLC, or Sciens Management, provides our
company with investment banking, corporate and strategic and
advisory services. Sciens Management and several of our
stockholders are employed by or affiliated with Sciens Capital
Management. Sciens Capital Management is an alternative
investment management firm headquartered in New&nbsp;York.
Sciens Capital Management manages a variety of alternative
assets, including private equity, venture capital, distressed
assets, structured finance and funds of hedge funds. Sciens
Capital Management has invested in the United&nbsp;States and
internationally as a control investor in buyouts or as a lead
investor in growth capital. Sciens Capital Management has made
investments in companies in defense and security, specialty
manufacturing, telecommunications and financial services, as
well as in early stage companies in information technology.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INTERNAL RESTRUCTURING</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Immediately prior to the effectiveness of the registration
statement of which this prospectus is a part, we will complete a
series of restructuring transactions, which we refer to
collectively as our &#147;Internal Restructuring,&#148; for the
purpose of transitioning from an organizational structure in
which our top-tier company is a limited liability company to a
structure in which our top-tier company is a corporation. Our
current top-tier company is Colt Defense&nbsp;LLC. Following the
Internal Restructuring, the current members of Colt
Defense&nbsp;LLC will be stockholders of our new top-tier
company, Colt Defense Inc., which is issuing shares of its
common stock to the public in this offering. In connection with
the Internal Restructuring, the current members of Colt
Defense&nbsp;LLC (other than Colt Defense Employee Plan Holding
Corporation) will contribute all of their membership interests
in Colt Defense&nbsp;LLC to Colt Defense&nbsp;Inc. in exchange
for shares of common stock, promissory notes of Colt
Defense&nbsp;Inc. and the right to participate in the
over-allotment option. Colt Defense Employee Profit Sharing Plan
will contribute all of the outstanding shares of Colt Defense
Employee Holding Corporation in exchange for shares of common
stock, promissory notes and the right to participate in the
over-allotment option. The promissory notes, which we refer to
as the &#147;Restructuring Notes,&#148; will be issued in an
aggregate principal amount plus accrued interest of
approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
and we intend to use
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
of the net proceeds from this offering to repay the
Restructuring Notes in full. See &#147;Internal
Restructuring&#148; on page&nbsp;25.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>OUR HEADQUARTERS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our headquarters are located at 547&nbsp;New Park Avenue, West
Hartford, Connecticut&nbsp;06110. Our telephone number is
(860)&nbsp;232-4489. Our internet address is <U>www.colt.com</U>.
</DIV>
</DIV>

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<B>THE OFFERING</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
    Common stock offered by us in this offering</TD>
    <TD></TD>
    <TD valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Common stock to be outstanding immediately after this offering(1)</TD>
    <TD></TD>
    <TD valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Over-allotment option</TD>
    <TD></TD>
    <TD valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Use of proceeds from this offering</TD>
    <TD></TD>
    <TD valign="top">
    We expect to use the net proceeds of this offering, which are
    estimated to be approximately
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
    to repay in full the Restructuring Notes that we will issue to
    certain of our existing stockholders as part of our Internal
    Restructuring, to repay
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
    of our outstanding indebtedness, and the remainder for working
    capital, for strategic acquisitions of businesses and for
    general corporate purposes. We intend to use the net proceeds
    from any shares sold pursuant to the underwriters&#146;
    over-allotment option to make additional payments to our
    existing stockholders. See &#147;Use of Proceeds&#148; and
    &#147;Internal Restructuring.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Dividend policy</TD>
    <TD></TD>
    <TD valign="top">
    We do not intend to pay dividends on our common stock for the
    foreseeable future. We plan to retain our earnings for use in
    the operation of our business and to fund future growth.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Proposed New&nbsp;York Stock Exchange symbol</TD>
    <TD></TD>
    <TD valign="top">
    &#147;CLT&#148;</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Except as otherwise indicated, the number of shares of common
stock stated to be outstanding after this offering gives effect
to the shares being issued in connection with the Internal
Restructuring, the shares of common stock being sold by us in
this offering, and adjustments to the number of outstanding
shares of common stock and options, and exercise prices as a
result of the Internal Restructuring. The number of shares of
common stock to be outstanding after this offering excludes:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of our common stock issuable upon the exercise of stock options
    outstanding as of April&nbsp;3, 2005 at a weighted average
    exercise price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share, of which options to
    purchase &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of our common stock were then exercisable;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of our common stock reserved for future grant under our employee
    incentive plan.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Unless specifically stated otherwise, the information in this
prospectus assumes:
</DIV>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    no exercise of the underwriters&#146; over-allotment option; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    an initial public offering price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share, the midpoint of the initial public offering price range
    indicated on the cover of this prospectus.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)</TD>
    <TD align="left">
    Shares outstanding
    includes &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    that will be issued to our existing stockholders if the
    underwriters do not exercise any portion of their over-allotment
    option. The number of shares issued will decrease to the extent
    the underwriters exercise their over-allotment option.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;">5

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left" style="font-size: 10pt;">
<A name='101'></A>
</DIV>

<!-- link1 "SUMMARY FINANCIAL DATA" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SUMMARY FINANCIAL DATA</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Colt Defense Inc. was incorporated on May&nbsp;25, 2005 and has
not engaged in any business or other activities except in
connection with its formation and the Internal Restructuring. In
order to facilitate this offering, we will consummate the
Internal Restructuring in which Colt Defense Inc. will become
the successor to Colt Defense LLC for accounting purposes. See
&#147;Internal Restructuring.&#148; The summary financial data
for the three months ended April&nbsp;3, 2005 and April&nbsp;4,
2004 are derived from the unaudited financial statements of our
predecessor, Colt Defense LLC, which in the opinion of
management, include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair statement of results
for the unaudited interim periods. The summary financial data as
of and for the years ended December&nbsp;31, 2004, 2003 and 2002
are derived from the audited financial statements of Colt
Defense&nbsp;LLC. The results of operations for the interim
periods are not necessarily indicative of the results to be
expected for the full year or any future period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The summary pro forma balance sheet data as of April&nbsp;3,
2005 and the summary pro forma statements of operations data for
the year ended December&nbsp;31, 2004 and the three months ended
April&nbsp;3, 2005 give pro forma effect to the following:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the Internal Restructuring as if it had occurred on
    April&nbsp;3, 2005, as further adjusted to give effect to this
    offering and the intended application of the net proceeds
    therefrom;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the refinancing of our debt and the payment of a special
    distribution of $16.1&nbsp;million by Colt Defense LLC; and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the treatment of Colt Defense LLC as a tax paying entity subject
    to federal and state income tax.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The summary pro forma financial data are for informational
purposes only and should not be considered indicative of actual
results that would have been achieved had these events actually
been consummated on the dates indicated and do not purport to
indicate results of operations as of any future date or for any
future period.
</DIV>
</DIV>

<P align="center" style="font-size: 10pt;">6

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The summary financial data presented below are not necessarily
indicative of the results of future operations and should be
read in conjunction with &#147;Unaudited Pro Forma Financial
Information,&#148; &#147;Selected Financial Data,&#148;
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations,&#148; &#147;Internal
Restructuring&#148; and our audited financial statements, and
the related notes, included elsewhere in this prospectus.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="35%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>Colt Defense LLC</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Colt Defense Inc.<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Three Months Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro Forma</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro Forma</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Three Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>April&nbsp;3,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>April&nbsp;4,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>April&nbsp;3, 2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD align="center" nowrap><I>($ in thousands, except per unit or share data)</I></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Statement of Operations Data:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>18,896</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>75,135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>66,682</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>53,329</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>75,135</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,622</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,376</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45,161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,768</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,622</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,376</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,987</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,556</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,521</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,561</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,987</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,759</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,633</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,982</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,266</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,788</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,529</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,695</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,516</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,179</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,725</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,137</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense (benefit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(222</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,485</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,238</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net
    income<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,878</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,166</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,245</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,401</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,240</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,899</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma
    (unaudited)<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,179</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,725</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,137</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma income tax expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,258</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,054</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,485</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,238</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,916</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,096</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,981</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,240</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,899</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma earnings per unit (assuming dilution)
    <SUP style="font-size: 85%; vertical-align: text-top">(4)(5)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12.55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>38.68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>19.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>70.83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma weighted average shares (assuming
    dilution)<SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>157,648</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>152,723</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>157,607</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>99,167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44,119</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="33%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>Colt Defense LLC</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Colt Defense Inc.<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Three Months Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro Forma Three</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>April&nbsp;3,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>April&nbsp;4,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Months Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>April&nbsp;3, 2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance Sheet Data<BR>
    (end of period):</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>28,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>31,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>37,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>47,461</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>23,901</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>59,382</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Short-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,678</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,568</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,027</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,184</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,159</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,027</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,162</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,449</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>143</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued benefit costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,915</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,900</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other long-term liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,071</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,274</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,071</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53,827</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62,555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64,767</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68,843</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44,888</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,927</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Members&#146; (deficit) equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25,225</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(30,655</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(27,063</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(21,382</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(20,987</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28,455</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Other Financial Data (Unaudited):</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    EBITDA<SUP style="font-size: 85%; vertical-align: text-top">(6)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,081</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,303</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,435</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,143</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjusted
    EBITDA<SUP style="font-size: 85%; vertical-align: text-top">(6)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,081</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,733</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,418</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,143</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Litigation expense (included in EBITDA and Adjusted
    EBITDA)<SUP style="font-size: 85%; vertical-align: text-top">(7)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>625</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>936</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>625</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)</TD>
    <TD align="left">
    The pro forma summary financial data do not include the results
    of operations of Colt Canada, which we recently acquired.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)</TD>
    <TD align="left">
    No provision for federal or state income taxes is reflected in
    the historical results, as Colt Defense LLC is treated as a
    partnership for tax purposes.* All operating losses of Colt
    Defense LLC have been allocated to our investors. Subsequent to
    the Internal Restructuring, the income of Colt Defense Inc. will
    be taxed at the corporate level.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)</TD>
    <TD align="left">
    For a reconciliation of the pro forma data to historical
    financial information, see &#147;Unaudited Pro Forma Financial
    Information.&#148;</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;">7
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(4)</TD>
    <TD align="left">
    Diluted earnings per unit are based on the weighted average
    number of units outstanding during the period adjusted to add
    the weighted-average number of potentially dilutive units that
    would have been outstanding upon the assumed exercise of the
    stock options and warrants issued in 2003 and adjusted for the
    December 2004 stock option grant and the option grants from the
    second quarter of 2005. The December 2004 option grant and the
    option grants from the second quarter of 2005 are considered
    nominal issuances and the underlying units are included in
    diluted earning per unit for all periods presented.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(5)</TD>
    <TD align="left">
    Share amounts and exercise prices will be adjusted to reflect
    the Internal Restructuring.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(6)</TD>
    <TD align="left">
    EBITDA and Adjusted EBITDA are not financial measures under
    United States Generally Accepted Accounting Principles, or
    U.S.&nbsp;GAAP. We use EBITDA and Adjusted EBITDA as
    supplemental financial measures. EBITDA is defined as net income
    before interest, income taxes, depreciation and amortization.
    Adjusted EBITDA is defined as EBITDA before one-time items. We
    believe EBITDA and Adjusted EBITDA are useful financial
    performance measures for our equity holders and us and are a
    complement to net income determined in accordance with
    U.S.&nbsp;GAAP. Because it excludes interest and income taxes,
    EBITDA provides insight with respect to our ongoing operating
    results irrespective of our capital structure and because it
    excludes depreciation and amortization, EBITDA provides a basis
    for measuring our financial performance unrelated to historical
    cost or carrying value of long-lived assets. Because it excludes
    one-time items, Adjusted EBITDA provides a benchmark for
    comparing operating results between periods. EBITDA and Adjusted
    EBITDA do not measure the capital we require to maintain our
    fixed assets and does not take into account the total amount of
    interest we pay on outstanding debt nor does it show trends in
    interest costs due to changes in our borrowings or changes in
    interest rates. Non-U.S.&nbsp;GAAP measures such as EBITDA and
    Adjusted EBITDA should not be considered in isolation or as a
    substitute for U.S.&nbsp;GAAP measures. EBITDA and Adjusted
    EBITDA do not represent cash generated from operating activities
    determined in accordance with U.S.&nbsp;GAAP and should not be
    considered as an alternative to operating income, income before
    income taxes or net income determined in accordance with
    U.S.&nbsp;GAAP as an indicator of performance or as an
    alternative to cash flows from operating activities as an
    indicator of liquidity. We note that EBITDA reporting is
    required by our lenders to assist them in understanding our
    operating performance. The amounts shown for EBITDA as presented
    herein are different from the amounts calculated under the
    EBITDA used in our senior secured credit facility. EBITDA as
    defined in our senior secured credit facility is equal to
    Adjusted EBITDA above plus any litigation costs incurred in
    connection with our litigation with Bushmaster Firearms, Inc.,
    nonrecurring expenses associated with certain &#147;permitted
    acquisitions&#148; under our senior secured credit facility,
    stock based compensation expense and any management fees paid to
    Sciens Management.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;*</TD>
    <TD align="left">
    Income tax as shown represents Canadian withholding taxes on
    royalty income.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 8pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
The following table presents a reconciliation of EBITDA and
Adjusted EBITDA to net income:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="39%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>Colt Defense LLC</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Colt Defense Inc.<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Three Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro Forma Three</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>April&nbsp;3,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>April&nbsp;4,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Months Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>April&nbsp;3, 2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,878</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,166</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,245</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,401</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,240</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(222</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,485</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>133</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>810</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>121</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>888</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,735</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,582</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>297</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    EBITDA</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,081</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,303</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,435</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,143</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Royalty expense to Colt&#146;s Manufacturing</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reorganization costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net settlement of litigation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(842</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjusted EBITDA</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,081</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,733</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,418</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,143</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(7)</TD>
    <TD align="left">
    Our net income from continuing operations was negatively
    impacted by the effects of certain litigation. See Note&nbsp;12
    to our audited financial statements included elsewhere in this
    prospectus.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;">8

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<DIV align="left" style="font-size: 10pt;">
<A name='102'></A>
</DIV>

<!-- link1 "RISK FACTORS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>RISK FACTORS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Before making an investment in our common stock you should
carefully consider the risks described below, as well as the
other information set forth in this prospectus, including our
consolidated financial statements and related notes.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Any of the risk factors described below could significantly
and negatively affect our business, prospects, financial
condition or operating results, which could cause the trading
price of our common stock to decline and could cause you to lose
all or part of your investment. Additional risks and
uncertainties not presently known to us, or risks that we
currently consider immaterial, may also impair our
operations.</I>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Risks Related to Our Business</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>We rely on contracts with U.S.&nbsp;government entities
for a significant portion of our sales. The loss of such
contracts would have a material adverse effect on our
business.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our sales are predominantly derived from contracts with agencies
of the Department of Defense. Approximately 54% of our sales for
the year ended December&nbsp;31, 2004, were made directly or
indirectly to agencies of the U.S.&nbsp;government. The
U.S.&nbsp;Army is moving toward a faster and lighter force,
which might reduce funding for U.S.&nbsp;Army programs in which
we participate. The U.S.&nbsp;Army may decide to phase out our
M4 weapon systems. The loss of all or a substantial portion of
our contracts with the U.S.&nbsp;government would significantly
reduce our revenues. Additionally, the U.S.&nbsp;government has
historically awarded certain programs to us on a sole-source
basis. In the future it may open these programs to a competitive
bidding process.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>We depend on a dominant product for a majority of our
revenues. A reduction in sales of this product would have a
material adverse effect on our revenues.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We derive a majority of our revenues from the sales of our M4
carbines. There can be no assurance as to how long the M4
carbine will continue to be the primary small arms weapon of the
U.S.&nbsp;military. Even if the M4 carbine does remain the
primary small arms weapon of the U.S.&nbsp;government, we cannot
assure you that we will be successful in competing for contracts
to produce the M4 carbine after our sole source agreement
expires in June 2009. Although we own the TDPs for the M4
carbine and M16 rifle, that does not prevent other competitors
from competing against us (after June 2009 in the case of the M4
carbine) in the production of these weapons. For example,
another manufacturer has been a nonexclusive supplier to the
U.S.&nbsp;government of M16 rifles since 1988. If we do not
remain the primary supplier of M4 carbines to the
U.S.&nbsp;military, it would have a material adverse effect on
our business, prospects, financial condition, results of
operations and cash flows. Additionally, prior to June 2009,
under limited circumstances the U.S.&nbsp;government may
contract with another supplier to produce the M4 carbine such as
in the event the U.S.&nbsp;government requires more M4 carbines
than we have the capacity to produce.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>The pending U.S.&nbsp;government solicitation for next
generation small arms could adversely affect our business if we
are not the winner.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since the mid 1990s, the U.S.&nbsp;government has been funding
an initiative to develop more advanced light armaments known as
the Objective Individual Combat Weapon program. The
U.S.&nbsp;Army funded development and conducted field testing of
a rifle produced by another manufacturer designated as the XM8
into 2004. However, in the 2005 Department of Defense budget,
all funding for the development of the XM8 was removed. In May
2005, the U.S.&nbsp;Army issued a Request for Proposal, or RFP,
for the Offensive Individual Combat Weapon&nbsp;&#151;
Increment&nbsp;I, or OICW. This RFP invites defense contractors
to submit a technical and financial document package with sample
weapons for the purpose of evaluating the next generation of
modern modular weapon systems. The program requires one family
of weapons that consists of the following four variants:
standard carbine, special compact version, designated marksman
version, or rifle, and light machine gun. We have already
started the requisite work to complete and submit our response
to the RFP, which is due on November&nbsp;7, 2005. The
solicitation states that the winning company will be awarded a
low-rate initial production contract to produce up to 4,900
weapon systems and could receive an initial full-rate production
contract to make more than 134,000 weapons. If this program
results in the selection and funding of a
</DIV>

<P align="center" style="font-size: 10pt;">9
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<DIV align="left" style="font-size: 10pt;">
replacement for the M4 carbine and M16 rifle and we are not the
winner, our business, results of operations and liquidity could
be materially adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>A reduction in the U.S.&nbsp;defense budget would have a
material adverse effect on our business.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The U.S.&nbsp;government may decide to reduce government defense
spending in the programs in which we participate. The loss or
significant reduction in government funding for any program in
which we participate could materially adversely affect our sales
and earnings and thus negatively affect our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>We may lose money on our fixed unit price
contracts.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We provide our products and services primarily through fixed
unit price contracts. In a fixed unit price contract, we provide
our products and services at a predetermined price, regardless
of the costs we incur. Accordingly, we must fully absorb cost
overruns, notwithstanding the difficulty of estimating all of
the costs we will incur in performing these contracts and in
projecting the ultimate level of sales that we may achieve. Our
failure to estimate costs accurately, control costs during
performance or anticipate technical problems of a fixed unit
price contract may reduce our profitability or cause a loss.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>There are limited sources for some of our raw materials
which may significantly impede our manufacturing
obligations.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The raw materials we use in manufacturing include steel,
aluminum and petroleum-based resins. Should these materials
become unavailable for any reason, we would be unable to replace
them with materials of like weight and strength. We purchase
steel for our rifle barrels from a single supplier. Events which
disrupt our supplies of steel for a substantial period of time,
such as the bankruptcy of our supplier, would require us to
source steel from an alternative supplier and could have a
material adverse effect on our financial condition and the
results of our operations. If our supply of steel or of any of
these materials were substantially reduced or cut off, or if
there was a material increase in the price of these materials,
our manufacturing operations could be adversely affected and our
costs increased, and our business, financial condition, results
of operations and liquidity could be materially adversely
affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>If our suppliers fail to adequately perform their
contractual obligations, our prime contract performance and our
ability to obtain future business could be materially and
adversely impacted.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We rely on suppliers to perform a portion of the work in respect
of the products and services we are obligated to deliver to our
customers. There is a risk that we may have disputes with these
suppliers concerning a number of issues, such as the quality and
timeliness of their work. The failure by one or more of our
suppliers to satisfactorily deliver on a timely basis the
agreed-upon supplies or services may materially and adversely
impact our ability to perform our obligations and may result in
the default termination of a government contract. A default
termination could expose us to liability for the excess costs of
reprocurement by the government and could have a material
adverse effect on our ability to compete for future contracts
and task orders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>If we lose key management or are unable to attract and
retain qualified individuals required for our business, our
operating results and growth may suffer.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Two members of our management team had careers in the
U.S.&nbsp;Marine Corps and are intimately familiar with the
types of weapons required to complete combat missions both
domestically and internationally. Losing the services of these
or other members of our management team could harm our business
and our expansion efforts. Our ability to operate our business
is dependent on our ability to hire and retain technically
skilled workers. Our workforce is aging, and competition for
some qualified employees, such as engineering professionals, has
intensified in recent years and may become even more competitive
in the future. If we are unable to attract and retain qualified
employees, our operating results, growth and ability to obtain
future contracts could suffer.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Our manufacturing facilities may experience disruptions
adversely affecting our financial position and results of
operations.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We currently manufacture our products at facilities in West
Hartford, Connecticut and Kitchener, Ontario, Canada. Any
natural disaster or other serious disruption at these facilities
due to a fire or any other calamity could damage our capital
equipment or supporting infrastructure and materially impair our
ability to manufacture our products. Even a short time
disruption in our production output could delay shipments and
cause damage to relationships with our customers, causing them
to reduce or eliminate the amount of products they purchase from
us. Any such disruption could result in lost revenues, increased
costs and reduced profits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Our operating performance is heavily dependent upon the
timing and delivery of products under our contracts.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our operating results and cash flow are materially dependent
upon the timing of manufacturing and delivery of products under
our contracts and on our ability to produce our products to meet
our customers&#146; timetables. We do not recognize sales on a
unit until we deliver and the customer accepts such unit. This
may extend the period of time during which we carry inventory
and may result in an uneven distribution of revenue from these
contracts between periods. As a result, our period-to-period
performance may fluctuate significantly, and you should not
consider our performance during any particular period as
indicative of longer-term results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Our government contracts are subject to audit and our
business could be adversely affected by a negative audit by
government agencies.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a U.S. and Canadian government contractor, we are subject to
financial audits and other reviews by the U.S. and Canadian
governments of our costs, performance, accounting and general
business practices relating to certain of our significant U.S.
and Canadian government contracts. Like most government
contractors, we are audited and reviewed on a continual basis.
Based on the results of its audits, the U.S. and Canadian
governments may challenge the price we have negotiated for our
products. Although adjustments arising from government audits
and reviews have not had a material adverse effect on our
results of operations in the past, there can be no assurance
that future audits and reviews would not have such effects. In
addition, under U.S. and Canadian government purchasing
regulations, some of our costs, including most financing costs,
amortization of intangible assets, portions of our research and
development costs, and some marketing expenses may not be
reimbursable or allowed in our negotiation of fixed-price
contracts. Further, as a U.S. and Canadian government
contractor, we are subject to an increased risk of
investigations, criminal prosecution, civil fraud, whistleblower
lawsuits and other legal actions and liabilities to which purely
private sector companies are not, the results of which could
have a material adverse effect on our operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Our U.S. and Canadian government contracts are multi-year
contracts that are funded by government appropriations
annually.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are a sole source, prime contractor to the
U.S.&nbsp;Department of Defense and the Canadian Department of
National Defence. Our primary contracts with the
U.S.&nbsp;government are indefinite delivery indefinite quantity
contracts under which the customer places orders at its
discretion. Although these contracts have a four-year term, they
are funded annually by government appropriations. The
U.S.&nbsp;government&#146;s termination of, or failure to place
orders under, one or more of our contracts would have a negative
impact on our operating results and financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our contracts with the Canadian Department of National Defence
are awarded under a strategic source agreement between the
Canadian government, Colt Canada and Colt Defense that was
entered into in May 2005. This replaced an earlier agreement
between the Canadian government and the predecessor of Colt
Canada. The current strategic source agreement has a two-year
term, which will renew automatically on an annual basis
thereafter unless either party gives two years&#146; notice of
termination. We also have a license agreement with the Canadian
government, under which Colt Canada is the only approved
contractor to
</DIV>

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<DIV align="left" style="font-size: 10pt;">
manufacture weapons contracted for by the government under our
strategic source agreement, though the Canadian government can
replace Colt Canada as contractor, and we may not unreasonably
withhold our consent to such a replacement. Additionally, we
intend to enter into an annual consolidated contract with the
Canadian Department of National Defence for engineering,
technical publications, repair and overhaul work. Colt Canada
conducts other weapons work for the Canadian Department of
National Defence on an as required basis under discrete
contracts. These contracts are funded annually by Canadian
government appropriations. The Canadian government&#146;s
termination of, failure to enter into or failure to place orders
under one or more of our contracts, or its replacement of Colt
Canada as contractor, would have a negative impact on our
operating results and financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Certain licenses or authorizations are required for us to
sell our products overseas that we may not be able to receive or
retain.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Approximately 30% of our 2004&nbsp;net sales were attributable
to direct foreign sales. U.S.&nbsp;government licenses are
required for us to export our products from the United States or
Canada. In the case of certain sales of defense equipment to
foreign governments, the U.S.&nbsp;government&#146;s Executive
Branch must notify Congress at least 30&nbsp;days, depending on
the location of the sale, prior to authorizing these sales.
During this time, Congress may take action to block the proposed
sale. We cannot be sure of our ability to obtain any licenses
required to export our products or to receive authorization from
the Executive Branch for sales to foreign governments. To the
extent Colt Canada exports its products, it may require similar
approval of the Canadian government. Failure to receive required
licenses or authorization would hinder our ability to sell our
products outside the United States or Canada.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Our intellectual property rights are valuable, and any
inability to protect them could reduce the value of our
products, services and brand.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our design, manufacturing know-how, and patent and trademark
rights are important assets for us. There are events that are
outside of our control that pose a threat to our intellectual
property rights. The efforts we have taken to protect our
proprietary rights may not be sufficient or effective. Any
significant impairment of our intellectual property rights could
harm our business or our ability to compete. Also, protecting
our intellectual property rights is costly and time consuming.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We face risks associated with our trademarks. For example, we
have brought actions in Federal district court against
Bushmaster Firearms, Inc., or Bushmaster, challenging
Bushmaster&#146;s manufacture, marketing, distribution and sale
of M4 look-alike weapons. We have alleged trademark, trade
dress, and patent infringement, together with unfair competition
and false advertising. Bushmaster has filed a partial motion for
summary judgment, challenging the validity of our registered M4
trademark and related rights, which we are opposing. If we are
not successful in the Bushmaster litigation, it could adversely
impact our ability to protect our trademark.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>We may experience labor disruptions associated with the
expiration of our collective bargaining agreements with our
labor force in the U.S.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of April&nbsp;3, 2005, we had approximately 380
U.S.&nbsp;employees. Approximately 74% of our
U.S.&nbsp;employees are covered by collective bargaining
agreements. The United Automobile, Aerospace&nbsp;&#38;
Agricultural Implement Workers of America, or UAW, represents
our West Hartford work force and that collective bargaining
agreement expires in May 2007. We believe that we have
satisfactory relations with our unions and, therefore,
anticipate reaching new agreements on satisfactory terms as the
existing agreements expire or shortly thereafter. There can be
no assurance, however, that new agreements will be reached
without a work stoppage or strike or will be reached on terms
satisfactory to us. In early April 2004, we locked out our
UAW-represented employees for two weeks at our West Hartford
manufacturing facility, in connection with the negotiation of a
new collective bargaining agreement. A prolonged work stoppage
or strike at either of our manufacturing facilities could have a
material adverse effect on our results of operations.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Significant risks are inherent in the day-to-day
operations of our business.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The day-to-day activities of our business involve the operation
of machinery and other operating hazards, including worker
exposure to hazardous substances. As a result, our operations
can cause personal injury or loss of life, severe damage to and
destruction of property and equipment, and interruption of our
business. The mechanical failure of our rifles can result in
injuries, damages or death.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We could be named as a defendant in a lawsuit asserting
substantial claims upon the occurrence of any of these events.
Although we maintain insurance protection in amounts we consider
to be adequate, we cannot assure you that this insurance will be
sufficient in coverage or effective under all circumstances or
against all hazards to which we may be subject. If we are not
fully insured against a successful claim, there could be a
material adverse effect on our financial condition and result of
operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Environmental laws and regulations may subject us to
significant costs and liabilities.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are subject to various federal, state, local, provincial and
foreign environmental laws and regulations, including those
related to the discharge of hazardous materials into the air,
water and soil and the generation, storage, treatment, handling,
transportation, disposal, investigation and remediation of
hazardous materials. Certain of these laws and regulations
require our facilities to obtain and operate under permits or
licenses that are subject to periodic renewal or modification.
These laws, regulations or permits can require the installation
of pollution control equipment or operational changes to limit
actual or potential impacts to the environment. A violation of
these laws, regulations or permit conditions can result in
substantial fines or penalties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the November&nbsp;4, 2002 asset contribution agreement
pursuant to which we were formed, our predecessors and
affiliates, New Colt and Colt&#146;s Manufacturing, agreed to
indemnify us against certain liabilities including certain
environmental, health and safety liabilities relating to their
operations, whether the liabilities arise before or after the
contribution date. To the extent the obligations under this
indemnity are challenged, if our indemnitors cannot fund these
obligations or if these obligations are otherwise not satisfied,
we could be required to incur environmental costs to remediate
these liabilities and there can be no assurances these costs
would not be material.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain environmental laws impose joint, strict and several
liability for the investigation and remediation of spills and
releases of hazardous materials and damages to natural
resources, without regard to negligence or fault on the part of
the person being held responsible. In addition, certain laws
require the investigation and remediation of contamination upon
the occurrence of certain property transfers or corporate
transactions. See &#147;Management&#146;s Discussion and
Analysis of Financial Condition and Results of
Operations&nbsp;&#151; Certain Significant Transactions and
Events&nbsp;&#151; Planned Purchase of West Hartford
Facility.&#148; We are potentially liable under these and other
environmental laws and regulations for the investigation and
remediation of contamination at properties we currently or have
formerly owned, operated or leased and at off-site locations
where we have sent hazardous materials for treatment or
disposal. We may also be subject to related claims by private
parties alleging property damage and personal injury as a result
of exposure to hazardous materials at or in the vicinity of
these properties. Although we have not incurred material costs
for environmental compliance since we were created in 2002,
environmental litigation or remediation, new laws and
regulations, stricter or more vigorous enforcement of existing
laws and regulations, the discovery of unknown contamination or
the imposition of new or more stringent clean-up requirements
may require us to incur substantial costs in the future. As
such, there is no assurance that we will not incur material
costs in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>We may not have the ability to make acquisitions or to
integrate acquisitions into our business.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As part of our growth strategy, we intend to selectively pursue
acquisitions. We consider strategic transactions from time to
time and may be evaluating acquisitions or engaged in
negotiations at any time. There is no assurance, however, that
we will be able to effect acquisitions. If we enter into these
transactions, we cannot be sure that we will realize the
benefits we anticipate. In addition, we cannot be sure that we
will be able to obtain additional financing for these
transactions.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The integration of any strategic acquisitions into our business
may result in unforeseen operating difficulties and may require
significant financial and managerial resources that would
otherwise be available for the ongoing development or expansion
of our existing operations. Consummating these transactions
could result in the incurrence of additional debt and related
interest expense, as well as unforeseen liabilities, all of
which could have a material adverse effect on our financial
condition and operating results. In addition, we may be required
to enter into novation agreements with the U.S.&nbsp;government
in order to succeed to the U.S.&nbsp;government contracts of any
acquired entity. Novation can be a lengthy process that often
occurs after the consummation of an acquisition. Accordingly,
our failure to obtain any required novation could have a
material adverse effect on the value to us of an acquired
business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>There may be potential undisclosed liabilities associated
with acquisitions.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We conduct due diligence in connection with each of our proposed
acquisitions. In connection with any of our acquisitions, there
may be liabilities that we fail to discover or that we
inadequately assess in our due diligence efforts. In particular,
to the extent that prior owners of any acquired businesses or
properties failed to comply with or otherwise violated
applicable laws or regulations, or failed to fulfill their
contractual obligations to the U.S.&nbsp;or other governments or
other customers, we, as the successor owner, may be financially
responsible for these violations and failures and may suffer
reputational harm or otherwise be adversely affected. The
discovery of any material liabilities associated with our
acquisitions could harm our operating results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Government contracts are subject to competitive
bidding.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We obtain a portion of our U.S.&nbsp;government contracts
through a competitive bidding process. We cannot assure you that
we will win these contracts or that they will be profitable. We
are also subject to risks associated with:
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the frequent need to bid on programs in advance of the
    completion of their designs, which may result in unforeseen
    technological difficulties or cost overruns;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the substantial time and effort required to prepare bids and
    proposals for competitively awarded contracts that may not be
    awarded to us;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    rapid technological obsolescence;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the constant need for design improvement.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>The defense industry is highly competitive, and this
competitiveness may limit our ability to win and retain
government contracts.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have significant domestic and international competition for
government contracts. Some competitors have substantially
greater financial, technical, marketing, manufacturing and
distribution resources than we do. Our ability to compete for
these contracts depends on our ability to offer better product
performance than our competitors at a lower cost to the
U.S.&nbsp;government and the readiness of our facilities,
equipment and personnel to produce our products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Additionally, our U.S.&nbsp;government programs must compete for
limited funding with programs managed by other defense
contractors. Our competitors continually engage in efforts to
expand their business relationship with the U.S.&nbsp;government
and are likely to continue these efforts in the future. As a
result, the U.S.&nbsp;government may use its resources to
procure products from other defense contractors as opposed to
purchasing our systems.
</DIV>

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<B><I>Our international operations subject us to risks that
could materially adversely affect our results of operations and
financial condition.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our strategy includes expansion of our international operations
and export sales. In connection with these international
operations and sales we are subject to risks, including the
following:
</DIV>

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    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    devaluations and fluctuations in currency exchange rates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    potential violations of the Foreign Corrupt Practices Act by our
    employees or agents;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    imposition or increase of withholding and other taxes on
    remittances and other payments by foreign subsidiaries;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    hyperinflation or political instability in the countries in
    which we operate or sell;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    changes in interpretations of foreign regulations that may
    adversely affect our ability to repatriate profits to the United
    States;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    potential imposition of trade or foreign exchange restrictions
    or increased tariffs;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    imposition of limitations on conversions of foreign currencies
    into U.S.&nbsp;dollars;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    U.S.&nbsp;arms export control regulations and policies that
    restrict our ability to supply foreign customers;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    changes in overall diplomatic and security relationships between
    the United States and various foreign countries.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These and other associated risks are likely to become more
significant to us if we expand our international operations.
Although these risks have not had a material adverse effect on
our financial condition or results of operations in the past,
there is no assurance that these risks will not have a material
adverse effect on our results of operations and financial
position in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Our U.S.&nbsp;government contracts contain termination
provisions such that they can be cancelled by the government at
its sole discretion.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are subject to business risks specific to companies engaged
primarily in supplying defense-related equipment and services to
the U.S.&nbsp;government. These risks include the ability of the
U.S.&nbsp;government to unilaterally suspend or permanently
prevent us from receiving new contracts or extending existing
contracts based on violations or suspected violations of
procurement laws or regulations, terminate our existing
contracts, reduce the value of our existing contracts, change
certain terms and conditions in our contracts and, under certain
circumstances, prohibit the export of our products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The U.S.&nbsp;government can terminate contracts with us either
for its convenience or if we default by failing to perform.
Termination for convenience provisions generally would enable us
to recover only our costs incurred or committed, and settlement
expenses and profit on the work completed, prior to termination.
Termination for default provisions do not permit these
recoveries and make us liable for excess costs incurred by the
U.S.&nbsp;government in procuring undelivered items from another
source. Our contracts with foreign governments may contain
similar provisions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Employee misconduct could harm us and is difficult to
detect and deter.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As with other government contractors, we are faced with the
possibility that our employees may engage in misconduct, fraud
or other improper activities that may have adverse consequences
on our prospects and results of operations. Misconduct by
employees could include failures to comply with applicable
government procurement regulations, violation of government
requirements concerning the protection of classified information
and misappropriation of government or third-party property and
information. The occurrence of any of such employee activities
could result in our suspension or debarment from contracting
with the government procurement agency, as well as the
imposition of fines and penalties, which would cause material
</DIV>

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<DIV align="left" style="font-size: 10pt;">
harm to our business. It is not always possible to deter
employee misconduct and the precautions we take to detect and
prevent this activity may not be effective in all cases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Risks Related To This Offering</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Our share price may be volatile, and you may be unable to
sell your shares at or above the offering price.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The initial public offering price for our shares will be
determined by negotiations between us and representatives of the
underwriters and may not be indicative of prices that will
prevail in the trading market. The market price of shares of our
common stock could be subject to wide fluctuations in response
to many risk factors listed in this section, and others beyond
our control, including:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    changes in projections of our operating results by securities
    analysts;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    fluctuations in the valuation of companies perceived to be
    comparable to us;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    share price and volume fluctuations attributable to inconsistent
    trading volume levels or other factors.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Furthermore, the stock markets have experienced extreme price
and volume fluctuations that have affected and continue to
affect the market prices of equity securities of many companies.
These fluctuations often have been unrelated or disproportionate
to the operating performance of those companies. These broad
market and industry fluctuations, as well as general economic,
political and market conditions such as recessions, interest
rate changes or international currency fluctuations, may
negatively impact the market price of shares of our common
stock. If the market price of shares of our common stock after
this offering does not exceed the initial public offering price,
you may not realize any return on your investment in us and may
lose some or all of your investment. In the past, companies that
have experienced volatility in the market price of their stock
have been subject to securities class action litigation. We may
be the target of this type of litigation in the future.
Securities litigation against us could result in substantial
costs and divert our management&#146;s attention from other
business concerns, which could materially adversely affect us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>No public market for our common stock currently exists,
and an active trading market may not develop or be sustained
following this offering.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to this offering, there has been no public market for our
common stock. An active trading market may not develop following
the closing of this offering or, if developed, may not be
sustained. The lack of an active market may impair your ability
to sell your shares at the time you wish to sell them or at a
price that you consider reasonable. The lack of an active market
may also reduce the fair market value of your shares. An
inactive market may also impair our ability to raise capital by
selling shares and may impair our ability to acquire other
companies or technologies by using our shares as consideration,
which in turn could materially adversely affect our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>If securities or industry analysts do not publish research
reports about our business, or publish negative reports about
our business, our stock price and trading volume could
decline.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The trading market for our common stock will depend, in part, on
the research reports and ratings that securities or industry
analysts publish about us, our business and the defense market
in general. We do not have any control over these analysts. If
one or more of the analysts who cover us downgrade our stock,
our stock price may decline. If one or more of these analysts
cease coverage of our company or fail to regularly publish
reports on us, we could lose visibility in the financial
markets, which could cause our stock price or trading volume to
decline.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Purchasers in this offering will experience immediate and
substantial dilution in the book value of their
investment.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The initial public offering price will be substantially higher
than the tangible book value per share of shares of our common
stock based on the total value of our tangible assets less our
total liabilities immediately following this offering.
Therefore, if you purchase shares of our common stock in this
offering,
</DIV>

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you will experience immediate and substantial dilution of
approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share in the price you pay for shares of our common stock as
compared to its tangible book value, assuming an initial public
offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. To the extent outstanding options to purchase shares of
common stock are exercised, there will be further dilution. For
further information on this calculation, see
&#147;Dilution.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Being a public company will increase our expenses and
administrative burden.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a public company, we will incur significant legal, accounting
and other expenses that we did not incur as a private company.
In addition, our administrative staff will be required to
perform additional tasks. For example, in anticipation of
becoming a public company, we will need to create or revise the
roles and duties of our board committees, adopt additional
internal controls and disclosure controls and procedures, retain
a transfer agent, adopt an insider trading policy and bear all
of the internal and external costs of preparing and distributing
periodic public reports in compliance with our obligations under
the securities laws.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, changing laws, regulations and standards relating
to corporate governance and public disclosure, including the
Sarbanes-Oxley Act of 2002 and related regulations implemented
by the Securities and Exchange Commission, or SEC, and the New
York Stock Exchange, or NYSE, are creating uncertainty for
public companies, increasing legal and financial compliance
costs and making some activities more time consuming. We are
currently evaluating and monitoring developments with respect to
new and proposed rules and cannot predict or estimate the amount
of the additional costs we may incur or the timing of such
costs. These laws, regulations and standards are subject to
varying interpretations, in many cases due to their lack of
specificity, and, as a result, their application in practice may
evolve over time as new guidance is provided by regulatory and
governing bodies. This could result in continuing uncertainty
regarding compliance matters and higher costs necessitated by
ongoing revisions to disclosure and governance practices. We
intend to invest resources to comply with evolving laws,
regulations and standards, and this investment may result in
increased general and administrative expenses and a diversion of
management&#146;s time and attention from revenue-generating
activities to compliance activities. If our efforts to comply
with new laws, regulations and standards differ from the
activities intended by regulatory or governing bodies due to
ambiguities related to practice, regulatory authorities may
initiate legal proceedings against us, and our business may be
harmed. We also expect that being a public company, along with
these new rules and regulations, will make it more expensive for
us to obtain director and officer liability insurance, and we
may be required to accept reduced coverage or incur
substantially higher costs to obtain coverage. These factors
could also make it more difficult for us to attract and retain
qualified members of our board of directors (particularly to
serve on our audit committee) and qualified executive officers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Substantial future sales of our common stock in the public
market could cause our stock price to fall.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Additional sales of our common stock in the public market after
this offering, or the perception that these sales could occur,
could cause the market price of our common stock to decline.
Upon completion of this offering, there will
be &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock outstanding, excluding
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
shares of common stock underlying outstanding stock options,
warrants and rights. Of these shares, shares of common stock
expected to be sold in this offering will be freely transferable
without restriction or additional registration under the
Securities Act of 1933, or Securities Act. The remaining shares
of common stock outstanding after this offering will be
available for sale, subject to the 180-day lock-up agreements
under which our directors, executive officers and identified
principal stockholders have agreed not to sell or otherwise
dispose of their common stock in the public market, and the
manner of sale and notice requirements and volume limitations on
sales of stock contained in Rule&nbsp;144 under the Securities
Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Any or all of these shares of common stock may be released prior
to expiration of the 180-day lock-up period at the discretion of
Banc of America Securities LLC. To the extent shares are
released before the expiration of the lock-up period and these
shares are sold into the market, the market price of our common
stock could decline. Immediately following the 180-day lock-up
period, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock outstanding after this offering will become
available for sale. The remaining shares of common stock will
become available for sale at various times thereafter upon the
expiration of one-year holding periods.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, beginning 180 and 365&nbsp;days after this
offering, the holders of
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock, respectively, will be entitled to rights to
cause us to register the sale of those stocks under the
Securities Act. Registration of these shares of common stock
under the Securities Act would result in these shares, other
than shares purchased by our affiliates, becoming freely
tradable without restriction under the Securities Act
immediately upon the effectiveness of the registration. See
&#147;Shares Eligible for Future Sale.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Our principal stockholders and management own a
significant percentage of our outstanding common stock and will
be able to exercise significant influence over our
affairs.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our executive officers, current directors and holders of five
percent or more of our common stock, as
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
beneficially owned approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of our common stock based on the SEC&#146;s rules for
determining beneficial ownership. We expect that, upon the
closing of this offering, that same group will continue to hold
at least a majority of our outstanding common stock. Even after
this offering, these stockholders will likely be able to
determine the composition of our board of directors, retain the
voting power to approve all matters requiring stockholder
approval and continue to have significant influence over our
operations. The interests of these stockholders may be different
than the interests of other stockholders on these matters. This
concentration of ownership could also have the effect of
delaying or preventing a change in our control or otherwise
discouraging a potential acquirer from attempting to obtain
control of us, which in turn could reduce the price of our
common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>We are a &#147;controlled company&#148; within the meaning
of the New York Stock Exchange rules and, as a result, will
qualify for, and intend to rely on, exemptions from certain
corporate governance requirements.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Following the completion of this offering we will be deemed to
be a &#147;controlled company&#148; under the rules of the NYSE.
Under these rules, a company of which more than 50% of the
voting power is held by a group is a &#147;controlled
company&#148; and may elect not to comply with certain NYSE
corporate governance requirements, including (1)&nbsp;the
requirement that a majority of the board of directors consist of
independent directors, (2)&nbsp;the requirement that the
nominating and governance committee be composed entirely of
independent directors, (3)&nbsp;the requirement that the
compensation committee be composed entirely of independent
directors and (4)&nbsp;the requirement for an annual performance
evaluation of the nominating and corporate governance and
compensation committees. We intend to rely on this exemption,
and therefore we do not intend to have a majority of independent
directors or nominating and compensation committees consisting
entirely of independent directors. Accordingly, you may not have
the same protections afforded to stockholders of companies that
are subject to all of the NYSE&#146;s corporate governance
requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Provisions in our corporate governance documents as well
as Delaware law may delay or prevent an acquisition of us that
stockholders may consider favorable, which could decrease the
value of your shares.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our certificate of incorporation and bylaws and Delaware law
contain provisions that could make it more difficult for a third
party to acquire us without the consent of our board of
directors. These provisions include restrictions on the ability
of our stockholders to remove directors, a classified board of
directors and limitations on action by our stockholders by
written consent. In addition, our board of directors has the
right to issue preferred stock without stockholder approval,
which could be used to make an acquisition of us more difficult.
Although we believe these provisions protect our stockholders
from coercive or otherwise unfair takeover tactics and thereby
provide for an opportunity to receive a higher bid by requiring
potential acquirers to negotiate with our board of directors,
these provisions apply even if the offer may be considered
beneficial by some stockholders. For more information on these
protective provisions, see &#147;Description of Capital
Stock&#148; found elsewhere in this prospectus.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<A name='103'></A>
</DIV>

<!-- link1 "FORWARD-LOOKING STATEMENTS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>FORWARD-LOOKING STATEMENTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This prospectus contains forward-looking statements that involve
substantial risks and uncertainties. All statements, other than
statements of historical facts, included in this prospectus
regarding our strategy, future operations, future financial
position, future revenues, projected costs, prospects, plans and
objectives of management are forward-looking statements. The
words &#147;anticipate,&#148; &#147;believe,&#148;
&#147;estimate,&#148; &#147;potential,&#148; &#147;expect,&#148;
&#147;intend,&#148; &#147;may,&#148; &#147;plan,&#148;
&#147;project,&#148; &#147;will,&#148; &#147;should,&#148;
&#147;could,&#148; &#147;would&#148; and similar expressions are
intended to identify forward-looking statements, although not
all forward-looking statements contain these identifying words.
We may not actually achieve the plans, intentions or
expectations disclosed in our forward-looking statements and you
should not place undue reliance on our forward-looking
statements. Actual results or events could differ materially
from the plans, intentions and expectations disclosed in the
forward-looking statements we make. We have included important
factors in the cautionary statements included in this
prospectus, particularly in the &#147;Risk Factors&#148;
section, that we believe could cause actual results or events to
differ materially from the forward-looking statements that we
make. Our forward-looking statements do not reflect the
potential impact of any future acquisitions, mergers,
dispositions, joint ventures or investments we may make. We do
not assume any obligation to update any forward-looking
statements.
</DIV>

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<A name='104'></A>
</DIV>

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<B>USE OF PROCEEDS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We estimate that we will receive net proceeds of approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
from the sale of shares in this offering after deducting
underwriting discounts and estimated offering expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We intend to use
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
of the net proceeds from this offering:
</DIV>

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    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    to repay in full the Restructuring Notes we will issue to
    certain of our existing stockholders in connection with the
    Internal Restructuring, which Restructuring Notes will bear
    interest at a rate equal to the short-term applicable federal
    rate (AFR)&nbsp;for federal income tax purposes, which is
    currently &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%&nbsp;per annum;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    to repay outstanding indebtedness of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
    under our senior secured credit facility, which indebtedness is
    described more fully below;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    to fund all or a portion of the costs of any acquisitions of
    complementary businesses we determine to pursue in the future,
    although we cannot assure you that we will be able to
    successfully identify or consummate any such
    acquisitions;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    for working capital and other general corporate purposes.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pending use of the net proceeds described above, we intend to
invest the net proceeds of this offering, not used to repay
indebtedness, in United States government securities and money
market instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Restructuring Notes and accrued interest thereon will be
repayable upon demand in an aggregate amount equal to
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;from
the net proceeds from this offering. See &#147;Internal
Restructuring.&#148; If the underwriters exercise their
over-allotment option, we intend to use the net proceeds to make
additional payments to our existing stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On May&nbsp;20, 2005, Colt Defense LLC entered into a senior
secured credit facility with an aggregate principal amount of up
to $65.0&nbsp;million as set forth below:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    $10.0&nbsp;million three-year revolving credit facility, which
    includes a $2&nbsp;million sublimit for the issuance of standby
    letters of credit;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    $25.0&nbsp;million three-year term loan facility (Term A
    Facility);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    $14.0&nbsp;million three-year term loan facility (Term B
    Facility);&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    $16.0&nbsp;million three-year term loan facility and available
    to our Canadian subsidiary, Colt Canada, which is denominated in
    Canadian dollars (Term C Facility).</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Term Loan&nbsp;A of the facility ($25.0&nbsp;million) was used
to repay our existing debt of $25.0&nbsp;million; we used Term
Loan&nbsp;B ($14.0&nbsp;million) and $2.1&nbsp;million of our
$10.0&nbsp;million revolver to pay a special distribution to the
members of Colt Defense LLC of $16.1&nbsp;million and we used
Term Loan&nbsp;C ($16.0&nbsp;million) to pay for our acquisition
of Colt Canada.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='105'></A>
</DIV>

<!-- link1 "DIVIDEND POLICY" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DIVIDEND POLICY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We do not currently intend to pay any cash dividends on our
common stock, and instead intend to retain earnings, if any, for
future operation and expansion. The amounts available to us to
pay dividends are restricted by our senior secured credit
facility, under which we do not have the ability to pay cash
dividends on our common stock. See &#147;Description of Capital
Stock&nbsp;&#151; Description of Indebtedness&#148; for a more
complete description of our senior secured credit facility. Any
decision to declare and pay dividends in the future will be made
at the discretion of our board of directors and will depend on,
among other things, our results of operations, cash
requirements, financial condition, contractual restrictions and
other factors that our board of directors may deem relevant.
</DIV>

<P align="center" style="font-size: 10pt;">20
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For 2003, Colt Defense LLC paid distributions to Colt&#146;s
Manufacturing of $3.9&nbsp;million. For 2004, Colt Defense LLC
paid distributions to its members of $11.4&nbsp;million, as well
as tax distributions to its members of $3.9&nbsp;million. In
April 2005, Colt Defense LLC paid tax distributions to its
members of $1.1&nbsp;million for 2005. At the closing of our
senior secured credit facility in May 2005, Colt Defense LLC
made a special distribution of $16.1&nbsp;million to its
members. In addition, prior to the consummation of this
offering, we will pay a distribution to our members to pay their
allocable portion of taxes on our profits up to the date of our
Internal Restructuring.
</DIV>

<P align="center" style="font-size: 10pt;">21

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='106'></A>
</DIV>

<!-- link1 "CAPITALIZATION" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CAPITALIZATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth our capitalization as of
April&nbsp;3, 2005:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    on an actual basis for Colt Defense LLC;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    on a pro forma basis for Colt Defense Inc. to reflect
    (1)&nbsp;the incurrence of $65.0&nbsp;million of debt under our
    senior secured credit facility and the payment of a
    $16.1&nbsp;million dividend to the members of Colt Defense LLC
    on May&nbsp;20, 2005 and (2)&nbsp;the Internal Restructuring;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    on a pro forma basis for Colt Defense Inc., as adjusted to
    reflect:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="1%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the sale by us
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock in this offering at an assumed price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    the mid-point of the estimated price range shown on the cover
    page of this prospectus, after deducting underwriting discounts
    and estimated offering expenses;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the application of the estimated net proceeds of this offering
    as described under &#147;Use of Proceeds&#148;;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the issuance
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock to our existing stockholders that we will make
    to the extent the underwriters do not exercise their
    over-allotment option as described under &#147;Internal
    Restructuring.&#148;</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table excludes:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock issuable upon exercise of options outstanding as
    of April&nbsp;3, 2005 under our 2003 management option incentive
    plan, with a weighted average exercise price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    additional shares of common stock reserved for issuance under
    our employee incentive plan following the completion of this
    offering.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You should read this table in conjunction with &#147;Internal
Restructuring,&#148; &#147;Unaudited Pro Forma Financial
Information,&#148; &#147;Management&#146;s Discussion and
Analysis of Financial Condition and Results of Operations&#148;
and our financial statements and the related notes appearing
elsewhere in this prospectus.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="54%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="center" nowrap><B>As of April&nbsp;3, 2005</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Pro Forma</B></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Actual</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro Forma</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>As Adjusted</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="center" nowrap><B>(unaudited)</B></TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="center" nowrap><B>($ in thousands, except per share data)</B></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,775</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,775</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Debt:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes payable to
    affiliates<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Members&#146; equity (deficit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,231</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(28,301</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,966</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,966</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital stock:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Preferred stock; $0.01&nbsp;par
    value; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares authorized; no
    shares issued and outstanding, pro forma and pro forma as
    adjusted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock; $0.01&nbsp;par
    value; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares authorized; shares
    issued and outstanding, pro forma
    and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares issued and outstanding
    pro forma as adjusted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additional paid-in capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated deficit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated other comprehensive loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,028</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,028</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total members&#146; equity and stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25,225</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(42,295</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total capitalization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(82</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,152</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD align="left">
    Represents the Restructuring Notes.
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of the proceeds
    from this offering will be used to repay the Restructuring Notes
    in full.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">22

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='107'></A>
</DIV>

<!-- link1 "DILUTION" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DILUTION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If you invest in our common stock, your interest will be diluted
to the extent of the difference between the initial public
offering price per share of our common stock and the net
tangible book value per share of common stock upon completion of
this offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Dilution is the amount by which the offering price paid by the
purchasers of the common stock to be sold in this offering will
exceed the net tangible book value per share of common stock
after the offering. The net tangible book value per share
presented below is equal to the amount of our total tangible
assets (total assets less intangible assets) less total
liabilities as of April&nbsp;3, 2005, divided by the number of
shares of our common stock that would have been held by our
existing stockholders as of April&nbsp;3, 2005, had the Internal
Restructuring been completed and had we effected the issuance of
shares of common stock to our existing stockholders that we will
make if and to the extent the underwriters do not exercise their
over-allotment option as described under &#147;Internal
Restructuring.&#148; On a pro forma basis, after giving effect
to (1)&nbsp;the Internal Restructuring and (2)&nbsp;the sale by
us of shares of common stock in this offering at an assumed
initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, the mid-point of the price range on the cover of this
prospectus, after deducting underwriting discounts and estimated
offering expenses and the application of the estimated net
proceeds of this offering as described under &#147;Use of
Proceeds,&#148; our pro forma net tangible book value as of
April&nbsp;3, 2005 would have been $&nbsp;million, or
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share of common stock. This represents an immediate increase in
net tangible book value (or a decrease in net tangible book
deficit) of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to the existing stockholders and an immediate dilution in
net tangible book value of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to new investors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table illustrates this per share dilution:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="74%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Assumed initial public offering price per share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma net tangible book value per share as of April&nbsp;3,
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase in pro forma net tangible book value per share
    attributable to investors in this offering</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma net tangible book value per share after this offering</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dilution per share to new
    investors<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)</TD>
    <TD align="left">
    Dilution is determined by subtracting net tangible book value
    per share after giving effect to the offering from the initial
    public offering price paid by a new investor.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
We will reduce the number of shares that we will issue to our
existing stockholders in the stock issuance described above by
the number of shares sold to the underwriters, if any, pursuant
to their over-allotment option. We will also make a cash payment
to our existing stockholders equal to the net proceeds we
receive from the sale of our shares in the over-allotment
option. Accordingly, our pro forma net tangible book value will
not be affected by the underwriters&#146; exercise of their
over-allotment option. The following table summarizes, on a pro
forma basis as of April&nbsp;3, 2005, after giving effect to the
transactions described above, the total number of shares of
common stock purchased from us, the total consideration paid to
us and the average price per share paid by the existing
stockholders and by new investors purchasing shares in this
offering:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="41%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Total</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Shares Purchased</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Consideration</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average Price</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amount</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Per Share</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Existing
    stockholders<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New investors</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(2)</TD>
    <TD align="left">
    Total consideration and average price per share paid by existing
    stockholders does not give effect to (1)&nbsp;the
    $16.1&nbsp;million distribution made to holders of common units
    of Colt Defense LLC in May 2005 using proceeds from the senior
    secured credit facility or (2)&nbsp;the</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">23
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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD align="left">
    <FONT style="font-size: 8pt">repayment of the Restructuring
    Notes using the net proceeds from this offering. If the table
    were adjusted to give effect to these payments, total
    consideration for shares of existing stockholders would be
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, with an
    average share price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
The discussion and tables set forth above also exclude:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of our common stock issuable upon the exercise of options and
    rights outstanding as of April&nbsp;3, 2005;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
    shares of common stock reserved for future grants under our
    equity compensation plans.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To the extent outstanding options and rights are exercised,
there will be further dilution to new investors. See
&#147;Management&nbsp;&#151; Stock Option and Other Benefit
Plans,&#148; &#147;Shares Eligible For Future Sale&nbsp;&#151;
Stock Options&#148; and &#147;Internal Restructuring.&#148; In
addition, we may choose to raise additional capital due to
market conditions or strategic consideration even if we believe
we have sufficient funds for our current or future operation
plans. To the extent that additional capital is raised through
the sale of equity or convertible debt securities, the issuance
of these securities could result in further dilution to our
stockholders.
</DIV>

<P align="center" style="font-size: 10pt;">24

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<DIV align="left" style="font-size: 10pt;">
<A name='108'></A>
</DIV>

<!-- link1 "INTERNAL RESTRUCTURING" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INTERNAL RESTRUCTURING</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Immediately prior to the effectiveness of the registration
statement of which this prospectus is a part, we will complete a
series of transactions for the purpose of transitioning from an
organizational structure in which our top-tier company is a
limited liability company to a structure in which our top-tier
company is a corporation, which we refer to collectively as our
&#147;Internal Restructuring.&#148; Following the Internal
Restructuring, the current members of Colt Defense LLC will be
stockholders of our new top-tier company Colt Defense Inc.,
which is issuing shares of its common stock to the public in
this offering. We originally formed our organization as a tiered
structure of companies, with Colt Defense LLC as the top-tier
limited liability company, in order to maximize the tax benefits
to our members of a flow-through tax structure. However, these
benefits are generally not available to owners of publicly
traded limited liability companies. Furthermore, because, in our
view, publicly traded limited liability companies are not common
or easily understood, we believe that the conversion of our
structure from a limited liability company to a corporation will
facilitate investors&#146; understanding of our capital and
governance structures and make us more easily comparable to the
other publicly traded defense companies, all of which are
corporations. The principal Internal Restructuring transactions,
to be effected pursuant to the terms of our Internal
Restructuring Agreement, are summarized below:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Members of Colt Defense LLC who have issued Stockholder
    Promissory Notes will satisfy notes by surrendering units of
    Colt Defense LLC equal to the amount due at the time of payment.
    See &#147;Certain Relationships and Related Party
    Transactions&nbsp;&#151; Transactions with Affiliates Involving
    Securities&#148; for information regarding the Stockholder
    Promissory Notes.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    All members of Colt Defense LLC (other than the Colt Defense
    Employee Plan Holding Corp., or Plan Holding Corp.) will
    contribute all of their membership interests in Colt Defense LLC
    to us in exchange for shares of our common stock, Restructuring
    Notes in an aggregate principal amount of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
    and the right to participate in the over-allotment option.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Colt Defense Employee Profit Sharing Plan, or Colt Defense
    Sharing Plan, which owns all of the outstanding shares of stock
    of Plan Holding Corp., will contribute all of the shares of
    common stock of Plan Holding Corp. to Colt Defense LLC in
    exchange for shares of our common stock, Restructuring Notes in
    the aggregate principal amount of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
    the right to participate in the over-allotment option.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    If the underwriters exercise their over-allotment option to
    purchase additional shares of common stock from us, the cash to
    be paid to our existing stockholders in the Internal
    Restructuring will be increased by the proceeds to us of any
    additional shares sold to the underwriters, after deducting
    underwriting discounts and commissions.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    If the underwriters do not exercise their over-allotment option
    in full, then the aggregate number of shares of common stock
    that we will issue to our existing stockholders in the Internal
    Restructuring will be increased by the number of shares subject
    to the over-allotment option that are not purchased by the
    underwriters.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    On the closing date of this offering, we will use
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
    the net proceeds from this offering to repay the Restructuring
    Notes in full. The aggregate principal amount of the
    Restructuring Notes and accrued interest thereon will be equal
    to
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
    the net proceeds from this offering.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Consummation of the transactions contemplated in the Internal
Restructuring Agreement is a condition to the closing of this
offering. The closing under the Internal Restructuring is
subject to certain conditions including, among others,
(1)&nbsp;the approval of our lenders to amend our credit
facility to permit the Internal Restructuring, and (2)&nbsp;the
absence of any law, regulation, injunction or order prohibiting
the consummation of the Internal Restructuring.
</DIV>

<P align="center" style="font-size: 10pt;">25

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following diagram depicts our ownership and structure prior
to our transition to a corporate structure and immediately
following the completion of the Internal Restructuring
transactions described above and this offering:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>STRUCTURE PRIOR TO INTERNAL RESTRUCTURING AND THIS
OFFERING</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y09554y0955401.gif" alt="(CHART)">
</DIV>

<P align="center" style="font-size: 10pt;">26

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<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>STRUCTURE FOLLOWING INTERNAL RESTRUCTURING</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y09554y0955402.gif" alt="(CHART)">
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)</TD>
    <TD align="left">
    Assuming 100% participation in the Restructuring Notes.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">27
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<DIV align="left" style="font-size: 10pt;">
<A name='109'></A>
</DIV>

<!-- link1 "UNAUDITED PRO FORMA FINANCIAL INFORMATION" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>UNAUDITED PRO FORMA FINANCIAL INFORMATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following unaudited pro forma financial information has been
derived by application of pro forma adjustments to the
historical financial statements of Colt Defense LLC included
elsewhere in this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The historical financial information as of April&nbsp;3, 2005
and for the three months then ended and for the year ended
December&nbsp;31, 2004 for Colt Defense Inc. has been derived
from Colt Defense LLC&#146;s historical financial statements.
The following unaudited pro forma financial data gives effect to
the following items:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the Internal Restructuring;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the refinancing of our debt and the payment of a special
    distribution of $16.1&nbsp;million;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the treatment of Colt Defense LLC as a corporate tax paying
    entity; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the sale by us
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock
    at &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share, the mid-point of the assumed offering range, and the
    application of the net proceeds to us of approximately
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;from
    this offering.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The unaudited pro forma balance sheet data is presented as if
these transactions had occurred as of April&nbsp;3, 2005 and the
unaudited pro forma statement of operations and other data for
the three months ended April&nbsp;3, 2005 and the year ended
December&nbsp;31, 2004 are presented as if these transactions
had occurred on the first day of the period presented.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The unaudited pro forma financial information and related notes
are presented for informational purposes only and do not purport
to represent what our financial position or results of
operations would actually have been if the transactions had in
fact occurred on the dates discussed above. They also do not
project or forecast our financial position or results of
operations for any future date or period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>The unaudited pro forma financial information should be read
together with our historical financial statements and related
notes included elsewhere in this prospectus and with the
information set forth under &#147;Management&#146;s Discussion
and Analysis of Financial Condition and Results of
Operations.&#148; The pro forma adjustments are based on
available information and upon assumptions that we believe are
reasonable. However, we cannot assure you that actual results
will not differ from the pro forma information and perhaps in
material and adverse ways.</B>
</DIV>

<P align="center" style="font-size: 10pt;">28

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>COLT DEFENSE INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>UNAUDITED PRO FORMA BALANCE SHEET AS OF</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>APRIL&nbsp;3,
2005<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(dollars in thousands)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Debt</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Refinancing</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjustment</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>and Special</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Recapital-</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Internal</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>for this</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Colt Defense</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Historical<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Dividend</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>ization</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Restructuring</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Offering</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro Forma</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>CURRENT ASSETS</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,775</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,775</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,525</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restricted cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>563</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>563</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>563</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts receivable, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,190</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventories</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,973</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,973</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,973</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,636</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,636</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,636</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,137</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,137</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,887</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,237</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,237</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,237</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Goodwill</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,175</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,175</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,175</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Intangible assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,023</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred license fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,891</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred financing costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(970</TD>
    <TD align="left" valign="bottom" nowrap>)<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Business acquisition costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>762</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>762</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>762</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Intangible pension asset</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>816</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>816</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>816</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,000</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(7)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>591</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>591</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>591</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    TOTAL ASSETS</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>28,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(970</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>27,632</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>17,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>59,382</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="27">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="27" align="left" valign="top">
    <B>LIABILITIES AND SHAREHOLDERS&#146; EQUITY</B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Short-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,100</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,159</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable and accrued expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,443</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,443</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,443</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,211</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,713</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,813</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,813</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,000</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(39,000</TD>
    <TD align="left" valign="bottom" nowrap>) <SUP style="font-size: 85%; vertical-align: text-top">(8)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>143</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued employee benefit costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,900</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restructuring notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,000</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,071</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,071</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,071</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53,827</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>69,927</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(54,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,927</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    SHAREHOLDERS&#146; EQUITY</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Members&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,231</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17,070</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(28,301</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,000</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68,750</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(8)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57,449</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,966</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,966</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,966</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(6)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated other comprehensive loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,028</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,028</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,028</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Treasury stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25,966</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25,966</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total shareholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25,225</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17,070</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(42,295</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28,455</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    TOTAL LIABILITIES and SHAREHOLDERS&#146; EQUITY</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>28,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(970</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>27,632</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>17,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>59,382</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The accompanying notes are an integral part of the Unaudited Pro
Forma Financial Information.
</DIV>

<P align="center" style="font-size: 10pt;">29

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>COLT DEFENSE INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>UNAUDITED PRO FORMA STATEMENT OF OPERATIONS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>FOR THE THREE MONTHS ENDED APRIL&nbsp;3,
2005<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(dollars in thousands)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Colt</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjustment</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Defense</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>for this</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Colt Defense</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Historical<SUP style="font-size: 85%; vertical-align: text-top">(9)</SUP></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Recapitalization</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Offering</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro Forma</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,609</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,622</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,622</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,987</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,987</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling and commissions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,270</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    General and administrative</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,459</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(62</TD>
    <TD align="left" valign="bottom" nowrap>)<SUP style="font-size: 85%; vertical-align: text-top">(11)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,397</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Litigation costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>625</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>625</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,633</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,695</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other expenses (income):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(116</TD>
    <TD align="left" valign="bottom" nowrap>)<SUP style="font-size: 85%; vertical-align: text-top">(10)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(647</TD>
    <TD align="left" valign="bottom" nowrap>)<SUP style="font-size: 85%; vertical-align: text-top">(11)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>297</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Royalty income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(219</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(219</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(108</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(108</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>709</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,725</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(12)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,417</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(12)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,485</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(12)</SUP></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,878</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(708</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,240</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings per share, assuming dilution
    <SUP style="font-size: 85%; vertical-align: text-top">(12)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>121</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(116</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(647</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>297</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,417</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,485</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Litigation costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>625</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>625</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The accompanying notes are an integral part of the Unaudited Pro
Forma Financial Information.
</DIV>

<P align="center" style="font-size: 10pt;">30

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>COLT DEFENSE INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>UNAUDITED PRO FORMA STATEMENT OF OPERATIONS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>FOR THE YEAR ENDED DECEMBER&nbsp;31,
2004<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(dollars in thousands)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjustment</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>for this</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Colt Defense</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Historical<SUP style="font-size: 85%; vertical-align: text-top">(9)</SUP></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Recapitalization</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Offering</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro Forma</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>75,135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>75,135</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,376</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,376</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross Profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,759</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling and commissions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,981</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,981</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    General and administrative</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(250</TD>
    <TD align="left" valign="bottom" nowrap>)<SUP style="font-size: 85%; vertical-align: text-top">(11)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,326</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Litigation costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>936</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>936</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,266</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,516</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other expenses (income):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,735</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(198</TD>
    <TD align="left" valign="bottom" nowrap>)<SUP style="font-size: 85%; vertical-align: text-top">(10)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,587</TD>
    <TD align="left" valign="bottom" nowrap>) <SUP style="font-size: 85%; vertical-align: text-top">(11)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>950</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepayment discounts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(842</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(842</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Royalty income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(759</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(759</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,137</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>78</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(12)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,086</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(12)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,238</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(12)</SUP></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,249</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,899</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings per share, assuming dilution
    <SUP style="font-size: 85%; vertical-align: text-top">(13)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>505</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,735</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(198</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,587</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>950</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,086</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,238</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Litigation costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>936</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>936</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The accompanying notes are an integral part of the Unaudited Pro
Forma Financial Information.
</DIV>

<P align="center" style="font-size: 10pt;">31

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>COLT DEFENSE INC.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='110'></A>
</DIV>

<!-- link1 "NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION" -->

<DIV align="center" style="font-size: 10pt;">
<B>NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Unaudited Pro Forma Financial Information assumes an initial
public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, the midpoint range set forth on the cover page of this
prospectus. All share amounts and exercise prices will be
adjusted to reflect the Internal Restructuring.
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="7%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(1)</TD>
    <TD align="left">
    The Unaudited Pro Forma Financial Information does not reflect
    the acquisition of Colt Canada.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(2)</TD>
    <TD align="left">
    Reflects the unaudited historical balance sheet of Colt Defense
    LLC.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(3)</TD>
    <TD align="left">
    Reflects the write-off of the deferred financing costs related
    to our previous credit facility, which was replaced by our new
    senior secured credit facility on May&nbsp;20, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(4)</TD>
    <TD align="left">
    In May 2005, we obtained a new $65.0&nbsp;million senior secured
    credit facility. We used Term Loan&nbsp;B ($14.0&nbsp;million)
    and $2.1&nbsp;million of our $10.0&nbsp;million revolver of the
    senior secured credit facility to pay a special distribution to
    the members of Colt Defense LLC of $16.1&nbsp;million.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(5)</TD>
    <TD align="left">
    Reflects the Restructuring Notes and accrued interest. The
    aggregate principal amount of the Restructuring Notes and
    accrued interest thereon will be equal to
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
    the net proceeds from this offering will be used to repay the
    Restructuring Notes in full. See &#147;Internal
    Restructuring.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(6)</TD>
    <TD align="left">
    Reflects the repayment of the Stockholder Promissory Notes from
    unit holders of Colt Defense LLC of $11.0&nbsp;million in
    exchange for the re-purchase
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;units
    of Colt Defense LLC by us from these employees.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(7)</TD>
    <TD align="left">
    Prior to this offering, Colt Defense LLC was a limited liability
    company taxed as a partnership for Federal income tax purposes.
    This adjustment reflects the deferred tax assets and liabilities
    for the estimated U.S.&nbsp;Federal and state income tax impact
    of the differences between the tax basis and financial reporting
    carrying values of the assets and liabilities of Colt Defense
    LLC. The excess of tax basis over the financial reporting
    carrying value of assets and liabilities is $22.7&nbsp;million.
    See Note&nbsp;2 to our audited financial statements included
    elsewhere in this prospectus. This creates a net deferred tax
    asset of $9.0&nbsp;million. Of this asset, $7.8&nbsp;million
    will be recorded as a benefit from income taxes and
    $1.2&nbsp;million, related to the minimum pension liability,
    will adjust accumulated other comprehensive income. In addition,
    there is an increase in deferred tax assets (estimated to be
    approximately $8.0&nbsp;million) recognized upon consummation of
    the Internal Restructuring related to the excess of the tax
    basis of our investment in the shares purchased from certain of
    our stockholders over our financial statement carrying value
    upon consummation of the Internal Restructuring. We intend to
    obtain an appraisal to support this valuation and, accordingly,
    the actual amount recorded may differ as a result. This benefit
    will be recorded to contributed capital. The estimated tax rate
    of 39.875% is computed using the Connecticut state tax rate of
    7.5% and the statutory Federal rate of 35% as required by
    U.S.&nbsp;GAAP. We qualify as a manufacturer under The American
    Jobs Creation Act of 2004 and, therefore, our future Federal tax
    rate could be lower than 35%. In accordance with the limited
    liability agreement of Colt Defense LLC, distributions will be
    made to its members equal to 45% of taxable income up to the
    date of the Internal Restructuring.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(8)</TD>
    <TD align="left">
    Reflects our offering
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock and estimated use of the net proceeds to repay
    our debt. Does not reflect any charge we will incur because it
    is not recurring. We will incur a charge of $2.0&nbsp;million
    related to the immediate vesting of 5,310 unexercised stock
    options granted in December 2004 and in the second quarter of
    2005 and $0.7&nbsp;million related to vested options.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(9)</TD>
    <TD align="left">
    Reflects the historical results of operations of Colt Defense
    LLC.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="6%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(10)</TD>
    <TD align="left">
    Reflects the reduction of interest expense with an annual impact
    of $1.2&nbsp;million resulting from our refinancing of our
    existing term loan with Term Loan&nbsp;A net of the interest
    expense related to Term Loan&nbsp;B and the draws on the
    revolver under our senior secured credit facility to pay a
    special distribution to the members of Colt Defense LLC.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">32
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>COLT DEFENSE INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO UNAUDITED PRO FORMA FINANCIAL
INFORMATION&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV style="margin-top: 15pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="6%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(11)</TD>
    <TD align="left">
    Reflects the reduction in interest expense from the repayment of
    outstanding indebtedness under our senior secured credit
    facility with proceeds from this offering. Coincident with this
    offering, the management fee with Sciens Management of
    $0.25&nbsp;million annually will be settled for a one-time
    termination fee of $1.0&nbsp;million.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(12)</TD>
    <TD align="left">
    Reflects the income tax impact of the operations and adjustments
    described herein at the estimated tax rate of 39.875%, which is
    the Connecticut state tax rate of 7.5%, net of Federal tax
    benefit, and the U.S.&nbsp;statutory rate of 35%.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(13)</TD>
    <TD align="left">
    Diluted earnings per share is computed based on pro forma number
    of common shares outstanding of Colt Defense LLC
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
    This is based on the units outstanding at April&nbsp;3, 2005 of
    152,048 adjusted to reflect: (1)&nbsp;the 300 options granted
    December 2004 which become vested upon consummation of this
    offering and 5,010 options granted in the second quarter of 2005
    (which all become vested upon the consummation of this
    offering), (2)&nbsp;to reflect the dilutive effect of the 2003
    options outstanding of 1,826 at April&nbsp;3, 2005 (which are
    all fully vested), and (3)&nbsp;to reflect the shares of common
    stock issued by us in this offering
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">33

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='111'></A>
</DIV>

<!-- link1 "SELECTED FINANCIAL DATA" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SELECTED FINANCIAL DATA</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following tables present our historical financial and
operating data as of the dates or for the periods indicated.
Except as otherwise described below, the selected financial and
operating data relate to Colt Defense LLC. The selected
financial data as of and for the years ended December&nbsp;31,
2004, 2003 and 2002 are derived from Colt Defense LLC&#146;s
audited financial statements. The selected financial data for
the three months ended April&nbsp;3, 2005 and April&nbsp;4, 2004
are derived from Colt Defense LLC&#146;s unaudited financial
statements, which in the opinion of management, include all
adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of results for the unaudited
interim periods. The financial data as of and for the years
ended December&nbsp;31, 2001 and 2000 was derived from the
unaudited financial statements of our predecessor, which are not
included in this prospectus. In order to facilitate this
offering, we will consummate the Internal Restructuring in which
Colt Defense Inc. will become the successor to Colt Defense LLC
for accounting purposes. The selected financial data presented
below are not necessarily indicative of the results of future
operations and should be read in conjunction with
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&#148; and our audited and
unaudited financial statements and notes thereto that are
included elsewhere in this prospectus.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="24%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Three Months Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="19">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>April&nbsp;3,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>April&nbsp;4,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2001</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap><B>(in thousands, except per share data)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Statement of Operations Data:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>18,896</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>75,135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>66,682</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>53,329</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>42,008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>57,737</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,622</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,376</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45,161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,768</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46,883</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,987</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,556</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,521</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,561</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,453</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,854</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling and commissions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,981</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,819</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,732</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,497</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    General and administrative</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,459</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,297</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,312</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,298</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,498</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Litigation costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>625</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>936</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Noncash stock compensation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,633</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,982</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,266</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,788</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,529</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,868</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,859</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>888</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,735</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,582</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,464</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reorganization costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net settlement of litigation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(842</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Royalty income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(219</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(80</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(759</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(381</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(429</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(493</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Royalty expense to Colt&#146;s Manufacturing</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(108</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(126</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(650</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>511</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>460</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,179</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,436</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,065</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense (benefit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(222</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income
    (loss)<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,878</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,166</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,245</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,401</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,485</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,065</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings per unit (assuming
    dilution)<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>18.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>20.73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>63.63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>32.72</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>122.42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(78.99</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(46.81</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance Sheet Data (end of period):</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,775</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,402</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>314</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24,268</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>212</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>57</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restricted cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>563</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>559</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>562</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>558</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>506</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>648</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>760</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">34

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="24%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Three Months Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="19">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>April&nbsp;3,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>April&nbsp;4,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2001</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap><B>(in thousands, except per share data)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current assets other than cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,799</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,579</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,266</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,279</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,863</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,918</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current liabilities other than debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,654</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,791</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,569</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,361</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,723</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,148</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47,461</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,901</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,485</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,901</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Short-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,678</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,568</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,027</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,184</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>251</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>352</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,027</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,162</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,449</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,811</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,364</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued benefit costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,915</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,593</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,024</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other long-term liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,071</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,274</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>247</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53,827</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62,555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64,767</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68,843</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44,888</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43,211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46,135</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Members&#146; deficit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25,225</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(30,655</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(27,063</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(21,382</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(20,987</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(22,726</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(21,234</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Other Financial Data (Unaudited):</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    EBITDA<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,081</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,303</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,435</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(142</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,228</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjusted EBITDA</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,081</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,733</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,418</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(142</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,228</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Litigation expense (included in EBITDA and Adjusted
    EBITDA)<SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>625</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>936</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)</TD>
    <TD align="left">
    There is no provision for Federal and State income taxes
    reflected, as Colt Defense LLC is treated as a partnership for
    tax purposes. All operating results of Colt Defense LLC have
    been allocated to our investors. Subsequent to the Internal
    Reorganization, the income of Colt Defense Inc. will be taxed at
    the corporate level. The only income taxes the company pays are
    for foreign withholding taxes related to its royalty income.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)</TD>
    <TD align="left">
    Diluted earnings per unit are based on the weighted average
    number of units outstanding during the period adjusted to add
    the weighted-average number of potentially dilutive units that
    would have been outstanding upon the assumed exercise of the
    stock options and warrants issued in 2003 and adjusted for the
    December 2004 stock option grant and the option grants from the
    second quarter of 2005. The December 2004 option grant and the
    option grants from the second quarter of 2005 are considered
    nominal issuances and the underlying units are included in
    diluted earning per unit for all periods presented. Loss per
    unit for the predecessor was calculated utilizing weighted
    average units&nbsp;&#151; assuming dilution for 2002.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)</TD>
    <TD align="left">
    EBITDA and Adjusted EBITDA are not financial measures under
    U.S.&nbsp;GAAP. We use EBITDA and Adjusted EBITDA as
    supplemental financial measures. EBITDA is defined as net income
    before interest, income taxes, depreciation and amortization.
    Adjusted EBITDA is defined as EBITDA before one-time items. We
    believe EBITDA and Adjusted EBITDA are useful financial
    performance measures for our equity holders and us and are a
    complement to net income determined in accordance with
    U.S.&nbsp;GAAP. Because it excludes interest and income taxes,
    EBITDA provides insight with respect to our ongoing operating
    results irrespective of our capital structure and because it
    excludes depreciation and amortization, EBITDA provides a basis
    for measuring our financial performance unrelated to historical
    cost or carrying value of long-lived assets. Because it excludes
    one-time items, Adjusted EBITDA provides a benchmark for
    comparing operating results between periods. EBITDA and Adjusted
    EBITDA do not measure the capital we require to maintain our
    fixed assets and does not take into account the total amount of
    interest we pay on outstanding debt nor does it show trends in
    interest costs due to changes in our borrowings or changes in
    interest rates. Non-U.S.&nbsp;GAAP measures such as EBITDA and
    Adjusted EBITDA should not be considered in isolation or as a
    substitute for U.S.&nbsp;GAAP measures. EBITDA and Adjusted
    EBITDA do not represent cash generated from operating activities
    determined in accordance with U.S.&nbsp;GAAP and should not be
    considered as an alternative to operating income, income before
    income taxes or net income determined in accordance with
    U.S.&nbsp;GAAP as an indicator of performance or as an
    alternative to cash flows from operating activities as an
    indicator of liquidity. We note that EBITDA reporting is
    required by our lenders to assist them in understanding our
    operating performance. The amounts shown for EBITDA as presented
    herein are different from the amounts calculated under the
    EBITDA used in our senior secured credit facility. EBITDA as
    defined in our senior secured credit facility is equal to
    Adjusted</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">35
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD align="left">
    <FONT style="font-size: 8pt">EBITDA above plus any litigation
    costs incurred in connection with our litigation with
    Bushmaster, nonrecurring expenses associated with certain
    &#147;permitted acquisitions&#148; under our senior secured
    credit facility, stock-based compensation expense and any
    management fees paid to Sciens Management.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 8pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
The following table presents a reconciliation of EBITDA and
Adjusted EBITDA to net income:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="33%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>Colt Defense LLC</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Three Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>April&nbsp;3,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>April&nbsp;4,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2001</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,878</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,166</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,245</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,401</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,043</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,744</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>888</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,735</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,582</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,464</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(222</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and
    amortization<SUP style="font-size: 85%; vertical-align: text-top">(a)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>133</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>810</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,351</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,508</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    EBITDA</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,081</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,303</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,435</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(142</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,228</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Royalty expense to Colt&#146;s Manufacturing</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reorganization costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net settlement of litigation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(842</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjusted EBITDA</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,081</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,733</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,418</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(142</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,228</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="1%"></TD>
    <TD width="94%"></TD>
</TR>

<TR>
    <TD valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</TD>
    <TD></TD>
    <TD valign="top">
    See Note&nbsp;2 to our audited financial statements included
    elsewhere in this prospectus.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR>
    <TD valign="top">
    (4)</TD>
    <TD></TD>
    <TD valign="top">
    Our net income from continuing operations was negatively
    impacted by the effects of certain litigation. See Note&nbsp;12
    to our audited financial statements included elsewhere in this
    prospectus.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">36

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='112'></A>
</DIV>

<!-- link1 "MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF RESULTS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>OF OPERATIONS AND FINANCIAL CONDITION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>You should read the following discussion and analysis in
conjunction with our combined financial statements and related
notes, our &#147;Unaudited Pro Forma Financial
Information,&#148; and our &#147;Selected Financial Data&#148;
included elsewhere in this prospectus. The historical financial
information discussed below is for Colt Defense LLC and
subsidiaries, which was our top-tier company prior to our
Internal Restructuring.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Overview</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are a leading designer, developer and manufacturer of small
arms and weapon systems for the U.S.&nbsp;military, its allies
and federal, state and local law enforcement agencies. Our
products include military rifles, such as the M4 carbine rifle
and its predecessor, the M16 rifle, auxiliary weapon systems,
such as the M203 grenade launcher, and rifles for law
enforcement agencies around the world. We also refurbish,
recondition and repair these weapons, and produce spare parts
and component kits such as barrels, springs, screws, handguards,
upper receivers and buttstocks. In addition, we provide
centralized procurement and training services. We have produced
for, and sold to (or have orders for), the U.S. and allied
militaries approximately seven million M16 and 340,000 M4
weapons.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to November&nbsp;4, 2002, we operated as a division of
Colt&#146;s Manufacturing, which was a wholly owned subsidiary
of New Colt. On November&nbsp;4, 2002, New Colt and Colt&#146;s
Manufacturing contributed the assets and liabilities comprising
our business to a newly formed limited liability company as a
first step of a two-step reorganization process. On June&nbsp;3,
2003, the second step of the reorganization took place in which
Colt&#146;s Manufacturing was itself converted to a limited
liability company, and the ownership interest in our company was
distributed to the stockholders of New Colt. See &#147;Certain
Relationships and Related Party Transactions&nbsp;&#151;
Reorganization&#148; and Note&nbsp;1 to our audited historical
financial statements for more information about our
reorganization.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As discussed below, in connection with the reorganization we
recorded one-time reorganization costs of $0.3&nbsp;million in
2002 and $1.2&nbsp;million in 2003. Also in connection with the
reorganization, as discussed below, in January 2004 we entered
into a new 20-year paid up license agreement (with successive
five-year extensions at our option with the payment of
$0.25&nbsp;million upon each extension) with Colt&#146;s
Manufacturing, for our use of certain trademarks and trade
names. See &#147;&#151;&nbsp;Other Expense (Income).&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since November&nbsp;4, 2002 and for the remainder of the periods
covered by the financial statements included in this prospectus,
Colt Defense LLC has operated as a limited liability company. As
a result, it was not subject to federal or most state income
taxes. Rather, its members were taxed on their proportionate
share of our taxable income during such periods. Concurrently
with the consummation of this offering, our top-tier company
will be a tax paying entity. This will have an impact on our
financial results for subsequent periods as discussed below
under &#147;&#151;&nbsp;Income Tax Expense.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Internal Restructuring and Offering</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Immediately prior to the effectiveness of the registration
statement of which this prospectus is a part, we will complete a
series of transactions in connection with our Internal
Restructuring for the purpose of transitioning our top-tier
company from a limited liability company to a corporation. See
&#147;Internal Restructuring.&#148; As a result of this offering
and our Internal Restructuring, we will incur additional
expenses that we have not incurred in the past, including
expenses associated with compliance with corporate governance
and periodic financial reporting requirements for public
companies. Moreover, our income will be subject to income tax.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a result of the repayment of our existing indebtedness with
the proceeds from our new senior secured credit facility, we
will incur a write-off of our existing deferred financing costs
(approximately $1.0&nbsp;million at April&nbsp;3, 2005). As a
result of this offering, we will: (1)&nbsp;record an additional
compensation charge of approximately $2.0&nbsp;million from the
acceleration of employee stock option vesting and
(2)&nbsp;record a charge of $1.0&nbsp;million for the
termination of our agreement with Sciens Management.
</DIV>

<P align="center" style="font-size: 10pt;">37
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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Net Sales</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our net sales are derived primarily from the sales of our
products. We recognize revenue when ownership to the goods
transfers to the buyer, which primarily occurs upon shipping.
For certain U.S.&nbsp;government-related sales, we recognize
revenue upon inspection and acceptance of the goods by a
U.S.&nbsp;government official and our placing the accepted goods
in a U.S.&nbsp;government approved location at our premises.
During the first quarter of 2005 and during 2004 and 2003, 69%,
54% and 45%, respectively, of our net sales were to the
U.S.&nbsp;government, and during 2004 and 2003, 16% and 18%,
respectively, of our net sales were to a single foreign country
customer. Our U.S.&nbsp;government contract includes a 4%
inflation factor, which has been adequate over the past three
years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Cost of Sales</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our cost of sales consists of direct labor and benefits,
materials, subcontractor cost, manufacturing overhead, including
depreciation and amortization, utilities cost, and maintenance
and repair. Our union agreement that covers 74% of our
U.S.&nbsp;work force provides for labor rate increases of 2.5%
in 2005 and 3% in 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Selling Expenses and Commissions</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Selling expenses and commissions consist of salaries, travel,
trade shows, marketing materials, customer training and
commissions to export sales representatives. We pay commissions
on most direct foreign sales. Foreign sales usually yield higher
gross profit percentages, which offset the higher cost of
commissions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>General and Administrative Expenses</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
General and administrative expenses consist of salaries and
expenses for research and development, accounting, corporate
administration, human resources and management information
systems. After this offering, we expect that we will experience
additional legal, accounting, administrative and other expenses
to address public company costs to improve our internal
controls, disclosure controls, information systems, financial
reporting systems and to retain a transfer agent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Litigation Costs</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During 2004 and 2005, we incurred legal costs associated with
our lawsuits against Bushmaster and Heckler&nbsp;&#38; Koch. See
&#147;Risk Factors&#148; and &#147;Business&nbsp;&#151;
Intellectual Property.&#148; These costs are a necessary part of
our business as they relate to the protection of our patents and
other intellectual property rights. We settled the
Heckler&nbsp;&#38; Koch suit in March 2005 and our litigation
with Bushmaster is still continuing as of May&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Other Expense (Income)</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Other expense (income) includes interest expense, reorganization
costs associated with our separation from Colt&#146;s
Manufacturing, settlement of litigation, prepayment discounts,
royalty income from Colt Canada, and royalty expense to
Colt&#146;s Manufacturing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our total outstanding borrowings have increased as a result of
the payment of a special distribution of $16.1&nbsp;million to
the members of Colt Defense LLC on May&nbsp;20, 2005 and the
purchase of Colt Canada. We have significantly reduced the
interest rates we pay with our new senior secured credit
facility. See &#147;Liquidity&nbsp;&#151; Credit
Facilities.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In accordance with the limited liability company agreement of
Colt Defense LLC, distributions will be made to members equal to
45% of taxable income up to the date of the Internal
Restructuring.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2002 and 2003, we recognized one-time reorganization costs of
$0.3&nbsp;million and $1.2&nbsp;million, respectively, with
respect of the separation of our business and from Colt&#146;s
Manufacturing. We do not expect any future charges related to
this reorganization. In addition, in 2003 we recognized a
one-time charge of
</DIV>

<P align="center" style="font-size: 10pt;">38

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<DIV align="left" style="font-size: 10pt;">
$2.6&nbsp;million with respect to the settlement of litigation
with a foreign sales agent. In 2004, we pre-paid the liability
for the settlement of litigation with a foreign sales agent and
received a discount of $0.8&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2003 and 2002, we settled some old payables related to
professional fees and received a discount of $0.1&nbsp;million
and $0.6&nbsp;million, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the periods covered by the financial statements included
in this prospectus, we recognized royalty income from payments
from the Diemaco division of H&#233;roux-Devtek Inc., which
manufactures and sells rifles to the Canadian military and
numerous allies, for the use of certain of our TDPs. On
May&nbsp;20, 2005, we completed our acquisition of the Diemaco
division and this business is now called Colt Canada. These
royalty payments will be eliminated in subsequent periods as we
will consolidate the operations of Colt Canada with ours. See
&#147;Business&nbsp;&#151; Intellectual Property.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Royalty expense for 2003 and 2002 consists of payments to New
Colt for use of the Colt trademarks and trade names. In January
2004, we entered into a new 20-year paid up license agreement
(with successive five-year extensions) with New Colt, for our
use of certain trademarks and trade names. We paid licensing
fees of $2.0&nbsp;million and transferred the Colt Match
Target&#174; Rifle product line to Colt&#146;s Manufacturing,
which was recorded as a prepaid asset and is being amortized to
cost of sales over the initial 20-year term of this agreement.
See &#147;Certain Relationships and Related Party
Transactions&nbsp;&#151; Match Target&#174;Agreements.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Income Tax Expense</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a limited liability company, since November&nbsp;4, 2002, we
were not subject to federal or most state income taxes. Rather,
our members pay tax on their proportionate share of our taxable
income. The income tax expense reported related to the Canadian
withholdings tax required on the royalty income we receive from
Colt Canada. If we had been a tax paying entity, we estimate
that our effective tax rate for the periods covered by the
financial statements included in this prospectus would have been
approximately 40%. Concurrently with the completion of the
Internal Restructuring, we will be a tax paying entity. We will
qualify as a manufacturer under the American Jobs Creation Act
of 2004 and, accordingly, our Federal tax rate can be reduced
below 35% through 2010. In conjunction with becoming a tax
paying entity, we will record deferred tax assets for the excess
of the tax basis of our assets and liabilities and the financial
reporting carrying value. When we record the net deferred tax
assets, we expect the amount will be approximately
$9&nbsp;million, offset by a credit to income tax expense of
$7.8&nbsp;million and a credit to other comprehensive income
(loss) of $1.2&nbsp;million. The ultimate realization of
deferred tax assets will depend on the generation of future
taxable income between the periods in which these temporary
differences become deductible.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Key Performance Measures</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We consider our key performance measures to be:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Organic sales growth&nbsp;&#151; the portion of net sales growth
    not attributable to acquisitions or dispositions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Gross profit as a percentage of net sales;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Operating income as a percentage of net sales;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    EBITDA;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Adjusted EBITDA;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Adjusted EBITDA as a percentage of net sales.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">39

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For the first quarter of 2005 and 2004 and for the year ended
December&nbsp;31, 2004, 2003 and 2002, these key performance
measures were:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="47%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Three</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Three</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>April&nbsp;3,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>April&nbsp;4,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Organic sales
    growth<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14.4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26.9</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit margin</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25.4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating income margin</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16.8</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    EBITDA<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,081</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,303</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,435</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjusted EBITDA</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,081</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,733</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,418</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjusted EBITDA margin</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18.9</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15.8</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)</TD>
    <TD align="left">
    We will adjust the base net sales amount to include Colt
    Canada&#146;s net sales in calculating this key performance
    measure for future periods.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)</TD>
    <TD align="left">
    EBITDA and Adjusted EBITDA are not financial measures under
    U.S.&nbsp;GAAP. We use EBITDA and Adjusted EBITDA as
    supplemental financial measures. EBITDA is defined as net income
    before interest, income taxes, depreciation and amortization.
    Adjusted EBITDA is defined as EBITDA before one-time items. We
    believe EBITDA and Adjusted EBITDA are useful financial
    performance measures for our equity holders and us and are a
    complement to net income determined in accordance with
    U.S.&nbsp;GAAP. Because it excludes interest and income taxes,
    EBITDA provides insight with respect to our ongoing operating
    results irrespective of our capital structure and because it
    excludes depreciation and amortization, EBITDA provides a basis
    for measuring our financial performance unrelated to historical
    cost or carrying value of long-lived assets. Because it excludes
    one-time items, Adjusted EBITDA provides a benchmark for
    comparing operating results between periods. EBITDA and Adjusted
    EBITDA do not measure the capital we require to maintain our
    fixed assets and does not take into account the total amount of
    interest we pay on outstanding debt nor does it show trends in
    interest costs due to changes in our borrowings or changes in
    interest rates. Non-U.S.&nbsp;GAAP measures such as EBITDA and
    Adjusted EBITDA should not be considered in isolation or as a
    substitute for U.S.&nbsp;GAAP measures. EBITDA and Adjusted
    EBITDA do not represent cash generated from operating activities
    determined in accordance with U.S.&nbsp;GAAP and should not be
    considered as an alternative to operating income, income before
    income taxes or net income determined in accordance with
    U.S.&nbsp;GAAP as an indicator of performance or as an
    alternative to cash flows from operating activities as an
    indicator of liquidity. We note that EBITDA reporting is
    required by our lenders to assist them in understanding our
    operating performance. The amounts shown for EBITDA as presented
    herein are different from the amounts calculated under the
    EBITDA used in our senior secured credit facility. EBITDA as
    defined in our senior secured credit facility is equal to
    Adjusted EBITDA above plus any litigation costs incurred in
    connection with our litigation with Bushmaster, nonrecurring
    expenses associated with certain &#147;permitted
    acquisitions&#148; under our senior secured credit facility,
    stock based compensation expense and any management fees paid to
    Sciens Management.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 8pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
The following table presents a reconciliation of EBITDA and
Adjusted EBITDA to net income:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="56%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Three</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Three</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>April&nbsp;3,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>April&nbsp;4,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,878</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,166</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,245</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,401</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(222</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>133</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>810</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>888</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,735</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,582</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,446</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    EBITDA</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,081</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,303</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,435</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Royalty expense to Colt&#146;s Manufacturing</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>650</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reorganization costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>333</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net settlement of litigation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(842</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjusted EBITDA</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,081</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,733</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,418</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">40

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
EBITDA, as present above, includes the following one-time
charges:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    reorganization costs of $1.2&nbsp;million and $0.3&nbsp;million
    in 2003 and 2002, respectively, in connection with the
    separation of our business from Colt&#146;s Manufacturing;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    litigation settlement charge of $2.6&nbsp;million in 2003 in
    connection with a settlement with a former commission
    agent;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    royalty expense of $3.6&nbsp;million and $0.7&nbsp;million in
    2003 and 2002, respectively, in connection with a sublicensing
    agreement with Colt&#146;s Manufacturing.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Certain Significant Transactions and Events</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our financial results and conditions in the periods covered by
the financial statements included in this prospectus were
impacted by the following:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Debt Agreement</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On December&nbsp;23, 2003, we entered into a $33.5&nbsp;million
financing agreement, which consisted of a $25.0&nbsp;million
term loan and a revolving credit facility. The term loan
proceeds were used in 2004 to repay $9.4&nbsp;million of
subordinated indebtedness, to make $11.4&nbsp;million of
distributions to our members, and to pay $2.0&nbsp;million
licensing fees under the license agreement referred to below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>License Agreement</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On January&nbsp;1, 2004, we entered into a 20-year paid-up
license agreement (with successive five-year extensions) with
New Colt for our use of certain Colt trademarks and trade names.
We paid licensing fees of $2.0&nbsp;million and transferred the
Colt Match Target&#174; rifle product line to Colt&#146;s
Manufacturing, which was recorded as a prepaid asset and is
being amortized over the initial 20-year term of the agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Diemaco Acquisition</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On May&nbsp;20, 2005, we completed our acquisition of the
Diemaco division of H&#233;roux-Devtek Inc., which manufactures
and sells rifles to the Canadian Military and numerous allies.
The business is now called Colt Canada. In the first quarter of
2005 and for the full year 2004, we earned $0.2&nbsp;million and
$0.8&nbsp;million, respectively, in royalties from Diemaco.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Union Matters</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In May 2004, we signed a new three-year agreement with the UAW,
which represents 74% of our U.S.&nbsp;work force. A key feature
in this agreement is the capping of the cost of healthcare
insurance premiums, which reduced our projected benefit
obligation by $5.8&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Planned Purchase of West Hartford Facility</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In February 2005, we signed an agreement to acquire our West
Hartford manufacturing facility where we also have our corporate
offices. The contractual purchase price is $7.0&nbsp;million and
is subject to a reduction of up to $0.6&nbsp;million in exchange
for which we assume the obligation to investigate and remediate
environmental conditions at the site under the &#147;Connecticut
Transfer Act.&#148; See &#147;Risk Factors&nbsp;&#151;
Environmental laws and regulations may subject us to significant
costs and liabilities&#148; for more information.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Senior Secured Credit Facility</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In May 2005, we entered into a senior secured credit facility
with an aggregate principal amount of up to $65.0&nbsp;million
as set forth below:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    $10.0&nbsp;million three-year revolving credit facility, which
    includes a $2.0&nbsp;million sublimit for the issuance of
    standby letters of credit;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">41

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    $25.0&nbsp;million three-year term loan facility (Term A
    Facility);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    $14.0&nbsp;million three-year term loan facility (Term B
    Facility);&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    $16.0&nbsp;million three-year term loan facility (Term C
    Facility).</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In May 2005, we borrowed $60.3&nbsp;million under the senior
secured credit secured facility to repay existing term loan
indebtedness of $25.0&nbsp;million, to finance the acquisition
of Colt Canada ($16.0&nbsp;million), to make distributions of
$16.1&nbsp;million to our members and to repay draws on our
existing revolver and pay transaction costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Results of Operations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth our results of operations based
on the amounts and percentage relationship of the items listed
to revenues during the period shown:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="29%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Three Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Three Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Ended April&nbsp;3,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Ended April&nbsp;4,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="23">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="22" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="22" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>%</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>%</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>%</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>%</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>%</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>18,896</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>75,135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>66,682</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>53,329</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,987</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,556</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,521</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,561</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25.4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling and commission</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,981</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,819</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,732</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.0</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    General and administrative</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,459</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,297</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,312</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Litigation costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>625</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>936</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Noncash stock compensation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,633</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,982</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,266</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,788</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,529</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12.2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Royalty income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(219</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(80</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(759</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(381</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(429</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reorganization costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Settlement of litigation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(842</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Royalty expense to Colt&#146;s Manufacturing</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(108</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(126</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(650</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>888</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,735</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,582</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income before taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,179</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(222</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,878</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,166</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,245</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,401</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income before taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,179</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma income taxes at 40%</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,258</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,054</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,916</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,096</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,981</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.9</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Quarter ended April&nbsp;3, 2005 compared to quarter ended
    April&nbsp;4, 2004</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Net Sales</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net sales for the first quarter of 2005 were $21.6&nbsp;million,
an increase of $2.7&nbsp;million, or 14.4%, from net sales of
$18.9&nbsp;million in the first quarter of 2004. This increase
was attributable to a 7.9% increase in the number of rifles
sold, which more than offset a decrease in our average selling
prices of 6.3%. The decrease in average selling price was due to
the large number of direct foreign rifles sold in the first
quarter of 2004 under a large contract we had in 2004 with a
foreign customer. This contract ended during the fourth quarter
</DIV>

<P align="center" style="font-size: 10pt;">42

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
of 2004. Direct foreign sales have a higher average selling
price as compared to the other categories. The following table
shows net sales for the first quarters of 2005 and 2004 by
product category (in thousands):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="77%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    U.S.&nbsp;government rifles</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,709</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Direct foreign rifles</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,149</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    U.S. law enforcement rifles</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,611</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Spares and contract management</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,431</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,748</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>185</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>679</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>18,896</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Cost of Sales/Gross Profit</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cost of sales was $14.6&nbsp;million for the first quarter of
2005, an increase of $2.3&nbsp;million, or 18.5%, from cost of
sales of $12.3&nbsp;million for the first quarter of 2004. This
increase was primarily attributable to the increase in net
sales. Gross profit increased to $7.0&nbsp;million for the first
quarter of 2005, an increase of $0.4&nbsp;million, or 6.6%, from
gross profit of $6.6&nbsp;million for the first quarter of 2004.
As a percentage of net sales, gross profit decreased to 32.3%
for the first quarter of 2005 from 34.7% for the first quarter
of 2004. This decrease is due to the fact that a greater
percentage by net sales in the first quarter of 2005 were lower
margin U.S.&nbsp;government sales, offset in part by an increase
in the sale of spares and contract management, which typically
have higher margins. Direct material costs were 29.6% of net
sales in the first quarter of 2005 as compared to 23.8% in the
first quarter of 2004. This is primarily due to the mix of
product sold in the first quarter of 2005, which included
$3.4&nbsp;million of contract management parts, as well as
recent price increases for raw materials. Direct labor costs
were 16.6% of net sales in the first quarter of 2005 as compared
to 18% in the first quarter of 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Selling Expenses and Commissions</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Selling expenses and commissions were unchanged at
$1.3&nbsp;million in each of the first quarters of 2004 and
2005. As a percentage of net sales, selling expenses and
commissions were 5.9% for the first quarter of 2005, compared to
6.8% for the first quarter of 2004. The higher costs in 2004
resulted from the volume of direct foreign sales, which often
result in us paying commissions to our agents in certain foreign
countries. These foreign sales usually yield higher gross profit
percentages which offset the higher costs of commissions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>General and Administrative Expenses</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
General and administrative expenses for the first quarter of
2005 were $1.5&nbsp;million, an increase of $0.2&nbsp;million,
or 12.5%, from general and administrative expenses of
$1.3&nbsp;million for the first quarter of 2004. As a percentage
of net sales, general and administrative expenses were 6.8% for
the first quarter of 2005 as compared to 6.9% for the first
quarter of 2004. The increase in administration costs was
primarily attributable to increased salary costs and a marketing
research study that was conducted in the first quarter of 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Litigation Costs</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We incurred $0.6&nbsp;million in the first quarter of 2005 for
legal costs related to our lawsuits against Bushmaster and
Heckler&nbsp;&#38; Koch. There was no comparable expense in the
first quarter of 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Operating Income</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the reasons discussed above, operating income for the first
quarter of 2005 was $3.6&nbsp;million, a decrease of
$0.4&nbsp;million, or 8.8%, from operating income of
$4.0&nbsp;million for the first quarter of 2004. As a percentage
of net sales, operating income for the first quarter of 2005 was
16.8%, compared to 21.1% for the first quarter of 2004.
</DIV>

<P align="center" style="font-size: 10pt;">43

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Other Expense (Income)</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Interest expense for the first quarter of 2005 was
$1.1&nbsp;million, an increase of $0.2&nbsp;million, or 19.4%,
from interest expense of $0.9&nbsp;million for the first quarter
of 2004. This increase was attributable to higher average
borrowings under our revolving credit facility
($2.8&nbsp;million for the first quarter of 2005 compared to
$2.1&nbsp;million for the first quarter of 2004).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Royalty income was $0.2&nbsp;million for the first quarter of
2005, an increase of $0.1&nbsp;million from royalty income of
$0.1&nbsp;million for the first quarter of 2004. Royalty income
represents payments received from Colt Canada and will be
eliminated after May&nbsp;20, 2005 once Colt Canada is
consolidated with our operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Income Before Income Taxes</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Income before income taxes for the first quarter of 2005 was
$2.9&nbsp;million, a decrease of $0.3&nbsp;million, or 8.6%,
from income before income taxes of $3.2&nbsp;million for the
first quarter of 2004. The decrease is primarily attributable to
the increased general and administrative expenses and the
litigation expense discussed above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Income Tax Expense</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We were not subject to federal or most state income taxes during
the first quarter of 2004 or 2005. See
&#147;&#151;&nbsp;Overview&nbsp;&#151; Income Tax Expense.&#148;
For the first quarter of 2005 we had income tax expense of
$0.022&nbsp;million compared to $0.008&nbsp;million for the
first quarter of 2004. The income tax we do incur results from
withholding tax required on the royalty income from Canada.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Net Income</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the reasons discussed above, net income for the first
quarter of 2005 was $2.9&nbsp;million, a decrease of
$0.3&nbsp;million, or 9.1%, from net income of $3.2&nbsp;million
for the first quarter of 2004.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Year ended December&nbsp;31, 2004 compared to year ended
    December&nbsp;31, 2003</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Net Sales</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net sales for 2004 were $75.1&nbsp;million, an increase of
$8.5&nbsp;million, or 12.7%, from net sales of
$66.7&nbsp;million for 2003. This increase was attributable to
an 18.9% increase in selling prices, as well as a significant
increase in the sale of spares. This more than offset an 8.8%
decrease in the number of rifles sold that resulted primarily
from a two-week lock-out of the UAW in April 2004. The lock-out
resulted in approximately 3,000 rifles not being produced. There
were also production shortfalls later in the year due to
machinery problems in the upper receiver line. The following
table shows net sales for 2004 and 2003 by product categories
(in thousands):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="77%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    U.S.&nbsp;government rifles</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>31,011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>30,437</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Direct foreign rifles</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,756</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,738</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    U.S. law enforcement rifles</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,700</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Spares and contract management</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,964</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,525</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,014</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,282</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>75,135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>66,682</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Cost of Sales/ Gross Profit</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cost of sales for 2004 was $50.4&nbsp;million, an increase of
$5.2&nbsp;million, or 11.5%, from cost of sales of
$45.2&nbsp;million for 2003. Gross profit for 2004 was
$24.8&nbsp;million, an increase of $3.2&nbsp;million, or 15%,
from gross profit of $21.5&nbsp;million for 2003. As a
percentage of net sales, gross profit for 2004 increased to 33%
from 32.3% for 2003. This improvement was due to the increased
sales of spare parts, on which we earn a
</DIV>

<P align="center" style="font-size: 10pt;">44

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<P><HR noshade><P>
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<DIV align="left" style="font-size: 10pt;">
higher margin. Direct material costs were 28.1% of net sales in
2004 as compared to 27% in 2003. Direct labor costs were 17% of
net sales in 2004 as compared to 17.6% in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Selling Expenses and Commissions</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Selling expenses and commissions for 2004 were
$6.0&nbsp;million, an increase of $1.2&nbsp;million, from
selling expenses and commissions of $4.8&nbsp;million for 2003.
This increase was attributable to an increase in direct foreign
sales, which often result in us paying commissions to our agents
in certain foreign countries. These foreign sales usually yield
higher gross profit percentages, which offset the higher costs
of commissions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>General and Administrative Expenses</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
General and administrative expenses for 2004 were
$5.6&nbsp;million, an increase of $1.3&nbsp;million, or 29.3%,
from general and administrative expenses of $4.3&nbsp;million
for 2003. This increase was attributable to discontinuation of
the common services agreement with Colt&#146;s Manufacturing. As
a percentage of net sales, general and administrative expenses
increased to 7.4% for 2004 from 6.5% for 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Litigation Costs</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We incurred legal costs related to our lawsuits against
Bushmaster and Heckler&nbsp;&#38; Koch in 2004 of
$0.9&nbsp;million. There was no comparable litigation expense
for 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Noncash Employee Compensation</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For 2003, we recorded $0.6&nbsp;million charged for noncash
employee equity compensation. This resulted from the exercise of
options in exchange for nonrecourse notes. The notes were
considered new option grants requiring a new measurement date.
Because the interest rate on the notes is fixed, the new option
grant is a fixed award and no additional compensation expense
will be recognized in connection with this award in the future.
There was no corresponding charge in 2004. See &#147;Certain
Relationships and Related Party Transactions&nbsp;&#151;
Transaction with Affiliates Involving Securities.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Operating Income</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the reasons discussed above, operating income for 2004 was
$12.3&nbsp;million, an increase of $0.5&nbsp;million, or 4.1%
from operating income of $11.8&nbsp;million for 2003. As a
percentage of net sales, operating income decreased to 16.3% for
2004 as compared to 17.7% for 2003. The reduction is due to the
increase in research and development costs and the litigation
expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Other Expense (Income)</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Interest expense was $3.7&nbsp;million for 2004, an increase of
$2.2&nbsp;million, from interest expense of $1.6&nbsp;million
for 2003. This increase was due to our increased indebtedness in
December 2003. See &#147;&#151;&nbsp;Liquidity&nbsp;&#151;
Credit Facilities.&#148; Interest expense related to the term
loan portion of our previous credit facility was
$2.8&nbsp;million for 2004. Amortization of deferred financing
cost was $0.5&nbsp;million for 2004 compared to
$0.1&nbsp;million for 2003. Our average borrowings during 2004
were $2.4&nbsp;million and interest expense on the revolving
credit portion of our previous credit facility was
$0.2&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We incurred a $1.2&nbsp;million one-time reorganization cost in
2003 resulting from the separation of our business from
Colt&#146;s Manufacturing. There is no comparable charge for
2004 and we do not expect any future costs related to this
reorganization.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We recorded a charge of $2.6&nbsp;million in 2003 in settlement
of litigation with a foreign sales agent. In 2004, we prepaid
this settlement and received a discount of $0.8&nbsp;million
recorded as a prepayment discount.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Royalty income was $0.8&nbsp;million in 2004, an increase of
$0.4&nbsp;million, from royalty income of $0.4&nbsp;million for
2003. This royalty was received from Colt Canada and will be
eliminated in future years as we consolidate Colt Canada after
May&nbsp;20, 2005.
</DIV>

<P align="center" style="font-size: 10pt;">45

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In January 2004, we paid $2.0&nbsp;million to Colt&#146;s
Manufacturing in connection with a 20-year paid-up license from
New Colt for use of the Colt trademarks and trade names. In
2004, we amortized $0.1&nbsp;million of expense related to this
paid-up license. Prior to entering into this agreement, we
recorded a royalty expense of $3.6&nbsp;million for 2003 with
respect to the payments to Colt&#146;s Manufacturing for use of
the Colt trademarks and trade names.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Income Before Income Taxes</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Income before income taxes for 2004 was $10.1&nbsp;million, an
increase of $6.8&nbsp;million, from income before income taxes
of $3.3&nbsp;million for 2003. The increase was attributable to
the increase in operating income discussed above, and the
one-time charges included in other expense (income) for 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Income Tax Expense</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For both 2004 and 2003, we were not subject to federal or most
state income taxes. See &#147;&#151;&nbsp;Overview&nbsp;&#151;
Income Tax Expense.&#148; For 2004, income tax expense was
$0.074&nbsp;million compared to $0.038&nbsp;million for 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Net Income</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the reasons discussed above, net income for 2004 was
$10.0&nbsp;million, an increase of $6.8&nbsp;million, from net
income of $3.2&nbsp;million for 2003.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Year ended December&nbsp;31, 2003 compared to year ended
    December&nbsp;31, 2002</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Net Sales</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net sales for 2003 were $66.7&nbsp;million, an increase of
$13.4&nbsp;million, or 25%, from net sales of $53.3&nbsp;million
for 2002. This increase was attributable to a 7.9% increase in
the number of rifles sold and a 19.6% increase in selling
prices, principally due to new U.S.&nbsp;government contracts,
and price increases for rifles sold to law enforcement agencies
and directly to international customers. The following table
shows net sales for 2003 and 2002 by product categories (in
thousands):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="77%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    U.S.&nbsp;government rifles</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>30,437</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,809</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Direct foreign rifles</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,738</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,271</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    U.S. law enforcement rifles</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,655</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Spares and contract management</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,525</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,637</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,282</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,957</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>66,682</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>53,329</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Cost of Sales/ Gross Profit</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cost of sales for 2003 was $45.2&nbsp;million, an increase of
$5.4&nbsp;million, or 13.6%, from cost of sales of
$39.8&nbsp;million for 2002. Gross profit for 2003 was
$21.5&nbsp;million, an increase of $8.0&nbsp;million, or 58.7%,
from gross profit of $13.6&nbsp;million for 2002. As a
percentage of net sales, gross profit for 2003 was 32.3%
compared to 25.4% for 2002. This improvement was due to a
substantial increase in the pricing of M4 carbine. Direct
material costs were 27% of net sales in 2003 as compared to
29.8% in 2002. Direct labor costs were 17.6% of net sales in
2003 as compared to 22.1% in 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Selling Expenses and Commissions</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Selling expenses and commissions for 2003 were
$4.8&nbsp;million, an increase of $1.1&nbsp;million, or 29.1%,
from selling expenses and commissions of $3.7&nbsp;million for
2002. This increase was attributable to increased
</DIV>

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<DIV align="left" style="font-size: 10pt;">
commissions on direct foreign sales in 2003, and increased
spending on sales and marketing efforts, such as shows, travel
and customers&#146; training.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>General and Administrative Expenses</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
General and administrative expenses for 2003 were
$4.3&nbsp;million, an increase of $1.0&nbsp;million, or 30.7%,
from general and administrative expenses of $3.3&nbsp;million
for 2002. This increase was attributable to increased spending
in accounting personnel, office services, human resources, and
outside legal services. As a percentage of net sales, general
and administrative expenses were 6.5% for 2003 and 6.2% for 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Noncash Employee Compensation</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For 2003, we recorded $0.6&nbsp;million charged for noncash
employee equity compensation. This resulted from the exercise of
options in exchange for nonrecourse notes. The notes were
considered new option grants requiring a new measurement date.
Because the interest rate on the notes is fixed, the new option
grant is a fixed award and no additional compensation expense
will be recognized in connection with this award in the future.
There was no corresponding charge in 2002. See &#147;Certain
Relationships and Related Party Transactions&nbsp;&#151;
Transaction with Affiliates Involving Securities.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Operating Income</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the reasons discussed above, operating income for 2003 was
$11.8&nbsp;million, an increase of $5.3&nbsp;million, or 80.5%
from operating income of $6.5&nbsp;million for 2002. As a
percentage of net sales, operating income increased to 17.7% in
2003 as compared to 12.2% for 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Other Expense (Income)</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Interest expense was $1.6&nbsp;million for 2003, an increase of
$0.1&nbsp;million from interest expense of $1.4&nbsp;million for
2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We incurred a $1.2&nbsp;million and $0.3&nbsp;million one-time
reorganization costs in 2003 and 2002, respectively, resulting
from the separation of our business from Colt&#146;s
Manufacturing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We recorded a charge of $2.6&nbsp;million in 2003 in settlement
of litigation with a foreign sales agent. There was no
comparable charge in 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Royalty income was $0.4&nbsp;million in each of 2003 and 2002.
This royalty was received from Colt Canada.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We recorded a royalty expense of $3.6&nbsp;million for 2003,
compared to $0.6&nbsp;million for 2002, with respect to the
payments to Colt&#146;s Manufacturing for use of the Colt
trademarks and trade names. The expense for 2002 was for the
two-month period from November&nbsp;4, 2002 to December&nbsp;31,
2002 when Colt Defense LLC was organized.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Income Before Income Taxes</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Income before income taxes for 2003 was $3.3&nbsp;million, a
decrease of $1.9&nbsp;million, from income before income taxes
of $5.2&nbsp;million for 2002. The decrease was attributable to
the one-time charges included in other expense (income) for 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Income Tax Expense</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
From November&nbsp;2, 2002, we were not subject to federal or
most state income taxes. See
&#147;&#151;&nbsp;Overview&nbsp;&#151; Income Tax Expense.&#148;
For 2003 income tax expense was $0.038&nbsp;million compared to
an income tax benefit of $0.222&nbsp;million for 2002, which
resulted from refunds of prior year taxes.
</DIV>

<P align="center" style="font-size: 10pt;">47

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Net Income</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the reasons discussed above, net income for 2003 was
$3.2&nbsp;million, a decrease of $2.2&nbsp;million, or 39.9%,
from net income of $5.4&nbsp;million for 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Liquidity And Capital Resources</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Historically, our primary liquidity requirements have been for
debt service and working capital requirements. We have funded
these requirements primarily through internally generated
operating cash flow and funds borrowed. Our principal working
capital need is for funding accounts receivable. The timing of
foreign sales and collections can impact our working capital
requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We intend to, and expect over the next twelve months to be able
to, fund our working capital, replacement capital expenditures
and debt service requirements through cash flow from operations.
Over the longer term, our ability to generate sufficient cash
flow from operations will depend on our future financial
performance, which will be affected by a range of economic,
competitive and business factors, many of which are outside of
our control.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Cash Flow</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash provided by operating activities for the first quarter
of 2005 was $10.5&nbsp;million, compared to net cash used in
operating activities for the first quarter of 2004 of
$5.5&nbsp;million. First quarter 2005 cash flow was primarily
impacted by the collection of a large foreign accounts
receivable in February 2005. First quarter 2004 cash flow was
primarily impacted by the payment of the $2.0&nbsp;million
license fee to Colt&#146;s Manufacturing and the slow collection
of accounts receivable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash used in operating activities for 2004 was
$6.6&nbsp;million, compared to net cash provided by operating
activities for 2003 and 2002 of $6.7&nbsp;million and
$2.5&nbsp;million, respectively. The change from year to year is
primarily the result of the timing of our cash collections from
customers. Accounts receivable of $12.4&nbsp;million were
recorded in December 2004 in respect of shipments to a foreign
customer, but were not collected in 2004. In February 2005, the
accounts receivable were collected. As noted above, the
$2.0&nbsp;million license fee to Colt&#146;s Manufacturing also
negatively impacted cash flow for 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash used in investing activities was $0.5&nbsp;million for
the first quarter of 2005, compared to $0.035&nbsp;million for
the first quarter of 2004, and was $0.4&nbsp;million,
$0.2&nbsp;million and $0.1&nbsp;million for 2004, 2003, and
2002, respectively. Net cash used in investment activities for
the first quarter of 2005 was primarily impacted by our
$0.3&nbsp;million deposit made in respect of our West Hartford,
Connecticut facility. In February 2005, we signed an agreement
to acquire this facility, which we use for both manufacturing
and our corporate offices. The purchase price is
$7.0&nbsp;million, but is subject to a reduction of up to
$0.6&nbsp;million based upon environmental conditions. We have
had relatively low capital investment requirements historically.
We estimate that we will need approximately $2.0&nbsp;million
for replacement capital expenditures through the end of 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash used in financing activities was $8.6&nbsp;million for
the first quarter of 2005, compared to $17.7&nbsp;million for
the first quarter of 2004. Net cash used in financing activities
was $17.0&nbsp;million for 2004. In 2003, there was net cash
provided by financing activities of $17.6&nbsp;million. For
2002, net cash used in financing activities was
$2.5&nbsp;million. Cash used in financing activities for 2005
was impacted by the payment in full of our revolving line of
credit ($6.5&nbsp;million) and distributions of
$2.1&nbsp;million to our members for taxes. Cash used in
financing activities for 2004 include the repayment of
$9.4&nbsp;million of subordinated indebtedness, and
distributions of $12.3&nbsp;million to members.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cash provided by financing activities for 2003 was
$17.6&nbsp;million resulting from term loan borrowings of
$25.0&nbsp;million and subordinated borrowings of
$1.2&nbsp;million offset by debt repayments of
$3.2&nbsp;million, payment of debt issuance costs of
$1.4&nbsp;million, and distributions to Colt&#146;s
Manufacturing of $3.9&nbsp;million.
</DIV>

<P align="center" style="font-size: 10pt;">48

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<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Credit Facilities</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On December&nbsp;23, 2003, Colt Defense LLC entered into a
$33.5&nbsp;million financing agreement, consisting of a
$25.0&nbsp;million term loan and a revolving credit facility.
Proceeds of this indebtedness were used (1)&nbsp;in December
2003 to make $3.9&nbsp;million of distributions to Colt&#146;s
Manufacturing, (2)&nbsp;in January 2004 to repay
$9.4&nbsp;million of certain subordinated indebtedness,
(3)&nbsp;to make $11.4&nbsp;million of distributions to Colt
Defense LLC&#146;s members and (4)&nbsp;to pay a
$2.0&nbsp;million license fee to Colt&#146;s Manufacturing for
Colt trademarks and trade names. At December&nbsp;31, 2004 and
April&nbsp;3, 2005, we were in compliance with all covenants
contained in this credit agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In May 2005, we entered into a new $65.0&nbsp;million senior
secured credit facility comprised of:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    $10.0&nbsp;million three-year revolving credit facility, which
    includes a $2.0&nbsp;million sublimit for the issuance of
    standby letters of credit;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    $25.0&nbsp;million three-year term loan&nbsp;A facility;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    $14.0&nbsp;million three-year term loan&nbsp;B facility;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    $16.0&nbsp;million three-year term loan&nbsp;C facility, which
    is available to our Canadian subsidiary and is denominated in
    Canadian dollars.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We used $60.3&nbsp;million of proceeds of the senior secured
credit facility to repay existing indebtedness and terminated
the 2003 credit facility, to finance the acquisition of Colt
Canada, to pay distributions of $16.1&nbsp;million to our
members and for working capital and capital expenditures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The revolving credit facility will terminate in May 2008. The
term&nbsp;A facility will be subject to quarterly amortization
of principal of $1.25&nbsp;million commencing June&nbsp;30, 2006
with the remaining principal due in May 2008. The term&nbsp;B
facility will be subject to quarterly amortization commencing
June&nbsp;30, 2006 of $0.625&nbsp;million with the remaining
principal due in May 2008. The term&nbsp;C facility will be
subject to quarterly amortization of $0.625&nbsp;million
commencing June&nbsp;30, 2006 with the remaining principal due
in May 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to the amortization described above, prepayments are
required in the event of sales and other dispositions of our
property and assets (excluding sales of inventory in the
ordinary course of business), from the issuance of additional
debt, from the issuance of equity and unless our ratio of funded
indebtedness is less than 2.25% we are required each year to
prepay our term loans in an amount equal to 75% of &#147;Excess
Cash Flow,&#148; as defined in the senior secured credit
facility. We are required to use $30.0&nbsp;million of the net
proceeds from this offering to prepay the term loans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We may prepay the senior secured credit facility in whole or in
part at any time without penalty, subject to reimbursement of
the lenders&#146; breakage and redeployment costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are subject to financial covenants requiring the maintenance
of:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    minimum EBITDA (as defined in our senior secured credit
    facility) of $7.5&nbsp;million in total for two consecutive
    quarters;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a maximum leverage ratio (total funded debt/ EBITDA) of
    (a)&nbsp;3.25x through September&nbsp;30, 2005, (b)&nbsp;3.1x at
    December&nbsp;31, 2005, (c)&nbsp;3.00x through
    September&nbsp;30, 2006, (d)&nbsp;2.50x through
    September&nbsp;30, 2007 and (e)&nbsp;2.25x therafter;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a minimum fixed charge coverage ratio (EBITDA less capital
    expenditures less cash taxes)/(cash interest expense plus
    scheduled principal repayments) of (a)&nbsp;2.0:1.0 through
    March&nbsp;31, 2006, (b)&nbsp;1.10:1.0 through June&nbsp;30,
    2007 and (c)&nbsp;1.25:1.0 thereafter<I>.</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Loans under the revolving credit facility and the term loan
facilities bear interest based on an agreed-upon margin plus
either LIBOR, prime or the Federal Funds rate plus 0.50%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We will write off the deferred financing costs
($0.97&nbsp;million at April&nbsp;3, 2005) related to our
existing credit facility in the second quarter of 2005.
</DIV>

<P align="center" style="font-size: 10pt;">49
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<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Pension Plans and Postretirement Health Care</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our pensions plans were underfunded (the benefit obligation
exceeds the plan assets) by $3.2&nbsp;million at
December&nbsp;31, 2004. In 2004, we made pension contributions
of $1.9&nbsp;million as compared to recorded pension expense of
$0.9&nbsp;million. We expect to make contributions of
$1.7&nbsp;million in 2005 as compared to projected recorded
pension expense of $1.0&nbsp;million. We expect our pension
contributions for 2006 and 2007 will also exceed recorded
pension expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our accumulated benefit obligations for postretirement health
care benefits were $9.0&nbsp;million at December&nbsp;31, 2004.
In 2004, we recorded $0.2&nbsp;million of expense. We paid
$0.4&nbsp;million in 2004 for postretirement health care costs
and expect to pay approximately $0.5&nbsp;million in 2005. In
future years, we expect that amounts paid for postretirement
health care benefits to exceed the expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In May 2004, we signed a new three-year agreement with the UAW,
which represents 74% of our U.S.&nbsp;workforce. A key feature
of this agreement is the capping of the cost of health care
insurance premiums, which reduced our projected benefit
obligation by $5.8&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Off-Balance Sheet Items and Aggregate Contractual
Obligations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our only off-balance sheet items relate to operating leases with
total minimum lease payments of $1.2&nbsp;million over the next
three years. None of our operating leases have any contingent
rents associated and there are no escalation clauses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table provides information (in thousands) as of
December&nbsp;31, 2004 regarding our operating leases and
contractual obligations.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="47%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2006/7</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2008/9</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Thereafter</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt, including interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>30,875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>27,937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital lease obligations, including interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,191</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>544</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>647</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payments from pension
    trust<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,433</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>473</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,541</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,225</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Postretirement healthcare payments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,197</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>468</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,098</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,234</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,397</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchase
    obligations<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
(1)&nbsp;&nbsp;&nbsp;&nbsp;Our pension plan is underfunded at
December&nbsp;31, 2004. See &#147;&#151;&nbsp;Pension Plans and
Postretirement Health Care.&#148;
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(2)</TD>
    <TD align="left">
    We generally do not make unconditional, noncancellable purchase
    commitments. We enter into purchase orders that have duration of
    less than one year in the normal course of business. As of
    April&nbsp;1, 2005, except with respect to Carlton Chen (See
    &#147;Management&nbsp;&#151; Employment Agreements&#148;), there
    were no contractual obligations associated with any employment
    agreements.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Critical Accounting Policies</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our discussion and analysis of our financial condition and
results of operations is based on our audited financial
statements, which have been prepared in conformity with
U.S.&nbsp;GAAP. Note&nbsp;1 to our audited financial statements
contains a summary of our significant accounting policies, many
of which require the use of estimates and assumptions. We
believe that of our significant accounting policies, the
following are noteworthy because they are based on estimates and
assumptions that require complex, subjective judgments by
management, which can materially impact reported results.
Changes in these estimates or assumptions could materially
impact our financial condition and results of operations. Our
most critical accounting policy is the valuation of pension and
postretirement health care liabilities and the related expense,
which requires a significant judgment in determination of:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    The discount rate used to calculate the benefit obligation for
    pensions and post retirement health care liabilities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    The assumed inflation rate for health care costs;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    The expected return on pension plan assets.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">50

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have defined benefit pension plans covering substantially all
of our employees. Our funding policy is to make the minimum
annual contribution required by the Employee Retirement Income
Security Act of 1974. Plan obligations and annual pension
expense are determined by independent actuaries using a number
of assumptions provided by us including assumptions about
employee demographics, retirement age, compensation levels, pay
rates, turnover, mortality, expected long-term rate of return on
plan assets, discount rate, and the amount and timing of claims.
Each plan assumption reflects our best estimate of the
plan&#146;s future experience. The most sensitive assumption in
the determination of plan obligations for pensions (and
postretirement benefits&nbsp;&#151; see below) is the discount
rate. The actuarially determined present value of benefits
attributed by the pension benefit formula for employee service
to date based on current and past compensation levels is called
the accumulated benefit obligation. Our accumulated benefit
obligation at December&nbsp;31, 2004 was $13.2&nbsp;million. The
projected benefit obligation includes an assumption for future
compensation levels and was $13.4&nbsp;million and
$11.9&nbsp;million at December&nbsp;31, 2004 and 2003,
respectively. Our pension plans are underfunded, as the fair
value of plan assets was $10.2&nbsp;million and
$8.0&nbsp;million at December&nbsp;31, 2004 and 2003,
respectively. The excess of the projected benefit obligation
over plan assets is $3.2&nbsp;million. Since our accumulated
benefit obligation exceeds the fair value of plan assets, we are
required to increase our pension liability to the full amount of
the difference between the accumulated benefit obligation and
the plans assets. Accordingly, our pension liability recorded
under U.S.&nbsp;GAAP is $3.1&nbsp;million. As required we have
increased the liability to $3.1&nbsp;million by recording an
intangible asset of $0.855&nbsp;million for our unrecognized
prior service cost and $3.1&nbsp;million is recorded as a charge
against accumulated other comprehensive income. The intangible
asset and the charge in accumulated other comprehensive income
will be reduced over time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We provide postretirement health care benefits to our union
employees. The benefit obligation for postretirement health
costs was $9.0&nbsp;million and $11.9&nbsp;million at
December&nbsp;31, 2004 and 2003, respectively. The
postretirement health plan is unfunded. Plan obligations and
annual postretirement health care expense are determined by
independent actuaries using a number of assumptions provided by
us including information about employee demographics, retirement
age, future health care costs, turnover, mortality, discount
rate, amount and timing of claims, and a health care inflation
trend rate. The most sensitive assumptions in the determination
of the plan obligations and expense are the discount rate and
the assumed inflation health care trend rate. For measurement
purposes, we have assumed a 7% annual rate of increase in cost
per capita of claims. Beginning in 2005, the inflation trend
rate is assumed to decrease each year by 1% to a rate of 5% in
2007 and remain at that level thereafter. Although the plan
obligations are $9.0&nbsp;million, our liability recorded under
U.S.&nbsp;GAAP is $12.3&nbsp;million, as U.S.&nbsp;GAAP requires
that we smooth into the income statement the effect of the
reduction in the plan obligations resulting from our agreement
with our union in connection with the renewal of our collective
bargaining agreement in 2004 to cap the monthly cost of
providing retiree health care benefits at $209.95&nbsp;per
employee. For the year ended December&nbsp;31, 2004, the cost
per month was $175.08&nbsp;per employee. The impact of this
change in benefits was an increase in negative prior service
cost of $5.8&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The discount rate also affects the measurement of expense for
pension and postretirement health care expense since a key
element of such expense is interest on the benefit obligation.
The benefit obligations for both the pension plans and the post
retirement health plans were determined using a discount rate of
6% and 6.25% at December&nbsp;31, 2004 and 2003, respectively.
We are using a discount rate of 6% to calculate the 2005
expense. Any change in the discount rate assumption would result
in a change to the benefit obligation. An increase in the
discount rate reduces the measurement of benefit obligations.
The estimated long-term return on plan assets is another
critical assumption in the computation of pension expense. The
estimated return on plan assets was 9% at December&nbsp;31, 2004
and 2003. Our expected return on plan assets for 2004 and 2003
was $0.8&nbsp;million and $0.6&nbsp;million as compared to
actual return of $0.6&nbsp;million and $0.6&nbsp;million. Our
expected rate of return for plan assets for 2005 is 8%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Other areas requiring the significant use of judgments and
estimates include, but are not limited to:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Accounts receivable valuation (allowance for doubtful
accounts) and revenue recognition.</I> Extension of credit is
based on an evaluation of each customer&#146;s financial
condition and, generally, collateral is not required. We
regularly monitor credit risk exposure related to our customers
other than the U.S.&nbsp;government
</DIV>

<P align="center" style="font-size: 10pt;">51

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<DIV align="left" style="font-size: 10pt;">
and take steps to mitigate the likelihood of such exposure
resulting in a loss. Our collection experience has been very
good historically. We maintained an allowance for doubtful of
$0.023&nbsp;million, $0.033&nbsp;million and $0.036&nbsp;million
at April&nbsp;3, 2005, December&nbsp;31, 2004 and 2003,
respectively. At least quarterly we perform detailed reviews of
our receivables to determine if impairment has occurred and to
assess the adequacy of the allowance for credit losses, based on
historical and anticipated trends and other factors affecting
credit quality. Credit losses are provided for in the financial
statements, primarily on a specific identification basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Allowance for obsolete inventories.</I> Historically, our
inventories have not been highly susceptible to obsolescence. At
April&nbsp;3, 2005, December&nbsp;31, 2004 and 2003, we had an
allowance for obsolete parts inventories of $1.1&nbsp;million,
$1.1&nbsp;million and $1.1&nbsp;million, respectively. We
determined the allowance based on our evaluation of our parts
inventories as compared to sales of specific products within the
last twelve months, our existing backlog of orders and our
knowledge of business trends for our products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Goodwill and intangible assets valuation (possible
impairment).</I> At December&nbsp;31, 2004, we had goodwill of
$4.2&nbsp;million and intellectual property (intangible assets)
deemed to have indefinite lives of $3.0&nbsp;million, which are
not amortized, but rather are tested for impairments annually at
December&nbsp;31, or immediately if conditions indicate that
such impairment could exist. The test for impairment is based on
an estimate of our fair value and therefore requires an estimate
of future cash flows and evaluation of an appropriate
capitalization rate based on the price earnings ratios of
similar companies that are public and transactions involving
public and nonpublic companies that are similar and prevailing
conditions in the equity and debt markets. Our acquisition of
Colt Canada will add goodwill and intangible assets to our
balance sheet. The Colt Canada intangible assets include
definite lived intangibles that will be amortized over ten
years. The Colt Canada intangible assets will be evaluated for
impairment whenever events or changes in circumstances indicate
that the carrying value of the intangible assets may not be
recoverable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Amortization expense for intangible assets (determination of
the useful life or designation of indefinite life for
intellectual property and other intangible assets).</I> We have
$3.0&nbsp;million of intangible assets for intellectual
property. These assets are deemed to have an indefinite life
and, accordingly, no amortization expense is computed. We
re-assess annually whether such assets continue to have
indefinite lives. If we were to determine that all or a portion
of these assets did have a remaining definite life we would
amortize the definite life asset over its estimated remaining
useful life, which could have a significant impact on our
reported results of operations. In January 2004, we paid
Colt&#146;s Manufacturing $2.0&nbsp;million for a 20-year
paid-up license for certain Colt trademarks. For our intangible
assets related to Colt Canada, we re-assess the estimated
remaining useful lives annually. A change in the remaining
useful lives of the intangible assets could have a significant
impact on our reported results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Stock-based compensation.</I> Compensation expense for
employee stock compensation historically has been measured using
the intrinsic value-based method of accounting prescribed by
Accounting Principles Board Opinion No.&nbsp;25,
&#147;Accounting for Stock Issued to Employees.&#148; Under the
intrinsic value method if stock options are granted at an
exercise price that is equal to the market value of common stock
at the date of grant, there is no compensation expense for the
grant, vesting or exercise of stock options. We issued 23,074
stock options upon its formation in June 2003 to replace options
our employees were holding to purchase common stock in our
predecessor. The exercise price of $91.00&nbsp;per unit was the
estimated fair value of the underlying common stock at the
original grant date. In December 2004, we issued 300 stock
options to a Director and in the second quarter of 2005, we
issued 5,010 stock options to three employees and Directors with
an exercise price of $91.00&nbsp;per unit. We believe the
exercise price is less than the fair value of our common stock
at the date of issuance and, accordingly, we plan to record
expense of $2.0&nbsp;million over three years commencing
April&nbsp;1, 2005, which will be accelerated as a result of
this offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Commencing January&nbsp;1, 2006, the Company will be required to
adopt the fair value recognition provisions of Statement of
Financial Accounting Standards (SFAS)&nbsp;No.&nbsp;123R,
&#147;Stock-Based Payment&#148; with the fair value of stock
options measured at the date of grant. We will implement
SFAS&nbsp;123R prospectively. We plan to primarily use
restricted stock rather than stock options in future years and,
accordingly, do not expect SFAS&nbsp;123R to have a significant
impact. If we do issue stock options, we would compute fair
value based on the Black-Scholes option-pricing model. The
primary assumptions required in valuing stock options
</DIV>

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<DIV align="left" style="font-size: 10pt;">
under SFAS&nbsp;No.&nbsp;123R is the volatility of common stock
values, the risk free rate of return, expected dividend yield
and expected life of stock options. The most significant
assumption is volatility. As a private company or a newly public
company, we would be required to estimate volatility by
identifying similar companies that are public and using their
reported volatilities as a proxy. The selection of companies to
use as a proxy is subjective and the results can vary
significantly depending upon the companies selected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Inflation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We experience inflation in labor rates based on our union
agreement and we have experienced material price increases in
the past three years. Our U.S.&nbsp;government contracts provide
for a 4% inflation factor, which has been adequate in the past
three years. There can be no assurance that the inflation factor
in our contracts with the U.S.&nbsp;government will continue to
cover our labor and material cost increases in the future and
there can be no assurance that the prices we quote for foreign
sales and law enforcement sales will be adequate to cover future
cost increases. Our union agreement provides for labor rate
increases of 2.5% in April&nbsp;2005 and 3% in April 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Recently Issued Accounting Standards</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We will adopt Statement of Financial Accounting Standards
No.&nbsp;123 Revised, &#147;Share-Based Payment&#148;
(&#147;SFAS&nbsp;123R&#148;) on January&nbsp;1, 2006. We have
the option of adopting the new standard prospectively or using a
modified retroactive approach. We plan to implement
SFAS&nbsp;123R prospectively. We currently apply APB Opinion
No.&nbsp;25, &#147;Accounting for Stock Issued to
Employees,&#148; and related interpretations in accounting for
our plans and do not recognize compensation expense for our
employee stock option grants unless the exercise price is less
than the estimated fair value of the underlying common stock at
the grant date. We granted options in the second quarter of 2005
and will have a noncash charge for stock compensation in future
periods, which will be accelerated as a result of this offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Market Risk</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our new senior secured credit facility has floating rate
long-term debt. During 2004 and 2003, our average borrowing
outstanding on our previous credit facility revolver were
$2.4&nbsp;million and $4.4&nbsp;million, respectively. We try to
minimize our exposure to changes in interest rates by focusing
on billing and collecting receivables to pay down debt. Since we
plan to use the net proceeds from this offering by us to repay
our debt, this market risk is expected to be significantly
mitigated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our investment in Colt Canada (acquired in May 2005) of
approximately U.S.&nbsp;$16.0&nbsp;million was primarily paid
with the proceeds from Term Loan&nbsp;C under our new senior
secured credit facility, which is denominated in Canadian
dollars. Accordingly, we do not have significant foreign
currency risk on this investment.
</DIV>

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<A name='113'></A>
</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>BUSINESS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Overview</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are a leading designer, developer and manufacturer of small
arms and weapon systems for the U.S.&nbsp;military, its allies
and federal, state and local law enforcement agencies. Our
products include military rifles, such as the M4 carbine and its
predecessor, the M16 rifle, auxiliary weapon systems, such as
the M203 grenade launcher, and rifles for law enforcement
agencies around the world. We also refurbish, recondition and
repair these weapons, and produce spare parts and component kits
such as barrels, springs, screws, handguards, upper receivers
and buttstocks. In addition, we provide centralized procurement
and training services. We have produced for, and sold to (or
have orders for), the U.S. and allied militaries approximately
seven million M16 and 340,000 M4 weapons. In 2004, we had net
sales of $75.1&nbsp;million, EBITDA of $14.3&nbsp;million, and
net income of $10.0&nbsp;million. Approximately 54% of our 2004
sales were to the U.S.&nbsp;government. As of April&nbsp;3,
2005, we had a funded backlog of approximately $59&nbsp;million,
$44&nbsp;million of which is expected to be delivered by
December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We and our predecessors have been supplying small arms to the
U.S.&nbsp;military since 1847. Since the spin-off and
distribution of Colt Defense LLC from its prior parent,
Colt&#146;s Manufacturing, in 2002, Colt Defense has sold and
marketed exclusively to the U.S. and allied militaries and law
enforcement agencies. Our products enjoy outstanding brand name
recognition and have proven themselves under the most severe
battle conditions&nbsp;&#151; from the jungles of Vietnam to the
deserts of the Middle East and the mountains of Afghanistan. Our
expertise in the design and manufacture of individual weapon
systems enables us to integrate new technologies and features
into a large installed base, introduce additional related
products and services at the point of sale, and retain our
market leadership as we invest in new technologies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Industry Overview</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The funding for our small arms is primarily linked to trends in
U.S. and international military, national security and law
enforcement spending. We believe domestic and international
defense spending will continue to grow over the next several
years with an increased emphasis on national security and the
&#147;War on Terror&#148; by the U.S.&nbsp;government and its
allies. While historically our revenues have been derived from
sales to the Department of Defense, allied governments and state
and local law enforcement agencies, the creation of the
Department of Homeland Security has centralized the
U.S.&nbsp;weapons procurement process for certain agencies of
the U.S.&nbsp;government that had previously procured their
weapons directly from us. Excluding supplemental appropriations
(which provide funds in addition to the regular appropriations
level and often arise when an emergency requires immediate
funding), the 2005 defense budget was $401.7&nbsp;billion, a 7%
increase over the 2004 budget of $375.3&nbsp;billion. According
to the President&#146;s 2006 Department of Defense budget
request, the defense budget is expected to grow at a compound
annual growth rate of 4.7% through 2009. Additionally, the
U.S.&nbsp;defense budget has been augmented by wartime
supplemental appropriations since September&nbsp;11, 2001. There
were supplemental appropriations in the amounts of
$15.9&nbsp;billion in 2002, $78.5&nbsp;billion in 2003,
$87.0&nbsp;billion in 2004 and $80.9&nbsp;billion in 2005. We
believe the following developments and trends will drive growth
in the U.S.&nbsp;defense budget and, in particular, small arms
weapon systems:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
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<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    The Department of Defense is in the midst of transforming the
    military into a more mobile, agile and lethal force capable of
    being deployed with minimal lead-time in connection with its
    modularity program. Today, U.S.&nbsp;soldiers could face
    anything from trained, well-equipped regular forces to guerilla
    insurgents. To accomplish this transformation, the Department of
    Defense is focusing on providing individual soldiers with
    lighter, integrated weapon systems with greater accuracy and
    firepower.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    The U.S.&nbsp;military is currently focused on upgrading its
    equipment, particularly small arms for the soldier. The 2005
    supplemental appropriation request included $55.4&nbsp;million
    for M4 carbines to support the Army&#146;s modularity
    requirements.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    In addition to the current small weapons program, the United
    States is continuing to fund an initiative to develop more
    advanced light armaments. Other manufacturers developed small
    arms weapon</TD>
</TR>

</TABLE>

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    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
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    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    systems, such as the XM29 and the XM8, in response to this
    funding initiative. Funding continued on the XM8 for prototype
    development and testing into 2004. However, in the 2005 Defense
    Department budget, all funding for the XM8 production was
    removed. In May 2005, the U.S.&nbsp;Army issued a RFP for the
    OICW. This RFP invites defense contractors to submit a technical
    and financial document package with sample weapons for the
    purpose of evaluating the next generation of modern modular
    weapon systems. The program requires one family of weapons that
    consists of the following four variants: standard carbine,
    special compact version, designated marksman version, or rifle,
    and light machine gun. We have already started the requisite
    work to complete and submit our response to the RFP, which is
    due on November&nbsp;7, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Military operations on urbanized terrain, or MOUT, is becoming a
    significant focus of the U.S.&nbsp;military. The accelerated
    growth of city populations have made the problems of combat in
    built-up areas an urgent requirement for the U.S.&nbsp;military.
    MOUT places an emphasis on small arms that are lightweight,
    compact and reliable, such as the M4 carbine.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Internationally, the increased cooperative effort to combat
terrorism and domestic unrest has caused governments and
militaries to enhance and modernize their military and law
enforcement capabilities dramatically. With the proliferation of
regional conflicts that have the potential to escalate,
international governments have realized the importance of
maintaining a ready and mobile military force with lightweight
weapons, which can deploy and maneuver quickly. In light of the
importance of equipping a military force with modern and
lightweight small arms, we expect these numbers to increase.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As more countries join NATO, such as the former Soviet Bloc and
Warsaw Pact countries, we believe they will need to convert
their weapons to meet the NATO standard caliber requirement.
Accordingly, we expect to see an increase in demand for the M4
carbine as more countries join NATO and as current NATO
participants seek to upgrade their older weapons.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Given the increased threat of terrorism and the need for
enhanced security, the Department of Homeland Security budget
has increased by 8.2% from 2004 to $35.5&nbsp;billion for 2005
and is budgeted to increase to $41.1&nbsp;billion in 2006. The
Government Electronics&nbsp;&#38; Information Technology
Association projects that the budget will grow by a compound
annual growth rate of 3.5% from 2005 to 2010. We believe state
and local law enforcement budgets will continue to increase as
well.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Business Strengths</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that we have a strong competitive position
attributable to a number of factors, including:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Global Brand Name with Leading Market Share.</I> Colt is a
widely recognized global brand name associated with quality,
value and reliability. Over the past 40&nbsp;years, we and our
predecessors have sold over seven million military and law
enforcement weapons. Our products are currently used in 16 NATO
countries and approximately 65 other countries worldwide. We are
the number one provider of military rifles to the U.S. and
Canadian militaries. Our rifles and carbines have enjoyed
significant customer acceptance, both in the U.S. and globally,
for over 40&nbsp;years. The acquisition of Colt Canada has
increased our market penetration in Northern European and NATO
countries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Sole Source Provider of the M4 Carbine.</I> We are the
U.S.&nbsp;military&#146;s sole source supplier of the M4
carbine. As of April&nbsp;3, 2005, we have sold or have orders
for approximately 340,000&nbsp;M4&nbsp;carbines, including
270,000 to the U.S.&nbsp;government. Our sole source agreement
with the U.S.&nbsp;government lasts until June&nbsp;30, 2009. If
the government seeks competitive bids after June 2009, we
believe we are well-positioned to compete successfully for this
business. M4 carbine sales to the U.S.&nbsp;government accounted
for approximately 41% of our 2004 revenues. The M4 carbine is
only at the beginning of its product life cycle, and is the
standard carbine for the U.S.&nbsp;Army and the other services
within the Department of Defense. Currently, the M4 carbine is
the successor for the M16 rifles in use by the
U.S.&nbsp;military. The M4 carbine is one of the
U.S.&nbsp;military&#146;s critical weapons system program, and
it is already a combat proven &#147;weapon of choice&#148; for
elite units such as the U.S.&nbsp;Navy Seals and Army Rangers
and Airborne. Colt Canada is also the sole source
</DIV>

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<DIV align="left" style="font-size: 10pt;">
supplier of small arms (including the C8 carbine) to the
Canadian Department of National Defence. See
&#147;&#151;&nbsp;Intellectual Property.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Long-standing Customer Relationships.</I> We and our
predecessors have been conducting business with the
U.S.&nbsp;government since 1847. We continue to enjoy a
successful long-term relationship with the U.S.&nbsp;government
(which includes the U.S.&nbsp;military and federal agencies),
our single largest customer and one of the largest purchasers of
firearms in the world. We interact primarily with the
U.S.&nbsp;Army, which acts as procurement agent for the other
military branches, and we also enjoy a strong relationship with
the Navy, Marines, Air Force, Coast Guard and National Guard and
Reserves. We have a variety of international customers, as we
provide small arms to allied foreign governments, and U.S. and
international law enforcement agencies. Our U.S.&nbsp;law
enforcement agency customers include the Federal Bureau of
Investigation, the Central Intelligence Agency, the
U.S.&nbsp;Customs and Border Protection Agency, the Federal
Bureau of Prisons, the Alcohol, Tobacco and Firearms Bureau, the
Drug Enforcement Agency, the Secret Service, the New York City
Police Department, the Virginia State Police, the California
Highway Patrol and the Pennsylvania State Police. Our
international law enforcement customers include Canada,
Colombia, France, Greece, Israel, Mexico and the United Arab
Emirates. The M4 carbine or its variations are also deployed
throughout other units in the U.S.&nbsp;military and in allied
military units of the following countries:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="18%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Argentina</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Brunei</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Egypt</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Iraq</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Latvia</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Norway</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Singapore</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Thailand</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Australia</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Canada</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Finland</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Israel</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Malaysia</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Oman</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    South Africa</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Tunisia</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Austria</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chile</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    France</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Italy</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Mexico</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Peru</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Spain</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Turkey</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Bahrain</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Colombia</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Germany</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Japan</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Nepal</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Philippines</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Sri Lanka</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    United Arab Emirates</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Belgium</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Denmark</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Greece</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Jordan</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Netherlands</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Portugal</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Switzerland</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    United Kingdom</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Botswana</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Ecuador</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Hong&nbsp;Kong</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Kuwait</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    New Zealand</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Qatar</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Taiwan</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Venezuela</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Brazil</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Extensive Installed Base and Aftermarket.</I> Over seven
million of our M16 rifles and 340,000 M4 carbines have been
ordered to date, with the majority of rifle sales being to the
U.S.&nbsp;military. While it is difficult to ascertain the
number of M16 rifles and M4 carbines still operational, we
estimate the worldwide military installed base to be at least
two&nbsp;million. We are expanding our business opportunities in
this extensive installed base with our M4 carbine and new weapon
systems as well as aftermarket products and services, including
weapon upgrades, accessories, spare parts, replacement kits,
training and logistic support, and by providing opportunities to
participate in our new programs. In 2004, our aftermarket sales
for spare parts were $10.7&nbsp;million and our contract
management sales were $5.3&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Ownership of the M4 and M16 Technical Data Packages.</I> We
are a technical leader in the design of small arms and we own
the TDP to the M4 carbine and the M16 rifle. The U.S.&nbsp;Army
has type-classified its standard issue military rifles and
carbines to our TDPs. We are the sole source supplier of M4
carbines and critical components until June&nbsp;30, 2009. We
have granted a limited manufacturing license agreement to the
U.S.&nbsp;government to make or have made M16 rifles and
critical components and, after June&nbsp;30, 2009, M4 carbines
and repair parts, for the U.S.&nbsp;military. After that time,
the U.S.&nbsp;government may elect to compete for the supply of
the M4 carbine. However, we enjoy a competitive advantage
because we would be entitled to a 5% royalty on all such sales
until 2037. Our continued development and enhancements to our
TDPs have strengthened our position as the technical leader in
small arms development.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Experienced Management Team.</I> The members of our
management team have an average of over 25&nbsp;years of
experience in the defense industry with strong and long-standing
market relationships with most of the principal buyers in the
market. We believe these relationships will allow us to continue
to expand our presence in the market. The team is led by our
chief executive officer, Lieutenant General William M. Keys,
United States Marine Corps (Ret.), who has over 40&nbsp;years of
experience in the defense industry. Our Executive Vice President
and Chief Operating Officer is Major General James R.
Battaglini, United States Marine Corps (Ret.). Both General Keys
and General Battaglini served in a variety of commands during
their careers in the Marines, worked in the Pentagon on war
fighting requirements and planning, and are intimately familiar
with the types of weapons critical to combat missions.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Superior Manufacturing Capability.</I> We have two
manufacturing facilities where we can produce small arms
efficiently and effectively to meet U.S. and Canadian government
requirements, as well as the needs of other customers. We were
the first firearms manufacturer and the first Connecticut
company to receive ISO 9001:2000 Registration, which we received
for our West Hartford, Connecticut manufacturing facility. We
also received U.S.&nbsp;Government Quality certification for
design and manufacture of rifles. Our Canadian facility is also
certified and registered ISO 9001:2000. Colt Canada has received
similar certification from the Canadian government.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Growth Strategy</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The major elements of our strategy are:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Consolidate Dominant Position of the M4 within the Department
of Defense.</I> Based on the M4 carbine&#146;s proven
versatility and exceptional reliability in combat operations in
Iraq and Afghanistan, the M4 has become the successor for the
M16&nbsp;rifle. We have an installed base of 232,000 M4 carbines
within the U.S.&nbsp;military. The Department of Defense spent a
total of $70&nbsp;million in 2004 and 2005 for the M4 carbine.
In addition, in 2005, the supplemental budget appropriated
$55.4&nbsp;million for the M4 carbine. We will continue to
promote extensive use of the M4 carbine by all elite and general
purpose forces in the Department of Defense, with the goal of
having all required personnel in the U.S.&nbsp;military upgraded
to the M4 carbine.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Continue to Support Increased Operating Tempo of U.S. and
Allied Militaries.</I> The recent military operations in both
Iraq and Afghanistan have resulted in a higher level of
operational tempo for U.S. and allied militaries. The tactics
employed during these conflicts have been heavily dependent on
ground force deployment and have magnified the weapon needs of
the ground war fighter. There are at least 387,000
U.S.&nbsp;troops currently deployed in 120 countries. Ground war
fighters need small arms that are lightweight, compact and
reliable, like the M4 carbine. With Operation Iraqi Freedom and
Operation Enduring Freedom, new small arms contracts for all
services have increased. We believe we have significant
opportunities to grow our sales based on heightened
U.S.&nbsp;military requirements and the need to effectively arm
the ground war fighter. Additionally, the higher utilization of
our products requires additional aftermarket support and,
ultimately, replacement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Maintain Our Leading Market Position through Ongoing Research
and Development and the Introduction of Other Transformational
Small Arms to the Department of Defense.</I> Utilizing our
research and development expertise, we intend to continue to
evolve the M4 carbine to maintain its position as the most
reliable rifle a soldier can carry. We are one of the leaders in
the design and development of small arms due to our focus on
engineering excellence and highly skilled research and
development teams, which we believe will allow us to compete
effectively to supply next generation small arms and other
transformational technologies to the U.S.&nbsp;military. We have
a long-standing tradition of working closely with military
ground troops to improve our weapon systems to meet their
requirements. In 2004, we adapted our existing technology to
build a prototype rifle with ambidextrous fire controls that
uses a gas-operated piston and pusher rod to operate the bolt
carrier. Colt Canada possesses similar research and development
capabilities. Through a strategic alliance, we have exclusively
licensed a coating process that we are considering incorporating
into the manufacture of our small arms to make them greaseless,
thereby reducing field maintenance to a minimum.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Pursue International Opportunities.</I> As the sole source
supplier of M4 carbines to the U.S.&nbsp;military, we are
positioned to capitalize on significant growth opportunities due
to small arms modernization efforts in other countries. We
believe other countries look to the United States when deciding
upon new weapon systems. Countries such as Brazil, Greece,
Norway, Portugal, and Turkey are actively evaluating replacing
or refurbishing their existing small arms to replace aging small
arms to meet the NATO standard caliber requirements. We believe
countries that are upgrading or replacing their small arms will
prefer to use the weapons used by the U.S.&nbsp;armed forces,
such as the M4. By acquiring Colt Canada, we have added
international customers and customers in Canada, Denmark, the
Netherlands and the United Kingdom, with further opportunities
in other countries. Our total number of NATO member customers is
16.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Expand Support and Outsourcing Capabilities.</I> The U.S. and
foreign militaries and law enforcement agencies worldwide are
beginning to focus on ways to outsource the management of the
full cycle of their small arms, which includes all of the
support, supply and maintenance functions relating to small arms
from after production through retirement. We are in the final
stages of a project whereby we would establish a facility with
the U.S.&nbsp;Marine Corps depot at Albany, Georgia. We intend
to use this facility for the refurbishment and repair of M16
rifles and the conversion of M16 rifles into M4 carbines and, in
the future, for other Colt products. We believe this capability
will allow us to capture additional aftermarket sales. We also
intend to expand our international sales by entering into
additional coproduction programs to enable certain foreign
customers to engage in in-country manufacture or assembly of our
small arms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Pursue Horizontal Integration through Bundling Sales of
Accessories with the M4 Weapon Systems.</I> We are dedicated to
increasing sales of high quality product accessories to our
customers. We have sold over 196,000 M4 carbines worldwide since
January&nbsp;1, 2000. We believe that we have a significant
opportunity to increase revenue by offering additional
accessories to enhance the capability and functionality of the
M4 carbine.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Pursue Opportunities with Law Enforcement Agencies.</I> We
have sold approximately 55,000 rifles, carbines and related
weapon systems to the Department of Homeland Security and a
variety of domestic law enforcement agencies over the past five
years. Law enforcement agencies typically look to the
U.S.&nbsp;military when determining their weapon of choice.
Because we have such a strong presence within the
U.S.&nbsp;military, we believe law enforcement agencies will
continue to look to us to provide them with additional weapons,
upgrades and spare parts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Pursue Strategic Acquisitions.</I> We intend to seek out
selected domestic and international acquisition opportunities.
In evaluating acquisition candidates, we intend to focus on
companies that have a complementary product line or
technological competencies, as well as those we believe will
enhance our ability to implement our business strategy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>History</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&#147;Abe Lincoln may have freed all men, but Sam Colt made them
equal.&#148; This post-Civil War slogan would have been music to
Sam Colt&#146;s ears had he lived long enough to hear it. Sam
Colt&#146;s success story began with the issuance of a
U.S.&nbsp;patent in 1836 for the Colt firearm equipped with a
revolving cylinder containing five or six bullets. Colt&#146;s
revolver provided its user with greatly increased firepower.
Prior to his invention, only one- and two-barrel flintlock
pistols were available. As a direct result of his invention and
the marketing and sales success that followed, Sam Colt and his
firearms played a prominent role in the history of a developing
America. So popular was the Colt revolver during the latter half
of the 1800s that it was perhaps the best known firearm, not
only in this country, but also in Canada, Mexico, and many
European countries. To this day, we believe the name Colt
suggests firearms to most Americans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following dates have been key events in our and our
predecessors&#146; history:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    In 1867, a predecessor of our company began producing
    Dr.&nbsp;R.J. Gatling&#146;s machine gun, a semiautomatic using
    a hand-operated crank to turn a cluster of six to ten barrels
    while feeding ammunition into the breech.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    In 1911, the Model 1911 Automatic Pistol was introduced, a
    design that still defines the standard for modern day .45
    caliber semi-automatic pistols.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    In 1960, the AR-15 semi-automatic rifle was introduced, followed
    by the M16 military fully automatic version.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    In 1993, we were awarded a contract to supply nearly 19,000 of
    the new M4 carbines to the U.S.&nbsp;Army and to joint Special
    Forces personnel.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    In 1997, the U.S.&nbsp;government recognized us as the sole
    source supplier to the U.S.&nbsp;military of the M4 carbine.</TD>
</TR>

</TABLE>

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    In 2002, New Colt Holding Corp., or New Colt, legally separated
    its commercial business, Colt&#146;s Manufacturing, and its
    defense business, Colt Defense LLC. This separation was intended
    to allow the two divisions to focus on core customers,
    facilitate the development and execution of business
    opportunities, and optimize financing opportunities. In 2003,
    New Colt distributed its ownership in Colt Defense LLC, pro-rata
    to the stockholders of New Colt. As part of the restructuring,
    we received a license to use the Colt name in connection with
    the sale, marketing, manufacturing and distribution of military
    and law enforcement weapons, including handguns for military
    use. This license was subsequently replaced by a 20-year paid-up
    license, which may be extended solely at our option for
    successive five-year periods upon payment of $250,000 for each
    additional five-year period.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Products</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our product line includes rifles, carbine rifles, grenade
launchers, and submachine guns as well as a range of
weapons-related products and accessories. Below is a brief
description of some of our primary products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Military Rifles</I></B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y09554y0955406.gif" alt="(PICTURE OF M4 5.56MM CARBINE)">
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>M4 5.56mm Carbine.</I> The M4&nbsp;carbine, first approved
for use by the U.S.&nbsp;military in 1993 due to its size and
performance, is not only well suited for special operations and
elite battle units of the U.S.&nbsp;military and similar units
of other militaries but for all general purpose forces as well.
The M4 is a fully/semi-automatic, air-cooled, magazine-fed,
gas-operated carbine. The M4&nbsp;carbine is based on simplicity
of operation, maximum interchangeability of parts and ease of
maintenance. This combination of favorable characteristics has
contributed to a durable, high performance system with low life
cycle maintenance costs. The M4&nbsp;carbine features a
four-position sliding buttstock allowing it to adapt to soldiers
of different sizes and physical characteristics as well as
various firing positions. The M4 is the first weapon to fully
utilize the flat top upper receiver, which allows the user
flexibility in accessorizing. We have designed it so that all
parts are completely interchangeable with other
M4&nbsp;carbines, ensuring quality, commonality of parts and
reduced maintenance costs. We sold approximately
40,000&nbsp;units of the M4&nbsp;carbine in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The M4 carbine is designed to accept the M203 grenade launcher
which can easily be assembled to the carbine offering the user
both point and area firing capabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We also offer a variation of this rifle through Colt Canada as
the C8 carbine, and a flat-topped variation through Colt Canada
as the C8FT. Additionally, we offer a variation that is
fully-automatic. We sold approximately 3,650&nbsp;units of the
C8 carbine from February&nbsp;1, 2004 through January&nbsp;31,
2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a large number of militaries modernize equipment, several
have chosen to replace their outdated weapons with lighter
weapons, including the replacement of 7.62 mm with 5.56 mm
caliber weapons. We are the sole source supplier to the
U.S.&nbsp;government of the M4 carbine and all critical M4
carbine spare parts through June&nbsp;30, 2009.
</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y09554y0955407.gif" alt="(PICTURE OF M4 COMMANDO)">
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>M4 Commando.</I> The M4 Commando, a derivative of the M4
carbine, is the most compact of our 5.56 millimeter family of
weapons, and we believe it is particularly useful for close
quarters combat, where lightness, ease of handling, accuracy and
reliability matter most. We also offer through Colt Canada a
similar version known as the C8CQB (Close Quarter Battle)
carbine.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Colt Canada also offers a variation of this carbine under the
&#147;Special Forces Weapon&#148; widely recognized brand name
and the Special Forces Support Weapon, which incorporates a
mechanical buffer system to reduce the rate of fire and thereby
increase accuracy. The Special Forces Support Weapon is also
available with a special 100 round high capacity magazine. We
sold approximately 2,000&nbsp;units of the M4 Commando in 2004.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y09554y0955408.gif" alt="(PICTURE OF COLT AUTOMATIC RIFLE)">
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Colt Automatic Rifle.</I> The Colt Automatic Rifle, or CAR,
is a newly designed weapon system that is our candidate to
replace the M249 Squad Automatic Weapon and will be one of the
four variants for our submission under the OICW-Increment I RFP.
The CAR is a gas-operated, air-cooled, magazine-fed, fully
automatic weapon with a firing rate of 600-750 rounds per
minute. The new, heavier barrel design increases stability,
accuracy and heat dissipation. The Automatic Rifle features a
rugged bipod design, which deploys and retracts rapidly and
easily with the use of a single hand. We did not sell any units
of the CAR in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The CAR shares common features with the M16 rifle and M4
carbine, and is immediately familiar to soldiers trained in
operating the M16 family of firearms. It uses the same wide
variety of ammunition as the M16 and shares the same magazine
and parts with the M16 and M4 families of weapons, thereby
drastically reducing training and logistics requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We also offer a variation of this rifle through Colt Canada as
the Light Support Weapon Rifle.
</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y09554y0955409.gif" alt="(PICTURE OF 9MM SUBMACHINE GUN)">
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>9mm Submachine Gun.</I> The 9 mm Submachine Gun, or SMG, is a
lightweight, compact weapon encompassing the same straight-line
construction and design as the M4 carbine. This straight-line
construction, coupled with the low recoil associated with 9 mm
ammunition, the SMG provides highly accurate fire with less
muzzle climb, especially in full automatic fire. Less recoil
also facilitates ease of training and improves accuracy. We sold
approximately 600&nbsp;units of the SMG in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The operation and training for the 9 mm Submachine Gun is
similar to that of the M16 rifle, M4 carbine or M4 Commando,
eliminating the need for substantial cross training. The SMG is
extremely well-suited for military organizations with a definite
need for a lightweight, compact weapon required to turn out
sustained and controlled fire in close confrontations. The 9 mm
Submachine Gun is also ideal in military and law enforcement
situations where maximum concealability and lower velocity are
required. Furthermore, due to its lack of over-penetration, it
is desirable in the following areas: urban environments, boats
and ships, in and around buildings, and airfields.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y09554y0955410.gif" alt="(PICTURE OF M16 5.56 RIFLE)">
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>M16 5.56 mm Rifle.</I> The M16 is a fully/semi-automatic,
air-cooled, magazine-fed, gas-operated rifle. It is the primary
weapon of issue for the U.S.&nbsp;Army and 50 other armed forces
around the world with an estimated installed base of two million
units. The M16A4 Rifle version features a removable carrying
handle with an integral rail-mounting system. When the carrying
handle is removed, any accessory device with a rail grabber,
such as an optical sight, can be mounted on the weapon. We sold
approximately 1,400&nbsp;units of the M16 in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The M16A4 Rifle is designed to accept the M203 Grenade Launcher
which can easily be attached to the rifle offering the user both
point and area firing capabilities. Also, all US and NATO rifle
grenades can be fired without any supplementary equipment.
</DIV>

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We also offer a variation of this rifle through Colt Canada as
the C7 Rifle. We sold approximately 3,800&nbsp;units of the C7
rifle from February&nbsp;1, 2004 through January&nbsp;31, 2005.
</DIV>

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<B><I>Grenade Launchers</I></B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y09554y0955411.gif" alt="(PICTURE OF GRENADE LAUNCHER)">
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>M203 Grenade Launcher.</I> The M203 grenade launcher is a
lightweight, single-shot, breech-loaded 40 millimeter weapon
designed for attachment to M16 rifles, M4 carbines and law
enforcement rifles, creating a versatile combination weapon
system capable of firing 5.56 millimeter rifle ammunition as
well as a whole range of 40 millimeter high explosive and
special purpose ammunition (including non-lethal ammunition). It
has a maximum effective range of 400 meters, low recoil, and is
extremely accurate. The M203 grenade launcher is also utilized
by government agencies for crowd control and criminal
apprehension though the use of tear gas, rubber bullets and bean
bags. We also offer a variation of this product through Colt
Canada as the M203A1 grenade launcher. We sold approximately
3,000&nbsp;units of the M203 grenade launcher in 2004.
</DIV>

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<B><I>Law Enforcement Rifles</I></B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y09554y0955412.gif" alt="(PICTURE OF AR-15A2 GOVERNMENT CARBINE)">
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>AR-15A2 Government Carbine.</I> The AR-15A2 Government
Carbine comes in a lightweight, compact, semi-automatic package
while offering 5.56 millimeter semi-automatic firepower with
high mobility. We believe it is particularly suited to law
enforcement requirements outside the range and accuracy of
handguns. We sold approximately 1,590&nbsp;units of the AR-15A2
Government Carbine in 2004.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y09554y0955413.gif" alt="(PICTURE OF LAW ENFORCEMENT CARBINE)">
</DIV>

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<I>Law Enforcement Carbine.</I> This specially designed law
enforcement weapon system features many of the combat proven
advantages of the military M4 carbine and is designed for
tactical deployment and traditional patrol. It offers a
semi-automatic only mode. The Law Enforcement Carbine rifle is
also available with a step-cut barrel that allows it to accept a
grenade launcher for nonlethal options. We sold approximately
4,100&nbsp;units of the Law Enforcement Carbine in 2004.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y09554y0955414.gif" alt="(PICTURE OF ACCURIZED RIFLE)">
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Accurized Rifle.</I> The Accurized Rifle features an all-new
free floating, 24&#148; (61 cm) stainless steel barrel that
delivers increased accuracy in a semiautomatic platform.
Included as part of the Accurized Rifle
</DIV>

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<DIV align="left" style="font-size: 10pt;">
design is an all-aluminum tubular handguard with twin sling
swivel studs that allow for easy target sling and bipod
attachment.
</DIV>

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Also, the Accurized Rifle utilizes an enhanced trigger group for
smoother and more consistent trigger pull. When situations
demand rapid and accurate multiple shot deployment, the
Accurized Rifle delivers unparalleled accuracy. We sold
approximately 240&nbsp;units of the Accurized Rifle in 2004.
</DIV>

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<B>Spare Parts and Replacement Kits</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We produce and provide spare parts and replacement kits for our
weapon systems. The spare parts and replacement kits activities
generated revenues of $6.2&nbsp;million in 2003 and
$10.7&nbsp;million in 2004. We believe this area of activity is
poised to expand with increased weapons usage in accordance with
the heightened state of alert and activity surrounding the
support of homeland defense initiatives. Additionally, as the
U.S.&nbsp;increases its training requirements for its special
operations forces, international forces become more active as
well. We believe this activity translates to near-term higher
weapons usage both domestically and abroad, resulting in
increased deliveries for our spare parts and kits business.
</DIV>

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<B>Accessories</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Due to the flexibility of our small arms, we offer our customers
procurement services whereby we will accessorize the small arms
we sell to the customer&#146;s specifications. The M16 rifles
and M4 carbines are the platform for the
U.S.&nbsp;military&#146;s current generation modular weapon
system, or MWS, which incorporate a rail adapter system into the
weapons. With rail systems attached, MWS provides multiple
mounting surfaces for the M16 and M4 weapons. The M16 and M4
employ the U.S.&nbsp;military&#146;s standard 1913 rail system
which provides the weapon with the capacity to mount various
accessory devices, including topical sights, thermal sights,
backup iron sights, laser sighting and targeting devices, a
combat identification of dismounted soldiers system or a
flashlight. Accordingly, there is a large base of components
using this system and a significant investment by the
U.S.&nbsp;military and foreign countries in these components. In
2004, as part of our procurement services, we provided the
United Arab Emirates a &#147;package&#148; of M4 carbines with
accessories tailored to their specifications. In 2004, our
contract management sales were $5.3&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Licensing and Coproduction Programs</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our other business is composed primarily of granting a
manufacturing license agreement, or MLA, and technical
assistance agreement, or TAA, to enable certain governments to
avail themselves of our M4, M16 and M203 weapons technology
(subject to U.S.&nbsp;State Department approval) to engage in
in-country manufacture or assembly of these weapon systems. The
advantage of granting such rights is to install the Colt weapon
system in the host country and enable Colt to collect royalties
and other income based on these activities. It also enables the
host country to convert and modernize their present production
facilities to enable the manufacture of these weapons and
maintain control of the cost and actual number of weapons
produced. At present, we have MLAs with the Canadian government
manufacturer and with the Hellenic Defense Systems in Greece for
the assembly of M4 and M16 kits and M203 grenade launchers. We
are currently responding to a &#147;Request for Proposal&#148;
to supply M4 carbines to the entire Hellenic armed forces. We
continuously evaluate opportunities to enter into coproduction
programs with allied governments to convert their standard issue
rifle from the 7.62 caliber to 5.56 caliber ammunition. Since
the M16 rifle and M4 carbine are the leading candidates in the
majority of these expected procurements, we believe we are well
positioned to participate in this new trend.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Acquisitions</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We pursue a strategy of growth through acquisition by acquiring
businesses and assets that complement our existing operations
and enhance our competitiveness. We exercise a high degree of
financial discipline
</DIV>

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and strictly adhere to the following criteria to evaluate
prospective acquisitions, including whether the business to be
acquired:
</DIV>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    broadens the scope of products we offer or the geographic areas
    we serve;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    offers attractive margins;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    is accretive to earnings;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    offers opportunity to improve profitability by increasing the
    efficiency of our operations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    is managed in a manner consistent with our existing
    businesses;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    complements our portfolio of existing businesses by increasing
    our ability to meet our customers&#146; needs.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our desire to be responsive to the needs of the military and
law enforcement communities, including fighting an extended
conflict and taking on new missions in homeland security, we are
pursuing an acquisition strategy that complements the
Army&#146;s strategy of evolutionary acquisitions through spiral
development and other methodologies. In this regard, we are
using our expertise in government procurement to field new
technologies and understand the needs of the war-fighting forces.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For example, our recent acquisition of the Diemaco division of
H&#233;roux-Devtek Inc. (now Colt Canada Corporation) has
broadened our market presence with additional scale and critical
mass. Colt Canada has been designated the center of excellence
for small arms for over 25&nbsp;years by the Canadian
government, and is the sole source supplier of the C7 rifle and
the C8 carbine to the Canadian Department of National Defence,
under the terms of our license agreement with the Canadian
government. In addition, Colt Canada is the Canadian
government&#146;s preferred source for all other small arms and
related parts and services. Nearly all of Colt Canada&#146;s
products are based on licensed Colt technology and are similar
to our products in many respects. For example, Colt
Canada&#146;s C8 carbine is largely based on M4 technology and
its C7 rifle is largely based on M16 technology. Thus, our
discussions with respect to the M4 carbine also apply to the C8
carbine. By acquiring Colt Canada, we have diversified our
customer base and channels of distribution, adding customers and
contracts in Canada, Denmark, the Netherlands and the United
Kingdom with further possible opportunities in other countries.
We also have bolstered our next-generation product capabilities
through this acquisition by capitalizing on the talents of Colt
Canada engineering and design staff. We seek to attain cost
synergies through improved and increased production capacity,
combined purchasing power and the benefits of operating our two
manufacturing facilities, all for the benefit of not only Colt
but also its customers.
</DIV>

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<B>Customers</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We provide firearms and weapon systems to a diverse customer
base that we divide into the following three categories: the
U.S.&nbsp;government (including sales by the
U.S.&nbsp;government to foreign militaries), direct sales to
foreign governments, and domestic law enforcement agencies. The
table below reflect our small arms sales by customer in 2004:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y09554y0955403.gif" alt="(PIE CHART)">
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our single largest customer is the U.S.&nbsp;government, which
represented approximately 54% of our sales in 2004. Canada, the
United Arab Emirates and Denmark, each accounted for more than
10% of our consolidated revenue for the fiscal year ended
December&nbsp;31, 2004. Our largest domestic law enforcement
customers are the New York City Police Department and the Idaho,
Virginia and Washington State Police. Internationally, we
provide firearms to the militaries and law enforcement agencies
of numerous countries, including Australia, Brazil, Canada,
Colombia, Israel, Mexico and Thailand.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Research and Development</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We devote a substantial portion of our resources to developing
new products and enhancing existing products. We have a
long-standing tradition of working closely with military ground
troops to improve our weapon systems to meet their requirements.
Our ability to compete for new contracts depends, to a large
extent, on the success and innovation of our research and
development programs. We spent $712,000 $476,000 and $291,000 of
our revenues on research and development in 2004, 2003 and 2002,
respectively. Our product engineering department consists of: an
engineering services group that is responsible for developing
and maintaining all drawings and bills of material; a test and
support group that is responsible for engineering support of
current products as well as planning and carrying out
developmental testing and testing of competitive products; a
design group that not only supports existing products but also
designs new products; and a model shop equipped with
sophisticated multi-axis equipment and software to enable three
dimensional models to be imported from the design group to be
quickly converted into hardware.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We also maintain a product support engineering group at our
Canadian facility that is responsible for supporting existing
products and developing new products in response to customer
requirements. This group also is responsible for ongoing
independent research and development activities. This group
includes engineers, technicians, technologists, CAD draftsmen,
designers and support personnel. In the most recent fiscal year
of Colt Canada, it spent $550,000 on research and development.
</DIV>

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We have developed a niche market catering to Special Forces and
law enforcement by customizing weapons to customer requirements.
An example is the successful introduction of the SFW (special
forces
</DIV>

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<DIV align="left" style="font-size: 10pt;">
weapon) currently in service with elite forces from Canada, the
United Kingdom, Norway and others. Our SFW production capability
uses state-of-the-art machinery that provides us with the
flexibility required to run small quantities of unique
configurations economically, which would be difficult to
replicate at larger facilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe our research and development expertise will enable us
to compete for new contracts based on the success and innovation
of our research and development programs. Our capabilities
enable us to offer products to a wider customer base and thus
enhance our market position, particularly within Europe and the
law enforcement markets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Marketing and Distribution</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our marketing strategy is a customer-based approach that takes
advantage of interaction with the customer. This enables us to
respond to the feedback and guidance of customers on a real-time
basis. We continuously analyze the defense and law enforcement
markets to anticipate the needs of our existing customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our unique position as the sole source supplier of the M4 weapon
system to the U.S.&nbsp;military allows us to position ourselves
to be able to satisfy not only U.S.&nbsp;government
requirements, but also the requirements of law enforcement and
international customers. The prevailing strategy to counter
insurgent/terrorist activity is the use of mobile military units
with lightweight weapons that can be deployed and maneuvered
quickly. We believe that the M4 carbine and its derivatives are
the lightweight weapons that meet and exceed that challenge.
Domestic law enforcement sales are made and distributed either
directly to the end user, such as the FBI, the New York City
Police Department, and the Drug Enforcement Agency, or through
our distributors and sales agents. In addition to our internal
business development staff, we sell our products to law
enforcement customers through a network of approximately 20
distributors and other additional sales agents. Some law
enforcement sales can also be made by using the
U.S.&nbsp;government as the buying agent. Our distribution
strategy enables us to service smaller law enforcement agencies
as well.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The contracting process with our customers often takes anywhere
from six to twelve months to complete and sometimes longer.
Widely recognized brand name loyalty and weapons already in
stock play a significant role in the selection process of our
customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Export Sales</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There are two predominant principal contracting methods used for
export sales, Direct Foreign Sales, or DFS, and the
U.S.&nbsp;government&#146;s Foreign Military Sales, or FMS. In a
DFS transaction, the contractor sells directly to the foreign
country and assumes all risks in the transactions. In a FMS
transaction, the sale is funded for, contracted by and made to
the U.S.&nbsp;government, which in turn sells the product to the
foreign country. Licenses are required from U.S.&nbsp;government
agencies for DFS exports from the U.S.&nbsp;or Canada for all of
our products. Licenses are also required from the Canadian
government for export sales by Colt Canada. Additionally, some
sales are made with the U.S.&nbsp;acting as a buying agent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We currently sell several of our products in the international
marketplace. Direct sales to non-U.S.&nbsp;government customers
accounted for approximately 46%, 27% and 30% of our revenue in
the years ended December&nbsp;31, 2002, 2003 and 2004,
respectively. Except for sales by Colt Canada, our foreign
contracts are payable in United States dollars.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We maintain relationships with representatives in foreign
countries to provide assistance in promoting the technical and
military advantages of the M4 weapon system. These relationships
are an important component to our international marketing
efforts. These relationships are based on representation
agreements with the local in-country representatives and are
renewable on an annual basis. We maintain one representative per
country, where a representative may range from a single
individual to a group/company. As of April&nbsp;3, 2005, there
were approximately 30 representatives with whom we have a
working relationship. The representatives assist us in
identifying opportunities, positioning us to obtain the contract
award successfully, assist local government officials and us in
the facilitation of legal and financial obligations of the sale,
and oversee the
</DIV>

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delivery and after sale services of the sale. We require that
our representatives comply with all applicable law, including
the Foreign Corrupt Practices Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Product Manufacturing and Raw Materials</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Manufacturing</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have two manufacturing facilities where we can produce small
arms efficiently and effectively to meet U.S. and Canadian
government requirements, as well as the needs of other
customers. Both of our facilities are certified and registered
ISO&nbsp;9001:2000, a widely recognized quality management
standard set and monitored by the International Organization for
Standardization. Our primary manufacturing facility is located
in West Hartford, Connecticut. This facility totals
approximately 310,000&nbsp;square feet, of which we use
207,000&nbsp;square feet and lease the remainder to Colt&#146;s
Manufacturing. This manufacturing facility successfully achieved
its U.S.&nbsp;government Quality Certification for design and
manufacture of rifles and carbines. We successfully passed our
most recent audit in September 2004. Our other manufacturing
facility in Kitchener, Ontario, purchased as part of our May
2005 acquisition of Colt Canada, has 44,000&nbsp;square feet of
space.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Both facilities operate on a single production plan so that we
can maximize our output and efficiency. In addition, both
facilities organize weapons manufacturing around production work
cells to maximize productivity and minimize bottlenecks. Weapon
production is supported by dedicated machinery, which eliminates
long set-up and change-over times. We produce an average of
6,500 rifles and carbines per month between our two
manufacturing facilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Quality Assurance</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There are several areas of quality assurance that are an
integral part of the manufacturing process. First, the
metallurgical laboratory ensures the grade and quality of the
materials that are identified for a specific process. Since heat
treating and chemical finishes areas are critical to the
manufacture of a world class firearm, we monitor the
manufacturing processes within the strict guidelines of our
ISO&nbsp;9001:2000 quality management system. Once the firearms
are assembled, we test the rifles for reliability, durability
and accuracy. The workstations are equipped with
software-enabled computers to rate and measure each weapon. We
believe our testing process ensures high quality and first-rate
weaponry.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Raw Materials</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our manufacturing operations require raw materials, primarily
aluminum and steel, which are purchased in the open market and,
except for steel, are normally available from a number of
suppliers. In the U.S., the steel we purchase for our gun
barrels is currently available from only a single supplier who
has been approved by the Department of Defense to manufacture
the quality of steel it requires. We have not experienced any
significant delays in obtaining timely deliveries of essential
raw materials. In recent years, the average cost of materials
has risen less than 4%. Although all of our contracts are
fixed-price contracts, we can raise prices by 4% each year to
offset inflationary impacts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Backlog</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of April&nbsp;3, 2005, our funded backlog was approximately
$59&nbsp;million compared with $23.3&nbsp;million as of
April&nbsp;4, 2004. A substantial majority of this backlog is
expected to be earned as revenues by the end of 2005. This
backlog provides management with a useful tool to project sales
and plan its business on an ongoing basis. Funded backlog is
based upon amounts actually appropriated and therefore does not
include the awarded but unfunded portion of total contract
values. In addition to our funded backlog, we have an IDIQ
(indefinite delivery, indefinite quantity) contract with the
U.S.&nbsp;government for an additional $45&nbsp;million that is
expected to be ordered by July 2005. Together this backlog and
the orders expected on the remaining portion of the IDIQ
contract should take over 18&nbsp;months to build.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Competition</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The market for arms manufacturing is highly competitive.
Heckler&nbsp;&#38; Koch and Fabrique Nationale Nouvelle Herstal
S.A. are our largest competitors in the small arms market. We
also encounter additional competition from other industry
participants, including Bushmaster, Olympic Arms, DPMS and Rock
River Arms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our smaller competitors are primarily in the commercial
&#147;black rifle&#148; market. This market is characterized by
rifle sales to law enforcement and commercial distributors. Such
competitors are not part of the restricted base of suppliers to
the U.S.&nbsp;military, nor have they historically competed
against us for U.S.&nbsp;government contracts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In programs where we are the sole source provider, other
suppliers may compete against us only as our license agreements
allow. Over 41% of our total contract revenue for the year ended
December&nbsp;31, 2004 was derived from our sole-source business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that we will continue to be able to compete
successfully based upon the quality, technological advancement
and cost competitiveness of our products and services. Our
ability to compete depends to a large extent on the success and
innovation of our research and development programs, whether we
can partner with military industrial facilities owned by the
Department of Defense, and our readiness in facilities,
equipment and personnel to undertake the programs for which we
compete.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Intellectual Property</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our intellectual property can be categorized into two
classifications: (1)&nbsp;trademarks and copyrights and
(2)&nbsp;technology. We own the TDP to manufacture the
M16&nbsp;rifle and a separate TDP to manufacture the
M4&nbsp;carbine. We also develop and maintain a TDP for each of
the weapon types and models that we develop for production. We
own or license common law and registered trademarks and
copyrights that are used to identify our products and services.
Our trademarks are registered in the United States and/or in
certain foreign jurisdictions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our technology base of intellectual property consists of
(1)&nbsp;patents, (2)&nbsp;manufacturing processes,
(3)&nbsp;proprietary know-how and (4)&nbsp;other trade secrets.
This body of technology is used to develop a TDP, which is a
blue print for manufacturing our small arms products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have maintained the M16 and M4 design and technical data and
have made improvements at considerable expense. We also have
safeguarded our TDP from unauthorized disclosure and use. These
efforts have ensured that our M16 and M4 weapons are
unparalleled in quality, endurance and performance. While some
companies imitate our products, we believe these imitations are
made without regard to our rigorous quality of materials,
processes and testing that are required to be met by the
Department of Defense. For example, we use materials and
machining processes that are proprietary. We employ stringent
quality assurance and final acceptance testing of each product
prior to shipment, requirements that are defined in government
weapons specification. These include electrochemical coatings,
heat treating, special formulations of chrome vanadium steel,
metallurgical laboratory testing, high pressure resistance
testing, magnetic particle inspection, and form, fit, function
and accuracy evaluations to ensure a weapon ready for combat.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 1967, our predecessor entered into a Technical Data Sales and
Patent License Agreement, or 1967 License, with the
U.S.&nbsp;government, Department of the Army. Pursuant to the
1967 License, we granted to the U.S.&nbsp;government a
non-exclusive license to use the TDP for the M16 rifle and to
make or have made M16 rifles and repair parts in the United
States, and to use and sell such weapons throughout the world
for military use (including the right to make foreign military
sales of M16 rifles). The payment of royalties relating to the
M16 rifle and repair parts ceased in 1990. In 1997, the 1967
License was amended to include a nonexclusive license to use the
TDP for the M4&nbsp;carbine and to make or have made
M4&nbsp;carbines and M4&nbsp;unique components in the United
States for military use after June&nbsp;30, 2009. The 1967
License was further amended to extend the term for the license
for the M16&nbsp;rifle and M4&nbsp;carbine through
December&nbsp;24, 2037, after which the U.S.&nbsp;government
will have a fully paid-up license to use the TDP for the M4
carbine for any government purpose without the payment of
additional royalties.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our predecessor entered into a license agreement with the
Canadian government as of February&nbsp;8, 1984, pursuant to
which it granted to the Canadian government the exclusive
license to use the TDPs for various rifles&nbsp;&#151;
including, among others, the C-10&nbsp;Canadian Forces Small
Bore Rifle, the C7&nbsp;rifle and C8&nbsp;carbine&nbsp;&#151;
and to make or have made such rifles and repair parts in Canada
for use by the Canadian military, as well as a nonexclusive
license to use such TDPs and to make or have made such rifles
and repair parts for sales to other NATO nations. Under the
current license agreement, as amended, Colt Canada is the sole
contractor authorized to manufacture weapons under the license
agreement, and can only be replaced by the Canadian government
with our consent (which cannot be unreasonably withheld).
Royalties of between 5% and 7% (depending on the countries to
which they are shipped) are payable on most such rifles and
repair parts manufactured by the Canadian government; separate,
fixed royalties are payable for each C-10&nbsp;rifle and repair
part manufactured thereunder. The license has a 30-year term,
after which the Canadian government will have a fully paid up
license to use the TDPs for such rifles without the payment of
additional royalties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have an exclusive, worldwide, license right from New Colt to
use the COLT&#174; widely recognized brand name for the sale of
firearms, spare parts and related products for military and law
enforcement use (including handguns for military use). This
license also includes the use of the
<IMG src="y09554y0955404.gif" alt="(COLT LOGO)">&#174; and
<IMG src="y09554y0955405.gif" alt="(COLT TRADEMARK)">&#174;
trademarks. The trademark license is fully paid up for its
initial 20-year term, which may be extended solely at our option
for successive five year periods upon payment of $250,000 for
each additional five-year period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We maintain and vigorously protect our intellectual property
rights. From time to time, we pursue litigation or other legal
means to challenge the conduct of our competitors over the
unauthorized use of such rights. For example, we have brought
actions in federal district court against Bushmaster Firearms,
Inc., which cases are pending in Portland, Maine, challenging
Bushmaster&#146;s manufacture, marketing, distribution and sale
of M4&nbsp;look-alike weapons and we have alleged trademark,
trade dress, and patent infringement, together with unfair
competition and false advertising. Bushmaster has filed a
partial motion for summary judgment challenging the validity of
our registered M4 trademark and related rights, which we are
opposing. We are seeking damages and injunctive relief. A trial
is scheduled for later this year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Government Contracts; Regulatory Matters</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A majority of our revenue is derived from contracts with the
Department of Defense or other U.S.&nbsp;government agencies.
U.S.&nbsp;government business is performed under fixed-price
contracts. We are not a party to any cost-plus contracts. Under
U.S.&nbsp;government regulations, certain costs, including
certain financing costs, portions of research and development
costs, lobbying expenses, certain types of legal expenses, and
certain marketing expenses related to the preparation of bids
and proposals, are not allowed for pricing purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The U.S.&nbsp;government also regulates the methods under which
costs are allocated to U.S.&nbsp;government contracts. We are
subject to a variety of audits performed by U.S.&nbsp;government
agencies. These include pre-award audits that are performed upon
the submission of a proposal to the government. During the
performance of certain contracts, the U.S.&nbsp;government has
the right to request and to examine labor charges, material
purchases, and overhead charges to any active contract. Upon a
contract&#146;s completion, the U.S.&nbsp;government may perform
a post-award audit of all aspects of contract performance to
ensure that we have performed the contract in a manner
consistent with our proposal.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
U.S.&nbsp;government contracts are, by their terms, subject to
termination by the government for either its convenience or
default by the contractor. Termination for convenience is at the
government&#146;s discretion and occurs when there is a
determination that termination of the contract is in the
government&#146;s interest, such as when there is a change in
the government&#146;s needs. Fixed-price contracts provide for
payment upon termination for items delivered to and accepted by
the U.S.&nbsp;government and, if the termination is for
convenience, for payment of fair compensation of work performed
plus the costs of settling and paying claims by terminated
subcontractors, other settlement expenses, and a reasonable
profit on the costs incurred. If a contract termination is for
default, however, the contractor is paid an amount agreed upon
for completed and partially completed products and services
accepted by the U.S.&nbsp;government. In these circumstances,
the U.S.&nbsp;government is not liable for the contractor&#146;s
costs with respect to unaccepted items, and is entitled to
</DIV>

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<DIV align="left" style="font-size: 10pt;">
repayment of advance payments and progress payments, if any,
related to the terminated portion of the contract. The
contractor may be liable for excess reprocurement costs incurred
by the U.S.&nbsp;government in procuring undelivered items from
another source and/or damages.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to the right of the U.S.&nbsp;government to
terminate government contracts for default or convenience,
U.S.&nbsp;government contracts are conditioned upon the
continuing availability of Congressional appropriations. As is
common in the industry, we are subject to business risks,
including changes in governmental appropriations, national
defense policies or regulations, service modernization plans,
and availability of funds. Any of these factors could materially
adversely affect our business with the U.S.&nbsp;government in
the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Environmental Laws and Regulations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are subject to federal, state, local, provincial and foreign
laws and regulations governing the protection of human health
and the environment, including those regulating releases and
discharges to the air and water, the management of wastes, the
control of noise and odors, and the generation, storage,
handling, use, transportation and disposal of hazardous
materials. Certain of these laws and regulations require us to
obtain and operate under permits that are subject to periodic
renewal or modification. While we strive to operate in
compliance with the requirements of these laws and permits, we
cannot assure you that we are or have been at all times in the
past in complete compliance with all such requirements. We are
subject to potentially significant fines or penalties if we fail
to comply with the requirements and conditions of such laws and
permits and we are not insured for costs arising from such
noncompliance events. These laws and permits can require the
installation of pollution control equipment or operational
changes to limit actual or potential impacts to the environment.
Although we have made and will continue to make capital
expenditures in order to comply with the requirements of
environmental laws and permits, we do not expect material
capital expenditures for environmental controls for the
remainder of 2005 or next year. However, environmental
requirements are complex, change frequently, and could become
more stringent in the future. Accordingly, we cannot assure you
that these requirements will not change in a manner that will
require material capital or operating expenditures or will
otherwise have a material adverse effect on us in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are also subject to environmental laws requiring the
investigation and cleanup of environmental contamination.
Certain of these laws impose joint, strict and several
liability, including liability for investigation and cleanup
costs and natural resources damages, associated with
contamination at our current or former facilities, in some
circumstances even if such contamination was caused by a third
party, such as a prior owner or operator. We may be subject to
liability if contamination is discovered at a landfill or other
off-site disposal location where we have disposed of wastes,
notwithstanding that our historic disposal practices may have
been in accordance with all applicable requirements. We can also
be subject to related claims by private parties alleging
property damage and personal injury due to exposure to hazardous
materials located at or released from such properties. While we
have not incurred material costs for environmental compliance,
environmental litigation or remediation in the past, new laws
and regulations, stricter or more vigorous enforcement of
existing laws and regulations, the discovery of unknown
contamination or the imposition of new or more stringent
clean-up requirements may require us to incur substantial costs
in the future. As such, there is no assurance that we will not
incur material costs in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Employees</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of April&nbsp;3, 2005, we have approximately 380 employees in
the U.S. and 90 in Canada. Approximately 74% of our
U.S.&nbsp;employees are represented by a union and are covered
by a three-year collective bargaining agreement that was entered
into in May 2004 and that expires in May 2007. We had a two-week
work stoppage in April 2004 which was a result of a management
lock-out of unionized employees at our West Hartford,
Connecticut facility in connection with the negotiation of a new
collective bargaining agreement. We believe that our relations
with all of our employees are good.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our Properties</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our corporate headquarters, engineering, manufacturing and
research and development activities are located in our West
Hartford, Connecticut facility. We lease this approximately
310,000&nbsp;square foot facility pursuant to a lease expiring
December&nbsp;31, 2006. In February 2005, we entered into an
agreement with the landlord to purchase this facility. We own a
manufacturing, engineering and research and development facility
in Kitchener, Ontario, Canada that is approximately
44,000&nbsp;square feet. We also lease a warehouse in Kitchener,
Ontario, Canada that is approximately 3,700&nbsp;square feet,
under a lease expiring on May&nbsp;14, 2007. We anticipate
leasing a 40,000&nbsp;square feet facility in the Marine Corps
Logistics Base at Albany, Georgia under a five-year lease with
the Department of the Navy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Legal Proceedings</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
From time to time we are involved in legal proceedings arising
in the ordinary course of our business. We believe that we have
adequately reserved for these liabilities and that there is no
litigation pending that is likely to have a material adverse
effect on our financial condition, results of operations and
cash flows.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a government contractor, we are subject to
U.S.&nbsp;government investigations from time to time relating
to our operations and audits of our accounting procedures by the
Defense Contract Audit Agency. Government contractors who are
found to have violated the False Claims Act, or are indicted or
convicted for violations of other federal laws, may be suspended
or disbarred from government contracting for some period. Such
an event could also result in fines or penalties. Given our
dependence on U.S.&nbsp;government contracts, suspension or
debarment could have a material adverse effect on us. We have
never been proposed for and/or suspended or debarred from
contracting with the U.S.&nbsp;government. Our policy is to
cooperate with governmental investigations and inquiries
regarding compliance matters, and we also make voluntary
disclosures of any compliance issues to governmental agencies as
appropriate. We continuously provide information on compliance
matters to various government agencies, and we expect to
continue to do so in the future.
</DIV>

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<A name='114'></A>
</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>MANAGEMENT</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Officers and Directors</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Set forth below is information concerning the persons who will
be the executive officers, key employees and directors of Colt
as of the completion of the offering:
</DIV>

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    <TD width="46%">&nbsp;</TD>
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    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Age</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Position</B></TD>
</TR>

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    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
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    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Executive Officers</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
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<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Lt. Gen. William M. Keys, USMC (ret.)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director, President and Chief Executive Officer</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Maj. Gen. James R. Battaglini, USMC (ret.)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Executive Vice President and Chief Operating Officer</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Carlton S. Chen</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Vice President, General Counsel and Secretary</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Richard J. Nadeau</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Vice President and Chief Financial Officer</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Other Key Employees</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Kevin J. Brown</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Executive Director&nbsp;&#151; Military Programs</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Michael P. Reissig</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Executive Director&nbsp;&#151; Sales and Marketing</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Directors</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gen. the Lord Guthrie of Craigiebank</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    John P. Rigas</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gen. Gordon R. Sullivan, USA (ret.)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    John R. Torell&nbsp;III</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Philip A. Wheeler</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>William M. Keys,</I> Lieutenant General, United States Marine
Corps, (Ret.), age 68, has been our President, Chief Executive
Officer and Director since 2002, before which he served as
President, Chief Executive Officer and Director of Colt&#146;s
Manufacturing. During his 34-year career as a U.S. Marine Corps
Infantry officer, he served two tours in Vietnam and commanded
at every level of operational command from platoon to division.
He served as the Commanding General, 2d Marine Division, during
Desert Storm. His last active duty assignment was as the
Commanding General, Marine Forces Atlantic with Command of all
Operational Forces of Fleet Marine forces Atlantic, II Marine
Expeditionary Force, Camp Lejeune, NC and Component Command of
all Marine forces in Europe and Central and South America.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>James R. Battaglini,</I> Major General, United States Marine
Corps. (Ret.), age&nbsp;55, has been our Vice President of
Operations since October 2004. Prior to joining our company, he
held various staff and leadership positions as an infantry
officer in the United States Marine Corps for over
33&nbsp;years, before retiring from active service in 2004. His
leadership positions in the United States Marine Corps included:
Commanding General, Third Marine Division in Okinawa, Japan from
July 2001 until June 2002; Commanding General, 1st&nbsp;Marine
Expeditionary Brigade/ Deputy Commanding General, I Marine
Expeditionary Force from July 1999 until July 2001; and
Commanding General, Marine Corps Recruit Depot, Parris Island,
S.C., from September 1997 until June 1999. In his last active
duty assignment from June 2002 until August 2004, he served as
Director, Expeditionary Warfare Division, Warfighting
Requirements and Programs (N7), Navy Staff, Pentagon.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Carlton S. Chen, </I>age&nbsp;54, has been our Vice
President, General Counsel and Secretary since 2002, having
served previously as General Counsel to New Colt and Colt&#146;s
Manufacturing. Additionally, he serves on the Board of Directors
of two nonprofit companies, Sporting Arms and Ammunition
Manufacturers&#146; Institute, Inc. and the American Corporate
Counsel Association, Westchester/ Southern Connecticut Chapter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Richard J. Nadeau,</I> age&nbsp;50, has been our Vice
President and Chief Financial Officer since May&nbsp;16, 2005.
Before joining our company, Mr.&nbsp;Nadeau was a Partner at the
accounting firms of KPMG LLP and, prior to 2002, Arthur Andersen
LLP, where he served as a commercial audit partner, primarily
serving government contractors and US&nbsp;Airways.
</DIV>

<P align="center" style="font-size: 10pt;">72
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Kevin J. Brown,</I> age&nbsp;53, has been our Executive
Director of Military Programs since our inception, before which
he served as Executive Director of Military Programs to
Colt&#146;s Manufacturing from June 2002 until November 2002.
From January 2000 to June 2002, Mr. Brown served as a Principal
at NE CT Contract Associates, a consulting firm specializing in
government contracts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Michael P. Reissig,</I> age&nbsp;54, has been our Executive
Director of Sales and Marketing since our inception, before
which he served as Director of Sales and Marketing to
Colt&#146;s Manufacturing, as well as Senior Vice President of
New Colt.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Lord Guthrie of Craigiebank, </I>General, age&nbsp;66, has
been a Director since December 2004. In addition to serving on
our Governing Board, he also serves as a nonexecutive Director
of N.M. Rothschild&nbsp;&#38; Sons, a merchant bank, and
Favermead, Ltd., a property management company, both
headquartered in London, England. He is currently Colonel of the
Life Guards, Gold Stick to Her Majesty Queen Elizabeth&nbsp;II
and Colonel Commandant of the Special Air Service, or SAS. He
served the Welsh Guard and the SAS throughout Europe, Malaysia
and East Africa for over 40&nbsp;years. Apart from holding
several senior staff appointments and commanderships, he was
Chief of the Defence Staff and the Principal Military Advisor to
two prime ministers and three Secretaries of State for Defence.
He retired from the British Army in 2001.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>John P. Rigas, </I>age&nbsp;41, has been a Director since
1994. He is the Chairman and Chief Executive Officer of Sciens
Capital Management, an alternative asset management firm
headquartered in New York City. He has been employed as an
executive with Sciens Capital Management or its predecessors
since 1988. Prior to 1988, he was an analyst at E.F. Hutton
&#38; Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Gordon R. Sullivan, </I>General, United States Army (Ret.),
age&nbsp;67, has been a Director since April 2005. He has been
President of the Association of the United States Army since
1998. He also serves as a Director of Newell Rubbermaid Inc.
(NYSE: NWL), a manufacturer of consumer products, Shell Oil
Company U.S., a petroleum company, Electronic Warfare
Associates, Inc., an information technology company, and the
Institute for Defense Analyses, an institute providing analysis
on national security issues. From 1995 through 1997, he served
as President of Coleman Federal, a division of Coleman Research
Corporation (a subsidiary of Thermo Electron Corporation), a
systems engineering company. From 1991 through 1995, he served
as the 32nd&nbsp;Chief of Staff of the United States Army and as
a member of the Joint Chiefs of Staff. Prior thereto, he served
as Vice Chief of Staff and Deputy Chief of Staff for Operations
and Plans of the United States Army.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>John R. Torell&nbsp;III, </I>age&nbsp;65, has been a Director
since 1996. He has been a Partner of Core Capital Group, a
private equity investment firm, since 1999. He currently serves
as a Director, and member of the Audit Committee, of Wyeth
(NYSE: WYE), a pharmaceutical and healthcare company. He is also
Chairman of the International Executive Services Corps, the
world&#146;s largest organization providing executive volunteers
to developing countries and emerging democracies. He is the
former Chairman and Chief Executive Officer of Fortune Bancorp,
former Chairman of the Board, President and Chief Executive
Officer of CalFed Inc. and former President of Manufacturers
Hanover Corporation and Manufacturers Hanover Trust Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Philip A. Wheeler, </I>age&nbsp;63, has been a Director since
2003. Since 1989, he served as Director of Region 9A of the UAW.
He presently is an officer of the Legislative Electoral Action
Program and the United Labor Agency of Connecticut.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A number of our directors, named executive officers and key
employees (including Gen. Keys, Gen. Battaglini,
Mr.&nbsp;Nadeau, Mr.&nbsp;Chen, Mr.&nbsp;Brown,
Mr.&nbsp;Reissig, Mr.&nbsp;Rigas, Mr.&nbsp;Torell and
Mr.&nbsp;Wheeler) serve in similar positions with New Colt and
Colt&#146;s Manufacturing. Additionally, Gen. Keys serves as
sole Director and President of Colt Defense Employee Plan
Holding Corp., and Mr.&nbsp;Chen serves as its Secretary. Gen.
Keys, Mr.&nbsp;Rigas, Mr. Torell and Mr. Wheeler intend to
remain directors of Colt&#146;s Manufacturing and New Colt after
the consummation of this offering. Each named executive officer
and key employee intends to resign his executive positions with
New Colt and Colt&#146;s Manufacturing prior to the consummation
of this offering.
</DIV>

<P align="center" style="font-size: 10pt;">73

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Composition of the Board After This Offering</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our board of directors consists of six members. We intend to add
up to one additional nonmanagement director following completion
of this offering. Our bylaws provide for a staggered board of
directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Directors are elected for three-year terms as follows:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Messrs.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;have
    been designated Class&nbsp;I directors whose terms will expire
    at the 2008 annual meeting of stockholders;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Messrs.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;have
    been designated Class&nbsp;II directors whose terms will expire
    at the 2007 annual meeting of stockholders;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Messrs.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;have
    been designated Class&nbsp;III directors whose terms will expire
    at the 2006 annual meeting of stockholders.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This classification of our board of directors could have the
effect of delaying or preventing changes in control or changes
in our management.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon the completion of this offering, our board will consist of
six
directors, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
whom will qualify as &#147;independent&#148; according to the
rules and regulations of the SEC and the NYSE. We expect to add
another independent director within 90&nbsp;days after the
effectiveness of the registration statement of which this
prospectus is a part.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Following the consummation of this offering, we will be deemed
to be a &#147;controlled company&#148; under the rules of the
NYSE, and we will qualify for, and intend to rely upon, the
&#147;controlled company&#148; exception to the board of
directors and committee composition requirements under the rules
of the NYSE. Pursuant to this exception, we will be exempt from
the rules that would otherwise require that our board of
directors be comprised of a majority of &#147;independent
directors&#148; and that our executive compensation and
corporate governance and nominating and governance committees be
comprised solely of &#147;independent directors,&#148; as
defined under the rules of the NYSE. The &#147;controlled
company&#148; exception does not modify the independence
requirements for the audit committee, and we intend to comply
with the requirements of the Sarbanes-Oxley Act of 2002 and the
NYSE rules, which require that our audit committee be comprised
exclusively of independent directors within one year of an
initial public offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with this offering, we will enter into a
nominating agreement with the UAW pursuant to which we, acting
through our nominating and corporate governance committee, will
agree, subject to the requirements of our directors&#146;
fiduciary duties, that the UAW will be entitled to designate one
director to be nominated for election to our board of directors
as long as the collective bargaining agreement remains in force.
No person that is subject to any statutory disqualification (as
defined under Section&nbsp;3(a)(39) of the Exchange Act) will be
permitted to serve as a director of our company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Director Compensation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our policy is not to pay compensation to directors who are also
employees of the Company. We anticipate that outside directors
will enter into compensation arrangements to be determined.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Board Committees</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to or promptly following the completion of this offering,
our board of directors will establish an audit committee, a
compensation committee and a nominating and governance
committee. The composition, duties and responsibilities of these
committees are set forth below. Committee members will hold
office for a term of one year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Compensation Committee</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At the time of the consummation of this offering, the
compensation committee will be comprised of
Messrs.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
We intend to avail ourselves of the &#147;controlled
company&#148; exception under the NYSE rules which eliminates
the requirement that we have a compensation committee composed
entirely
</DIV>

<P align="center" style="font-size: 10pt;">74

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<DIV align="left" style="font-size: 10pt;">
of independent directors. Our compensation committee reviews the
salaries and other compensation of our executive officers,
including equity-based compensation, and makes recommendations
to our Board of Directors. In addition, the compensation
committee reviews and administers our incentive compensation and
other stock-based plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Audit Committee</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At the time of the consummation of this offering, the audit
committee will be comprised of
Messrs &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
The board of directors has determined that
Mr.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;qualifies
as an audit committee financial expert as defined in
Item&nbsp;401(h) of Regulation&nbsp;S-K and is independent under
the rules of the NYSE.
Messrs.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and &nbsp;of
our audit committee will not be independent as independence is
defined in Rule&nbsp;10A-3(b)(i) under the Exchange Act or under
the NYSE listing standards. We plan to nominate a new
independent member to our audit committee within 90&nbsp;days of
the effectiveness of the registration statement of which this
prospectus is a part and a third independent director to our
audit committee within one year after the effective date of the
registration statement to replace existing members so that all
of our audit committee members will be independent as such term
is defined in Rule&nbsp;10A-3(b)(i) under the Exchange Act and
under the NYSE Rule&nbsp;303A. In addition, one of them will be
determined to be an &#147;audit committee financial expert&#148;
as such term is defined in Item&nbsp;401(h) of
Regulation&nbsp;S-K.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our audit committee makes recommendations to our board of
directors regarding the selection of our independent auditors
and reviews the professional services provided by our
independent auditors, the independence of our auditors, the
professional fees payable to our auditors, our annual financial
statements, and our system of internal accounting procedures and
controls.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Nominating and Governance Committee</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At the time of the consummation of this offering, the nominating
and governance committee will be comprised of
Messrs.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
We intend to avail ourselves of the &#147;controlled
company&#148; exception under the New York Stock Exchange rules
which eliminates the requirement that we have a nominating and
governance committee composed entirely of independent directors.
Our nominating and governance committee identifies and
recommends nominees for election of our board of directors,
develops and recommends to our board our corporate governance
principles and oversees the evaluation of our board and
management.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Compensation Committee Interlocks and Insider
    Participation</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
None of our executive officers serves as a member of the board
of directors or compensation committee of any other company that
has one or more executive officers serving as a member of our
board of directors or compensation committee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Executive Compensation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Summary Compensation Table</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth all compensation received for
services rendered during the year ended December&nbsp;31, 2004
by our chief executive officer and our other named executive
officers whose total compensation exceeded $100,000 in such
fiscal year. These four officers are referred to as the
&#147;named executive officers&#148; in this prospectus. The
compensation described in this table does not include medical,
</DIV>

<P align="center" style="font-size: 10pt;">75

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<DIV align="left" style="font-size: 10pt;">
group life insurance or other benefits which are available
generally to all of our salaried employees. The share numbers in
the Summary Compensation Table and footnotes thereto do not
reflect the Internal Restructuring.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Summary Compensation Table</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="center" nowrap><B>Annual Compensation</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Other Annual</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>All Other</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2" align="left" nowrap><B>Name and Principal Position<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Salary&nbsp;($)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Bonus&nbsp;($)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Compensation&nbsp;($)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Compensation&nbsp;($)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR bgcolor="#CCEEFF">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    William M. Keys</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top" nowrap>421,860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR bgcolor="#CCEEFF">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chief Executive Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Carlton S. Chen</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top" nowrap>182,863</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    V.P., General Counsel and</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Secretary</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR bgcolor="#CCEEFF">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    James R.
    Battaglini<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top" nowrap>77,858</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR bgcolor="#CCEEFF">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Executive Vice President and</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR bgcolor="#CCEEFF">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chief Operating Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thomas C.
    Moore<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top" nowrap>152,788</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top" nowrap>102,181</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Former Vice President of Finance</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    and Chief Financial Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)</TD>
    <TD align="left">
    The named executive officers do not include our Chief Financial
    Officer, Richard J. Nadeau, who became our Chief Financial
    Officer as of May&nbsp;16, 2005. Mr.&nbsp;Nadeau&#146;s base
    salary for the year ending December&nbsp;31, 2005 is $250,000.
    On commencement of employment, Mr.&nbsp;Nadeau was granted
    options to purchase&nbsp;2,310&nbsp;shares of common stock at an
    exercise price of $91.00&nbsp;per share, with 513 vesting
    annually on the first, second and third anniversaries of his
    employment, and 770 vesting upon the earlier of ten years&#146;
    employment or our initial public offering.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)</TD>
    <TD align="left">
    Gen. Battaglini commenced employment on October&nbsp;1, 2004.
    His salary and bonus, if annualized, would have been greater
    than $100,000.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)</TD>
    <TD align="left">
    Mr.&nbsp;Moore was our Vice President of Finance and Chief
    Financial Officer until September&nbsp;30, 2004. Amounts shown
    under &#147;Other Annual Compensation&#148; include salary
    continuation and medical benefits received by Mr.&nbsp;Moore
    pursuant to a separation agreement and general release of claims
    dated September&nbsp;30, 2004.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Option Grants in the Last Fiscal Year</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There were no options granted to our named executive officers in
fiscal year 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Aggregated Option Exercises in Last Fiscal Year and Fiscal
Year End Option Values</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
None of our named executive officers exercised any options in
fiscal year 2004. Our named executive officers did not hold any
unexercised options to purchase our shares of our common stock
as of December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Employment Agreements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Carlton S. Chen</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On May&nbsp;21, 1998, Colt&#146;s Manufacturing entered into an
employment agreement with Carlton S. Chen to serve as a vice
president. This employment agreement was assigned to us in our
November 2002 reorganization. The agreement is for an initial
term of one year and renews automatically for successive
one-year terms, unless we provide written notice of our election
not to renew the agreement. Under his employment agreement,
Mr.&nbsp;Chen agreed to certain noncompetition provisions and
other restrictive covenants. Mr.&nbsp;Chen&#146;s base salary,
currently $206,674, is set annually by Chief Executive Officer
or our compensation committee. In addition to a base salary, he
is eligible to receive an annual performance bonus and awards
pursuant to our Management Option Incentive Plan. Mr.&nbsp;Chen
is also eligible to participate in our standard employee benefit
plans. We may terminate the agreement at any time and
Mr.&nbsp;Chen may terminate his employment upon 60&nbsp;days
prior written notice to us (or 45&nbsp;days, if we have
materially diminished his authority, duties or
responsibilities). If we fail to renew his employment agreement,
terminate Mr.&nbsp;Chen&#146;s employment without cause (as
defined in the agreement), or his employment agreement
terminates due to Mr.&nbsp;Chen&#146;s disability or death, he
(or his estate) will receive severance pay equal to one year of
salary, plus a
</DIV>

<P align="center" style="font-size: 10pt;">76
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<DIV align="left" style="font-size: 10pt;">
prorated portion of his annual performance bonus, and one year
of group health benefits. If Mr.&nbsp;Chen obtains other
employment during this severance period, his salary continuation
and health benefits will cease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Other Executive Officers</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We do not have written employment agreements with our other
named executive officers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Stock Option and Other Benefit Plans</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The share and unit numbers and exercise prices included in the
following summary of our Stock Option and Other Benefit Plans do
not reflect the Internal Restructuring.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>2003 Management Incentive Compensation Plan</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have established the 2003 Management Incentive Compensation
Plan, or 2003 Plan, to reward certain members of our management
and other employees and to encourage them to increase their
efforts on our behalf. The 2003 Plan reserved 23,074&nbsp;units
for issuance pursuant to options, plus the number of units which
remain unvested at their expiration or forfeiture.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our 2003 Plan provides for the grant of nonqualified stock
options. Our compensation committee has sole discretion to
administer and interpret the 2003 Plan. The options granted
under the 2003 Plan will carry per unit exercise prices that are
equal to the fair market value of units underlying such options
on their date of grant, vest according to a schedule determined
by our compensation committee, and expire five years following
the date of grant, subject to earlier expiration upon, or after
a specified period following, termination of employment, but not
longer than the date the options would otherwise expire under
the 2003 Plan. Upon termination of employment, we have the right
to repurchase these options at the fair market value of the
units issuable upon exercise of such option, less the
option&#146;s exercise price. Our payment for these repurchased
options may consist of a cash payment, or up to two-thirds of
the repurchase price may be paid for by a note we issue which is
repayable over two years. All unvested options become fully
vested upon (a)&nbsp;a sale of all or substantially all of our
assets resulting in net proceeds of at least $21&nbsp;million,
(b)&nbsp;our dissolution or liquidation, (c)&nbsp;any merger
where we are not the surviving entity, or (d)&nbsp;an
underwritten public offering, such as this offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with our reorganization on June&nbsp;12, 2003, a
total of 23,074 options to purchase units of Colt Defense LLC
were issued to reflect options that had been granted to
employees of New Colt under our 2002 Management Incentive
Compensation Plan, or 2002 Plan. Gen. Keys and Mr.&nbsp;Moore
received grants of options to purchase&nbsp;19,018.16&nbsp;units
and 304.3&nbsp;units, respectively, with an exercise price of
$91.00&nbsp;per unit. The grant to Gen.&nbsp;Keys was vested
immediately. One-half of Mr.&nbsp;Moore&#146;s grant was
exercisable immediately and the remaining grant vested one-half
on January&nbsp;4, 2004 and one-half on January&nbsp;4, 2005. On
June&nbsp;30, 2003, management, including Gen.&nbsp;Keys and
Mr.&nbsp;Moore, exercised 20,996 options by executing
nonrecourse notes which bear interest at the rate of 4%&nbsp;per
year and are due upon the earlier of our change in control or
June&nbsp;30, 2008. These notes have been amended to permit our
management to retire these notes by tendering units of Colt
Defense LLC immediately prior to the effective time of this
offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On December&nbsp;7, 2004, Gen. the Lord Guthrie received options
to purchase&nbsp;300&nbsp;units of Colt Defense LLC, with an
exercise price of $91.00. The options vest one-half on
January&nbsp;1, 2006 and one-half on January&nbsp;1, 2007. As of
December&nbsp;31, 2004, options to
purchase&nbsp;2,126&nbsp;units were outstanding. On
April&nbsp;12, 2005, Gen. Battaglini received a grant of options
to purchase&nbsp;2,100&nbsp;units of Colt Defense LLC and each
of Gen. Sullivan and Mr.&nbsp;Chen received options to
purchase&nbsp;300&nbsp;units, all with an exercise price of
$91.00. The grant to Mr.&nbsp;Chen vested immediately. One-third
of the grant to Gen.&nbsp;Battaglini vested immediately, with
the remaining options vesting one-half on May&nbsp;1, 2006 and
the remainder on May&nbsp;1, 2007. The grant to
Gen.&nbsp;Sullivan vests one-half on May&nbsp;1, 2006 and the
remainder on May&nbsp;1, 2007. Also on April&nbsp;12, 2005,
Gen.&nbsp;Battaglini exercised 700 of his options and
Mr.&nbsp;Chen exercised his 300 options, each by executing
nonrecourse notes which bear interest at the rate of 4% per year
and are due upon the earlier of our change of control or
April&nbsp;12, 2010. These notes have been amended to permit our
management to retire these notes by tendering units of Colt
Defense LLC immediately prior to the effective time of this
offering. In addition,
</DIV>

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<DIV align="left" style="font-size: 10pt;">
in connection with his hiring, in May 2005 we granted
Mr.&nbsp;Nadeau options to purchase&nbsp;1,540 of units of Colt
Defense LLC. These options vest over three years and have an
exercise price of $91.00&nbsp;per unit. We also granted
Mr.&nbsp;Nadeau options to purchase an additional 770&nbsp;units
that vest on the earlier of ten years&#146; employment or an
initial public offering. Upon consummation of our initial public
offering, all outstanding options in the 2003 Plan will vest.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the Internal Restructuring, options to
purchase&nbsp;6,136 of our units will automatically be converted
into options to purchase our common shares. Options already
granted under the 2003 Plan would remain outstanding in
accordance with their terms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>2005 Equity Compensation Plan</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have adopted a new 2005 Equity Compensation Plan, or 2005
Plan, to replace the 2003 Plan, although awards already granted
under the 2003 Plan will remain outstanding in accordance with
their terms. The 2005 Plan generally is to be administered by
the compensation committee of our board of directors, except
that the full board may act at any time to administer the plan,
and authority to administer any aspect of the 2005 Plan may be
delegated to an executive officer or any other person. The 2005
Plan allows the plan administrator to grant awards of shares of
our common stock or the right to receive or purchase shares of
our common stock (including options to purchase common stock,
restricted stock and stock units, bonus stock, performance
stock, and stock appreciation rights) to our employees,
directors or other persons or entities providing significant
services to us or our subsidiaries, and further provides the
plan administrator the authority to reprice outstanding stock
options or other awards. The actual terms of an award, including
the number of shares of common stock relating to the award, any
exercise or purchase price, any vesting, forfeiture or transfer
restrictions, the time or times of exercisability for or
delivery of shares of common stock are to be determined by the
plan administrator and set forth in a written award agreement
with the participant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The aggregate number of shares of our common stock for which
awards may be granted under the 2005 Plan cannot
exceed &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of the number of shares
of our common stock issued and outstanding at the time any award
is granted; provided, however, that no more
than &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock may be issued upon the exercise of incentive
stock options. Awards made under the 2005 Plan that have been
forfeited (including our repurchase of shares of common stock
subject to an award for the price, if any, paid to us for such
shares of common stock, or for their par value), cancelled or
have expired will not be treated as having been granted for
purposes of the preceding sentence. Unless otherwise provided in
an award agreement, all unvested awards become fully vested, and
all performance conditions will lapse, upon a termination of the
grantee&#146;s employment by reason of the grantee&#146;s death,
disability or retirement, except that certain performance-based
awards will only vest based on the number of days completed in
the applicable performance period (as of the date of
termination).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The 2005 Plan permits the plan administrator to make an
equitable adjustment to the number, kind and exercise price per
share of awards in the event of our recapitalization,
reorganization, merger, spin-off, share exchange, dividend of
common stock, liquidation, dissolution or other similar
transaction or events. In addition, the plan administrator may
make adjustments in the terms and conditions of any awards in
recognition of any unusual or nonrecurring events. Our board of
directors may, at any time, alter, amend, suspend or discontinue
the 2005 Plan. The 2005 Plan will automatically terminate ten
years after it has been most recently approved by our
stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Salaried Retirement Income Plan</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We maintain the Colt Defense LLC Salaried Retirement Income
Plan, or the Retirement Plan, a cash balance pension plan,
intended to be qualified under Section&nbsp;401(a) of the
Internal Revenue Code, which is available for all of our
employees other than those whose terms and conditions of
employment are covered by a collective bargaining agreement. Our
named executive officers participate on the same basis as all of
our other non-union employees.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Retirement Plan expresses benefits as a hypothetical account
balance established in each participant&#146;s name. A
participant&#146;s hypothetical account balance is equal to the
sum of their annual benefit credits and interest credits. Each
participant&#146;s annual benefit credit, for each plan year in
which they are actively employed is determined by multiplying a
participant&#146;s eligible annual compensation by a percentage,
which is based upon the participant&#146;s years of credited
service on or after March&nbsp;23, 1990, with us and our
predecessors as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="78%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Benefit Credit</B></TD><TD></TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Years of Credited Service</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percentage</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less than 5&nbsp;years</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    5 but less than 10&nbsp;years</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.25</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10 or more years</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Compensation for this purpose generally includes salary but
excludes bonuses and other extra compensation shown in the
summary compensation table and is subject to the compensation
limit applicable to tax-qualified plans ($205,000 for 2004). The
maximum annual benefit under a tax-qualified pension plan is
$165,000 for 2004, if payable beginning at the Social Security
retirement age. Interest credits are accumulated on each
participant&#146;s (both active employees and terminated vested
employees) account balance at an annual rate equal to 6.5%,
credited monthly, compounded annually. At termination of
employment after having completed at least five years of
service, a participant will be eligible to receive the amount
then credited to the participant&#146;s cash balance account in
an actuarially equivalent life annuity. The participant may also
choose from other actuarially equivalent forms of benefit. As of
January&nbsp;1, 2005, the named executive officers had the
following years of credited service: Gen. Keys, 5.25&nbsp;years;
Mr.&nbsp;Chen, 7.50&nbsp;years; Gen.&nbsp;Battaglini,
0.33&nbsp;years; and Mr.&nbsp;Moore, 2.75&nbsp;years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Estimated Annual Benefits Payable to Named Executive Officers.
The following table provides the estimated annual benefits from
the Retirement Plan, payable as a life annuity commencing at
normal retirement age (age&nbsp;65), or as of January&nbsp;1,
2005 if older, for each of our named executive officers. These
estimates assume that the named executive officers&#146;
eligible compensation and regulatory limits on compensation and
benefits remain constant through normal retirement age (or
January&nbsp;1, 2005, if older). The estimates use the
Retirement Plan&#146;s interest rate, 6.5%, for purposes of
calculating the projected interest credits.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="78%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Annual Benefit</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    William M. Keys</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top" nowrap>4,217</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Carlton S. Chen</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top" nowrap>24,936</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    James R. Battaglini</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top" nowrap>10,543</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thomas C. Moore*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top" nowrap>0</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>*</TD>
    <TD align="left">
    Mr.&nbsp;Moore terminated his employment with us on
    September&nbsp;30, 2004, without becoming vested in his cash
    balance account.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">79
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<DIV align="left" style="font-size: 10pt;">
<A name='115'></A>
</DIV>

<!-- link1 "CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The share and unit numbers and exercise prices included in the
following summary of Certain Relationships and Related Party
Transactions do not give effect to the Internal Restructuring.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Transactions in Connection with Internal Restructuring</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Immediately prior to the effectiveness of the registration
statement of which this prospectus is a part, we will complete a
series of transactions in connection with our Internal
Restructuring. The principal Internal Restructuring
transactions, to be effective pursuant to the terms of our
Internal Restructuring Agreement, are summarized below:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Members of Colt Defense LLC who have issued Stockholder
    Promissory Notes will satisfy notes by surrendering units of
    Colt Defense LLC equal to the amount due at the time of payment.
    Transactions with Affiliates Involving Securities&#148; for
    information regarding the Stockholder Promissory Notes.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    All members of Colt Defense LLC (other than the Plan Holding
    Corp.) will contribute all of their membership interests in Colt
    Defense LLC to us in exchange for shares of our common stock,
    Restructuring Notes in an aggregate principal amount of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
    and the right to participate in the over-allotment option.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Colt Defense Employee Profit Sharing Plan, or Colt Defense
    Sharing Plan, which owns all of the outstanding shares of stock
    of Plan Holding Corp., will contribute all of the shares of
    common stock of Plan Holding Corp. to Colt Defense LLC in
    exchange for shares of our common stock, Restructuring Notes in
    the aggregate principal amount of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
    the right to participate in the over-allotment option.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    If the underwriters exercise their over-allotment option to
    purchase additional shares of common stock from us, the cash to
    be paid to our existing stockholders in the Internal
    Restructuring will be increased by the proceeds to us of any
    additional shares sold to the underwriters, after deducting
    underwriting discounts and commissions.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    If the underwriters do not exercise their over-allotment option
    in full, then the aggregate number of shares of common stock
    that we will issue to our existing stockholders in the Internal
    Restructuring will be increased by the number of shares subject
    to the over-allotment option that are not purchased by the
    underwriters.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    On the closing date of this offering, we will use
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
    the net proceeds from this offering to repay the Restructuring
    Notes in full. The aggregate principal amount of the
    Restructuring Notes and accrued interest thereon will be equal
    to
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
    the net proceeds from this offering.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The transactions described above will be effected pursuant to an
Internal Restructuring Agreement to be dated as
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005 among us, Colt Defense LLC and its members. The Internal
Restructuring Agreement will be approved by our Board of
Directors and the Board of Directors of Colt Defense LLC, and
the governing bodies of the other parties to the agreement prior
to the consummation of the Internal Reorganization. Prior to
such time, our board of directors will also approve the
issuances of shares of our common stock pursuant to the terms of
the agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Consummation of the transactions contemplated in the Internal
Restructuring Agreement is a condition to the closing of this
offering. The closing under the Internal Restructuring is
conditioned upon, among others, (1)&nbsp;the approval of our
lenders to amend our credit facility to permit the Internal
Restructuring, and (2)&nbsp;the absence of any law, regulation,
injunction or order prohibiting the consummation of the Internal
Restructuring.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Internal Restructuring Agreement will provide that each Colt
Defense LLC member (including the management members) who will
receive shares of our common stock as a result of the Internal
Restructuring has agreed to release us and our past, present and
future affiliates from any and all claims such member may have
against Colt Defense LLC relating to events occurring prior to
the closing. We, in turn, will agree to
</DIV>

<P align="center" style="font-size: 10pt;">80
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<DIV align="left" style="font-size: 10pt;">
indemnify the members of Colt Defense LLC (including the
management members) with respect to any action which may be
brought against any member by reason of the fact that the member
was a member, managing member, executive, director or officer of
Colt Defense LLC prior to the closing of the Internal
Restructuring, other than with respect to any acts committed in
bad faith or that were the result of active and deliberate
dishonesty or from which the member gained financial profit or
another advantage to which the member was not legally entitled.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Reorganization</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Overview</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to November 2002, our business operated as a division of
Colt&#146;s Manufacturing, which was a wholly owned subsidiary
of New Colt and controlled by individuals associated with Sciens
Capital Management. Colt&#146;s Manufacturing and New Colt also
operated a commercial firearm business. As part of a strategy to
streamline the operations of both businesses, to allow the
businesses to focus on core customers, to facilitate the
development and execution of business opportunities by each
business, and to optimize financing alternatives, New Colt and
Colt&#146;s Manufacturing formed Colt Defense LLC to own and
operate our business. On November&nbsp;4, 2002, New Colt,
Colt&#146;s Manufacturing and Colt Defense LLC signed an asset
contribution agreement providing for the acquisition by Colt
Defense LLC of substantially all the assets and the assumption
by it of certain of the liabilities associated with New
Colt&#146;s and Colt&#146;s Manufacturing&#146;s defense and law
enforcement business. This was the first step of a two-step
reorganization process to create two legally separate companies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Subsequently, in a series of transactions, the second step of
the reorganization was consummated whereby the limited liability
interests in Colt Defense LLC were distributed pro rata to the
stockholders of New Colt. In connection with the reorganization,
certain stockholders, warrantholders and optionholders
contributed their interests in Colt Defense LLC to a holding
company, Colt Defense Holding LLC. Colt&#146;s Manufacturing and
Colt Defense LLC have been operating as legally separate
businesses since November 2002. The objective of the second step
was to further separate the companies and increase financing
opportunities. The primary agreements entered into in connection
with the reorganization are described below.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Asset Contribution Agreement</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the November&nbsp;4, 2002 asset contribution agreement,
New Colt and Colt&#146;s Manufacturing contributed their defense
and law enforcement business to Colt Defense LLC, which agreed
to acquire substantially all of the assets and liabilities of
such business. The asset contribution agreement contains
customary representations and warranties, covenants and other
agreements and provides for indemnification for losses relating
to specified events, circumstances or matters. Colt&#146;s
Manufacturing and New Colt have agreed to indemnify us from
certain liabilities, including: (1)&nbsp;any losses or damages
arising from the inaccuracy or breach of any representation or
warranty of Colt&#146;s Manufacturing and New Colt contained in
the asset contribution agreement or certain ancillary agreements
entered into in connection with this transaction;
(2)&nbsp;certain liabilities retained by Colt&#146;s
Manufacturing and New Colt, regardless of whether the
liabilities arise before or after the contribution date,
including environmental, health, safety and/or products
liability relating to Colt&#146;s Manufacturing&#146;s or New
Colt&#146;s operations; and (3)&nbsp;any liability arising out
of the ownership of the assets contributed to us or our business
prior to the contribution date, other than liabilities we
specifically assumed. We are required to indemnify Colt&#146;s
Manufacturing and New Colt and their respective affiliates from
liabilities arising from certain specified matters, including
the inaccuracy or breach of any representation or warranty of
Colt Defense LLC, the liabilities designated as &#147;Assumed
Liabilities&#148; under the asset contribution agreement and
liabilities arising out of the ownership or operation of our
business by us after the date of contribution, except for
liabilities designated as &#147;Retained Liabilities&#148; under
the asset contribution agreement.
</DIV>

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<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Sublicensing Agreement</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the reorganization, Colt Defense LLC entered
into a sublicensing agreement with Colt&#146;s Manufacturing on
November&nbsp;4, 2002 whereby Colt&#146;s Manufacturing licensed
certain Colt trademarks to Colt Defense LLC, including the Colt
brand name, in return for specified royalties. We paid
Colt&#146;s Manufacturing a total of $4.25&nbsp;million under
this agreement. This agreement terminated on December&nbsp;31,
2003. See &#147;&#151;&nbsp;Match Target&#174; Agreements.&#148;
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Services Agreement</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On November&nbsp;4, 2002, we entered into a services agreement
with Colt&#146;s Manufacturing, under which we agreed to provide
certain services (including corporate services, direct
manufacturing services, and indirect manufacturing services) to
Colt&#146;s Manufacturing, in return for specified payments.
Colt&#146;s Manufacturing paid us a total of $1.98&nbsp;million
under this agreement. This agreement was terminated by the
parties on June&nbsp;11, 2003. See &#147;&#151;&nbsp;Management
Services Agreement.&#148;
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Inducement Agreement</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On June&nbsp;12, 2003, in connection with the entry into an
amended and restated limited liability company agreement of Colt
Defense LLC, Colt Defense LLC and the Connecticut Development
Authority entered into an inducement agreement whereby Colt
Defense LLC agreed to abide by certain covenants (including
informational requirements and an agreement not to relocate
outside of Connecticut that has since expired) and to enter into
a registration rights agreement with the Connecticut Development
Authority to induce the Connecticut Development Authority to
enter into such amended and restated limited liability company
agreement and to accept certain units and warrants under the
distribution agreement. See
&#147;&#151;&nbsp;Reorganization&nbsp;&#151; Distribution
Agreement&#148; and &#147;&#151;&nbsp;2003 Registration Rights
Agreement.&#148;
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>2003 Registration Rights Agreement</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In satisfaction of one of the conditions of the inducement
agreement, Colt Defense LLC entered into a registration rights
agreement with the Connecticut Development Authority on
June&nbsp;12, 2003, pursuant to which Colt Defense LLC agreed to
register certain of its registrable securities (as defined in
such registration rights agreement) under certain circumstances.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Demand Registration.</I> The Connecticut Development
Authority has one demand registration right, which it can
exercise one year after this offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Piggy-back Rights.</I> If we file a registration statement
for an offering of any of our securities for ourselves or for
our security holders other than the Connecticut Development
Authority, we must offer the Connecticut Development Authority
the opportunity to register its registrable securities in such
offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Conditions and Limitations; Expenses.</I> The registration
rights of the Connecticut Development Authority are subject to
certain conditions and limitations, including the right of the
underwriters to limit the number of shares to be included in a
registration and our right to delay or withdraw a registration
statement under certain circumstances. We will pay all
registration expenses in connection with a demand registration,
except for the underwriting discounts and commissions, which
will be paid by the Connecticut Development Authority.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Distribution Agreement</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On June&nbsp;12, 2003, New Colt, Colt Defense Holding LLC, Colt
Defense Employee Plan Holding Corp., Colt Defense LLC and
certain stockholders, warrantholders and optionholders of New
Colt entered into a distribution agreement whereby Colt Defense
LLC issued to New Colt certain company units, warrants and
options, and New Colt distributed (1)&nbsp;such company units to
certain stockholders or their designees in partial redemption of
the common stock held by them in New Colt, (2)&nbsp;such company
warrants to certain warrantholders or their designees in partial
redemption of the warrants held by them in New Colt and
(3)&nbsp;such company options to certain optionholders in
partial redemption of the options held by them in New
</DIV>

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<DIV align="left" style="font-size: 10pt;">
Colt. As a result of this agreement, Colt Defense Holding LLC,
as designee of a number of the stockholders, warrantholders and
optionholders, became the majority member of Colt Defense LLC.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Sublease Agreement</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the asset contribution agreement, Colt&#146;s
Manufacturing assigned to Colt Defense LLC a lease with Coltec
Industries Inc. relating to the property in West Hartford,
Connecticut, on which Colt Defense LLC&#146;s headquarters and
manufacturing facility are located. See
&#147;Business&nbsp;&#151; Our Properties.&#148; Colt&#146;s
Manufacturing and Colt Defense LLC entered into a sublease
agreement on June&nbsp;12, 2003, under which Colt Defense LLC
subleased a portion of such property to Colt&#146;s
Manufacturing until December&nbsp;21, 2006, in return for
monthly rental payments of $13,400.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Management Services Agreement</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Colt Defense LLC entered into a management services agreement
with Colt&#146;s Manufacturing on June&nbsp;12, 2003, under
which we received fees and reimbursement of expenses for
providing management services (including corporate services,
direct manufacturing services, and indirect manufacturing
services) to Colt&#146;s Manufacturing. Colt&#146;s
Manufacturing owed us approximately $2.0&nbsp;million under this
agreement, but paid us only $132,000. We wrote off the balance
in 2003 of approximately $1.9&nbsp;million as uncollectible.
This agreement terminated on June&nbsp;30, 2004. Notwithstanding
the termination of this agreement, we continue to provide
certain accounting and other administrative services at no
charge to Colt&#146;s Manufacturing. We intend to terminate
these services prior to the consummation of this offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Distributions to Members of Colt Defense LLC</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since its formation in November 2002, Colt Defense LLC has made
periodic distributions of profits to its members. The amounts of
these distributions totaled $3.9&nbsp;million for 2003 and
$11.4&nbsp;million in 2004. In addition, since its
reorganization in June 2003, Colt Defense LLC has made periodic
distributions to its members, on dates and in amounts calculated
in accordance with its governing documents, sufficient to enable
its members to pay their estimated income tax liability
associated with their holdings in Colt Defense LLC. The amounts
of these distributions totaled $3.9&nbsp;million for 2004 and
$1.1&nbsp;million during the first four months of 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At the closing of our senior secured credit facility in May
2005, Colt Defense LLC paid a further special distribution of
$16.1&nbsp;million to its members. This special distribution was
funded by borrowings under our senior secured credit facility.
In addition, prior to the consummation of this offering and the
Internal Restructuring, Colt Defense LLC will pay distributions
in an aggregate amount of approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
to its owners of common units, to pay their allocable portion of
taxes on its profits up to the date of our Internal
Restructuring.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Match Target&#174; Agreements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Colt Defense LLC entered into an agreement, dated as of
December&nbsp;19, 2003, but effective as of January&nbsp;1,
2004, with Colt&#146;s Manufacturing, pursuant to which Colt
Defense LLC transferred its commercial Match Target&#174; rifle
business (including its inventories, open purchase orders,
customer data, deposits and prepayments relating to consumer or
commercial purchases of Match Target&#174; rifles) to
Colt&#146;s Manufacturing, and Colt&#146;s Manufacturing agreed
to assume certain liabilities in connection with the Match
Target&#174; business (including liabilities for outstanding
orders, warranty liability, and liabilities with respect to the
ongoing operations of the Match Target&#174; business). This
agreement also provides that we will supply Match Target&#174;
rifles to Colt&#146;s Manufacturing for such period as agreed
with Colt&#146;s Manufacturing. We sold approximately $436,000
of Match Target&#174; rifles to Colt&#146;s Manufacturing in
2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Colt Defense LLC entered into a license agreement with New Colt
for the use of certain Colt trademarks on December&nbsp;19,
2003, but effective as of January&nbsp;1, 2004. This license
agreement replaced Colt Defense LLC&#146;s sublicense agreement
with Colt&#146;s Manufacturing for the same trademarks. Under
the terms of this license agreement, Colt Defense LLC received a
20-year, paid-up, sublicensable license to use the specified
</DIV>

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<DIV align="left" style="font-size: 10pt;">
Colt trademarks until December&nbsp;31, 2023. Thereafter, the
license agreement may be extended for successive five-year
periods upon payment of $250,000 for each five-year period.
Consideration for the initial term of the license agreement
included the transfer to Colt&#146;s Manufacturing of our Match
Target&#174; rifles line of business inventories of $18,000 and
a cash payment of $2.0&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Rapid Mat</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March&nbsp;1, 2005, we provided a secured line of credit of
up to $300,000 to Rapid Mat, LLC and Rapid Mat US, LLC, or the
Rapid Mat Entities collectively. John&nbsp;P. Rigas, a member of
our board of directors and a managing member of Sciens Capital
Management owns a portion of the membership interests in the
Rapid Mat Entities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The interest rate for borrowings under the line of credit is
10%&nbsp;per year. The line of credit matured on April&nbsp;15,
2005. The Rapid Mat Entities did not repay the loan when it
matured. As a result, we commenced action to foreclose on their
properties and assets. We assigned the loan and collateral to
our wholly owned subsidiary, Colt Rapid Mat LLC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Management Agreements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have entered into agreements with Sciens Management, an
affiliate of Sciens Capital Management, whereby Sciens
Management agreed to provide us investment banking, corporate
and strategic advisory services. John P. Rigas, one of our
directors, is a partner and the sole manager and unit holder of
Sciens Management. Under the terms of these agreements, we
incurred annual advisory fees of $126,000 in 2002, $162,000 in
2003 and $250,000 in 2004, as well as reimbursements of expenses
of $111,000 in 2003 and $189,000 in 2004. We made additional
payments to Sciens Management of $415,000 in 2003 and $666,000
in 2004 for special financial advisory services. The current
agreement with Sciens Management (1)&nbsp;commenced on
January&nbsp;1, 2004, (2)&nbsp;provides for an annual retainer
of $250,000 and (3)&nbsp;terminates on December&nbsp;31, 2008.
At Sciens Management&#146;s option, it may elect to receive its
fee in securities of our company. We agreed to indemnify Sciens
Management for losses relating to the services contemplated by
this agreement. Upon consummation of this offering we will pay
Sciens Management a termination fee of $1.0&nbsp;million to
terminate the current agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In May 2005, we paid Sciens Management an advisory and
arrangement fee of $675,000 for its services in connection with
our acquisition of Colt Canada and the arrangement of our senior
secured credit facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>2005 Registration Rights Agreement</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On June&nbsp;2, 2005, we entered into a registration rights
agreement with Colt Defense Holding LLC, certain of our
employees and certain other holders of our registrable
securities, which we collectively refer to as the Holders
herein, pursuant to which we agreed to register certain of their
registrable securities (as defined therein) under certain
circumstances.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Demand Registration.</I> The Holders have two&nbsp;(2)
long-form demand registration rights and three&nbsp;(3)
short-form demand registration rights, which they can exercise
six months after this offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Piggy-back Rights.</I> If we file a registration statement
for an offering of any of our securities for ourselves or for
our security holders other than the Holders, we must offer the
Holders the opportunity to register their registrable securities
in such offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Conditions and Limitations; Expenses.</I> The registration
rights of the Holders are subject to certain conditions and
limitations, including the right of the underwriters to limit
the number of shares to be included in a registration and our
right to delay or withdraw a registration statement under
certain circumstances. We will pay all registration expenses in
connection with a demand registration, except for the
underwriting discounts and commissions, which will be paid pro
rata by the Holders.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Transactions with Affiliates Involving Securities</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In lieu of payment for certain obligations, Colt Defense LLC
issued promissory notes, dated June&nbsp;16, 2003, to each of
Sciens Management and three other affiliates of Colt Defense
LLC&#146;s controlling members, in the aggregate amount of
$1.2&nbsp;million. In connection with this transaction, Colt
Defense LLC issued to Colt Defense Holding LLC warrants to
purchase&nbsp;7,080 of its common units at an exercise price of
$120.00&nbsp;per unit. These promissory notes were repaid in
January 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On June&nbsp;30, 2003, a number of warrantholders and
optionholders (including certain affiliates of Sciens Management
and certain of our named executive officers) exercised their
warrants and vested options, respectively, and Colt Defense LLC
issued an aggregate of 107,212 common units to them. Both the
warrantholders and the employees exercising their vested options
executed Secured Non-Recourse Promissory Notes, or Stockholder
Promissory Notes, in an aggregate amount of approximately
$9.7&nbsp;million, maturing on June&nbsp;30, 2008, secured by
their newly issued units, in lieu of payment of the exercise
price.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In March 2005, Colt Defense LLC issued 6,126 common units to
certain of its investors in connection with the exercise of
certain warrants. Such investors (who included certain
affiliates of Sciens Management and certain of our named
executive officers) executed Stockholder Promissory Notes in an
aggregate amount of $557,466, maturing on March&nbsp;29, 2010,
secured by their newly issued units, in lieu of payment of the
exercise price. Immediately prior to the Internal Restructuring,
the investors who issued the Stockholder Promissory Notes will
exchange a number of units of Colt Defense LLC equal to the
amount due under the Stockholder Promissory Notes for payment in
full of the Stockholder Promissory Notes.
</DIV>

<P align="center" style="font-size: 10pt;">85

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='116'></A>
</DIV>

<!-- link1 "PRINCIPAL STOCKHOLDERS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PRINCIPAL STOCKHOLDERS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following and accompanying footnotes show information
regarding the beneficial ownership of our common stock before
and after this offering, for:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    each person who is known by us to own beneficially more than 5%
    of our common stock;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    each member of our board of directors and each of our named
    executive officers;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    all members of our board of directors and our executive offers
    as a group.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The number of shares outstanding and percentage of beneficial
ownership before the offering set forth below is based on the
number of shares of our common stock to be issued and
outstanding immediately prior to the effectiveness of the
registration statement of which this prospectus is a part after
giving effect to the Internal Restructuring. The number of
shares and percentage of beneficial ownership after the offering
set forth below is based on shares of our common stock to be
issued and outstanding immediately after this offering, giving
effect to the issuance
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock to our existing stockholders that will occur if
the underwriters do not exercise any portion of their
over-allotment option. The number of shares issued will decrease
to the extent the underwriters exercise their over-allotment
option.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To our knowledge, each person named in the table has sole voting
and investment power with respect to all of the shares of our
common stock shown as beneficially owned by such person, except
as otherwise set forth in the notes to the table. The number of
shares shown represents the number of shares of common stock the
person &#147;beneficially owns,&#148; as determined by the rules
of the SEC. The SEC has defined &#147;beneficial&#148; ownership
of a security to mean the possession, directly or indirectly, of
voting power and/or investment power. A stockholder is also
deemed to be, as of any date, the beneficial owner of all
securities that such stockholder has the right to acquire within
60&nbsp;days after that date through (a)&nbsp;the exercise of
any option, warrant or right, (b)&nbsp;the conversion of a
security, (c)&nbsp;the power to revoke a trust, discretionary
account or similar arrangement, or (d)&nbsp;the automatic
termination of a trust, discretionary account or similar
arrangement. Except as otherwise set forth below, the street
address of the beneficial owner is c/o&nbsp;Colt Defense Inc.,
547&nbsp;New Park Avenue, West Hartford, Connecticut 06110.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="46%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Shares Beneficially Owned</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>After Offering</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Assuming the</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Assuming the</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Underwriters&#146;</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Underwriters&#146;</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Shares Beneficially</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Over-allotment</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Over-allotment</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Owned Prior to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Option Is Not</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Option Is</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Offering</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Exercised</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Exercised in Full</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Name and Address</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>5% Stockholders:</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Colt Defense Holding LLC</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD align="left" valign="top" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Connecticut Development Authority</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD align="left" valign="top" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Directors and
    Officers:<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    William M. Keys</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    John P. Rigas</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD align="left" valign="top" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Lord Guthrie of Craigiebank</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD align="left" valign="top" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gordon R. Sullivan</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD align="left" valign="top" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(6)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    John R. Torell&nbsp;III</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Philip A. Wheeler</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    James R. Battaglini</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD align="left" valign="top" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(7)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Carlton S. Chen</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thomas C. Moore</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>All executive officers and directors as a group (nine
    persons).</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">86
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<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>*&nbsp;</TD>
    <TD align="left">
    Represents less than 1% of the number of shares of common stock
    outstanding.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)</TD>
    <TD align="left">
    Colt Defense Holding LLC, or CDH, is the direct beneficial owner
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock included in this table. Sciens Management is the
    managing member of CDH. Sciens Management disclaims beneficial
    ownership of the shares of common stock owned by CDH, except to
    the extent of its indirect pecuniary interest therein. John P.
    Rigas is the managing member of Sciens Management and its sole
    unit holder. Under applicable law, Mr.&nbsp;Rigas and his spouse
    may be deemed to be the beneficial owners of the securities of
    owned of record by CDH by virtue of such status. Each of
    Mr.&nbsp;Rigas and Mr.&nbsp;Rigas&#146; spouse disclaims
    beneficial ownership of all shares of common stock owned by CDH,
    except to extent of their respective indirect pecuniary interest
    therein. The address of CDH is c/o&nbsp;Sciens Capital
    Management, 667 Madison Avenue, New York, New York 10021.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)</TD>
    <TD align="left">
    The address of the Connecticut Development Authority is 999 West
    Street, Rocky Hill, Connecticut 06067.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)</TD>
    <TD align="left">
    The named executive officers do not include our Chief Financial
    Officer, Richard J. Nadeau, who became our Chief Financial
    Officer as of May&nbsp;16, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(4)</TD>
    <TD align="left">
    Mr.&nbsp;Rigas is the managing and sole member of Sciens
    Management. Sciens Management is the managing member of CDH
    which holds shares of our common stock. Pursuant to certain
    agency agreements among Sciens Management, Colt Defense LLC and
    certain of our stockholders, Sciens Management may be deemed to
    beneficially
    own &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of our common stock. In his capacity as managing member of
    Sciens Management, under applicable securities laws,
    Mr.&nbsp;Rigas may be deemed the beneficial owner of the shares
    of common stock held by CDH and, pursuant to the agency
    agreements, certain other stockholders. Mr.&nbsp;Rigas, however,
    disclaims beneficial ownership of these shares of our common
    stock, except to the extent of his pecuniary interest therein.
    The address for Mr.&nbsp;Rigas is c/o&nbsp;Sciens Capital
    Management, L.P., 667 Madison Avenue, New York, New York 10021.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(5)</TD>
    <TD align="left">
    Includes &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common
    shares which could be acquired upon the exercise of options
    which will vest upon completion of this offering.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(6)</TD>
    <TD align="left">
    Includes &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common
    shares which could be acquired upon the exercise of options
    which will vest upon completion of this offering.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(7)</TD>
    <TD align="left">
    Includes &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common
    shares which could be acquired upon the exercise of options
    which will vest upon completion of this offering.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">87

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<DIV align="left" style="font-size: 10pt;">
<A name='117'></A>
</DIV>

<!-- link1 "DESCRIPTION OF CAPITAL STOCK" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DESCRIPTION OF CAPITAL STOCK</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>The following is a description of the material terms of our
restated certificate of incorporation and amended and restated
bylaws as each is in effect as of the completion of this
offering, copies of which have been filed as exhibits to the
registration statement of which this prospectus forms a part.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Authorized Capitalization</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our authorized capital stock consists of
(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock, par value $.01&nbsp;per share, of
which &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
are currently issued and outstanding, and
(2)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of preferred stock, par value $.01&nbsp;per share, of which no
shares are currently issued and outstanding. Immediately
following the completion of this offering, there are expected to
be &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock, and no shares of preferred stock, outstanding.
This information gives effect to the Internal Restructuring.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Common Stock</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Voting Rights.</I> Holders of common stock are entitled to
one vote per share on all matters to be voted upon by the
stockholders. The holders of common stock do not have cumulative
voting rights in the election of directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Dividend Rights.</I> Holders of common stock are entitled to
receive ratably dividends if, as and when dividends are declared
from time to time by our board of directors out of funds legally
available for that purpose, after payment of dividends required
to be paid on outstanding preferred stock, as described below,
if any. Our credit facility imposes restrictions on our ability
to declare dividends with respect to our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Liquidation Rights.</I> Upon liquidation, dissolution or
winding up, any business combination or a sale or disposition of
all or substantially all of the assets, the holders of common
stock are entitled to receive ratably the assets available for
distribution to the stockholders after payment of liabilities
and accrued but unpaid dividends and liquidation preferences on
any outstanding preferred stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Other Matters.</I> The common stock has no preemptive or
conversion rights and is not subject to further calls or
assessment by us. There are no redemption or sinking fund
provisions applicable to the common stock. All outstanding
shares of our common stock, including the common stock offered
in this offering, are fully paid and nonassessable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Preferred Stock</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our restated certificate of incorporation authorizes our board
of directors to establish one or more series of preferred stock
and to determine, with respect to any series of preferred stock,
the terms and rights of that series, including:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the designation of the series;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the number of shares of the series, which our board may, except
    where otherwise provided in the preferred stock designation,
    increase or decrease, but not below the number of shares then
    outstanding;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    whether dividends, if any, will be cumulative or noncumulative
    and the dividend rate of the series;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the dates at which dividends, if any, will be payable;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the redemption rights and price or prices, if any, for shares of
    the series;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the terms and amounts of any sinking fund provided for the
    purchase or redemption of shares of the series;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the amounts payable on shares of the series in the event of any
    voluntary or involuntary liquidation, dissolution or winding-up
    of the affairs of our company;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">88
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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    whether the shares of the series will be convertible into shares
    of any other class or series, or any other security, of our
    company or any other corporation, and, if so, the specification
    of the other class or series or other security, the conversion
    price or prices or rate or rates, any rate adjustments, the date
    or dates as of which the shares will be convertible and all
    other terms and conditions upon which the conversion may be made;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    restrictions on the issuance of shares of the same series or of
    any other class or series;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the voting rights, if any, of the holders of the series.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Antitakeover Effects of Certain Provisions of Our Certificate
of Incorporation and Bylaws</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain provisions of our restated certificate of incorporation
and amended and restated bylaws, which are summarized in the
following paragraphs, may have an antitakeover effect and may
delay, defer or prevent a tender offer or takeover attempt that
a stockholder might consider in its best interest, including
those attempts that might result in a premium over the market
price for the shares held by stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Classified Board</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our restated certificate of incorporation provides that our
board of directors will be divided into three classes of
directors, with the classes to be as nearly equal in number as
possible. As a result, approximately one-third of our board of
directors will be elected each year. The classification of
directors will have the effect of making it more difficult for
stockholders to change the composition of our board. Our
restated certificate of incorporation and amended and restated
bylaws provide that the number of directors will be fixed from
time to time exclusively pursuant to a resolution adopted by the
board, but must consist of not less
than &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;or
more
than &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Removal of Directors; Vacancies</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the Delaware General Corporation Law, or DGCL, unless
otherwise provided in our restated certificate of incorporation,
directors serving on a classified board may be removed by the
stockholders only for cause. Our restated certificate of
incorporation and amended and restated bylaws provide that
directors may be removed only for cause and only upon the
affirmative vote of holders of at least 80% of the voting power
of all the then outstanding shares of stock entitled to vote
generally in the election of directors, voting together as a
single class. In addition, our restated certificate of
incorporation and amended and restated bylaws also provide that
any vacancies on our board of directors will be filled only by
the affirmative vote of a majority of the remaining directors,
although less than a quorum.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>No Cumulative Voting</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The DGCL provides that stockholders are not entitled to the
right to cumulate votes in the election of directors unless our
certificate of incorporation provides otherwise. Our restated
certificate of incorporation does not expressly provide for
cumulative voting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>No Stockholder Action by Written Consent; Calling of
Special Meetings of Stockholders</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our restated certificate of incorporation prohibits stockholder
action by written consent. It also provides that special
meetings of our stockholders may be called only by the chairman
of our board or the President or Secretary at the direction of
the board of directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Advance Notice Requirements for Stockholder Proposals and
Director Nominations</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our amended and restated bylaws provide that stockholders
seeking to nominate candidates for election as directors or to
bring business before an annual meeting of stockholders must
provide timely notice of their proposal in writing to the
corporate secretary.
</DIV>

<P align="center" style="font-size: 10pt;">89

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Generally, to be timely, a stockholder&#146;s notice must be
received at our principal executive offices not less than
90&nbsp;days nor more than 120&nbsp;days prior to the first
anniversary date of the previous year&#146;s annual meeting. Our
amended and restated bylaws also specify requirements as to the
form and content of a stockholder&#146;s notice. These
provisions may impede stockholders&#146; ability to bring
matters before an annual meeting of stockholders or make
nominations for directors at an annual meeting of stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Supermajority Provisions</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The DGCL provides generally that the affirmative vote of a
majority of the outstanding shares entitled to vote is required
to amend a corporation&#146;s certificate of incorporation or
bylaws, unless the certificate of incorporation requires a
greater percentage. Our restated certificate of incorporation
provides that the following provisions in the certificate of
incorporation and bylaws may be amended only by a vote of at
least 80% of the voting power of all of the outstanding shares
of our stock entitled to vote:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    classified board (the election and term of directors);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the prohibition on stockholder action by written consent;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the ability to call a special meeting of stockholders being
    vested solely in our board of directors and the chairman of our
    board;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the advance notice requirements for stockholder proposals and
    director nominations;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the amendment provision requiring that the above provisions be
    amended only with an 80% supermajority vote.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, our restated certificate of incorporation grants
our board of directors the authority to amend and repeal our
amended and restated bylaws without a stockholder vote in any
manner not inconsistent with the laws of the State of Delaware
or our restated certificate of incorporation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Limitations on Liability and Indemnification of Officers and
Directors</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The DGCL authorizes corporations to limit or eliminate the
personal liability of directors to corporations and their
stockholders for monetary damages for breaches of
directors&#146; fiduciary duties. Our restated certificate of
incorporation includes a provision that eliminates the personal
liability of directors for monetary damages for actions taken as
a director, except for liability:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    for breach of duty of loyalty;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    for acts or omissions not in good faith or involving intentional
    misconduct or knowing violation of law;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    under Section&nbsp;174 of the DGCL (unlawful dividends);&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    for transactions from which the director derived improper
    personal benefit.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our restated certificate of incorporation and amended and
restated bylaws provide that we must indemnify our directors and
officers to the fullest extent authorized by the DGCL. We are
also expressly authorized to carry directors&#146; and
officers&#146; insurance providing indemnification for our
directors, officers and certain employees for some liabilities.
We believe that these indemnification provisions and insurance
are useful to attract and retain qualified directors and
executive officers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The limitation of liability and indemnification provisions in
our restated certificate of incorporation and amended and
restated bylaws may discourage stockholders from bringing a
lawsuit against directors for breach of their fiduciary duty.
These provisions may also have the effect of reducing the
likelihood of derivative litigation against directors and
officers, even though such an action, if successful, might
otherwise benefit us and our stockholders. In addition, your
investment may be adversely affected to the extent we pay the
costs of settlement and damage awards against directors and
officers pursuant to these indemnification provisions.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There is currently no pending material litigation or proceeding
involving any of our directors, officers or employees for which
indemnification is sought.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Rights Agreement</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We adopted a rights agreement. Each share of common stock has
attached to it one right. Each right entitles the holder to
purchase one one-thousandth of a share of a new series of our
preferred stock designated as series&nbsp;A junior participating
preferred stock at an exercise price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
subject to adjustment. The following summary description of the
rights agreement does not purport to be complete and is
qualified in its entirety by reference to the rights agreement
between us
and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
as rights agent, a copy of which is filed as an exhibit to the
registration statement of which this prospectus is a part and is
incorporated herein by reference.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Rights will only be exercisable under limited circumstances
specified in the rights agreement when there has been a
distribution of the rights and such rights are no longer
redeemable by us. A distribution of the rights would occur upon
the earlier of:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    10 business days, or such later date as our board of directors
    may determine, following a public announcement that any person
    or group, other than one involving Colt Defense Holding LLC, has
    acquired beneficial ownership of 15% or more of the outstanding
    shares our common stock, other than as a result of repurchases
    of stock by us or inadvertence by certain stockholders as set
    forth in the rights agreement;&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    10 business days, or such later date as our board of directors
    may determine, after the date of the commencement or the date of
    first public announcement with respect thereto, whichever is
    earlier, of a tender offer or exchange offer that would result
    in any person, group or related persons acquiring beneficial
    ownership of 15% or more of the outstanding shares of our common
    stock.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The rights will expire at 5:00&nbsp;P.M. (New York City time)
on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2015, unless such date is extended or the rights are earlier
redeemed or exchanged by us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If any person or group acquires shares representing 15% or more
of the outstanding shares of our common stock, the
&#147;flip-in&#148; provision of the rights agreement will be
triggered and the rights will entitle a holder, other than such
person, any member of such group or related person, as such
rights will be null and void, to acquire a number of additional
shares of our common stock having a market value of twice the
exercise price of each right. If we are involved in a merger or
other business combination transaction, each right will entitle
its holder to purchase, at the right&#146;s then-current
exercise price, a number of shares of the acquiring or surviving
company&#146;s common stock having a market value at that time
of twice the rights&#146; exercise price.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Up to and including the tenth business day following a public
announcement that a person or group of affiliated or associated
persons has acquired beneficial ownership of 15% or more of the
outstanding shares of our common stock, other than as a result
of repurchases of stock by us, we may redeem the rights in
whole, but not in part, at a price of $.01&nbsp;per right,
payable in cash, common stock or other consideration that we
deemed appropriate. Promptly upon our election to redeem the
rights, the rights will terminate and the only right of the
holders of rights will be to receive the $.01 redemption price.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At any time after any person or group acquires 15% or more of
outstanding shares of our common stock, and prior to the
acquisition by such person or group of fifty percent (50%) or
more of outstanding shares of our common stock, our board of
directors may exchange the rights, other than rights owned by
such person, group or related parties which have become void, in
whole or in part, for our common stock at an exchange ratio
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
for holders of our common stock, one share of common stock, for
one one-thousandth of a share of our series&nbsp;A junior
participating preferred stock of the right, or of a share of a
class or series of our preferred stock or other security having
equivalent rights, preferences and privileges, per right,
subject to adjustment.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Until a right is exercised, the holder of the right, as such,
will have no rights as a stockholder of our company, including,
without limitation, no right to vote or to receive dividends.
While the distribution of the rights will not be taxable to
stockholders or to us, stockholders may, depending upon the
circumstances, recognize taxable income in the event that the
rights become exercisable for our common stock or other
consideration or for common stock of the acquiring or surviving
company or in the event of the redemption of the rights as set
forth above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Any of the provisions of the rights agreement may be amended by
our board of directors prior to the distribution of the rights.
After such distribution, the provisions of the rights agreement
may be amended by our board of directors in order to cure any
ambiguity, to make changes which do not adversely affect the
interests of holders of rights or to shorten or lengthen any
time period under the rights agreement. The foregoing
notwithstanding, no amendment may be made at such time as the
rights are not redeemable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The existence of the rights agreement and the rights is intended
to deter coercive or partial offers which may not provide fair
value to all stockholders and to enhance our ability to
represent all of our stockholders and thereby maximize
stockholder value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Delaware Antitakeover Statute</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon completion of the offering, Colt will be subject to the
provisions of Section&nbsp;203 of the DGCL. In general,
Section&nbsp;203 prohibits a publicly held Delaware corporation
from engaging in a &#147;business combination&#148; with an
&#147;interested stockholder&#148; for a period of three years
after the date of the transaction in which the person became an
interested stockholder, unless the business combination is
approved in a prescribed manner. A &#147;business
combination&#148; includes a merger, asset sale or a transaction
resulting in a financial benefit to the interested stockholder.
Subject to various exceptions, an &#147;interested
stockholder&#148; is defined generally as a person who, together
with affiliates and associates, owns 15% or more of the
corporation&#146;s outstanding voting stock. Under
Section&nbsp;203, a business combination between Colt and an
interested stockholder is prohibited unless it satisfies one of
the following conditions:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    prior to the time the stockholder became an interested
    stockholder, the board of directors of Colt must have previously
    approved either the business combination or the transaction that
    resulted in the stockholder becoming an interested stockholder;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    on consummation of the transaction that resulted in the
    stockholder becoming an interested stockholder, the interested
    stockholder owned at least 85% of the voting stock of Colt
    outstanding at the time the transaction commenced (excluding,
    for purposes of determining the number of shares outstanding,
    shares owned by persons who are both directors and officers and
    shares owned by employee stock plans in which employees do not
    have the right to determine confidentially whether shares held
    subject to the plan will be tendered in a tender or exchange
    offer);&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    at or after the transaction in which the stockholder became an
    interested stockholder, the business combination is approved by
    the board of directors of Archipelago and authorized at an
    annual or special meeting of the stockholders by the affirmative
    vote of at least
    66<FONT style="font-size: 70%"><SUP>2</SUP></FONT>/<FONT style="font-size: 60%">3</FONT>%
    of the outstanding voting stock which is not owned by the
    interested stockholder.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Authorized but Unissued Capital Stock</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The DGCL does not require stockholder approval for any issuance
of authorized shares. However, the listing requirements of the
NYSE, which would apply so long as our common stock is listed on
the NYSE, require stockholder approval of certain issuances
equal to or exceeding 20% of the then-outstanding voting power
or then outstanding number of shares of common stock. These
additional shares may be used for a variety of corporate
purposes, including future public offerings, to raise additional
capital or to facilitate acquisitions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
One of the effects of the existence of unissued and unreserved
common stock or preferred stock may be to enable our board of
directors to issue shares to persons friendly to current
management, which issuance could render more difficult or
discourage an attempt to obtain control of our company by means
of a merger,
</DIV>

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<DIV align="left" style="font-size: 10pt;">
tender offer, proxy contest or otherwise, and thereby protect
the continuity of our management and possibly deprive the
stockholders of opportunities to sell their shares of common
stock at prices higher than prevailing market prices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Transfer Agent and Registrar</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The transfer agent and registrar for our common stock
is &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
Its telephone number
is &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>New York Stock Exchange Listing</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have applied to have our common stock listed on the NYSE
under the symbol &#147;CLT&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Description of Indebtedness</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Senior
secured credit facility</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In May 2005, Colt Defense and Colt Canada entered into a senior
secured credit facility with Bank of America, N.A., as
U.S.&nbsp;Administrative Agent and L/ C Issuer, and Bank of
America N.A., acting through its Canadian branch, as Canadian
Administrative Agent, and the lenders signatory thereto. Our
senior secured credit facility consists of:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a $10.0&nbsp;million three-year revolving credit facility, which
    includes a $2.0&nbsp;million sublimit for the issuance of
    standby letters of credit;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a $25.0&nbsp;million three-year term loan&nbsp;A facility;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a $14.0&nbsp;million three-year term loan&nbsp;B
    facility;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a $16.0&nbsp;million three-year term loan&nbsp;C facility, which
    is available to our Canadian subsidiary and is denominated in
    Canadian dollars.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Security
and guarantees</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our obligations under our senior secured credit facility are
unconditionally and irrevocably guaranteed, jointly and
severally, by our current and future subsidiaries. Our
obligations under our senior secured credit facility, and the
guarantees of those obligations, are secured by substantially
all of our assets and substantially all of the assets of each of
our current and future subsidiaries, including but not limited
to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    all the capital stock of each of its current and future direct
    and indirect subsidiaries, except that, with respect to foreign
    subsidiaries, such lien and pledge shall be limited to 65% of
    the capital stock of &#147;first-tier&#148; foreign
    subsidiaries; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    substantially all of its and its current and future
    subsidiaries&#146; tangible and intangible assets.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Interest
rates and fees</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Borrowings under the senior secured credit facility bear
interest as follows:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Revolving Credit Facility and Term A Facility:</I> at our
    option, at either LIBOR plus 2.25% to 3% each year (depending on
    the consolidated leverage ratio shown on the last compliance
    certificate delivered to the U.S.&nbsp;Administrative Agent), or
    the alternate base rate plus 1.50% each year;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Term B Facility and Term C Facility:</I> at our option, at
    either LIBOR plus 2.50% to 3.25% each year (depending on the
    consolidated leverage ratio shown on the last compliance
    certificate delivered to the U.S.&nbsp;Administrative Agent), or
    the alternate base rate plus 1.75% each year;</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The senior secured credit facility also provides for the payment
to the lenders of a commitment fee on average daily unused
commitments under the revolving credit facility (if any) at a
rate equal to 0.25% to 0.50%&nbsp;per year, depending on the
consolidated leverage ratio shown on the last compliance
certificate delivered to the U.S.&nbsp;Administrative Agent.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Scheduled
amortization payments and mandatory prepayments</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each of the Term Loan&nbsp;A Facility, the Term Loan&nbsp;B
Facility and the Term Loan&nbsp;C Facility provides for
substantial quarterly amortization payments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, the senior secured credit facility requires us to
prepay outstanding loans, subject to certain exceptions, with:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    100% of the net proceeds of certain sales, licenses, leases or
    other dispositions (including sale and leaseback transactions);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    75% of excess cash flow (as defined in the senior secured credit
    facility), subject to reductions to a lower percentage if we
    attain certain leverage ratios;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    100% of the net proceeds of certain debt issuances.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Voluntary prepayments</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The senior secured credit facility provides for voluntary
prepayments of the loans and voluntary reductions of the
unutilized portion of the commitments under the revolving credit
facility, without penalty, subject to certain conditions
pertaining to minimum notice and payment/reduction amounts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Covenants</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The senior secured credit facility contains financial,
affirmative and negative covenants that we believe are usual and
customary for a senior secured credit facility. The covenants in
the senior secured credit facility includes limitations (each of
which is subject to customary exceptions) on the ability of us
and our subsidiaries to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    incur liens;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    make loans and investments;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    incur additional debt;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    engage in mergers, acquisitions or other corporate restructuring
    transactions, or permit anyone other than Colt Defense to own
    any equity interests in its subsidiaries ;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    engage in asset sales, sale/leaseback transactions or other
    dispositions of assets;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    pay dividends with respect to capital stock;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    change the business conducted by the company and its
    subsidiaries, their fiscal year, their names, or their place or
    form of organization;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    enter into certain transactions with affiliates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    enter into agreements that restrict the company&#146;s ability
    to pay dividends or repay debt, or that restrict the
    company&#146;s ability to incur liens;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    amend the terms of the Colt Canada acquisition documents or of
    subordinated debt;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    use the proceeds of the senior secured credit facility except as
    specified therein;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    pay management fees or enter into management agreements.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, the credit agreement contains customary financial
covenants including minimum EBITDA, maximum leverage, and
minimum fixed charges.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Events
of default</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The senior secured credit facilities contain certain customary
events of default, including:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    nonpayment of principal or interest;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    breach of covenants (with notice and cure periods);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    material breach of the representations or warranties;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    cross-default and cross-acceleration to other material
    indebtedness;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    bankruptcy, insolvency or a general inability to pay debts as
    they become due;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    material judgments;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    certain ERISA violations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    actual or asserted invalidity of any material collateral or
    guarantee;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a change of control (as defined in the senior secured credit
    facility);&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    labor disturbances lasting more than a specified period.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">95

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<DIV align="left" style="font-size: 10pt;">
<A name='118'></A>
</DIV>

<!-- link1 "SHARES ELIGIBLE FOR FUTURE SALE" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SHARES ELIGIBLE FOR FUTURE SALE</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to the offering, there has been no public market for our
common stock. Future sales of substantial amounts of common
stock in the public market, or the perception that such sales
may occur, could adversely affect the prevailing market price of
the common stock. Upon completion of the offering, we expect
there will
be &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock outstanding, excluding
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
shares of common stock underlying outstanding stock options,
warrants and rights. Of these
shares, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock expected to be sold in the offering will be
freely transferable without restriction or further registration
under the Securities Act of 1933. Of the remaining shares of
common stock
outstanding, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock held by us, our executive officers, directors
and identified principal stockholders and other stockholders
will be subject to the lock-up arrangements described below and
will be eligible for resale pursuant to Rule&nbsp;144 after one
year as described below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Lock-Up Agreements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with this offering, we, our executive officers,
directors and stockholders will enter into 180-day lock-up
agreements with the underwriters of this offering under which
neither we nor they may, for a period of 180&nbsp;days after the
date of this prospectus, directly or indirectly sell or dispose
of any shares of common stock or any securities convertible into
or exchangeable or exercisable for shares of common stock
without the prior written consent of the underwriters.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The 180-day restricted period described in the preceding
sentence is subject to extension such that, in the event that
either (1)&nbsp;during the last 17&nbsp;days of the 180-day
restricted period, we issue an earnings release or material news
or a material event related to us occurs or (2)&nbsp;prior to
the expiration of the 180-day restricted period, we announce
that we will release earnings results during the 16-day period
beginning on the last day of the 180-day period, the
&#147;lock-up&#148; restrictions described above will continue
to apply until the expiration of the 18-day period beginning on
the earnings release or the occurrence of the material news or
material event.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Rule&nbsp;144</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In general, under Rule&nbsp;144, a person (or persons whose
shares are required to be aggregated), including an affiliate,
who has beneficially owned shares for at least one year is
entitled to sell, within any three-month period commencing
90&nbsp;days after the date of this prospectus, a number of
shares that does not exceed the greater of:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    1% of the number of shares of common stock then outstanding,
    which will equal
    approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    after the closing of this offering;&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the average weekly trading volume of the common stock during the
    four calendar weeks preceding the filing of a notice on
    Form&nbsp;144 with respect to such sale.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Sales under Rule&nbsp;144 also are subject to manner-of-sale
    provisions and notice requirements and to the availability of
    current public information about us.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Rule&nbsp;144(k)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under paragraph&nbsp;(k)&nbsp;of Rule&nbsp;144, persons who are
not our affiliate at any time during the 90&nbsp;days preceding
a sale and who have beneficially owned the shares proposed to be
sold for at least two years are entitled to sell such shares
without complying with the manner of sale, public information,
volume limitation or notice provisions of Rule&nbsp;144. The
two-year holding period includes the holding period of any prior
owner who is not our affiliate. Therefore, unless otherwise
restricted, shares covered by Rule&nbsp;144(k) may be sold at
any time.
</DIV>

<P align="center" style="font-size: 10pt;">96
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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Rule&nbsp;701</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In general, under Rule&nbsp;701, any of our employees,
directors, officers, consultants or advisors who purchased
shares from us in connection with a compensatory stock or option
plan or other written agreement before the effective date of
this offering, or who purchased shares from us after that date
upon the exercise of options granted before that date, are
eligible to resell such shares in reliance upon Rule&nbsp;144.
If such person is not an affiliate, such sale may be made
subject only to the manner of sale provisions of Rule&nbsp;144.
If such a person is an affiliate, such sale may be made under
Rule&nbsp;144 without compliance with its one-year minimum
holding period, but subject to the other Rule&nbsp;144
restrictions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Stock Options</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, as of April&nbsp;3, 2005, employee stock options to
purchase and rights with respect to a total of
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock were outstanding. We intend to file a
registration statement on Form&nbsp;S-8 under the Securities Act
to register the issuance and resale of those shares issuable
under our stock option plan. That registration statement
automatically becomes effective upon filing. As a result, when
the options or rights are exercised, such shares issuable on
exercise thereof will be freely tradable under the Securities
Act, except that any shares purchased by &#147;affiliates,&#148;
as that term is defined in Rule&nbsp;144, would be subject to
limitations and restrictions that are described above. For a
discussion of key terms of the Company&#146;s stock option and
stock purchase plans, see &#147;Management&nbsp;&#151; Stock
Option and Other Benefit Plans.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Registration Rights</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Beginning 180 and 365&nbsp;days after the date of this offering,
holders of
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;restricted
shares of our common stock, respectively, will be entitled to
registration rights described above. For more detailed
information regarding these registration rights, see
&#147;Certain Relationships and Related Party
Transactions&nbsp;&#151; Reorganization&nbsp;&#151; 2003
Registration Rights Agreement&#148; and &#147;&#151;&nbsp;2005
Registration Rights Agreement.&#148; Registration of such shares
under the Securities Act would result in such shares becoming
freely tradable without restriction under the Securities Act,
except for shares purchased by &#147;affiliates,&#148; as that
term is defined in Rule&nbsp;144, immediately upon the
effectiveness of such registration.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<A name='119'></A>
</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>UNDERWRITING</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are offering shares of common stock described in this
prospectus through a number of underwriters. Banc of America
Securities LLC, SG Cowen&nbsp;&#38; Co., LLC and Friedman,
Billings, Ramsey &#38; Co., Inc. are the representatives of the
underwriters. We have entered into an underwriting agreement
with the representatives. Subject to the terms and conditions of
the underwriting agreement, we have agreed to sell to the
underwriters, and each underwriter has agreed to purchase, the
number of shares of common stock listed next to its name in the
following table:
</DIV>

<CENTER>
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    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" nowrap><B>Underwriter</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of Shares</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Banc of America Securities LLC</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    SG Cowen&nbsp;&#38; Co., LLC</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Friedman, Billings, Ramsey&nbsp;&#38; Co., Inc.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The underwriting agreement is subject to a number of terms and
conditions and provides that the underwriters must buy all of
the shares if they buy any of them. The underwriters will sell
the shares to the public when and if the underwriters buy the
shares from us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The underwriters initially will offer the shares to the public
at the price specified on the cover page of this prospectus. The
underwriters may allow a concession of not more than
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to selected dealers. The underwriters may also allow, and
those dealers may re-allow, a concession of not more than
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to some other dealers. If all the shares are not sold at
the public offering price, the underwriters may change the
public offering price and the other selling terms. The common
stock is offered subject to a number of conditions, including:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    receipt and acceptance of the common stock by the
    underwriters;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the underwriters&#146; right to reject orders in whole or in
    part.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Over-Allotment Option.</I> We have granted the underwriters
an over-allotment option to buy up
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
shares of our common stock at the same price per share as they
are paying for the shares shown in the table above. These
additional shares would cover sales of shares by the
underwriters that exceed the total number of shares shown in the
table above. The underwriters may exercise this option at any
time within 30&nbsp;days after the date of this prospectus. To
the extent that the underwriters exercise this option, each
underwriter will purchase additional shares from us in
approximately the same proportion as it purchased the shares
shown in the table above. If purchased, the additional shares
will be sold by the underwriters on the same terms as those on
which the other shares are sold. We will pay the expenses
associated with the exercise of this option.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Discounts and Commissions.</I> The following table shows the
per share and total underwriting discounts and commissions to be
paid to the underwriters by us. These amounts are shown assuming
no exercise and full exercise of the underwriters&#146; option
to purchase additional shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We estimate that the expenses of the offering to be paid by us,
not including underwriting discounts and commissions, will be
approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</DIV>

<CENTER>
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    <TD width="3%">&nbsp;</TD>
    <TD width="63%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Paid by Us</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>No Exercise</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Full Exercise</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Per Share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Listing.</I> We are applying to have our common stock listed
on the NYSE under the symbol &#147;CLT&#148;. In order to meet
one of the requirements for listing our common stock on the
NYSE, the underwriters have undertaken to sell 100 or more
shares of our common stock to a minimum of 2,000 beneficial
holders.
</DIV>

<P align="center" style="font-size: 10pt;">98
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<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Stabilization.</I> In connection with this offering, the
underwriters may engage in activities that stabilize, maintain
or otherwise affect the price of our common stock, including:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    stabilizing transactions;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    short sales;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    syndicate covering transactions;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    imposition of penalty bids;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    purchases to cover positions created by short sales.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Stabilizing transactions consist of bids or purchases made for
the purpose of preventing or retarding a decline in the market
price of our common stock while this offering is in progress.
Stabilizing transactions may include making short sales of our
common stock, which involves the sale by the underwriters of a
greater number of shares of common stock than they are required
to purchase in this offering, and purchasing shares of common
stock from us or in the open market to cover positions created
by short sales. Short sales may be &#147;covered&#148; shorts,
which are short positions in an amount not greater than the
underwriters&#146; over-allotment option referred to above, or
may be &#147;naked&#148; shorts, which are short positions in
excess of that amount. Syndicate covering transactions involve
purchases of our common stock in the open market after the
distribution has been completed in order to cover syndicate
short positions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The underwriters may close out any covered short position either
by exercising their over-allotment option, in whole or in part,
or by purchasing shares in the open market. In making this
determination, the underwriters will consider, among other
things, the price of shares available for purchase in the open
market compared to the price at which the underwriters may
purchase shares pursuant to the over-allotment option.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A naked short position is more likely to be created if the
underwriters are concerned that there may be downward pressure
on the price of the common stock in the open market that could
adversely affect investors who purchased shares of our common
stock in this offering. To the extent that the underwriters
create a naked short position, they will purchase shares in the
open market to cover the position.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The representatives also may impose a penalty bid on
underwriters and dealers participating in the offering. This
means that the representatives may reclaim from any syndicate
member or other dealers participating in the offering the
commissions and selling concessions on shares sold by them and
purchased by the representatives in stabilizing or short
covering transactions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These activities may have the effect of raising or maintaining
the market price for our common stock or preventing or retarding
a decline in the market price of our common stock. As a result
of these activities, the price of our common stock may be higher
than the price that otherwise might exist in the open market. If
the underwriters commence these activities, they may discontinue
them at any time. The underwriters may carry out these
transactions on the NYSE, in the over-the-counter market or
otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Discretionary Accounts.</I> The underwriters have informed us
that they do not expect to make sales to accounts over which
they exercise discretionary authority in excess of 5% of the
shares of common stock being offered.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>IPO Pricing.</I> Prior to this offering, there has been no
public market for our common stock. The initial public offering
price will be negotiated between us and the representatives of
the underwriters. Among the factors to be considered in these
negotiations are:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the history of, and prospects for, our company and the industry
    in which we compete;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our past and present financial performance;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    an assessment of our management;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the prospects for our future earnings;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the prevailing conditions of the applicable United States
    securities market at the time of this offering;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    market valuations of publicly traded companies that we and the
    representatives of the underwriters believe to be comparable to
    us;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    other factors deemed relevant.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">99

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The estimated initial public offering price range set forth on
the cover of this prospectus is subject to change as a result of
market conditions and other factors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Qualified Independent Underwriter.</I> Banc of America
Securities LLC is a member of the National Association of
Securities Dealers, Inc. (&#147;NASD&#148;). Because we expect
that more than 10% of the net proceeds of this offering will be
paid to affiliates of Banc of America Securities LLC under the
credit facility, this offering is being conducted in accordance
with the applicable requirements of Conduct Rule&nbsp;2710(h)
and Conduct Rule&nbsp;2720 of the NASD regarding the
underwriting of securities of a company with which a member has
a conflict of interest within the meaning of those rules.
Conduct Rule&nbsp;2720(c)(3) requires that the public offering
price of an equity security must be no higher than the price
recommended by a qualified independent underwriter which has
participated in the preparation of the registration statement
and performed its usual standard of due diligence in connection
with that preparation. SG Cowen&nbsp;&#38; Co., LLC has agreed
to act as qualified independent underwriter with respect of this
offering. The public offering price of our common stock will be
no higher than that recommended by SG Cowen&nbsp;&#38; Co., LLC.
SG Cowen&nbsp;&#38; Co., LLC will not receive any compensation
for acting in this capacity in connection with this offering;
however, we have agreed to indemnify SG Cowen&nbsp;&#38; Co.,
LLC in its capacity as qualified independent underwriter against
certain liabilities under the Securities Act. Additionally, in
accordance with Conduct Rule&nbsp;2720(1), no member of the NASD
participating in the offering will execute a transaction in the
common stock in a discretionary account without the prior
specific written approval of the member&#146;s customer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Lock-up Agreements.</I> We, our directors and executive
officers and our stockholders have entered into lock-up
agreements with the underwriters. Under these agreements,
subject to exceptions, we may not issue any new shares of common
stock, and those holders of stock may not, directly or
indirectly, offer, sell, contract to sell, pledge or otherwise
dispose of or hedge any common stock or securities convertible
into or exchangeable for shares of common stock, or publicly
announce the intention to do any of the foregoing, without the
prior written consent of Banc of America Securities LLC for a
period of 180&nbsp;days from the date of this prospectus. This
consent may be given at any time without public notice. In
addition, during this 180-day period, we have also agreed not to
file any registration statement for, and each of our officers
and stockholders has agreed not to make any demand for, or
exercise any right of, the registration of, any shares of common
stock or any securities convertible into or exercisable or
exchangeable for common stock without the prior written consent
of Banc of America Securities LLC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The 180-day restricted period described above is subject to
extension such that, in the event that either (1)&nbsp;during
the last 17&nbsp;days of the 180-day restricted period, we issue
an earnings release or material news or a material event related
to us occurs or (2)&nbsp;prior to the expiration of the 180-day
restricted period, we announce that we will release earnings
results during the 16-day period beginning on the last day of
the 180-day period, the &#147;lock-up&#148; restrictions
described above will continue to apply until the expiration of
the 18-day period beginning on the earnings release or the
occurrence of the material news or material event.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Indemnification.</I> We will indemnify the underwriters
against some liabilities, including liabilities under the
Securities Act. If we are unable to provide this
indemnification, we will contribute to payments the underwriters
may be required to make in respect to those liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Online Offering.</I> A prospectus in electronic format may be
made available on the web sites maintained by one or more of the
underwriters participating in this offering. Other than the
prospectus in electronic format, the information on any such web
site, or accessible through any such web site, is not part of
the prospectus. The representatives may agree to allocate a
number of shares to underwriters for sale to their online
brokerage account holders. Internet distributions will be
allocated by the underwriters that will make internet
distributions on the same basis as other allocations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Conflicts/ Affiliates.</I> The underwriters and their
affiliates have provided and may in the future provide, various
investment banking commercial banking and other financial
services to us for which services they have received and may in
the future receive customary fees. An affiliate of Banc of
America Securities LLC is the U.S.&nbsp;Administrative Agent and
L/C&nbsp;Issuer and the Canadian Administrative Agent under our
senior secured credit facility. We expect to use
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
of the proceeds of this offering to repay debt outstanding under
this facility.
</DIV>

<P align="center" style="font-size: 10pt;">100
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<DIV align="left" style="font-size: 10pt;">
<A name='120'></A>
</DIV>

<!-- link1 "NOTICE TO CANADIAN RESIDENTS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTICE TO CANADIAN RESIDENTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Resale Restriction.</I> The distribution of the common stock
in Canada is being made only on a private placement basis exempt
from the requirement that we prepare and file a prospectus with
the securities regulatory authorities in each province where
trades of common stock are made. Any resale of the common stock
in Canada must be made under applicable securities laws which
will vary depending on the relevant jurisdiction and which may
require resales to be made under available statutory exemptions
or under a discretionary exemption granted by the applicable
Canadian securities regulatory authority. Purchasers are advised
to seek legal advice prior to any resale of the common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Representations of Purchasers.</I> By purchasing common stock
in Canada and accepting a purchase confirmation a purchaser is
representing to us and the dealer from whom the purchase
confirmation is received that:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the purchaser is entitled under applicable provincial securities
    laws to purchase the common stock without the benefit of a
    prospectus qualified under those securities laws;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    where required by law, that the purchaser is purchasing as
    principal and not as agent;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the purchaser has reviewed the text above under Resale
    Restrictions.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Right of Action (Ontario Purchasers).</I> The securities
being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action
prescribed by Ontario securities law. As a result, Ontario
purchasers must rely on other remedies that may be available,
including common law rights of action for damages or rescission
or rights of action under the civil liability provisions of the
U.S.&nbsp;federal securities laws.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Enforcement of Legal Rights.</I> All of the issuer&#146;s
directors and officers as well as the experts named herein may
be located outside of Canada and, as a result, it may not be
possible for Canadian purchasers to effect service of process
within Canada upon the issuer or such persons. All or a
substantial portion of the assets of the issuer and such persons
may be located outside of Canada and, as a result, it may not be
possible to satisfy a judgment against the issuer or such
persons in Canada or to enforce a judgment obtained in Canadian
courts against such issuer or persons outside of Canada.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Notice to British Columbia Residents.</I> A purchaser of
common stock to whom the Securities Act (British Columbia)
applies is advised that the purchaser is required to file with
the British Columbia Securities Commission a report within ten
days of the sale of any common stock acquired by the purchaser
in this offering. The report must be in the form attached to
British Columbia Securities Commission Blanket Order
BOR&nbsp;#95/17, a copy of which may be obtained from us. Only
one report must be filed for common stock acquired on the same
date and under the same prospectus exemption.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Taxation and Eligibility for Investment.</I> Canadian
purchasers of common stock should consult their own legal and
tax advisors with respect to the tax consequences of an
investment in the common stock in their particular circumstances
and about the eligibility of the common stock for investment by
the purchaser under relevant Canadian legislation.
</DIV>

<P align="center" style="font-size: 10pt;">101
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<DIV align="left" style="font-size: 10pt;">
<A name='121'></A>
</DIV>

<!-- link1 "LEGAL MATTERS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>LEGAL MATTERS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The validity of the shares of common stock offered hereby will
be passed upon for us by Morgan, Lewis&nbsp;&#38; Bockius LLP,
New York, New York. Certain legal matters will be passed upon
for the underwriters by Davis Polk&nbsp;&#38; Wardwell, New
York, New York.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='122'></A>
</DIV>

<!-- link1 "EXPERTS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>EXPERTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The financial statements and schedule of Colt Defense LLC at
December&nbsp;31, 2004 and 2003, and for each of the three years
in the period ended December&nbsp;31, 2004, appearing in this
Prospectus and Registration Statement have been audited by
Ernst&nbsp;&#38; Young LLP, independent registered public
accounting firm, as set forth in their report thereon appearing
elsewhere herein, and are included in reliance upon such report
given on the authority of such firm as experts in accounting and
auditing.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='123'></A>
</DIV>

<!-- link1 "WHERE YOU CAN FIND MORE INFORMATION" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>WHERE YOU CAN FIND MORE INFORMATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have filed with the Securities and Exchange Commission a
registration statement on Form&nbsp;S-1, including exhibits,
schedules and amendments filed with this registration statement,
under the Securities Act with respect to the shares of our
common stock to be sold in this offering. This prospectus does
not contain all of the information set forth in the registration
statement and exhibits and schedules to the registration
statement. For further information with respect to our company
and the shares of our common stock to be sold in this offering,
reference is made to the registration statement, including the
exhibits to the registration statement. Statements contained in
this prospectus as to the contents of any contract or other
document referred to in this prospectus are not necessarily
complete and, where that contract is an exhibit to the
registration statement, each statement is qualified in all
respects by the exhibit to which the reference relates. Copies
of the registration statement, including the exhibits and
schedules to the registration statement, may be examined without
charge at the public reference room of the Securities and
Exchange Commission, One Station Place, 100 F&nbsp;Street, N.E.,
Washington, DC 20549. Information about the operation of the
public reference room may be obtained by calling the Securities
and Exchange Commission at 1-800-SEC-0300. Copies of all or a
portion of the registration statement can be obtained from the
public reference room of the Securities and Exchange Commission
upon payment of prescribed fees. Our Securities and Exchange
Commission filings, including our registration statement, are
also available to you on the Securities and Exchange
Commission&#146;s website, <U>www.sec.gov</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon completion of this offering, we will be subject to the
information reporting requirements of the Exchange Act and we
will file reports, proxy statements and other information with
the SEC. We also intend to furnish our shareholders with annual
reports containing our financial statements audited by an
independent public accounting firm and quarterly reports
containing our unaudited financial information.
</DIV>

<P align="center" style="font-size: 10pt;">102
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<DIV align="left" style="font-size: 10pt;">
<A name='124'></A>
</DIV>

<!-- link1 "INDEX TO CONSOLIDATED FINANCIAL STATEMENTS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INDEX TO CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="91%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#125'>Report of Independent Registered Public
    Accounting Firm</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#126'>Balance Sheets</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#127'>Statements of Operations</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#128'>Statements of Changes in Members&#146;
    Deficit</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#129'>Statements of Cash Flows</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#130'>Notes to Financial Statements</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#131'>Schedule&nbsp;&#151; Valuation and
    Qualifying Accounts</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-25</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-1
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<DIV align="left" style="font-size: 10pt;">
<A name='125'></A>
</DIV>

<!-- link1 "Report of Independent Registered Public Accounting Firm" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Report of Independent Registered Public Accounting Firm</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>To the Board of Directors and Members of</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<B>Colt Defense LLC</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have audited the accompanying balance sheets of Colt Defense
LLC as of December&nbsp;31, 2004 and 2003, and the related
statements of operations, changes in members&#146; deficit, and
cash flows for each of the three years in the period ended
December&nbsp;31, 2004. Our audits also included the financial
statement schedule on page&nbsp;F-24. These financial statements
and schedule are the responsibility of the Company&#146;s
management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. We were not engaged to perform an
audit of the Company&#146;s internal control over financial
reporting. Our audits included consideration of internal control
over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of
the Company&#146;s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Colt Defense LLC at December&nbsp;31, 2004 and 2003, and the
results of its operations and its cash flows for each of the
three years in the period ended December&nbsp;31, 2004, in
conformity with U.S.&nbsp;generally accepted accounting
principles. Also, in our opinion, the related financial
statements schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 36pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
/s/ Ernst&nbsp;&#38; Young LLP
</DIV>

<DIV align="left" style="font-size: 10pt;">
Hartford, CT
</DIV>

<DIV align="left" style="font-size: 10pt;">
March&nbsp;11, 2005
</DIV>

<DIV align="left" style="font-size: 10pt;">
Except for Note&nbsp;16, as to which the date is
</DIV>

<DIV align="left" style="font-size: 10pt;">
May&nbsp;20, 2005
</DIV>

<P align="center" style="font-size: 10pt;">F-2
<!-- PAGEBREAK -->
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Colt Defense LLC</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='126'></A>
</DIV>

<!-- link1 "Balance Sheets" -->

<DIV align="center" style="font-size: 10pt;">
<B>Balance Sheets</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(dollars in thousands)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>April&nbsp;3,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="14" align="center" valign="top">
    <B>Assets</B></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current assets:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,775</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>314</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24,268</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restricted cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>563</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>562</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>558</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts receivable, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,888</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,995</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventories, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,973</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,384</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,892</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,636</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,307</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,379</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,137</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,455</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,092</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Machinery, equipment and tooling</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,965</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,257</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,366</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Furniture, fixtures and leasehold improvements</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,560</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,564</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,743</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,525</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,821</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,109</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less accumulated depreciation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,288</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,564</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,614</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,237</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,257</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,495</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Goodwill</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,175</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,175</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,175</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Intellectual property</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,023</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred license fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,917</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred financing costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,126</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,442</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Business acquisition costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>762</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>671</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Intangible pension asset</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>816</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>855</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,009</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>591</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>225</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>28,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>37,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>47,461</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="14" align="center" valign="top">
    <B>Liabilities and Members&#146; Deficit</B></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revolving line of credit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,509</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,568</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current portion of capital lease obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Subordinated notes payable and accrued interest due to affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,392</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,805</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,941</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,405</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,534</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,273</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,434</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current portion of accrued employee benefit costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,156</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,156</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,956</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tax distributions payable to members</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,974</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,981</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Customer advances</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>335</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Due to affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,231</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,713</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,137</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,388</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued employee benefit costs, less current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,190</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital lease obligations, less current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>162</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term portion of accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>790</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>828</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,564</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other long-term liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>281</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>626</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53,827</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64,767</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68,843</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Members&#146; deficit:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Members&#146; deficit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,231</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13,668</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,850</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes receivable from exercise of options and warrants</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,966</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,312</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,923</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated other compensation loss&nbsp;&#151; minimum pension
    liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,028</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,083</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,609</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total members&#146; deficit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25,225</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(27,063</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(21,382</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities and members&#146; deficit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>28,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>37,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>47,461</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes.
</DIV>

<P align="center" style="font-size: 10pt;">F-3

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Colt Defense LLC</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='127'></A>
</DIV>

<!-- link1 "Statements of Operations" -->

<DIV align="center" style="font-size: 10pt;">
<B>Statements of Operations</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(dollars in thousands)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Three Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>April&nbsp;3,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>April&nbsp;4,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>18,896</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>75,135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>66,682</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>53,329</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,622</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,376</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45,161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,768</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,987</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,556</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,521</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,561</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling and commissions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,981</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,819</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,732</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    General and administrative</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,459</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,297</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,312</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,300</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Litigation costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>625</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>936</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Noncash stock compensation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,633</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,982</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,266</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,788</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,529</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other expense (income):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>888</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,735</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,582</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,446</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reorganization costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>333</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Settlement of litigation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(842</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepayment discounts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(145</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(595</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Royalty income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(219</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(80</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(759</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(381</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(429</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Royalty expense to Colt&#146;s Manufacturing</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>650</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(108</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(55</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,179</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense (benefit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(222</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,878</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,166</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,245</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,401</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings per unit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>19.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>68.72</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>35.13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>139.17</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings per unit&nbsp;&#151; assuming dilution</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>18.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>20.73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>63.63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>32.72</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>122.42</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average units</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>146,126</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>145,922</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>145,922</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>92,366</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,809</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average units&nbsp;&#151; assuming dilution</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>157,648</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>152,723</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>157,607</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>99,167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44,119</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma to reflect income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,179</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,258</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,054</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,916</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,096</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,981</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,125</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings per unit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13.13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>41.78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21.45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>80.52</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings per unit&nbsp;&#151; assuming dilution</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12.55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>38.68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>19.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>70.83</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes.
</DIV>

<P align="center" style="font-size: 10pt;">F-4

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Colt Defense LLC</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='128'></A>
</DIV>

<!-- link1 "Statements of Changes in Members&#146; Deficit" -->

<DIV align="center" style="font-size: 10pt;">
<B>Statements of Changes in Members&#146; Deficit</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>For the three years ended December&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(dollars in thousands)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="47%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Accumulated</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Other</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Members&#146;</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Notes</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Comprehensive</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Deficit</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Receivable</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Loss</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance, December&nbsp;31, 2001</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(20,859</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,347</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(22,206</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Distributions to Colt&#146;s Manufacturing Company, Inc.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,295</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,295</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,401</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,401</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other comprehensive loss&nbsp;&#151; minimum pension liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(887</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(887</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Comprehensive income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,514</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance, December&nbsp;31, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(18,753</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,234</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(20,987</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exercise of options and warrants</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,731</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(9,731</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued interest on notes receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>192</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(192</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchase of common units</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Distributions to Colt&#146;s Manufacturing</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,863</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,863</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Noncash employee compensation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>602</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,245</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,245</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other comprehensive loss&nbsp;&#151; minimum pension liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(375</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(375</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Comprehensive income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,870</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance, December&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,850</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,923</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,609</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(21,382</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued interest on notes receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>389</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(389</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Distributions to members</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,354</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,354</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tax distributions to members</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,881</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,881</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,028</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other comprehensive loss&nbsp;&#151; minimum pension liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(474</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(474</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Comprehensive income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,554</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance, December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13,668</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,312</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,083</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(27,063</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exercise of options and warrants (unaudited)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>558</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(558</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued interest on notes receivable (unaudited)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(96</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tax distributions to members (unaudited)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,095</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,095</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (unaudited)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,878</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,878</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other comprehensive loss&nbsp;&#151; minimum pension liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Comprehensive income (unaudited)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,933</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance, April&nbsp;3, 2005 (unaudited)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11,231</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(10,966</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,028</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(25,225</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes.
</DIV>

<P align="center" style="font-size: 10pt;">F-5

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Colt Defense LLC</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='129'></A>
</DIV>

<!-- link1 "Statements of Cash Flows" -->

<DIV align="center" style="font-size: 10pt;">
<B>Statements of Cash Flows</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(dollars in thousands)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="46%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Three Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>April&nbsp;3,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>April&nbsp;4,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Operating activities</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,878</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,166</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,245</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,401</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustments to reconcile net income to net cash (used in)
    provided by operating activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>694</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,059</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepayment discounts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(842</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(145</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(595</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Noncash employee compensation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense accrual on debt subordinated notes payable due
    to affiliates, notes payable to affiliates and subordinated
    notes payable due to affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>583</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>740</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(18</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Changes in operating assets and liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restricted cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(52</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>142</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,695</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,939</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,893</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,169</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,433</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventories</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>411</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>754</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(510</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(793</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>330</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses and other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(330</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(715</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(363</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(168</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepayment license fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Due to affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(122</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(347</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,096</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>727</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>234</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable and accrued expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,062</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(352</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(256</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(392</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(168</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued employee benefit costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(200</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(275</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,116</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(535</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(90</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash (used in) provided by operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,455</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,620</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,740</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,452</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Investing activities</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Business acquisition costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(364</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deposit paid on West Hartford facility</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(250</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchases of equipment and leasehold improvements</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(76</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(35</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(221</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(140</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes receivable related parties</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(115</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(457</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(35</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(381</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(221</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(140</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Financing activities</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Term loan borrowings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Subordinated debt borrowings (repayments)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,376</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,376</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Distribution to Colt&#146;s Manufacturing</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,863</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,295</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Distribution to members</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,354</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,354</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tax distribution to members</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,100</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(900</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net (repayments)&nbsp;borrowings under revolving line of credit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,509</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,043</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,941</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,151</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,184</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payment of financing costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(194</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,442</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Repayments of loans and capital lease obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(20</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(48</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(70</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(128</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(415</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchase of common units</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash (used in) provided by financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,629</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17,735</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,953</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,577</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,526</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Change in cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,461</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(23,225</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(23,954</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,096</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(214</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents at beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>314</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,268</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,268</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>386</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents at end of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,775</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,043</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>314</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24,268</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>172</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes.
</DIV>

<P align="center" style="font-size: 10pt;">F-6

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Colt Defense LLC</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='130'></A>
</DIV>

<!-- link1 "Notes to Financial Statements" -->

<DIV align="center" style="font-size: 10pt;">
<B>Notes to Financial Statements</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information for the three months ended April&nbsp;3, 2005
and April&nbsp;4, 2004 is unaudited)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B><I>(dollars in thousands, except share amounts)</I></B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>1.</B></TD>
    <TD>
    <B>Business</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Colt Defense LLC (the Company) is a leading designer, developer
and manufacturer of small arms and weapon systems for the
U.S.&nbsp;Military, its allies and federal, state and local law
enforcement agencies. Our products include military rifles, such
as the M4 carbine rifle and its predecessor, the M16 rifle,
auxiliary weapons systems, such as the M203 grenade launcher and
rifles for law enforcement agencies around the world. We also
refurbish, recondition and repair these weapons and produce
spare parts and component kits such as barrels, springs, screws,
handguards, upper receivers and buttstocks. In addition, we
provide centralized procurement and training services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to November&nbsp;4, 2002, the Company was a division of
Colt&#146;s Manufacturing Company, Inc. (CMC), which was a
wholly owned subsidiary of New Colt Holding Corp. (NCHC). On
November&nbsp;4, 2002, NCHC and CMC contributed the net assets
of its military and commercial rifle businesses to the Company
(a newly formed limited liability company) as the first step of
a two-step reorganization process (the Reorganization). CMC
continued to operate its handgun business. The purpose of the
first step of the Reorganization was to streamline the existing
rifle and commercial handgun businesses by creating two separate
companies to better focus on core customers and to encourage the
development, execution and optimization of business
opportunities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On June&nbsp;12, 2003, the second step of the Reorganization
took place in which CMC was converted to a limited liability
company and became Colt&#146;s Manufacturing Company LLC (CMC
LLC). The ownership interests in the Company were distributed to
its Members in partial redemption of the NCHC
shareholders&#146;, warrant holders&#146; and option
holders&#146; equity interest in NCHC (the Distribution). These
distributions of ownership interests in the Company were made in
proportion to each equity holders&#146; interests in NCHC. The
objective of the second step of the Reorganization was to
further separate the companies to enhance financing
opportunities. The Company incurred $1,211 and $333 of costs
related to its reorganization in 2003 and 2002, respectively.
The Company is an indefinite life LLC that will terminate upon
the completion of an initial public offering.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>2.</B></TD>
    <TD>
    <B>Summary of Significant Accounting Policies</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Basis of Presentation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the period January&nbsp;1, 2002 through November&nbsp;4,
2002, the military and commercial rifle business that was
contributed to the Company was conducted as a separate division
of CMC. During the period November&nbsp;4, 2002 through
December&nbsp;31, 2002, this business was conducted by the
Company as a separate legal entity. For presentation purposes,
the business of the Company is shown as if it had operated as a
separate legal entity for all of 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Basis of Accounting</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The financial statements are prepared in accordance with
generally accepted accounting principles in the United States of
America (GAAP).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Use of Estimates</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The preparation of financial statements in conformity with
U.S.&nbsp;GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual
results could differ from those estimates. Significant
</DIV>

<P align="center" style="font-size: 10pt;">F-7

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>Colt Defense LLC</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Financial Statements (continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information for the three months ended April&nbsp;3, 2005
and April&nbsp;4, 2004 is unaudited)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B><I>(dollars in thousands, except share amounts)</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
estimates are required for the valuation of pension and
postretirement health care liabilities and the related expense,
which require significant judgment in determination of:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the discount rate used to calculated the benefit obligation for
    pensions and post retirement health care liabilities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the assumed inflation rate for health care costs;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the expected return on pension plan assets.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Interim Financial Information</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The unaudited balance sheet and statement of operations and cash
flows as of and for each of the three-month periods ended
April&nbsp;3, 2005 and April&nbsp;4, 2004, respectively, have
been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally
accepted in the United States of America (U.S.&nbsp;GAAP) have
been condensed or omitted pursuant to such rules and
regulations. Operating results for the three-month period ended
April&nbsp;3, 2005, are not necessarily indicative of the
results that may be expected for the year ending
December&nbsp;31, 2005. The unaudited balance sheet and
statement of operations and cash flows as of and for each of the
three-month periods ended April&nbsp;3, 2005 and April&nbsp;4,
2004, respectively, should be read in conjunction with the
Company&#146;s Audited Financial Statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In management&#146;s opinion, the unaudited balance sheet and
statement of operations contain all adjustments, which are of a
normal recurring nature, necessary for a fair statement of the
results for the three-month periods ended April&nbsp;3, 2005 and
April&nbsp;4, 2004, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Cash and Cash Equivalents</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company considers investments in highly liquid debt
instruments with original maturities of three months or less to
be cash equivalents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Restricted cash of $563 at April&nbsp;3, 2005, $562 at
December&nbsp;31, 2004 and $558 at December&nbsp;31, 2003
consists of funds deposited to secure standby letters of credit
for foreign-based sales performance guarantees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Revenue and Accounts Receivable Recognition and Allowance for
Doubtful Accounts</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company recognizes revenue and accounts receivable when
ownership to the goods transfers to the buyer, primarily upon
shipment. For certain U.S.&nbsp;government related sales,
revenue and accounts receivable is recognized upon inspection
and acceptance of the goods by a U.S.&nbsp;government official
and upon the Company placing the accepted goods in a
U.S.&nbsp;government approved location at the Company&#146;s
premises. Credit is extended based on an evaluation of each
customer&#146;s financial condition; generally, collateral is
not required. Credit losses are provided for in the financial
statements, primarily on a specific identification basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Once a customer is identified as high risk based on the
customer&#146;s history and credit worthiness, the Company will
provide an allowance for the estimated uncollectible portion.
Accounts are considered past due based on the original invoice
date. Write-off of uncollectible accounts occurs when all
reasonable collection efforts have been made. At
December&nbsp;31, 2004 and 2003, the allowance for doubtful
accounts was $33 and $36, respectively. At April&nbsp;3, 2005,
the allowance for doubtful accounts was $23.
</DIV>

<P align="center" style="font-size: 10pt;">F-8

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>Colt Defense LLC</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Financial Statements (continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information for the three months ended April&nbsp;3, 2005
and April&nbsp;4, 2004 is unaudited)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B><I>(dollars in thousands, except share amounts)</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Inventories</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Inventories are stated at the lower of cost or market using the
first-in, first-out method. Cost includes materials, labor and
manufacturing overhead related to the purchase and production of
inventories. The Company provides allowances for excess or
slow-moving inventory as well as inventory whose carrying value
is in excess of net realizable value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Equipment and Leasehold Improvements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Equipment and leasehold improvements are recorded at cost.
Depreciation of equipment and amortization of leasehold
improvements are computed using the straight-line method over
the estimated useful life of the assets, which varies from 3 to
15&nbsp;years, or the life of the lease term, whichever is
shorter. The Company evaluates equipment and leasehold
improvements for impairment when events or circumstances
indicate that impairment may exist. To date, no impairment
losses have been recorded. Depreciation and amortization was
$505, $438 and $810 for 2004, 2003 and 2002, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Goodwill and Intangible Assets</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Goodwill is not amortized but rather is tested annually for
impairment on December&nbsp;31. Impairment of goodwill would
exist if the carrying value of the Company exceeded the fair
value of the Company. Intangible assets such as certain
intellectual property, which the Company has determined to have
indefinite lives, are also evaluated annually to determine if
their useful life continues to be indefinite. To date, no
impairments have been recorded.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On January&nbsp;1, 2004, the Company entered into a successor
agreement with NCHC for use of certain Colt trademarks. The
payment of $2,018 is being amortized over the initial term of
the agreement that is 20&nbsp;years (see note&nbsp;10).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Deferred Financing Costs</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Deferred financing costs are amortized over the term of the
related debt agreement. In connection with a new financing
arrangement entered into in December 2003, the Company incurred
$194 and $1,442 in 2004 and 2003, respectively, in financing
costs, which are being amortized over the three-year life of the
financing agreement. Amortization of deferred financing costs
included in interest expense was $510 and $124 in 2004 and 2003,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Warranty Costs</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company generally warrants its military products for a
period of one year. For foreign military sales, the posting of a
warranty bond for a one to five year period is occasionally
required. The Company provides a reserve for warranty expense in
the period of sale based on past experience. The warranty
accrual analysis is:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="54%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>April&nbsp;3,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December 31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December 31,</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>283</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(36</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(61</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    End of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>283</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-9

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>Colt Defense LLC</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Financial Statements (continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information for the three months ended April&nbsp;3, 2005
and April&nbsp;4, 2004 is unaudited)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B><I>(dollars in thousands, except share amounts)</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Research and Development Costs</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company expended $712, $476 and $291 in research and
development costs for each of the three years ended
December&nbsp;31, 2004, respectively. These costs include
research and development of new products, as well as product
enhancements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Advertising Costs</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company expenses advertising as incurred. Advertising
expense was $199, $147 and $146 in 2004, 2003 and 2002,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Shipping and Handling Costs</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Shipping and handling costs are classified within cost of sales
on the statement of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Customer Advances</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Customer advances represent payments by certain customers for
products that have not yet been shipped.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Self-Funded Medical Plan and Workers&#146; Compensation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company maintains a self-funded employee group medical plan
under which the liability is limited by individual and aggregate
stop loss insurance coverage. Included in the accompanying
financial statements is a liability for reported claims
outstanding, as well as an estimate of incurred but unreported
claims, based on the Company&#146;s best estimate of the
ultimate cost not covered by stop loss insurance. The actual
amount of the claims could differ from the estimated liability
recorded of $328 and $202 at December&nbsp;31, 2004 and 2003,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Through December&nbsp;31, 2002, the Company was partially
self-insured for workers&#146; compensation claims. Beginning in
2003, the Company changed to a fully insured premium based
policy. Included in the accompanying financial statements is a
liability for reported claims outstanding, as well as an
estimate of incurred but unreported claims, based on the
Company&#146;s estimated cost for the period prior to 2003. The
actual amount of these claims could differ from the estimated
liability recorded of $156 and $192 at December&nbsp;31, 2004
and 2003, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Income Taxes</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to the June&nbsp;12, 2003 Reorganization and Distribution,
the Company filed federal and state income tax returns as a
corporation, on a consolidated basis with its parent company,
NCHC. Subsequently, as a limited liability company, the Company
is treated as a partnership for federal and state income tax
reporting purposes. As a partnership, the Company is not subject
to federal or state income taxes. Rather, the Company files
informational income tax returns and issues standard tax reports
to its members. For the period June&nbsp;13, 2003 to
December&nbsp;31, 2003 and thereafter, the taxable income (loss)
of the Company will be reported to the members for inclusion in
their individual tax returns.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Distribution was treated as a taxable transaction for income
tax purposes. Accordingly, an increase in the tax basis of the
Company&#146;s net assets of $13,184 occurred, representing the
difference between historical and fair market value of the
assets. Because the parties to the transaction were affiliated,
no adjustment to the financial reporting basis of the assets and
liabilities of the Company was made. The increase in tax basis
was recognized as a taxable gain by NCHC.
</DIV>

<P align="center" style="font-size: 10pt;">F-10

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>Colt Defense LLC</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Financial Statements (continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information for the three months ended April&nbsp;3, 2005
and April&nbsp;4, 2004 is unaudited)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B><I>(dollars in thousands, except share amounts)</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In accordance with the Limited Liability Company Agreement of
the Company, in any year in which taxable income is allocated to
the members, and to the extent the Board of Directors of the
Company determines that funds are available, distributions to
members equal to 45% of such allocation of taxable income shall
be made. For the period June&nbsp;13, 2003 to December&nbsp;31,
2003, there was no reportable taxable income and no
distributions were required as timing differences entirely
offset otherwise taxable income for the period. For the year
ended December&nbsp;31, 2004, taxable income of $8,624 was
reported to members. During 2004, distributions to members of
$900 were made, and accordingly, tax distributions payable to
members of $2,981 is reflected as a liability in the
accompanying balance sheet at December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If the Company had been a tax paying entity the estimated
provision for income taxes for 2004 would have been:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="87%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,102</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Taxes at the Federal statutory rate at 35%</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,536</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Estimated state income taxes, net of Federal benefit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>460</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Effect of permanent differences</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Estimated pro forma tax provision</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,006</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Foreign taxes withheld on royalty income of $74, $38 and $42 are
included in income tax expense for 2004, 2003 and 2002,
respectively. During 2003, due to a tax law change, the Company
realized an AMT income tax benefit of $264.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At December&nbsp;31, 2004, the excess of tax basis over the
financial reporting carrying value of assets and liabilities was:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="84%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Allowance for obsolete inventories</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,121</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Machinery and leasehold improvements</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,855</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Intangible assets and goodwill</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,187</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued employee benefit costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,494</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other accrued liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,200</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(190</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    TOTAL</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>22,667</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Stock Based Compensation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company follows Accounting Principles Board Opinion
No.&nbsp;25 (APB&nbsp;25), &#147;Accounting for Stock Issued to
Employees&#148; and related interpretations in accounting for
its employee unit plan. Accordingly, compensation cost is
recognized only for those arrangements where the fair market
value of a unit, as determined by the Board of Directors at the
grant date, is in excess of the amount the employee must pay to
acquire the unit. Stock-based compensation costs for stock
awards are reflected in net income over the vesting period of
the awards. The pro forma disclosure provisions of
FAS&nbsp;No.&nbsp;123, &#147;Accounting for Stock Based
Compensation&#148; have not been presented as the effect is not
material.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Recent Accounting Pronouncements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In November 2004, the FASB issued SFAS&nbsp;No.&nbsp;151.
&#147;Inventory Costs,&#148; an amendment of ARB No.&nbsp;43,
Chapter&nbsp;4, &#147;Inventory Pricing.&#148; SFAS&nbsp;No 151
clarifies that abnormal amounts of idle facility expense,
freight, handling costs, and wasted material should be expensed
as current period charges and provides guidance on the
allocation of overhead. This statement will be adopted for the
Company&#146;s first quarter of
</DIV>

<P align="center" style="font-size: 10pt;">F-11

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>Colt Defense LLC</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Financial Statements (continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information for the three months ended April&nbsp;3, 2005
and April&nbsp;4, 2004 is unaudited)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B><I>(dollars in thousands, except share amounts)</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
2006. The Company does not expect this statement to have a
material impact on its financial position, results of operations
or cash flows.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, the FASB issued SFAS&nbsp;No.&nbsp;123
(revised 2004), &#147;Share-Based Payment.&#148;
SFAS&nbsp;No.&nbsp;123R requires companies to record
compensation expense based on the fair value of stock-based
compensation awards. The statement also requires that the
compensation expense be recognized over the period during which
the employee is required to provide service in exchange for the
award. SFAS&nbsp;No.&nbsp;123R will be effective January&nbsp;1,
2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On December&nbsp;16, 2004, the FASB issued
SFAS&nbsp;No.&nbsp;123 (revised 2004), <I>Share-Based
Payment</I>, which is a revision of SFAS&nbsp;No.&nbsp;123,
<I>Accounting for Stock-Based Compensation</I>. SFAS&nbsp;123(R)
supersedes APB&nbsp;Opinion No.&nbsp;25, <I>Accounting for Stock
Issued to Employees</I>, and amends SFAS&nbsp;No.&nbsp;95,
<I>Statement of Cash Flows</I>. Generally, the approach in
SFAS&nbsp;123(R) is similar to the approach described in
SFAS&nbsp;123. However, SFAS&nbsp;123(R) requires all
share-based payments to employees, including grants of employee
stock options, to be recognized in the income statement based on
their fair values. Pro forma disclosure is no longer an
alternative.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In April&nbsp;14, 2005, the SEC announced that it would provide
for a phased-in implementation process for FASB Statement
No.&nbsp;123(R), <I>Share-Based Payment</I>. The SEC would
require registrants that are not small business issuers to adopt
Statement&nbsp;123(R)&#146;s fair value method of accounting for
share-based payments to employees no later than the beginning of
the first fiscal year beginning after June&nbsp;15, 2005. We
expect to adopt SFAS&nbsp;123(R) on January&nbsp;1, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
SFAS 123(R) permits public companies to adopt its requirements
using one of two methods:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="1%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    A &#147;modified prospective&#148; method in which compensation
    cost is recognized beginning with the effective date
    (a)&nbsp;based on the requirements of SFAS&nbsp;123(R) for all
    share-based payments granted after the effective date and
    (b)&nbsp;based on the requirements of SFAS&nbsp;123 for all
    awards granted to employees prior to the effective date of
    SFAS&nbsp;123(R) that remain unvested on the effective date.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    A &#147;modified retrospective&#148; method which includes the
    requirements of the modified prospective method described above,
    but also permits entities to restate based on the amounts
    previously recognized under SFAS&nbsp;123 for purposes of pro
    forma disclosures either (a)&nbsp;all prior periods presented or
    (b)&nbsp;prior interim periods of the year of adoption.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company expects to elect to implement SFAS&nbsp;123R
prospectively on January&nbsp;1, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Earnings Per Unit</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Basic earnings per unit for all periods presented was computed
by dividing net earnings for the respective period by the
weighted-average number of units outstanding during the period.
Diluted earnings per unit was computed by dividing (i)&nbsp;net
earnings during the period, by (ii)&nbsp;the weighted-average
number of units outstanding during the period, adjusted to add
the weighted-average number of potential dilutive units that
would have been outstanding upon the assumed exercise of the
stock options and warrants and adjusted for the option grants in
December 2004 and in the second quarter of 2005 which are
considered nominal issuances and therefore are included in
computing diluted earnings per unit for all periods. Options and
warrants of 7,952 were not included in 2002 as their impact was
anti-dilutive.
</DIV>

<P align="center" style="font-size: 10pt;">F-12

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>Colt Defense LLC</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Financial Statements (continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information for the three months ended April&nbsp;3, 2005
and April&nbsp;4, 2004 is unaudited)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B><I>(dollars in thousands, except share amounts)</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Basic and diluted earnings per unit amounts were computed using
the following denominations:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="43%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Three Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>April&nbsp;3,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>April&nbsp;4,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average units</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>146,126</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>145,922</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>145,922</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>92,366</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,809</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    December 2004 and 2005 options</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,310</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,310</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,310</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,310</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,310</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Impact of dilutive securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Employee stock options</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,464</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,464</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Warrants</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,748</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,149</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,911</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,149</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average units-assuming dilution</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>157,648</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>152,723</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>157,607</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>99,167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44,119</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Reclassification</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain reclassifications have been made to the prior year
financial statements to conform to the current year presentation.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>3.</B></TD>
    <TD>
    <B>Inventories</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The components of inventories consisted of the following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="67%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>April&nbsp;3,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Materials</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,422</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,360</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,989</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Work-in-process</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,357</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,586</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,343</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Finished goods</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>332</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>559</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>599</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,931</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less-allowance for excess and slow moving inventory</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,039</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,972</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,384</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,892</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>4.</B></TD>
    <TD>
    <B>Credit Facility</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On December&nbsp;23, 2003, the Company entered into $33,500
financing agreement with a financial institution, which
consisted of a $25,000 term loan (the Term Loan) and a revolving
credit facility (the Revolver) (collectively the Loans), which
provides for borrowings up to $8,500, subject to collateral
availability, which consists of substantially all of the
Company&#146;s assets (through an amendment, the Revolver
borrowing base was increased to $12,000 in January 2005). The
interest rates on the Loans are determined quarterly and are
based upon the greater of the prime rate or 4% plus the
applicable leverage ratio margin rates. Interest rates at
December&nbsp;31, 2004 for the Term Loan and Revolver were
11.75% and 7.25%, respectively. The Loans have a final maturity
date of December&nbsp;23, 2006. The Term Loan requires payments
of interest only, except for mandatory annual repayments of
principal based upon a percentage of excess cash flow, if any,
as defined. The Revolver loan at inception replaced $2,801
outstanding under the former line of credit facility. At
December&nbsp;31, 2004 and 2003, the Revolver balance was $6,509
and $1,568, respectively. The Company has $986 of borrowing
availability reserved to secure outstanding standby letters of
credit, resulting in the Company having $1,005 available for
additional borrowings at December&nbsp;31, 2004.
</DIV>

<P align="center" style="font-size: 10pt;">F-13

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>Colt Defense LLC</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Financial Statements (continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information for the three months ended April&nbsp;3, 2005
and April&nbsp;4, 2004 is unaudited)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B><I>(dollars in thousands, except share amounts)</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Loans include financial covenants that require the Company
to maintain certain leverage ratios, minimum fixed charge
coverage ratios, and minimum levels of EBITDA, as defined in the
loan agreement. At December&nbsp;31, 2004, the Company was in
compliance with those covenants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Term Loan proceeds of $25,000 were received in December 2003
and disbursed as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="78%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Bank fees and closing costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,263</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Commission settlement payment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Repayment of subordinated notes payable to affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,376</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Royalty payment to Colt&#146;s Manufacturing</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Distributions to members</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,354</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>22,737</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,263</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At December&nbsp;31, 2004, the balance payable on the Term Loan
was $25,000. There were no mandatory repayments of principal
required based upon the excess cash flow criteria.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Concurrent with the December 2003 financing transaction, the
Company released The Connecticut Development Authority
(CDA)&nbsp;from its commitment to guarantee a letter of credit
in the amount of $873 in exchange for the release of a lien on
Company assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Interest payments on loans from financial institutions were
$2,741, $432 and $793 in 2004, 2003 and 2002, respectively.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>5.</B></TD>
    <TD>
    <B>Subordinated Notes&nbsp;Payable Due to Affiliates</B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes payable issued between 1996 and 2002 to affiliates of
    controlling members bearing interest at 10%, due and payable,
    including accrued interest, on May&nbsp;31, 2006. At
    December&nbsp;31, 2003, accrued interest included in the balance
    was $1,644</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,163</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2003 notes payable to four affiliates of controlling members,
    bearing interest at 10%, due and payable, including accrued
    interest, on May&nbsp;31, 2006. At December&nbsp;31, 2003,
    accrued interest included in the balance was $63</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,229</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,392</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On December&nbsp;23, 2003, $9.4&nbsp;million was transferred to
an agency account and held in trust for the benefit of the
Company until January&nbsp;7, 2004 when the subordinated notes
were retired.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In conjunction with the issuance of the 2003 notes, the Company
issued warrants to the lenders, effective June&nbsp;16, 2003, to
purchase&nbsp;6,990 membership units at $120&nbsp;per unit. The
warrants, which vested immediately, were exercised on
June&nbsp;30, 2003. At the date the warrants were issued, the
Company&#146;s per unit fair market value equaled the exercise
price of the warrants and the expected life of the warrants was
under one month. Therefore, no value was assigned to the
warrants.
</DIV>

<P align="center" style="font-size: 10pt;">F-14

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>Colt Defense LLC</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Financial Statements (continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information for the three months ended April&nbsp;3, 2005
and April&nbsp;4, 2004 is unaudited)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B><I>(dollars in thousands, except share amounts)</I></B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>6.</B></TD>
    <TD>
    <B>Lease Obligations</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has certain noncancelable leases for machinery,
computer equipment and vehicles. The outstanding lease
obligations and minimum future payments at December&nbsp;31,
2004 follow:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="74%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Gross</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Capital</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Operating</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Leases</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Leases</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>72</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>544</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>508</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>139</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2008</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2009</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total minimum lease payments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,191</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less amount representing interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Present value of net minimum lease payments (including $59
    classified as current)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>221</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During 2004, the Company entered into a capital lease for
equipment for $149. As of December&nbsp;31, 2004, machinery and
computer equipment with a cost of approximately $3,090 was
recorded under capital leases with accumulated depreciation of
approximately $2,844. Depreciation of assets under capital
leases is included in depreciation expense. Rent expense of
approximately $401, $426 and $373 was incurred in 2004, 2003 and
2002, respectively. Rent expense in 2004 and 2003 is net of $161
and $130, respectively, of rental income for a portion of the
facilities subleased to Colt&#146;s Manufacturing. Rent income
of $161&nbsp;per year is expected through the expiration of the
Colt&#146;s Manufacturing sublease in December 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In February 2005, the Company entered into an agreement with its
landlord to purchase its office and manufacturing facilities,
which it currently leases, for a purchase price of $7,000. The
closing is contingent upon certain events occurring and the
purchase price is subject to a reduction of up to $600 in
exchange for which we assume the obligation to investigate and
remediate environmental conditions at the site pursuant to
certain Connecticut property transfer law requirements. In March
2005, the Company deposited $250 as a down payment against this
transaction, which contractually must close by June 2005, unless
certain conditions are not met. The most significant condition
is that the estimated costs of investigation and remediation
referred to above do not exceed $1,000.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>7.</B></TD>
    <TD>
    <B>Pension, Savings and Postretirement Benefits</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has two noncontributory, defined benefit pension
plans that cover substantially all eligible salaried and hourly
employees. The Company has recorded a pension liability, which
represents the excess of the accumulated benefit pension
obligation over the related pension plan assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company also provides certain postretirement health care
coverage to retired employees who were subject to the
Company&#146;s collective bargaining agreement when they were
employees. The cost of these postretirement benefits is
determined actuarially and is recognized in the financial
statements during the employees&#146; active working career.
</DIV>

<P align="center" style="font-size: 10pt;">F-15

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>Colt Defense LLC</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Financial Statements (continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information for the three months ended April&nbsp;3, 2005
and April&nbsp;4, 2004 is unaudited)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B><I>(dollars in thousands, except share amounts)</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Disclosures related to the pension plans and the postretirement
health care coverage is as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Post Retirement</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Pension Plans</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Health</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Projected benefit obligation at beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,882</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,711</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,853</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,594</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Service cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>578</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>134</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>230</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>730</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>528</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>708</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Plan amendment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>610</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Negative prior service cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,760</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Actuarial loss (gain)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>414</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>573</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,662</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(402</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Projected benefits paid</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(314</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(266</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(382</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(277</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Projected benefit obligation at end of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,355</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,882</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,035</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,853</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fair value of plan assets at beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,045</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,605</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Employer contributions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,869</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,108</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Actual return on plan assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>562</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>598</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benefits paid</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(314</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(266</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fair value of plan assets at end of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,162</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,045</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unfunded benefit obligation at end of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,193</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,837</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,035</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,853</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unrecognized (negative)&nbsp;prior service cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>855</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,232</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unrecognized net gain (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,719</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(566</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net amount recognized</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>852</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(109</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(12,264</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(12,419</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The components of the amounts recognized in the accompanying
balance sheet are as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="57%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Post Retirement</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Pension Plans</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Health</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued benefit costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,086</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,727</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(12,264</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(12,419</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Intangible pension asset</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>855</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated other comprehensive loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,083</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net amount recognized</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>852</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(109</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(12,264</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(12,419</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During 2005, the Company expects to make contributions of $1,688
to the pension plans and $468 to the postretirement plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At December&nbsp;31, 2004, the accrued benefit costs for the
bargaining unit plan and salaried plan were $2,446 and $640,
respectively.
</DIV>

<P align="center" style="font-size: 10pt;">F-16

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>Colt Defense LLC</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Financial Statements (continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information for the three months ended April&nbsp;3, 2005
and April&nbsp;4, 2004 is unaudited)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B><I>(dollars in thousands, except share amounts)</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The components of the amounts recognized in the Company&#146;s
income statement are as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Pension Plans</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Post Retirement Health</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Three Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Three Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>April 3, 2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>April 3, 2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Service cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>186</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>578</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>489</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>134</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>230</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>200</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>197</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>730</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>627</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>528</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>708</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>667</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expected return on assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(215</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(789</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(557</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(502</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of unrecognized negative prior service cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(132</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(528</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of unrecognized loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(62</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(174</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net periodic pension cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>259</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>906</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>228</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>876</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>693</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Pension Benefit Guaranty Corporation (PBGC)&nbsp;granted the
Company a waiver with respect to meeting minimum funding
requirements for the year ended December&nbsp;31, 2001, under an
agreement to become current with contributions by making
quarterly installment payments of $148 through January&nbsp;15,
2007. The terms of the agreement prohibit increases in pension
benefits until funding becomes current.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Weighted average assumptions are as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Post</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Pension</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Retirement</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Plans</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Health</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Discount rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.25</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.25</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expected return on plan assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>N/A</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Rate of compensation increase</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>N/A</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s assumptions for 2005 are a discount rate of
6%, an expected return on plan assets of 8%, and a rate of
compensation increase of 4%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The assumed health care cost trend rate for 2005 is estimated at
7%, which is expected to decrease by 1%&nbsp;per year over the
next 2&nbsp;years and to remain steady at 5% thereafter. The
impact of a 1% change either up or down on the amount of expense
for the plan benefit obligations is immaterial. In connection
with the renewal of its collective bargaining agreement in 2004,
effective April&nbsp;7, 2007, the Company capped the monthly
cost of providing retiree health care benefits at
$209.95&nbsp;per employee. For the year ended December&nbsp;31,
2004, the cost per month was $175.08&nbsp;per employee. The
impact of this change in benefits was an increase in negative
prior service cost of $5,760.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In developing the overall expected long-term return on plan
assets assumption, a building block approach was used in which
rates of return in excess of inflation were considered
separately for equity securities, debt
</DIV>

<P align="center" style="font-size: 10pt;">F-17

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>Colt Defense LLC</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Financial Statements (continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information for the three months ended April&nbsp;3, 2005
and April&nbsp;4, 2004 is unaudited)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B><I>(dollars in thousands, except share amounts)</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
securities and other assets. The excess returns were weighted by
the representative target allocation and added along with an
appropriate rate of inflation to develop the overall expected
long-term return on plan assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the pension plans, the weighted-average asset allocation at
December&nbsp;31, 2004 and by asset category, is as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="81%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equity securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fixed income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has developed an investment strategy for the pension
plans. The investment strategy is to emphasize total return;
that is, the aggregate return from capital appreciation and
dividend and interest income. The primary objective of the
investment management for the plan&#146;s assets is the emphasis
on consistent growth; specifically, growth in a manner that
protects the Plan&#146;s assets from excessive volatility in the
market value from year to year. The investment policy takes into
consideration the benefit obligations, including timing of
distributions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The primary objective for the pension plans is to provide
long-term capital appreciation through investment in equity and
debt securities. The Company&#146;s target asset allocation is
consistent with the weighted-average allocation at
December&nbsp;31, 2004. The Company selects professional
managers whose investment policies are consistent with the
Company&#146;s investment strategy and monitors their
performance against appropriate benchmarks.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following benefit payments, which reflect future service as
appropriate, are expected to be paid. The benefit payments are
based on the same assumptions used to measure the Company&#146;s
benefit obligation at the end of fiscal 2004.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Post</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pension</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Retirement</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Plans</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Health</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>473</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>468</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>529</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>644</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>569</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2008</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>732</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>606</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2009</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>809</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>628</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2010-2014</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,397</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>401K Plan</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has a contributory savings plan under
Section&nbsp;401(k) of the Internal Revenue Code covering
substantially all employees. The plan allows participants to
make voluntary contributions of up to 15% of their annual
compensation on a pretax basis, subject to IRS limitations. The
plan provides for contributions by the Company at its
discretion. The Company made no contributions in 2004, 2003 or
2002.
</DIV>

<P align="center" style="font-size: 10pt;">F-18

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>Colt Defense LLC</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Financial Statements (continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information for the three months ended April&nbsp;3, 2005
and April&nbsp;4, 2004 is unaudited)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B><I>(dollars in thousands, except share amounts)</I></B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>8.</B></TD>
    <TD>
    <B>Members Equity</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The authorized capitalization of the Company consists of 200,000
common units, of which 145,922&nbsp;units were issued and
outstanding as of December&nbsp;31, 2004 and 2003, and 1,000
preferred units, none of which were outstanding as of
December&nbsp;31, 2004 and 2003. Outstanding units at
April&nbsp;3, 2005 were 152,048.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Effective June&nbsp;12, 2003, in connection with the
Distribution, the Company issued 1,058 common units to Colt
Defense Employee Plan Holding Corp. (E-Plan Holding),
representing the same relative ownership held by New Colt
Holding Corp. Employee Stock Ownership Plan&nbsp;&#38; Trust, as
amended (the Plan), which at the time was converted to a profit
sharing plan. As a result of the Distribution, a one-time
tax-free distribution of $80 was made to E-Plan Holding and
treated as a dividend to the Plan, for distribution to plan
participants as allocated by the Plan&#146;s trustee. The
Company has no obligation to make any future contributions to
E-Plan Holding or the Plan. During 2003, the Company acquired 28
common units of the Company from E-Plan Holding for $4. No units
were acquired during 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Warrants</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Concurrent with the June&nbsp;12, 2003 Distribution, holders of
warrants to purchase&nbsp;85,352 common shares of NCHC received
warrants to purchase the same proportional interest in common
units of the Company. To determine new separate company warrant
exercise prices, the original NCHC exercise price was allocated
between the Company and NCHC in relation to the fair values of
the two entities at the time of the transaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A summary of the status of the warrants to purchase common units
of the Company at December&nbsp;31, 2004 and changes during the
two years then ended is as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="69%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Weighted</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Warrants</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercise Price</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Outstanding at December&nbsp;31, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issued in connection with the Distribution Agreement</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>85,352</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>88</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additional warrants issued 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,990</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>120</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Warrants exercised 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(86,216</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>91</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Outstanding at December&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,126</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>91</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Outstanding at December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,126</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>91</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On June&nbsp;30, 2003, warrant holders exercised 86,216 warrants
for a total consideration of $7,820 in exchange for the issuance
of nonrecourse notes receivable. These notes are reflected as a
reduction in members&#146; equity in the accompanying statement
of changes in members&#146; deficit, bear interest at 4% and are
due at the earlier of a change in control or June&nbsp;30, 2008.
Accrued interest on these notes has been recorded within
members&#146; equity and is included in notes receivable from
the exercise of options warrants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March&nbsp;29, 2005, the outstanding warrants were exercised
for a total consideration of $558 in exchange for the issuance
of nonrecourse notes receivable. These notes are reflected as a
reduction in members&#146; equity, bear interest at 4% and are
due at the earlier of a change in control or March 2010. Accrued
interest on these notes has been recorded within members&#146;
equity and is included in notes receivable from exercise of
warrants.
</DIV>

<P align="center" style="font-size: 10pt;">F-19

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>Colt Defense LLC</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Financial Statements (continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information for the three months ended April&nbsp;3, 2005
and April&nbsp;4, 2004 is unaudited)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B><I>(dollars in thousands, except share amounts)</I></B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>9.</B></TD>
    <TD>
    <B>Management Option Incentive Plan</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Effective June&nbsp;12, 2003, the Company established the Colt
Defense LLC 2003 Management Option Incentive Plan (the Option
Plan). In conjunction with the Distribution, employees holding
options to purchase common shares of NCHC received options to
purchase the same proportional interest in common units of the
Company. To determine new separate company warrant exercise
prices, the original NCHC exercise price was allocated between
the Company and NCHC in relation to the fair values of the two
entities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Options to purchase&nbsp;23,074 common units were issued in
connection with the distribution to reflect the options that had
been granted to the employees by NCHC. No additional options may
be issued under the Option Plan. The options vested immediately
or in installments through January 2005, subject to certain
conditions. All options terminate no later than January 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On June&nbsp;30, 2003, management exercised 20,996 options for
$1,911 in exchange for the issuance of nonrecourse notes
receivable. The notes are reflected as a reduction of
members&#146; deficit in the accompanying statements of changes
in members&#146; deficit, bear interest at 4% and are due at the
earlier of a change in control or June&nbsp;30, 2008. Accrued
interest on these notes has been recorded within members&#146;
equity and is included in notes receivable from the exercise of
options and warrants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The original options did not specifically permit the use of a
nonrecourse note as an exercise method and since the notes
extended the term of the original options, the notes are
considered new option grants requiring a new measurement date.
The aggregate $602 difference between the fair market value of
the units on the new measurement date and the exercise price was
charged to expense during 2003 as employee compensation. Because
the interest rate on the notes is fixed and the notes are not
prepayable, except with the consent of the Company, the new
option grant is considered a fixed award and, as such, no
additional compensation expense will be recognized in connection
with this award in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A summary of the status of the outstanding options as of
December&nbsp;31, 2004 and changes during the two years then
ended is as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="69%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Weighted</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Options</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercise Price</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Outstanding at December&nbsp;31, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issued in connection with the Distribution Agreement</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,074</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>103</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Options exercised</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(20,996</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>91</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Outstanding at December&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,078</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>221</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Options issued</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>91</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Options expired</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>252</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,166</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Outstanding at December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,126</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>91</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exercisable at December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>913</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>91</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At December&nbsp;31, 2004, all outstanding options had a
remaining contractual life of three years. The last tranche of
the options became exercisable on January&nbsp;4, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, the Company granted 300 stock options to a
Director with an exercise price of $91&nbsp;per share. The fair
value of the common stock was determined in early May 2005 to
have been $335&nbsp;per share at the time of the grant. The
intrinsic value of $73 is being recognized as compensation
expense over
</DIV>

<P align="center" style="font-size: 10pt;">F-20

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>Colt Defense LLC</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Financial Statements (continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information for the three months ended April&nbsp;3, 2005
and April&nbsp;4, 2004 is unaudited)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B><I>(dollars in thousands, except share amounts)</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
the two-year vesting period. The options vest immediately in the
event of an initial public offering or other liquidity event.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>10.</B></TD>
    <TD>
    <B>Transactions with Affiliates</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has a financial advisory agreement with an affiliate
of its primary unit holder. Under the terms of the agreement,
the Company incurred annual advisory fees of $250, $162 and $126
in 2004, 2003 and 2002, respectively. The Company also
reimburses the affiliate for expenses incurred in connection
with the financial advisory services provided. During 2004, and
2003, the Company incurred $189, and $111, respectively, for
such expenditures. There were no expenditures in 2002. Payments
of $666 and $415 were made in 2004 and 2003, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There were no payments in 2002. The cost for the advisory
service and the expenses are recorded within selling, general
and administrative expenses. At December&nbsp;31, 2004, the
Company has a prepaid balance of $34 with the affiliate. At
December&nbsp;31, 2003, the company owed the affiliate $193.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Commencing November&nbsp;4, 2002, the Company entered into a
sublicensing agreement with CMC whereby CMC would receive
license revenues from the Company for licensing its trademarks.
During 2003, the Company recognized $3,600 of royalty expense
related to this agreement. The agreement terminated
December&nbsp;31, 2003. At December&nbsp;31, 2004 and 2003, the
amount due CMC was $135 and $1,038, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On January&nbsp;1, 2004, the Company entered into a successor
license agreement (the License) with NCHC for the use of certain
Colt trademarks. Under the terms of the License, the Company
received a 20-year paid-up license for the use of the Colt
trademarks, which expires December&nbsp;31, 2023. Thereafter,
the License may be extended for successive five-year periods.
Consideration for the License included the transfer to
Colt&#146;s Manufacturing of the Colt Match Target&#174; rifle
line of business inventories of $18 and $2,000 in cash. The
Company recorded the amount transferred of $2,018 as an
intangible asset, which is being amortized over 20&nbsp;years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During 2003, the Company received reimbursements for expenses of
$1,452 for providing certain services under a Common Service
Agreement to CMC. As of December&nbsp;31, 2003, this Agreement
was terminated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the period January&nbsp;1, 2003 through June&nbsp;12,
2003, cash distributions of $3,863 were made to CMC.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>11.</B></TD>
    <TD>
    <B>Royalty Agreement</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has licensed certain proprietary technology to a
third party (Diemaco&nbsp;&#151; See Note&nbsp;16) under a
royalty income arrangement earning $759, $381 and $429 in 2004,
2003 and 2002, respectively.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>12.</B></TD>
    <TD>
    <B>Commitments and Contingencies</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Performance and warranty bonds have been established on behalf
of the Company by a third party in connection with sales to a
foreign customer. Although the customer has drawn no amounts,
the Company could ultimately be liable for bonds totaling $3,329
at December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During 2004, the Company filed two lawsuits in Federal District
Court against competitors Heckler&nbsp;&#38; Koch and Bushmaster
alleging unfair competition concerning their look-alike
M4&nbsp;carbine models and other trade practices.
</DIV>

<P align="center" style="font-size: 10pt;">F-21

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>Colt Defense LLC</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Financial Statements (continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information for the three months ended April&nbsp;3, 2005
and April&nbsp;4, 2004 is unaudited)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B><I>(dollars in thousands, except share amounts)</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March&nbsp;25, 2005, Heckler&nbsp;&#38; Koch Defense, Inc.
and Heckler&nbsp;&#38; Koch, Inc., as defendants, and the
Company, as the plaintiff, settled the Company&#146;s case
against them to the parties&#146; mutual satisfaction and the
court to dismissed the Company&#146;s case pursuant to an agreed
order of dismissal. The settlement terms are confidential.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Notwithstanding this settlement, the Company&#146;s case against
Bushmaster Firearms is continuing. A trial is scheduled for
later this year and Bushmaster has filed a partial motion for
summary judgment, including a motion to cancel the
Company&#146;s U.S.&nbsp;registered trademark for
&#147;M4&#148;. On May&nbsp;16, 2005, the Company filed a patent
infringement lawsuit in Federal District Court against
Bushmaster based on information obtained through discovery in
the first case. In both cases against Bushmaster, the Company is
seeking injunctive relief, damages, attorneys&#146; fees and
costs. Litigation costs relating to the above cases amounted to
$936 and $625 for the year ended December&nbsp;31, 2004 and for
the three-month period ended April&nbsp;3, 2005, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company is involved in other various matters of litigation
incidental to the normal course of its business. In
management&#146;s opinion, the disposition of these matters will
not have a material adverse effect on the financial condition,
results of operations or cash flows of the Company.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>13.</B></TD>
    <TD>
    <B>Concentration of Risk</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Financial instruments, which potentially subject the Company to
concentration of credit risk, consist primarily of trade
receivables. The fair value and the carrying value of the
Company&#146;s financial instruments (accounts receivable,
accounts payable and debt) are not materially different.
Accounts receivable from three customers in total represented
82% and 65% of trade receivables as of December&nbsp;31, 2004
and 2003, respectively. At December&nbsp;31, 2004 and 2003,
amounts due from foreign customers represent 80% and 43% of
accounts receivable, respectively. During 2004, 2003 and 2002,
sales to the U.S.&nbsp;government were 54%, 45% and 30% of net
sales, respectively. Sales to foreign countries represented 30%,
28% and 40% of total net sales in 2004, 2003 and 2002,
respectively. Sales to one of the Company&#146;s direct foreign
customers were 16%, 18% and 9% in 2004, 2003 and 2002,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Approximately three-fourths of the Company&#146;s (U.S.)
workforce is subject to a collective bargaining agreement, which
expires on April&nbsp;1, 2007.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>14.</B></TD>
    <TD>
    <B>Long-term Accounts Payable</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has entered into agreements with certain vendors to
secure discounts and to establish extended payment arrangements.
No discounts were received in 2004 and $145 was received in 2003
and $595 was received in 2002. The discount amount deferred at
December&nbsp;31, 2004 and 2003 of $120 has been recorded within
other long-term liabilities since the discounts are contingent
upon required future payments. Amounts due under the extended
payment arrangements are payable over the next seven years with
$185 due in 2005 and the remaining $828 due in 2006 and
thereafter. Amounts due after 2005 have been included in the
long-term portion of accounts payable.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>15.</B></TD>
    <TD>
    <B>Settlement of Disputed Commissions Payable</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2003, the Company reached a settlement with a former
agent in the amount of $5,600 relating to commissions owed on
sales. A liability for $2,981 had been recorded as of
December&nbsp;31, 2002. The settlement resulted in an additional
$2,619 charge in the statement of operations in 2003. The total
obligation was scheduled to be paid in monthly installments
through 2008. The settlement provided for up to a one-third
reduction in the amount due in the event of an early payoff.
</DIV>

<P align="center" style="font-size: 10pt;">F-22

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>Colt Defense LLC</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Financial Statements (continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information for the three months ended April&nbsp;3, 2005
and April&nbsp;4, 2004 is unaudited)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B><I>(dollars in thousands, except share amounts)</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, the Company paid the obligation in full and
received a prepayment discount of $842. The Company&#146;s
obligation was repaid as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="89%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2003 payments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,250</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2004 scheduled payments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,800</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2004 additional payment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,708</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total payments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,758</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepayment discount</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>842</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,600</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>16.</B></TD>
    <TD>
    <B>Subsequent Events</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Business Acquisition</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On May&nbsp;20, 2005, the Company acquired the Logistics and
Defense Division, Diemaco, of H&#233;roux-Devtek Inc., located
in Kitchener, Ontario, Canada for $16,500 Canadian
($13,080&nbsp;US) plus $2,672 Canadian ($2,118 US) for estimated
working capital at closing. This business is now called Colt
Canada. Through April&nbsp;3, 2005, the Company had incurred
$762 of costs in connection with this acquisition, which were
capitalized and classified as business acquisition costs in the
accompanying balance sheet. The purchase price is subject to
changes in working capital as a result of an audit that is in
process.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Debt Refinancing</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On May&nbsp;20, 2005, the Company entered into a Senior Secured
Facility with an aggregate principal amount of up to
$65.0&nbsp;million as set forth below:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    $10.0&nbsp;million three-year revolving credit facility
    (Revolving Credit Facility), which includes a $2.0&nbsp;million
    sublimit for the issuance of standby letters of credit;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    $25.0&nbsp;million three-year term loan facility (Term&nbsp;A
    Facility);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    $14.0&nbsp;million three-year term loan facility (Term&nbsp;B
    Facility);&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    $16.0&nbsp;million three-year term loan facility and available
    to the Company&#146;s Canadian subsidiary, which is denominated
    in Canadian dollars (Term&nbsp;C Facility).</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Term Loan&nbsp;A of the facility ($25,000) was used to repay the
Company&#146;s existing debt of $25,000, the Company used Term
Loan&nbsp;B ($14,000) and $2,100 of our $10,000 revolver to pay
a Special Dividend of $16,100 (see below) and the Company used
Term Loan&nbsp;C ($16,000) to pay for the Company&#146;s
acquisition of Colt Canada. The Company will write off the
unamortized deferred financing costs related to our existing
indebtedness of $970 in the second quarter of 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Revolving Credit Facility will terminate in May 2008. The
Term A Facility will be subject to quarterly amortization of
principal of $1.25&nbsp;million commencing June&nbsp;30, 2006
with the remaining principal due in May 2008. The Term&nbsp;B
Facility will be subject to quarterly amortization commencing
June&nbsp;30, 2006 of $625 with the remaining principal to be
payable in May 2008. The Term&nbsp;C Facility will be subject to
quarterly amortization of $625 commencing June&nbsp;30, 2006
with the remaining principal due in May 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to the amortization described above, prepayments are
required in the event of sales and other dispositions of the
Company&#146;s property and assets (excluding sales of inventory
in the ordinary course of business), from the issuance of
additional debt, from the issuance of equity and unless the
Company&#146;s ratio of funded indebtedness is less than 2.25%
the Company is required each year to prepay our term loans in an
</DIV>

<P align="center" style="font-size: 10pt;">F-23

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>Colt Defense LLC</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Financial Statements (continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information for the three months ended April&nbsp;3, 2005
and April&nbsp;4, 2004 is unaudited)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B><I>(dollars in thousands, except share amounts)</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
amount equal to 75% of Excess Cash Flow, as defined. The Company
is required to use $30.0&nbsp;million of the net proceeds from
this offering to pre-pay term loans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company may prepay the Senior Credit Facility in whole or in
part at any time without penalty, subject to reimbursement of
the lenders&#146; breakage and redeployment costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company is subject to financial covenants requiring the
maintenance of:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a minimum EBITDA (as defined in the Company&#146;s Senior Credit
    Facility) of $7.5&nbsp;million in total for two consecutive
    quarters;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a maximum leverage ratio (total funded debt/ EBITDA) of
    (a)&nbsp;3.25x through September&nbsp;30, 2005, (b)&nbsp;3.1x at
    December&nbsp;31, 2005, (c)&nbsp;3.00x through
    September&nbsp;30, 2006, (d)&nbsp;2.50x through
    September&nbsp;30, 2007 and (e)&nbsp;2.25x thereafter;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a minimum Fixed Charge Coverage Ratio (EBITDA less capital
    expenditures less cash taxes)/(cash interest expense plus
    scheduled principal repayments) of (a)&nbsp;2.0:1.0 through
    March&nbsp;31, 2006, (b)&nbsp;1.10:1.0 through June&nbsp;30,
    2007 and (c)&nbsp;1.25:1.0 thereafter.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Loans under the Revolving Credit Facility and the Term Loan
Facilities bear interest based on an agreed-upon margin plus
either LIBOR, prime or the Federal Funds rate plus&nbsp;0.50%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Loans under the Revolving Credit Facility and the Term&nbsp;A
Facility bear interest at a rate equal to the Applicable Margin,
plus LIBOR or a Base Rate (defined as the higher of (a)&nbsp;the
Bank of America prime rate and (b)&nbsp;the Federal Funds rate
plus .50%) and the Term&nbsp;B Facility will bear interest at a
rate equal to LIBOR plus the Applicable Margin then applicable
to the Revolving Credit Facility and the Term&nbsp;A Facility
<U>plus</U> 25&nbsp;basis points. A default rate shall apply on
all obligations in the event of default under the Senior Secured
Facility at a rate per annum of 2%&nbsp;above the applicable
interest rate. The initial interest rates were 6.21% for the
Revolving Credit Facility and Term&nbsp;A Facility, 6.46% for
the Term&nbsp;B Facility and 5.84% for the Term&nbsp;C Facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Special Dividend</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On May&nbsp;20, 2005, the Company paid a special dividend of
$16,100 ($105.20&nbsp;per unit) to its existing members.
Members&#146; deficit was $25,225 at April&nbsp;3, 2005. On a
pro forma to reflect the special dividend and the write-off of
the deferred financing costs related to the Company&#146;s
existing debt, the members&#146; deficit at April&nbsp;3, 2005
is $42,295.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Stock Option Grants</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In April 2005, the Company granted 5,010&nbsp;options to three
employees and a Director with an exercise price of $91&nbsp;per
unit. The fair value of the common stock was determined in early
May 2005 to be $459&nbsp;per share at the time of the grant. The
intrinsic value of $2,000 will be recognized over the respective
vesting periods commencing in the second quarter of 2005. The
options vest immediately in the event of an initial public
offering or other liquidity event.
</DIV>

<P align="center" style="font-size: 10pt;">F-24

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Colt Defense LLC</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Valuation and Qualifying Accounts</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Years Ended December&nbsp;31, 2004, 2003, and 2002</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='131'></A>
</DIV>

<!-- link1 "Schedule II" -->

<DIV align="center" style="font-size: 10pt;">
<B>Schedule&nbsp;II</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<I>(in thousands)</I>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="43%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Balance at</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Charges to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>beginning of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>costs and</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Balance at end</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>year</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>expenses</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Deductions</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>of year</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Allowance for doubtful accounts:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year ended December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>33</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year ended December&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year ended December&nbsp;31, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(36</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reserve for excess and obsolete inventory:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year ended December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,039</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,121</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year ended December&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,039</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year ended December&nbsp;31, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>997</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(79</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>918</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-25

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 0pt;">
<FONT style="font-size: 10pt">________________________________________________________________________________
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</FONT>
</DIV>

<DIV align="center" style="font-size: 15pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><FONT face="helvetica,arial">Shares</FONT></B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y09554y0955400.gif" alt="(LOGO)">
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Colt Defense Inc.</B>
</DIV>

<DIV align="center" style="font-size: 15pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Common Stock</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 37%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Prospectus
</DIV>

<DIV align="center" style="font-size: 10pt;">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 37%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 16pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><FONT face="helvetica,arial">Banc of America Securities
LLC</FONT></B>
</DIV>

<DIV align="center" style="font-size: 16pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><FONT face="helvetica,arial">SG Cowen&nbsp;&#38;
Co.</FONT></B>
</DIV>

<DIV align="center" style="font-size: 16pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><FONT face="helvetica,arial">Friedman Billings
Ramsey</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Until &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005, all dealers that buy, sell or trade in shares of our
common stock, whether or not participating in this offering, may
be required to deliver a prospectus. This is in addition to the
dealers&#146; obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or
subscriptions.
</DIV>

<DIV align="left" style="font-size: 1pt; margin-top: 30pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 4pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PART&nbsp;II</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INFORMATION NOT REQUIRED IN PROSPECTUS</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;13.</B></TD>
    <TD>
    <B><I>Other Expenses Of Issuance And Distribution</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth the various expenses payable by
the Registrant (including any fees and expenses of the selling
shareholders that the Registrant is obligated to pay) in
connection with the offering of the common shares being
registered hereby. All of the fees set forth below are estimates
except for the SEC registration fee and the NASD fee.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="81%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    SEC registration fee</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,151.63</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    NASD filing fee</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,125.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    NYSE listing fee</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Printing and engraving expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Transfer agent and registrar fees and expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Legal fees and expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accountants&#146; fees and expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Blue Sky fees and expenses (including legal fees)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Miscellaneous expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>*</TD>
    <TD align="left">
    To be provided by amendment.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;14.</B></TD>
    <TD>
    <B><I>Indemnification Of Officers And Directors</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Section&nbsp;145 of the Delaware General Corporation Law (the
&#147;DGCL&#148;) provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal or investigative (other than
an action by or in the right of the corporation) by reason of
the fact that he or she is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorney&#146;s fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such
action, suit or proceeding if he or she acted in good faith and
in a manner he or she reasonably believed to be in or not
opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable
cause to believe such conduct was unlawful. Section&nbsp;145
further provides that a corporation similarly may indemnify any
such person serving in any such capacity who was or is a party
or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the
corporation to procure a judgment in its favor, against expenses
actually and reasonably incurred in connection with the defense
or settlement of such action or suit if he or she acted in good
faith and in a manner he or she reasonably believed to be in or
not opposed to the best interest of the corporation, except that
no indemnification shall be made in respect of any claim, issue
or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the
Delaware Court of Chancery or such other court in which such
action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the
Court of Chancery or such other court shall deem proper.
Section&nbsp;145 also provides that it is not exclusive of other
rights to which those seeking indemnification may be entitled
under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise. Our bylaws provide for
indemnification, to the fullest extent permitted by law, of any
person made or threatened to be made party to any action, suit
or proceeding by reason of the fact that such person is or was a
director or officer of the Registrant, or is or was a director
of a subsidiary of the Registrant, against all expenses,
liabilities, losses and claims actually incurred or suffered by
such person in connection with the action, suit or proceeding.
</DIV>

<P align="center" style="font-size: 10pt;">II-1
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Section&nbsp;102(b)(7) of the DGCL permits a corporation to
include in its certificate of incorporation a provision
eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director; provided, that such
provision shall not eliminate or limit the liability of a
director (i)&nbsp;for any breach of the director&#146;s duty of
loyalty to the corporation or its stockholders, (ii)&nbsp;for
acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii)&nbsp;under
Section&nbsp;174 of the DGCL (relating to unlawful payment of
dividends and unlawful stock purchase and redemption) or
(iv)&nbsp;for any transaction from which the director derived an
improper personal benefit. Our certificate of incorporation
eliminates the personal liability of our directors to the
fullest extent allowed under Delaware law, as it shall be
supplemented and amended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Registrant expects to obtain policies of insurance under
which, subject to the limitations of such policies, coverage
will be provided (a)&nbsp;to its directors and officers against
loss arising from claims made by reason of breach of fiduciary
duty or other wrongful acts as a director or officer, including
claims relating to public securities matters and (b)&nbsp;to the
Registrant with respect to payments which may be made by the
Registrant to these officers and directors pursuant to the above
indemnification provision or otherwise as a matter of law.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;15.</B></TD>
    <TD>
    <B><I>Recent Sales Of Unregistered Securities</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Registrant was formed in May 2005 and has not issued any
securities. Prior to the completion of the offering of the
securities being registered hereby and in connection with our
Internal Restructuring, the Registrant will issue an aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of the Registrant&#146;s common stock in exchange for interests
in Colt Defense LLC, the Registrant&#146;s predecessor. This
issuance will be made in reliance upon Section&nbsp;4(2) of the
Securities Act or under Rules&nbsp;506 or 701 promulgated by the
SEC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since its organization as Colt Defense LLC in 2002, the
Registrant&#146;s predecessor has issued unregistered securities
as described below. None of the transactions involved any
underwriters, underwriting discounts or commissions, or any
public offering. Unless otherwise set forth below, the
Registrant believes that each transaction, if deemed to be a
sale of a security, was exempt from the registration
requirements under the Securities Act by virtue of
Section&nbsp;4(2) thereof, Regulation&nbsp;D promulgated
thereunder, or Rule&nbsp;701 promulgated under Section&nbsp;3(b)
thereof. The recipients of securities in each such transaction
represented their intention to acquire the securities for
investment only and not with a view to or for sale in connection
with any distribution thereof. Such securities were restricted
as to transfers and appropriate legends were affixed to the unit
certificates and instruments issued in such transactions. All
recipients either received adequate information about the
Registrant&#146;s predecessor or had access, through employment
or other relationships, to such information.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following unit numbers and exercise prices do not give
effect to the Internal Restructuring.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As part of its reorganization, on June&nbsp;12, 2003, the
Registrant&#146;s predecessor issued (1)&nbsp;an aggregate of
38,738 common units to the stockholders of New Colt, in partial
redemption of their shares in New Colt; (2)&nbsp;warrants to
purchase an aggregate of (a)&nbsp;77,401 common units at an
exercise price of $91&nbsp;per common unit, (b)&nbsp;11,709
common units at an exercise price of $70&nbsp;per common unit,
and (c)&nbsp;1,236 common units at an exercise price of
$105&nbsp;per common unit, to the warrantholders of New Colt, in
partial redemption of their warrants to purchase shares of New
Colt; and (3)&nbsp;options to purchase an aggregate of
23,073.727 common units at an exercise price of $2,800&nbsp;per
common unit to the optionholders of New Colt, in partial
redemption of their options to purchase shares of New Colt. Also
on June&nbsp;12, 2003, the Registrant&#146;s predecessor issued
options to purchase an aggregate of 23,074 common units to
certain of its employees at an exercise price of $91&nbsp;per
common unit under its 2003 Management Option Incentive Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In lieu of repayment for certain obligations, the
Registrant&#146;s predecessor issued Promissory Notes, dated
June&nbsp;16, 2003 to certain members and an affiliate of a
certain member, in the aggregate amount of approximately
$1.2&nbsp;million. In connection with this transaction, the
Registrant&#146;s predecessor issued to Colt Defense Holding LLC
warrants to purchase&nbsp;7,080 of its common units at an
exercise price of $120&nbsp;per unit.
</DIV>

<P align="center" style="font-size: 10pt;">II-2

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On June&nbsp;30, 2003, a number of its warrantholders and
optionholders exercised their warrants and vested options,
respectively, and the Registrant&#146;s predecessor issued an
aggregate of 107,212 common units to them.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March&nbsp;29, 2005, the Registrant&#146;s predecessor issued
6,126 common units to certain of its members in connection with
the exercise of outstanding warrants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Between December 2004 and May 2005, the Registrant&#146;s
predecessor issued options to purchase&nbsp;5,130 common units
at an exercise price of $91&nbsp;per common unit to certain of
the Registrant&#146;s employees and directors, of which options
to purchase&nbsp;1,000 common units vested and were subsequently
exercised. At present, the Registrant has options to
purchase&nbsp;6,136 common units outstanding, of which 1,826 are
presently vested.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;16.</B></TD>
    <TD>
    <B><I>Exhibits and Financial Statements</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Exhibits:</I>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="85%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B>Exhibit</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B>Number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap><B>Description of Exhibits</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Underwriting Agreement</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Distribution Agreement, dated as of June&nbsp;12, 2003, by and
    among New Colt Holding Corp., the NC Stockholders and NC
    Warrantholders (as defined therein), Colt Defense Holding LLC,
    Colt Defense Employee Plan Holding Corp. and Colt Defense LLC</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2</TD>
    <TD align="left" valign="top" nowrap>.2*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Asset Contribution Agreement, dated as of November&nbsp;4, 2002,
    among New Colt Holding Corp., Colt&#146;s Manufacturing Company,
    Inc. and Colt Defense LLC</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2</TD>
    <TD align="left" valign="top" nowrap>.3*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Stock Purchase Agreement, dated as of February&nbsp;10, 2005, by
    and among Devtek Corporation, Colt Canada Corporation and Colt
    Defense LLC</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2</TD>
    <TD align="left" valign="top" nowrap>.4*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Internal Restructuring Agreement</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Restated Certificate of Incorporation of the Registrant,
    to be effective upon the closing of this offering</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.2*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Amended and Restated Bylaws of the Registrant, to be
    effective upon the closing of this offering</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Specimen certificate for shares of common stock</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Opinion of Morgan, Lewis&nbsp;&#38; Bockius LLP, counsel to the
    Registrant</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Registration Rights Agreement, dated as of June&nbsp;12, 2003,
    by and between Colt Defense LLC and Connecticut Development
    Authority</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.2*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Registration Rights Agreement, dated as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2005, by and among Colt Defense LLC and the Holders named therein</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.3*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Rights Agreement, dated as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2005, by and among the Registrant and the Holders named therein</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.4*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    License Agreement, dated as of December&nbsp;19, 2003, by and
    between Colt Defense LLC and New Colt Holding Corp.</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.5*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Technical Data Sales and Patent License Agreement, dated as of
    June&nbsp;30, 1967, by and between Colt Defense LLC (as
    successor to Colt&#146;s Inc.) and the United States of America,
    as amended by Modification No.&nbsp;65 thereto</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.6*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    M4 Addendum to Technical Data Sales and Patent License
    Agreement, dated as of December&nbsp;24, 1997, by and between
    Colt Defense LLC (as assignee of Colt&#146;s Manufacturing
    Company, Inc.) and the United States of America, as amended by
    that certain letter agreement dated as of June&nbsp;12, 2001</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.7*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Strategic Source Agreement, dated as of May&nbsp;18, 2005, by
    and among Her Majesty the Queen in right of Canada, Colt Canada
    Corporation and Colt Defense LLC</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">II-3

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="85%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B>Exhibit</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B>Number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap><B>Description of Exhibits</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.8*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consolidated License Agreement, dated as of February&nbsp;8,
    1984, by and between Her Majesty the Queen in right of Canada
    and Colt Defense LLC (as assignee of Colt&#146;s Manufacturing
    Company, Inc.)</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.9</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Colt Defense LLC 2003 Management Option Incentive Plan</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.10*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    2005 Incentive Plan</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.11*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Credit Agreement, dated as of May&nbsp;20, 2005, by and among
    Colt Defense LLC and Colt Canada Corp., as borrowers, the
    subsidiaries referred to therein, as guarantors, the lenders
    referred to therein, Bank of America, N.A., as
    U.S.&nbsp;Administrative Agent and L/C Issuer, and Bank of
    America N.A., acting through its Canadian branch, as Canadian
    Administrative Agent</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.12*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    U.S. Security and Pledge Agreement, dated as of May&nbsp;20,
    2005, by and among Colt Defense LLC and Colt Rapid Mat LLC, as
    grantors, and Bank of America, N.A., as Collateral Agent</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.13*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Canadian Security and Pledge Agreement, dated as of May&nbsp;20,
    2005, by and among Colt Defense LLC, Colt Canada Corporation and
    Diemaco Inc., as grantors, and Bank of America, N.A., as
    Collateral Agent</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.14*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Canadian Pledge Agreement, dated as of May&nbsp;20, 2005, by and
    between Colt Defense LLC, as Pledgor, and Bank of America, N.A.,
    as Collateral Agent</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.15*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Lease, dated as of March&nbsp;22, 1990, between Coltec
    Industries Inc. and Colt Defense LLC, as successor to
    Colt&#146;s Manufacturing Company, Inc., as amended</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.16*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement, dated as of May&nbsp;21, 1998, between
    Colt Defense LLC, as successor to Colt&#146;s Manufacturing
    Company, Inc., and Carlton S. Chen</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.17*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Colt Defense LLC Salaried Retirement Income Plan</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.18*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Nominating Agreement</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>21</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    List of Subsidiaries</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Morgan, Lewis&nbsp;&#38; Bockius LLP (included in
    Exhibit&nbsp;5.1)</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Ernst&nbsp;&#38; Young LLP</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>24</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Powers of Attorney (included in signature pages to Registration
    Statement)</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>99</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Gen. the Lord Guthrie of Craigiebank</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>99</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Gordon R. Sullivan</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>99</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of John R. Torell&nbsp;III</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>99</TD>
    <TD align="left" valign="top" nowrap>.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Philip A. Wheeler</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>99</TD>
    <TD align="left" valign="top" nowrap>.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of William M. Keys</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>*</TD>
    <TD align="left">
    To be filed by amendment.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financial Statement Schedules:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All financial statement schedules have been omitted because
either they are not required, are not applicable, or the
information is otherwise set forth in the Financial Statements
and notes thereto.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;17.</B></TD>
    <TD>
    <B><I>Undertakings</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned Registrant
hereby undertakes to provide to the underwriters at the closing
specified in the Underwriting Agreement share certificates in
such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to
directors, officers and controlling persons of the Registrant
pursuant to the provisions described under Item&nbsp;14 above,
or otherwise, the Registrant has been advised that in the
opinion of the SEC such indemnification is
</DIV>

<P align="center" style="font-size: 10pt;">II-4
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<DIV align="left" style="font-size: 10pt;">
against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final
adjudication of such issue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned Registrant
hereby undertakes that:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    (1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For purposes of determining any
    liability under the Securities Act, the information omitted from
    the form of prospectus filed as part of this registration
    statement in reliance on Rule&nbsp;430A and contained in a form
    of prospectus filed by the Registrant pursuant to
    Rule&nbsp;424(b)(1) or (4)&nbsp;or 497(h) under the Securities
    Act shall be deemed to be part of this registration statement as
    of the time it is first declared effective.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    (2)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the purpose of determining
    any liability under the Securities Act, each post-effective
    amendment that contains a form of prospectus shall be deemed to
    be a new registration statement relating to the securities
    offered therein, and the offering of such securities at that
    time shall be deemed to be the initial bona fide offering
    thereof.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">II-5

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SIGNATURES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this registration
statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of West Hartford,
Connecticut on June&nbsp;3, 2005.
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    COLT DEFENSE INC.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 48pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="2%"></TD>
    <TD width="58%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>By:&nbsp;</TD>
    <TD align="center">
    /s/ <FONT style="font-variant:SMALL-CAPS">William M. Keys
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 3pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt" align="left">&nbsp;</DIV></TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="left">
    Name:&nbsp;William M. Keys</TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="left">
    Title:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;President and Chief
    Executive Officer</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>POWERS OF ATTORNEY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
KNOW ALL MEN BY THESE PRESENT, that each person whose signature
appears below hereby constitutes and appoints William&nbsp;M.
Keys and Richard&nbsp;J. Nadeau, or either one of them, his true
and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place,
and stead, in any and all capacities, to sign any and all
amendments to the Registration Statement, including
post-effective amendments, and registration statements filed
pursuant to Rule&nbsp;462 under the Securities Act of 1933, as
amended, and to file the same, with all exhibits hereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, and does hereby grant unto said
attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his
substitutes, may lawfully do or cause to be done by virtue
hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the requirements of the Securities Act of 1933, as
amended, this registration statement has been signed below by
the following persons, in the capacities and on the dates
indicated.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="38%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="38%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="3" align="center" nowrap><B>Signature</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Title</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Date</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">William M. Keys<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>William
    M. Keys</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    President and Chief Executive Officer (Principal Executive
    Officer)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    June&nbsp;3, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">Richard J. Nadeau<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>Richard
    J. Nadeau</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Vice President and Chief Financial Officer (Principal Financial
    and Accounting Officer)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    June&nbsp;3, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">John P. Rigas<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>John
    P. Rigas</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    June&nbsp;3, 2005</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">II-6
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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>EXHIBIT LIST</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="85%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap><B>Description of Exhibits</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Underwriting Agreement</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Distribution Agreement, dated as of June&nbsp;12, 2003, by and
    among New Colt Holding Corp., the NC Stockholders and NC
    Warrantholders (as defined therein), Colt Defense Holding LLC,
    Colt Defense Employee Plan Holding Corp. and Colt Defense LLC</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2</TD>
    <TD align="left" valign="top" nowrap>.2*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Asset Contribution Agreement, dated as of November&nbsp;4, 2002,
    among New Colt Holding Corp., Colt&#146;s Manufacturing Company,
    Inc. and Colt Defense LLC</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2</TD>
    <TD align="left" valign="top" nowrap>.3*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Stock Purchase Agreement, dated as of February&nbsp;10, 2005, by
    and among Devtek Corporation, Colt Canada Corporation and Colt
    Defense LLC</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2</TD>
    <TD align="left" valign="top" nowrap>.4*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Internal Restructuring Agreement</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Restated Certificate of Incorporation of the Registrant,
    to be effective upon the closing of this offering</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.2*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Amended and Restated Bylaws of the Registrant, to be
    effective upon the closing of this offering</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Specimen certificate for shares of common stock</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Opinion of Morgan, Lewis&nbsp;&#38; Bockius LLP, counsel to the
    Registrant</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Registration Rights Agreement, dated as of June&nbsp;12, 2003,
    by and between Colt Defense LLC and Connecticut Development
    Authority</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.2*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Registration Rights Agreement, dated as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2005, by and among Colt Defense LLC and the Holders named therein</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.3*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Rights Agreement, dated as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2005, by and among the Registrant and the Holders named therein</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.4*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    License Agreement, dated as of December&nbsp;19, 2003, by and
    between Colt Defense LLC and New Colt Holding Corp.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.5*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Technical Data Sales and Patent License Agreement, dated as of
    June&nbsp;30, 1967, by and between Colt Defense LLC (as
    successor to Colt&#146;s Inc.) and the United States of America,
    as amended by Modification No.&nbsp;65 thereto</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.6*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    M4 Addendum to Technical Data Sales and Patent License
    Agreement, dated as of December&nbsp;24, 1997, by and between
    Colt Defense LLC (as assignee of Colt&#146;s Manufacturing
    Company, Inc.) and the United States of America, as amended by
    that certain letter agreement dated as of June&nbsp;12, 2001</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.7*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Strategic Source Agreement, dated as of May&nbsp;18, 2005, by
    and among Her Majesty the Queen in right of Canada, Colt Canada
    Corporation and Colt Defense LLC</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.8*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consolidated License Agreement, dated as of February&nbsp;8,
    1984, by and between Her Majesty the Queen in right of Canada
    and Colt Defense LLC (as assignee of Colt&#146;s Manufacturing
    Company, Inc.)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.9</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Colt Defense LLC 2003 Management Option Incentive Plan</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.10*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    2005 Incentive Plan</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.11*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Credit Agreement, dated as of May&nbsp;20, 2005, by and among
    Colt Defense LLC and Colt Canada Corp., as borrowers, the
    subsidiaries referred to therein, as guarantors, the lenders
    referred to therein, Bank of America, N.A., as
    U.S.&nbsp;Administrative Agent and L/C Issuer, and Bank of
    America N.A., acting through its Canadian branch, as Canadian
    Administrative Agent</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.12*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    U.S. Security and Pledge Agreement, dated as of May&nbsp;20,
    2005, by and among Colt Defense LLC and Colt Rapid Mat LLC, as
    grantors, and Bank of America, N.A., as Collateral Agent</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.13*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Canadian Security and Pledge Agreement, dated as of May&nbsp;20,
    2005, by and among Colt Defense LLC, Colt Canada Corporation and
    Diemaco Inc., as grantors, and Bank of America, N.A., as
    Collateral Agent</TD>
</TR>

</TABLE>
</CENTER>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="85%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap><B>Description of Exhibits</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.14*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Canadian Pledge Agreement, dated as of May&nbsp;20, 2005, by and
    between Colt Defense LLC, as Pledgor, and Bank of America, N.A.,
    as Collateral Agent</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.15*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Lease, dated as of March&nbsp;22, 1990, between Coltec
    Industries Inc. and Colt Defense LLC, as successor to
    Colt&#146;s Manufacturing Company, Inc., as amended</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.16*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement, dated as of May&nbsp;21, 1998, between
    Colt Defense LLC, as successor to Colt&#146;s Manufacturing
    Company, Inc. and Carlton S. Chen</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.17*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Colt Defense LLC Salaried Retirement Income Plan</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.18*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Nominating Agreement</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>21</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    List of Subsidiaries</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Morgan, Lewis&nbsp;&#38; Bockius LLP (included in
    Exhibit&nbsp;5.1)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Ernst&nbsp;&#38; Young LLP</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>24</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Powers of Attorney (included in signature pages to Registration
    Statement)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>99</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Gen. the Lord Guthrie of Craigiebank</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>99</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Gordon R. Sullivan</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>99</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of John R. Torell&nbsp;III</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>99</TD>
    <TD align="left" valign="top" nowrap>.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Philip A. Wheeler</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>99</TD>
    <TD align="left" valign="top" nowrap>.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of William M. Keys</TD>
</TR>

</TABLE>
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<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>*</TD>
    <TD align="left">
    To be filed by amendment</TD>
</TR>

</TABLE>
</BODY>
</HTML>
[{"type": "S-1", "sequence": "1", "filename": "y09554sv1.htm", "description": "FORM S-1", "secsgml_size_bytes": 1424862}]
{"company-data": {"conformed-name": "Colt Defense Inc.", "cik": "0001328644", "irs-number": "000000000", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-125503", "film-number": "05878025"}, "business-address": {"street1": "547 NEW PARK AVENUE", "city": "WEST HARTFORD", "state": "CT", "zip": "06110", "phone": "860-232-4489"}, "mail-address": {"street1": "547 NEW PARK AVENUE", "city": "WEST HARTFORD", "state": "CT", "zip": "06110"}}
FORM S-1
Table of Contents
As filed with the Securities and Exchange Commission on
June 3, 2005
Registration
No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Colt Defense Inc.
(Exact name of registrant as specified in its charter)
Delaware
3490
20-2902260
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification No.)
Colt Defense Inc.
547 New Park Avenue
West Hartford, Connecticut 06110
(860) 232-4489
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
William M. Keys
Colt Defense Inc.
President and Chief Executive Officer
547 New Park Avenue
West Hartford, Connecticut 06110
(860) 232-4489
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
copies to:
Robert G. Robison, Esq.
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Telephone: (212) 309-6000
Facsimile: (212) 309-6001
Carlton S. Chen, Esq.
Colt Defense Inc.
547 New Park Avenue
West Hartford, Connecticut 06110
Telephone: (860) 232-4489
Facsimile: (860) 244-1475
Richard D. Truesdell, Jr., Esq.
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telephone: (212) 450-4000
Facsimile: (212) 450-3800
Approximate date of commencement of proposed sale to
public:
As soon as practicable after the effective date
hereof.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act, check the following
box.
o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering.
o
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration number of the
earlier effective registration statement for the same
offering.
o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration number of the
earlier effective registration statement for the same
offering.
o
If delivery of the Prospectus is expected to be made pursuant to
Rule 434, please check the following
box.
o
CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities
Proposed Maximum Aggregate
Amount of
to be Registered
Offering Price
(1)(2)
Registration Fee
Common Stock, par value per share $0.01 (including preferred
    stock purchase
    rights)
(3)
$86,250,000
$10,151.63
(1)
Estimated solely for the purpose of calculating the amount of
    the registration fee pursuant to Rule 457(o) under the
    Securities Act of 1933.
(2)
Includes shares subject to the underwriters' over-allotment
    option.
(3)
Rights initially will trade together with the common stock. The
    value attributable to the rights, if any, is reflected in the
    market price of the common stock.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON
SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE
DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL
THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A)
OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
Table of Contents
The
information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities and we are not soliciting an offer to buy these
securities in any state where the offer or sale is not
permitted.
SUBJECT TO COMPLETION, DATED JUNE 3,
2005
Prospectus
Shares
Colt Defense Inc.
Common Stock
This is our initial public offering of common stock and no
public market currently exists for our common stock. All of
the                      shares
of common stock are being sold by us. We intend to use
$          of
the net proceeds from the sale of shares in this offering to
repay outstanding indebtedness under our credit facility and
$          to
repay indebtedness to certain of our existing stockholders. We
currently expect the initial public offering price of our common
stock to be between
$          and
$           per
share. After the offering, the market price for our shares may
be outside this range.
We have applied to have our common stock listed on the New York
Stock Exchange under the symbol "CLT".
Investing in our common stock involves a high degree of risk.
See "Risk Factors" beginning on page 9.
Per Share
Total
Offering price
$
$
Discounts and commissions to underwriters
$
$
Offering proceeds to us, before expenses
$
$
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
We have granted the underwriters the right to purchase up
to                     additional
shares of common stock to cover any over-allotments. We intend
to use the net proceeds we receive from any shares sold pursuant
to the underwriters' over-allotment option to make
additional payments to our existing stockholders. The
underwriters can exercise the right at any time within
30 days after the offering. The underwriters expect to
deliver the shares of common stock to investors on or
about                     .
Banc of America Securities LLC
SG Cowen & Co.
Sole Book-Running Manager
Joint Lead Manager
Friedman Billings
Ramsey
, 2005
You should rely only on the information contained in this
prospectus. We have not, and the underwriters have not,
authorized anyone to provide you with different information. We
are not making an offer of these securities in any jurisdiction
where the offer or sale is not permitted. You should assume that
the information contained in this prospectus is accurate as of
the date on the front of this prospectus only. Our business,
financial condition, results of operations and prospects may
have changed since that date.
Information contained in our web site does not constitute
part of this prospectus.
Colt Defense LLC, Colt Defense Inc., our logo and other
trademarks mentioned in this prospectus are the property of
their respective owners.
Market data and other statistical information used in this
prospectus are based on industry publications, government
publications, publicly available information or other published
industry sources. Although we believe these sources are
reliable, we have not independently verified their information
and cannot guarantee it.
TABLE OF CONTENTS
Page
Prospectus Summary
1
Risk Factors
9
Forward-Looking Statements
19
Use of Proceeds
20
Dividend Policy
20
Capitalization
22
Dilution
23
Internal Restructuring
25
Unaudited Pro Forma Financial
    Information
28
Notes to Unaudited Pro Forma Financial
    Information
32
Selected Financial Data
34
Management's Discussion and Analysis
    of Results of Operations and Financial Condition
37
Business
54
Management
72
Certain Relationships and Related Party
    Transactions
80
Principal Stockholders
86
Description of Capital Stock
88
Shares Eligible for Future Sale
96
Underwriting
98
Notice to Canadian Residents
101
Legal Matters
102
Experts
102
Where You Can Find More Information
102
Index to Consolidated Financial
    Statements
F-1
COLT DEFENSE LLC 2003 MANAGEMENT OPTION INCENTIVE PLAN
LIST OF SUBSIDIARIES
CONSENT OF ERNST & YOUNG LLP
CONSENT OF GEN. THE LORD GUTHRIE OF CRAIGIEBANK
CONSENT OF GORDON R. SULLIVAN
CONSENT OF JOHN R. TORELL III
CONSENT OF PHILIP A. WHEELER
CONSENT OF WILLIAM M. KEYS
i
Table of Contents
PROSPECTUS SUMMARY
While this summary highlights information about us and our
business that we believe is important for you to read and
consider, you should read this entire prospectus carefully,
including "Risk Factors" beginning on
page  and our financial statements and the notes to
those financial statements beginning on page F-1, before you
decide to invest in our common stock.
Unless the context otherwise indicates, as used in this
prospectus, the terms "Company," "Colt,"
"Colt Defense," "we," "us" and
"our" refer to (1) our predecessors with respect
to periods prior to November 4, 2002, (2) Colt Defense
LLC and subsidiaries on a combined basis with respect to periods
on and after November 4, 2002 until the completion of our
Internal Restructuring as defined and described below under
"Internal Restructuring" and (3) Colt Defense
Inc. and its consolidated subsidiaries with respect to periods
from and after the completion of our Internal Restructuring.
COLT DEFENSE
We are a leading designer, developer and manufacturer of small
arms and weapon systems for the U.S. military, its allies
and federal, state and local law enforcement agencies. Our
products include military rifles, such as the M4 carbine
rifle and its predecessor, the M16 rifle, auxiliary weapon
systems, such as the M203 grenade launcher, and rifles for
law enforcement agencies around the world. We also refurbish,
recondition and repair these weapons, and produce spare parts
and component kits such as barrels, springs, screws, handguards,
upper and lower receivers and buttstocks. In addition, we
provide centralized procurement and training services. We have
produced for, and sold to (or have orders for), the U.S. and
allied militaries approximately seven million M16 and 340,000 M4
weapons. In 2004, we had net sales of $75.1 million, EBITDA
(as defined) of $14.3 million and net income of
$10.0 million. Approximately 54% of our 2004 sales
were to the U.S. government. As of April 3, 2005, we
had a funded backlog of approximately $59 million,
$44 million of which is expected to be delivered by
December 31, 2005. In addition to our funded backlog, we
have an IDIQ (indefinite delivery, indefinite quantity) contract
with the U.S. government for an additional $45 million
that is expected to be ordered by July 2005.
We are the U.S. military's sole source supplier of the
M4 carbine rifle. The M4 is the standard carbine for the
U.S. Army and the other services within the Department of
Defense and is currently the successor for the M16 rifles
in use by the U.S. military. The M4 carbine is one of
the U.S. military's critical weapon systems programs,
and it is already a combat proven "weapon of choice."
The M4 carbine is used broadly across the
U.S. military, from general purpose forces to elite units,
including the U.S. Navy Seals and Army Rangers and
Airborne. We are also the sole source supplier of small arms to
the Canadian military and the principal supplier of military
rifles to a number of NATO countries.
We and our predecessors have been supplying small arms to the
U.S. military since 1847. Since the spin-off and
distribution of Colt Defense LLC from its prior parent,
Colt's Manufacturing Company, LLC (formerly Colt's
Manufacturing Company, Inc.), or Colt's Manufacturing, in
2002, Colt Defense has sold and marketed exclusively to the U.S.
and allied militaries and law enforcement agencies. Our products
enjoy outstanding brand name recognition and have proven
themselves under the most severe battle conditions —
from the jungles of Vietnam to the deserts of the Middle East
and the mountains of Afghanistan. Our expertise in the design
and manufacture of advanced individual weapon systems enables us
to integrate new technologies and features into a large
installed base, introduce additional related products and
services at the point of sale, and retain our market leadership
as we invest in new technologies.
RECENT ACQUISITION
We recently acquired Diemaco, a division of Héroux-Devtek
Inc., a leading manufacturer of small caliber firearms and
weapon systems for the Canadian military and law enforcement and
other international militaries. The acquisition of Diemaco,
which we have renamed Colt Canada Corporation, or Colt Canada,
has broadened our market presence with additional scale and
critical mass. Colt Canada has been designated the center of
excellence for small arms for over 25 years by the Canadian
government, and is the sole source
1
Table of Contents
supplier of the C7 rifle and the C8 carbine to the
Canadian Department of National Defence. In addition, Colt
Canada is the Canadian government's preferred source for
all other small arms and related parts and services. Nearly all
of Colt Canada's products are based on licensed Colt
technology and are similar to our products in many respects. For
example, Colt Canada's C8 carbine is largely based on
M4 technology, and its C7 rifle is largely based on
M16 technology. Thus, our discussions with respect to the
M4 carbine also apply to the C8 carbine. By acquiring
Colt Canada, we have enhanced our research and development
capabilities and diversified our customer base and channels of
distribution, adding customers and contracts in Canada and
various European countries. In addition, we have increased our
manufacturing capacity through the addition of a modern and
cost-effective second manufacturing facility.
OUR COMPETITIVE STRENGTHS
We believe that we have a strong competitive position
attributable to a number of factors, including:
Global Brand Name with Leading Market Share.
Colt is a
widely recognized global brand name associated with quality,
value and reliability. Over the past 40 years, we and our
predecessors have sold over seven million military and law
enforcement weapons to over 80 countries. We are the number
one provider of military rifles to the U.S. and Canadian
militaries.
Sole Source Provider of the M4 Carbine.
We are the
U.S. military's sole source supplier of the
M4 carbine. As of April 3, 2005, we have sold or have
orders for approximately 340,000 M4 carbines, including
270,000 to the U.S. government. Our sole source agreement
with the U.S. government lasts until June 30, 2009. If
the government seeks competitive bids after June 2009, we
believe we are well-positioned to compete successfully for this
business. The M4 carbine is only at the beginning of its
product life cycle and is the standard carbine for the
U.S. Army and the other services within the Department of
Defense. Currently, the M4 carbine is the successor for the
M16 rifles in use by the U.S. military. We are also
the sole source supplier of small arms (including the
C8 carbine) to the Canadian Department of National Defence.
Long-standing Customer Relationships.
We continue to
enjoy a successful long-term relationship with the
U.S. government (which includes the U.S. military and
federal agencies), our single largest customer and one of the
largest purchasers of firearms in the world. We interact
primarily with the U.S. Army, which acts as procurement
agent for the other military branches, and we also enjoy a
strong relationship with the Navy, Marines, Air Force,
Coast Guard and National Guard and Reserves. We have a variety
of international customers, as we provide small arms to allied
foreign governments, as well as U.S. and international law
enforcement agencies.
Extensive Installed Base and Aftermarket.
Over seven
million of our M16 rifles and 340,000 M4 carbines have been sold
or ordered to date, with the majority of rifle sales being to
the U.S. military. While it is difficult to ascertain the
number of M16 rifles and M4 carbines still
operational, we estimate the worldwide military installed base
to be at least two million. We are expanding our business
opportunities in this extensive installed base with our
M4 carbine and new weapon systems as well as aftermarket
products and services, including weapon upgrades, accessories,
spare parts, replacement kits, training and logistic support. In
2004, our aftermarket sales for spare parts were
$10.7 million and our contract management sales were
$5.3 million.
Ownership of the M4 and M16 Technical Data Packages.
We are a technical leader in the design of small arms and we
own the design, manufacturing know-how, patent and trademark
rights, and other proprietary and confidential data rights,
which we refer to as the technical data package, or TDP, to the
M4 carbine and the M16 rifle. We are the sole source
supplier of M4 carbines and repair parts to the
U.S. military until June 30, 2009. We have granted a
limited manufacturing license to the U.S. government to
make or have made M16 rifles and critical components and,
after June 30, 2009, M4 carbines and critical
components for the U.S. military. Our continued development
and enhancements to our TDPs have strengthened our position as
the technical leader in small arms development.
Experienced Management Team.
The members of our
management team have an average of over 25 years of
experience in the defense industry with strong and long-standing
market relationships with most
2
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of the principal buyers in the market. We believe these
relationships will allow us to continue to expand our presence
in the market. The team is led by our chief executive officer,
Lieutenant General William M. Keys, U.S. Marine Corps
(Ret.), who has over 40 years of experience in the
defense industry.
Superior Manufacturing Capability.
We have two
manufacturing facilities where we can produce small arms
efficiently and effectively to meet U.S. and Canadian government
requirements, as well as the needs of other customers. Both of
our facilities are certified and registered ISO 9001:2000, a
widely recognized quality management standard set and monitored
by the International Organization for Standardization.
OUR STRATEGY
The major elements of our strategy are:
Consolidate Dominant Position of the M4 within the
Department of Defense.
Based on the M4 carbine's
proven versatility and exceptional reliability in combat
operations in Iraq and Afghanistan, the M4 has become the
successor for the M16 rifle. We have an installed base of
232,000 M4 carbines within the U.S. military. We will
continue to promote extensive use of the M4 carbine by all elite
and general purpose forces in the Department of Defense, with
the goal of having all required personnel in the
U.S. military upgraded to the M4 carbine.
Continue to Support Increased Operating Tempo of U.S. and
Allied Militaries.
The recent military operations in both
Iraq and Afghanistan have resulted in a higher level of
operational tempo for U.S. and allied militaries. The tactics
employed during these conflicts have been heavily dependent on
ground force deployment and have magnified the weapons needs of
the ground war fighter. There are approximately 387,000
U.S. troops currently deployed in 120 countries. Ground war
fighters need small arms that are lightweight, compact and
reliable, like the M4 carbine. With Operation Iraqi Freedom
and Operation Enduring Freedom, new small arms contracts for all
services have increased. We believe we have significant
opportunities to grow our sales based on heightened
U.S. military requirements and the need to effectively arm
the ground war fighter.
Maintain Our Leading Market Position through Ongoing Research
and Development and the Introduction of Other Transformational
Small Arms to the Department of Defense.
We are one of the
leaders in the design and development of small arms due to our
focus on engineering excellence and highly skilled research and
development teams, which we believe will allow us to compete
effectively to supply next generation small arms and other
transformational technologies to the U.S. military. We have
a long-standing tradition of working closely with military
ground troops to improve our weapon systems to meet their
requirements. We have formed the Colt New Technologies
Laboratory to pursue the development of transformational
technology and products.
Pursue International Opportunities.
As the sole source
supplier of the M4 carbine to the U.S. military, we
are positioned to capitalize on growth from weapons
modernization efforts in various countries. We believe other
countries look to the United States when deciding upon new
weapon systems. Countries such as Brazil, Greece, Norway,
Portugal and Turkey are actively evaluating the replacement and
refurbishment of small arms due to aging and to meet NATO
standard caliber requirements. In addition, the acquisition of
Colt Canada has added new customers in Canada, Denmark, the
Netherlands and the United Kingdom, with incremental
opportunities in other countries.
Expand Support and Outsourcing Capabilities.
We are in
the final stages of a project whereby we would establish a
facility at the U.S. Marine Corps depot, Albany, Georgia.
We intend to use this facility for the refurbishment and repair
of M16 rifles and the conversion of M16 rifles into
M4 carbines and, in the future, for other Colt products. We
believe this capability will allow us to capture additional
aftermarket sales. We also intend to expand our international
sales by entering into additional coproduction programs to
enable certain foreign customers to engage in in-country
manufacture or assembly of our small arms.
Pursue Horizontal Integration through Bundling Sales of
Accessories with M4 Weapon Systems.
With approximately
340,000 M4 carbines sold or ordered worldwide over the past
ten years, we believe that we
3
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have a significant opportunity to increase revenue by offering
additional accessories to enhance the capability and
functionality of the M4 carbine.
Pursue Opportunities with Law Enforcement Agencies.
Law
enforcement agencies typically look to the U.S. military
when determining their weapon of choice. Because we have such a
strong presence within the U.S. military, we believe law
enforcement agencies will continue to look to us to provide them
with additional weapons, upgrades and spare parts. We have sold
approximately 55,000 rifles, carbines and related weapon
systems to the Department of Homeland Security and a variety of
domestic law enforcement agencies over the past five years.
Pursue Strategic Acquisitions.
We intend to seek selected
domestic and international acquisition opportunities. In
evaluating acquisition candidates, we intend to focus on
companies that have a complementary product line or
technological competencies, as well as those we believe will
enhance our ability to implement our business strategy.
SCIENS CAPITAL MANAGEMENT
Sciens Management LLC, or Sciens Management, provides our
company with investment banking, corporate and strategic and
advisory services. Sciens Management and several of our
stockholders are employed by or affiliated with Sciens Capital
Management. Sciens Capital Management is an alternative
investment management firm headquartered in New York.
Sciens Capital Management manages a variety of alternative
assets, including private equity, venture capital, distressed
assets, structured finance and funds of hedge funds. Sciens
Capital Management has invested in the United States and
internationally as a control investor in buyouts or as a lead
investor in growth capital. Sciens Capital Management has made
investments in companies in defense and security, specialty
manufacturing, telecommunications and financial services, as
well as in early stage companies in information technology.
INTERNAL RESTRUCTURING
Immediately prior to the effectiveness of the registration
statement of which this prospectus is a part, we will complete a
series of restructuring transactions, which we refer to
collectively as our "Internal Restructuring," for the
purpose of transitioning from an organizational structure in
which our top-tier company is a limited liability company to a
structure in which our top-tier company is a corporation. Our
current top-tier company is Colt Defense LLC. Following the
Internal Restructuring, the current members of Colt
Defense LLC will be stockholders of our new top-tier
company, Colt Defense Inc., which is issuing shares of its
common stock to the public in this offering. In connection with
the Internal Restructuring, the current members of Colt
Defense LLC (other than Colt Defense Employee Plan Holding
Corporation) will contribute all of their membership interests
in Colt Defense LLC to Colt Defense Inc. in exchange
for shares of common stock, promissory notes of Colt
Defense Inc. and the right to participate in the
over-allotment option. Colt Defense Employee Profit Sharing Plan
will contribute all of the outstanding shares of Colt Defense
Employee Holding Corporation in exchange for shares of common
stock, promissory notes and the right to participate in the
over-allotment option. The promissory notes, which we refer to
as the "Restructuring Notes," will be issued in an
aggregate principal amount plus accrued interest of
approximately
$                     million,
and we intend to use
$                     million
of the net proceeds from this offering to repay the
Restructuring Notes in full. See "Internal
Restructuring" on page 25.
OUR HEADQUARTERS
Our headquarters are located at 547 New Park Avenue, West
Hartford, Connecticut 06110. Our telephone number is
(860) 232-4489. Our internet address is
www.colt.com
.
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Table of Contents
THE OFFERING
Common stock offered by us in this offering
shares
Common stock to be outstanding immediately after this offering(1)
shares
Over-allotment option
shares
Use of proceeds from this offering
We expect to use the net proceeds of this offering, which are
    estimated to be approximately
    $           million,
    to repay in full the Restructuring Notes that we will issue to
    certain of our existing stockholders as part of our Internal
    Restructuring, to repay
    $           million
    of our outstanding indebtedness, and the remainder for working
    capital, for strategic acquisitions of businesses and for
    general corporate purposes. We intend to use the net proceeds
    from any shares sold pursuant to the underwriters'
    over-allotment option to make additional payments to our
    existing stockholders. See "Use of Proceeds" and
    "Internal Restructuring."
Dividend policy
We do not intend to pay dividends on our common stock for the
    foreseeable future. We plan to retain our earnings for use in
    the operation of our business and to fund future growth.
Proposed New York Stock Exchange symbol
"CLT"
Except as otherwise indicated, the number of shares of common
stock stated to be outstanding after this offering gives effect
to the shares being issued in connection with the Internal
Restructuring, the shares of common stock being sold by us in
this offering, and adjustments to the number of outstanding
shares of common stock and options, and exercise prices as a
result of the Internal Restructuring. The number of shares of
common stock to be outstanding after this offering excludes:
•
shares
    of our common stock issuable upon the exercise of stock options
    outstanding as of April 3, 2005 at a weighted average
    exercise price of
    $           per
    share, of which options to
    purchase                      shares
    of our common stock were then exercisable; and
•
shares
    of our common stock reserved for future grant under our employee
    incentive plan.
Unless specifically stated otherwise, the information in this
prospectus assumes:
•
no exercise of the underwriters' over-allotment option; and
•
an initial public offering price of
    $           per
    share, the midpoint of the initial public offering price range
    indicated on the cover of this prospectus.
(1)
Shares outstanding
    includes                  shares
    that will be issued to our existing stockholders if the
    underwriters do not exercise any portion of their over-allotment
    option. The number of shares issued will decrease to the extent
    the underwriters exercise their over-allotment option.
5
Table of Contents
SUMMARY FINANCIAL DATA
Colt Defense Inc. was incorporated on May 25, 2005 and has
not engaged in any business or other activities except in
connection with its formation and the Internal Restructuring. In
order to facilitate this offering, we will consummate the
Internal Restructuring in which Colt Defense Inc. will become
the successor to Colt Defense LLC for accounting purposes. See
"Internal Restructuring." The summary financial data
for the three months ended April 3, 2005 and April 4,
2004 are derived from the unaudited financial statements of our
predecessor, Colt Defense LLC, which in the opinion of
management, include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair statement of results
for the unaudited interim periods. The summary financial data as
of and for the years ended December 31, 2004, 2003 and 2002
are derived from the audited financial statements of Colt
Defense LLC. The results of operations for the interim
periods are not necessarily indicative of the results to be
expected for the full year or any future period.
The summary pro forma balance sheet data as of April 3,
2005 and the summary pro forma statements of operations data for
the year ended December 31, 2004 and the three months ended
April 3, 2005 give pro forma effect to the following:
•
the Internal Restructuring as if it had occurred on
    April 3, 2005, as further adjusted to give effect to this
    offering and the intended application of the net proceeds
    therefrom;
•
the refinancing of our debt and the payment of a special
    distribution of $16.1 million by Colt Defense LLC; and
•
the treatment of Colt Defense LLC as a tax paying entity subject
    to federal and state income tax.
The summary pro forma financial data are for informational
purposes only and should not be considered indicative of actual
results that would have been achieved had these events actually
been consummated on the dates indicated and do not purport to
indicate results of operations as of any future date or for any
future period.
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Table of Contents
The summary financial data presented below are not necessarily
indicative of the results of future operations and should be
read in conjunction with "Unaudited Pro Forma Financial
Information," "Selected Financial Data,"
"Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Internal
Restructuring" and our audited financial statements, and
the related notes, included elsewhere in this prospectus.
Colt Defense LLC
Colt Defense Inc.
(1)
Three Months Ended
Pro Forma
Pro Forma
Year Ended December 31,
Three Months
Year Ended
April 3,
April 4,
Ended
December 31,
2005
2004
2004
2003
2002
April 3, 2005
2004
($ in thousands, except per unit or share data)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Statement of Operations Data:
Net sales
$
21,609
$
18,896
$
75,135
$
66,682
$
53,329
$
21,609
$
75,135
Cost of sales
14,622
12,340
50,376
45,161
39,768
14,622
50,376
Gross profit
6,987
6,556
24,759
21,521
13,561
6,987
24,759
Operating income
3,633
3,982
12,266
11,788
6,529
3,695
12,516
Income before income taxes
2,900
3,174
10,102
3,283
5,179
3,725
13,137
Income tax expense (benefit)
22
8
74
38
(222
)
1,485
5,238
Net
    income
(2)
$
2,878
$
3,166
$
10,028
$
3,245
$
5,401
$
2,240
$
7,899
Pro forma
    (unaudited)
(3)
Pro forma before income taxes
$
2,900
$
3,174
$
10,102
$
3,283
$
5,179
$
3,725
$
13,137
Pro forma income tax expense
1,150
1,258
4,006
1,302
2,054
1,485
5,238
Pro forma net income
$
1,750
$
1,916
$
6,096
$
1,981
$
3,125
$
2,240
$
7,899
Pro forma earnings per unit (assuming dilution)
(4)(5)
$
11.10
$
12.55
$
38.68
$
19.98
$
70.83
$
$
Pro forma weighted average shares (assuming
    dilution)
(5)
157,648
152,723
157,607
99,167
44,119
Colt Defense LLC
Colt Defense Inc.
(1)
Three Months Ended
Year Ended December 31,
Pro Forma Three
April 3,
April 4,
Months Ended
2005
2004
2004
2003
2002
April 3, 2005
(unaudited)
(unaudited)
(unaudited)
Balance Sheet Data
(end of period):
Total assets
$
28,602
$
31,900
$
37,704
$
47,461
$
23,901
$
59,382
Short-term debt
59
4,678
6,568
11,027
1,184
2,159
Long-term debt
25,143
25,027
25,162
25,075
11,449
143
Accrued benefit costs
12,900
13,915
13,194
14,190
13,555
12,900
Other long-term liabilities
1,071
4,144
1,274
4,190
5,300
1,071
Total liabilities
53,827
62,555
64,767
68,843
44,888
30,927
Members' (deficit) equity
(25,225
)
(30,655
)
(27,063
)
(21,382
)
(20,987
)
28,455
Other Financial Data (Unaudited):
EBITDA
(6)
$
4,081
$
4,195
$
14,342
$
5,303
$
7,435
$
4,143
Adjusted
    EBITDA
(6)
$
4,081
$
4,195
$
13,500
$
12,733
$
8,418
$
4,143
Litigation expense (included in EBITDA and Adjusted
    EBITDA)
(7)
$
625
$
—
$
936
$
—
$
—
$
625
(1)
The pro forma summary financial data do not include the results
    of operations of Colt Canada, which we recently acquired.
(2)
No provision for federal or state income taxes is reflected in
    the historical results, as Colt Defense LLC is treated as a
    partnership for tax purposes.* All operating losses of Colt
    Defense LLC have been allocated to our investors. Subsequent to
    the Internal Restructuring, the income of Colt Defense Inc. will
    be taxed at the corporate level.
(3)
For a reconciliation of the pro forma data to historical
    financial information, see "Unaudited Pro Forma Financial
    Information."
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(4)
Diluted earnings per unit are based on the weighted average
    number of units outstanding during the period adjusted to add
    the weighted-average number of potentially dilutive units that
    would have been outstanding upon the assumed exercise of the
    stock options and warrants issued in 2003 and adjusted for the
    December 2004 stock option grant and the option grants from the
    second quarter of 2005. The December 2004 option grant and the
    option grants from the second quarter of 2005 are considered
    nominal issuances and the underlying units are included in
    diluted earning per unit for all periods presented.
(5)
Share amounts and exercise prices will be adjusted to reflect
    the Internal Restructuring.
(6)
EBITDA and Adjusted EBITDA are not financial measures under
    United States Generally Accepted Accounting Principles, or
    U.S. GAAP. We use EBITDA and Adjusted EBITDA as
    supplemental financial measures. EBITDA is defined as net income
    before interest, income taxes, depreciation and amortization.
    Adjusted EBITDA is defined as EBITDA before one-time items. We
    believe EBITDA and Adjusted EBITDA are useful financial
    performance measures for our equity holders and us and are a
    complement to net income determined in accordance with
    U.S. GAAP. Because it excludes interest and income taxes,
    EBITDA provides insight with respect to our ongoing operating
    results irrespective of our capital structure and because it
    excludes depreciation and amortization, EBITDA provides a basis
    for measuring our financial performance unrelated to historical
    cost or carrying value of long-lived assets. Because it excludes
    one-time items, Adjusted EBITDA provides a benchmark for
    comparing operating results between periods. EBITDA and Adjusted
    EBITDA do not measure the capital we require to maintain our
    fixed assets and does not take into account the total amount of
    interest we pay on outstanding debt nor does it show trends in
    interest costs due to changes in our borrowings or changes in
    interest rates. Non-U.S. GAAP measures such as EBITDA and
    Adjusted EBITDA should not be considered in isolation or as a
    substitute for U.S. GAAP measures. EBITDA and Adjusted
    EBITDA do not represent cash generated from operating activities
    determined in accordance with U.S. GAAP and should not be
    considered as an alternative to operating income, income before
    income taxes or net income determined in accordance with
    U.S. GAAP as an indicator of performance or as an
    alternative to cash flows from operating activities as an
    indicator of liquidity. We note that EBITDA reporting is
    required by our lenders to assist them in understanding our
    operating performance. The amounts shown for EBITDA as presented
    herein are different from the amounts calculated under the
    EBITDA used in our senior secured credit facility. EBITDA as
    defined in our senior secured credit facility is equal to
    Adjusted EBITDA above plus any litigation costs incurred in
    connection with our litigation with Bushmaster Firearms, Inc.,
    nonrecurring expenses associated with certain "permitted
    acquisitions" under our senior secured credit facility,
    stock based compensation expense and any management fees paid to
    Sciens Management.
*
Income tax as shown represents Canadian withholding taxes on
    royalty income.
The following table presents a reconciliation of EBITDA and
Adjusted EBITDA to net income:
Colt Defense LLC
Colt Defense Inc.
(1)
Three Months
Ended
Year Ended
December 31,
Pro Forma Three
April 3,
April 4,
Months Ended
2005
2004
2004
2003
2002
April 3, 2005
Net income
$
2,878
$
3,166
$
10,028
$
3,245
$
5,401
$
2,240
Income tax expense
22
8
74
38
(222
)
1,485
Depreciation and amortization
121
133
505
438
810
121
Interest expense
1,060
888
3,735
1,582
1,446
297
EBITDA
4,081
4,195
14,342
5,303
7,435
4,143
Royalty expense to Colt's Manufacturing
—
—
—
3,600
650
—
Reorganization costs
—
—
—
1,211
333
—
Net settlement of litigation
—
—
(842
)
2,619
—
—
Adjusted EBITDA
$
4,081
$
4,195
$
13,500
$
12,733
$
8,418
$
4,143
(7)
Our net income from continuing operations was negatively
    impacted by the effects of certain litigation. See Note 12
    to our audited financial statements included elsewhere in this
    prospectus.
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RISK FACTORS
Before making an investment in our common stock you should
carefully consider the risks described below, as well as the
other information set forth in this prospectus, including our
consolidated financial statements and related notes.
Any of the risk factors described below could significantly
and negatively affect our business, prospects, financial
condition or operating results, which could cause the trading
price of our common stock to decline and could cause you to lose
all or part of your investment. Additional risks and
uncertainties not presently known to us, or risks that we
currently consider immaterial, may also impair our
operations.
Risks Related to Our Business
We rely on contracts with U.S. government entities
for a significant portion of our sales. The loss of such
contracts would have a material adverse effect on our
business.
Our sales are predominantly derived from contracts with agencies
of the Department of Defense. Approximately 54% of our sales for
the year ended December 31, 2004, were made directly or
indirectly to agencies of the U.S. government. The
U.S. Army is moving toward a faster and lighter force,
which might reduce funding for U.S. Army programs in which
we participate. The U.S. Army may decide to phase out our
M4 weapon systems. The loss of all or a substantial portion of
our contracts with the U.S. government would significantly
reduce our revenues. Additionally, the U.S. government has
historically awarded certain programs to us on a sole-source
basis. In the future it may open these programs to a competitive
bidding process.
We depend on a dominant product for a majority of our
revenues. A reduction in sales of this product would have a
material adverse effect on our revenues.
We derive a majority of our revenues from the sales of our M4
carbines. There can be no assurance as to how long the M4
carbine will continue to be the primary small arms weapon of the
U.S. military. Even if the M4 carbine does remain the
primary small arms weapon of the U.S. government, we cannot
assure you that we will be successful in competing for contracts
to produce the M4 carbine after our sole source agreement
expires in June 2009. Although we own the TDPs for the M4
carbine and M16 rifle, that does not prevent other competitors
from competing against us (after June 2009 in the case of the M4
carbine) in the production of these weapons. For example,
another manufacturer has been a nonexclusive supplier to the
U.S. government of M16 rifles since 1988. If we do not
remain the primary supplier of M4 carbines to the
U.S. military, it would have a material adverse effect on
our business, prospects, financial condition, results of
operations and cash flows. Additionally, prior to June 2009,
under limited circumstances the U.S. government may
contract with another supplier to produce the M4 carbine such as
in the event the U.S. government requires more M4 carbines
than we have the capacity to produce.
The pending U.S. government solicitation for next
generation small arms could adversely affect our business if we
are not the winner.
Since the mid 1990s, the U.S. government has been funding
an initiative to develop more advanced light armaments known as
the Objective Individual Combat Weapon program. The
U.S. Army funded development and conducted field testing of
a rifle produced by another manufacturer designated as the XM8
into 2004. However, in the 2005 Department of Defense budget,
all funding for the development of the XM8 was removed. In May
2005, the U.S. Army issued a Request for Proposal, or RFP,
for the Offensive Individual Combat Weapon —
Increment I, or OICW. This RFP invites defense contractors
to submit a technical and financial document package with sample
weapons for the purpose of evaluating the next generation of
modern modular weapon systems. The program requires one family
of weapons that consists of the following four variants:
standard carbine, special compact version, designated marksman
version, or rifle, and light machine gun. We have already
started the requisite work to complete and submit our response
to the RFP, which is due on November 7, 2005. The
solicitation states that the winning company will be awarded a
low-rate initial production contract to produce up to 4,900
weapon systems and could receive an initial full-rate production
contract to make more than 134,000 weapons. If this program
results in the selection and funding of a
9
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replacement for the M4 carbine and M16 rifle and we are not the
winner, our business, results of operations and liquidity could
be materially adversely affected.
A reduction in the U.S. defense budget would have a
material adverse effect on our business.
The U.S. government may decide to reduce government defense
spending in the programs in which we participate. The loss or
significant reduction in government funding for any program in
which we participate could materially adversely affect our sales
and earnings and thus negatively affect our business.
We may lose money on our fixed unit price
contracts.
We provide our products and services primarily through fixed
unit price contracts. In a fixed unit price contract, we provide
our products and services at a predetermined price, regardless
of the costs we incur. Accordingly, we must fully absorb cost
overruns, notwithstanding the difficulty of estimating all of
the costs we will incur in performing these contracts and in
projecting the ultimate level of sales that we may achieve. Our
failure to estimate costs accurately, control costs during
performance or anticipate technical problems of a fixed unit
price contract may reduce our profitability or cause a loss.
There are limited sources for some of our raw materials
which may significantly impede our manufacturing
obligations.
The raw materials we use in manufacturing include steel,
aluminum and petroleum-based resins. Should these materials
become unavailable for any reason, we would be unable to replace
them with materials of like weight and strength. We purchase
steel for our rifle barrels from a single supplier. Events which
disrupt our supplies of steel for a substantial period of time,
such as the bankruptcy of our supplier, would require us to
source steel from an alternative supplier and could have a
material adverse effect on our financial condition and the
results of our operations. If our supply of steel or of any of
these materials were substantially reduced or cut off, or if
there was a material increase in the price of these materials,
our manufacturing operations could be adversely affected and our
costs increased, and our business, financial condition, results
of operations and liquidity could be materially adversely
affected.
If our suppliers fail to adequately perform their
contractual obligations, our prime contract performance and our
ability to obtain future business could be materially and
adversely impacted.
We rely on suppliers to perform a portion of the work in respect
of the products and services we are obligated to deliver to our
customers. There is a risk that we may have disputes with these
suppliers concerning a number of issues, such as the quality and
timeliness of their work. The failure by one or more of our
suppliers to satisfactorily deliver on a timely basis the
agreed-upon supplies or services may materially and adversely
impact our ability to perform our obligations and may result in
the default termination of a government contract. A default
termination could expose us to liability for the excess costs of
reprocurement by the government and could have a material
adverse effect on our ability to compete for future contracts
and task orders.
If we lose key management or are unable to attract and
retain qualified individuals required for our business, our
operating results and growth may suffer.
Two members of our management team had careers in the
U.S. Marine Corps and are intimately familiar with the
types of weapons required to complete combat missions both
domestically and internationally. Losing the services of these
or other members of our management team could harm our business
and our expansion efforts. Our ability to operate our business
is dependent on our ability to hire and retain technically
skilled workers. Our workforce is aging, and competition for
some qualified employees, such as engineering professionals, has
intensified in recent years and may become even more competitive
in the future. If we are unable to attract and retain qualified
employees, our operating results, growth and ability to obtain
future contracts could suffer.
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Our manufacturing facilities may experience disruptions
adversely affecting our financial position and results of
operations.
We currently manufacture our products at facilities in West
Hartford, Connecticut and Kitchener, Ontario, Canada. Any
natural disaster or other serious disruption at these facilities
due to a fire or any other calamity could damage our capital
equipment or supporting infrastructure and materially impair our
ability to manufacture our products. Even a short time
disruption in our production output could delay shipments and
cause damage to relationships with our customers, causing them
to reduce or eliminate the amount of products they purchase from
us. Any such disruption could result in lost revenues, increased
costs and reduced profits.
Our operating performance is heavily dependent upon the
timing and delivery of products under our contracts.
Our operating results and cash flow are materially dependent
upon the timing of manufacturing and delivery of products under
our contracts and on our ability to produce our products to meet
our customers' timetables. We do not recognize sales on a
unit until we deliver and the customer accepts such unit. This
may extend the period of time during which we carry inventory
and may result in an uneven distribution of revenue from these
contracts between periods. As a result, our period-to-period
performance may fluctuate significantly, and you should not
consider our performance during any particular period as
indicative of longer-term results.
Our government contracts are subject to audit and our
business could be adversely affected by a negative audit by
government agencies.
As a U.S. and Canadian government contractor, we are subject to
financial audits and other reviews by the U.S. and Canadian
governments of our costs, performance, accounting and general
business practices relating to certain of our significant U.S.
and Canadian government contracts. Like most government
contractors, we are audited and reviewed on a continual basis.
Based on the results of its audits, the U.S. and Canadian
governments may challenge the price we have negotiated for our
products. Although adjustments arising from government audits
and reviews have not had a material adverse effect on our
results of operations in the past, there can be no assurance
that future audits and reviews would not have such effects. In
addition, under U.S. and Canadian government purchasing
regulations, some of our costs, including most financing costs,
amortization of intangible assets, portions of our research and
development costs, and some marketing expenses may not be
reimbursable or allowed in our negotiation of fixed-price
contracts. Further, as a U.S. and Canadian government
contractor, we are subject to an increased risk of
investigations, criminal prosecution, civil fraud, whistleblower
lawsuits and other legal actions and liabilities to which purely
private sector companies are not, the results of which could
have a material adverse effect on our operations.
Our U.S. and Canadian government contracts are multi-year
contracts that are funded by government appropriations
annually.
We are a sole source, prime contractor to the
U.S. Department of Defense and the Canadian Department of
National Defence. Our primary contracts with the
U.S. government are indefinite delivery indefinite quantity
contracts under which the customer places orders at its
discretion. Although these contracts have a four-year term, they
are funded annually by government appropriations. The
U.S. government's termination of, or failure to place
orders under, one or more of our contracts would have a negative
impact on our operating results and financial condition.
Our contracts with the Canadian Department of National Defence
are awarded under a strategic source agreement between the
Canadian government, Colt Canada and Colt Defense that was
entered into in May 2005. This replaced an earlier agreement
between the Canadian government and the predecessor of Colt
Canada. The current strategic source agreement has a two-year
term, which will renew automatically on an annual basis
thereafter unless either party gives two years' notice of
termination. We also have a license agreement with the Canadian
government, under which Colt Canada is the only approved
contractor to
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manufacture weapons contracted for by the government under our
strategic source agreement, though the Canadian government can
replace Colt Canada as contractor, and we may not unreasonably
withhold our consent to such a replacement. Additionally, we
intend to enter into an annual consolidated contract with the
Canadian Department of National Defence for engineering,
technical publications, repair and overhaul work. Colt Canada
conducts other weapons work for the Canadian Department of
National Defence on an as required basis under discrete
contracts. These contracts are funded annually by Canadian
government appropriations. The Canadian government's
termination of, failure to enter into or failure to place orders
under one or more of our contracts, or its replacement of Colt
Canada as contractor, would have a negative impact on our
operating results and financial condition.
Certain licenses or authorizations are required for us to
sell our products overseas that we may not be able to receive or
retain.
Approximately 30% of our 2004 net sales were attributable
to direct foreign sales. U.S. government licenses are
required for us to export our products from the United States or
Canada. In the case of certain sales of defense equipment to
foreign governments, the U.S. government's Executive
Branch must notify Congress at least 30 days, depending on
the location of the sale, prior to authorizing these sales.
During this time, Congress may take action to block the proposed
sale. We cannot be sure of our ability to obtain any licenses
required to export our products or to receive authorization from
the Executive Branch for sales to foreign governments. To the
extent Colt Canada exports its products, it may require similar
approval of the Canadian government. Failure to receive required
licenses or authorization would hinder our ability to sell our
products outside the United States or Canada.
Our intellectual property rights are valuable, and any
inability to protect them could reduce the value of our
products, services and brand.
Our design, manufacturing know-how, and patent and trademark
rights are important assets for us. There are events that are
outside of our control that pose a threat to our intellectual
property rights. The efforts we have taken to protect our
proprietary rights may not be sufficient or effective. Any
significant impairment of our intellectual property rights could
harm our business or our ability to compete. Also, protecting
our intellectual property rights is costly and time consuming.
We face risks associated with our trademarks. For example, we
have brought actions in Federal district court against
Bushmaster Firearms, Inc., or Bushmaster, challenging
Bushmaster's manufacture, marketing, distribution and sale
of M4 look-alike weapons. We have alleged trademark, trade
dress, and patent infringement, together with unfair competition
and false advertising. Bushmaster has filed a partial motion for
summary judgment, challenging the validity of our registered M4
trademark and related rights, which we are opposing. If we are
not successful in the Bushmaster litigation, it could adversely
impact our ability to protect our trademark.
We may experience labor disruptions associated with the
expiration of our collective bargaining agreements with our
labor force in the U.S.
As of April 3, 2005, we had approximately 380
U.S. employees. Approximately 74% of our
U.S. employees are covered by collective bargaining
agreements. The United Automobile, Aerospace &
Agricultural Implement Workers of America, or UAW, represents
our West Hartford work force and that collective bargaining
agreement expires in May 2007. We believe that we have
satisfactory relations with our unions and, therefore,
anticipate reaching new agreements on satisfactory terms as the
existing agreements expire or shortly thereafter. There can be
no assurance, however, that new agreements will be reached
without a work stoppage or strike or will be reached on terms
satisfactory to us. In early April 2004, we locked out our
UAW-represented employees for two weeks at our West Hartford
manufacturing facility, in connection with the negotiation of a
new collective bargaining agreement. A prolonged work stoppage
or strike at either of our manufacturing facilities could have a
material adverse effect on our results of operations.
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Significant risks are inherent in the day-to-day
operations of our business.
The day-to-day activities of our business involve the operation
of machinery and other operating hazards, including worker
exposure to hazardous substances. As a result, our operations
can cause personal injury or loss of life, severe damage to and
destruction of property and equipment, and interruption of our
business. The mechanical failure of our rifles can result in
injuries, damages or death.
We could be named as a defendant in a lawsuit asserting
substantial claims upon the occurrence of any of these events.
Although we maintain insurance protection in amounts we consider
to be adequate, we cannot assure you that this insurance will be
sufficient in coverage or effective under all circumstances or
against all hazards to which we may be subject. If we are not
fully insured against a successful claim, there could be a
material adverse effect on our financial condition and result of
operations.
Environmental laws and regulations may subject us to
significant costs and liabilities.
We are subject to various federal, state, local, provincial and
foreign environmental laws and regulations, including those
related to the discharge of hazardous materials into the air,
water and soil and the generation, storage, treatment, handling,
transportation, disposal, investigation and remediation of
hazardous materials. Certain of these laws and regulations
require our facilities to obtain and operate under permits or
licenses that are subject to periodic renewal or modification.
These laws, regulations or permits can require the installation
of pollution control equipment or operational changes to limit
actual or potential impacts to the environment. A violation of
these laws, regulations or permit conditions can result in
substantial fines or penalties.
Under the November 4, 2002 asset contribution agreement
pursuant to which we were formed, our predecessors and
affiliates, New Colt and Colt's Manufacturing, agreed to
indemnify us against certain liabilities including certain
environmental, health and safety liabilities relating to their
operations, whether the liabilities arise before or after the
contribution date. To the extent the obligations under this
indemnity are challenged, if our indemnitors cannot fund these
obligations or if these obligations are otherwise not satisfied,
we could be required to incur environmental costs to remediate
these liabilities and there can be no assurances these costs
would not be material.
Certain environmental laws impose joint, strict and several
liability for the investigation and remediation of spills and
releases of hazardous materials and damages to natural
resources, without regard to negligence or fault on the part of
the person being held responsible. In addition, certain laws
require the investigation and remediation of contamination upon
the occurrence of certain property transfers or corporate
transactions. See "Management's Discussion and
Analysis of Financial Condition and Results of
Operations — Certain Significant Transactions and
Events — Planned Purchase of West Hartford
Facility." We are potentially liable under these and other
environmental laws and regulations for the investigation and
remediation of contamination at properties we currently or have
formerly owned, operated or leased and at off-site locations
where we have sent hazardous materials for treatment or
disposal. We may also be subject to related claims by private
parties alleging property damage and personal injury as a result
of exposure to hazardous materials at or in the vicinity of
these properties. Although we have not incurred material costs
for environmental compliance since we were created in 2002,
environmental litigation or remediation, new laws and
regulations, stricter or more vigorous enforcement of existing
laws and regulations, the discovery of unknown contamination or
the imposition of new or more stringent clean-up requirements
may require us to incur substantial costs in the future. As
such, there is no assurance that we will not incur material
costs in the future.
We may not have the ability to make acquisitions or to
integrate acquisitions into our business.
As part of our growth strategy, we intend to selectively pursue
acquisitions. We consider strategic transactions from time to
time and may be evaluating acquisitions or engaged in
negotiations at any time. There is no assurance, however, that
we will be able to effect acquisitions. If we enter into these
transactions, we cannot be sure that we will realize the
benefits we anticipate. In addition, we cannot be sure that we
will be able to obtain additional financing for these
transactions.
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The integration of any strategic acquisitions into our business
may result in unforeseen operating difficulties and may require
significant financial and managerial resources that would
otherwise be available for the ongoing development or expansion
of our existing operations. Consummating these transactions
could result in the incurrence of additional debt and related
interest expense, as well as unforeseen liabilities, all of
which could have a material adverse effect on our financial
condition and operating results. In addition, we may be required
to enter into novation agreements with the U.S. government
in order to succeed to the U.S. government contracts of any
acquired entity. Novation can be a lengthy process that often
occurs after the consummation of an acquisition. Accordingly,
our failure to obtain any required novation could have a
material adverse effect on the value to us of an acquired
business.
There may be potential undisclosed liabilities associated
with acquisitions.
We conduct due diligence in connection with each of our proposed
acquisitions. In connection with any of our acquisitions, there
may be liabilities that we fail to discover or that we
inadequately assess in our due diligence efforts. In particular,
to the extent that prior owners of any acquired businesses or
properties failed to comply with or otherwise violated
applicable laws or regulations, or failed to fulfill their
contractual obligations to the U.S. or other governments or
other customers, we, as the successor owner, may be financially
responsible for these violations and failures and may suffer
reputational harm or otherwise be adversely affected. The
discovery of any material liabilities associated with our
acquisitions could harm our operating results.
Government contracts are subject to competitive
bidding.
We obtain a portion of our U.S. government contracts
through a competitive bidding process. We cannot assure you that
we will win these contracts or that they will be profitable. We
are also subject to risks associated with:
•
the frequent need to bid on programs in advance of the
    completion of their designs, which may result in unforeseen
    technological difficulties or cost overruns;
•
the substantial time and effort required to prepare bids and
    proposals for competitively awarded contracts that may not be
    awarded to us;
•
rapid technological obsolescence; and
•
the constant need for design improvement.
The defense industry is highly competitive, and this
competitiveness may limit our ability to win and retain
government contracts.
We have significant domestic and international competition for
government contracts. Some competitors have substantially
greater financial, technical, marketing, manufacturing and
distribution resources than we do. Our ability to compete for
these contracts depends on our ability to offer better product
performance than our competitors at a lower cost to the
U.S. government and the readiness of our facilities,
equipment and personnel to produce our products.
Additionally, our U.S. government programs must compete for
limited funding with programs managed by other defense
contractors. Our competitors continually engage in efforts to
expand their business relationship with the U.S. government
and are likely to continue these efforts in the future. As a
result, the U.S. government may use its resources to
procure products from other defense contractors as opposed to
purchasing our systems.
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Our international operations subject us to risks that
could materially adversely affect our results of operations and
financial condition.
Our strategy includes expansion of our international operations
and export sales. In connection with these international
operations and sales we are subject to risks, including the
following:
•
devaluations and fluctuations in currency exchange rates;
•
potential violations of the Foreign Corrupt Practices Act by our
    employees or agents;
•
imposition or increase of withholding and other taxes on
    remittances and other payments by foreign subsidiaries;
•
hyperinflation or political instability in the countries in
    which we operate or sell;
•
changes in interpretations of foreign regulations that may
    adversely affect our ability to repatriate profits to the United
    States;
•
potential imposition of trade or foreign exchange restrictions
    or increased tariffs;
•
imposition of limitations on conversions of foreign currencies
    into U.S. dollars;
•
U.S. arms export control regulations and policies that
    restrict our ability to supply foreign customers; and
•
changes in overall diplomatic and security relationships between
    the United States and various foreign countries.
These and other associated risks are likely to become more
significant to us if we expand our international operations.
Although these risks have not had a material adverse effect on
our financial condition or results of operations in the past,
there is no assurance that these risks will not have a material
adverse effect on our results of operations and financial
position in the future.
Our U.S. government contracts contain termination
provisions such that they can be cancelled by the government at
its sole discretion.
We are subject to business risks specific to companies engaged
primarily in supplying defense-related equipment and services to
the U.S. government. These risks include the ability of the
U.S. government to unilaterally suspend or permanently
prevent us from receiving new contracts or extending existing
contracts based on violations or suspected violations of
procurement laws or regulations, terminate our existing
contracts, reduce the value of our existing contracts, change
certain terms and conditions in our contracts and, under certain
circumstances, prohibit the export of our products.
The U.S. government can terminate contracts with us either
for its convenience or if we default by failing to perform.
Termination for convenience provisions generally would enable us
to recover only our costs incurred or committed, and settlement
expenses and profit on the work completed, prior to termination.
Termination for default provisions do not permit these
recoveries and make us liable for excess costs incurred by the
U.S. government in procuring undelivered items from another
source. Our contracts with foreign governments may contain
similar provisions.
Employee misconduct could harm us and is difficult to
detect and deter.
As with other government contractors, we are faced with the
possibility that our employees may engage in misconduct, fraud
or other improper activities that may have adverse consequences
on our prospects and results of operations. Misconduct by
employees could include failures to comply with applicable
government procurement regulations, violation of government
requirements concerning the protection of classified information
and misappropriation of government or third-party property and
information. The occurrence of any of such employee activities
could result in our suspension or debarment from contracting
with the government procurement agency, as well as the
imposition of fines and penalties, which would cause material
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harm to our business. It is not always possible to deter
employee misconduct and the precautions we take to detect and
prevent this activity may not be effective in all cases.
Risks Related To This Offering
Our share price may be volatile, and you may be unable to
sell your shares at or above the offering price.
The initial public offering price for our shares will be
determined by negotiations between us and representatives of the
underwriters and may not be indicative of prices that will
prevail in the trading market. The market price of shares of our
common stock could be subject to wide fluctuations in response
to many risk factors listed in this section, and others beyond
our control, including:
•
changes in projections of our operating results by securities
    analysts;
•
fluctuations in the valuation of companies perceived to be
    comparable to us; and
•
share price and volume fluctuations attributable to inconsistent
    trading volume levels or other factors.
Furthermore, the stock markets have experienced extreme price
and volume fluctuations that have affected and continue to
affect the market prices of equity securities of many companies.
These fluctuations often have been unrelated or disproportionate
to the operating performance of those companies. These broad
market and industry fluctuations, as well as general economic,
political and market conditions such as recessions, interest
rate changes or international currency fluctuations, may
negatively impact the market price of shares of our common
stock. If the market price of shares of our common stock after
this offering does not exceed the initial public offering price,
you may not realize any return on your investment in us and may
lose some or all of your investment. In the past, companies that
have experienced volatility in the market price of their stock
have been subject to securities class action litigation. We may
be the target of this type of litigation in the future.
Securities litigation against us could result in substantial
costs and divert our management's attention from other
business concerns, which could materially adversely affect us.
No public market for our common stock currently exists,
and an active trading market may not develop or be sustained
following this offering.
Prior to this offering, there has been no public market for our
common stock. An active trading market may not develop following
the closing of this offering or, if developed, may not be
sustained. The lack of an active market may impair your ability
to sell your shares at the time you wish to sell them or at a
price that you consider reasonable. The lack of an active market
may also reduce the fair market value of your shares. An
inactive market may also impair our ability to raise capital by
selling shares and may impair our ability to acquire other
companies or technologies by using our shares as consideration,
which in turn could materially adversely affect our business.
If securities or industry analysts do not publish research
reports about our business, or publish negative reports about
our business, our stock price and trading volume could
decline.
The trading market for our common stock will depend, in part, on
the research reports and ratings that securities or industry
analysts publish about us, our business and the defense market
in general. We do not have any control over these analysts. If
one or more of the analysts who cover us downgrade our stock,
our stock price may decline. If one or more of these analysts
cease coverage of our company or fail to regularly publish
reports on us, we could lose visibility in the financial
markets, which could cause our stock price or trading volume to
decline.
Purchasers in this offering will experience immediate and
substantial dilution in the book value of their
investment.
The initial public offering price will be substantially higher
than the tangible book value per share of shares of our common
stock based on the total value of our tangible assets less our
total liabilities immediately following this offering.
Therefore, if you purchase shares of our common stock in this
offering,
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you will experience immediate and substantial dilution of
approximately
$           per
share in the price you pay for shares of our common stock as
compared to its tangible book value, assuming an initial public
offering price of
$           per
share. To the extent outstanding options to purchase shares of
common stock are exercised, there will be further dilution. For
further information on this calculation, see
"Dilution."
Being a public company will increase our expenses and
administrative burden.
As a public company, we will incur significant legal, accounting
and other expenses that we did not incur as a private company.
In addition, our administrative staff will be required to
perform additional tasks. For example, in anticipation of
becoming a public company, we will need to create or revise the
roles and duties of our board committees, adopt additional
internal controls and disclosure controls and procedures, retain
a transfer agent, adopt an insider trading policy and bear all
of the internal and external costs of preparing and distributing
periodic public reports in compliance with our obligations under
the securities laws.
In addition, changing laws, regulations and standards relating
to corporate governance and public disclosure, including the
Sarbanes-Oxley Act of 2002 and related regulations implemented
by the Securities and Exchange Commission, or SEC, and the New
York Stock Exchange, or NYSE, are creating uncertainty for
public companies, increasing legal and financial compliance
costs and making some activities more time consuming. We are
currently evaluating and monitoring developments with respect to
new and proposed rules and cannot predict or estimate the amount
of the additional costs we may incur or the timing of such
costs. These laws, regulations and standards are subject to
varying interpretations, in many cases due to their lack of
specificity, and, as a result, their application in practice may
evolve over time as new guidance is provided by regulatory and
governing bodies. This could result in continuing uncertainty
regarding compliance matters and higher costs necessitated by
ongoing revisions to disclosure and governance practices. We
intend to invest resources to comply with evolving laws,
regulations and standards, and this investment may result in
increased general and administrative expenses and a diversion of
management's time and attention from revenue-generating
activities to compliance activities. If our efforts to comply
with new laws, regulations and standards differ from the
activities intended by regulatory or governing bodies due to
ambiguities related to practice, regulatory authorities may
initiate legal proceedings against us, and our business may be
harmed. We also expect that being a public company, along with
these new rules and regulations, will make it more expensive for
us to obtain director and officer liability insurance, and we
may be required to accept reduced coverage or incur
substantially higher costs to obtain coverage. These factors
could also make it more difficult for us to attract and retain
qualified members of our board of directors (particularly to
serve on our audit committee) and qualified executive officers.
Substantial future sales of our common stock in the public
market could cause our stock price to fall.
Additional sales of our common stock in the public market after
this offering, or the perception that these sales could occur,
could cause the market price of our common stock to decline.
Upon completion of this offering, there will
be                      shares
of common stock outstanding, excluding
approximately                      million
shares of common stock underlying outstanding stock options,
warrants and rights. Of these shares, shares of common stock
expected to be sold in this offering will be freely transferable
without restriction or additional registration under the
Securities Act of 1933, or Securities Act. The remaining shares
of common stock outstanding after this offering will be
available for sale, subject to the 180-day lock-up agreements
under which our directors, executive officers and identified
principal stockholders have agreed not to sell or otherwise
dispose of their common stock in the public market, and the
manner of sale and notice requirements and volume limitations on
sales of stock contained in Rule 144 under the Securities
Act.
Any or all of these shares of common stock may be released prior
to expiration of the 180-day lock-up period at the discretion of
Banc of America Securities LLC. To the extent shares are
released before the expiration of the lock-up period and these
shares are sold into the market, the market price of our common
stock could decline. Immediately following the 180-day lock-up
period,                      shares
of our common stock outstanding after this offering will become
available for sale. The remaining shares of common stock will
become available for sale at various times thereafter upon the
expiration of one-year holding periods.
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In addition, beginning 180 and 365 days after this
offering, the holders of
approximately                     and                      shares
of common stock, respectively, will be entitled to rights to
cause us to register the sale of those stocks under the
Securities Act. Registration of these shares of common stock
under the Securities Act would result in these shares, other
than shares purchased by our affiliates, becoming freely
tradable without restriction under the Securities Act
immediately upon the effectiveness of the registration. See
"Shares Eligible for Future Sale."
Our principal stockholders and management own a
significant percentage of our outstanding common stock and will
be able to exercise significant influence over our
affairs.
Our executive officers, current directors and holders of five
percent or more of our common stock, as
of                                ,
beneficially owned approximately      %
of our common stock based on the SEC's rules for
determining beneficial ownership. We expect that, upon the
closing of this offering, that same group will continue to hold
at least a majority of our outstanding common stock. Even after
this offering, these stockholders will likely be able to
determine the composition of our board of directors, retain the
voting power to approve all matters requiring stockholder
approval and continue to have significant influence over our
operations. The interests of these stockholders may be different
than the interests of other stockholders on these matters. This
concentration of ownership could also have the effect of
delaying or preventing a change in our control or otherwise
discouraging a potential acquirer from attempting to obtain
control of us, which in turn could reduce the price of our
common stock.
We are a "controlled company" within the meaning
of the New York Stock Exchange rules and, as a result, will
qualify for, and intend to rely on, exemptions from certain
corporate governance requirements.
Following the completion of this offering we will be deemed to
be a "controlled company" under the rules of the NYSE.
Under these rules, a company of which more than 50% of the
voting power is held by a group is a "controlled
company" and may elect not to comply with certain NYSE
corporate governance requirements, including (1) the
requirement that a majority of the board of directors consist of
independent directors, (2) the requirement that the
nominating and governance committee be composed entirely of
independent directors, (3) the requirement that the
compensation committee be composed entirely of independent
directors and (4) the requirement for an annual performance
evaluation of the nominating and corporate governance and
compensation committees. We intend to rely on this exemption,
and therefore we do not intend to have a majority of independent
directors or nominating and compensation committees consisting
entirely of independent directors. Accordingly, you may not have
the same protections afforded to stockholders of companies that
are subject to all of the NYSE's corporate governance
requirements.
Provisions in our corporate governance documents as well
as Delaware law may delay or prevent an acquisition of us that
stockholders may consider favorable, which could decrease the
value of your shares.
Our certificate of incorporation and bylaws and Delaware law
contain provisions that could make it more difficult for a third
party to acquire us without the consent of our board of
directors. These provisions include restrictions on the ability
of our stockholders to remove directors, a classified board of
directors and limitations on action by our stockholders by
written consent. In addition, our board of directors has the
right to issue preferred stock without stockholder approval,
which could be used to make an acquisition of us more difficult.
Although we believe these provisions protect our stockholders
from coercive or otherwise unfair takeover tactics and thereby
provide for an opportunity to receive a higher bid by requiring
potential acquirers to negotiate with our board of directors,
these provisions apply even if the offer may be considered
beneficial by some stockholders. For more information on these
protective provisions, see "Description of Capital
Stock" found elsewhere in this prospectus.
18
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FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve
substantial risks and uncertainties. All statements, other than
statements of historical facts, included in this prospectus
regarding our strategy, future operations, future financial
position, future revenues, projected costs, prospects, plans and
objectives of management are forward-looking statements. The
words "anticipate," "believe,"
"estimate," "potential," "expect,"
"intend," "may," "plan,"
"project," "will," "should,"
"could," "would" and similar expressions are
intended to identify forward-looking statements, although not
all forward-looking statements contain these identifying words.
We may not actually achieve the plans, intentions or
expectations disclosed in our forward-looking statements and you
should not place undue reliance on our forward-looking
statements. Actual results or events could differ materially
from the plans, intentions and expectations disclosed in the
forward-looking statements we make. We have included important
factors in the cautionary statements included in this
prospectus, particularly in the "Risk Factors"
section, that we believe could cause actual results or events to
differ materially from the forward-looking statements that we
make. Our forward-looking statements do not reflect the
potential impact of any future acquisitions, mergers,
dispositions, joint ventures or investments we may make. We do
not assume any obligation to update any forward-looking
statements.
19
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USE OF PROCEEDS
We estimate that we will receive net proceeds of approximately
$           million
from the sale of shares in this offering after deducting
underwriting discounts and estimated offering expenses.
We intend to use
$           million
of the net proceeds from this offering:
•
to repay in full the Restructuring Notes we will issue to
    certain of our existing stockholders in connection with the
    Internal Restructuring, which Restructuring Notes will bear
    interest at a rate equal to the short-term applicable federal
    rate (AFR) for federal income tax purposes, which is
    currently      % per annum;
•
to repay outstanding indebtedness of
    $           million
    under our senior secured credit facility, which indebtedness is
    described more fully below;
•
to fund all or a portion of the costs of any acquisitions of
    complementary businesses we determine to pursue in the future,
    although we cannot assure you that we will be able to
    successfully identify or consummate any such
    acquisitions; and
•
for working capital and other general corporate purposes.
Pending use of the net proceeds described above, we intend to
invest the net proceeds of this offering, not used to repay
indebtedness, in United States government securities and money
market instruments.
The Restructuring Notes and accrued interest thereon will be
repayable upon demand in an aggregate amount equal to
$          from
the net proceeds from this offering. See "Internal
Restructuring." If the underwriters exercise their
over-allotment option, we intend to use the net proceeds to make
additional payments to our existing stockholders.
On May 20, 2005, Colt Defense LLC entered into a senior
secured credit facility with an aggregate principal amount of up
to $65.0 million as set forth below:
•
$10.0 million three-year revolving credit facility, which
    includes a $2 million sublimit for the issuance of standby
    letters of credit;
•
$25.0 million three-year term loan facility (Term A
    Facility);
•
$14.0 million three-year term loan facility (Term B
    Facility); and
•
$16.0 million three-year term loan facility and available
    to our Canadian subsidiary, Colt Canada, which is denominated in
    Canadian dollars (Term C Facility).
Term Loan A of the facility ($25.0 million) was used
to repay our existing debt of $25.0 million; we used Term
Loan B ($14.0 million) and $2.1 million of our
$10.0 million revolver to pay a special distribution to the
members of Colt Defense LLC of $16.1 million and we used
Term Loan C ($16.0 million) to pay for our acquisition
of Colt Canada.
DIVIDEND POLICY
We do not currently intend to pay any cash dividends on our
common stock, and instead intend to retain earnings, if any, for
future operation and expansion. The amounts available to us to
pay dividends are restricted by our senior secured credit
facility, under which we do not have the ability to pay cash
dividends on our common stock. See "Description of Capital
Stock — Description of Indebtedness" for a more
complete description of our senior secured credit facility. Any
decision to declare and pay dividends in the future will be made
at the discretion of our board of directors and will depend on,
among other things, our results of operations, cash
requirements, financial condition, contractual restrictions and
other factors that our board of directors may deem relevant.
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For 2003, Colt Defense LLC paid distributions to Colt's
Manufacturing of $3.9 million. For 2004, Colt Defense LLC
paid distributions to its members of $11.4 million, as well
as tax distributions to its members of $3.9 million. In
April 2005, Colt Defense LLC paid tax distributions to its
members of $1.1 million for 2005. At the closing of our
senior secured credit facility in May 2005, Colt Defense LLC
made a special distribution of $16.1 million to its
members. In addition, prior to the consummation of this
offering, we will pay a distribution to our members to pay their
allocable portion of taxes on our profits up to the date of our
Internal Restructuring.
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CAPITALIZATION
The following table sets forth our capitalization as of
April 3, 2005:
•
on an actual basis for Colt Defense LLC;
•
on a pro forma basis for Colt Defense Inc. to reflect
    (1) the incurrence of $65.0 million of debt under our
    senior secured credit facility and the payment of a
    $16.1 million dividend to the members of Colt Defense LLC
    on May 20, 2005 and (2) the Internal Restructuring;
•
on a pro forma basis for Colt Defense Inc., as adjusted to
    reflect:
•
the sale by us
    of                      shares
    of common stock in this offering at an assumed price of
    $          ,
    the mid-point of the estimated price range shown on the cover
    page of this prospectus, after deducting underwriting discounts
    and estimated offering expenses;
•
the application of the estimated net proceeds of this offering
    as described under "Use of Proceeds"; and
•
the issuance
    of                      shares
    of common stock to our existing stockholders that we will make
    to the extent the underwriters do not exercise their
    over-allotment option as described under "Internal
    Restructuring."
The following table excludes:
•
shares
    of common stock issuable upon exercise of options outstanding as
    of April 3, 2005 under our 2003 management option incentive
    plan, with a weighted average exercise price of
    $          per
    share; and
•
additional shares of common stock reserved for issuance under
    our employee incentive plan following the completion of this
    offering.
You should read this table in conjunction with "Internal
Restructuring," "Unaudited Pro Forma Financial
Information," "Management's Discussion and
Analysis of Financial Condition and Results of Operations"
and our financial statements and the related notes appearing
elsewhere in this prospectus.
As of April 3, 2005
Pro Forma
Actual
Pro Forma
As Adjusted
(unaudited)
($ in thousands, except per share data)
Cash and cash equivalents
$
1,775
$
1,775
$
Debt:
Notes payable to
    affiliates
(1)
$
—
$
—
$
Long-term debt
25,143
39,143
Total debt
25,143
39,143
Members' equity (deficit)
(11,231
)
(28,301
)
Notes receivable
(10,966
)
(10,966
)
—
Capital stock:
Preferred stock; $0.01 par
    value;      shares authorized; no
    shares issued and outstanding, pro forma and pro forma as
    adjusted
—
—
Common stock; $0.01 par
    value;      shares authorized; shares
    issued and outstanding, pro forma
    and      shares issued and outstanding
    pro forma as adjusted
—
—
Additional paid-in capital
—
—
Accumulated deficit
—
—
Accumulated other comprehensive loss
(3,028
)
(3,028
)
Total members' equity and stockholders' equity
(25,225
)
(42,295
)
Total capitalization
$
(82
)
$
(3,152
)
$
(1)
Represents the Restructuring Notes.
    $        of the proceeds
    from this offering will be used to repay the Restructuring Notes
    in full.
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DILUTION
If you invest in our common stock, your interest will be diluted
to the extent of the difference between the initial public
offering price per share of our common stock and the net
tangible book value per share of common stock upon completion of
this offering.
Dilution is the amount by which the offering price paid by the
purchasers of the common stock to be sold in this offering will
exceed the net tangible book value per share of common stock
after the offering. The net tangible book value per share
presented below is equal to the amount of our total tangible
assets (total assets less intangible assets) less total
liabilities as of April 3, 2005, divided by the number of
shares of our common stock that would have been held by our
existing stockholders as of April 3, 2005, had the Internal
Restructuring been completed and had we effected the issuance of
shares of common stock to our existing stockholders that we will
make if and to the extent the underwriters do not exercise their
over-allotment option as described under "Internal
Restructuring." On a pro forma basis, after giving effect
to (1) the Internal Restructuring and (2) the sale by
us of shares of common stock in this offering at an assumed
initial public offering price of
$           per
share, the mid-point of the price range on the cover of this
prospectus, after deducting underwriting discounts and estimated
offering expenses and the application of the estimated net
proceeds of this offering as described under "Use of
Proceeds," our pro forma net tangible book value as of
April 3, 2005 would have been $ million, or
$           per
share of common stock. This represents an immediate increase in
net tangible book value (or a decrease in net tangible book
deficit) of
$           per
share to the existing stockholders and an immediate dilution in
net tangible book value of
$           per
share to new investors.
The following table illustrates this per share dilution:
Assumed initial public offering price per share
$
Pro forma net tangible book value per share as of April 3,
    2005
$
Increase in pro forma net tangible book value per share
    attributable to investors in this offering
$
Pro forma net tangible book value per share after this offering
$
Dilution per share to new
    investors
(1)
$
(1)
Dilution is determined by subtracting net tangible book value
    per share after giving effect to the offering from the initial
    public offering price paid by a new investor.
We will reduce the number of shares that we will issue to our
existing stockholders in the stock issuance described above by
the number of shares sold to the underwriters, if any, pursuant
to their over-allotment option. We will also make a cash payment
to our existing stockholders equal to the net proceeds we
receive from the sale of our shares in the over-allotment
option. Accordingly, our pro forma net tangible book value will
not be affected by the underwriters' exercise of their
over-allotment option. The following table summarizes, on a pro
forma basis as of April 3, 2005, after giving effect to the
transactions described above, the total number of shares of
common stock purchased from us, the total consideration paid to
us and the average price per share paid by the existing
stockholders and by new investors purchasing shares in this
offering:
Total
Shares Purchased
Consideration
Average Price
Number
Percent
Amount
Percent
Per Share
Existing
    stockholders
(2)
%
$
%
$
New investors
%
%
Total
100
%
100
%
(2)
Total consideration and average price per share paid by existing
    stockholders does not give effect to (1) the
    $16.1 million distribution made to holders of common units
    of Colt Defense LLC in May 2005 using proceeds from the senior
    secured credit facility or (2) the
23
Table of Contents
repayment of the Restructuring
    Notes using the net proceeds from this offering. If the table
    were adjusted to give effect to these payments, total
    consideration for shares of existing stockholders would be
    $        , with an
    average share price of
    $        .
The discussion and tables set forth above also exclude:
•
approximately                      shares
    of our common stock issuable upon the exercise of options and
    rights outstanding as of April 3, 2005; and
•
approximately                     additional
    shares of common stock reserved for future grants under our
    equity compensation plans.
To the extent outstanding options and rights are exercised,
there will be further dilution to new investors. See
"Management — Stock Option and Other Benefit
Plans," "Shares Eligible For Future Sale —
Stock Options" and "Internal Restructuring." In
addition, we may choose to raise additional capital due to
market conditions or strategic consideration even if we believe
we have sufficient funds for our current or future operation
plans. To the extent that additional capital is raised through
the sale of equity or convertible debt securities, the issuance
of these securities could result in further dilution to our
stockholders.
24
Table of Contents
INTERNAL RESTRUCTURING
Immediately prior to the effectiveness of the registration
statement of which this prospectus is a part, we will complete a
series of transactions for the purpose of transitioning from an
organizational structure in which our top-tier company is a
limited liability company to a structure in which our top-tier
company is a corporation, which we refer to collectively as our
"Internal Restructuring." Following the Internal
Restructuring, the current members of Colt Defense LLC will be
stockholders of our new top-tier company Colt Defense Inc.,
which is issuing shares of its common stock to the public in
this offering. We originally formed our organization as a tiered
structure of companies, with Colt Defense LLC as the top-tier
limited liability company, in order to maximize the tax benefits
to our members of a flow-through tax structure. However, these
benefits are generally not available to owners of publicly
traded limited liability companies. Furthermore, because, in our
view, publicly traded limited liability companies are not common
or easily understood, we believe that the conversion of our
structure from a limited liability company to a corporation will
facilitate investors' understanding of our capital and
governance structures and make us more easily comparable to the
other publicly traded defense companies, all of which are
corporations. The principal Internal Restructuring transactions,
to be effected pursuant to the terms of our Internal
Restructuring Agreement, are summarized below:
•
Members of Colt Defense LLC who have issued Stockholder
    Promissory Notes will satisfy notes by surrendering units of
    Colt Defense LLC equal to the amount due at the time of payment.
    See "Certain Relationships and Related Party
    Transactions — Transactions with Affiliates Involving
    Securities" for information regarding the Stockholder
    Promissory Notes.
•
All members of Colt Defense LLC (other than the Colt Defense
    Employee Plan Holding Corp., or Plan Holding Corp.) will
    contribute all of their membership interests in Colt Defense LLC
    to us in exchange for shares of our common stock, Restructuring
    Notes in an aggregate principal amount of
    $           million
    and the right to participate in the over-allotment option.
•
Colt Defense Employee Profit Sharing Plan, or Colt Defense
    Sharing Plan, which owns all of the outstanding shares of stock
    of Plan Holding Corp., will contribute all of the shares of
    common stock of Plan Holding Corp. to Colt Defense LLC in
    exchange for shares of our common stock, Restructuring Notes in
    the aggregate principal amount of
    $          and
    the right to participate in the over-allotment option.
•
If the underwriters exercise their over-allotment option to
    purchase additional shares of common stock from us, the cash to
    be paid to our existing stockholders in the Internal
    Restructuring will be increased by the proceeds to us of any
    additional shares sold to the underwriters, after deducting
    underwriting discounts and commissions.
•
If the underwriters do not exercise their over-allotment option
    in full, then the aggregate number of shares of common stock
    that we will issue to our existing stockholders in the Internal
    Restructuring will be increased by the number of shares subject
    to the over-allotment option that are not purchased by the
    underwriters.
•
On the closing date of this offering, we will use
    $          of
    the net proceeds from this offering to repay the Restructuring
    Notes in full. The aggregate principal amount of the
    Restructuring Notes and accrued interest thereon will be equal
    to
    $          of
    the net proceeds from this offering.
Consummation of the transactions contemplated in the Internal
Restructuring Agreement is a condition to the closing of this
offering. The closing under the Internal Restructuring is
subject to certain conditions including, among others,
(1) the approval of our lenders to amend our credit
facility to permit the Internal Restructuring, and (2) the
absence of any law, regulation, injunction or order prohibiting
the consummation of the Internal Restructuring.
25
Table of Contents
The following diagram depicts our ownership and structure prior
to our transition to a corporate structure and immediately
following the completion of the Internal Restructuring
transactions described above and this offering:
STRUCTURE PRIOR TO INTERNAL RESTRUCTURING AND THIS
OFFERING
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STRUCTURE FOLLOWING INTERNAL RESTRUCTURING
(1)
Assuming 100% participation in the Restructuring Notes.
27
Table of Contents
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information has been
derived by application of pro forma adjustments to the
historical financial statements of Colt Defense LLC included
elsewhere in this prospectus.
The historical financial information as of April 3, 2005
and for the three months then ended and for the year ended
December 31, 2004 for Colt Defense Inc. has been derived
from Colt Defense LLC's historical financial statements.
The following unaudited pro forma financial data gives effect to
the following items:
•
the Internal Restructuring;
•
the refinancing of our debt and the payment of a special
    distribution of $16.1 million;
•
the treatment of Colt Defense LLC as a corporate tax paying
    entity; and
•
the sale by us
    of                      shares
    of common stock
    at                     per
    share, the mid-point of the assumed offering range, and the
    application of the net proceeds to us of approximately
    $          from
    this offering.
The unaudited pro forma balance sheet data is presented as if
these transactions had occurred as of April 3, 2005 and the
unaudited pro forma statement of operations and other data for
the three months ended April 3, 2005 and the year ended
December 31, 2004 are presented as if these transactions
had occurred on the first day of the period presented.
The unaudited pro forma financial information and related notes
are presented for informational purposes only and do not purport
to represent what our financial position or results of
operations would actually have been if the transactions had in
fact occurred on the dates discussed above. They also do not
project or forecast our financial position or results of
operations for any future date or period.
The unaudited pro forma financial information should be read
together with our historical financial statements and related
notes included elsewhere in this prospectus and with the
information set forth under "Management's Discussion
and Analysis of Financial Condition and Results of
Operations." The pro forma adjustments are based on
available information and upon assumptions that we believe are
reasonable. However, we cannot assure you that actual results
will not differ from the pro forma information and perhaps in
material and adverse ways.
28
Table of Contents
COLT DEFENSE INC.
UNAUDITED PRO FORMA BALANCE SHEET AS OF
APRIL 3,
2005
(1)
(dollars in thousands)
Debt
Refinancing
Adjustment
and Special
Recapital-
Internal
for this
Colt Defense
Historical
(2)
Dividend
ization
Restructuring
Offering
Pro Forma
CURRENT ASSETS
Cash and cash equivalents
$
1,775
$
—
$
1,775
$
—
$
14,750
$
16,525
Restricted cash
563
—
563
—
—
563
Accounts receivable, net
6,190
—
6,190
—
—
6,190
Inventories
4,973
—
4,973
—
—
4,973
Other current assets
1,636
—
1,636
—
—
1,636
Total current assets
15,137
—
15,137
—
14,750
29,887
Net property and equipment
1,237
—
1,237
—
—
1,237
Goodwill
4,175
—
4,175
—
—
4,175
Intangible assets
3,023
—
3,023
—
—
3,023
Deferred license fees
1,891
—
1,891
—
—
1,891
Deferred financing costs
970
(970
)
(3)
—
—
—
—
Business acquisition costs
762
—
762
—
—
762
Intangible pension asset
816
—
816
—
—
816
Deferred tax assets
—
—
—
17,000
(7)
—
17,000
Other assets
591
—
591
—
—
591
TOTAL ASSETS
$
28,602
$
(970
)
$
27,632
$
17,000
$
14,750
$
59,382
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt
$
59
$
2,100
(4)
$
2,159
—
—
$
2,159
Accounts payable and accrued expenses
10,443
—
10,443
—
—
10,443
Other
4,211
—
4,211
—
—
4,211
Total current liabilities
14,713
2,100
16,813
—
—
16,813
Long-term debt
25,143
14,000
(4)
39,143
—
(39,000
)
(8)
143
Accrued employee benefit costs
12,900
—
12,900
—
—
12,900
Restructuring notes
—
—
—
15,000
(5)
(15,000
)
—
Other
1,071
—
1,071
—
—
1,071
Total Liabilities
53,827
16,100
69,927
15,000
(54,000
)
30,927
SHAREHOLDERS' EQUITY
Members' equity
(11,231
)
(17,070
)
(28,301
)
17,000
(5)
68,750
(8)
57,449
Notes receivable
(10,966
)
—
(10,966
)
10,966
(6)
—
—
Accumulated other comprehensive loss
(3,028
)
—
(3,028
)
—
—
(3,028
)
Treasury stock
—
—
—
(25,966
)
—
(25,966
)
Total shareholders' equity
(25,225
)
(17,070
)
(42,295
)
2,000
68,750
28,455
TOTAL LIABILITIES and SHAREHOLDERS' EQUITY
$
28,602
$
(970
)
$
27,632
$
17,000
$
14,750
$
59,382
The accompanying notes are an integral part of the Unaudited Pro
Forma Financial Information.
29
Table of Contents
COLT DEFENSE INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED APRIL 3,
2005
(1)
(dollars in thousands)
Colt
Adjustment
Defense
for this
Colt Defense
Historical
(9)
Recapitalization
Offering
Pro Forma
Net sales
$
21,609
$
—
$
—
$
21,609
Cost of sales
14,622
—
—
14,622
Gross profit
6,987
—
—
6,987
Selling and commissions
1,270
—
—
1,270
General and administrative
1,459
—
(62
)
(11)
1,397
Litigation costs
625
—
—
625
Operating income
3,633
62
3,695
Other expenses (income):
Interest expense
1,060
(116
)
(10)
(647
)
(11)
297
Royalty income
(219
)
—
—
(219
)
Other, net
(108
)
—
—
(108
)
Income before income taxes
2,900
116
709
3,725
Income tax expense
22
46
(12)
1,417
(12)
1,485
(12)
Net income
$
2,878
$
70
$
(708
)
$
2,240
Earnings per share, assuming dilution
(12)
Depreciation and amortization
$
121
$
—
$
—
$
121
Interest expense
1,060
(116
)
(647
)
297
Income tax expense
22
46
1,417
1,485
Litigation costs
625
—
—
625
The accompanying notes are an integral part of the Unaudited Pro
Forma Financial Information.
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COLT DEFENSE INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31,
2004
(1)
(dollars in thousands)
Adjustment
for this
Colt Defense
Historical
(9)
Recapitalization
Offering
Pro Forma
Net sales
$
75,135
$
—
$
—
$
75,135
Cost of sales
50,376
—
—
50,376
Gross Profit
24,759
—
—
24,759
Selling and commissions
5,981
—
—
5,981
General and administrative
5,576
—
(250
)
(11)
5,326
Litigation costs
936
—
—
936
Operating profit
12,266
—
250
12,516
Other expenses (income):
Interest expense
3,735
(198
)
(10)
(2,587
)
(11)
950
Prepayment discounts
(842
)
—
—
(842
)
Royalty income
(759
)
—
—
(759
)
Other, net
30
—
—
30
Income before income taxes
10,102
198
2,837
13,137
Income tax expense
74
78
(12)
5,086
(12)
5,238
(12)
Net income
$
10,028
$
120
$
(2,249
)
$
7,899
Earnings per share, assuming dilution
(13)
Depreciation and amortization
$
505
$
—
$
—
$
505
Interest expense
3,735
(198
)
(2,587
)
950
Income tax expense
74
78
5,086
5,238
Litigation costs
936
—
—
936
The accompanying notes are an integral part of the Unaudited Pro
Forma Financial Information.
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COLT DEFENSE INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
The Unaudited Pro Forma Financial Information assumes an initial
public offering price of
$           per
share, the midpoint range set forth on the cover page of this
prospectus. All share amounts and exercise prices will be
adjusted to reflect the Internal Restructuring.
(1)
The Unaudited Pro Forma Financial Information does not reflect
    the acquisition of Colt Canada.
(2)
Reflects the unaudited historical balance sheet of Colt Defense
    LLC.
(3)
Reflects the write-off of the deferred financing costs related
    to our previous credit facility, which was replaced by our new
    senior secured credit facility on May 20, 2005.
(4)
In May 2005, we obtained a new $65.0 million senior secured
    credit facility. We used Term Loan B ($14.0 million)
    and $2.1 million of our $10.0 million revolver of the
    senior secured credit facility to pay a special distribution to
    the members of Colt Defense LLC of $16.1 million.
(5)
Reflects the Restructuring Notes and accrued interest. The
    aggregate principal amount of the Restructuring Notes and
    accrued interest thereon will be equal to
    $          .
    $          of
    the net proceeds from this offering will be used to repay the
    Restructuring Notes in full. See "Internal
    Restructuring."
(6)
Reflects the repayment of the Stockholder Promissory Notes from
    unit holders of Colt Defense LLC of $11.0 million in
    exchange for the re-purchase
    of                     units
    of Colt Defense LLC by us from these employees.
(7)
Prior to this offering, Colt Defense LLC was a limited liability
    company taxed as a partnership for Federal income tax purposes.
    This adjustment reflects the deferred tax assets and liabilities
    for the estimated U.S. Federal and state income tax impact
    of the differences between the tax basis and financial reporting
    carrying values of the assets and liabilities of Colt Defense
    LLC. The excess of tax basis over the financial reporting
    carrying value of assets and liabilities is $22.7 million.
    See Note 2 to our audited financial statements included
    elsewhere in this prospectus. This creates a net deferred tax
    asset of $9.0 million. Of this asset, $7.8 million
    will be recorded as a benefit from income taxes and
    $1.2 million, related to the minimum pension liability,
    will adjust accumulated other comprehensive income. In addition,
    there is an increase in deferred tax assets (estimated to be
    approximately $8.0 million) recognized upon consummation of
    the Internal Restructuring related to the excess of the tax
    basis of our investment in the shares purchased from certain of
    our stockholders over our financial statement carrying value
    upon consummation of the Internal Restructuring. We intend to
    obtain an appraisal to support this valuation and, accordingly,
    the actual amount recorded may differ as a result. This benefit
    will be recorded to contributed capital. The estimated tax rate
    of 39.875% is computed using the Connecticut state tax rate of
    7.5% and the statutory Federal rate of 35% as required by
    U.S. GAAP. We qualify as a manufacturer under The American
    Jobs Creation Act of 2004 and, therefore, our future Federal tax
    rate could be lower than 35%. In accordance with the limited
    liability agreement of Colt Defense LLC, distributions will be
    made to its members equal to 45% of taxable income up to the
    date of the Internal Restructuring.
(8)
Reflects our offering
    of                      shares
    of common stock and estimated use of the net proceeds to repay
    our debt. Does not reflect any charge we will incur because it
    is not recurring. We will incur a charge of $2.0 million
    related to the immediate vesting of 5,310 unexercised stock
    options granted in December 2004 and in the second quarter of
    2005 and $0.7 million related to vested options.
(9)
Reflects the historical results of operations of Colt Defense
    LLC.
(10)
Reflects the reduction of interest expense with an annual impact
    of $1.2 million resulting from our refinancing of our
    existing term loan with Term Loan A net of the interest
    expense related to Term Loan B and the draws on the
    revolver under our senior secured credit facility to pay a
    special distribution to the members of Colt Defense LLC.
32
Table of Contents
COLT DEFENSE INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL
INFORMATION — (Continued)
(11)
Reflects the reduction in interest expense from the repayment of
    outstanding indebtedness under our senior secured credit
    facility with proceeds from this offering. Coincident with this
    offering, the management fee with Sciens Management of
    $0.25 million annually will be settled for a one-time
    termination fee of $1.0 million.
(12)
Reflects the income tax impact of the operations and adjustments
    described herein at the estimated tax rate of 39.875%, which is
    the Connecticut state tax rate of 7.5%, net of Federal tax
    benefit, and the U.S. statutory rate of 35%.
(13)
Diluted earnings per share is computed based on pro forma number
    of common shares outstanding of Colt Defense LLC
    of                     .
    This is based on the units outstanding at April 3, 2005 of
    152,048 adjusted to reflect: (1) the 300 options granted
    December 2004 which become vested upon consummation of this
    offering and 5,010 options granted in the second quarter of 2005
    (which all become vested upon the consummation of this
    offering), (2) to reflect the dilutive effect of the 2003
    options outstanding of 1,826 at April 3, 2005 (which are
    all fully vested), and (3) to reflect the shares of common
    stock issued by us in this offering
    of                     .
33
Table of Contents
SELECTED FINANCIAL DATA
The following tables present our historical financial and
operating data as of the dates or for the periods indicated.
Except as otherwise described below, the selected financial and
operating data relate to Colt Defense LLC. The selected
financial data as of and for the years ended December 31,
2004, 2003 and 2002 are derived from Colt Defense LLC's
audited financial statements. The selected financial data for
the three months ended April 3, 2005 and April 4, 2004
are derived from Colt Defense LLC's unaudited financial
statements, which in the opinion of management, include all
adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of results for the unaudited
interim periods. The financial data as of and for the years
ended December 31, 2001 and 2000 was derived from the
unaudited financial statements of our predecessor, which are not
included in this prospectus. In order to facilitate this
offering, we will consummate the Internal Restructuring in which
Colt Defense Inc. will become the successor to Colt Defense LLC
for accounting purposes. The selected financial data presented
below are not necessarily indicative of the results of future
operations and should be read in conjunction with
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our audited and
unaudited financial statements and notes thereto that are
included elsewhere in this prospectus.
Three Months Ended
Year Ended December 31,
April 3,
April 4,
2005
2004
2004
2003
2002
2001
2000
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(in thousands, except per share data)
Statement of Operations Data:
Net sales
$
21,609
$
18,896
$
75,135
$
66,682
$
53,329
$
42,008
$
57,737
Cost of sales
14,622
12,340
50,376
45,161
39,768
35,555
46,883
Gross profit
6,987
6,556
24,759
21,521
13,561
6,453
10,854
Selling and commissions
1,270
1,277
5,981
4,819
3,732
5,023
5,497
General and administrative
1,459
1,297
5,576
4,312
3,300
3,298
3,498
Litigation costs
625
—
936
—
—
—
—
Noncash stock compensation
—
—
—
602
—
—
—
Operating income
3,633
3,982
12,266
11,788
6,529
(1,868
)
1,859
Interest expense
1,060
888
3,735
1,582
1,446
1,550
3,464
Reorganization costs
—
—
—
1,211
333
—
—
Net settlement of litigation
—
—
(842
)
2,619
—
—
—
Royalty income
(219
)
(80
)
(759
)
(381
)
(429
)
(493
)
—
Royalty expense to Colt's Manufacturing
—
—
—
3,600
650
—
—
Other
(108
)
—
30
(126
)
(650
)
511
460
Income (loss) before income taxes
2,900
3,174
10,102
3,283
5,179
(3,436
)
(2,065
)
Income tax expense (benefit)
22
8
74
38
(222
)
49
—
Net income
    (loss)
(1)
$
2,878
$
3,166
$
10,028
$
3,245
$
5,401
$
(3,485
)
$
(2,065
)
Earnings per unit (assuming
    dilution)
(2)
$
18.26
$
20.73
$
63.63
$
32.72
$
122.42
$
(78.99
)
$
(46.81
)
Balance Sheet Data (end of period):
Cash
$
1,775
$
1,402
$
314
$
24,268
$
172
$
212
$
57
Restricted cash
563
559
562
558
506
648
760
34
Table of Contents
Three Months Ended
Year Ended December 31,
April 3,
April 4,
2005
2004
2004
2003
2002
2001
2000
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(in thousands, except per share data)
Current assets other than cash
12,799
17,195
23,579
11,266
13,279
8,863
11,918
Current liabilities other than debt
14,654
14,791
18,569
14,361
13,400
13,723
17,148
Total assets
28,602
31,900
37,704
47,461
23,901
20,485
24,901
Short-term debt
59
4,678
6,568
11,027
1,184
251
352
Long-term debt
25,143
25,027
25,162
25,075
11,449
10,811
16,364
Accrued benefit costs
12,900
13,915
13,194
14,190
13,555
13,593
12,024
Other long-term liabilities
1,071
4,144
1,274
4,190
5,300
4,833
247
Total liabilities
53,827
62,555
64,767
68,843
44,888
43,211
46,135
Members' deficit
(25,225
)
(30,655
)
(27,063
)
(21,382
)
(20,987
)
(22,726
)
(21,234
)
Other Financial Data (Unaudited):
EBITDA
(3)
$
4,081
$
4,195
$
14,342
$
5,303
$
7,435
$
(142
)
$
3,228
Adjusted EBITDA
$
4,081
$
4,195
$
13,500
$
12,733
$
8,418
$
(142
)
$
3,228
Litigation expense (included in EBITDA and Adjusted
    EBITDA)
(4)
$
625
$
—
$
936
$
—
$
—
$
—
$
—
(1)
There is no provision for Federal and State income taxes
    reflected, as Colt Defense LLC is treated as a partnership for
    tax purposes. All operating results of Colt Defense LLC have
    been allocated to our investors. Subsequent to the Internal
    Reorganization, the income of Colt Defense Inc. will be taxed at
    the corporate level. The only income taxes the company pays are
    for foreign withholding taxes related to its royalty income.
(2)
Diluted earnings per unit are based on the weighted average
    number of units outstanding during the period adjusted to add
    the weighted-average number of potentially dilutive units that
    would have been outstanding upon the assumed exercise of the
    stock options and warrants issued in 2003 and adjusted for the
    December 2004 stock option grant and the option grants from the
    second quarter of 2005. The December 2004 option grant and the
    option grants from the second quarter of 2005 are considered
    nominal issuances and the underlying units are included in
    diluted earning per unit for all periods presented. Loss per
    unit for the predecessor was calculated utilizing weighted
    average units — assuming dilution for 2002.
(3)
EBITDA and Adjusted EBITDA are not financial measures under
    U.S. GAAP. We use EBITDA and Adjusted EBITDA as
    supplemental financial measures. EBITDA is defined as net income
    before interest, income taxes, depreciation and amortization.
    Adjusted EBITDA is defined as EBITDA before one-time items. We
    believe EBITDA and Adjusted EBITDA are useful financial
    performance measures for our equity holders and us and are a
    complement to net income determined in accordance with
    U.S. GAAP. Because it excludes interest and income taxes,
    EBITDA provides insight with respect to our ongoing operating
    results irrespective of our capital structure and because it
    excludes depreciation and amortization, EBITDA provides a basis
    for measuring our financial performance unrelated to historical
    cost or carrying value of long-lived assets. Because it excludes
    one-time items, Adjusted EBITDA provides a benchmark for
    comparing operating results between periods. EBITDA and Adjusted
    EBITDA do not measure the capital we require to maintain our
    fixed assets and does not take into account the total amount of
    interest we pay on outstanding debt nor does it show trends in
    interest costs due to changes in our borrowings or changes in
    interest rates. Non-U.S. GAAP measures such as EBITDA and
    Adjusted EBITDA should not be considered in isolation or as a
    substitute for U.S. GAAP measures. EBITDA and Adjusted
    EBITDA do not represent cash generated from operating activities
    determined in accordance with U.S. GAAP and should not be
    considered as an alternative to operating income, income before
    income taxes or net income determined in accordance with
    U.S. GAAP as an indicator of performance or as an
    alternative to cash flows from operating activities as an
    indicator of liquidity. We note that EBITDA reporting is
    required by our lenders to assist them in understanding our
    operating performance. The amounts shown for EBITDA as presented
    herein are different from the amounts calculated under the
    EBITDA used in our senior secured credit facility. EBITDA as
    defined in our senior secured credit facility is equal to
    Adjusted
35
Table of Contents
EBITDA above plus any litigation
    costs incurred in connection with our litigation with
    Bushmaster, nonrecurring expenses associated with certain
    "permitted acquisitions" under our senior secured
    credit facility, stock-based compensation expense and any
    management fees paid to Sciens Management.
The following table presents a reconciliation of EBITDA and
Adjusted EBITDA to net income:
Colt Defense LLC
Predecessor
Three Months
Ended
Year Ended December 31,
Year Ended December 31,
April 3,
April 4,
2005
2004
2004
2003
2002
2001
2000
(unaudited)
(unaudited)
Net income
$
2,878
$
3,166
$
10,028
$
3,245
$
5,401
$
(3,043
)
$
(1,744
)
Interest expense
1,060
888
3,735
1,582
1,446
1,550
3,464
Income tax expense
22
8
74
38
(222
)
—
—
Depreciation and
    amortization
(a)
121
133
505
438
810
1,351
1,508
EBITDA
4,081
4,195
14,342
5,303
7,435
(142
)
3,228
Royalty expense to Colt's Manufacturing
—
—
—
3,600
650
—
—
Reorganization costs
—
—
—
1,211
333
—
—
Net settlement of litigation
—
—
(842
)
2,619
—
—
—
Adjusted EBITDA
$
4,081
$
4,195
$
13,500
$
12,733
$
8,418
$
(142
)
$
3,228
(a)
See Note 2 to our audited financial statements included
    elsewhere in this prospectus.
(4)
Our net income from continuing operations was negatively
    impacted by the effects of certain litigation. See Note 12
    to our audited financial statements included elsewhere in this
    prospectus.
36
Table of Contents
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
You should read the following discussion and analysis in
conjunction with our combined financial statements and related
notes, our "Unaudited Pro Forma Financial
Information," and our "Selected Financial Data"
included elsewhere in this prospectus. The historical financial
information discussed below is for Colt Defense LLC and
subsidiaries, which was our top-tier company prior to our
Internal Restructuring.
Overview
We are a leading designer, developer and manufacturer of small
arms and weapon systems for the U.S. military, its allies
and federal, state and local law enforcement agencies. Our
products include military rifles, such as the M4 carbine rifle
and its predecessor, the M16 rifle, auxiliary weapon systems,
such as the M203 grenade launcher, and rifles for law
enforcement agencies around the world. We also refurbish,
recondition and repair these weapons, and produce spare parts
and component kits such as barrels, springs, screws, handguards,
upper receivers and buttstocks. In addition, we provide
centralized procurement and training services. We have produced
for, and sold to (or have orders for), the U.S. and allied
militaries approximately seven million M16 and 340,000 M4
weapons.
Prior to November 4, 2002, we operated as a division of
Colt's Manufacturing, which was a wholly owned subsidiary
of New Colt. On November 4, 2002, New Colt and Colt's
Manufacturing contributed the assets and liabilities comprising
our business to a newly formed limited liability company as a
first step of a two-step reorganization process. On June 3,
2003, the second step of the reorganization took place in which
Colt's Manufacturing was itself converted to a limited
liability company, and the ownership interest in our company was
distributed to the stockholders of New Colt. See "Certain
Relationships and Related Party Transactions —
Reorganization" and Note 1 to our audited historical
financial statements for more information about our
reorganization.
As discussed below, in connection with the reorganization we
recorded one-time reorganization costs of $0.3 million in
2002 and $1.2 million in 2003. Also in connection with the
reorganization, as discussed below, in January 2004 we entered
into a new 20-year paid up license agreement (with successive
five-year extensions at our option with the payment of
$0.25 million upon each extension) with Colt's
Manufacturing, for our use of certain trademarks and trade
names. See "— Other Expense (Income)."
Since November 4, 2002 and for the remainder of the periods
covered by the financial statements included in this prospectus,
Colt Defense LLC has operated as a limited liability company. As
a result, it was not subject to federal or most state income
taxes. Rather, its members were taxed on their proportionate
share of our taxable income during such periods. Concurrently
with the consummation of this offering, our top-tier company
will be a tax paying entity. This will have an impact on our
financial results for subsequent periods as discussed below
under "— Income Tax Expense."
Internal Restructuring and Offering
Immediately prior to the effectiveness of the registration
statement of which this prospectus is a part, we will complete a
series of transactions in connection with our Internal
Restructuring for the purpose of transitioning our top-tier
company from a limited liability company to a corporation. See
"Internal Restructuring." As a result of this offering
and our Internal Restructuring, we will incur additional
expenses that we have not incurred in the past, including
expenses associated with compliance with corporate governance
and periodic financial reporting requirements for public
companies. Moreover, our income will be subject to income tax.
As a result of the repayment of our existing indebtedness with
the proceeds from our new senior secured credit facility, we
will incur a write-off of our existing deferred financing costs
(approximately $1.0 million at April 3, 2005). As a
result of this offering, we will: (1) record an additional
compensation charge of approximately $2.0 million from the
acceleration of employee stock option vesting and
(2) record a charge of $1.0 million for the
termination of our agreement with Sciens Management.
37
Table of Contents
Net Sales
Our net sales are derived primarily from the sales of our
products. We recognize revenue when ownership to the goods
transfers to the buyer, which primarily occurs upon shipping.
For certain U.S. government-related sales, we recognize
revenue upon inspection and acceptance of the goods by a
U.S. government official and our placing the accepted goods
in a U.S. government approved location at our premises.
During the first quarter of 2005 and during 2004 and 2003, 69%,
54% and 45%, respectively, of our net sales were to the
U.S. government, and during 2004 and 2003, 16% and 18%,
respectively, of our net sales were to a single foreign country
customer. Our U.S. government contract includes a 4%
inflation factor, which has been adequate over the past three
years.
Cost of Sales
Our cost of sales consists of direct labor and benefits,
materials, subcontractor cost, manufacturing overhead, including
depreciation and amortization, utilities cost, and maintenance
and repair. Our union agreement that covers 74% of our
U.S. work force provides for labor rate increases of 2.5%
in 2005 and 3% in 2006.
Selling Expenses and Commissions
Selling expenses and commissions consist of salaries, travel,
trade shows, marketing materials, customer training and
commissions to export sales representatives. We pay commissions
on most direct foreign sales. Foreign sales usually yield higher
gross profit percentages, which offset the higher cost of
commissions.
General and Administrative Expenses
General and administrative expenses consist of salaries and
expenses for research and development, accounting, corporate
administration, human resources and management information
systems. After this offering, we expect that we will experience
additional legal, accounting, administrative and other expenses
to address public company costs to improve our internal
controls, disclosure controls, information systems, financial
reporting systems and to retain a transfer agent.
Litigation Costs
During 2004 and 2005, we incurred legal costs associated with
our lawsuits against Bushmaster and Heckler & Koch. See
"Risk Factors" and "Business —
Intellectual Property." These costs are a necessary part of
our business as they relate to the protection of our patents and
other intellectual property rights. We settled the
Heckler & Koch suit in March 2005 and our litigation
with Bushmaster is still continuing as of May 31, 2005.
Other Expense (Income)
Other expense (income) includes interest expense, reorganization
costs associated with our separation from Colt's
Manufacturing, settlement of litigation, prepayment discounts,
royalty income from Colt Canada, and royalty expense to
Colt's Manufacturing.
Our total outstanding borrowings have increased as a result of
the payment of a special distribution of $16.1 million to
the members of Colt Defense LLC on May 20, 2005 and the
purchase of Colt Canada. We have significantly reduced the
interest rates we pay with our new senior secured credit
facility. See "Liquidity — Credit
Facilities."
In accordance with the limited liability company agreement of
Colt Defense LLC, distributions will be made to members equal to
45% of taxable income up to the date of the Internal
Restructuring.
In 2002 and 2003, we recognized one-time reorganization costs of
$0.3 million and $1.2 million, respectively, with
respect of the separation of our business and from Colt's
Manufacturing. We do not expect any future charges related to
this reorganization. In addition, in 2003 we recognized a
one-time charge of
38
Table of Contents
$2.6 million with respect to the settlement of litigation
with a foreign sales agent. In 2004, we pre-paid the liability
for the settlement of litigation with a foreign sales agent and
received a discount of $0.8 million.
In 2003 and 2002, we settled some old payables related to
professional fees and received a discount of $0.1 million
and $0.6 million, respectively.
During the periods covered by the financial statements included
in this prospectus, we recognized royalty income from payments
from the Diemaco division of Héroux-Devtek Inc., which
manufactures and sells rifles to the Canadian military and
numerous allies, for the use of certain of our TDPs. On
May 20, 2005, we completed our acquisition of the Diemaco
division and this business is now called Colt Canada. These
royalty payments will be eliminated in subsequent periods as we
will consolidate the operations of Colt Canada with ours. See
"Business — Intellectual Property."
Royalty expense for 2003 and 2002 consists of payments to New
Colt for use of the Colt trademarks and trade names. In January
2004, we entered into a new 20-year paid up license agreement
(with successive five-year extensions) with New Colt, for our
use of certain trademarks and trade names. We paid licensing
fees of $2.0 million and transferred the Colt Match
Target® Rifle product line to Colt's Manufacturing,
which was recorded as a prepaid asset and is being amortized to
cost of sales over the initial 20-year term of this agreement.
See "Certain Relationships and Related Party
Transactions — Match Target®Agreements."
Income Tax Expense
As a limited liability company, since November 4, 2002, we
were not subject to federal or most state income taxes. Rather,
our members pay tax on their proportionate share of our taxable
income. The income tax expense reported related to the Canadian
withholdings tax required on the royalty income we receive from
Colt Canada. If we had been a tax paying entity, we estimate
that our effective tax rate for the periods covered by the
financial statements included in this prospectus would have been
approximately 40%. Concurrently with the completion of the
Internal Restructuring, we will be a tax paying entity. We will
qualify as a manufacturer under the American Jobs Creation Act
of 2004 and, accordingly, our Federal tax rate can be reduced
below 35% through 2010. In conjunction with becoming a tax
paying entity, we will record deferred tax assets for the excess
of the tax basis of our assets and liabilities and the financial
reporting carrying value. When we record the net deferred tax
assets, we expect the amount will be approximately
$9 million, offset by a credit to income tax expense of
$7.8 million and a credit to other comprehensive income
(loss) of $1.2 million. The ultimate realization of
deferred tax assets will depend on the generation of future
taxable income between the periods in which these temporary
differences become deductible.
Key Performance Measures
We consider our key performance measures to be:
•
Organic sales growth — the portion of net sales growth
    not attributable to acquisitions or dispositions;
•
Gross profit as a percentage of net sales;
•
Operating income as a percentage of net sales;
•
EBITDA;
•
Adjusted EBITDA; and
•
Adjusted EBITDA as a percentage of net sales.
39
Table of Contents
For the first quarter of 2005 and 2004 and for the year ended
December 31, 2004, 2003 and 2002, these key performance
measures were:
Three
Three
Months
Months
Ended
Ended
Year Ended December 31,
April 3,
April 4,
2005
2004
2004
2003
2002
Organic sales
    growth
(1)
14.4
%
26.5
%
12.7
%
25
%
26.9
%
Gross profit margin
32.3
%
34.7
%
33
%
32.3
%
25.4
%
Operating income margin
16.8
%
21.1
%
16.3
%
17.7
%
12.2
%
EBITDA
(2)
$
4,081
$
4,195
$
14,342
$
5,303
$
7,435
Adjusted EBITDA
$
4,081
$
4,195
$
13,500
$
12,733
$
8,418
Adjusted EBITDA margin
18.9
%
22.2
%
18
%
19.1
%
15.8
%
(1)
We will adjust the base net sales amount to include Colt
    Canada's net sales in calculating this key performance
    measure for future periods.
(2)
EBITDA and Adjusted EBITDA are not financial measures under
    U.S. GAAP. We use EBITDA and Adjusted EBITDA as
    supplemental financial measures. EBITDA is defined as net income
    before interest, income taxes, depreciation and amortization.
    Adjusted EBITDA is defined as EBITDA before one-time items. We
    believe EBITDA and Adjusted EBITDA are useful financial
    performance measures for our equity holders and us and are a
    complement to net income determined in accordance with
    U.S. GAAP. Because it excludes interest and income taxes,
    EBITDA provides insight with respect to our ongoing operating
    results irrespective of our capital structure and because it
    excludes depreciation and amortization, EBITDA provides a basis
    for measuring our financial performance unrelated to historical
    cost or carrying value of long-lived assets. Because it excludes
    one-time items, Adjusted EBITDA provides a benchmark for
    comparing operating results between periods. EBITDA and Adjusted
    EBITDA do not measure the capital we require to maintain our
    fixed assets and does not take into account the total amount of
    interest we pay on outstanding debt nor does it show trends in
    interest costs due to changes in our borrowings or changes in
    interest rates. Non-U.S. GAAP measures such as EBITDA and
    Adjusted EBITDA should not be considered in isolation or as a
    substitute for U.S. GAAP measures. EBITDA and Adjusted
    EBITDA do not represent cash generated from operating activities
    determined in accordance with U.S. GAAP and should not be
    considered as an alternative to operating income, income before
    income taxes or net income determined in accordance with
    U.S. GAAP as an indicator of performance or as an
    alternative to cash flows from operating activities as an
    indicator of liquidity. We note that EBITDA reporting is
    required by our lenders to assist them in understanding our
    operating performance. The amounts shown for EBITDA as presented
    herein are different from the amounts calculated under the
    EBITDA used in our senior secured credit facility. EBITDA as
    defined in our senior secured credit facility is equal to
    Adjusted EBITDA above plus any litigation costs incurred in
    connection with our litigation with Bushmaster, nonrecurring
    expenses associated with certain "permitted
    acquisitions" under our senior secured credit facility,
    stock based compensation expense and any management fees paid to
    Sciens Management.
The following table presents a reconciliation of EBITDA and
Adjusted EBITDA to net income:
Three
Three
Months
Months
Ended
Ended
Year Ended December 31,
April 3,
April 4,
2005
2004
2004
2003
2002
Net income
$
2,878
$
3,166
$
10,028
$
3,245
$
5,401
Income tax expense
22
8
74
38
(222
)
Depreciation and amortization
121
133
505
438
810
Interest expense
1,060
888
3,735
1,582
1,446
EBITDA
4,081
4,195
14,342
5,303
7,435
Royalty expense to Colt's Manufacturing
—
—
—
3,600
650
Reorganization costs
—
—
—
1,211
333
Net settlement of litigation
—
—
(842
)
2,619
—
Adjusted EBITDA
$
4,081
$
4,195
$
13,500
$
12,733
$
8,418
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EBITDA, as present above, includes the following one-time
charges:
•
reorganization costs of $1.2 million and $0.3 million
    in 2003 and 2002, respectively, in connection with the
    separation of our business from Colt's Manufacturing;
•
litigation settlement charge of $2.6 million in 2003 in
    connection with a settlement with a former commission
    agent; and
•
royalty expense of $3.6 million and $0.7 million in
    2003 and 2002, respectively, in connection with a sublicensing
    agreement with Colt's Manufacturing.
Certain Significant Transactions and Events
Our financial results and conditions in the periods covered by
the financial statements included in this prospectus were
impacted by the following:
Debt Agreement
On December 23, 2003, we entered into a $33.5 million
financing agreement, which consisted of a $25.0 million
term loan and a revolving credit facility. The term loan
proceeds were used in 2004 to repay $9.4 million of
subordinated indebtedness, to make $11.4 million of
distributions to our members, and to pay $2.0 million
licensing fees under the license agreement referred to below.
License Agreement
On January 1, 2004, we entered into a 20-year paid-up
license agreement (with successive five-year extensions) with
New Colt for our use of certain Colt trademarks and trade names.
We paid licensing fees of $2.0 million and transferred the
Colt Match Target® rifle product line to Colt's
Manufacturing, which was recorded as a prepaid asset and is
being amortized over the initial 20-year term of the agreement.
Diemaco Acquisition
On May 20, 2005, we completed our acquisition of the
Diemaco division of Héroux-Devtek Inc., which manufactures
and sells rifles to the Canadian Military and numerous allies.
The business is now called Colt Canada. In the first quarter of
2005 and for the full year 2004, we earned $0.2 million and
$0.8 million, respectively, in royalties from Diemaco.
Union Matters
In May 2004, we signed a new three-year agreement with the UAW,
which represents 74% of our U.S. work force. A key feature
in this agreement is the capping of the cost of healthcare
insurance premiums, which reduced our projected benefit
obligation by $5.8 million.
Planned Purchase of West Hartford Facility
In February 2005, we signed an agreement to acquire our West
Hartford manufacturing facility where we also have our corporate
offices. The contractual purchase price is $7.0 million and
is subject to a reduction of up to $0.6 million in exchange
for which we assume the obligation to investigate and remediate
environmental conditions at the site under the "Connecticut
Transfer Act." See "Risk Factors —
Environmental laws and regulations may subject us to significant
costs and liabilities" for more information.
Senior Secured Credit Facility
In May 2005, we entered into a senior secured credit facility
with an aggregate principal amount of up to $65.0 million
as set forth below:
•
$10.0 million three-year revolving credit facility, which
    includes a $2.0 million sublimit for the issuance of
    standby letters of credit;
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Table of Contents
•
$25.0 million three-year term loan facility (Term A
    Facility);
•
$14.0 million three-year term loan facility (Term B
    Facility); and
•
$16.0 million three-year term loan facility (Term C
    Facility).
In May 2005, we borrowed $60.3 million under the senior
secured credit secured facility to repay existing term loan
indebtedness of $25.0 million, to finance the acquisition
of Colt Canada ($16.0 million), to make distributions of
$16.1 million to our members and to repay draws on our
existing revolver and pay transaction costs.
Results of Operations
The following table sets forth our results of operations based
on the amounts and percentage relationship of the items listed
to revenues during the period shown:
Three Months
Three Months
Ended April 3,
Ended April 4,
Year Ended December 31,
(unaudited)
(unaudited)
2005
%
2004
%
2004
%
2003
%
2002
%
Net sales
$
21,609
100
%
$
18,896
100
%
$
75,135
100
%
$
66,682
100
%
$
53,329
100
%
Gross profit
6,987
32.3
6,556
34.7
24,759
33.0
21,521
32.3
13,561
25.4
Selling and commission
1,270
5.9
1,277
6.8
5,981
8.0
4,819
7.2
3,732
7.0
General and administrative
1,459
6.8
1,297
6.9
5,576
7.4
4,312
6.5
3,300
6.2
Litigation costs
625
—
—
—
936
—
—
—
—
—
Noncash stock compensation
—
—
—
—
—
—
602
—
—
—
Operating income
3,633
16.8
3,982
21.1
12,266
16.3
11,788
17.7
6,529
12.2
Royalty income
(219
)
—
(80
)
—
(759
)
—
(381
)
—
(429
)
—
Reorganization costs
—
—
—
—
—
—
1,211
—
333
—
Settlement of litigation
—
—
—
—
(842
)
—
2,619
—
—
—
Royalty expense to Colt's Manufacturing
—
—
—
—
—
—
3,600
—
650
—
Other, net
(108
)
—
—
—
30
—
(126
)
—
(650
)
—
Interest expense
1,060
—
888
—
3,735
—
1,582
—
1,446
—
Income before taxes
2,900
13.4
3,174
16.8
10,102
13.4
3,283
4.9
5,179
9.7
Income taxes
22
—
8
—
74
—
38
—
(222
)
—
Net income
$
2,878
—
$
3,166
—
$
10,028
—
$
3,245
—
$
5,401
—
Income before taxes
$
2,900
13.4
$
3,174
16.8
$
10,102
13.4
$
3,283
4.9
$
5,179
9.7
Pro forma income taxes at 40%
1,150
—
1,258
—
4,006
—
1,302
—
2,054
—
Pro forma net income
$
1,750
8.1
%
$
1,916
10.1
%
$
6,096
8.1
%
$
1,981
3
%
$
3,125
5.9
%
Quarter ended April 3, 2005 compared to quarter ended
    April 4, 2004
Net Sales
Net sales for the first quarter of 2005 were $21.6 million,
an increase of $2.7 million, or 14.4%, from net sales of
$18.9 million in the first quarter of 2004. This increase
was attributable to a 7.9% increase in the number of rifles
sold, which more than offset a decrease in our average selling
prices of 6.3%. The decrease in average selling price was due to
the large number of direct foreign rifles sold in the first
quarter of 2004 under a large contract we had in 2004 with a
foreign customer. This contract ended during the fourth quarter
42
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of 2004. Direct foreign sales have a higher average selling
price as compared to the other categories. The following table
shows net sales for the first quarters of 2005 and 2004 by
product category (in thousands):
2005
2004
U.S. government rifles
$
13,548
$
7,709
Direct foreign rifles
103
6,149
U.S. law enforcement rifles
2,342
1,611
Spares and contract management
5,431
2,748
Other
185
679
Total
$
21,609
$
18,896
Cost of Sales/Gross Profit
Cost of sales was $14.6 million for the first quarter of
2005, an increase of $2.3 million, or 18.5%, from cost of
sales of $12.3 million for the first quarter of 2004. This
increase was primarily attributable to the increase in net
sales. Gross profit increased to $7.0 million for the first
quarter of 2005, an increase of $0.4 million, or 6.6%, from
gross profit of $6.6 million for the first quarter of 2004.
As a percentage of net sales, gross profit decreased to 32.3%
for the first quarter of 2005 from 34.7% for the first quarter
of 2004. This decrease is due to the fact that a greater
percentage by net sales in the first quarter of 2005 were lower
margin U.S. government sales, offset in part by an increase
in the sale of spares and contract management, which typically
have higher margins. Direct material costs were 29.6% of net
sales in the first quarter of 2005 as compared to 23.8% in the
first quarter of 2004. This is primarily due to the mix of
product sold in the first quarter of 2005, which included
$3.4 million of contract management parts, as well as
recent price increases for raw materials. Direct labor costs
were 16.6% of net sales in the first quarter of 2005 as compared
to 18% in the first quarter of 2004.
Selling Expenses and Commissions
Selling expenses and commissions were unchanged at
$1.3 million in each of the first quarters of 2004 and
2005. As a percentage of net sales, selling expenses and
commissions were 5.9% for the first quarter of 2005, compared to
6.8% for the first quarter of 2004. The higher costs in 2004
resulted from the volume of direct foreign sales, which often
result in us paying commissions to our agents in certain foreign
countries. These foreign sales usually yield higher gross profit
percentages which offset the higher costs of commissions.
General and Administrative Expenses
General and administrative expenses for the first quarter of
2005 were $1.5 million, an increase of $0.2 million,
or 12.5%, from general and administrative expenses of
$1.3 million for the first quarter of 2004. As a percentage
of net sales, general and administrative expenses were 6.8% for
the first quarter of 2005 as compared to 6.9% for the first
quarter of 2004. The increase in administration costs was
primarily attributable to increased salary costs and a marketing
research study that was conducted in the first quarter of 2005.
Litigation Costs
We incurred $0.6 million in the first quarter of 2005 for
legal costs related to our lawsuits against Bushmaster and
Heckler & Koch. There was no comparable expense in the
first quarter of 2004.
Operating Income
For the reasons discussed above, operating income for the first
quarter of 2005 was $3.6 million, a decrease of
$0.4 million, or 8.8%, from operating income of
$4.0 million for the first quarter of 2004. As a percentage
of net sales, operating income for the first quarter of 2005 was
16.8%, compared to 21.1% for the first quarter of 2004.
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Table of Contents
Other Expense (Income)
Interest expense for the first quarter of 2005 was
$1.1 million, an increase of $0.2 million, or 19.4%,
from interest expense of $0.9 million for the first quarter
of 2004. This increase was attributable to higher average
borrowings under our revolving credit facility
($2.8 million for the first quarter of 2005 compared to
$2.1 million for the first quarter of 2004).
Royalty income was $0.2 million for the first quarter of
2005, an increase of $0.1 million from royalty income of
$0.1 million for the first quarter of 2004. Royalty income
represents payments received from Colt Canada and will be
eliminated after May 20, 2005 once Colt Canada is
consolidated with our operations.
Income Before Income Taxes
Income before income taxes for the first quarter of 2005 was
$2.9 million, a decrease of $0.3 million, or 8.6%,
from income before income taxes of $3.2 million for the
first quarter of 2004. The decrease is primarily attributable to
the increased general and administrative expenses and the
litigation expense discussed above.
Income Tax Expense
We were not subject to federal or most state income taxes during
the first quarter of 2004 or 2005. See
"— Overview — Income Tax Expense."
For the first quarter of 2005 we had income tax expense of
$0.022 million compared to $0.008 million for the
first quarter of 2004. The income tax we do incur results from
withholding tax required on the royalty income from Canada.
Net Income
For the reasons discussed above, net income for the first
quarter of 2005 was $2.9 million, a decrease of
$0.3 million, or 9.1%, from net income of $3.2 million
for the first quarter of 2004.
Year ended December 31, 2004 compared to year ended
    December 31, 2003
Net Sales
Net sales for 2004 were $75.1 million, an increase of
$8.5 million, or 12.7%, from net sales of
$66.7 million for 2003. This increase was attributable to
an 18.9% increase in selling prices, as well as a significant
increase in the sale of spares. This more than offset an 8.8%
decrease in the number of rifles sold that resulted primarily
from a two-week lock-out of the UAW in April 2004. The lock-out
resulted in approximately 3,000 rifles not being produced. There
were also production shortfalls later in the year due to
machinery problems in the upper receiver line. The following
table shows net sales for 2004 and 2003 by product categories
(in thousands):
2004
2003
U.S. government rifles
$
31,011
$
30,437
Direct foreign rifles
14,756
15,738
U.S. law enforcement rifles
9,390
7,700
Spares and contract management
15,964
7,525
Other
4,014
5,282
Total
$
75,135
$
66,682
Cost of Sales/ Gross Profit
Cost of sales for 2004 was $50.4 million, an increase of
$5.2 million, or 11.5%, from cost of sales of
$45.2 million for 2003. Gross profit for 2004 was
$24.8 million, an increase of $3.2 million, or 15%,
from gross profit of $21.5 million for 2003. As a
percentage of net sales, gross profit for 2004 increased to 33%
from 32.3% for 2003. This improvement was due to the increased
sales of spare parts, on which we earn a
44
Table of Contents
higher margin. Direct material costs were 28.1% of net sales in
2004 as compared to 27% in 2003. Direct labor costs were 17% of
net sales in 2004 as compared to 17.6% in 2003.
Selling Expenses and Commissions
Selling expenses and commissions for 2004 were
$6.0 million, an increase of $1.2 million, from
selling expenses and commissions of $4.8 million for 2003.
This increase was attributable to an increase in direct foreign
sales, which often result in us paying commissions to our agents
in certain foreign countries. These foreign sales usually yield
higher gross profit percentages, which offset the higher costs
of commissions.
General and Administrative Expenses
General and administrative expenses for 2004 were
$5.6 million, an increase of $1.3 million, or 29.3%,
from general and administrative expenses of $4.3 million
for 2003. This increase was attributable to discontinuation of
the common services agreement with Colt's Manufacturing. As
a percentage of net sales, general and administrative expenses
increased to 7.4% for 2004 from 6.5% for 2003.
Litigation Costs
We incurred legal costs related to our lawsuits against
Bushmaster and Heckler & Koch in 2004 of
$0.9 million. There was no comparable litigation expense
for 2003.
Noncash Employee Compensation
For 2003, we recorded $0.6 million charged for noncash
employee equity compensation. This resulted from the exercise of
options in exchange for nonrecourse notes. The notes were
considered new option grants requiring a new measurement date.
Because the interest rate on the notes is fixed, the new option
grant is a fixed award and no additional compensation expense
will be recognized in connection with this award in the future.
There was no corresponding charge in 2004. See "Certain
Relationships and Related Party Transactions —
Transaction with Affiliates Involving Securities."
Operating Income
For the reasons discussed above, operating income for 2004 was
$12.3 million, an increase of $0.5 million, or 4.1%
from operating income of $11.8 million for 2003. As a
percentage of net sales, operating income decreased to 16.3% for
2004 as compared to 17.7% for 2003. The reduction is due to the
increase in research and development costs and the litigation
expense.
Other Expense (Income)
Interest expense was $3.7 million for 2004, an increase of
$2.2 million, from interest expense of $1.6 million
for 2003. This increase was due to our increased indebtedness in
December 2003. See "— Liquidity —
Credit Facilities." Interest expense related to the term
loan portion of our previous credit facility was
$2.8 million for 2004. Amortization of deferred financing
cost was $0.5 million for 2004 compared to
$0.1 million for 2003. Our average borrowings during 2004
were $2.4 million and interest expense on the revolving
credit portion of our previous credit facility was
$0.2 million.
We incurred a $1.2 million one-time reorganization cost in
2003 resulting from the separation of our business from
Colt's Manufacturing. There is no comparable charge for
2004 and we do not expect any future costs related to this
reorganization.
We recorded a charge of $2.6 million in 2003 in settlement
of litigation with a foreign sales agent. In 2004, we prepaid
this settlement and received a discount of $0.8 million
recorded as a prepayment discount.
Royalty income was $0.8 million in 2004, an increase of
$0.4 million, from royalty income of $0.4 million for
2003. This royalty was received from Colt Canada and will be
eliminated in future years as we consolidate Colt Canada after
May 20, 2005.
45
Table of Contents
In January 2004, we paid $2.0 million to Colt's
Manufacturing in connection with a 20-year paid-up license from
New Colt for use of the Colt trademarks and trade names. In
2004, we amortized $0.1 million of expense related to this
paid-up license. Prior to entering into this agreement, we
recorded a royalty expense of $3.6 million for 2003 with
respect to the payments to Colt's Manufacturing for use of
the Colt trademarks and trade names.
Income Before Income Taxes
Income before income taxes for 2004 was $10.1 million, an
increase of $6.8 million, from income before income taxes
of $3.3 million for 2003. The increase was attributable to
the increase in operating income discussed above, and the
one-time charges included in other expense (income) for 2003.
Income Tax Expense
For both 2004 and 2003, we were not subject to federal or most
state income taxes. See "— Overview —
Income Tax Expense." For 2004, income tax expense was
$0.074 million compared to $0.038 million for 2003.
Net Income
For the reasons discussed above, net income for 2004 was
$10.0 million, an increase of $6.8 million, from net
income of $3.2 million for 2003.
Year ended December 31, 2003 compared to year ended
    December 31, 2002
Net Sales
Net sales for 2003 were $66.7 million, an increase of
$13.4 million, or 25%, from net sales of $53.3 million
for 2002. This increase was attributable to a 7.9% increase in
the number of rifles sold and a 19.6% increase in selling
prices, principally due to new U.S. government contracts,
and price increases for rifles sold to law enforcement agencies
and directly to international customers. The following table
shows net sales for 2003 and 2002 by product categories (in
thousands):
2003
2002
U.S. government rifles
$
30,437
$
12,809
Direct foreign rifles
15,738
22,271
U.S. law enforcement rifles
7,700
6,655
Spares and contract management
7,525
7,637
Other
5,282
3,957
Total
$
66,682
$
53,329
Cost of Sales/ Gross Profit
Cost of sales for 2003 was $45.2 million, an increase of
$5.4 million, or 13.6%, from cost of sales of
$39.8 million for 2002. Gross profit for 2003 was
$21.5 million, an increase of $8.0 million, or 58.7%,
from gross profit of $13.6 million for 2002. As a
percentage of net sales, gross profit for 2003 was 32.3%
compared to 25.4% for 2002. This improvement was due to a
substantial increase in the pricing of M4 carbine. Direct
material costs were 27% of net sales in 2003 as compared to
29.8% in 2002. Direct labor costs were 17.6% of net sales in
2003 as compared to 22.1% in 2002.
Selling Expenses and Commissions
Selling expenses and commissions for 2003 were
$4.8 million, an increase of $1.1 million, or 29.1%,
from selling expenses and commissions of $3.7 million for
2002. This increase was attributable to increased
46
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commissions on direct foreign sales in 2003, and increased
spending on sales and marketing efforts, such as shows, travel
and customers' training.
General and Administrative Expenses
General and administrative expenses for 2003 were
$4.3 million, an increase of $1.0 million, or 30.7%,
from general and administrative expenses of $3.3 million
for 2002. This increase was attributable to increased spending
in accounting personnel, office services, human resources, and
outside legal services. As a percentage of net sales, general
and administrative expenses were 6.5% for 2003 and 6.2% for 2002.
Noncash Employee Compensation
For 2003, we recorded $0.6 million charged for noncash
employee equity compensation. This resulted from the exercise of
options in exchange for nonrecourse notes. The notes were
considered new option grants requiring a new measurement date.
Because the interest rate on the notes is fixed, the new option
grant is a fixed award and no additional compensation expense
will be recognized in connection with this award in the future.
There was no corresponding charge in 2002. See "Certain
Relationships and Related Party Transactions —
Transaction with Affiliates Involving Securities."
Operating Income
For the reasons discussed above, operating income for 2003 was
$11.8 million, an increase of $5.3 million, or 80.5%
from operating income of $6.5 million for 2002. As a
percentage of net sales, operating income increased to 17.7% in
2003 as compared to 12.2% for 2002.
Other Expense (Income)
Interest expense was $1.6 million for 2003, an increase of
$0.1 million from interest expense of $1.4 million for
2002.
We incurred a $1.2 million and $0.3 million one-time
reorganization costs in 2003 and 2002, respectively, resulting
from the separation of our business from Colt's
Manufacturing.
We recorded a charge of $2.6 million in 2003 in settlement
of litigation with a foreign sales agent. There was no
comparable charge in 2002.
Royalty income was $0.4 million in each of 2003 and 2002.
This royalty was received from Colt Canada.
We recorded a royalty expense of $3.6 million for 2003,
compared to $0.6 million for 2002, with respect to the
payments to Colt's Manufacturing for use of the Colt
trademarks and trade names. The expense for 2002 was for the
two-month period from November 4, 2002 to December 31,
2002 when Colt Defense LLC was organized.
Income Before Income Taxes
Income before income taxes for 2003 was $3.3 million, a
decrease of $1.9 million, from income before income taxes
of $5.2 million for 2002. The decrease was attributable to
the one-time charges included in other expense (income) for 2003.
Income Tax Expense
From November 2, 2002, we were not subject to federal or
most state income taxes. See
"— Overview — Income Tax Expense."
For 2003 income tax expense was $0.038 million compared to
an income tax benefit of $0.222 million for 2002, which
resulted from refunds of prior year taxes.
47
Table of Contents
Net Income
For the reasons discussed above, net income for 2003 was
$3.2 million, a decrease of $2.2 million, or 39.9%,
from net income of $5.4 million for 2002.
Liquidity And Capital Resources
Historically, our primary liquidity requirements have been for
debt service and working capital requirements. We have funded
these requirements primarily through internally generated
operating cash flow and funds borrowed. Our principal working
capital need is for funding accounts receivable. The timing of
foreign sales and collections can impact our working capital
requirements.
We intend to, and expect over the next twelve months to be able
to, fund our working capital, replacement capital expenditures
and debt service requirements through cash flow from operations.
Over the longer term, our ability to generate sufficient cash
flow from operations will depend on our future financial
performance, which will be affected by a range of economic,
competitive and business factors, many of which are outside of
our control.
Cash Flow
Net cash provided by operating activities for the first quarter
of 2005 was $10.5 million, compared to net cash used in
operating activities for the first quarter of 2004 of
$5.5 million. First quarter 2005 cash flow was primarily
impacted by the collection of a large foreign accounts
receivable in February 2005. First quarter 2004 cash flow was
primarily impacted by the payment of the $2.0 million
license fee to Colt's Manufacturing and the slow collection
of accounts receivable.
Net cash used in operating activities for 2004 was
$6.6 million, compared to net cash provided by operating
activities for 2003 and 2002 of $6.7 million and
$2.5 million, respectively. The change from year to year is
primarily the result of the timing of our cash collections from
customers. Accounts receivable of $12.4 million were
recorded in December 2004 in respect of shipments to a foreign
customer, but were not collected in 2004. In February 2005, the
accounts receivable were collected. As noted above, the
$2.0 million license fee to Colt's Manufacturing also
negatively impacted cash flow for 2004.
Net cash used in investing activities was $0.5 million for
the first quarter of 2005, compared to $0.035 million for
the first quarter of 2004, and was $0.4 million,
$0.2 million and $0.1 million for 2004, 2003, and
2002, respectively. Net cash used in investment activities for
the first quarter of 2005 was primarily impacted by our
$0.3 million deposit made in respect of our West Hartford,
Connecticut facility. In February 2005, we signed an agreement
to acquire this facility, which we use for both manufacturing
and our corporate offices. The purchase price is
$7.0 million, but is subject to a reduction of up to
$0.6 million based upon environmental conditions. We have
had relatively low capital investment requirements historically.
We estimate that we will need approximately $2.0 million
for replacement capital expenditures through the end of 2005.
Net cash used in financing activities was $8.6 million for
the first quarter of 2005, compared to $17.7 million for
the first quarter of 2004. Net cash used in financing activities
was $17.0 million for 2004. In 2003, there was net cash
provided by financing activities of $17.6 million. For
2002, net cash used in financing activities was
$2.5 million. Cash used in financing activities for 2005
was impacted by the payment in full of our revolving line of
credit ($6.5 million) and distributions of
$2.1 million to our members for taxes. Cash used in
financing activities for 2004 include the repayment of
$9.4 million of subordinated indebtedness, and
distributions of $12.3 million to members.
Cash provided by financing activities for 2003 was
$17.6 million resulting from term loan borrowings of
$25.0 million and subordinated borrowings of
$1.2 million offset by debt repayments of
$3.2 million, payment of debt issuance costs of
$1.4 million, and distributions to Colt's
Manufacturing of $3.9 million.
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Credit Facilities
On December 23, 2003, Colt Defense LLC entered into a
$33.5 million financing agreement, consisting of a
$25.0 million term loan and a revolving credit facility.
Proceeds of this indebtedness were used (1) in December
2003 to make $3.9 million of distributions to Colt's
Manufacturing, (2) in January 2004 to repay
$9.4 million of certain subordinated indebtedness,
(3) to make $11.4 million of distributions to Colt
Defense LLC's members and (4) to pay a
$2.0 million license fee to Colt's Manufacturing for
Colt trademarks and trade names. At December 31, 2004 and
April 3, 2005, we were in compliance with all covenants
contained in this credit agreement.
In May 2005, we entered into a new $65.0 million senior
secured credit facility comprised of:
•
$10.0 million three-year revolving credit facility, which
    includes a $2.0 million sublimit for the issuance of
    standby letters of credit;
•
$25.0 million three-year term loan A facility;
•
$14.0 million three-year term loan B facility; and
•
$16.0 million three-year term loan C facility, which
    is available to our Canadian subsidiary and is denominated in
    Canadian dollars.
We used $60.3 million of proceeds of the senior secured
credit facility to repay existing indebtedness and terminated
the 2003 credit facility, to finance the acquisition of Colt
Canada, to pay distributions of $16.1 million to our
members and for working capital and capital expenditures.
The revolving credit facility will terminate in May 2008. The
term A facility will be subject to quarterly amortization
of principal of $1.25 million commencing June 30, 2006
with the remaining principal due in May 2008. The term B
facility will be subject to quarterly amortization commencing
June 30, 2006 of $0.625 million with the remaining
principal due in May 2008. The term C facility will be
subject to quarterly amortization of $0.625 million
commencing June 30, 2006 with the remaining principal due
in May 2008.
In addition to the amortization described above, prepayments are
required in the event of sales and other dispositions of our
property and assets (excluding sales of inventory in the
ordinary course of business), from the issuance of additional
debt, from the issuance of equity and unless our ratio of funded
indebtedness is less than 2.25% we are required each year to
prepay our term loans in an amount equal to 75% of "Excess
Cash Flow," as defined in the senior secured credit
facility. We are required to use $30.0 million of the net
proceeds from this offering to prepay the term loans.
We may prepay the senior secured credit facility in whole or in
part at any time without penalty, subject to reimbursement of
the lenders' breakage and redeployment costs.
We are subject to financial covenants requiring the maintenance
of:
•
minimum EBITDA (as defined in our senior secured credit
    facility) of $7.5 million in total for two consecutive
    quarters;
•
a maximum leverage ratio (total funded debt/ EBITDA) of
    (a) 3.25x through September 30, 2005, (b) 3.1x at
    December 31, 2005, (c) 3.00x through
    September 30, 2006, (d) 2.50x through
    September 30, 2007 and (e) 2.25x therafter; and
•
a minimum fixed charge coverage ratio (EBITDA less capital
    expenditures less cash taxes)/(cash interest expense plus
    scheduled principal repayments) of (a) 2.0:1.0 through
    March 31, 2006, (b) 1.10:1.0 through June 30,
    2007 and (c) 1.25:1.0 thereafter
.
Loans under the revolving credit facility and the term loan
facilities bear interest based on an agreed-upon margin plus
either LIBOR, prime or the Federal Funds rate plus 0.50%.
We will write off the deferred financing costs
($0.97 million at April 3, 2005) related to our
existing credit facility in the second quarter of 2005.
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Pension Plans and Postretirement Health Care
Our pensions plans were underfunded (the benefit obligation
exceeds the plan assets) by $3.2 million at
December 31, 2004. In 2004, we made pension contributions
of $1.9 million as compared to recorded pension expense of
$0.9 million. We expect to make contributions of
$1.7 million in 2005 as compared to projected recorded
pension expense of $1.0 million. We expect our pension
contributions for 2006 and 2007 will also exceed recorded
pension expense.
Our accumulated benefit obligations for postretirement health
care benefits were $9.0 million at December 31, 2004.
In 2004, we recorded $0.2 million of expense. We paid
$0.4 million in 2004 for postretirement health care costs
and expect to pay approximately $0.5 million in 2005. In
future years, we expect that amounts paid for postretirement
health care benefits to exceed the expense.
In May 2004, we signed a new three-year agreement with the UAW,
which represents 74% of our U.S. workforce. A key feature
of this agreement is the capping of the cost of health care
insurance premiums, which reduced our projected benefit
obligation by $5.8 million.
Off-Balance Sheet Items and Aggregate Contractual
Obligations
Our only off-balance sheet items relate to operating leases with
total minimum lease payments of $1.2 million over the next
three years. None of our operating leases have any contingent
rents associated and there are no escalation clauses.
The following table provides information (in thousands) as of
December 31, 2004 regarding our operating leases and
contractual obligations.
Total
2005
2006/7
2008/9
Thereafter
Long-term debt, including interest
$
30,875
$
2,938
$
27,937
—
—
Capital lease obligations, including interest
253
72
121
60
—
Operating leases
1,191
544
647
—
—
Payments from pension
    trust
(1)
8,433
473
1,194
1,541
5,225
Postretirement healthcare payments
7,197
468
1,098
1,234
4,397
Purchase
    obligations
(2)
(1)    Our pension plan is underfunded at
December 31, 2004. See "— Pension Plans and
Postretirement Health Care."
(2)
We generally do not make unconditional, noncancellable purchase
    commitments. We enter into purchase orders that have duration of
    less than one year in the normal course of business. As of
    April 1, 2005, except with respect to Carlton Chen (See
    "Management — Employment Agreements"), there
    were no contractual obligations associated with any employment
    agreements.
Critical Accounting Policies
Our discussion and analysis of our financial condition and
results of operations is based on our audited financial
statements, which have been prepared in conformity with
U.S. GAAP. Note 1 to our audited financial statements
contains a summary of our significant accounting policies, many
of which require the use of estimates and assumptions. We
believe that of our significant accounting policies, the
following are noteworthy because they are based on estimates and
assumptions that require complex, subjective judgments by
management, which can materially impact reported results.
Changes in these estimates or assumptions could materially
impact our financial condition and results of operations. Our
most critical accounting policy is the valuation of pension and
postretirement health care liabilities and the related expense,
which requires a significant judgment in determination of:
•
The discount rate used to calculate the benefit obligation for
    pensions and post retirement health care liabilities;
•
The assumed inflation rate for health care costs; and
•
The expected return on pension plan assets.
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We have defined benefit pension plans covering substantially all
of our employees. Our funding policy is to make the minimum
annual contribution required by the Employee Retirement Income
Security Act of 1974. Plan obligations and annual pension
expense are determined by independent actuaries using a number
of assumptions provided by us including assumptions about
employee demographics, retirement age, compensation levels, pay
rates, turnover, mortality, expected long-term rate of return on
plan assets, discount rate, and the amount and timing of claims.
Each plan assumption reflects our best estimate of the
plan's future experience. The most sensitive assumption in
the determination of plan obligations for pensions (and
postretirement benefits — see below) is the discount
rate. The actuarially determined present value of benefits
attributed by the pension benefit formula for employee service
to date based on current and past compensation levels is called
the accumulated benefit obligation. Our accumulated benefit
obligation at December 31, 2004 was $13.2 million. The
projected benefit obligation includes an assumption for future
compensation levels and was $13.4 million and
$11.9 million at December 31, 2004 and 2003,
respectively. Our pension plans are underfunded, as the fair
value of plan assets was $10.2 million and
$8.0 million at December 31, 2004 and 2003,
respectively. The excess of the projected benefit obligation
over plan assets is $3.2 million. Since our accumulated
benefit obligation exceeds the fair value of plan assets, we are
required to increase our pension liability to the full amount of
the difference between the accumulated benefit obligation and
the plans assets. Accordingly, our pension liability recorded
under U.S. GAAP is $3.1 million. As required we have
increased the liability to $3.1 million by recording an
intangible asset of $0.855 million for our unrecognized
prior service cost and $3.1 million is recorded as a charge
against accumulated other comprehensive income. The intangible
asset and the charge in accumulated other comprehensive income
will be reduced over time.
We provide postretirement health care benefits to our union
employees. The benefit obligation for postretirement health
costs was $9.0 million and $11.9 million at
December 31, 2004 and 2003, respectively. The
postretirement health plan is unfunded. Plan obligations and
annual postretirement health care expense are determined by
independent actuaries using a number of assumptions provided by
us including information about employee demographics, retirement
age, future health care costs, turnover, mortality, discount
rate, amount and timing of claims, and a health care inflation
trend rate. The most sensitive assumptions in the determination
of the plan obligations and expense are the discount rate and
the assumed inflation health care trend rate. For measurement
purposes, we have assumed a 7% annual rate of increase in cost
per capita of claims. Beginning in 2005, the inflation trend
rate is assumed to decrease each year by 1% to a rate of 5% in
2007 and remain at that level thereafter. Although the plan
obligations are $9.0 million, our liability recorded under
U.S. GAAP is $12.3 million, as U.S. GAAP requires
that we smooth into the income statement the effect of the
reduction in the plan obligations resulting from our agreement
with our union in connection with the renewal of our collective
bargaining agreement in 2004 to cap the monthly cost of
providing retiree health care benefits at $209.95 per
employee. For the year ended December 31, 2004, the cost
per month was $175.08 per employee. The impact of this
change in benefits was an increase in negative prior service
cost of $5.8 million.
The discount rate also affects the measurement of expense for
pension and postretirement health care expense since a key
element of such expense is interest on the benefit obligation.
The benefit obligations for both the pension plans and the post
retirement health plans were determined using a discount rate of
6% and 6.25% at December 31, 2004 and 2003, respectively.
We are using a discount rate of 6% to calculate the 2005
expense. Any change in the discount rate assumption would result
in a change to the benefit obligation. An increase in the
discount rate reduces the measurement of benefit obligations.
The estimated long-term return on plan assets is another
critical assumption in the computation of pension expense. The
estimated return on plan assets was 9% at December 31, 2004
and 2003. Our expected return on plan assets for 2004 and 2003
was $0.8 million and $0.6 million as compared to
actual return of $0.6 million and $0.6 million. Our
expected rate of return for plan assets for 2005 is 8%.
Other areas requiring the significant use of judgments and
estimates include, but are not limited to:
Accounts receivable valuation (allowance for doubtful
accounts) and revenue recognition.
Extension of credit is
based on an evaluation of each customer's financial
condition and, generally, collateral is not required. We
regularly monitor credit risk exposure related to our customers
other than the U.S. government
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and take steps to mitigate the likelihood of such exposure
resulting in a loss. Our collection experience has been very
good historically. We maintained an allowance for doubtful of
$0.023 million, $0.033 million and $0.036 million
at April 3, 2005, December 31, 2004 and 2003,
respectively. At least quarterly we perform detailed reviews of
our receivables to determine if impairment has occurred and to
assess the adequacy of the allowance for credit losses, based on
historical and anticipated trends and other factors affecting
credit quality. Credit losses are provided for in the financial
statements, primarily on a specific identification basis.
Allowance for obsolete inventories.
Historically, our
inventories have not been highly susceptible to obsolescence. At
April 3, 2005, December 31, 2004 and 2003, we had an
allowance for obsolete parts inventories of $1.1 million,
$1.1 million and $1.1 million, respectively. We
determined the allowance based on our evaluation of our parts
inventories as compared to sales of specific products within the
last twelve months, our existing backlog of orders and our
knowledge of business trends for our products.
Goodwill and intangible assets valuation (possible
impairment).
At December 31, 2004, we had goodwill of
$4.2 million and intellectual property (intangible assets)
deemed to have indefinite lives of $3.0 million, which are
not amortized, but rather are tested for impairments annually at
December 31, or immediately if conditions indicate that
such impairment could exist. The test for impairment is based on
an estimate of our fair value and therefore requires an estimate
of future cash flows and evaluation of an appropriate
capitalization rate based on the price earnings ratios of
similar companies that are public and transactions involving
public and nonpublic companies that are similar and prevailing
conditions in the equity and debt markets. Our acquisition of
Colt Canada will add goodwill and intangible assets to our
balance sheet. The Colt Canada intangible assets include
definite lived intangibles that will be amortized over ten
years. The Colt Canada intangible assets will be evaluated for
impairment whenever events or changes in circumstances indicate
that the carrying value of the intangible assets may not be
recoverable.
Amortization expense for intangible assets (determination of
the useful life or designation of indefinite life for
intellectual property and other intangible assets).
We have
$3.0 million of intangible assets for intellectual
property. These assets are deemed to have an indefinite life
and, accordingly, no amortization expense is computed. We
re-assess annually whether such assets continue to have
indefinite lives. If we were to determine that all or a portion
of these assets did have a remaining definite life we would
amortize the definite life asset over its estimated remaining
useful life, which could have a significant impact on our
reported results of operations. In January 2004, we paid
Colt's Manufacturing $2.0 million for a 20-year
paid-up license for certain Colt trademarks. For our intangible
assets related to Colt Canada, we re-assess the estimated
remaining useful lives annually. A change in the remaining
useful lives of the intangible assets could have a significant
impact on our reported results of operations.
Stock-based compensation.
Compensation expense for
employee stock compensation historically has been measured using
the intrinsic value-based method of accounting prescribed by
Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." Under the
intrinsic value method if stock options are granted at an
exercise price that is equal to the market value of common stock
at the date of grant, there is no compensation expense for the
grant, vesting or exercise of stock options. We issued 23,074
stock options upon its formation in June 2003 to replace options
our employees were holding to purchase common stock in our
predecessor. The exercise price of $91.00 per unit was the
estimated fair value of the underlying common stock at the
original grant date. In December 2004, we issued 300 stock
options to a Director and in the second quarter of 2005, we
issued 5,010 stock options to three employees and Directors with
an exercise price of $91.00 per unit. We believe the
exercise price is less than the fair value of our common stock
at the date of issuance and, accordingly, we plan to record
expense of $2.0 million over three years commencing
April 1, 2005, which will be accelerated as a result of
this offering.
Commencing January 1, 2006, the Company will be required to
adopt the fair value recognition provisions of Statement of
Financial Accounting Standards (SFAS) No. 123R,
"Stock-Based Payment" with the fair value of stock
options measured at the date of grant. We will implement
SFAS 123R prospectively. We plan to primarily use
restricted stock rather than stock options in future years and,
accordingly, do not expect SFAS 123R to have a significant
impact. If we do issue stock options, we would compute fair
value based on the Black-Scholes option-pricing model. The
primary assumptions required in valuing stock options
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under SFAS No. 123R is the volatility of common stock
values, the risk free rate of return, expected dividend yield
and expected life of stock options. The most significant
assumption is volatility. As a private company or a newly public
company, we would be required to estimate volatility by
identifying similar companies that are public and using their
reported volatilities as a proxy. The selection of companies to
use as a proxy is subjective and the results can vary
significantly depending upon the companies selected.
Inflation
We experience inflation in labor rates based on our union
agreement and we have experienced material price increases in
the past three years. Our U.S. government contracts provide
for a 4% inflation factor, which has been adequate in the past
three years. There can be no assurance that the inflation factor
in our contracts with the U.S. government will continue to
cover our labor and material cost increases in the future and
there can be no assurance that the prices we quote for foreign
sales and law enforcement sales will be adequate to cover future
cost increases. Our union agreement provides for labor rate
increases of 2.5% in April 2005 and 3% in April 2006.
Recently Issued Accounting Standards
We will adopt Statement of Financial Accounting Standards
No. 123 Revised, "Share-Based Payment"
("SFAS 123R") on January 1, 2006. We have
the option of adopting the new standard prospectively or using a
modified retroactive approach. We plan to implement
SFAS 123R prospectively. We currently apply APB Opinion
No. 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for
our plans and do not recognize compensation expense for our
employee stock option grants unless the exercise price is less
than the estimated fair value of the underlying common stock at
the grant date. We granted options in the second quarter of 2005
and will have a noncash charge for stock compensation in future
periods, which will be accelerated as a result of this offering.
Market Risk
Our new senior secured credit facility has floating rate
long-term debt. During 2004 and 2003, our average borrowing
outstanding on our previous credit facility revolver were
$2.4 million and $4.4 million, respectively. We try to
minimize our exposure to changes in interest rates by focusing
on billing and collecting receivables to pay down debt. Since we
plan to use the net proceeds from this offering by us to repay
our debt, this market risk is expected to be significantly
mitigated.
Our investment in Colt Canada (acquired in May 2005) of
approximately U.S. $16.0 million was primarily paid
with the proceeds from Term Loan C under our new senior
secured credit facility, which is denominated in Canadian
dollars. Accordingly, we do not have significant foreign
currency risk on this investment.
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BUSINESS
Overview
We are a leading designer, developer and manufacturer of small
arms and weapon systems for the U.S. military, its allies
and federal, state and local law enforcement agencies. Our
products include military rifles, such as the M4 carbine and its
predecessor, the M16 rifle, auxiliary weapon systems, such as
the M203 grenade launcher, and rifles for law enforcement
agencies around the world. We also refurbish, recondition and
repair these weapons, and produce spare parts and component kits
such as barrels, springs, screws, handguards, upper receivers
and buttstocks. In addition, we provide centralized procurement
and training services. We have produced for, and sold to (or
have orders for), the U.S. and allied militaries approximately
seven million M16 and 340,000 M4 weapons. In 2004, we had net
sales of $75.1 million, EBITDA of $14.3 million, and
net income of $10.0 million. Approximately 54% of our 2004
sales were to the U.S. government. As of April 3,
2005, we had a funded backlog of approximately $59 million,
$44 million of which is expected to be delivered by
December 31, 2005.
We and our predecessors have been supplying small arms to the
U.S. military since 1847. Since the spin-off and
distribution of Colt Defense LLC from its prior parent,
Colt's Manufacturing, in 2002, Colt Defense has sold and
marketed exclusively to the U.S. and allied militaries and law
enforcement agencies. Our products enjoy outstanding brand name
recognition and have proven themselves under the most severe
battle conditions — from the jungles of Vietnam to the
deserts of the Middle East and the mountains of Afghanistan. Our
expertise in the design and manufacture of individual weapon
systems enables us to integrate new technologies and features
into a large installed base, introduce additional related
products and services at the point of sale, and retain our
market leadership as we invest in new technologies.
Industry Overview
The funding for our small arms is primarily linked to trends in
U.S. and international military, national security and law
enforcement spending. We believe domestic and international
defense spending will continue to grow over the next several
years with an increased emphasis on national security and the
"War on Terror" by the U.S. government and its
allies. While historically our revenues have been derived from
sales to the Department of Defense, allied governments and state
and local law enforcement agencies, the creation of the
Department of Homeland Security has centralized the
U.S. weapons procurement process for certain agencies of
the U.S. government that had previously procured their
weapons directly from us. Excluding supplemental appropriations
(which provide funds in addition to the regular appropriations
level and often arise when an emergency requires immediate
funding), the 2005 defense budget was $401.7 billion, a 7%
increase over the 2004 budget of $375.3 billion. According
to the President's 2006 Department of Defense budget
request, the defense budget is expected to grow at a compound
annual growth rate of 4.7% through 2009. Additionally, the
U.S. defense budget has been augmented by wartime
supplemental appropriations since September 11, 2001. There
were supplemental appropriations in the amounts of
$15.9 billion in 2002, $78.5 billion in 2003,
$87.0 billion in 2004 and $80.9 billion in 2005. We
believe the following developments and trends will drive growth
in the U.S. defense budget and, in particular, small arms
weapon systems:
•
The Department of Defense is in the midst of transforming the
    military into a more mobile, agile and lethal force capable of
    being deployed with minimal lead-time in connection with its
    modularity program. Today, U.S. soldiers could face
    anything from trained, well-equipped regular forces to guerilla
    insurgents. To accomplish this transformation, the Department of
    Defense is focusing on providing individual soldiers with
    lighter, integrated weapon systems with greater accuracy and
    firepower.
•
The U.S. military is currently focused on upgrading its
    equipment, particularly small arms for the soldier. The 2005
    supplemental appropriation request included $55.4 million
    for M4 carbines to support the Army's modularity
    requirements.
•
In addition to the current small weapons program, the United
    States is continuing to fund an initiative to develop more
    advanced light armaments. Other manufacturers developed small
    arms weapon
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systems, such as the XM29 and the XM8, in response to this
    funding initiative. Funding continued on the XM8 for prototype
    development and testing into 2004. However, in the 2005 Defense
    Department budget, all funding for the XM8 production was
    removed. In May 2005, the U.S. Army issued a RFP for the
    OICW. This RFP invites defense contractors to submit a technical
    and financial document package with sample weapons for the
    purpose of evaluating the next generation of modern modular
    weapon systems. The program requires one family of weapons that
    consists of the following four variants: standard carbine,
    special compact version, designated marksman version, or rifle,
    and light machine gun. We have already started the requisite
    work to complete and submit our response to the RFP, which is
    due on November 7, 2005.
•
Military operations on urbanized terrain, or MOUT, is becoming a
    significant focus of the U.S. military. The accelerated
    growth of city populations have made the problems of combat in
    built-up areas an urgent requirement for the U.S. military.
    MOUT places an emphasis on small arms that are lightweight,
    compact and reliable, such as the M4 carbine.
Internationally, the increased cooperative effort to combat
terrorism and domestic unrest has caused governments and
militaries to enhance and modernize their military and law
enforcement capabilities dramatically. With the proliferation of
regional conflicts that have the potential to escalate,
international governments have realized the importance of
maintaining a ready and mobile military force with lightweight
weapons, which can deploy and maneuver quickly. In light of the
importance of equipping a military force with modern and
lightweight small arms, we expect these numbers to increase.
As more countries join NATO, such as the former Soviet Bloc and
Warsaw Pact countries, we believe they will need to convert
their weapons to meet the NATO standard caliber requirement.
Accordingly, we expect to see an increase in demand for the M4
carbine as more countries join NATO and as current NATO
participants seek to upgrade their older weapons.
Given the increased threat of terrorism and the need for
enhanced security, the Department of Homeland Security budget
has increased by 8.2% from 2004 to $35.5 billion for 2005
and is budgeted to increase to $41.1 billion in 2006. The
Government Electronics & Information Technology
Association projects that the budget will grow by a compound
annual growth rate of 3.5% from 2005 to 2010. We believe state
and local law enforcement budgets will continue to increase as
well.
Business Strengths
We believe that we have a strong competitive position
attributable to a number of factors, including:
Global Brand Name with Leading Market Share.
Colt is a
widely recognized global brand name associated with quality,
value and reliability. Over the past 40 years, we and our
predecessors have sold over seven million military and law
enforcement weapons. Our products are currently used in 16 NATO
countries and approximately 65 other countries worldwide. We are
the number one provider of military rifles to the U.S. and
Canadian militaries. Our rifles and carbines have enjoyed
significant customer acceptance, both in the U.S. and globally,
for over 40 years. The acquisition of Colt Canada has
increased our market penetration in Northern European and NATO
countries.
Sole Source Provider of the M4 Carbine.
We are the
U.S. military's sole source supplier of the M4
carbine. As of April 3, 2005, we have sold or have orders
for approximately 340,000 M4 carbines, including
270,000 to the U.S. government. Our sole source agreement
with the U.S. government lasts until June 30, 2009. If
the government seeks competitive bids after June 2009, we
believe we are well-positioned to compete successfully for this
business. M4 carbine sales to the U.S. government accounted
for approximately 41% of our 2004 revenues. The M4 carbine is
only at the beginning of its product life cycle, and is the
standard carbine for the U.S. Army and the other services
within the Department of Defense. Currently, the M4 carbine is
the successor for the M16 rifles in use by the
U.S. military. The M4 carbine is one of the
U.S. military's critical weapons system program, and
it is already a combat proven "weapon of choice" for
elite units such as the U.S. Navy Seals and Army Rangers
and Airborne. Colt Canada is also the sole source
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supplier of small arms (including the C8 carbine) to the
Canadian Department of National Defence. See
"— Intellectual Property."
Long-standing Customer Relationships.
We and our
predecessors have been conducting business with the
U.S. government since 1847. We continue to enjoy a
successful long-term relationship with the U.S. government
(which includes the U.S. military and federal agencies),
our single largest customer and one of the largest purchasers of
firearms in the world. We interact primarily with the
U.S. Army, which acts as procurement agent for the other
military branches, and we also enjoy a strong relationship with
the Navy, Marines, Air Force, Coast Guard and National Guard and
Reserves. We have a variety of international customers, as we
provide small arms to allied foreign governments, and U.S. and
international law enforcement agencies. Our U.S. law
enforcement agency customers include the Federal Bureau of
Investigation, the Central Intelligence Agency, the
U.S. Customs and Border Protection Agency, the Federal
Bureau of Prisons, the Alcohol, Tobacco and Firearms Bureau, the
Drug Enforcement Agency, the Secret Service, the New York City
Police Department, the Virginia State Police, the California
Highway Patrol and the Pennsylvania State Police. Our
international law enforcement customers include Canada,
Colombia, France, Greece, Israel, Mexico and the United Arab
Emirates. The M4 carbine or its variations are also deployed
throughout other units in the U.S. military and in allied
military units of the following countries:
Argentina
Brunei
Egypt
Iraq
Latvia
Norway
Singapore
Thailand
Australia
Canada
Finland
Israel
Malaysia
Oman
South Africa
Tunisia
Austria
Chile
France
Italy
Mexico
Peru
Spain
Turkey
Bahrain
Colombia
Germany
Japan
Nepal
Philippines
Sri Lanka
United Arab Emirates
Belgium
Denmark
Greece
Jordan
Netherlands
Portugal
Switzerland
United Kingdom
Botswana
Ecuador
Hong Kong
Kuwait
New Zealand
Qatar
Taiwan
Venezuela
Brazil
Extensive Installed Base and Aftermarket.
Over seven
million of our M16 rifles and 340,000 M4 carbines have been
ordered to date, with the majority of rifle sales being to the
U.S. military. While it is difficult to ascertain the
number of M16 rifles and M4 carbines still operational, we
estimate the worldwide military installed base to be at least
two million. We are expanding our business opportunities in
this extensive installed base with our M4 carbine and new weapon
systems as well as aftermarket products and services, including
weapon upgrades, accessories, spare parts, replacement kits,
training and logistic support, and by providing opportunities to
participate in our new programs. In 2004, our aftermarket sales
for spare parts were $10.7 million and our contract
management sales were $5.3 million.
Ownership of the M4 and M16 Technical Data Packages.
We
are a technical leader in the design of small arms and we own
the TDP to the M4 carbine and the M16 rifle. The U.S. Army
has type-classified its standard issue military rifles and
carbines to our TDPs. We are the sole source supplier of M4
carbines and critical components until June 30, 2009. We
have granted a limited manufacturing license agreement to the
U.S. government to make or have made M16 rifles and
critical components and, after June 30, 2009, M4 carbines
and repair parts, for the U.S. military. After that time,
the U.S. government may elect to compete for the supply of
the M4 carbine. However, we enjoy a competitive advantage
because we would be entitled to a 5% royalty on all such sales
until 2037. Our continued development and enhancements to our
TDPs have strengthened our position as the technical leader in
small arms development.
Experienced Management Team.
The members of our
management team have an average of over 25 years of
experience in the defense industry with strong and long-standing
market relationships with most of the principal buyers in the
market. We believe these relationships will allow us to continue
to expand our presence in the market. The team is led by our
chief executive officer, Lieutenant General William M. Keys,
United States Marine Corps (Ret.), who has over 40 years of
experience in the defense industry. Our Executive Vice President
and Chief Operating Officer is Major General James R.
Battaglini, United States Marine Corps (Ret.). Both General Keys
and General Battaglini served in a variety of commands during
their careers in the Marines, worked in the Pentagon on war
fighting requirements and planning, and are intimately familiar
with the types of weapons critical to combat missions.
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Superior Manufacturing Capability.
We have two
manufacturing facilities where we can produce small arms
efficiently and effectively to meet U.S. and Canadian government
requirements, as well as the needs of other customers. We were
the first firearms manufacturer and the first Connecticut
company to receive ISO 9001:2000 Registration, which we received
for our West Hartford, Connecticut manufacturing facility. We
also received U.S. Government Quality certification for
design and manufacture of rifles. Our Canadian facility is also
certified and registered ISO 9001:2000. Colt Canada has received
similar certification from the Canadian government.
Growth Strategy
The major elements of our strategy are:
Consolidate Dominant Position of the M4 within the Department
of Defense.
Based on the M4 carbine's proven
versatility and exceptional reliability in combat operations in
Iraq and Afghanistan, the M4 has become the successor for the
M16 rifle. We have an installed base of 232,000 M4 carbines
within the U.S. military. The Department of Defense spent a
total of $70 million in 2004 and 2005 for the M4 carbine.
In addition, in 2005, the supplemental budget appropriated
$55.4 million for the M4 carbine. We will continue to
promote extensive use of the M4 carbine by all elite and general
purpose forces in the Department of Defense, with the goal of
having all required personnel in the U.S. military upgraded
to the M4 carbine.
Continue to Support Increased Operating Tempo of U.S. and
Allied Militaries.
The recent military operations in both
Iraq and Afghanistan have resulted in a higher level of
operational tempo for U.S. and allied militaries. The tactics
employed during these conflicts have been heavily dependent on
ground force deployment and have magnified the weapon needs of
the ground war fighter. There are at least 387,000
U.S. troops currently deployed in 120 countries. Ground war
fighters need small arms that are lightweight, compact and
reliable, like the M4 carbine. With Operation Iraqi Freedom and
Operation Enduring Freedom, new small arms contracts for all
services have increased. We believe we have significant
opportunities to grow our sales based on heightened
U.S. military requirements and the need to effectively arm
the ground war fighter. Additionally, the higher utilization of
our products requires additional aftermarket support and,
ultimately, replacement.
Maintain Our Leading Market Position through Ongoing Research
and Development and the Introduction of Other Transformational
Small Arms to the Department of Defense.
Utilizing our
research and development expertise, we intend to continue to
evolve the M4 carbine to maintain its position as the most
reliable rifle a soldier can carry. We are one of the leaders in
the design and development of small arms due to our focus on
engineering excellence and highly skilled research and
development teams, which we believe will allow us to compete
effectively to supply next generation small arms and other
transformational technologies to the U.S. military. We have
a long-standing tradition of working closely with military
ground troops to improve our weapon systems to meet their
requirements. In 2004, we adapted our existing technology to
build a prototype rifle with ambidextrous fire controls that
uses a gas-operated piston and pusher rod to operate the bolt
carrier. Colt Canada possesses similar research and development
capabilities. Through a strategic alliance, we have exclusively
licensed a coating process that we are considering incorporating
into the manufacture of our small arms to make them greaseless,
thereby reducing field maintenance to a minimum.
Pursue International Opportunities.
As the sole source
supplier of M4 carbines to the U.S. military, we are
positioned to capitalize on significant growth opportunities due
to small arms modernization efforts in other countries. We
believe other countries look to the United States when deciding
upon new weapon systems. Countries such as Brazil, Greece,
Norway, Portugal, and Turkey are actively evaluating replacing
or refurbishing their existing small arms to replace aging small
arms to meet the NATO standard caliber requirements. We believe
countries that are upgrading or replacing their small arms will
prefer to use the weapons used by the U.S. armed forces,
such as the M4. By acquiring Colt Canada, we have added
international customers and customers in Canada, Denmark, the
Netherlands and the United Kingdom, with further opportunities
in other countries. Our total number of NATO member customers is
16.
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Expand Support and Outsourcing Capabilities.
The U.S. and
foreign militaries and law enforcement agencies worldwide are
beginning to focus on ways to outsource the management of the
full cycle of their small arms, which includes all of the
support, supply and maintenance functions relating to small arms
from after production through retirement. We are in the final
stages of a project whereby we would establish a facility with
the U.S. Marine Corps depot at Albany, Georgia. We intend
to use this facility for the refurbishment and repair of M16
rifles and the conversion of M16 rifles into M4 carbines and, in
the future, for other Colt products. We believe this capability
will allow us to capture additional aftermarket sales. We also
intend to expand our international sales by entering into
additional coproduction programs to enable certain foreign
customers to engage in in-country manufacture or assembly of our
small arms.
Pursue Horizontal Integration through Bundling Sales of
Accessories with the M4 Weapon Systems.
We are dedicated to
increasing sales of high quality product accessories to our
customers. We have sold over 196,000 M4 carbines worldwide since
January 1, 2000. We believe that we have a significant
opportunity to increase revenue by offering additional
accessories to enhance the capability and functionality of the
M4 carbine.
Pursue Opportunities with Law Enforcement Agencies.
We
have sold approximately 55,000 rifles, carbines and related
weapon systems to the Department of Homeland Security and a
variety of domestic law enforcement agencies over the past five
years. Law enforcement agencies typically look to the
U.S. military when determining their weapon of choice.
Because we have such a strong presence within the
U.S. military, we believe law enforcement agencies will
continue to look to us to provide them with additional weapons,
upgrades and spare parts.
Pursue Strategic Acquisitions.
We intend to seek out
selected domestic and international acquisition opportunities.
In evaluating acquisition candidates, we intend to focus on
companies that have a complementary product line or
technological competencies, as well as those we believe will
enhance our ability to implement our business strategy.
History
"Abe Lincoln may have freed all men, but Sam Colt made them
equal." This post-Civil War slogan would have been music to
Sam Colt's ears had he lived long enough to hear it. Sam
Colt's success story began with the issuance of a
U.S. patent in 1836 for the Colt firearm equipped with a
revolving cylinder containing five or six bullets. Colt's
revolver provided its user with greatly increased firepower.
Prior to his invention, only one- and two-barrel flintlock
pistols were available. As a direct result of his invention and
the marketing and sales success that followed, Sam Colt and his
firearms played a prominent role in the history of a developing
America. So popular was the Colt revolver during the latter half
of the 1800s that it was perhaps the best known firearm, not
only in this country, but also in Canada, Mexico, and many
European countries. To this day, we believe the name Colt
suggests firearms to most Americans.
The following dates have been key events in our and our
predecessors' history:
•
In 1867, a predecessor of our company began producing
    Dr. R.J. Gatling's machine gun, a semiautomatic using
    a hand-operated crank to turn a cluster of six to ten barrels
    while feeding ammunition into the breech.
•
In 1911, the Model 1911 Automatic Pistol was introduced, a
    design that still defines the standard for modern day .45
    caliber semi-automatic pistols.
•
In 1960, the AR-15 semi-automatic rifle was introduced, followed
    by the M16 military fully automatic version.
•
In 1993, we were awarded a contract to supply nearly 19,000 of
    the new M4 carbines to the U.S. Army and to joint Special
    Forces personnel.
•
In 1997, the U.S. government recognized us as the sole
    source supplier to the U.S. military of the M4 carbine.
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•
In 2002, New Colt Holding Corp., or New Colt, legally separated
    its commercial business, Colt's Manufacturing, and its
    defense business, Colt Defense LLC. This separation was intended
    to allow the two divisions to focus on core customers,
    facilitate the development and execution of business
    opportunities, and optimize financing opportunities. In 2003,
    New Colt distributed its ownership in Colt Defense LLC, pro-rata
    to the stockholders of New Colt. As part of the restructuring,
    we received a license to use the Colt name in connection with
    the sale, marketing, manufacturing and distribution of military
    and law enforcement weapons, including handguns for military
    use. This license was subsequently replaced by a 20-year paid-up
    license, which may be extended solely at our option for
    successive five-year periods upon payment of $250,000 for each
    additional five-year period.
Products
Our product line includes rifles, carbine rifles, grenade
launchers, and submachine guns as well as a range of
weapons-related products and accessories. Below is a brief
description of some of our primary products.
Military Rifles
M4 5.56mm Carbine.
The M4 carbine, first approved
for use by the U.S. military in 1993 due to its size and
performance, is not only well suited for special operations and
elite battle units of the U.S. military and similar units
of other militaries but for all general purpose forces as well.
The M4 is a fully/semi-automatic, air-cooled, magazine-fed,
gas-operated carbine. The M4 carbine is based on simplicity
of operation, maximum interchangeability of parts and ease of
maintenance. This combination of favorable characteristics has
contributed to a durable, high performance system with low life
cycle maintenance costs. The M4 carbine features a
four-position sliding buttstock allowing it to adapt to soldiers
of different sizes and physical characteristics as well as
various firing positions. The M4 is the first weapon to fully
utilize the flat top upper receiver, which allows the user
flexibility in accessorizing. We have designed it so that all
parts are completely interchangeable with other
M4 carbines, ensuring quality, commonality of parts and
reduced maintenance costs. We sold approximately
40,000 units of the M4 carbine in 2004.
The M4 carbine is designed to accept the M203 grenade launcher
which can easily be assembled to the carbine offering the user
both point and area firing capabilities.
We also offer a variation of this rifle through Colt Canada as
the C8 carbine, and a flat-topped variation through Colt Canada
as the C8FT. Additionally, we offer a variation that is
fully-automatic. We sold approximately 3,650 units of the
C8 carbine from February 1, 2004 through January 31,
2005.
As a large number of militaries modernize equipment, several
have chosen to replace their outdated weapons with lighter
weapons, including the replacement of 7.62 mm with 5.56 mm
caliber weapons. We are the sole source supplier to the
U.S. government of the M4 carbine and all critical M4
carbine spare parts through June 30, 2009.
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M4 Commando.
The M4 Commando, a derivative of the M4
carbine, is the most compact of our 5.56 millimeter family of
weapons, and we believe it is particularly useful for close
quarters combat, where lightness, ease of handling, accuracy and
reliability matter most. We also offer through Colt Canada a
similar version known as the C8CQB (Close Quarter Battle)
carbine.
Colt Canada also offers a variation of this carbine under the
"Special Forces Weapon" widely recognized brand name
and the Special Forces Support Weapon, which incorporates a
mechanical buffer system to reduce the rate of fire and thereby
increase accuracy. The Special Forces Support Weapon is also
available with a special 100 round high capacity magazine. We
sold approximately 2,000 units of the M4 Commando in 2004.
Colt Automatic Rifle.
The Colt Automatic Rifle, or CAR,
is a newly designed weapon system that is our candidate to
replace the M249 Squad Automatic Weapon and will be one of the
four variants for our submission under the OICW-Increment I RFP.
The CAR is a gas-operated, air-cooled, magazine-fed, fully
automatic weapon with a firing rate of 600-750 rounds per
minute. The new, heavier barrel design increases stability,
accuracy and heat dissipation. The Automatic Rifle features a
rugged bipod design, which deploys and retracts rapidly and
easily with the use of a single hand. We did not sell any units
of the CAR in 2004.
The CAR shares common features with the M16 rifle and M4
carbine, and is immediately familiar to soldiers trained in
operating the M16 family of firearms. It uses the same wide
variety of ammunition as the M16 and shares the same magazine
and parts with the M16 and M4 families of weapons, thereby
drastically reducing training and logistics requirements.
We also offer a variation of this rifle through Colt Canada as
the Light Support Weapon Rifle.
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9mm Submachine Gun.
The 9 mm Submachine Gun, or SMG, is a
lightweight, compact weapon encompassing the same straight-line
construction and design as the M4 carbine. This straight-line
construction, coupled with the low recoil associated with 9 mm
ammunition, the SMG provides highly accurate fire with less
muzzle climb, especially in full automatic fire. Less recoil
also facilitates ease of training and improves accuracy. We sold
approximately 600 units of the SMG in 2004.
The operation and training for the 9 mm Submachine Gun is
similar to that of the M16 rifle, M4 carbine or M4 Commando,
eliminating the need for substantial cross training. The SMG is
extremely well-suited for military organizations with a definite
need for a lightweight, compact weapon required to turn out
sustained and controlled fire in close confrontations. The 9 mm
Submachine Gun is also ideal in military and law enforcement
situations where maximum concealability and lower velocity are
required. Furthermore, due to its lack of over-penetration, it
is desirable in the following areas: urban environments, boats
and ships, in and around buildings, and airfields.
M16 5.56 mm Rifle.
The M16 is a fully/semi-automatic,
air-cooled, magazine-fed, gas-operated rifle. It is the primary
weapon of issue for the U.S. Army and 50 other armed forces
around the world with an estimated installed base of two million
units. The M16A4 Rifle version features a removable carrying
handle with an integral rail-mounting system. When the carrying
handle is removed, any accessory device with a rail grabber,
such as an optical sight, can be mounted on the weapon. We sold
approximately 1,400 units of the M16 in 2004.
The M16A4 Rifle is designed to accept the M203 Grenade Launcher
which can easily be attached to the rifle offering the user both
point and area firing capabilities. Also, all US and NATO rifle
grenades can be fired without any supplementary equipment.
We also offer a variation of this rifle through Colt Canada as
the C7 Rifle. We sold approximately 3,800 units of the C7
rifle from February 1, 2004 through January 31, 2005.
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Grenade Launchers
M203 Grenade Launcher.
The M203 grenade launcher is a
lightweight, single-shot, breech-loaded 40 millimeter weapon
designed for attachment to M16 rifles, M4 carbines and law
enforcement rifles, creating a versatile combination weapon
system capable of firing 5.56 millimeter rifle ammunition as
well as a whole range of 40 millimeter high explosive and
special purpose ammunition (including non-lethal ammunition). It
has a maximum effective range of 400 meters, low recoil, and is
extremely accurate. The M203 grenade launcher is also utilized
by government agencies for crowd control and criminal
apprehension though the use of tear gas, rubber bullets and bean
bags. We also offer a variation of this product through Colt
Canada as the M203A1 grenade launcher. We sold approximately
3,000 units of the M203 grenade launcher in 2004.
Law Enforcement Rifles
AR-15A2 Government Carbine.
The AR-15A2 Government
Carbine comes in a lightweight, compact, semi-automatic package
while offering 5.56 millimeter semi-automatic firepower with
high mobility. We believe it is particularly suited to law
enforcement requirements outside the range and accuracy of
handguns. We sold approximately 1,590 units of the AR-15A2
Government Carbine in 2004.
Law Enforcement Carbine.
This specially designed law
enforcement weapon system features many of the combat proven
advantages of the military M4 carbine and is designed for
tactical deployment and traditional patrol. It offers a
semi-automatic only mode. The Law Enforcement Carbine rifle is
also available with a step-cut barrel that allows it to accept a
grenade launcher for nonlethal options. We sold approximately
4,100 units of the Law Enforcement Carbine in 2004.
Accurized Rifle.
The Accurized Rifle features an all-new
free floating, 24" (61 cm) stainless steel barrel that
delivers increased accuracy in a semiautomatic platform.
Included as part of the Accurized Rifle
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design is an all-aluminum tubular handguard with twin sling
swivel studs that allow for easy target sling and bipod
attachment.
Also, the Accurized Rifle utilizes an enhanced trigger group for
smoother and more consistent trigger pull. When situations
demand rapid and accurate multiple shot deployment, the
Accurized Rifle delivers unparalleled accuracy. We sold
approximately 240 units of the Accurized Rifle in 2004.
Spare Parts and Replacement Kits
We produce and provide spare parts and replacement kits for our
weapon systems. The spare parts and replacement kits activities
generated revenues of $6.2 million in 2003 and
$10.7 million in 2004. We believe this area of activity is
poised to expand with increased weapons usage in accordance with
the heightened state of alert and activity surrounding the
support of homeland defense initiatives. Additionally, as the
U.S. increases its training requirements for its special
operations forces, international forces become more active as
well. We believe this activity translates to near-term higher
weapons usage both domestically and abroad, resulting in
increased deliveries for our spare parts and kits business.
Accessories
Due to the flexibility of our small arms, we offer our customers
procurement services whereby we will accessorize the small arms
we sell to the customer's specifications. The M16 rifles
and M4 carbines are the platform for the
U.S. military's current generation modular weapon
system, or MWS, which incorporate a rail adapter system into the
weapons. With rail systems attached, MWS provides multiple
mounting surfaces for the M16 and M4 weapons. The M16 and M4
employ the U.S. military's standard 1913 rail system
which provides the weapon with the capacity to mount various
accessory devices, including topical sights, thermal sights,
backup iron sights, laser sighting and targeting devices, a
combat identification of dismounted soldiers system or a
flashlight. Accordingly, there is a large base of components
using this system and a significant investment by the
U.S. military and foreign countries in these components. In
2004, as part of our procurement services, we provided the
United Arab Emirates a "package" of M4 carbines with
accessories tailored to their specifications. In 2004, our
contract management sales were $5.3 million.
Licensing and Coproduction Programs
Our other business is composed primarily of granting a
manufacturing license agreement, or MLA, and technical
assistance agreement, or TAA, to enable certain governments to
avail themselves of our M4, M16 and M203 weapons technology
(subject to U.S. State Department approval) to engage in
in-country manufacture or assembly of these weapon systems. The
advantage of granting such rights is to install the Colt weapon
system in the host country and enable Colt to collect royalties
and other income based on these activities. It also enables the
host country to convert and modernize their present production
facilities to enable the manufacture of these weapons and
maintain control of the cost and actual number of weapons
produced. At present, we have MLAs with the Canadian government
manufacturer and with the Hellenic Defense Systems in Greece for
the assembly of M4 and M16 kits and M203 grenade launchers. We
are currently responding to a "Request for Proposal"
to supply M4 carbines to the entire Hellenic armed forces. We
continuously evaluate opportunities to enter into coproduction
programs with allied governments to convert their standard issue
rifle from the 7.62 caliber to 5.56 caliber ammunition. Since
the M16 rifle and M4 carbine are the leading candidates in the
majority of these expected procurements, we believe we are well
positioned to participate in this new trend.
Acquisitions
We pursue a strategy of growth through acquisition by acquiring
businesses and assets that complement our existing operations
and enhance our competitiveness. We exercise a high degree of
financial discipline
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and strictly adhere to the following criteria to evaluate
prospective acquisitions, including whether the business to be
acquired:
•
broadens the scope of products we offer or the geographic areas
    we serve;
•
offers attractive margins;
•
is accretive to earnings;
•
offers opportunity to improve profitability by increasing the
    efficiency of our operations;
•
is managed in a manner consistent with our existing
    businesses; and
•
complements our portfolio of existing businesses by increasing
    our ability to meet our customers' needs.
In our desire to be responsive to the needs of the military and
law enforcement communities, including fighting an extended
conflict and taking on new missions in homeland security, we are
pursuing an acquisition strategy that complements the
Army's strategy of evolutionary acquisitions through spiral
development and other methodologies. In this regard, we are
using our expertise in government procurement to field new
technologies and understand the needs of the war-fighting forces.
For example, our recent acquisition of the Diemaco division of
Héroux-Devtek Inc. (now Colt Canada Corporation) has
broadened our market presence with additional scale and critical
mass. Colt Canada has been designated the center of excellence
for small arms for over 25 years by the Canadian
government, and is the sole source supplier of the C7 rifle and
the C8 carbine to the Canadian Department of National Defence,
under the terms of our license agreement with the Canadian
government. In addition, Colt Canada is the Canadian
government's preferred source for all other small arms and
related parts and services. Nearly all of Colt Canada's
products are based on licensed Colt technology and are similar
to our products in many respects. For example, Colt
Canada's C8 carbine is largely based on M4 technology and
its C7 rifle is largely based on M16 technology. Thus, our
discussions with respect to the M4 carbine also apply to the C8
carbine. By acquiring Colt Canada, we have diversified our
customer base and channels of distribution, adding customers and
contracts in Canada, Denmark, the Netherlands and the United
Kingdom with further possible opportunities in other countries.
We also have bolstered our next-generation product capabilities
through this acquisition by capitalizing on the talents of Colt
Canada engineering and design staff. We seek to attain cost
synergies through improved and increased production capacity,
combined purchasing power and the benefits of operating our two
manufacturing facilities, all for the benefit of not only Colt
but also its customers.
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Customers
We provide firearms and weapon systems to a diverse customer
base that we divide into the following three categories: the
U.S. government (including sales by the
U.S. government to foreign militaries), direct sales to
foreign governments, and domestic law enforcement agencies. The
table below reflect our small arms sales by customer in 2004:
Our single largest customer is the U.S. government, which
represented approximately 54% of our sales in 2004. Canada, the
United Arab Emirates and Denmark, each accounted for more than
10% of our consolidated revenue for the fiscal year ended
December 31, 2004. Our largest domestic law enforcement
customers are the New York City Police Department and the Idaho,
Virginia and Washington State Police. Internationally, we
provide firearms to the militaries and law enforcement agencies
of numerous countries, including Australia, Brazil, Canada,
Colombia, Israel, Mexico and Thailand.
Research and Development
We devote a substantial portion of our resources to developing
new products and enhancing existing products. We have a
long-standing tradition of working closely with military ground
troops to improve our weapon systems to meet their requirements.
Our ability to compete for new contracts depends, to a large
extent, on the success and innovation of our research and
development programs. We spent $712,000 $476,000 and $291,000 of
our revenues on research and development in 2004, 2003 and 2002,
respectively. Our product engineering department consists of: an
engineering services group that is responsible for developing
and maintaining all drawings and bills of material; a test and
support group that is responsible for engineering support of
current products as well as planning and carrying out
developmental testing and testing of competitive products; a
design group that not only supports existing products but also
designs new products; and a model shop equipped with
sophisticated multi-axis equipment and software to enable three
dimensional models to be imported from the design group to be
quickly converted into hardware.
We also maintain a product support engineering group at our
Canadian facility that is responsible for supporting existing
products and developing new products in response to customer
requirements. This group also is responsible for ongoing
independent research and development activities. This group
includes engineers, technicians, technologists, CAD draftsmen,
designers and support personnel. In the most recent fiscal year
of Colt Canada, it spent $550,000 on research and development.
We have developed a niche market catering to Special Forces and
law enforcement by customizing weapons to customer requirements.
An example is the successful introduction of the SFW (special
forces
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weapon) currently in service with elite forces from Canada, the
United Kingdom, Norway and others. Our SFW production capability
uses state-of-the-art machinery that provides us with the
flexibility required to run small quantities of unique
configurations economically, which would be difficult to
replicate at larger facilities.
We believe our research and development expertise will enable us
to compete for new contracts based on the success and innovation
of our research and development programs. Our capabilities
enable us to offer products to a wider customer base and thus
enhance our market position, particularly within Europe and the
law enforcement markets.
Marketing and Distribution
Our marketing strategy is a customer-based approach that takes
advantage of interaction with the customer. This enables us to
respond to the feedback and guidance of customers on a real-time
basis. We continuously analyze the defense and law enforcement
markets to anticipate the needs of our existing customers.
Our unique position as the sole source supplier of the M4 weapon
system to the U.S. military allows us to position ourselves
to be able to satisfy not only U.S. government
requirements, but also the requirements of law enforcement and
international customers. The prevailing strategy to counter
insurgent/terrorist activity is the use of mobile military units
with lightweight weapons that can be deployed and maneuvered
quickly. We believe that the M4 carbine and its derivatives are
the lightweight weapons that meet and exceed that challenge.
Domestic law enforcement sales are made and distributed either
directly to the end user, such as the FBI, the New York City
Police Department, and the Drug Enforcement Agency, or through
our distributors and sales agents. In addition to our internal
business development staff, we sell our products to law
enforcement customers through a network of approximately 20
distributors and other additional sales agents. Some law
enforcement sales can also be made by using the
U.S. government as the buying agent. Our distribution
strategy enables us to service smaller law enforcement agencies
as well.
The contracting process with our customers often takes anywhere
from six to twelve months to complete and sometimes longer.
Widely recognized brand name loyalty and weapons already in
stock play a significant role in the selection process of our
customers.
Export Sales
There are two predominant principal contracting methods used for
export sales, Direct Foreign Sales, or DFS, and the
U.S. government's Foreign Military Sales, or FMS. In a
DFS transaction, the contractor sells directly to the foreign
country and assumes all risks in the transactions. In a FMS
transaction, the sale is funded for, contracted by and made to
the U.S. government, which in turn sells the product to the
foreign country. Licenses are required from U.S. government
agencies for DFS exports from the U.S. or Canada for all of
our products. Licenses are also required from the Canadian
government for export sales by Colt Canada. Additionally, some
sales are made with the U.S. acting as a buying agent.
We currently sell several of our products in the international
marketplace. Direct sales to non-U.S. government customers
accounted for approximately 46%, 27% and 30% of our revenue in
the years ended December 31, 2002, 2003 and 2004,
respectively. Except for sales by Colt Canada, our foreign
contracts are payable in United States dollars.
We maintain relationships with representatives in foreign
countries to provide assistance in promoting the technical and
military advantages of the M4 weapon system. These relationships
are an important component to our international marketing
efforts. These relationships are based on representation
agreements with the local in-country representatives and are
renewable on an annual basis. We maintain one representative per
country, where a representative may range from a single
individual to a group/company. As of April 3, 2005, there
were approximately 30 representatives with whom we have a
working relationship. The representatives assist us in
identifying opportunities, positioning us to obtain the contract
award successfully, assist local government officials and us in
the facilitation of legal and financial obligations of the sale,
and oversee the
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delivery and after sale services of the sale. We require that
our representatives comply with all applicable law, including
the Foreign Corrupt Practices Act.
Product Manufacturing and Raw Materials
Manufacturing
We have two manufacturing facilities where we can produce small
arms efficiently and effectively to meet U.S. and Canadian
government requirements, as well as the needs of other
customers. Both of our facilities are certified and registered
ISO 9001:2000, a widely recognized quality management
standard set and monitored by the International Organization for
Standardization. Our primary manufacturing facility is located
in West Hartford, Connecticut. This facility totals
approximately 310,000 square feet, of which we use
207,000 square feet and lease the remainder to Colt's
Manufacturing. This manufacturing facility successfully achieved
its U.S. government Quality Certification for design and
manufacture of rifles and carbines. We successfully passed our
most recent audit in September 2004. Our other manufacturing
facility in Kitchener, Ontario, purchased as part of our May
2005 acquisition of Colt Canada, has 44,000 square feet of
space.
Both facilities operate on a single production plan so that we
can maximize our output and efficiency. In addition, both
facilities organize weapons manufacturing around production work
cells to maximize productivity and minimize bottlenecks. Weapon
production is supported by dedicated machinery, which eliminates
long set-up and change-over times. We produce an average of
6,500 rifles and carbines per month between our two
manufacturing facilities.
Quality Assurance
There are several areas of quality assurance that are an
integral part of the manufacturing process. First, the
metallurgical laboratory ensures the grade and quality of the
materials that are identified for a specific process. Since heat
treating and chemical finishes areas are critical to the
manufacture of a world class firearm, we monitor the
manufacturing processes within the strict guidelines of our
ISO 9001:2000 quality management system. Once the firearms
are assembled, we test the rifles for reliability, durability
and accuracy. The workstations are equipped with
software-enabled computers to rate and measure each weapon. We
believe our testing process ensures high quality and first-rate
weaponry.
Raw Materials
Our manufacturing operations require raw materials, primarily
aluminum and steel, which are purchased in the open market and,
except for steel, are normally available from a number of
suppliers. In the U.S., the steel we purchase for our gun
barrels is currently available from only a single supplier who
has been approved by the Department of Defense to manufacture
the quality of steel it requires. We have not experienced any
significant delays in obtaining timely deliveries of essential
raw materials. In recent years, the average cost of materials
has risen less than 4%. Although all of our contracts are
fixed-price contracts, we can raise prices by 4% each year to
offset inflationary impacts.
Backlog
As of April 3, 2005, our funded backlog was approximately
$59 million compared with $23.3 million as of
April 4, 2004. A substantial majority of this backlog is
expected to be earned as revenues by the end of 2005. This
backlog provides management with a useful tool to project sales
and plan its business on an ongoing basis. Funded backlog is
based upon amounts actually appropriated and therefore does not
include the awarded but unfunded portion of total contract
values. In addition to our funded backlog, we have an IDIQ
(indefinite delivery, indefinite quantity) contract with the
U.S. government for an additional $45 million that is
expected to be ordered by July 2005. Together this backlog and
the orders expected on the remaining portion of the IDIQ
contract should take over 18 months to build.
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Competition
The market for arms manufacturing is highly competitive.
Heckler & Koch and Fabrique Nationale Nouvelle Herstal
S.A. are our largest competitors in the small arms market. We
also encounter additional competition from other industry
participants, including Bushmaster, Olympic Arms, DPMS and Rock
River Arms.
Our smaller competitors are primarily in the commercial
"black rifle" market. This market is characterized by
rifle sales to law enforcement and commercial distributors. Such
competitors are not part of the restricted base of suppliers to
the U.S. military, nor have they historically competed
against us for U.S. government contracts.
In programs where we are the sole source provider, other
suppliers may compete against us only as our license agreements
allow. Over 41% of our total contract revenue for the year ended
December 31, 2004 was derived from our sole-source business.
We believe that we will continue to be able to compete
successfully based upon the quality, technological advancement
and cost competitiveness of our products and services. Our
ability to compete depends to a large extent on the success and
innovation of our research and development programs, whether we
can partner with military industrial facilities owned by the
Department of Defense, and our readiness in facilities,
equipment and personnel to undertake the programs for which we
compete.
Intellectual Property
Our intellectual property can be categorized into two
classifications: (1) trademarks and copyrights and
(2) technology. We own the TDP to manufacture the
M16 rifle and a separate TDP to manufacture the
M4 carbine. We also develop and maintain a TDP for each of
the weapon types and models that we develop for production. We
own or license common law and registered trademarks and
copyrights that are used to identify our products and services.
Our trademarks are registered in the United States and/or in
certain foreign jurisdictions.
Our technology base of intellectual property consists of
(1) patents, (2) manufacturing processes,
(3) proprietary know-how and (4) other trade secrets.
This body of technology is used to develop a TDP, which is a
blue print for manufacturing our small arms products.
We have maintained the M16 and M4 design and technical data and
have made improvements at considerable expense. We also have
safeguarded our TDP from unauthorized disclosure and use. These
efforts have ensured that our M16 and M4 weapons are
unparalleled in quality, endurance and performance. While some
companies imitate our products, we believe these imitations are
made without regard to our rigorous quality of materials,
processes and testing that are required to be met by the
Department of Defense. For example, we use materials and
machining processes that are proprietary. We employ stringent
quality assurance and final acceptance testing of each product
prior to shipment, requirements that are defined in government
weapons specification. These include electrochemical coatings,
heat treating, special formulations of chrome vanadium steel,
metallurgical laboratory testing, high pressure resistance
testing, magnetic particle inspection, and form, fit, function
and accuracy evaluations to ensure a weapon ready for combat.
In 1967, our predecessor entered into a Technical Data Sales and
Patent License Agreement, or 1967 License, with the
U.S. government, Department of the Army. Pursuant to the
1967 License, we granted to the U.S. government a
non-exclusive license to use the TDP for the M16 rifle and to
make or have made M16 rifles and repair parts in the United
States, and to use and sell such weapons throughout the world
for military use (including the right to make foreign military
sales of M16 rifles). The payment of royalties relating to the
M16 rifle and repair parts ceased in 1990. In 1997, the 1967
License was amended to include a nonexclusive license to use the
TDP for the M4 carbine and to make or have made
M4 carbines and M4 unique components in the United
States for military use after June 30, 2009. The 1967
License was further amended to extend the term for the license
for the M16 rifle and M4 carbine through
December 24, 2037, after which the U.S. government
will have a fully paid-up license to use the TDP for the M4
carbine for any government purpose without the payment of
additional royalties.
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Our predecessor entered into a license agreement with the
Canadian government as of February 8, 1984, pursuant to
which it granted to the Canadian government the exclusive
license to use the TDPs for various rifles —
including, among others, the C-10 Canadian Forces Small
Bore Rifle, the C7 rifle and C8 carbine —
and to make or have made such rifles and repair parts in Canada
for use by the Canadian military, as well as a nonexclusive
license to use such TDPs and to make or have made such rifles
and repair parts for sales to other NATO nations. Under the
current license agreement, as amended, Colt Canada is the sole
contractor authorized to manufacture weapons under the license
agreement, and can only be replaced by the Canadian government
with our consent (which cannot be unreasonably withheld).
Royalties of between 5% and 7% (depending on the countries to
which they are shipped) are payable on most such rifles and
repair parts manufactured by the Canadian government; separate,
fixed royalties are payable for each C-10 rifle and repair
part manufactured thereunder. The license has a 30-year term,
after which the Canadian government will have a fully paid up
license to use the TDPs for such rifles without the payment of
additional royalties.
We have an exclusive, worldwide, license right from New Colt to
use the COLT® widely recognized brand name for the sale of
firearms, spare parts and related products for military and law
enforcement use (including handguns for military use). This
license also includes the use of the
® and
®
trademarks. The trademark license is fully paid up for its
initial 20-year term, which may be extended solely at our option
for successive five year periods upon payment of $250,000 for
each additional five-year period.
We maintain and vigorously protect our intellectual property
rights. From time to time, we pursue litigation or other legal
means to challenge the conduct of our competitors over the
unauthorized use of such rights. For example, we have brought
actions in federal district court against Bushmaster Firearms,
Inc., which cases are pending in Portland, Maine, challenging
Bushmaster's manufacture, marketing, distribution and sale
of M4 look-alike weapons and we have alleged trademark,
trade dress, and patent infringement, together with unfair
competition and false advertising. Bushmaster has filed a
partial motion for summary judgment challenging the validity of
our registered M4 trademark and related rights, which we are
opposing. We are seeking damages and injunctive relief. A trial
is scheduled for later this year.
Government Contracts; Regulatory Matters
A majority of our revenue is derived from contracts with the
Department of Defense or other U.S. government agencies.
U.S. government business is performed under fixed-price
contracts. We are not a party to any cost-plus contracts. Under
U.S. government regulations, certain costs, including
certain financing costs, portions of research and development
costs, lobbying expenses, certain types of legal expenses, and
certain marketing expenses related to the preparation of bids
and proposals, are not allowed for pricing purposes.
The U.S. government also regulates the methods under which
costs are allocated to U.S. government contracts. We are
subject to a variety of audits performed by U.S. government
agencies. These include pre-award audits that are performed upon
the submission of a proposal to the government. During the
performance of certain contracts, the U.S. government has
the right to request and to examine labor charges, material
purchases, and overhead charges to any active contract. Upon a
contract's completion, the U.S. government may perform
a post-award audit of all aspects of contract performance to
ensure that we have performed the contract in a manner
consistent with our proposal.
U.S. government contracts are, by their terms, subject to
termination by the government for either its convenience or
default by the contractor. Termination for convenience is at the
government's discretion and occurs when there is a
determination that termination of the contract is in the
government's interest, such as when there is a change in
the government's needs. Fixed-price contracts provide for
payment upon termination for items delivered to and accepted by
the U.S. government and, if the termination is for
convenience, for payment of fair compensation of work performed
plus the costs of settling and paying claims by terminated
subcontractors, other settlement expenses, and a reasonable
profit on the costs incurred. If a contract termination is for
default, however, the contractor is paid an amount agreed upon
for completed and partially completed products and services
accepted by the U.S. government. In these circumstances,
the U.S. government is not liable for the contractor's
costs with respect to unaccepted items, and is entitled to
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repayment of advance payments and progress payments, if any,
related to the terminated portion of the contract. The
contractor may be liable for excess reprocurement costs incurred
by the U.S. government in procuring undelivered items from
another source and/or damages.
In addition to the right of the U.S. government to
terminate government contracts for default or convenience,
U.S. government contracts are conditioned upon the
continuing availability of Congressional appropriations. As is
common in the industry, we are subject to business risks,
including changes in governmental appropriations, national
defense policies or regulations, service modernization plans,
and availability of funds. Any of these factors could materially
adversely affect our business with the U.S. government in
the future.
Environmental Laws and Regulations
We are subject to federal, state, local, provincial and foreign
laws and regulations governing the protection of human health
and the environment, including those regulating releases and
discharges to the air and water, the management of wastes, the
control of noise and odors, and the generation, storage,
handling, use, transportation and disposal of hazardous
materials. Certain of these laws and regulations require us to
obtain and operate under permits that are subject to periodic
renewal or modification. While we strive to operate in
compliance with the requirements of these laws and permits, we
cannot assure you that we are or have been at all times in the
past in complete compliance with all such requirements. We are
subject to potentially significant fines or penalties if we fail
to comply with the requirements and conditions of such laws and
permits and we are not insured for costs arising from such
noncompliance events. These laws and permits can require the
installation of pollution control equipment or operational
changes to limit actual or potential impacts to the environment.
Although we have made and will continue to make capital
expenditures in order to comply with the requirements of
environmental laws and permits, we do not expect material
capital expenditures for environmental controls for the
remainder of 2005 or next year. However, environmental
requirements are complex, change frequently, and could become
more stringent in the future. Accordingly, we cannot assure you
that these requirements will not change in a manner that will
require material capital or operating expenditures or will
otherwise have a material adverse effect on us in the future.
We are also subject to environmental laws requiring the
investigation and cleanup of environmental contamination.
Certain of these laws impose joint, strict and several
liability, including liability for investigation and cleanup
costs and natural resources damages, associated with
contamination at our current or former facilities, in some
circumstances even if such contamination was caused by a third
party, such as a prior owner or operator. We may be subject to
liability if contamination is discovered at a landfill or other
off-site disposal location where we have disposed of wastes,
notwithstanding that our historic disposal practices may have
been in accordance with all applicable requirements. We can also
be subject to related claims by private parties alleging
property damage and personal injury due to exposure to hazardous
materials located at or released from such properties. While we
have not incurred material costs for environmental compliance,
environmental litigation or remediation in the past, new laws
and regulations, stricter or more vigorous enforcement of
existing laws and regulations, the discovery of unknown
contamination or the imposition of new or more stringent
clean-up requirements may require us to incur substantial costs
in the future. As such, there is no assurance that we will not
incur material costs in the future.
Employees
As of April 3, 2005, we have approximately 380 employees in
the U.S. and 90 in Canada. Approximately 74% of our
U.S. employees are represented by a union and are covered
by a three-year collective bargaining agreement that was entered
into in May 2004 and that expires in May 2007. We had a two-week
work stoppage in April 2004 which was a result of a management
lock-out of unionized employees at our West Hartford,
Connecticut facility in connection with the negotiation of a new
collective bargaining agreement. We believe that our relations
with all of our employees are good.
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Our Properties
Our corporate headquarters, engineering, manufacturing and
research and development activities are located in our West
Hartford, Connecticut facility. We lease this approximately
310,000 square foot facility pursuant to a lease expiring
December 31, 2006. In February 2005, we entered into an
agreement with the landlord to purchase this facility. We own a
manufacturing, engineering and research and development facility
in Kitchener, Ontario, Canada that is approximately
44,000 square feet. We also lease a warehouse in Kitchener,
Ontario, Canada that is approximately 3,700 square feet,
under a lease expiring on May 14, 2007. We anticipate
leasing a 40,000 square feet facility in the Marine Corps
Logistics Base at Albany, Georgia under a five-year lease with
the Department of the Navy.
Legal Proceedings
From time to time we are involved in legal proceedings arising
in the ordinary course of our business. We believe that we have
adequately reserved for these liabilities and that there is no
litigation pending that is likely to have a material adverse
effect on our financial condition, results of operations and
cash flows.
As a government contractor, we are subject to
U.S. government investigations from time to time relating
to our operations and audits of our accounting procedures by the
Defense Contract Audit Agency. Government contractors who are
found to have violated the False Claims Act, or are indicted or
convicted for violations of other federal laws, may be suspended
or disbarred from government contracting for some period. Such
an event could also result in fines or penalties. Given our
dependence on U.S. government contracts, suspension or
debarment could have a material adverse effect on us. We have
never been proposed for and/or suspended or debarred from
contracting with the U.S. government. Our policy is to
cooperate with governmental investigations and inquiries
regarding compliance matters, and we also make voluntary
disclosures of any compliance issues to governmental agencies as
appropriate. We continuously provide information on compliance
matters to various government agencies, and we expect to
continue to do so in the future.
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MANAGEMENT
Officers and Directors
Set forth below is information concerning the persons who will
be the executive officers, key employees and directors of Colt
as of the completion of the offering:
Name
Age
Position
Executive Officers
Lt. Gen. William M. Keys, USMC (ret.)
68
Director, President and Chief Executive Officer
Maj. Gen. James R. Battaglini, USMC (ret.)
55
Executive Vice President and Chief Operating Officer
Carlton S. Chen
54
Vice President, General Counsel and Secretary
Richard J. Nadeau
50
Vice President and Chief Financial Officer
Other Key Employees
Kevin J. Brown
53
Executive Director — Military Programs
Michael P. Reissig
51
Executive Director — Sales and Marketing
Directors
Gen. the Lord Guthrie of Craigiebank
66
Director
John P. Rigas
41
Director
Gen. Gordon R. Sullivan, USA (ret.)
67
Director
John R. Torell III
65
Director
Philip A. Wheeler
63
Director
William M. Keys,
Lieutenant General, United States Marine
Corps, (Ret.), age 68, has been our President, Chief Executive
Officer and Director since 2002, before which he served as
President, Chief Executive Officer and Director of Colt's
Manufacturing. During his 34-year career as a U.S. Marine Corps
Infantry officer, he served two tours in Vietnam and commanded
at every level of operational command from platoon to division.
He served as the Commanding General, 2d Marine Division, during
Desert Storm. His last active duty assignment was as the
Commanding General, Marine Forces Atlantic with Command of all
Operational Forces of Fleet Marine forces Atlantic, II Marine
Expeditionary Force, Camp Lejeune, NC and Component Command of
all Marine forces in Europe and Central and South America.
James R. Battaglini,
Major General, United States Marine
Corps. (Ret.), age 55, has been our Vice President of
Operations since October 2004. Prior to joining our company, he
held various staff and leadership positions as an infantry
officer in the United States Marine Corps for over
33 years, before retiring from active service in 2004. His
leadership positions in the United States Marine Corps included:
Commanding General, Third Marine Division in Okinawa, Japan from
July 2001 until June 2002; Commanding General, 1st Marine
Expeditionary Brigade/ Deputy Commanding General, I Marine
Expeditionary Force from July 1999 until July 2001; and
Commanding General, Marine Corps Recruit Depot, Parris Island,
S.C., from September 1997 until June 1999. In his last active
duty assignment from June 2002 until August 2004, he served as
Director, Expeditionary Warfare Division, Warfighting
Requirements and Programs (N7), Navy Staff, Pentagon.
Carlton S. Chen,
age 54, has been our Vice
President, General Counsel and Secretary since 2002, having
served previously as General Counsel to New Colt and Colt's
Manufacturing. Additionally, he serves on the Board of Directors
of two nonprofit companies, Sporting Arms and Ammunition
Manufacturers' Institute, Inc. and the American Corporate
Counsel Association, Westchester/ Southern Connecticut Chapter.
Richard J. Nadeau,
age 50, has been our Vice
President and Chief Financial Officer since May 16, 2005.
Before joining our company, Mr. Nadeau was a Partner at the
accounting firms of KPMG LLP and, prior to 2002, Arthur Andersen
LLP, where he served as a commercial audit partner, primarily
serving government contractors and US Airways.
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Kevin J. Brown,
age 53, has been our Executive
Director of Military Programs since our inception, before which
he served as Executive Director of Military Programs to
Colt's Manufacturing from June 2002 until November 2002.
From January 2000 to June 2002, Mr. Brown served as a Principal
at NE CT Contract Associates, a consulting firm specializing in
government contracts.
Michael P. Reissig,
age 54, has been our Executive
Director of Sales and Marketing since our inception, before
which he served as Director of Sales and Marketing to
Colt's Manufacturing, as well as Senior Vice President of
New Colt.
Lord Guthrie of Craigiebank,
General, age 66, has
been a Director since December 2004. In addition to serving on
our Governing Board, he also serves as a nonexecutive Director
of N.M. Rothschild & Sons, a merchant bank, and
Favermead, Ltd., a property management company, both
headquartered in London, England. He is currently Colonel of the
Life Guards, Gold Stick to Her Majesty Queen Elizabeth II
and Colonel Commandant of the Special Air Service, or SAS. He
served the Welsh Guard and the SAS throughout Europe, Malaysia
and East Africa for over 40 years. Apart from holding
several senior staff appointments and commanderships, he was
Chief of the Defence Staff and the Principal Military Advisor to
two prime ministers and three Secretaries of State for Defence.
He retired from the British Army in 2001.
John P. Rigas,
age 41, has been a Director since
1994. He is the Chairman and Chief Executive Officer of Sciens
Capital Management, an alternative asset management firm
headquartered in New York City. He has been employed as an
executive with Sciens Capital Management or its predecessors
since 1988. Prior to 1988, he was an analyst at E.F. Hutton
& Company.
Gordon R. Sullivan,
General, United States Army (Ret.),
age 67, has been a Director since April 2005. He has been
President of the Association of the United States Army since
1998. He also serves as a Director of Newell Rubbermaid Inc.
(NYSE: NWL), a manufacturer of consumer products, Shell Oil
Company U.S., a petroleum company, Electronic Warfare
Associates, Inc., an information technology company, and the
Institute for Defense Analyses, an institute providing analysis
on national security issues. From 1995 through 1997, he served
as President of Coleman Federal, a division of Coleman Research
Corporation (a subsidiary of Thermo Electron Corporation), a
systems engineering company. From 1991 through 1995, he served
as the 32nd Chief of Staff of the United States Army and as
a member of the Joint Chiefs of Staff. Prior thereto, he served
as Vice Chief of Staff and Deputy Chief of Staff for Operations
and Plans of the United States Army.
John R. Torell III,
age 65, has been a Director
since 1996. He has been a Partner of Core Capital Group, a
private equity investment firm, since 1999. He currently serves
as a Director, and member of the Audit Committee, of Wyeth
(NYSE: WYE), a pharmaceutical and healthcare company. He is also
Chairman of the International Executive Services Corps, the
world's largest organization providing executive volunteers
to developing countries and emerging democracies. He is the
former Chairman and Chief Executive Officer of Fortune Bancorp,
former Chairman of the Board, President and Chief Executive
Officer of CalFed Inc. and former President of Manufacturers
Hanover Corporation and Manufacturers Hanover Trust Company.
Philip A. Wheeler,
age 63, has been a Director since
2003. Since 1989, he served as Director of Region 9A of the UAW.
He presently is an officer of the Legislative Electoral Action
Program and the United Labor Agency of Connecticut.
A number of our directors, named executive officers and key
employees (including Gen. Keys, Gen. Battaglini,
Mr. Nadeau, Mr. Chen, Mr. Brown,
Mr. Reissig, Mr. Rigas, Mr. Torell and
Mr. Wheeler) serve in similar positions with New Colt and
Colt's Manufacturing. Additionally, Gen. Keys serves as
sole Director and President of Colt Defense Employee Plan
Holding Corp., and Mr. Chen serves as its Secretary. Gen.
Keys, Mr. Rigas, Mr. Torell and Mr. Wheeler intend to
remain directors of Colt's Manufacturing and New Colt after
the consummation of this offering. Each named executive officer
and key employee intends to resign his executive positions with
New Colt and Colt's Manufacturing prior to the consummation
of this offering.
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Composition of the Board After This Offering
Our board of directors consists of six members. We intend to add
up to one additional nonmanagement director following completion
of this offering. Our bylaws provide for a staggered board of
directors.
Directors are elected for three-year terms as follows:
•
Messrs.                     ,                     and                     have
    been designated Class I directors whose terms will expire
    at the 2008 annual meeting of stockholders;
•
Messrs.                     ,                     and                     have
    been designated Class II directors whose terms will expire
    at the 2007 annual meeting of stockholders; and
•
Messrs.                     ,                     and                     have
    been designated Class III directors whose terms will expire
    at the 2006 annual meeting of stockholders.
This classification of our board of directors could have the
effect of delaying or preventing changes in control or changes
in our management.
Upon the completion of this offering, our board will consist of
six
directors,           of
whom will qualify as "independent" according to the
rules and regulations of the SEC and the NYSE. We expect to add
another independent director within 90 days after the
effectiveness of the registration statement of which this
prospectus is a part.
Following the consummation of this offering, we will be deemed
to be a "controlled company" under the rules of the
NYSE, and we will qualify for, and intend to rely upon, the
"controlled company" exception to the board of
directors and committee composition requirements under the rules
of the NYSE. Pursuant to this exception, we will be exempt from
the rules that would otherwise require that our board of
directors be comprised of a majority of "independent
directors" and that our executive compensation and
corporate governance and nominating and governance committees be
comprised solely of "independent directors," as
defined under the rules of the NYSE. The "controlled
company" exception does not modify the independence
requirements for the audit committee, and we intend to comply
with the requirements of the Sarbanes-Oxley Act of 2002 and the
NYSE rules, which require that our audit committee be comprised
exclusively of independent directors within one year of an
initial public offering.
In connection with this offering, we will enter into a
nominating agreement with the UAW pursuant to which we, acting
through our nominating and corporate governance committee, will
agree, subject to the requirements of our directors'
fiduciary duties, that the UAW will be entitled to designate one
director to be nominated for election to our board of directors
as long as the collective bargaining agreement remains in force.
No person that is subject to any statutory disqualification (as
defined under Section 3(a)(39) of the Exchange Act) will be
permitted to serve as a director of our company.
Director Compensation
Our policy is not to pay compensation to directors who are also
employees of the Company. We anticipate that outside directors
will enter into compensation arrangements to be determined.
Board Committees
Prior to or promptly following the completion of this offering,
our board of directors will establish an audit committee, a
compensation committee and a nominating and governance
committee. The composition, duties and responsibilities of these
committees are set forth below. Committee members will hold
office for a term of one year.
Compensation Committee
At the time of the consummation of this offering, the
compensation committee will be comprised of
Messrs.                     and                     .
We intend to avail ourselves of the "controlled
company" exception under the NYSE rules which eliminates
the requirement that we have a compensation committee composed
entirely
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of independent directors. Our compensation committee reviews the
salaries and other compensation of our executive officers,
including equity-based compensation, and makes recommendations
to our Board of Directors. In addition, the compensation
committee reviews and administers our incentive compensation and
other stock-based plans.
Audit Committee
At the time of the consummation of this offering, the audit
committee will be comprised of
Messrs                     ,                     and                     .
The board of directors has determined that
Mr.                     qualifies
as an audit committee financial expert as defined in
Item 401(h) of Regulation S-K and is independent under
the rules of the NYSE.
Messrs.                     and  of
our audit committee will not be independent as independence is
defined in Rule 10A-3(b)(i) under the Exchange Act or under
the NYSE listing standards. We plan to nominate a new
independent member to our audit committee within 90 days of
the effectiveness of the registration statement of which this
prospectus is a part and a third independent director to our
audit committee within one year after the effective date of the
registration statement to replace existing members so that all
of our audit committee members will be independent as such term
is defined in Rule 10A-3(b)(i) under the Exchange Act and
under the NYSE Rule 303A. In addition, one of them will be
determined to be an "audit committee financial expert"
as such term is defined in Item 401(h) of
Regulation S-K.
Our audit committee makes recommendations to our board of
directors regarding the selection of our independent auditors
and reviews the professional services provided by our
independent auditors, the independence of our auditors, the
professional fees payable to our auditors, our annual financial
statements, and our system of internal accounting procedures and
controls.
Nominating and Governance Committee
At the time of the consummation of this offering, the nominating
and governance committee will be comprised of
Messrs.                ,                and                .
We intend to avail ourselves of the "controlled
company" exception under the New York Stock Exchange rules
which eliminates the requirement that we have a nominating and
governance committee composed entirely of independent directors.
Our nominating and governance committee identifies and
recommends nominees for election of our board of directors,
develops and recommends to our board our corporate governance
principles and oversees the evaluation of our board and
management.
Compensation Committee Interlocks and Insider
    Participation
None of our executive officers serves as a member of the board
of directors or compensation committee of any other company that
has one or more executive officers serving as a member of our
board of directors or compensation committee.
Executive Compensation
Summary Compensation Table
The following table sets forth all compensation received for
services rendered during the year ended December 31, 2004
by our chief executive officer and our other named executive
officers whose total compensation exceeded $100,000 in such
fiscal year. These four officers are referred to as the
"named executive officers" in this prospectus. The
compensation described in this table does not include medical,
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group life insurance or other benefits which are available
generally to all of our salaried employees. The share numbers in
the Summary Compensation Table and footnotes thereto do not
reflect the Internal Restructuring.
Summary Compensation Table
Annual Compensation
Other Annual
All Other
Name and Principal Position
(1)
Salary ($)
Bonus ($)
Compensation ($)
Compensation ($)
William M. Keys
$
421,860
$
—
$
—
$
—
Chief Executive Officer
Carlton S. Chen
$
182,863
$
—
$
—
$
—
V.P., General Counsel and
Secretary
James R.
    Battaglini
(2)
$
77,858
$
—
$
—
$
—
Executive Vice President and
Chief Operating Officer
Thomas C.
    Moore
(3)
$
152,788
$
—
$
—
$
102,181
Former Vice President of Finance
and Chief Financial Officer
(1)
The named executive officers do not include our Chief Financial
    Officer, Richard J. Nadeau, who became our Chief Financial
    Officer as of May 16, 2005. Mr. Nadeau's base
    salary for the year ending December 31, 2005 is $250,000.
    On commencement of employment, Mr. Nadeau was granted
    options to purchase 2,310 shares of common stock at an
    exercise price of $91.00 per share, with 513 vesting
    annually on the first, second and third anniversaries of his
    employment, and 770 vesting upon the earlier of ten years'
    employment or our initial public offering.
(2)
Gen. Battaglini commenced employment on October 1, 2004.
    His salary and bonus, if annualized, would have been greater
    than $100,000.
(3)
Mr. Moore was our Vice President of Finance and Chief
    Financial Officer until September 30, 2004. Amounts shown
    under "Other Annual Compensation" include salary
    continuation and medical benefits received by Mr. Moore
    pursuant to a separation agreement and general release of claims
    dated September 30, 2004.
Option Grants in the Last Fiscal Year
There were no options granted to our named executive officers in
fiscal year 2004.
Aggregated Option Exercises in Last Fiscal Year and Fiscal
Year End Option Values
None of our named executive officers exercised any options in
fiscal year 2004. Our named executive officers did not hold any
unexercised options to purchase our shares of our common stock
as of December 31, 2004.
Employment Agreements
Carlton S. Chen
On May 21, 1998, Colt's Manufacturing entered into an
employment agreement with Carlton S. Chen to serve as a vice
president. This employment agreement was assigned to us in our
November 2002 reorganization. The agreement is for an initial
term of one year and renews automatically for successive
one-year terms, unless we provide written notice of our election
not to renew the agreement. Under his employment agreement,
Mr. Chen agreed to certain noncompetition provisions and
other restrictive covenants. Mr. Chen's base salary,
currently $206,674, is set annually by Chief Executive Officer
or our compensation committee. In addition to a base salary, he
is eligible to receive an annual performance bonus and awards
pursuant to our Management Option Incentive Plan. Mr. Chen
is also eligible to participate in our standard employee benefit
plans. We may terminate the agreement at any time and
Mr. Chen may terminate his employment upon 60 days
prior written notice to us (or 45 days, if we have
materially diminished his authority, duties or
responsibilities). If we fail to renew his employment agreement,
terminate Mr. Chen's employment without cause (as
defined in the agreement), or his employment agreement
terminates due to Mr. Chen's disability or death, he
(or his estate) will receive severance pay equal to one year of
salary, plus a
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prorated portion of his annual performance bonus, and one year
of group health benefits. If Mr. Chen obtains other
employment during this severance period, his salary continuation
and health benefits will cease.
Other Executive Officers
We do not have written employment agreements with our other
named executive officers.
Stock Option and Other Benefit Plans
The share and unit numbers and exercise prices included in the
following summary of our Stock Option and Other Benefit Plans do
not reflect the Internal Restructuring.
2003 Management Incentive Compensation Plan
We have established the 2003 Management Incentive Compensation
Plan, or 2003 Plan, to reward certain members of our management
and other employees and to encourage them to increase their
efforts on our behalf. The 2003 Plan reserved 23,074 units
for issuance pursuant to options, plus the number of units which
remain unvested at their expiration or forfeiture.
Our 2003 Plan provides for the grant of nonqualified stock
options. Our compensation committee has sole discretion to
administer and interpret the 2003 Plan. The options granted
under the 2003 Plan will carry per unit exercise prices that are
equal to the fair market value of units underlying such options
on their date of grant, vest according to a schedule determined
by our compensation committee, and expire five years following
the date of grant, subject to earlier expiration upon, or after
a specified period following, termination of employment, but not
longer than the date the options would otherwise expire under
the 2003 Plan. Upon termination of employment, we have the right
to repurchase these options at the fair market value of the
units issuable upon exercise of such option, less the
option's exercise price. Our payment for these repurchased
options may consist of a cash payment, or up to two-thirds of
the repurchase price may be paid for by a note we issue which is
repayable over two years. All unvested options become fully
vested upon (a) a sale of all or substantially all of our
assets resulting in net proceeds of at least $21 million,
(b) our dissolution or liquidation, (c) any merger
where we are not the surviving entity, or (d) an
underwritten public offering, such as this offering.
In connection with our reorganization on June 12, 2003, a
total of 23,074 options to purchase units of Colt Defense LLC
were issued to reflect options that had been granted to
employees of New Colt under our 2002 Management Incentive
Compensation Plan, or 2002 Plan. Gen. Keys and Mr. Moore
received grants of options to purchase 19,018.16 units
and 304.3 units, respectively, with an exercise price of
$91.00 per unit. The grant to Gen. Keys was vested
immediately. One-half of Mr. Moore's grant was
exercisable immediately and the remaining grant vested one-half
on January 4, 2004 and one-half on January 4, 2005. On
June 30, 2003, management, including Gen. Keys and
Mr. Moore, exercised 20,996 options by executing
nonrecourse notes which bear interest at the rate of 4% per
year and are due upon the earlier of our change in control or
June 30, 2008. These notes have been amended to permit our
management to retire these notes by tendering units of Colt
Defense LLC immediately prior to the effective time of this
offering.
On December 7, 2004, Gen. the Lord Guthrie received options
to purchase 300 units of Colt Defense LLC, with an
exercise price of $91.00. The options vest one-half on
January 1, 2006 and one-half on January 1, 2007. As of
December 31, 2004, options to
purchase 2,126 units were outstanding. On
April 12, 2005, Gen. Battaglini received a grant of options
to purchase 2,100 units of Colt Defense LLC and each
of Gen. Sullivan and Mr. Chen received options to
purchase 300 units, all with an exercise price of
$91.00. The grant to Mr. Chen vested immediately. One-third
of the grant to Gen. Battaglini vested immediately, with
the remaining options vesting one-half on May 1, 2006 and
the remainder on May 1, 2007. The grant to
Gen. Sullivan vests one-half on May 1, 2006 and the
remainder on May 1, 2007. Also on April 12, 2005,
Gen. Battaglini exercised 700 of his options and
Mr. Chen exercised his 300 options, each by executing
nonrecourse notes which bear interest at the rate of 4% per year
and are due upon the earlier of our change of control or
April 12, 2010. These notes have been amended to permit our
management to retire these notes by tendering units of Colt
Defense LLC immediately prior to the effective time of this
offering. In addition,
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in connection with his hiring, in May 2005 we granted
Mr. Nadeau options to purchase 1,540 of units of Colt
Defense LLC. These options vest over three years and have an
exercise price of $91.00 per unit. We also granted
Mr. Nadeau options to purchase an additional 770 units
that vest on the earlier of ten years' employment or an
initial public offering. Upon consummation of our initial public
offering, all outstanding options in the 2003 Plan will vest.
Pursuant to the Internal Restructuring, options to
purchase 6,136 of our units will automatically be converted
into options to purchase our common shares. Options already
granted under the 2003 Plan would remain outstanding in
accordance with their terms.
2005 Equity Compensation Plan
We have adopted a new 2005 Equity Compensation Plan, or 2005
Plan, to replace the 2003 Plan, although awards already granted
under the 2003 Plan will remain outstanding in accordance with
their terms. The 2005 Plan generally is to be administered by
the compensation committee of our board of directors, except
that the full board may act at any time to administer the plan,
and authority to administer any aspect of the 2005 Plan may be
delegated to an executive officer or any other person. The 2005
Plan allows the plan administrator to grant awards of shares of
our common stock or the right to receive or purchase shares of
our common stock (including options to purchase common stock,
restricted stock and stock units, bonus stock, performance
stock, and stock appreciation rights) to our employees,
directors or other persons or entities providing significant
services to us or our subsidiaries, and further provides the
plan administrator the authority to reprice outstanding stock
options or other awards. The actual terms of an award, including
the number of shares of common stock relating to the award, any
exercise or purchase price, any vesting, forfeiture or transfer
restrictions, the time or times of exercisability for or
delivery of shares of common stock are to be determined by the
plan administrator and set forth in a written award agreement
with the participant.
The aggregate number of shares of our common stock for which
awards may be granted under the 2005 Plan cannot
exceed      % of the number of shares
of our common stock issued and outstanding at the time any award
is granted; provided, however, that no more
than                      shares
of common stock may be issued upon the exercise of incentive
stock options. Awards made under the 2005 Plan that have been
forfeited (including our repurchase of shares of common stock
subject to an award for the price, if any, paid to us for such
shares of common stock, or for their par value), cancelled or
have expired will not be treated as having been granted for
purposes of the preceding sentence. Unless otherwise provided in
an award agreement, all unvested awards become fully vested, and
all performance conditions will lapse, upon a termination of the
grantee's employment by reason of the grantee's death,
disability or retirement, except that certain performance-based
awards will only vest based on the number of days completed in
the applicable performance period (as of the date of
termination).
The 2005 Plan permits the plan administrator to make an
equitable adjustment to the number, kind and exercise price per
share of awards in the event of our recapitalization,
reorganization, merger, spin-off, share exchange, dividend of
common stock, liquidation, dissolution or other similar
transaction or events. In addition, the plan administrator may
make adjustments in the terms and conditions of any awards in
recognition of any unusual or nonrecurring events. Our board of
directors may, at any time, alter, amend, suspend or discontinue
the 2005 Plan. The 2005 Plan will automatically terminate ten
years after it has been most recently approved by our
stockholders.
Salaried Retirement Income Plan
We maintain the Colt Defense LLC Salaried Retirement Income
Plan, or the Retirement Plan, a cash balance pension plan,
intended to be qualified under Section 401(a) of the
Internal Revenue Code, which is available for all of our
employees other than those whose terms and conditions of
employment are covered by a collective bargaining agreement. Our
named executive officers participate on the same basis as all of
our other non-union employees.
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The Retirement Plan expresses benefits as a hypothetical account
balance established in each participant's name. A
participant's hypothetical account balance is equal to the
sum of their annual benefit credits and interest credits. Each
participant's annual benefit credit, for each plan year in
which they are actively employed is determined by multiplying a
participant's eligible annual compensation by a percentage,
which is based upon the participant's years of credited
service on or after March 23, 1990, with us and our
predecessors as follows:
Benefit Credit
Years of Credited Service
Percentage
Less than 5 years
3.5
%
5 but less than 10 years
4.25
%
10 or more years
5
%
Compensation for this purpose generally includes salary but
excludes bonuses and other extra compensation shown in the
summary compensation table and is subject to the compensation
limit applicable to tax-qualified plans ($205,000 for 2004). The
maximum annual benefit under a tax-qualified pension plan is
$165,000 for 2004, if payable beginning at the Social Security
retirement age. Interest credits are accumulated on each
participant's (both active employees and terminated vested
employees) account balance at an annual rate equal to 6.5%,
credited monthly, compounded annually. At termination of
employment after having completed at least five years of
service, a participant will be eligible to receive the amount
then credited to the participant's cash balance account in
an actuarially equivalent life annuity. The participant may also
choose from other actuarially equivalent forms of benefit. As of
January 1, 2005, the named executive officers had the
following years of credited service: Gen. Keys, 5.25 years;
Mr. Chen, 7.50 years; Gen. Battaglini,
0.33 years; and Mr. Moore, 2.75 years.
Estimated Annual Benefits Payable to Named Executive Officers.
The following table provides the estimated annual benefits from
the Retirement Plan, payable as a life annuity commencing at
normal retirement age (age 65), or as of January 1,
2005 if older, for each of our named executive officers. These
estimates assume that the named executive officers'
eligible compensation and regulatory limits on compensation and
benefits remain constant through normal retirement age (or
January 1, 2005, if older). The estimates use the
Retirement Plan's interest rate, 6.5%, for purposes of
calculating the projected interest credits.
Name
Annual Benefit
William M. Keys
$
4,217
Carlton S. Chen
$
24,936
James R. Battaglini
$
10,543
Thomas C. Moore*
$
0
*
Mr. Moore terminated his employment with us on
    September 30, 2004, without becoming vested in his cash
    balance account.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The share and unit numbers and exercise prices included in the
following summary of Certain Relationships and Related Party
Transactions do not give effect to the Internal Restructuring.
Transactions in Connection with Internal Restructuring
Immediately prior to the effectiveness of the registration
statement of which this prospectus is a part, we will complete a
series of transactions in connection with our Internal
Restructuring. The principal Internal Restructuring
transactions, to be effective pursuant to the terms of our
Internal Restructuring Agreement, are summarized below:
•
Members of Colt Defense LLC who have issued Stockholder
    Promissory Notes will satisfy notes by surrendering units of
    Colt Defense LLC equal to the amount due at the time of payment.
    Transactions with Affiliates Involving Securities" for
    information regarding the Stockholder Promissory Notes.
•
All members of Colt Defense LLC (other than the Plan Holding
    Corp.) will contribute all of their membership interests in Colt
    Defense LLC to us in exchange for shares of our common stock,
    Restructuring Notes in an aggregate principal amount of
    $           million
    and the right to participate in the over-allotment option.
•
Colt Defense Employee Profit Sharing Plan, or Colt Defense
    Sharing Plan, which owns all of the outstanding shares of stock
    of Plan Holding Corp., will contribute all of the shares of
    common stock of Plan Holding Corp. to Colt Defense LLC in
    exchange for shares of our common stock, Restructuring Notes in
    the aggregate principal amount of
    $          and
    the right to participate in the over-allotment option.
•
If the underwriters exercise their over-allotment option to
    purchase additional shares of common stock from us, the cash to
    be paid to our existing stockholders in the Internal
    Restructuring will be increased by the proceeds to us of any
    additional shares sold to the underwriters, after deducting
    underwriting discounts and commissions.
•
If the underwriters do not exercise their over-allotment option
    in full, then the aggregate number of shares of common stock
    that we will issue to our existing stockholders in the Internal
    Restructuring will be increased by the number of shares subject
    to the over-allotment option that are not purchased by the
    underwriters.
•
On the closing date of this offering, we will use
    $          of
    the net proceeds from this offering to repay the Restructuring
    Notes in full. The aggregate principal amount of the
    Restructuring Notes and accrued interest thereon will be equal
    to
    $          of
    the net proceeds from this offering.
The transactions described above will be effected pursuant to an
Internal Restructuring Agreement to be dated as
of                     ,
2005 among us, Colt Defense LLC and its members. The Internal
Restructuring Agreement will be approved by our Board of
Directors and the Board of Directors of Colt Defense LLC, and
the governing bodies of the other parties to the agreement prior
to the consummation of the Internal Reorganization. Prior to
such time, our board of directors will also approve the
issuances of shares of our common stock pursuant to the terms of
the agreement.
Consummation of the transactions contemplated in the Internal
Restructuring Agreement is a condition to the closing of this
offering. The closing under the Internal Restructuring is
conditioned upon, among others, (1) the approval of our
lenders to amend our credit facility to permit the Internal
Restructuring, and (2) the absence of any law, regulation,
injunction or order prohibiting the consummation of the Internal
Restructuring.
The Internal Restructuring Agreement will provide that each Colt
Defense LLC member (including the management members) who will
receive shares of our common stock as a result of the Internal
Restructuring has agreed to release us and our past, present and
future affiliates from any and all claims such member may have
against Colt Defense LLC relating to events occurring prior to
the closing. We, in turn, will agree to
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indemnify the members of Colt Defense LLC (including the
management members) with respect to any action which may be
brought against any member by reason of the fact that the member
was a member, managing member, executive, director or officer of
Colt Defense LLC prior to the closing of the Internal
Restructuring, other than with respect to any acts committed in
bad faith or that were the result of active and deliberate
dishonesty or from which the member gained financial profit or
another advantage to which the member was not legally entitled.
Reorganization
Overview
Prior to November 2002, our business operated as a division of
Colt's Manufacturing, which was a wholly owned subsidiary
of New Colt and controlled by individuals associated with Sciens
Capital Management. Colt's Manufacturing and New Colt also
operated a commercial firearm business. As part of a strategy to
streamline the operations of both businesses, to allow the
businesses to focus on core customers, to facilitate the
development and execution of business opportunities by each
business, and to optimize financing alternatives, New Colt and
Colt's Manufacturing formed Colt Defense LLC to own and
operate our business. On November 4, 2002, New Colt,
Colt's Manufacturing and Colt Defense LLC signed an asset
contribution agreement providing for the acquisition by Colt
Defense LLC of substantially all the assets and the assumption
by it of certain of the liabilities associated with New
Colt's and Colt's Manufacturing's defense and law
enforcement business. This was the first step of a two-step
reorganization process to create two legally separate companies.
Subsequently, in a series of transactions, the second step of
the reorganization was consummated whereby the limited liability
interests in Colt Defense LLC were distributed pro rata to the
stockholders of New Colt. In connection with the reorganization,
certain stockholders, warrantholders and optionholders
contributed their interests in Colt Defense LLC to a holding
company, Colt Defense Holding LLC. Colt's Manufacturing and
Colt Defense LLC have been operating as legally separate
businesses since November 2002. The objective of the second step
was to further separate the companies and increase financing
opportunities. The primary agreements entered into in connection
with the reorganization are described below.
Asset Contribution Agreement
Under the November 4, 2002 asset contribution agreement,
New Colt and Colt's Manufacturing contributed their defense
and law enforcement business to Colt Defense LLC, which agreed
to acquire substantially all of the assets and liabilities of
such business. The asset contribution agreement contains
customary representations and warranties, covenants and other
agreements and provides for indemnification for losses relating
to specified events, circumstances or matters. Colt's
Manufacturing and New Colt have agreed to indemnify us from
certain liabilities, including: (1) any losses or damages
arising from the inaccuracy or breach of any representation or
warranty of Colt's Manufacturing and New Colt contained in
the asset contribution agreement or certain ancillary agreements
entered into in connection with this transaction;
(2) certain liabilities retained by Colt's
Manufacturing and New Colt, regardless of whether the
liabilities arise before or after the contribution date,
including environmental, health, safety and/or products
liability relating to Colt's Manufacturing's or New
Colt's operations; and (3) any liability arising out
of the ownership of the assets contributed to us or our business
prior to the contribution date, other than liabilities we
specifically assumed. We are required to indemnify Colt's
Manufacturing and New Colt and their respective affiliates from
liabilities arising from certain specified matters, including
the inaccuracy or breach of any representation or warranty of
Colt Defense LLC, the liabilities designated as "Assumed
Liabilities" under the asset contribution agreement and
liabilities arising out of the ownership or operation of our
business by us after the date of contribution, except for
liabilities designated as "Retained Liabilities" under
the asset contribution agreement.
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Sublicensing Agreement
In connection with the reorganization, Colt Defense LLC entered
into a sublicensing agreement with Colt's Manufacturing on
November 4, 2002 whereby Colt's Manufacturing licensed
certain Colt trademarks to Colt Defense LLC, including the Colt
brand name, in return for specified royalties. We paid
Colt's Manufacturing a total of $4.25 million under
this agreement. This agreement terminated on December 31,
2003. See "— Match Target® Agreements."
Services Agreement
On November 4, 2002, we entered into a services agreement
with Colt's Manufacturing, under which we agreed to provide
certain services (including corporate services, direct
manufacturing services, and indirect manufacturing services) to
Colt's Manufacturing, in return for specified payments.
Colt's Manufacturing paid us a total of $1.98 million
under this agreement. This agreement was terminated by the
parties on June 11, 2003. See "— Management
Services Agreement."
Inducement Agreement
On June 12, 2003, in connection with the entry into an
amended and restated limited liability company agreement of Colt
Defense LLC, Colt Defense LLC and the Connecticut Development
Authority entered into an inducement agreement whereby Colt
Defense LLC agreed to abide by certain covenants (including
informational requirements and an agreement not to relocate
outside of Connecticut that has since expired) and to enter into
a registration rights agreement with the Connecticut Development
Authority to induce the Connecticut Development Authority to
enter into such amended and restated limited liability company
agreement and to accept certain units and warrants under the
distribution agreement. See
"— Reorganization — Distribution
Agreement" and "— 2003 Registration Rights
Agreement."
2003 Registration Rights Agreement
In satisfaction of one of the conditions of the inducement
agreement, Colt Defense LLC entered into a registration rights
agreement with the Connecticut Development Authority on
June 12, 2003, pursuant to which Colt Defense LLC agreed to
register certain of its registrable securities (as defined in
such registration rights agreement) under certain circumstances.
Demand Registration.
The Connecticut Development
Authority has one demand registration right, which it can
exercise one year after this offering.
Piggy-back Rights.
If we file a registration statement
for an offering of any of our securities for ourselves or for
our security holders other than the Connecticut Development
Authority, we must offer the Connecticut Development Authority
the opportunity to register its registrable securities in such
offering.
Conditions and Limitations; Expenses.
The registration
rights of the Connecticut Development Authority are subject to
certain conditions and limitations, including the right of the
underwriters to limit the number of shares to be included in a
registration and our right to delay or withdraw a registration
statement under certain circumstances. We will pay all
registration expenses in connection with a demand registration,
except for the underwriting discounts and commissions, which
will be paid by the Connecticut Development Authority.
Distribution Agreement
On June 12, 2003, New Colt, Colt Defense Holding LLC, Colt
Defense Employee Plan Holding Corp., Colt Defense LLC and
certain stockholders, warrantholders and optionholders of New
Colt entered into a distribution agreement whereby Colt Defense
LLC issued to New Colt certain company units, warrants and
options, and New Colt distributed (1) such company units to
certain stockholders or their designees in partial redemption of
the common stock held by them in New Colt, (2) such company
warrants to certain warrantholders or their designees in partial
redemption of the warrants held by them in New Colt and
(3) such company options to certain optionholders in
partial redemption of the options held by them in New
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Colt. As a result of this agreement, Colt Defense Holding LLC,
as designee of a number of the stockholders, warrantholders and
optionholders, became the majority member of Colt Defense LLC.
Sublease Agreement
Under the asset contribution agreement, Colt's
Manufacturing assigned to Colt Defense LLC a lease with Coltec
Industries Inc. relating to the property in West Hartford,
Connecticut, on which Colt Defense LLC's headquarters and
manufacturing facility are located. See
"Business — Our Properties." Colt's
Manufacturing and Colt Defense LLC entered into a sublease
agreement on June 12, 2003, under which Colt Defense LLC
subleased a portion of such property to Colt's
Manufacturing until December 21, 2006, in return for
monthly rental payments of $13,400.
Management Services Agreement
Colt Defense LLC entered into a management services agreement
with Colt's Manufacturing on June 12, 2003, under
which we received fees and reimbursement of expenses for
providing management services (including corporate services,
direct manufacturing services, and indirect manufacturing
services) to Colt's Manufacturing. Colt's
Manufacturing owed us approximately $2.0 million under this
agreement, but paid us only $132,000. We wrote off the balance
in 2003 of approximately $1.9 million as uncollectible.
This agreement terminated on June 30, 2004. Notwithstanding
the termination of this agreement, we continue to provide
certain accounting and other administrative services at no
charge to Colt's Manufacturing. We intend to terminate
these services prior to the consummation of this offering.
Distributions to Members of Colt Defense LLC
Since its formation in November 2002, Colt Defense LLC has made
periodic distributions of profits to its members. The amounts of
these distributions totaled $3.9 million for 2003 and
$11.4 million in 2004. In addition, since its
reorganization in June 2003, Colt Defense LLC has made periodic
distributions to its members, on dates and in amounts calculated
in accordance with its governing documents, sufficient to enable
its members to pay their estimated income tax liability
associated with their holdings in Colt Defense LLC. The amounts
of these distributions totaled $3.9 million for 2004 and
$1.1 million during the first four months of 2005.
At the closing of our senior secured credit facility in May
2005, Colt Defense LLC paid a further special distribution of
$16.1 million to its members. This special distribution was
funded by borrowings under our senior secured credit facility.
In addition, prior to the consummation of this offering and the
Internal Restructuring, Colt Defense LLC will pay distributions
in an aggregate amount of approximately
$           million
to its owners of common units, to pay their allocable portion of
taxes on its profits up to the date of our Internal
Restructuring.
Match Target® Agreements
Colt Defense LLC entered into an agreement, dated as of
December 19, 2003, but effective as of January 1,
2004, with Colt's Manufacturing, pursuant to which Colt
Defense LLC transferred its commercial Match Target® rifle
business (including its inventories, open purchase orders,
customer data, deposits and prepayments relating to consumer or
commercial purchases of Match Target® rifles) to
Colt's Manufacturing, and Colt's Manufacturing agreed
to assume certain liabilities in connection with the Match
Target® business (including liabilities for outstanding
orders, warranty liability, and liabilities with respect to the
ongoing operations of the Match Target® business). This
agreement also provides that we will supply Match Target®
rifles to Colt's Manufacturing for such period as agreed
with Colt's Manufacturing. We sold approximately $436,000
of Match Target® rifles to Colt's Manufacturing in
2004.
Colt Defense LLC entered into a license agreement with New Colt
for the use of certain Colt trademarks on December 19,
2003, but effective as of January 1, 2004. This license
agreement replaced Colt Defense LLC's sublicense agreement
with Colt's Manufacturing for the same trademarks. Under
the terms of this license agreement, Colt Defense LLC received a
20-year, paid-up, sublicensable license to use the specified
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Colt trademarks until December 31, 2023. Thereafter, the
license agreement may be extended for successive five-year
periods upon payment of $250,000 for each five-year period.
Consideration for the initial term of the license agreement
included the transfer to Colt's Manufacturing of our Match
Target® rifles line of business inventories of $18,000 and
a cash payment of $2.0 million.
Rapid Mat
On March 1, 2005, we provided a secured line of credit of
up to $300,000 to Rapid Mat, LLC and Rapid Mat US, LLC, or the
Rapid Mat Entities collectively. John P. Rigas, a member of
our board of directors and a managing member of Sciens Capital
Management owns a portion of the membership interests in the
Rapid Mat Entities.
The interest rate for borrowings under the line of credit is
10% per year. The line of credit matured on April 15,
2005. The Rapid Mat Entities did not repay the loan when it
matured. As a result, we commenced action to foreclose on their
properties and assets. We assigned the loan and collateral to
our wholly owned subsidiary, Colt Rapid Mat LLC.
Management Agreements
We have entered into agreements with Sciens Management, an
affiliate of Sciens Capital Management, whereby Sciens
Management agreed to provide us investment banking, corporate
and strategic advisory services. John P. Rigas, one of our
directors, is a partner and the sole manager and unit holder of
Sciens Management. Under the terms of these agreements, we
incurred annual advisory fees of $126,000 in 2002, $162,000 in
2003 and $250,000 in 2004, as well as reimbursements of expenses
of $111,000 in 2003 and $189,000 in 2004. We made additional
payments to Sciens Management of $415,000 in 2003 and $666,000
in 2004 for special financial advisory services. The current
agreement with Sciens Management (1) commenced on
January 1, 2004, (2) provides for an annual retainer
of $250,000 and (3) terminates on December 31, 2008.
At Sciens Management's option, it may elect to receive its
fee in securities of our company. We agreed to indemnify Sciens
Management for losses relating to the services contemplated by
this agreement. Upon consummation of this offering we will pay
Sciens Management a termination fee of $1.0 million to
terminate the current agreement.
In May 2005, we paid Sciens Management an advisory and
arrangement fee of $675,000 for its services in connection with
our acquisition of Colt Canada and the arrangement of our senior
secured credit facility.
2005 Registration Rights Agreement
On June 2, 2005, we entered into a registration rights
agreement with Colt Defense Holding LLC, certain of our
employees and certain other holders of our registrable
securities, which we collectively refer to as the Holders
herein, pursuant to which we agreed to register certain of their
registrable securities (as defined therein) under certain
circumstances.
Demand Registration.
The Holders have two (2)
long-form demand registration rights and three (3)
short-form demand registration rights, which they can exercise
six months after this offering.
Piggy-back Rights.
If we file a registration statement
for an offering of any of our securities for ourselves or for
our security holders other than the Holders, we must offer the
Holders the opportunity to register their registrable securities
in such offering.
Conditions and Limitations; Expenses.
The registration
rights of the Holders are subject to certain conditions and
limitations, including the right of the underwriters to limit
the number of shares to be included in a registration and our
right to delay or withdraw a registration statement under
certain circumstances. We will pay all registration expenses in
connection with a demand registration, except for the
underwriting discounts and commissions, which will be paid pro
rata by the Holders.
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Transactions with Affiliates Involving Securities
In lieu of payment for certain obligations, Colt Defense LLC
issued promissory notes, dated June 16, 2003, to each of
Sciens Management and three other affiliates of Colt Defense
LLC's controlling members, in the aggregate amount of
$1.2 million. In connection with this transaction, Colt
Defense LLC issued to Colt Defense Holding LLC warrants to
purchase 7,080 of its common units at an exercise price of
$120.00 per unit. These promissory notes were repaid in
January 2004.
On June 30, 2003, a number of warrantholders and
optionholders (including certain affiliates of Sciens Management
and certain of our named executive officers) exercised their
warrants and vested options, respectively, and Colt Defense LLC
issued an aggregate of 107,212 common units to them. Both the
warrantholders and the employees exercising their vested options
executed Secured Non-Recourse Promissory Notes, or Stockholder
Promissory Notes, in an aggregate amount of approximately
$9.7 million, maturing on June 30, 2008, secured by
their newly issued units, in lieu of payment of the exercise
price.
In March 2005, Colt Defense LLC issued 6,126 common units to
certain of its investors in connection with the exercise of
certain warrants. Such investors (who included certain
affiliates of Sciens Management and certain of our named
executive officers) executed Stockholder Promissory Notes in an
aggregate amount of $557,466, maturing on March 29, 2010,
secured by their newly issued units, in lieu of payment of the
exercise price. Immediately prior to the Internal Restructuring,
the investors who issued the Stockholder Promissory Notes will
exchange a number of units of Colt Defense LLC equal to the
amount due under the Stockholder Promissory Notes for payment in
full of the Stockholder Promissory Notes.
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PRINCIPAL STOCKHOLDERS
The following and accompanying footnotes show information
regarding the beneficial ownership of our common stock before
and after this offering, for:
•
each person who is known by us to own beneficially more than 5%
    of our common stock;
•
each member of our board of directors and each of our named
    executive officers; and
•
all members of our board of directors and our executive offers
    as a group.
The number of shares outstanding and percentage of beneficial
ownership before the offering set forth below is based on the
number of shares of our common stock to be issued and
outstanding immediately prior to the effectiveness of the
registration statement of which this prospectus is a part after
giving effect to the Internal Restructuring. The number of
shares and percentage of beneficial ownership after the offering
set forth below is based on shares of our common stock to be
issued and outstanding immediately after this offering, giving
effect to the issuance
of                      shares
of common stock to our existing stockholders that will occur if
the underwriters do not exercise any portion of their
over-allotment option. The number of shares issued will decrease
to the extent the underwriters exercise their over-allotment
option.
To our knowledge, each person named in the table has sole voting
and investment power with respect to all of the shares of our
common stock shown as beneficially owned by such person, except
as otherwise set forth in the notes to the table. The number of
shares shown represents the number of shares of common stock the
person "beneficially owns," as determined by the rules
of the SEC. The SEC has defined "beneficial" ownership
of a security to mean the possession, directly or indirectly, of
voting power and/or investment power. A stockholder is also
deemed to be, as of any date, the beneficial owner of all
securities that such stockholder has the right to acquire within
60 days after that date through (a) the exercise of
any option, warrant or right, (b) the conversion of a
security, (c) the power to revoke a trust, discretionary
account or similar arrangement, or (d) the automatic
termination of a trust, discretionary account or similar
arrangement. Except as otherwise set forth below, the street
address of the beneficial owner is c/o Colt Defense Inc.,
547 New Park Avenue, West Hartford, Connecticut 06110.
Shares Beneficially Owned
After Offering
Assuming the
Assuming the
Underwriters'
Underwriters'
Shares Beneficially
Over-allotment
Over-allotment
Owned Prior to
Option Is Not
Option Is
Offering
Exercised
Exercised in Full
Name and Address
Number
Percent
Number
Percent
Number
Percent
5% Stockholders:
Colt Defense Holding LLC
(1)
Connecticut Development Authority
(2)
Directors and
    Officers:
(3)
William M. Keys
John P. Rigas
(4)
Lord Guthrie of Craigiebank
(5)
Gordon R. Sullivan
(6)
John R. Torell III
Philip A. Wheeler
James R. Battaglini
(7)
Carlton S. Chen
Thomas C. Moore
All executive officers and directors as a group (nine
    persons).
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*
Represents less than 1% of the number of shares of common stock
    outstanding.
(1)
Colt Defense Holding LLC, or CDH, is the direct beneficial owner
    of                  shares
    of common stock included in this table. Sciens Management is the
    managing member of CDH. Sciens Management disclaims beneficial
    ownership of the shares of common stock owned by CDH, except to
    the extent of its indirect pecuniary interest therein. John P.
    Rigas is the managing member of Sciens Management and its sole
    unit holder. Under applicable law, Mr. Rigas and his spouse
    may be deemed to be the beneficial owners of the securities of
    owned of record by CDH by virtue of such status. Each of
    Mr. Rigas and Mr. Rigas' spouse disclaims
    beneficial ownership of all shares of common stock owned by CDH,
    except to extent of their respective indirect pecuniary interest
    therein. The address of CDH is c/o Sciens Capital
    Management, 667 Madison Avenue, New York, New York 10021.
(2)
The address of the Connecticut Development Authority is 999 West
    Street, Rocky Hill, Connecticut 06067.
(3)
The named executive officers do not include our Chief Financial
    Officer, Richard J. Nadeau, who became our Chief Financial
    Officer as of May 16, 2005.
(4)
Mr. Rigas is the managing and sole member of Sciens
    Management. Sciens Management is the managing member of CDH
    which holds shares of our common stock. Pursuant to certain
    agency agreements among Sciens Management, Colt Defense LLC and
    certain of our stockholders, Sciens Management may be deemed to
    beneficially
    own                  shares
    of our common stock. In his capacity as managing member of
    Sciens Management, under applicable securities laws,
    Mr. Rigas may be deemed the beneficial owner of the shares
    of common stock held by CDH and, pursuant to the agency
    agreements, certain other stockholders. Mr. Rigas, however,
    disclaims beneficial ownership of these shares of our common
    stock, except to the extent of his pecuniary interest therein.
    The address for Mr. Rigas is c/o Sciens Capital
    Management, L.P., 667 Madison Avenue, New York, New York 10021.
(5)
Includes                 common
    shares which could be acquired upon the exercise of options
    which will vest upon completion of this offering.
(6)
Includes                 common
    shares which could be acquired upon the exercise of options
    which will vest upon completion of this offering.
(7)
Includes                 common
    shares which could be acquired upon the exercise of options
    which will vest upon completion of this offering.
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DESCRIPTION OF CAPITAL STOCK
The following is a description of the material terms of our
restated certificate of incorporation and amended and restated
bylaws as each is in effect as of the completion of this
offering, copies of which have been filed as exhibits to the
registration statement of which this prospectus forms a part.
Authorized Capitalization
Our authorized capital stock consists of
(1)                      shares
of common stock, par value $.01 per share, of
which                      shares
are currently issued and outstanding, and
(2)                      shares
of preferred stock, par value $.01 per share, of which no
shares are currently issued and outstanding. Immediately
following the completion of this offering, there are expected to
be                      shares
of common stock, and no shares of preferred stock, outstanding.
This information gives effect to the Internal Restructuring.
Common Stock
Voting Rights.
Holders of common stock are entitled to
one vote per share on all matters to be voted upon by the
stockholders. The holders of common stock do not have cumulative
voting rights in the election of directors.
Dividend Rights.
Holders of common stock are entitled to
receive ratably dividends if, as and when dividends are declared
from time to time by our board of directors out of funds legally
available for that purpose, after payment of dividends required
to be paid on outstanding preferred stock, as described below,
if any. Our credit facility imposes restrictions on our ability
to declare dividends with respect to our common stock.
Liquidation Rights.
Upon liquidation, dissolution or
winding up, any business combination or a sale or disposition of
all or substantially all of the assets, the holders of common
stock are entitled to receive ratably the assets available for
distribution to the stockholders after payment of liabilities
and accrued but unpaid dividends and liquidation preferences on
any outstanding preferred stock.
Other Matters.
The common stock has no preemptive or
conversion rights and is not subject to further calls or
assessment by us. There are no redemption or sinking fund
provisions applicable to the common stock. All outstanding
shares of our common stock, including the common stock offered
in this offering, are fully paid and nonassessable.
Preferred Stock
Our restated certificate of incorporation authorizes our board
of directors to establish one or more series of preferred stock
and to determine, with respect to any series of preferred stock,
the terms and rights of that series, including:
•
the designation of the series;
•
the number of shares of the series, which our board may, except
    where otherwise provided in the preferred stock designation,
    increase or decrease, but not below the number of shares then
    outstanding;
•
whether dividends, if any, will be cumulative or noncumulative
    and the dividend rate of the series;
•
the dates at which dividends, if any, will be payable;
•
the redemption rights and price or prices, if any, for shares of
    the series;
•
the terms and amounts of any sinking fund provided for the
    purchase or redemption of shares of the series;
•
the amounts payable on shares of the series in the event of any
    voluntary or involuntary liquidation, dissolution or winding-up
    of the affairs of our company;
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•
whether the shares of the series will be convertible into shares
    of any other class or series, or any other security, of our
    company or any other corporation, and, if so, the specification
    of the other class or series or other security, the conversion
    price or prices or rate or rates, any rate adjustments, the date
    or dates as of which the shares will be convertible and all
    other terms and conditions upon which the conversion may be made;
•
restrictions on the issuance of shares of the same series or of
    any other class or series; and
•
the voting rights, if any, of the holders of the series.
Antitakeover Effects of Certain Provisions of Our Certificate
of Incorporation and Bylaws
Certain provisions of our restated certificate of incorporation
and amended and restated bylaws, which are summarized in the
following paragraphs, may have an antitakeover effect and may
delay, defer or prevent a tender offer or takeover attempt that
a stockholder might consider in its best interest, including
those attempts that might result in a premium over the market
price for the shares held by stockholders.
Classified Board
Our restated certificate of incorporation provides that our
board of directors will be divided into three classes of
directors, with the classes to be as nearly equal in number as
possible. As a result, approximately one-third of our board of
directors will be elected each year. The classification of
directors will have the effect of making it more difficult for
stockholders to change the composition of our board. Our
restated certificate of incorporation and amended and restated
bylaws provide that the number of directors will be fixed from
time to time exclusively pursuant to a resolution adopted by the
board, but must consist of not less
than                or
more
than                directors.
Removal of Directors; Vacancies
Under the Delaware General Corporation Law, or DGCL, unless
otherwise provided in our restated certificate of incorporation,
directors serving on a classified board may be removed by the
stockholders only for cause. Our restated certificate of
incorporation and amended and restated bylaws provide that
directors may be removed only for cause and only upon the
affirmative vote of holders of at least 80% of the voting power
of all the then outstanding shares of stock entitled to vote
generally in the election of directors, voting together as a
single class. In addition, our restated certificate of
incorporation and amended and restated bylaws also provide that
any vacancies on our board of directors will be filled only by
the affirmative vote of a majority of the remaining directors,
although less than a quorum.
No Cumulative Voting
The DGCL provides that stockholders are not entitled to the
right to cumulate votes in the election of directors unless our
certificate of incorporation provides otherwise. Our restated
certificate of incorporation does not expressly provide for
cumulative voting.
No Stockholder Action by Written Consent; Calling of
Special Meetings of Stockholders
Our restated certificate of incorporation prohibits stockholder
action by written consent. It also provides that special
meetings of our stockholders may be called only by the chairman
of our board or the President or Secretary at the direction of
the board of directors.
Advance Notice Requirements for Stockholder Proposals and
Director Nominations
Our amended and restated bylaws provide that stockholders
seeking to nominate candidates for election as directors or to
bring business before an annual meeting of stockholders must
provide timely notice of their proposal in writing to the
corporate secretary.
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Generally, to be timely, a stockholder's notice must be
received at our principal executive offices not less than
90 days nor more than 120 days prior to the first
anniversary date of the previous year's annual meeting. Our
amended and restated bylaws also specify requirements as to the
form and content of a stockholder's notice. These
provisions may impede stockholders' ability to bring
matters before an annual meeting of stockholders or make
nominations for directors at an annual meeting of stockholders.
Supermajority Provisions
The DGCL provides generally that the affirmative vote of a
majority of the outstanding shares entitled to vote is required
to amend a corporation's certificate of incorporation or
bylaws, unless the certificate of incorporation requires a
greater percentage. Our restated certificate of incorporation
provides that the following provisions in the certificate of
incorporation and bylaws may be amended only by a vote of at
least 80% of the voting power of all of the outstanding shares
of our stock entitled to vote:
•
classified board (the election and term of directors);
•
the prohibition on stockholder action by written consent;
•
the ability to call a special meeting of stockholders being
    vested solely in our board of directors and the chairman of our
    board;
•
the advance notice requirements for stockholder proposals and
    director nominations; and
•
the amendment provision requiring that the above provisions be
    amended only with an 80% supermajority vote.
In addition, our restated certificate of incorporation grants
our board of directors the authority to amend and repeal our
amended and restated bylaws without a stockholder vote in any
manner not inconsistent with the laws of the State of Delaware
or our restated certificate of incorporation.
Limitations on Liability and Indemnification of Officers and
Directors
The DGCL authorizes corporations to limit or eliminate the
personal liability of directors to corporations and their
stockholders for monetary damages for breaches of
directors' fiduciary duties. Our restated certificate of
incorporation includes a provision that eliminates the personal
liability of directors for monetary damages for actions taken as
a director, except for liability:
•
for breach of duty of loyalty;
•
for acts or omissions not in good faith or involving intentional
    misconduct or knowing violation of law;
•
under Section 174 of the DGCL (unlawful dividends); or
•
for transactions from which the director derived improper
    personal benefit.
Our restated certificate of incorporation and amended and
restated bylaws provide that we must indemnify our directors and
officers to the fullest extent authorized by the DGCL. We are
also expressly authorized to carry directors' and
officers' insurance providing indemnification for our
directors, officers and certain employees for some liabilities.
We believe that these indemnification provisions and insurance
are useful to attract and retain qualified directors and
executive officers.
The limitation of liability and indemnification provisions in
our restated certificate of incorporation and amended and
restated bylaws may discourage stockholders from bringing a
lawsuit against directors for breach of their fiduciary duty.
These provisions may also have the effect of reducing the
likelihood of derivative litigation against directors and
officers, even though such an action, if successful, might
otherwise benefit us and our stockholders. In addition, your
investment may be adversely affected to the extent we pay the
costs of settlement and damage awards against directors and
officers pursuant to these indemnification provisions.
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There is currently no pending material litigation or proceeding
involving any of our directors, officers or employees for which
indemnification is sought.
Rights Agreement
We adopted a rights agreement. Each share of common stock has
attached to it one right. Each right entitles the holder to
purchase one one-thousandth of a share of a new series of our
preferred stock designated as series A junior participating
preferred stock at an exercise price of
$          ,
subject to adjustment. The following summary description of the
rights agreement does not purport to be complete and is
qualified in its entirety by reference to the rights agreement
between us
and                     ,
as rights agent, a copy of which is filed as an exhibit to the
registration statement of which this prospectus is a part and is
incorporated herein by reference.
Rights will only be exercisable under limited circumstances
specified in the rights agreement when there has been a
distribution of the rights and such rights are no longer
redeemable by us. A distribution of the rights would occur upon
the earlier of:
•
10 business days, or such later date as our board of directors
    may determine, following a public announcement that any person
    or group, other than one involving Colt Defense Holding LLC, has
    acquired beneficial ownership of 15% or more of the outstanding
    shares our common stock, other than as a result of repurchases
    of stock by us or inadvertence by certain stockholders as set
    forth in the rights agreement; or
•
10 business days, or such later date as our board of directors
    may determine, after the date of the commencement or the date of
    first public announcement with respect thereto, whichever is
    earlier, of a tender offer or exchange offer that would result
    in any person, group or related persons acquiring beneficial
    ownership of 15% or more of the outstanding shares of our common
    stock.
The rights will expire at 5:00 P.M. (New York City time)
on                     ,
2015, unless such date is extended or the rights are earlier
redeemed or exchanged by us.
If any person or group acquires shares representing 15% or more
of the outstanding shares of our common stock, the
"flip-in" provision of the rights agreement will be
triggered and the rights will entitle a holder, other than such
person, any member of such group or related person, as such
rights will be null and void, to acquire a number of additional
shares of our common stock having a market value of twice the
exercise price of each right. If we are involved in a merger or
other business combination transaction, each right will entitle
its holder to purchase, at the right's then-current
exercise price, a number of shares of the acquiring or surviving
company's common stock having a market value at that time
of twice the rights' exercise price.
Up to and including the tenth business day following a public
announcement that a person or group of affiliated or associated
persons has acquired beneficial ownership of 15% or more of the
outstanding shares of our common stock, other than as a result
of repurchases of stock by us, we may redeem the rights in
whole, but not in part, at a price of $.01 per right,
payable in cash, common stock or other consideration that we
deemed appropriate. Promptly upon our election to redeem the
rights, the rights will terminate and the only right of the
holders of rights will be to receive the $.01 redemption price.
At any time after any person or group acquires 15% or more of
outstanding shares of our common stock, and prior to the
acquisition by such person or group of fifty percent (50%) or
more of outstanding shares of our common stock, our board of
directors may exchange the rights, other than rights owned by
such person, group or related parties which have become void, in
whole or in part, for our common stock at an exchange ratio
of                     ,
for holders of our common stock, one share of common stock, for
one one-thousandth of a share of our series A junior
participating preferred stock of the right, or of a share of a
class or series of our preferred stock or other security having
equivalent rights, preferences and privileges, per right,
subject to adjustment.
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Until a right is exercised, the holder of the right, as such,
will have no rights as a stockholder of our company, including,
without limitation, no right to vote or to receive dividends.
While the distribution of the rights will not be taxable to
stockholders or to us, stockholders may, depending upon the
circumstances, recognize taxable income in the event that the
rights become exercisable for our common stock or other
consideration or for common stock of the acquiring or surviving
company or in the event of the redemption of the rights as set
forth above.
Any of the provisions of the rights agreement may be amended by
our board of directors prior to the distribution of the rights.
After such distribution, the provisions of the rights agreement
may be amended by our board of directors in order to cure any
ambiguity, to make changes which do not adversely affect the
interests of holders of rights or to shorten or lengthen any
time period under the rights agreement. The foregoing
notwithstanding, no amendment may be made at such time as the
rights are not redeemable.
The existence of the rights agreement and the rights is intended
to deter coercive or partial offers which may not provide fair
value to all stockholders and to enhance our ability to
represent all of our stockholders and thereby maximize
stockholder value.
Delaware Antitakeover Statute
Upon completion of the offering, Colt will be subject to the
provisions of Section 203 of the DGCL. In general,
Section 203 prohibits a publicly held Delaware corporation
from engaging in a "business combination" with an
"interested stockholder" for a period of three years
after the date of the transaction in which the person became an
interested stockholder, unless the business combination is
approved in a prescribed manner. A "business
combination" includes a merger, asset sale or a transaction
resulting in a financial benefit to the interested stockholder.
Subject to various exceptions, an "interested
stockholder" is defined generally as a person who, together
with affiliates and associates, owns 15% or more of the
corporation's outstanding voting stock. Under
Section 203, a business combination between Colt and an
interested stockholder is prohibited unless it satisfies one of
the following conditions:
•
prior to the time the stockholder became an interested
    stockholder, the board of directors of Colt must have previously
    approved either the business combination or the transaction that
    resulted in the stockholder becoming an interested stockholder;
•
on consummation of the transaction that resulted in the
    stockholder becoming an interested stockholder, the interested
    stockholder owned at least 85% of the voting stock of Colt
    outstanding at the time the transaction commenced (excluding,
    for purposes of determining the number of shares outstanding,
    shares owned by persons who are both directors and officers and
    shares owned by employee stock plans in which employees do not
    have the right to determine confidentially whether shares held
    subject to the plan will be tendered in a tender or exchange
    offer); or
•
at or after the transaction in which the stockholder became an
    interested stockholder, the business combination is approved by
    the board of directors of Archipelago and authorized at an
    annual or special meeting of the stockholders by the affirmative
    vote of at least
    66
2
/
3
%
    of the outstanding voting stock which is not owned by the
    interested stockholder.
Authorized but Unissued Capital Stock
The DGCL does not require stockholder approval for any issuance
of authorized shares. However, the listing requirements of the
NYSE, which would apply so long as our common stock is listed on
the NYSE, require stockholder approval of certain issuances
equal to or exceeding 20% of the then-outstanding voting power
or then outstanding number of shares of common stock. These
additional shares may be used for a variety of corporate
purposes, including future public offerings, to raise additional
capital or to facilitate acquisitions.
One of the effects of the existence of unissued and unreserved
common stock or preferred stock may be to enable our board of
directors to issue shares to persons friendly to current
management, which issuance could render more difficult or
discourage an attempt to obtain control of our company by means
of a merger,
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tender offer, proxy contest or otherwise, and thereby protect
the continuity of our management and possibly deprive the
stockholders of opportunities to sell their shares of common
stock at prices higher than prevailing market prices.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock
is                     .
Its telephone number
is                     .
New York Stock Exchange Listing
We have applied to have our common stock listed on the NYSE
under the symbol "CLT".
Description of Indebtedness
Senior
secured credit facility
In May 2005, Colt Defense and Colt Canada entered into a senior
secured credit facility with Bank of America, N.A., as
U.S. Administrative Agent and L/ C Issuer, and Bank of
America N.A., acting through its Canadian branch, as Canadian
Administrative Agent, and the lenders signatory thereto. Our
senior secured credit facility consists of:
•
a $10.0 million three-year revolving credit facility, which
    includes a $2.0 million sublimit for the issuance of
    standby letters of credit;
•
a $25.0 million three-year term loan A facility;
•
a $14.0 million three-year term loan B
    facility; and
•
a $16.0 million three-year term loan C facility, which
    is available to our Canadian subsidiary and is denominated in
    Canadian dollars.
Security
and guarantees
Our obligations under our senior secured credit facility are
unconditionally and irrevocably guaranteed, jointly and
severally, by our current and future subsidiaries. Our
obligations under our senior secured credit facility, and the
guarantees of those obligations, are secured by substantially
all of our assets and substantially all of the assets of each of
our current and future subsidiaries, including but not limited
to:
•
all the capital stock of each of its current and future direct
    and indirect subsidiaries, except that, with respect to foreign
    subsidiaries, such lien and pledge shall be limited to 65% of
    the capital stock of "first-tier" foreign
    subsidiaries; and
•
substantially all of its and its current and future
    subsidiaries' tangible and intangible assets.
Interest
rates and fees
Borrowings under the senior secured credit facility bear
interest as follows:
•
Revolving Credit Facility and Term A Facility:
at our
    option, at either LIBOR plus 2.25% to 3% each year (depending on
    the consolidated leverage ratio shown on the last compliance
    certificate delivered to the U.S. Administrative Agent), or
    the alternate base rate plus 1.50% each year;
•
Term B Facility and Term C Facility:
at our option, at
    either LIBOR plus 2.50% to 3.25% each year (depending on the
    consolidated leverage ratio shown on the last compliance
    certificate delivered to the U.S. Administrative Agent), or
    the alternate base rate plus 1.75% each year;
The senior secured credit facility also provides for the payment
to the lenders of a commitment fee on average daily unused
commitments under the revolving credit facility (if any) at a
rate equal to 0.25% to 0.50% per year, depending on the
consolidated leverage ratio shown on the last compliance
certificate delivered to the U.S. Administrative Agent.
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Scheduled
amortization payments and mandatory prepayments
Each of the Term Loan A Facility, the Term Loan B
Facility and the Term Loan C Facility provides for
substantial quarterly amortization payments.
In addition, the senior secured credit facility requires us to
prepay outstanding loans, subject to certain exceptions, with:
•
100% of the net proceeds of certain sales, licenses, leases or
    other dispositions (including sale and leaseback transactions);
•
75% of excess cash flow (as defined in the senior secured credit
    facility), subject to reductions to a lower percentage if we
    attain certain leverage ratios; and
•
100% of the net proceeds of certain debt issuances.
•
Voluntary prepayments
The senior secured credit facility provides for voluntary
prepayments of the loans and voluntary reductions of the
unutilized portion of the commitments under the revolving credit
facility, without penalty, subject to certain conditions
pertaining to minimum notice and payment/reduction amounts.
Covenants
The senior secured credit facility contains financial,
affirmative and negative covenants that we believe are usual and
customary for a senior secured credit facility. The covenants in
the senior secured credit facility includes limitations (each of
which is subject to customary exceptions) on the ability of us
and our subsidiaries to:
•
incur liens;
•
make loans and investments;
•
incur additional debt;
•
engage in mergers, acquisitions or other corporate restructuring
    transactions, or permit anyone other than Colt Defense to own
    any equity interests in its subsidiaries ;
•
engage in asset sales, sale/leaseback transactions or other
    dispositions of assets;
•
pay dividends with respect to capital stock;
•
change the business conducted by the company and its
    subsidiaries, their fiscal year, their names, or their place or
    form of organization;
•
enter into certain transactions with affiliates;
•
enter into agreements that restrict the company's ability
    to pay dividends or repay debt, or that restrict the
    company's ability to incur liens;
•
amend the terms of the Colt Canada acquisition documents or of
    subordinated debt;
•
use the proceeds of the senior secured credit facility except as
    specified therein; and
•
pay management fees or enter into management agreements.
In addition, the credit agreement contains customary financial
covenants including minimum EBITDA, maximum leverage, and
minimum fixed charges.
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Events
of default
The senior secured credit facilities contain certain customary
events of default, including:
•
nonpayment of principal or interest;
•
breach of covenants (with notice and cure periods);
•
material breach of the representations or warranties;
•
cross-default and cross-acceleration to other material
    indebtedness;
•
bankruptcy, insolvency or a general inability to pay debts as
    they become due;
•
material judgments;
•
certain ERISA violations;
•
actual or asserted invalidity of any material collateral or
    guarantee;
•
a change of control (as defined in the senior secured credit
    facility); and
•
labor disturbances lasting more than a specified period.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to the offering, there has been no public market for our
common stock. Future sales of substantial amounts of common
stock in the public market, or the perception that such sales
may occur, could adversely affect the prevailing market price of
the common stock. Upon completion of the offering, we expect
there will
be                      shares
of common stock outstanding, excluding
approximately            million
shares of common stock underlying outstanding stock options,
warrants and rights. Of these
shares,                      shares
of common stock expected to be sold in the offering will be
freely transferable without restriction or further registration
under the Securities Act of 1933. Of the remaining shares of
common stock
outstanding,                      shares
of common stock held by us, our executive officers, directors
and identified principal stockholders and other stockholders
will be subject to the lock-up arrangements described below and
will be eligible for resale pursuant to Rule 144 after one
year as described below.
Lock-Up Agreements
In connection with this offering, we, our executive officers,
directors and stockholders will enter into 180-day lock-up
agreements with the underwriters of this offering under which
neither we nor they may, for a period of 180 days after the
date of this prospectus, directly or indirectly sell or dispose
of any shares of common stock or any securities convertible into
or exchangeable or exercisable for shares of common stock
without the prior written consent of the underwriters.
The 180-day restricted period described in the preceding
sentence is subject to extension such that, in the event that
either (1) during the last 17 days of the 180-day
restricted period, we issue an earnings release or material news
or a material event related to us occurs or (2) prior to
the expiration of the 180-day restricted period, we announce
that we will release earnings results during the 16-day period
beginning on the last day of the 180-day period, the
"lock-up" restrictions described above will continue
to apply until the expiration of the 18-day period beginning on
the earnings release or the occurrence of the material news or
material event.
Rule 144
In general, under Rule 144, a person (or persons whose
shares are required to be aggregated), including an affiliate,
who has beneficially owned shares for at least one year is
entitled to sell, within any three-month period commencing
90 days after the date of this prospectus, a number of
shares that does not exceed the greater of:
•
1% of the number of shares of common stock then outstanding,
    which will equal
    approximately            shares
    after the closing of this offering; or
•
the average weekly trading volume of the common stock during the
    four calendar weeks preceding the filing of a notice on
    Form 144 with respect to such sale.
•
Sales under Rule 144 also are subject to manner-of-sale
    provisions and notice requirements and to the availability of
    current public information about us.
Rule 144(k)
Under paragraph (k) of Rule 144, persons who are
not our affiliate at any time during the 90 days preceding
a sale and who have beneficially owned the shares proposed to be
sold for at least two years are entitled to sell such shares
without complying with the manner of sale, public information,
volume limitation or notice provisions of Rule 144. The
two-year holding period includes the holding period of any prior
owner who is not our affiliate. Therefore, unless otherwise
restricted, shares covered by Rule 144(k) may be sold at
any time.
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Rule 701
In general, under Rule 701, any of our employees,
directors, officers, consultants or advisors who purchased
shares from us in connection with a compensatory stock or option
plan or other written agreement before the effective date of
this offering, or who purchased shares from us after that date
upon the exercise of options granted before that date, are
eligible to resell such shares in reliance upon Rule 144.
If such person is not an affiliate, such sale may be made
subject only to the manner of sale provisions of Rule 144.
If such a person is an affiliate, such sale may be made under
Rule 144 without compliance with its one-year minimum
holding period, but subject to the other Rule 144
restrictions.
Stock Options
In addition, as of April 3, 2005, employee stock options to
purchase and rights with respect to a total of
approximately                      shares
of common stock were outstanding. We intend to file a
registration statement on Form S-8 under the Securities Act
to register the issuance and resale of those shares issuable
under our stock option plan. That registration statement
automatically becomes effective upon filing. As a result, when
the options or rights are exercised, such shares issuable on
exercise thereof will be freely tradable under the Securities
Act, except that any shares purchased by "affiliates,"
as that term is defined in Rule 144, would be subject to
limitations and restrictions that are described above. For a
discussion of key terms of the Company's stock option and
stock purchase plans, see "Management — Stock
Option and Other Benefit Plans."
Registration Rights
Beginning 180 and 365 days after the date of this offering,
holders of
approximately                     and                      restricted
shares of our common stock, respectively, will be entitled to
registration rights described above. For more detailed
information regarding these registration rights, see
"Certain Relationships and Related Party
Transactions — Reorganization — 2003
Registration Rights Agreement" and "— 2005
Registration Rights Agreement." Registration of such shares
under the Securities Act would result in such shares becoming
freely tradable without restriction under the Securities Act,
except for shares purchased by "affiliates," as that
term is defined in Rule 144, immediately upon the
effectiveness of such registration.
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UNDERWRITING
We are offering shares of common stock described in this
prospectus through a number of underwriters. Banc of America
Securities LLC, SG Cowen & Co., LLC and Friedman,
Billings, Ramsey & Co., Inc. are the representatives of the
underwriters. We have entered into an underwriting agreement
with the representatives. Subject to the terms and conditions of
the underwriting agreement, we have agreed to sell to the
underwriters, and each underwriter has agreed to purchase, the
number of shares of common stock listed next to its name in the
following table:
Underwriter
Number of Shares
Banc of America Securities LLC
SG Cowen & Co., LLC
Friedman, Billings, Ramsey & Co., Inc.
Total
The underwriting agreement is subject to a number of terms and
conditions and provides that the underwriters must buy all of
the shares if they buy any of them. The underwriters will sell
the shares to the public when and if the underwriters buy the
shares from us.
The underwriters initially will offer the shares to the public
at the price specified on the cover page of this prospectus. The
underwriters may allow a concession of not more than
$           per
share to selected dealers. The underwriters may also allow, and
those dealers may re-allow, a concession of not more than
$           per
share to some other dealers. If all the shares are not sold at
the public offering price, the underwriters may change the
public offering price and the other selling terms. The common
stock is offered subject to a number of conditions, including:
•
receipt and acceptance of the common stock by the
    underwriters; and
•
the underwriters' right to reject orders in whole or in
    part.
Over-Allotment Option.
We have granted the underwriters
an over-allotment option to buy up
to                     additional
shares of our common stock at the same price per share as they
are paying for the shares shown in the table above. These
additional shares would cover sales of shares by the
underwriters that exceed the total number of shares shown in the
table above. The underwriters may exercise this option at any
time within 30 days after the date of this prospectus. To
the extent that the underwriters exercise this option, each
underwriter will purchase additional shares from us in
approximately the same proportion as it purchased the shares
shown in the table above. If purchased, the additional shares
will be sold by the underwriters on the same terms as those on
which the other shares are sold. We will pay the expenses
associated with the exercise of this option.
Discounts and Commissions.
The following table shows the
per share and total underwriting discounts and commissions to be
paid to the underwriters by us. These amounts are shown assuming
no exercise and full exercise of the underwriters' option
to purchase additional shares.
We estimate that the expenses of the offering to be paid by us,
not including underwriting discounts and commissions, will be
approximately
$          .
Paid by Us
No Exercise
Full Exercise
Per Share
$
$
Total
$
$
Listing.
We are applying to have our common stock listed
on the NYSE under the symbol "CLT". In order to meet
one of the requirements for listing our common stock on the
NYSE, the underwriters have undertaken to sell 100 or more
shares of our common stock to a minimum of 2,000 beneficial
holders.
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Stabilization.
In connection with this offering, the
underwriters may engage in activities that stabilize, maintain
or otherwise affect the price of our common stock, including:
•
stabilizing transactions;
•
short sales;
•
syndicate covering transactions;
•
imposition of penalty bids; and
•
purchases to cover positions created by short sales.
Stabilizing transactions consist of bids or purchases made for
the purpose of preventing or retarding a decline in the market
price of our common stock while this offering is in progress.
Stabilizing transactions may include making short sales of our
common stock, which involves the sale by the underwriters of a
greater number of shares of common stock than they are required
to purchase in this offering, and purchasing shares of common
stock from us or in the open market to cover positions created
by short sales. Short sales may be "covered" shorts,
which are short positions in an amount not greater than the
underwriters' over-allotment option referred to above, or
may be "naked" shorts, which are short positions in
excess of that amount. Syndicate covering transactions involve
purchases of our common stock in the open market after the
distribution has been completed in order to cover syndicate
short positions.
The underwriters may close out any covered short position either
by exercising their over-allotment option, in whole or in part,
or by purchasing shares in the open market. In making this
determination, the underwriters will consider, among other
things, the price of shares available for purchase in the open
market compared to the price at which the underwriters may
purchase shares pursuant to the over-allotment option.
A naked short position is more likely to be created if the
underwriters are concerned that there may be downward pressure
on the price of the common stock in the open market that could
adversely affect investors who purchased shares of our common
stock in this offering. To the extent that the underwriters
create a naked short position, they will purchase shares in the
open market to cover the position.
The representatives also may impose a penalty bid on
underwriters and dealers participating in the offering. This
means that the representatives may reclaim from any syndicate
member or other dealers participating in the offering the
commissions and selling concessions on shares sold by them and
purchased by the representatives in stabilizing or short
covering transactions.
These activities may have the effect of raising or maintaining
the market price for our common stock or preventing or retarding
a decline in the market price of our common stock. As a result
of these activities, the price of our common stock may be higher
than the price that otherwise might exist in the open market. If
the underwriters commence these activities, they may discontinue
them at any time. The underwriters may carry out these
transactions on the NYSE, in the over-the-counter market or
otherwise.
Discretionary Accounts.
The underwriters have informed us
that they do not expect to make sales to accounts over which
they exercise discretionary authority in excess of 5% of the
shares of common stock being offered.
IPO Pricing.
Prior to this offering, there has been no
public market for our common stock. The initial public offering
price will be negotiated between us and the representatives of
the underwriters. Among the factors to be considered in these
negotiations are:
•
the history of, and prospects for, our company and the industry
    in which we compete;
•
our past and present financial performance;
•
an assessment of our management;
•
the prospects for our future earnings;
•
the prevailing conditions of the applicable United States
    securities market at the time of this offering;
•
market valuations of publicly traded companies that we and the
    representatives of the underwriters believe to be comparable to
    us; and
•
other factors deemed relevant.
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The estimated initial public offering price range set forth on
the cover of this prospectus is subject to change as a result of
market conditions and other factors.
Qualified Independent Underwriter.
Banc of America
Securities LLC is a member of the National Association of
Securities Dealers, Inc. ("NASD"). Because we expect
that more than 10% of the net proceeds of this offering will be
paid to affiliates of Banc of America Securities LLC under the
credit facility, this offering is being conducted in accordance
with the applicable requirements of Conduct Rule 2710(h)
and Conduct Rule 2720 of the NASD regarding the
underwriting of securities of a company with which a member has
a conflict of interest within the meaning of those rules.
Conduct Rule 2720(c)(3) requires that the public offering
price of an equity security must be no higher than the price
recommended by a qualified independent underwriter which has
participated in the preparation of the registration statement
and performed its usual standard of due diligence in connection
with that preparation. SG Cowen & Co., LLC has agreed
to act as qualified independent underwriter with respect of this
offering. The public offering price of our common stock will be
no higher than that recommended by SG Cowen & Co., LLC.
SG Cowen & Co., LLC will not receive any compensation
for acting in this capacity in connection with this offering;
however, we have agreed to indemnify SG Cowen & Co.,
LLC in its capacity as qualified independent underwriter against
certain liabilities under the Securities Act. Additionally, in
accordance with Conduct Rule 2720(1), no member of the NASD
participating in the offering will execute a transaction in the
common stock in a discretionary account without the prior
specific written approval of the member's customer.
Lock-up Agreements.
We, our directors and executive
officers and our stockholders have entered into lock-up
agreements with the underwriters. Under these agreements,
subject to exceptions, we may not issue any new shares of common
stock, and those holders of stock may not, directly or
indirectly, offer, sell, contract to sell, pledge or otherwise
dispose of or hedge any common stock or securities convertible
into or exchangeable for shares of common stock, or publicly
announce the intention to do any of the foregoing, without the
prior written consent of Banc of America Securities LLC for a
period of 180 days from the date of this prospectus. This
consent may be given at any time without public notice. In
addition, during this 180-day period, we have also agreed not to
file any registration statement for, and each of our officers
and stockholders has agreed not to make any demand for, or
exercise any right of, the registration of, any shares of common
stock or any securities convertible into or exercisable or
exchangeable for common stock without the prior written consent
of Banc of America Securities LLC.
The 180-day restricted period described above is subject to
extension such that, in the event that either (1) during
the last 17 days of the 180-day restricted period, we issue
an earnings release or material news or a material event related
to us occurs or (2) prior to the expiration of the 180-day
restricted period, we announce that we will release earnings
results during the 16-day period beginning on the last day of
the 180-day period, the "lock-up" restrictions
described above will continue to apply until the expiration of
the 18-day period beginning on the earnings release or the
occurrence of the material news or material event.
Indemnification.
We will indemnify the underwriters
against some liabilities, including liabilities under the
Securities Act. If we are unable to provide this
indemnification, we will contribute to payments the underwriters
may be required to make in respect to those liabilities.
Online Offering.
A prospectus in electronic format may be
made available on the web sites maintained by one or more of the
underwriters participating in this offering. Other than the
prospectus in electronic format, the information on any such web
site, or accessible through any such web site, is not part of
the prospectus. The representatives may agree to allocate a
number of shares to underwriters for sale to their online
brokerage account holders. Internet distributions will be
allocated by the underwriters that will make internet
distributions on the same basis as other allocations.
Conflicts/ Affiliates.
The underwriters and their
affiliates have provided and may in the future provide, various
investment banking commercial banking and other financial
services to us for which services they have received and may in
the future receive customary fees. An affiliate of Banc of
America Securities LLC is the U.S. Administrative Agent and
L/C Issuer and the Canadian Administrative Agent under our
senior secured credit facility. We expect to use
$           million
of the proceeds of this offering to repay debt outstanding under
this facility.
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NOTICE TO CANADIAN RESIDENTS
Resale Restriction.
The distribution of the common stock
in Canada is being made only on a private placement basis exempt
from the requirement that we prepare and file a prospectus with
the securities regulatory authorities in each province where
trades of common stock are made. Any resale of the common stock
in Canada must be made under applicable securities laws which
will vary depending on the relevant jurisdiction and which may
require resales to be made under available statutory exemptions
or under a discretionary exemption granted by the applicable
Canadian securities regulatory authority. Purchasers are advised
to seek legal advice prior to any resale of the common stock.
Representations of Purchasers.
By purchasing common stock
in Canada and accepting a purchase confirmation a purchaser is
representing to us and the dealer from whom the purchase
confirmation is received that:
•
the purchaser is entitled under applicable provincial securities
    laws to purchase the common stock without the benefit of a
    prospectus qualified under those securities laws;
•
where required by law, that the purchaser is purchasing as
    principal and not as agent; and
•
the purchaser has reviewed the text above under Resale
    Restrictions.
Right of Action (Ontario Purchasers).
The securities
being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action
prescribed by Ontario securities law. As a result, Ontario
purchasers must rely on other remedies that may be available,
including common law rights of action for damages or rescission
or rights of action under the civil liability provisions of the
U.S. federal securities laws.
Enforcement of Legal Rights.
All of the issuer's
directors and officers as well as the experts named herein may
be located outside of Canada and, as a result, it may not be
possible for Canadian purchasers to effect service of process
within Canada upon the issuer or such persons. All or a
substantial portion of the assets of the issuer and such persons
may be located outside of Canada and, as a result, it may not be
possible to satisfy a judgment against the issuer or such
persons in Canada or to enforce a judgment obtained in Canadian
courts against such issuer or persons outside of Canada.
Notice to British Columbia Residents.
A purchaser of
common stock to whom the Securities Act (British Columbia)
applies is advised that the purchaser is required to file with
the British Columbia Securities Commission a report within ten
days of the sale of any common stock acquired by the purchaser
in this offering. The report must be in the form attached to
British Columbia Securities Commission Blanket Order
BOR #95/17, a copy of which may be obtained from us. Only
one report must be filed for common stock acquired on the same
date and under the same prospectus exemption.
Taxation and Eligibility for Investment.
Canadian
purchasers of common stock should consult their own legal and
tax advisors with respect to the tax consequences of an
investment in the common stock in their particular circumstances
and about the eligibility of the common stock for investment by
the purchaser under relevant Canadian legislation.
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LEGAL MATTERS
The validity of the shares of common stock offered hereby will
be passed upon for us by Morgan, Lewis & Bockius LLP,
New York, New York. Certain legal matters will be passed upon
for the underwriters by Davis Polk & Wardwell, New
York, New York.
EXPERTS
The financial statements and schedule of Colt Defense LLC at
December 31, 2004 and 2003, and for each of the three years
in the period ended December 31, 2004, appearing in this
Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent registered public
accounting firm, as set forth in their report thereon appearing
elsewhere herein, and are included in reliance upon such report
given on the authority of such firm as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a
registration statement on Form S-1, including exhibits,
schedules and amendments filed with this registration statement,
under the Securities Act with respect to the shares of our
common stock to be sold in this offering. This prospectus does
not contain all of the information set forth in the registration
statement and exhibits and schedules to the registration
statement. For further information with respect to our company
and the shares of our common stock to be sold in this offering,
reference is made to the registration statement, including the
exhibits to the registration statement. Statements contained in
this prospectus as to the contents of any contract or other
document referred to in this prospectus are not necessarily
complete and, where that contract is an exhibit to the
registration statement, each statement is qualified in all
respects by the exhibit to which the reference relates. Copies
of the registration statement, including the exhibits and
schedules to the registration statement, may be examined without
charge at the public reference room of the Securities and
Exchange Commission, One Station Place, 100 F Street, N.E.,
Washington, DC 20549. Information about the operation of the
public reference room may be obtained by calling the Securities
and Exchange Commission at 1-800-SEC-0300. Copies of all or a
portion of the registration statement can be obtained from the
public reference room of the Securities and Exchange Commission
upon payment of prescribed fees. Our Securities and Exchange
Commission filings, including our registration statement, are
also available to you on the Securities and Exchange
Commission's website,
www.sec.gov
.
Upon completion of this offering, we will be subject to the
information reporting requirements of the Exchange Act and we
will file reports, proxy statements and other information with
the SEC. We also intend to furnish our shareholders with annual
reports containing our financial statements audited by an
independent public accounting firm and quarterly reports
containing our unaudited financial information.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public
    Accounting Firm
F-2
Balance Sheets
F-3
Statements of Operations
F-4
Statements of Changes in Members'
    Deficit
F-5
Statements of Cash Flows
F-6
Notes to Financial Statements
F-7
Schedule — Valuation and
    Qualifying Accounts
F-25
F-1
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Members of
Colt Defense LLC
We have audited the accompanying balance sheets of Colt Defense
LLC as of December 31, 2004 and 2003, and the related
statements of operations, changes in members' deficit, and
cash flows for each of the three years in the period ended
December 31, 2004. Our audits also included the financial
statement schedule on page F-24. These financial statements
and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. We were not engaged to perform an
audit of the Company's internal control over financial
reporting. Our audits included consideration of internal control
over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of
the Company's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Colt Defense LLC at December 31, 2004 and 2003, and the
results of its operations and its cash flows for each of the
three years in the period ended December 31, 2004, in
conformity with U.S. generally accepted accounting
principles. Also, in our opinion, the related financial
statements schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
/s/ Ernst & Young LLP
Hartford, CT
March 11, 2005
Except for Note 16, as to which the date is
May 20, 2005
F-2
Table of Contents
Colt Defense LLC
Balance Sheets
(dollars in thousands)
December 31,
April 3,
2005
2004
2003
(unaudited)
Assets
Current assets:
Cash and cash equivalents
$
1,775
$
314
$
24,268
Restricted cash
563
562
558
Accounts receivable, net
6,190
16,888
4,995
Inventories, net
4,973
5,384
4,892
Other current assets
1,636
1,307
1,379
Total current assets
15,137
24,455
36,092
Machinery, equipment and tooling
7,965
8,257
9,366
Furniture, fixtures and leasehold improvements
3,560
3,564
3,743
11,525
11,821
13,109
Less accumulated depreciation
10,288
10,564
11,614
1,237
1,257
1,495
Other assets:
Goodwill
4,175
4,175
4,175
Intellectual property
3,023
3,023
3,023
Deferred license fees
1,891
1,917
—
Deferred financing costs
970
1,126
1,442
Business acquisition costs
762
671
—
Intangible pension asset
816
855
1,009
Other assets
591
225
225
Total assets
$
28,602
$
37,704
$
47,461
Liabilities and Members' Deficit
Current liabilities:
Revolving line of credit
$
—
$
6,509
$
1,568
Current portion of capital lease obligations
59
59
67
Subordinated notes payable and accrued interest due to affiliates
—
—
9,392
Accounts payable
5,805
7,941
8,405
Accrued expenses
4,534
5,273
2,434
Current portion of accrued employee benefit costs
2,156
2,156
1,956
Tax distributions payable to members
1,974
2,981
—
Customer advances
68
83
335
Due to affiliates
117
135
1,231
14,713
25,137
25,388
Long-term debt
25,000
25,000
25,000
Accrued employee benefit costs, less current portion
12,900
13,194
14,190
Capital lease obligations, less current portion
143
162
75
Long-term portion of accounts payable
790
828
3,564
Other long-term liabilities
281
446
626
Total liabilities
53,827
64,767
68,843
Members' deficit:
Members' deficit
(11,231
)
(13,668
)
(8,850
)
Notes receivable from exercise of options and warrants
(10,966
)
(10,312
)
(9,923
)
Accumulated other compensation loss — minimum pension
    liability
(3,028
)
(3,083
)
(2,609
)
Total members' deficit
(25,225
)
(27,063
)
(21,382
)
Total liabilities and members' deficit
$
28,602
$
37,704
$
47,461
See accompanying notes.
F-3
Table of Contents
Colt Defense LLC
Statements of Operations
(dollars in thousands)
Three Months
Ended
Year Ended December 31,
April 3,
April 4,
2005
2004
2004
2003
2002
(unaudited)
Net sales
$
21,609
$
18,896
$
75,135
$
66,682
$
53,329
Cost of sales
14,622
12,340
50,376
45,161
39,768
Gross profit
6,987
6,556
24,759
21,521
13,561
Selling and commissions
1,270
1,277
5,981
4,819
3,732
General and administrative
1,459
1,297
5,576
4,312
3,300
Litigation costs
625
—
936
—
—
Noncash stock compensation
—
—
—
602
—
Operating income
3,633
3,982
12,266
11,788
6,529
Other expense (income):
Interest expense
1,060
888
3,735
1,582
1,446
Reorganization costs
—
—
—
1,211
333
Settlement of litigation
—
—
(842
)
2,619
—
Prepayment discounts
—
—
—
(145
)
(595
)
Royalty income
(219
)
(80
)
(759
)
(381
)
(429
)
Royalty expense to Colt's Manufacturing
—
—
—
3,600
650
Other, net
(108
)
—
30
19
(55
)
Income before income taxes
2,900
3,174
10,102
3,283
5,179
Income tax expense (benefit)
22
8
74
38
(222
)
Net income
$
2,878
$
3,166
$
10,028
$
3,245
$
5,401
Earnings per unit
$
19.70
$
21.70
$
68.72
$
35.13
$
139.17
Earnings per unit — assuming dilution
$
18.26
$
20.73
$
63.63
$
32.72
$
122.42
Weighted average units
146,126
145,922
145,922
92,366
38,809
Weighted average units — assuming dilution
157,648
152,723
157,607
99,167
44,119
Pro forma to reflect income taxes
Income before income taxes
$
2,900
$
3,174
$
10,102
$
3,283
$
5,179
Income tax expense
1,150
1,258
4,006
1,302
2,054
Net income
$
1,750
$
1,916
$
6,096
$
1,981
$
3,125
Earnings per unit
$
11.98
$
13.13
$
41.78
$
21.45
$
80.52
Earnings per unit — assuming dilution
$
11.10
$
12.55
$
38.68
$
19.98
$
70.83
See accompanying notes.
F-4
Table of Contents
Colt Defense LLC
Statements of Changes in Members' Deficit
For the three years ended December 31, 2004
(dollars in thousands)
Accumulated
Other
Members'
Notes
Comprehensive
Deficit
Receivable
Loss
Total
Balance, December 31, 2001
$
(20,859
)
—
$
(1,347
)
$
(22,206
)
Distributions to Colt's Manufacturing Company, Inc.
(3,295
)
—
—
(3,295
)
Net income
5,401
—
—
5,401
Other comprehensive loss — minimum pension liability
—
—
(887
)
(887
)
Comprehensive income
4,514
Balance, December 31, 2002
(18,753
)
(2,234
)
(20,987
)
Exercise of options and warrants
9,731
$
(9,731
)
—
—
Accrued interest on notes receivable
192
(192
)
—
—
Purchase of common units
(4
)
—
—
(4
)
Distributions to Colt's Manufacturing
(3,863
)
—
—
(3,863
)
Noncash employee compensation
602
—
—
602
Net income
3,245
—
—
3,245
Other comprehensive loss — minimum pension liability
—
—
(375
)
(375
)
Comprehensive income
2,870
Balance, December 31, 2003
(8,850
)
(9,923
)
(2,609
)
(21,382
)
Accrued interest on notes receivable
389
(389
)
—
—
Distributions to members
(11,354
)
—
—
(11,354
)
Tax distributions to members
(3,881
)
—
—
(3,881
)
Net income
10,028
—
—
10,028
Other comprehensive loss — minimum pension liability
—
—
(474
)
(474
)
Comprehensive income
9,554
Balance, December 31, 2004
(13,668
)
(10,312
)
(3,083
)
(27,063
)
Exercise of options and warrants (unaudited)
558
(558
)
—
—
Accrued interest on notes receivable (unaudited)
96
(96
)
—
—
Tax distributions to members (unaudited)
(1,095
)
—
—
(1,095
)
Net income (unaudited)
2,878
—
—
2,878
Other comprehensive loss — minimum pension liability
—
—
55
55
Comprehensive income (unaudited)
2,933
Balance, April 3, 2005 (unaudited)
$
(11,231
)
$
(10,966
)
$
(3,028
)
$
(25,225
)
See accompanying notes.
F-5
Table of Contents
Colt Defense LLC
Statements of Cash Flows
(dollars in thousands)
Three Months
Ended
Year Ended December 31,
April 3,
April 4,
2005
2004
2004
2003
2002
(unaudited)
Operating activities
Net income
$
2,878
$
3,166
$
10,028
$
3,245
$
5,401
Adjustments to reconcile net income to net cash (used in)
    provided by operating activities:
Depreciation and amortization
277
253
1,015
694
1,059
Prepayment discounts
—
—
(842
)
(145
)
(595
)
Noncash employee compensation
—
—
—
602
—
Interest expense accrual on debt subordinated notes payable due
    to affiliates, notes payable to affiliates and subordinated
    notes payable due to affiliates
—
—
—
583
740
Other
—
—
(18
)
—
—
Changes in operating assets and liabilities:
Restricted cash
—
—
(4
)
(52
)
142
Accounts receivable
10,695
(5,939
)
(11,893
)
3,169
(4,433
)
Inventories
411
754
(510
)
(793
)
330
Prepaid expenses and other assets
(330
)
(715
)
72
(363
)
(168
)
Prepayment license fees
—
(2,000
)
(2,000
)
—
—
Due to affiliates
(122
)
(347
)
(1,096
)
727
234
Accounts payable and accrued expenses
(3,062
)
(352
)
(256
)
(392
)
(168
)
Accrued employee benefit costs
(200
)
(275
)
(1,116
)
(535
)
(90
)
Net cash (used in) provided by operating activities
10,547
(5,455
)
(6,620
)
6,740
2,452
Investing activities
Business acquisition costs
(16
)
—
(364
)
—
—
Deposit paid on West Hartford facility
(250
)
—
—
—
—
Purchases of equipment and leasehold improvements
(76
)
(35
)
(17
)
(221
)
(140
)
Notes receivable related parties
(115
)
—
—
—
—
Net cash used in investing activities
(457
)
(35
)
(381
)
(221
)
(140
)
Financing activities
Term loan borrowings
—
—
—
25,000
—
Subordinated debt borrowings (repayments)
—
(9,376
)
(9,376
)
1,165
—
Distribution to Colt's Manufacturing
—
—
—
(3,863
)
(3,295
)
Distribution to members
—
(11,354
)
(11,354
)
—
—
Tax distribution to members
(2,100
)
—
(900
)
—
—
Net (repayments) borrowings under revolving line of credit
(6,509
)
3,043
4,941
(3,151
)
1,184
Payment of financing costs
—
—
(194
)
(1,442
)
—
Repayments of loans and capital lease obligations
(20
)
(48
)
(70
)
(128
)
(415
)
Purchase of common units
—
—
—
(4
)
—
Net cash (used in) provided by financing activities
(8,629
)
(17,735
)
(16,953
)
17,577
(2,526
)
Change in cash
1,461
(23,225
)
(23,954
)
24,096
(214
)
Cash and cash equivalents at beginning of year
314
24,268
24,268
172
386
Cash and cash equivalents at end of year
$
1,775
$
1,043
$
314
$
24,268
$
172
See accompanying notes.
F-6
Table of Contents
Colt Defense LLC
Notes to Financial Statements
December 31, 2004
(Information for the three months ended April 3, 2005
and April 4, 2004 is unaudited)
(dollars in thousands, except share amounts)
1.
Business
Colt Defense LLC (the Company) is a leading designer, developer
and manufacturer of small arms and weapon systems for the
U.S. Military, its allies and federal, state and local law
enforcement agencies. Our products include military rifles, such
as the M4 carbine rifle and its predecessor, the M16 rifle,
auxiliary weapons systems, such as the M203 grenade launcher and
rifles for law enforcement agencies around the world. We also
refurbish, recondition and repair these weapons and produce
spare parts and component kits such as barrels, springs, screws,
handguards, upper receivers and buttstocks. In addition, we
provide centralized procurement and training services.
Prior to November 4, 2002, the Company was a division of
Colt's Manufacturing Company, Inc. (CMC), which was a
wholly owned subsidiary of New Colt Holding Corp. (NCHC). On
November 4, 2002, NCHC and CMC contributed the net assets
of its military and commercial rifle businesses to the Company
(a newly formed limited liability company) as the first step of
a two-step reorganization process (the Reorganization). CMC
continued to operate its handgun business. The purpose of the
first step of the Reorganization was to streamline the existing
rifle and commercial handgun businesses by creating two separate
companies to better focus on core customers and to encourage the
development, execution and optimization of business
opportunities.
On June 12, 2003, the second step of the Reorganization
took place in which CMC was converted to a limited liability
company and became Colt's Manufacturing Company LLC (CMC
LLC). The ownership interests in the Company were distributed to
its Members in partial redemption of the NCHC
shareholders', warrant holders' and option
holders' equity interest in NCHC (the Distribution). These
distributions of ownership interests in the Company were made in
proportion to each equity holders' interests in NCHC. The
objective of the second step of the Reorganization was to
further separate the companies to enhance financing
opportunities. The Company incurred $1,211 and $333 of costs
related to its reorganization in 2003 and 2002, respectively.
The Company is an indefinite life LLC that will terminate upon
the completion of an initial public offering.
2.
Summary of Significant Accounting Policies
Basis of Presentation
For the period January 1, 2002 through November 4,
2002, the military and commercial rifle business that was
contributed to the Company was conducted as a separate division
of CMC. During the period November 4, 2002 through
December 31, 2002, this business was conducted by the
Company as a separate legal entity. For presentation purposes,
the business of the Company is shown as if it had operated as a
separate legal entity for all of 2002.
Basis of Accounting
The financial statements are prepared in accordance with
generally accepted accounting principles in the United States of
America (GAAP).
Use of Estimates
The preparation of financial statements in conformity with
U.S. GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual
results could differ from those estimates. Significant
F-7
Table of Contents
Colt Defense LLC
Notes to Financial Statements (continued)
(Information for the three months ended April 3, 2005
and April 4, 2004 is unaudited)
(dollars in thousands, except share amounts)
estimates are required for the valuation of pension and
postretirement health care liabilities and the related expense,
which require significant judgment in determination of:
•
the discount rate used to calculated the benefit obligation for
    pensions and post retirement health care liabilities;
•
the assumed inflation rate for health care costs; and
•
the expected return on pension plan assets.
Interim Financial Information
The unaudited balance sheet and statement of operations and cash
flows as of and for each of the three-month periods ended
April 3, 2005 and April 4, 2004, respectively, have
been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally
accepted in the United States of America (U.S. GAAP) have
been condensed or omitted pursuant to such rules and
regulations. Operating results for the three-month period ended
April 3, 2005, are not necessarily indicative of the
results that may be expected for the year ending
December 31, 2005. The unaudited balance sheet and
statement of operations and cash flows as of and for each of the
three-month periods ended April 3, 2005 and April 4,
2004, respectively, should be read in conjunction with the
Company's Audited Financial Statements.
In management's opinion, the unaudited balance sheet and
statement of operations contain all adjustments, which are of a
normal recurring nature, necessary for a fair statement of the
results for the three-month periods ended April 3, 2005 and
April 4, 2004, respectively.
Cash and Cash Equivalents
The Company considers investments in highly liquid debt
instruments with original maturities of three months or less to
be cash equivalents.
Restricted cash of $563 at April 3, 2005, $562 at
December 31, 2004 and $558 at December 31, 2003
consists of funds deposited to secure standby letters of credit
for foreign-based sales performance guarantees.
Revenue and Accounts Receivable Recognition and Allowance for
Doubtful Accounts
The Company recognizes revenue and accounts receivable when
ownership to the goods transfers to the buyer, primarily upon
shipment. For certain U.S. government related sales,
revenue and accounts receivable is recognized upon inspection
and acceptance of the goods by a U.S. government official
and upon the Company placing the accepted goods in a
U.S. government approved location at the Company's
premises. Credit is extended based on an evaluation of each
customer's financial condition; generally, collateral is
not required. Credit losses are provided for in the financial
statements, primarily on a specific identification basis.
Once a customer is identified as high risk based on the
customer's history and credit worthiness, the Company will
provide an allowance for the estimated uncollectible portion.
Accounts are considered past due based on the original invoice
date. Write-off of uncollectible accounts occurs when all
reasonable collection efforts have been made. At
December 31, 2004 and 2003, the allowance for doubtful
accounts was $33 and $36, respectively. At April 3, 2005,
the allowance for doubtful accounts was $23.
F-8
Table of Contents
Colt Defense LLC
Notes to Financial Statements (continued)
(Information for the three months ended April 3, 2005
and April 4, 2004 is unaudited)
(dollars in thousands, except share amounts)
Inventories
Inventories are stated at the lower of cost or market using the
first-in, first-out method. Cost includes materials, labor and
manufacturing overhead related to the purchase and production of
inventories. The Company provides allowances for excess or
slow-moving inventory as well as inventory whose carrying value
is in excess of net realizable value.
Equipment and Leasehold Improvements
Equipment and leasehold improvements are recorded at cost.
Depreciation of equipment and amortization of leasehold
improvements are computed using the straight-line method over
the estimated useful life of the assets, which varies from 3 to
15 years, or the life of the lease term, whichever is
shorter. The Company evaluates equipment and leasehold
improvements for impairment when events or circumstances
indicate that impairment may exist. To date, no impairment
losses have been recorded. Depreciation and amortization was
$505, $438 and $810 for 2004, 2003 and 2002, respectively.
Goodwill and Intangible Assets
Goodwill is not amortized but rather is tested annually for
impairment on December 31. Impairment of goodwill would
exist if the carrying value of the Company exceeded the fair
value of the Company. Intangible assets such as certain
intellectual property, which the Company has determined to have
indefinite lives, are also evaluated annually to determine if
their useful life continues to be indefinite. To date, no
impairments have been recorded.
On January 1, 2004, the Company entered into a successor
agreement with NCHC for use of certain Colt trademarks. The
payment of $2,018 is being amortized over the initial term of
the agreement that is 20 years (see note 10).
Deferred Financing Costs
Deferred financing costs are amortized over the term of the
related debt agreement. In connection with a new financing
arrangement entered into in December 2003, the Company incurred
$194 and $1,442 in 2004 and 2003, respectively, in financing
costs, which are being amortized over the three-year life of the
financing agreement. Amortization of deferred financing costs
included in interest expense was $510 and $124 in 2004 and 2003,
respectively.
Warranty Costs
The Company generally warrants its military products for a
period of one year. For foreign military sales, the posting of a
warranty bond for a one to five year period is occasionally
required. The Company provides a reserve for warranty expense in
the period of sale based on past experience. The warranty
accrual analysis is:
April 3,
December 31,
December 31,
2005
2004
2003
Beginning of year
$
225
$
283
$
283
Expense
—
22
61
Payments
—
(36
)
(61
)
End of year
$
225
$
225
$
283
F-9
Table of Contents
Colt Defense LLC
Notes to Financial Statements (continued)
(Information for the three months ended April 3, 2005
and April 4, 2004 is unaudited)
(dollars in thousands, except share amounts)
Research and Development Costs
The Company expended $712, $476 and $291 in research and
development costs for each of the three years ended
December 31, 2004, respectively. These costs include
research and development of new products, as well as product
enhancements.
Advertising Costs
The Company expenses advertising as incurred. Advertising
expense was $199, $147 and $146 in 2004, 2003 and 2002,
respectively.
Shipping and Handling Costs
Shipping and handling costs are classified within cost of sales
on the statement of operations.
Customer Advances
Customer advances represent payments by certain customers for
products that have not yet been shipped.
Self-Funded Medical Plan and Workers' Compensation
The Company maintains a self-funded employee group medical plan
under which the liability is limited by individual and aggregate
stop loss insurance coverage. Included in the accompanying
financial statements is a liability for reported claims
outstanding, as well as an estimate of incurred but unreported
claims, based on the Company's best estimate of the
ultimate cost not covered by stop loss insurance. The actual
amount of the claims could differ from the estimated liability
recorded of $328 and $202 at December 31, 2004 and 2003,
respectively.
Through December 31, 2002, the Company was partially
self-insured for workers' compensation claims. Beginning in
2003, the Company changed to a fully insured premium based
policy. Included in the accompanying financial statements is a
liability for reported claims outstanding, as well as an
estimate of incurred but unreported claims, based on the
Company's estimated cost for the period prior to 2003. The
actual amount of these claims could differ from the estimated
liability recorded of $156 and $192 at December 31, 2004
and 2003, respectively.
Income Taxes
Prior to the June 12, 2003 Reorganization and Distribution,
the Company filed federal and state income tax returns as a
corporation, on a consolidated basis with its parent company,
NCHC. Subsequently, as a limited liability company, the Company
is treated as a partnership for federal and state income tax
reporting purposes. As a partnership, the Company is not subject
to federal or state income taxes. Rather, the Company files
informational income tax returns and issues standard tax reports
to its members. For the period June 13, 2003 to
December 31, 2003 and thereafter, the taxable income (loss)
of the Company will be reported to the members for inclusion in
their individual tax returns.
The Distribution was treated as a taxable transaction for income
tax purposes. Accordingly, an increase in the tax basis of the
Company's net assets of $13,184 occurred, representing the
difference between historical and fair market value of the
assets. Because the parties to the transaction were affiliated,
no adjustment to the financial reporting basis of the assets and
liabilities of the Company was made. The increase in tax basis
was recognized as a taxable gain by NCHC.
F-10
Table of Contents
Colt Defense LLC
Notes to Financial Statements (continued)
(Information for the three months ended April 3, 2005
and April 4, 2004 is unaudited)
(dollars in thousands, except share amounts)
In accordance with the Limited Liability Company Agreement of
the Company, in any year in which taxable income is allocated to
the members, and to the extent the Board of Directors of the
Company determines that funds are available, distributions to
members equal to 45% of such allocation of taxable income shall
be made. For the period June 13, 2003 to December 31,
2003, there was no reportable taxable income and no
distributions were required as timing differences entirely
offset otherwise taxable income for the period. For the year
ended December 31, 2004, taxable income of $8,624 was
reported to members. During 2004, distributions to members of
$900 were made, and accordingly, tax distributions payable to
members of $2,981 is reflected as a liability in the
accompanying balance sheet at December 31, 2004.
If the Company had been a tax paying entity the estimated
provision for income taxes for 2004 would have been:
Income before income taxes
$
10,102
Taxes at the Federal statutory rate at 35%
$
3,536
Estimated state income taxes, net of Federal benefit
460
Effect of permanent differences
10
Estimated pro forma tax provision
$
4,006
Foreign taxes withheld on royalty income of $74, $38 and $42 are
included in income tax expense for 2004, 2003 and 2002,
respectively. During 2003, due to a tax law change, the Company
realized an AMT income tax benefit of $264.
At December 31, 2004, the excess of tax basis over the
financial reporting carrying value of assets and liabilities was:
Allowance for obsolete inventories
$
1,121
Machinery and leasehold improvements
1,855
Intangible assets and goodwill
3,187
Accrued employee benefit costs
14,494
Other accrued liabilities
2,200
Other
(190
)
TOTAL
$
22,667
Stock Based Compensation
The Company follows Accounting Principles Board Opinion
No. 25 (APB 25), "Accounting for Stock Issued to
Employees" and related interpretations in accounting for
its employee unit plan. Accordingly, compensation cost is
recognized only for those arrangements where the fair market
value of a unit, as determined by the Board of Directors at the
grant date, is in excess of the amount the employee must pay to
acquire the unit. Stock-based compensation costs for stock
awards are reflected in net income over the vesting period of
the awards. The pro forma disclosure provisions of
FAS No. 123, "Accounting for Stock Based
Compensation" have not been presented as the effect is not
material.
Recent Accounting Pronouncements
In November 2004, the FASB issued SFAS No. 151.
"Inventory Costs," an amendment of ARB No. 43,
Chapter 4, "Inventory Pricing." SFAS No 151
clarifies that abnormal amounts of idle facility expense,
freight, handling costs, and wasted material should be expensed
as current period charges and provides guidance on the
allocation of overhead. This statement will be adopted for the
Company's first quarter of
F-11
Table of Contents
Colt Defense LLC
Notes to Financial Statements (continued)
(Information for the three months ended April 3, 2005
and April 4, 2004 is unaudited)
(dollars in thousands, except share amounts)
2006. The Company does not expect this statement to have a
material impact on its financial position, results of operations
or cash flows.
In December 2004, the FASB issued SFAS No. 123
(revised 2004), "Share-Based Payment."
SFAS No. 123R requires companies to record
compensation expense based on the fair value of stock-based
compensation awards. The statement also requires that the
compensation expense be recognized over the period during which
the employee is required to provide service in exchange for the
award. SFAS No. 123R will be effective January 1,
2006.
On December 16, 2004, the FASB issued
SFAS No. 123 (revised 2004),
Share-Based
Payment
, which is a revision of SFAS No. 123,
Accounting for Stock-Based Compensation
. SFAS 123(R)
supersedes APB Opinion No. 25,
Accounting for Stock
Issued to Employees
, and amends SFAS No. 95,
Statement of Cash Flows
. Generally, the approach in
SFAS 123(R) is similar to the approach described in
SFAS 123. However, SFAS 123(R) requires all
share-based payments to employees, including grants of employee
stock options, to be recognized in the income statement based on
their fair values. Pro forma disclosure is no longer an
alternative.
In April 14, 2005, the SEC announced that it would provide
for a phased-in implementation process for FASB Statement
No. 123(R),
Share-Based Payment
. The SEC would
require registrants that are not small business issuers to adopt
Statement 123(R)'s fair value method of accounting for
share-based payments to employees no later than the beginning of
the first fiscal year beginning after June 15, 2005. We
expect to adopt SFAS 123(R) on January 1, 2006.
SFAS 123(R) permits public companies to adopt its requirements
using one of two methods:
•
A "modified prospective" method in which compensation
    cost is recognized beginning with the effective date
    (a) based on the requirements of SFAS 123(R) for all
    share-based payments granted after the effective date and
    (b) based on the requirements of SFAS 123 for all
    awards granted to employees prior to the effective date of
    SFAS 123(R) that remain unvested on the effective date.
•
A "modified retrospective" method which includes the
    requirements of the modified prospective method described above,
    but also permits entities to restate based on the amounts
    previously recognized under SFAS 123 for purposes of pro
    forma disclosures either (a) all prior periods presented or
    (b) prior interim periods of the year of adoption.
The Company expects to elect to implement SFAS 123R
prospectively on January 1, 2006.
Earnings Per Unit
Basic earnings per unit for all periods presented was computed
by dividing net earnings for the respective period by the
weighted-average number of units outstanding during the period.
Diluted earnings per unit was computed by dividing (i) net
earnings during the period, by (ii) the weighted-average
number of units outstanding during the period, adjusted to add
the weighted-average number of potential dilutive units that
would have been outstanding upon the assumed exercise of the
stock options and warrants and adjusted for the option grants in
December 2004 and in the second quarter of 2005 which are
considered nominal issuances and therefore are included in
computing diluted earnings per unit for all periods. Options and
warrants of 7,952 were not included in 2002 as their impact was
anti-dilutive.
F-12
Table of Contents
Colt Defense LLC
Notes to Financial Statements (continued)
(Information for the three months ended April 3, 2005
and April 4, 2004 is unaudited)
(dollars in thousands, except share amounts)
Basic and diluted earnings per unit amounts were computed using
the following denominations:
Three Months
Ended
Year Ended December 31,
April 3,
April 4,
2005
2004
2004
2003
2002
Weighted average units
146,126
145,922
145,922
92,366
38,809
December 2004 and 2005 options
5,310
5,310
5,310
5,310
5,310
Impact of dilutive securities
Employee stock options
1,464
342
1,464
342
—
Warrants
4,748
1,149
4,911
1,149
—
Weighted average units-assuming dilution
157,648
152,723
157,607
99,167
44,119
Reclassification
Certain reclassifications have been made to the prior year
financial statements to conform to the current year presentation.
3.
Inventories
The components of inventories consisted of the following:
December 31,
April 3,
2005
2004
2003
Materials
$
3,422
$
3,360
$
2,989
Work-in-process
2,357
2,586
2,343
Finished goods
332
559
599
6,111
6,505
5,931
Less-allowance for excess and slow moving inventory
1,139
1,121
1,039
$
4,972
$
5,384
$
4,892
4.
Credit Facility
On December 23, 2003, the Company entered into $33,500
financing agreement with a financial institution, which
consisted of a $25,000 term loan (the Term Loan) and a revolving
credit facility (the Revolver) (collectively the Loans), which
provides for borrowings up to $8,500, subject to collateral
availability, which consists of substantially all of the
Company's assets (through an amendment, the Revolver
borrowing base was increased to $12,000 in January 2005). The
interest rates on the Loans are determined quarterly and are
based upon the greater of the prime rate or 4% plus the
applicable leverage ratio margin rates. Interest rates at
December 31, 2004 for the Term Loan and Revolver were
11.75% and 7.25%, respectively. The Loans have a final maturity
date of December 23, 2006. The Term Loan requires payments
of interest only, except for mandatory annual repayments of
principal based upon a percentage of excess cash flow, if any,
as defined. The Revolver loan at inception replaced $2,801
outstanding under the former line of credit facility. At
December 31, 2004 and 2003, the Revolver balance was $6,509
and $1,568, respectively. The Company has $986 of borrowing
availability reserved to secure outstanding standby letters of
credit, resulting in the Company having $1,005 available for
additional borrowings at December 31, 2004.
F-13
Table of Contents
Colt Defense LLC
Notes to Financial Statements (continued)
(Information for the three months ended April 3, 2005
and April 4, 2004 is unaudited)
(dollars in thousands, except share amounts)
The Loans include financial covenants that require the Company
to maintain certain leverage ratios, minimum fixed charge
coverage ratios, and minimum levels of EBITDA, as defined in the
loan agreement. At December 31, 2004, the Company was in
compliance with those covenants.
The Term Loan proceeds of $25,000 were received in December 2003
and disbursed as follows:
2004
2003
Bank fees and closing costs
$
—
$
1,263
Commission settlement payment
—
1,000
Repayment of subordinated notes payable to affiliates
9,376
—
Royalty payment to Colt's Manufacturing
2,000
—
Distributions to members
11,354
—
Other
7
—
$
22,737
$
2,263
At December 31, 2004, the balance payable on the Term Loan
was $25,000. There were no mandatory repayments of principal
required based upon the excess cash flow criteria.
Concurrent with the December 2003 financing transaction, the
Company released The Connecticut Development Authority
(CDA) from its commitment to guarantee a letter of credit
in the amount of $873 in exchange for the release of a lien on
Company assets.
Interest payments on loans from financial institutions were
$2,741, $432 and $793 in 2004, 2003 and 2002, respectively.
5.
Subordinated Notes Payable Due to Affiliates
December 31,
2004
2003
Notes payable issued between 1996 and 2002 to affiliates of
    controlling members bearing interest at 10%, due and payable,
    including accrued interest, on May 31, 2006. At
    December 31, 2003, accrued interest included in the balance
    was $1,644
$
—
$
8,163
2003 notes payable to four affiliates of controlling members,
    bearing interest at 10%, due and payable, including accrued
    interest, on May 31, 2006. At December 31, 2003,
    accrued interest included in the balance was $63
—
1,229
$
—
$
9,392
On December 23, 2003, $9.4 million was transferred to
an agency account and held in trust for the benefit of the
Company until January 7, 2004 when the subordinated notes
were retired.
In conjunction with the issuance of the 2003 notes, the Company
issued warrants to the lenders, effective June 16, 2003, to
purchase 6,990 membership units at $120 per unit. The
warrants, which vested immediately, were exercised on
June 30, 2003. At the date the warrants were issued, the
Company's per unit fair market value equaled the exercise
price of the warrants and the expected life of the warrants was
under one month. Therefore, no value was assigned to the
warrants.
F-14
Table of Contents
Colt Defense LLC
Notes to Financial Statements (continued)
(Information for the three months ended April 3, 2005
and April 4, 2004 is unaudited)
(dollars in thousands, except share amounts)
6.
Lease Obligations
The Company has certain noncancelable leases for machinery,
computer equipment and vehicles. The outstanding lease
obligations and minimum future payments at December 31,
2004 follow:
Gross
Capital
Operating
Leases
Leases
2005
$
72
$
544
2006
71
508
2007
50
139
2008
30
—
2009
30
—
Total minimum lease payments
253
$
1,191
Less amount representing interest
32
Present value of net minimum lease payments (including $59
    classified as current)
$
221
During 2004, the Company entered into a capital lease for
equipment for $149. As of December 31, 2004, machinery and
computer equipment with a cost of approximately $3,090 was
recorded under capital leases with accumulated depreciation of
approximately $2,844. Depreciation of assets under capital
leases is included in depreciation expense. Rent expense of
approximately $401, $426 and $373 was incurred in 2004, 2003 and
2002, respectively. Rent expense in 2004 and 2003 is net of $161
and $130, respectively, of rental income for a portion of the
facilities subleased to Colt's Manufacturing. Rent income
of $161 per year is expected through the expiration of the
Colt's Manufacturing sublease in December 2006.
In February 2005, the Company entered into an agreement with its
landlord to purchase its office and manufacturing facilities,
which it currently leases, for a purchase price of $7,000. The
closing is contingent upon certain events occurring and the
purchase price is subject to a reduction of up to $600 in
exchange for which we assume the obligation to investigate and
remediate environmental conditions at the site pursuant to
certain Connecticut property transfer law requirements. In March
2005, the Company deposited $250 as a down payment against this
transaction, which contractually must close by June 2005, unless
certain conditions are not met. The most significant condition
is that the estimated costs of investigation and remediation
referred to above do not exceed $1,000.
7.
Pension, Savings and Postretirement Benefits
The Company has two noncontributory, defined benefit pension
plans that cover substantially all eligible salaried and hourly
employees. The Company has recorded a pension liability, which
represents the excess of the accumulated benefit pension
obligation over the related pension plan assets.
The Company also provides certain postretirement health care
coverage to retired employees who were subject to the
Company's collective bargaining agreement when they were
employees. The cost of these postretirement benefits is
determined actuarially and is recognized in the financial
statements during the employees' active working career.
F-15
Table of Contents
Colt Defense LLC
Notes to Financial Statements (continued)
(Information for the three months ended April 3, 2005
and April 4, 2004 is unaudited)
(dollars in thousands, except share amounts)
Disclosures related to the pension plans and the postretirement
health care coverage is as follows:
Post Retirement
Pension Plans
Health
2004
2003
2004
2003
Projected benefit obligation at beginning of year
$
11,882
$
9,711
$
11,853
$
11,594
Service cost
643
578
134
230
Interest cost
730
676
528
708
Plan amendment
—
610
—
—
Negative prior service cost
—
—
(5,760
)
—
Actuarial loss (gain)
414
573
2,662
(402
)
Projected benefits paid
(314
)
(266
)
(382
)
(277
)
Projected benefit obligation at end of year
13,355
11,882
9,035
11,853
—
Fair value of plan assets at beginning of year
8,045
5,605
—
—
Employer contributions
1,869
2,108
—
—
Actual return on plan assets
562
598
—
—
Benefits paid
(314
)
(266
)
—
—
Fair value of plan assets at end of year
10,162
8,045
—
—
Unfunded benefit obligation at end of year
(3,193
)
(3,837
)
(9,035
)
(11,853
)
Unrecognized (negative) prior service cost
855
1,009
(5,232
)
—
Unrecognized net gain (loss)
3,190
2,719
2,003
(566
)
Net amount recognized
$
852
$
(109
)
$
(12,264
)
$
(12,419
)
The components of the amounts recognized in the accompanying
balance sheet are as follows:
Post Retirement
Pension Plans
Health
2004
2003
2004
2003
Accrued benefit costs
$
(3,086
)
$
(3,727
)
$
(12,264
)
$
(12,419
)
Intangible pension asset
855
1,009
—
—
Accumulated other comprehensive loss
3,083
2,609
—
—
Net amount recognized
$
852
$
(109
)
$
(12,264
)
$
(12,419
)
During 2005, the Company expects to make contributions of $1,688
to the pension plans and $468 to the postretirement plan.
At December 31, 2004, the accrued benefit costs for the
bargaining unit plan and salaried plan were $2,446 and $640,
respectively.
F-16
Table of Contents
Colt Defense LLC
Notes to Financial Statements (continued)
(Information for the three months ended April 3, 2005
and April 4, 2004 is unaudited)
(dollars in thousands, except share amounts)
The components of the amounts recognized in the Company's
income statement are as follows:
Pension Plans
Post Retirement Health
Year Ended
Year Ended
Three Months
December 31,
Three Months
December 31,
Ended
Ended
April 3, 2005
2004
2003
2002
April 3, 2005
2004
2003
2002
Service cost
$
186
$
643
$
578
$
489
$
35
$
134
$
230
$
200
Interest cost
197
730
676
627
127
528
708
667
Expected return on assets
(215
)
(789
)
(557
)
(502
)
—
—
—
—
Amortization of unrecognized negative prior service cost
39
154
154
93
(132
)
(528
)
—
—
Amortization of unrecognized loss
52
168
124
57
17
94
(62
)
(174
)
Net periodic pension cost
$
259
$
906
$
975
$
764
$
47
$
228
$
876
$
693
The Pension Benefit Guaranty Corporation (PBGC) granted the
Company a waiver with respect to meeting minimum funding
requirements for the year ended December 31, 2001, under an
agreement to become current with contributions by making
quarterly installment payments of $148 through January 15,
2007. The terms of the agreement prohibit increases in pension
benefits until funding becomes current.
Weighted average assumptions are as follows:
Post
Pension
Retirement
Plans
Health
2004
2003
2004
2003
Discount rate
6
%
6.25
%
6
%
6.25
%
Expected return on plan assets
9
%
9
%
N/A
N/A
Rate of compensation increase
4
%
4
%
N/A
N/A
The Company's assumptions for 2005 are a discount rate of
6%, an expected return on plan assets of 8%, and a rate of
compensation increase of 4%.
The assumed health care cost trend rate for 2005 is estimated at
7%, which is expected to decrease by 1% per year over the
next 2 years and to remain steady at 5% thereafter. The
impact of a 1% change either up or down on the amount of expense
for the plan benefit obligations is immaterial. In connection
with the renewal of its collective bargaining agreement in 2004,
effective April 7, 2007, the Company capped the monthly
cost of providing retiree health care benefits at
$209.95 per employee. For the year ended December 31,
2004, the cost per month was $175.08 per employee. The
impact of this change in benefits was an increase in negative
prior service cost of $5,760.
In developing the overall expected long-term return on plan
assets assumption, a building block approach was used in which
rates of return in excess of inflation were considered
separately for equity securities, debt
F-17
Table of Contents
Colt Defense LLC
Notes to Financial Statements (continued)
(Information for the three months ended April 3, 2005
and April 4, 2004 is unaudited)
(dollars in thousands, except share amounts)
securities and other assets. The excess returns were weighted by
the representative target allocation and added along with an
appropriate rate of inflation to develop the overall expected
long-term return on plan assets.
For the pension plans, the weighted-average asset allocation at
December 31, 2004 and by asset category, is as follows:
December 31
2004
2003
Equity securities
60
%
50
%
Fixed income
35
%
45
%
Cash
5
%
5
%
100
%
100
%
The Company has developed an investment strategy for the pension
plans. The investment strategy is to emphasize total return;
that is, the aggregate return from capital appreciation and
dividend and interest income. The primary objective of the
investment management for the plan's assets is the emphasis
on consistent growth; specifically, growth in a manner that
protects the Plan's assets from excessive volatility in the
market value from year to year. The investment policy takes into
consideration the benefit obligations, including timing of
distributions.
The primary objective for the pension plans is to provide
long-term capital appreciation through investment in equity and
debt securities. The Company's target asset allocation is
consistent with the weighted-average allocation at
December 31, 2004. The Company selects professional
managers whose investment policies are consistent with the
Company's investment strategy and monitors their
performance against appropriate benchmarks.
The following benefit payments, which reflect future service as
appropriate, are expected to be paid. The benefit payments are
based on the same assumptions used to measure the Company's
benefit obligation at the end of fiscal 2004.
Post
Pension
Retirement
Plans
Health
2005
$
473
$
468
2006
550
529
2007
644
569
2008
732
606
2009
809
628
2010-2014
5,225
4,397
401K Plan
The Company has a contributory savings plan under
Section 401(k) of the Internal Revenue Code covering
substantially all employees. The plan allows participants to
make voluntary contributions of up to 15% of their annual
compensation on a pretax basis, subject to IRS limitations. The
plan provides for contributions by the Company at its
discretion. The Company made no contributions in 2004, 2003 or
2002.
F-18
Table of Contents
Colt Defense LLC
Notes to Financial Statements (continued)
(Information for the three months ended April 3, 2005
and April 4, 2004 is unaudited)
(dollars in thousands, except share amounts)
8.
Members Equity
The authorized capitalization of the Company consists of 200,000
common units, of which 145,922 units were issued and
outstanding as of December 31, 2004 and 2003, and 1,000
preferred units, none of which were outstanding as of
December 31, 2004 and 2003. Outstanding units at
April 3, 2005 were 152,048.
Effective June 12, 2003, in connection with the
Distribution, the Company issued 1,058 common units to Colt
Defense Employee Plan Holding Corp. (E-Plan Holding),
representing the same relative ownership held by New Colt
Holding Corp. Employee Stock Ownership Plan & Trust, as
amended (the Plan), which at the time was converted to a profit
sharing plan. As a result of the Distribution, a one-time
tax-free distribution of $80 was made to E-Plan Holding and
treated as a dividend to the Plan, for distribution to plan
participants as allocated by the Plan's trustee. The
Company has no obligation to make any future contributions to
E-Plan Holding or the Plan. During 2003, the Company acquired 28
common units of the Company from E-Plan Holding for $4. No units
were acquired during 2004.
Warrants
Concurrent with the June 12, 2003 Distribution, holders of
warrants to purchase 85,352 common shares of NCHC received
warrants to purchase the same proportional interest in common
units of the Company. To determine new separate company warrant
exercise prices, the original NCHC exercise price was allocated
between the Company and NCHC in relation to the fair values of
the two entities at the time of the transaction.
A summary of the status of the warrants to purchase common units
of the Company at December 31, 2004 and changes during the
two years then ended is as follows:
Weighted
Average
Warrants
Exercise Price
Outstanding at December 31, 2002
—
$
—
Issued in connection with the Distribution Agreement
85,352
88
Additional warrants issued 2003
6,990
120
Warrants exercised 2003
(86,216
)
91
Outstanding at December 31, 2003
6,126
91
Outstanding at December 31, 2004
6,126
$
91
On June 30, 2003, warrant holders exercised 86,216 warrants
for a total consideration of $7,820 in exchange for the issuance
of nonrecourse notes receivable. These notes are reflected as a
reduction in members' equity in the accompanying statement
of changes in members' deficit, bear interest at 4% and are
due at the earlier of a change in control or June 30, 2008.
Accrued interest on these notes has been recorded within
members' equity and is included in notes receivable from
the exercise of options warrants.
On March 29, 2005, the outstanding warrants were exercised
for a total consideration of $558 in exchange for the issuance
of nonrecourse notes receivable. These notes are reflected as a
reduction in members' equity, bear interest at 4% and are
due at the earlier of a change in control or March 2010. Accrued
interest on these notes has been recorded within members'
equity and is included in notes receivable from exercise of
warrants.
F-19
Table of Contents
Colt Defense LLC
Notes to Financial Statements (continued)
(Information for the three months ended April 3, 2005
and April 4, 2004 is unaudited)
(dollars in thousands, except share amounts)
9.
Management Option Incentive Plan
Effective June 12, 2003, the Company established the Colt
Defense LLC 2003 Management Option Incentive Plan (the Option
Plan). In conjunction with the Distribution, employees holding
options to purchase common shares of NCHC received options to
purchase the same proportional interest in common units of the
Company. To determine new separate company warrant exercise
prices, the original NCHC exercise price was allocated between
the Company and NCHC in relation to the fair values of the two
entities.
Options to purchase 23,074 common units were issued in
connection with the distribution to reflect the options that had
been granted to the employees by NCHC. No additional options may
be issued under the Option Plan. The options vested immediately
or in installments through January 2005, subject to certain
conditions. All options terminate no later than January 2007.
On June 30, 2003, management exercised 20,996 options for
$1,911 in exchange for the issuance of nonrecourse notes
receivable. The notes are reflected as a reduction of
members' deficit in the accompanying statements of changes
in members' deficit, bear interest at 4% and are due at the
earlier of a change in control or June 30, 2008. Accrued
interest on these notes has been recorded within members'
equity and is included in notes receivable from the exercise of
options and warrants.
The original options did not specifically permit the use of a
nonrecourse note as an exercise method and since the notes
extended the term of the original options, the notes are
considered new option grants requiring a new measurement date.
The aggregate $602 difference between the fair market value of
the units on the new measurement date and the exercise price was
charged to expense during 2003 as employee compensation. Because
the interest rate on the notes is fixed and the notes are not
prepayable, except with the consent of the Company, the new
option grant is considered a fixed award and, as such, no
additional compensation expense will be recognized in connection
with this award in the future.
A summary of the status of the outstanding options as of
December 31, 2004 and changes during the two years then
ended is as follows:
Weighted
Average
Options
Exercise Price
Outstanding at December 31, 2002
—
$
—
Issued in connection with the Distribution Agreement
23,074
103
Options exercised
(20,996
)
91
Outstanding at December 31, 2003
2,078
221
Options issued
300
91
Options expired
252
1,166
Outstanding at December 31, 2004
2,126
$
91
Exercisable at December 31, 2004
913
$
91
At December 31, 2004, all outstanding options had a
remaining contractual life of three years. The last tranche of
the options became exercisable on January 4, 2005.
In December 2004, the Company granted 300 stock options to a
Director with an exercise price of $91 per share. The fair
value of the common stock was determined in early May 2005 to
have been $335 per share at the time of the grant. The
intrinsic value of $73 is being recognized as compensation
expense over
F-20
Table of Contents
Colt Defense LLC
Notes to Financial Statements (continued)
(Information for the three months ended April 3, 2005
and April 4, 2004 is unaudited)
(dollars in thousands, except share amounts)
the two-year vesting period. The options vest immediately in the
event of an initial public offering or other liquidity event.
10.
Transactions with Affiliates
The Company has a financial advisory agreement with an affiliate
of its primary unit holder. Under the terms of the agreement,
the Company incurred annual advisory fees of $250, $162 and $126
in 2004, 2003 and 2002, respectively. The Company also
reimburses the affiliate for expenses incurred in connection
with the financial advisory services provided. During 2004, and
2003, the Company incurred $189, and $111, respectively, for
such expenditures. There were no expenditures in 2002. Payments
of $666 and $415 were made in 2004 and 2003, respectively.
There were no payments in 2002. The cost for the advisory
service and the expenses are recorded within selling, general
and administrative expenses. At December 31, 2004, the
Company has a prepaid balance of $34 with the affiliate. At
December 31, 2003, the company owed the affiliate $193.
Commencing November 4, 2002, the Company entered into a
sublicensing agreement with CMC whereby CMC would receive
license revenues from the Company for licensing its trademarks.
During 2003, the Company recognized $3,600 of royalty expense
related to this agreement. The agreement terminated
December 31, 2003. At December 31, 2004 and 2003, the
amount due CMC was $135 and $1,038, respectively.
On January 1, 2004, the Company entered into a successor
license agreement (the License) with NCHC for the use of certain
Colt trademarks. Under the terms of the License, the Company
received a 20-year paid-up license for the use of the Colt
trademarks, which expires December 31, 2023. Thereafter,
the License may be extended for successive five-year periods.
Consideration for the License included the transfer to
Colt's Manufacturing of the Colt Match Target® rifle
line of business inventories of $18 and $2,000 in cash. The
Company recorded the amount transferred of $2,018 as an
intangible asset, which is being amortized over 20 years.
During 2003, the Company received reimbursements for expenses of
$1,452 for providing certain services under a Common Service
Agreement to CMC. As of December 31, 2003, this Agreement
was terminated.
During the period January 1, 2003 through June 12,
2003, cash distributions of $3,863 were made to CMC.
11.
Royalty Agreement
The Company has licensed certain proprietary technology to a
third party (Diemaco — See Note 16) under a
royalty income arrangement earning $759, $381 and $429 in 2004,
2003 and 2002, respectively.
12.
Commitments and Contingencies
Performance and warranty bonds have been established on behalf
of the Company by a third party in connection with sales to a
foreign customer. Although the customer has drawn no amounts,
the Company could ultimately be liable for bonds totaling $3,329
at December 31, 2004.
During 2004, the Company filed two lawsuits in Federal District
Court against competitors Heckler & Koch and Bushmaster
alleging unfair competition concerning their look-alike
M4 carbine models and other trade practices.
F-21
Table of Contents
Colt Defense LLC
Notes to Financial Statements (continued)
(Information for the three months ended April 3, 2005
and April 4, 2004 is unaudited)
(dollars in thousands, except share amounts)
On March 25, 2005, Heckler & Koch Defense, Inc.
and Heckler & Koch, Inc., as defendants, and the
Company, as the plaintiff, settled the Company's case
against them to the parties' mutual satisfaction and the
court to dismissed the Company's case pursuant to an agreed
order of dismissal. The settlement terms are confidential.
Notwithstanding this settlement, the Company's case against
Bushmaster Firearms is continuing. A trial is scheduled for
later this year and Bushmaster has filed a partial motion for
summary judgment, including a motion to cancel the
Company's U.S. registered trademark for
"M4". On May 16, 2005, the Company filed a patent
infringement lawsuit in Federal District Court against
Bushmaster based on information obtained through discovery in
the first case. In both cases against Bushmaster, the Company is
seeking injunctive relief, damages, attorneys' fees and
costs. Litigation costs relating to the above cases amounted to
$936 and $625 for the year ended December 31, 2004 and for
the three-month period ended April 3, 2005, respectively.
The Company is involved in other various matters of litigation
incidental to the normal course of its business. In
management's opinion, the disposition of these matters will
not have a material adverse effect on the financial condition,
results of operations or cash flows of the Company.
13.
Concentration of Risk
Financial instruments, which potentially subject the Company to
concentration of credit risk, consist primarily of trade
receivables. The fair value and the carrying value of the
Company's financial instruments (accounts receivable,
accounts payable and debt) are not materially different.
Accounts receivable from three customers in total represented
82% and 65% of trade receivables as of December 31, 2004
and 2003, respectively. At December 31, 2004 and 2003,
amounts due from foreign customers represent 80% and 43% of
accounts receivable, respectively. During 2004, 2003 and 2002,
sales to the U.S. government were 54%, 45% and 30% of net
sales, respectively. Sales to foreign countries represented 30%,
28% and 40% of total net sales in 2004, 2003 and 2002,
respectively. Sales to one of the Company's direct foreign
customers were 16%, 18% and 9% in 2004, 2003 and 2002,
respectively.
Approximately three-fourths of the Company's (U.S.)
workforce is subject to a collective bargaining agreement, which
expires on April 1, 2007.
14.
Long-term Accounts Payable
The Company has entered into agreements with certain vendors to
secure discounts and to establish extended payment arrangements.
No discounts were received in 2004 and $145 was received in 2003
and $595 was received in 2002. The discount amount deferred at
December 31, 2004 and 2003 of $120 has been recorded within
other long-term liabilities since the discounts are contingent
upon required future payments. Amounts due under the extended
payment arrangements are payable over the next seven years with
$185 due in 2005 and the remaining $828 due in 2006 and
thereafter. Amounts due after 2005 have been included in the
long-term portion of accounts payable.
15.
Settlement of Disputed Commissions Payable
In December 2003, the Company reached a settlement with a former
agent in the amount of $5,600 relating to commissions owed on
sales. A liability for $2,981 had been recorded as of
December 31, 2002. The settlement resulted in an additional
$2,619 charge in the statement of operations in 2003. The total
obligation was scheduled to be paid in monthly installments
through 2008. The settlement provided for up to a one-third
reduction in the amount due in the event of an early payoff.
F-22
Table of Contents
Colt Defense LLC
Notes to Financial Statements (continued)
(Information for the three months ended April 3, 2005
and April 4, 2004 is unaudited)
(dollars in thousands, except share amounts)
In December 2004, the Company paid the obligation in full and
received a prepayment discount of $842. The Company's
obligation was repaid as follows:
2003 payments
$
1,250
2004 scheduled payments
1,800
2004 additional payment
1,708
Total payments
4,758
Prepayment discount
842
$
5,600
16.
Subsequent Events
Business Acquisition
On May 20, 2005, the Company acquired the Logistics and
Defense Division, Diemaco, of Héroux-Devtek Inc., located
in Kitchener, Ontario, Canada for $16,500 Canadian
($13,080 US) plus $2,672 Canadian ($2,118 US) for estimated
working capital at closing. This business is now called Colt
Canada. Through April 3, 2005, the Company had incurred
$762 of costs in connection with this acquisition, which were
capitalized and classified as business acquisition costs in the
accompanying balance sheet. The purchase price is subject to
changes in working capital as a result of an audit that is in
process.
Debt Refinancing
On May 20, 2005, the Company entered into a Senior Secured
Facility with an aggregate principal amount of up to
$65.0 million as set forth below:
•
$10.0 million three-year revolving credit facility
    (Revolving Credit Facility), which includes a $2.0 million
    sublimit for the issuance of standby letters of credit;
•
$25.0 million three-year term loan facility (Term A
    Facility);
•
$14.0 million three-year term loan facility (Term B
    Facility); and
•
$16.0 million three-year term loan facility and available
    to the Company's Canadian subsidiary, which is denominated
    in Canadian dollars (Term C Facility).
Term Loan A of the facility ($25,000) was used to repay the
Company's existing debt of $25,000, the Company used Term
Loan B ($14,000) and $2,100 of our $10,000 revolver to pay
a Special Dividend of $16,100 (see below) and the Company used
Term Loan C ($16,000) to pay for the Company's
acquisition of Colt Canada. The Company will write off the
unamortized deferred financing costs related to our existing
indebtedness of $970 in the second quarter of 2005.
The Revolving Credit Facility will terminate in May 2008. The
Term A Facility will be subject to quarterly amortization of
principal of $1.25 million commencing June 30, 2006
with the remaining principal due in May 2008. The Term B
Facility will be subject to quarterly amortization commencing
June 30, 2006 of $625 with the remaining principal to be
payable in May 2008. The Term C Facility will be subject to
quarterly amortization of $625 commencing June 30, 2006
with the remaining principal due in May 2008.
In addition to the amortization described above, prepayments are
required in the event of sales and other dispositions of the
Company's property and assets (excluding sales of inventory
in the ordinary course of business), from the issuance of
additional debt, from the issuance of equity and unless the
Company's ratio of funded indebtedness is less than 2.25%
the Company is required each year to prepay our term loans in an
F-23
Table of Contents
Colt Defense LLC
Notes to Financial Statements (continued)
(Information for the three months ended April 3, 2005
and April 4, 2004 is unaudited)
(dollars in thousands, except share amounts)
amount equal to 75% of Excess Cash Flow, as defined. The Company
is required to use $30.0 million of the net proceeds from
this offering to pre-pay term loans.
The Company may prepay the Senior Credit Facility in whole or in
part at any time without penalty, subject to reimbursement of
the lenders' breakage and redeployment costs.
The Company is subject to financial covenants requiring the
maintenance of:
•
a minimum EBITDA (as defined in the Company's Senior Credit
    Facility) of $7.5 million in total for two consecutive
    quarters;
•
a maximum leverage ratio (total funded debt/ EBITDA) of
    (a) 3.25x through September 30, 2005, (b) 3.1x at
    December 31, 2005, (c) 3.00x through
    September 30, 2006, (d) 2.50x through
    September 30, 2007 and (e) 2.25x thereafter; and
•
a minimum Fixed Charge Coverage Ratio (EBITDA less capital
    expenditures less cash taxes)/(cash interest expense plus
    scheduled principal repayments) of (a) 2.0:1.0 through
    March 31, 2006, (b) 1.10:1.0 through June 30,
    2007 and (c) 1.25:1.0 thereafter.
Loans under the Revolving Credit Facility and the Term Loan
Facilities bear interest based on an agreed-upon margin plus
either LIBOR, prime or the Federal Funds rate plus 0.50%.
Loans under the Revolving Credit Facility and the Term A
Facility bear interest at a rate equal to the Applicable Margin,
plus LIBOR or a Base Rate (defined as the higher of (a) the
Bank of America prime rate and (b) the Federal Funds rate
plus .50%) and the Term B Facility will bear interest at a
rate equal to LIBOR plus the Applicable Margin then applicable
to the Revolving Credit Facility and the Term A Facility
plus
25 basis points. A default rate shall apply on
all obligations in the event of default under the Senior Secured
Facility at a rate per annum of 2% above the applicable
interest rate. The initial interest rates were 6.21% for the
Revolving Credit Facility and Term A Facility, 6.46% for
the Term B Facility and 5.84% for the Term C Facility.
Special Dividend
On May 20, 2005, the Company paid a special dividend of
$16,100 ($105.20 per unit) to its existing members.
Members' deficit was $25,225 at April 3, 2005. On a
pro forma to reflect the special dividend and the write-off of
the deferred financing costs related to the Company's
existing debt, the members' deficit at April 3, 2005
is $42,295.
Stock Option Grants
In April 2005, the Company granted 5,010 options to three
employees and a Director with an exercise price of $91 per
unit. The fair value of the common stock was determined in early
May 2005 to be $459 per share at the time of the grant. The
intrinsic value of $2,000 will be recognized over the respective
vesting periods commencing in the second quarter of 2005. The
options vest immediately in the event of an initial public
offering or other liquidity event.
F-24
Table of Contents
Colt Defense LLC
Valuation and Qualifying Accounts
Years Ended December 31, 2004, 2003, and 2002
Schedule II
(in thousands)
Balance at
Charges to
beginning of
costs and
Balance at end
year
expenses
Deductions
of year
Allowance for doubtful accounts:
Year ended December 31, 2004
$
36
$
—
$
(3
)
$
33
Year ended December 31, 2003
36
—
—
36
Year ended December 31, 2002
62
10
(36
)
36
Reserve for excess and obsolete inventory:
Year ended December 31, 2004
$
1,039
$
82
$
—
$
1,121
Year ended December 31, 2003
918
121
—
1,039
Year ended December 31, 2002
997
—
(79
)
918
F-25
Table of Contents
________________________________________________________________________________
Shares
Colt Defense Inc.
Common Stock
Prospectus
,
2005
Banc of America Securities
LLC
SG Cowen &
Co.
Friedman Billings
Ramsey
Until                     ,
2005, all dealers that buy, sell or trade in shares of our
common stock, whether or not participating in this offering, may
be required to deliver a prospectus. This is in addition to the
dealers' obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or
subscriptions.
Table of Contents
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13.
Other Expenses Of Issuance And Distribution
The following table sets forth the various expenses payable by
the Registrant (including any fees and expenses of the selling
shareholders that the Registrant is obligated to pay) in
connection with the offering of the common shares being
registered hereby. All of the fees set forth below are estimates
except for the SEC registration fee and the NASD fee.
SEC registration fee
$
10,151.63
NASD filing fee
9,125.00
NYSE listing fee
*
Printing and engraving expenses
*
Transfer agent and registrar fees and expenses
*
Legal fees and expenses
*
Accountants' fees and expenses
*
Blue Sky fees and expenses (including legal fees)
*
Miscellaneous expenses
*
Total
$
*
*
To be provided by amendment.
Item 14.
Indemnification Of Officers And Directors
Section 145 of the Delaware General Corporation Law (the
"DGCL") provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal or investigative (other than
an action by or in the right of the corporation) by reason of
the fact that he or she is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorney's fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such
action, suit or proceeding if he or she acted in good faith and
in a manner he or she reasonably believed to be in or not
opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable
cause to believe such conduct was unlawful. Section 145
further provides that a corporation similarly may indemnify any
such person serving in any such capacity who was or is a party
or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the
corporation to procure a judgment in its favor, against expenses
actually and reasonably incurred in connection with the defense
or settlement of such action or suit if he or she acted in good
faith and in a manner he or she reasonably believed to be in or
not opposed to the best interest of the corporation, except that
no indemnification shall be made in respect of any claim, issue
or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the
Delaware Court of Chancery or such other court in which such
action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the
Court of Chancery or such other court shall deem proper.
Section 145 also provides that it is not exclusive of other
rights to which those seeking indemnification may be entitled
under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise. Our bylaws provide for
indemnification, to the fullest extent permitted by law, of any
person made or threatened to be made party to any action, suit
or proceeding by reason of the fact that such person is or was a
director or officer of the Registrant, or is or was a director
of a subsidiary of the Registrant, against all expenses,
liabilities, losses and claims actually incurred or suffered by
such person in connection with the action, suit or proceeding.
II-1
Table of Contents
Section 102(b)(7) of the DGCL permits a corporation to
include in its certificate of incorporation a provision
eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director; provided, that such
provision shall not eliminate or limit the liability of a
director (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL (relating to unlawful payment of
dividends and unlawful stock purchase and redemption) or
(iv) for any transaction from which the director derived an
improper personal benefit. Our certificate of incorporation
eliminates the personal liability of our directors to the
fullest extent allowed under Delaware law, as it shall be
supplemented and amended.
The Registrant expects to obtain policies of insurance under
which, subject to the limitations of such policies, coverage
will be provided (a) to its directors and officers against
loss arising from claims made by reason of breach of fiduciary
duty or other wrongful acts as a director or officer, including
claims relating to public securities matters and (b) to the
Registrant with respect to payments which may be made by the
Registrant to these officers and directors pursuant to the above
indemnification provision or otherwise as a matter of law.
Item 15.
Recent Sales Of Unregistered Securities
The Registrant was formed in May 2005 and has not issued any
securities. Prior to the completion of the offering of the
securities being registered hereby and in connection with our
Internal Restructuring, the Registrant will issue an aggregate
of                      shares
of the Registrant's common stock in exchange for interests
in Colt Defense LLC, the Registrant's predecessor. This
issuance will be made in reliance upon Section 4(2) of the
Securities Act or under Rules 506 or 701 promulgated by the
SEC.
Since its organization as Colt Defense LLC in 2002, the
Registrant's predecessor has issued unregistered securities
as described below. None of the transactions involved any
underwriters, underwriting discounts or commissions, or any
public offering. Unless otherwise set forth below, the
Registrant believes that each transaction, if deemed to be a
sale of a security, was exempt from the registration
requirements under the Securities Act by virtue of
Section 4(2) thereof, Regulation D promulgated
thereunder, or Rule 701 promulgated under Section 3(b)
thereof. The recipients of securities in each such transaction
represented their intention to acquire the securities for
investment only and not with a view to or for sale in connection
with any distribution thereof. Such securities were restricted
as to transfers and appropriate legends were affixed to the unit
certificates and instruments issued in such transactions. All
recipients either received adequate information about the
Registrant's predecessor or had access, through employment
or other relationships, to such information.
The following unit numbers and exercise prices do not give
effect to the Internal Restructuring.
As part of its reorganization, on June 12, 2003, the
Registrant's predecessor issued (1) an aggregate of
38,738 common units to the stockholders of New Colt, in partial
redemption of their shares in New Colt; (2) warrants to
purchase an aggregate of (a) 77,401 common units at an
exercise price of $91 per common unit, (b) 11,709
common units at an exercise price of $70 per common unit,
and (c) 1,236 common units at an exercise price of
$105 per common unit, to the warrantholders of New Colt, in
partial redemption of their warrants to purchase shares of New
Colt; and (3) options to purchase an aggregate of
23,073.727 common units at an exercise price of $2,800 per
common unit to the optionholders of New Colt, in partial
redemption of their options to purchase shares of New Colt. Also
on June 12, 2003, the Registrant's predecessor issued
options to purchase an aggregate of 23,074 common units to
certain of its employees at an exercise price of $91 per
common unit under its 2003 Management Option Incentive Plan.
In lieu of repayment for certain obligations, the
Registrant's predecessor issued Promissory Notes, dated
June 16, 2003 to certain members and an affiliate of a
certain member, in the aggregate amount of approximately
$1.2 million. In connection with this transaction, the
Registrant's predecessor issued to Colt Defense Holding LLC
warrants to purchase 7,080 of its common units at an
exercise price of $120 per unit.
II-2
Table of Contents
On June 30, 2003, a number of its warrantholders and
optionholders exercised their warrants and vested options,
respectively, and the Registrant's predecessor issued an
aggregate of 107,212 common units to them.
On March 29, 2005, the Registrant's predecessor issued
6,126 common units to certain of its members in connection with
the exercise of outstanding warrants.
Between December 2004 and May 2005, the Registrant's
predecessor issued options to purchase 5,130 common units
at an exercise price of $91 per common unit to certain of
the Registrant's employees and directors, of which options
to purchase 1,000 common units vested and were subsequently
exercised. At present, the Registrant has options to
purchase 6,136 common units outstanding, of which 1,826 are
presently vested.
Item 16.
Exhibits and Financial Statements
(a)
Exhibits:
Exhibit
Number
Description of Exhibits
1
.1*
Form of Underwriting Agreement
2
.1*
Distribution Agreement, dated as of June 12, 2003, by and
    among New Colt Holding Corp., the NC Stockholders and NC
    Warrantholders (as defined therein), Colt Defense Holding LLC,
    Colt Defense Employee Plan Holding Corp. and Colt Defense LLC
2
.2*
Asset Contribution Agreement, dated as of November 4, 2002,
    among New Colt Holding Corp., Colt's Manufacturing Company,
    Inc. and Colt Defense LLC
2
.3*
Stock Purchase Agreement, dated as of February 10, 2005, by
    and among Devtek Corporation, Colt Canada Corporation and Colt
    Defense LLC
2
.4*
Form of Internal Restructuring Agreement
3
.1*
Form of Restated Certificate of Incorporation of the Registrant,
    to be effective upon the closing of this offering
3
.2*
Form of Amended and Restated Bylaws of the Registrant, to be
    effective upon the closing of this offering
4
.1*
Specimen certificate for shares of common stock
5
.1*
Opinion of Morgan, Lewis & Bockius LLP, counsel to the
    Registrant
10
.1*
Registration Rights Agreement, dated as of June 12, 2003,
    by and between Colt Defense LLC and Connecticut Development
    Authority
10
.2*
Registration Rights Agreement, dated as
    of           ,
    2005, by and among Colt Defense LLC and the Holders named therein
10
.3*
Rights Agreement, dated as
    of           ,
    2005, by and among the Registrant and the Holders named therein
10
.4*
License Agreement, dated as of December 19, 2003, by and
    between Colt Defense LLC and New Colt Holding Corp.
10
.5*
Technical Data Sales and Patent License Agreement, dated as of
    June 30, 1967, by and between Colt Defense LLC (as
    successor to Colt's Inc.) and the United States of America,
    as amended by Modification No. 65 thereto
10
.6*
M4 Addendum to Technical Data Sales and Patent License
    Agreement, dated as of December 24, 1997, by and between
    Colt Defense LLC (as assignee of Colt's Manufacturing
    Company, Inc.) and the United States of America, as amended by
    that certain letter agreement dated as of June 12, 2001
10
.7*
Strategic Source Agreement, dated as of May 18, 2005, by
    and among Her Majesty the Queen in right of Canada, Colt Canada
    Corporation and Colt Defense LLC
II-3
Table of Contents
Exhibit
Number
Description of Exhibits
10
.8*
Consolidated License Agreement, dated as of February 8,
    1984, by and between Her Majesty the Queen in right of Canada
    and Colt Defense LLC (as assignee of Colt's Manufacturing
    Company, Inc.)
10
.9
Colt Defense LLC 2003 Management Option Incentive Plan
10
.10*
2005 Incentive Plan
10
.11*
Credit Agreement, dated as of May 20, 2005, by and among
    Colt Defense LLC and Colt Canada Corp., as borrowers, the
    subsidiaries referred to therein, as guarantors, the lenders
    referred to therein, Bank of America, N.A., as
    U.S. Administrative Agent and L/C Issuer, and Bank of
    America N.A., acting through its Canadian branch, as Canadian
    Administrative Agent
10
.12*
U.S. Security and Pledge Agreement, dated as of May 20,
    2005, by and among Colt Defense LLC and Colt Rapid Mat LLC, as
    grantors, and Bank of America, N.A., as Collateral Agent
10
.13*
Canadian Security and Pledge Agreement, dated as of May 20,
    2005, by and among Colt Defense LLC, Colt Canada Corporation and
    Diemaco Inc., as grantors, and Bank of America, N.A., as
    Collateral Agent
10
.14*
Canadian Pledge Agreement, dated as of May 20, 2005, by and
    between Colt Defense LLC, as Pledgor, and Bank of America, N.A.,
    as Collateral Agent
10
.15*
Lease, dated as of March 22, 1990, between Coltec
    Industries Inc. and Colt Defense LLC, as successor to
    Colt's Manufacturing Company, Inc., as amended
10
.16*
Employment Agreement, dated as of May 21, 1998, between
    Colt Defense LLC, as successor to Colt's Manufacturing
    Company, Inc., and Carlton S. Chen
10
.17*
Colt Defense LLC Salaried Retirement Income Plan
10
.18*
Form of Nominating Agreement
21
.1
List of Subsidiaries
23
.1*
Consent of Morgan, Lewis & Bockius LLP (included in
    Exhibit 5.1)
23
.2
Consent of Ernst & Young LLP
24
.1
Powers of Attorney (included in signature pages to Registration
    Statement)
99
.1
Consent of Gen. the Lord Guthrie of Craigiebank
99
.2
Consent of Gordon R. Sullivan
99
.3
Consent of John R. Torell III
99
.4
Consent of Philip A. Wheeler
99
.5
Consent of William M. Keys
*
To be filed by amendment.
(b)     Financial Statement Schedules:
All financial statement schedules have been omitted because
either they are not required, are not applicable, or the
information is otherwise set forth in the Financial Statements
and notes thereto.
Item 17.
Undertakings
(a)     The undersigned Registrant
hereby undertakes to provide to the underwriters at the closing
specified in the Underwriting Agreement share certificates in
such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.
(b)     Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to
directors, officers and controlling persons of the Registrant
pursuant to the provisions described under Item 14 above,
or otherwise, the Registrant has been advised that in the
opinion of the SEC such indemnification is
II-4
Table of Contents
against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final
adjudication of such issue.
(c)     The undersigned Registrant
hereby undertakes that:
(1)     For purposes of determining any
    liability under the Securities Act, the information omitted from
    the form of prospectus filed as part of this registration
    statement in reliance on Rule 430A and contained in a form
    of prospectus filed by the Registrant pursuant to
    Rule 424(b)(1) or (4) or 497(h) under the Securities
    Act shall be deemed to be part of this registration statement as
    of the time it is first declared effective.
(2)     For the purpose of determining
    any liability under the Securities Act, each post-effective
    amendment that contains a form of prospectus shall be deemed to
    be a new registration statement relating to the securities
    offered therein, and the offering of such securities at that
    time shall be deemed to be the initial bona fide offering
    thereof.
II-5
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this registration
statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of West Hartford,
Connecticut on June 3, 2005.
COLT DEFENSE INC.
By:
/s/
William M. Keys
Name: William M. Keys
Title:     President and Chief
    Executive Officer
POWERS OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that each person whose signature
appears below hereby constitutes and appoints William M.
Keys and Richard J. Nadeau, or either one of them, his true
and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place,
and stead, in any and all capacities, to sign any and all
amendments to the Registration Statement, including
post-effective amendments, and registration statements filed
pursuant to Rule 462 under the Securities Act of 1933, as
amended, and to file the same, with all exhibits hereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, and does hereby grant unto said
attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his
substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this registration statement has been signed below by
the following persons, in the capacities and on the dates
indicated.
Signature
Title
Date
/s/
William M. Keys
William
    M. Keys
President and Chief Executive Officer (Principal Executive
    Officer)
June 3, 2005
/s/
Richard J. Nadeau
Richard
    J. Nadeau
Vice President and Chief Financial Officer (Principal Financial
    and Accounting Officer)
June 3, 2005
/s/
John P. Rigas
John
    P. Rigas
Director
June 3, 2005
II-6
Table of Contents
EXHIBIT LIST
Exhibit
Number
Description of Exhibits
1
.1*
Form of Underwriting Agreement
2
.1*
Distribution Agreement, dated as of June 12, 2003, by and
    among New Colt Holding Corp., the NC Stockholders and NC
    Warrantholders (as defined therein), Colt Defense Holding LLC,
    Colt Defense Employee Plan Holding Corp. and Colt Defense LLC
2
.2*
Asset Contribution Agreement, dated as of November 4, 2002,
    among New Colt Holding Corp., Colt's Manufacturing Company,
    Inc. and Colt Defense LLC
2
.3*
Stock Purchase Agreement, dated as of February 10, 2005, by
    and among Devtek Corporation, Colt Canada Corporation and Colt
    Defense LLC
2
.4*
Form of Internal Restructuring Agreement
3
.1*
Form of Restated Certificate of Incorporation of the Registrant,
    to be effective upon the closing of this offering
3
.2*
Form of Amended and Restated Bylaws of the Registrant, to be
    effective upon the closing of this offering
4
.1*
Specimen certificate for shares of common stock
5
.1*
Opinion of Morgan, Lewis & Bockius LLP, counsel to the
    Registrant
10
.1*
Registration Rights Agreement, dated as of June 12, 2003,
    by and between Colt Defense LLC and Connecticut Development
    Authority
10
.2*
Registration Rights Agreement, dated as
    of           ,
    2005, by and among Colt Defense LLC and the Holders named therein
10
.3*
Rights Agreement, dated as
    of           ,
    2005, by and among the Registrant and the Holders named therein
10
.4*
License Agreement, dated as of December 19, 2003, by and
    between Colt Defense LLC and New Colt Holding Corp.
10
.5*
Technical Data Sales and Patent License Agreement, dated as of
    June 30, 1967, by and between Colt Defense LLC (as
    successor to Colt's Inc.) and the United States of America,
    as amended by Modification No. 65 thereto
10
.6*
M4 Addendum to Technical Data Sales and Patent License
    Agreement, dated as of December 24, 1997, by and between
    Colt Defense LLC (as assignee of Colt's Manufacturing
    Company, Inc.) and the United States of America, as amended by
    that certain letter agreement dated as of June 12, 2001
10
.7*
Strategic Source Agreement, dated as of May 18, 2005, by
    and among Her Majesty the Queen in right of Canada, Colt Canada
    Corporation and Colt Defense LLC
10
.8*
Consolidated License Agreement, dated as of February 8,
    1984, by and between Her Majesty the Queen in right of Canada
    and Colt Defense LLC (as assignee of Colt's Manufacturing
    Company, Inc.)
10
.9
Colt Defense LLC 2003 Management Option Incentive Plan
10
.10*
2005 Incentive Plan
10
.11*
Credit Agreement, dated as of May 20, 2005, by and among
    Colt Defense LLC and Colt Canada Corp., as borrowers, the
    subsidiaries referred to therein, as guarantors, the lenders
    referred to therein, Bank of America, N.A., as
    U.S. Administrative Agent and L/C Issuer, and Bank of
    America N.A., acting through its Canadian branch, as Canadian
    Administrative Agent
10
.12*
U.S. Security and Pledge Agreement, dated as of May 20,
    2005, by and among Colt Defense LLC and Colt Rapid Mat LLC, as
    grantors, and Bank of America, N.A., as Collateral Agent
10
.13*
Canadian Security and Pledge Agreement, dated as of May 20,
    2005, by and among Colt Defense LLC, Colt Canada Corporation and
    Diemaco Inc., as grantors, and Bank of America, N.A., as
    Collateral Agent
Table of Contents
Exhibit
Number
Description of Exhibits
10
.14*
Canadian Pledge Agreement, dated as of May 20, 2005, by and
    between Colt Defense LLC, as Pledgor, and Bank of America, N.A.,
    as Collateral Agent
10
.15*
Lease, dated as of March 22, 1990, between Coltec
    Industries Inc. and Colt Defense LLC, as successor to
    Colt's Manufacturing Company, Inc., as amended
10
.16*
Employment Agreement, dated as of May 21, 1998, between
    Colt Defense LLC, as successor to Colt's Manufacturing
    Company, Inc. and Carlton S. Chen
10
.17*
Colt Defense LLC Salaried Retirement Income Plan
10
.18*
Form of Nominating Agreement
21
.1
List of Subsidiaries
23
.1*
Consent of Morgan, Lewis & Bockius LLP (included in
    Exhibit 5.1)
23
.2
Consent of Ernst & Young LLP
24
.1
Powers of Attorney (included in signature pages to Registration
    Statement)
99
.1
Consent of Gen. the Lord Guthrie of Craigiebank
99
.2
Consent of Gordon R. Sullivan
99
.3
Consent of John R. Torell III
99
.4
Consent of Philip A. Wheeler
99
.5
Consent of William M. Keys
*
To be filed by amendment