PART I

CAUTIONARY STATEMENT IDENTIFYING IMPORTANT FACTORS

THAT COULD CAUSE THE COMPANY’S ACTUAL RESULTS TO

DIFFER FROM THOSE PROJECTED IN FORWARD LOOKING STATEMENTS

Readers of this document and any document incorporated by reference herein, are advised that this document and documents incorporated by reference into this document contain both statements of historical facts and forward looking statements. Forward looking statements are subject to certain risks and uncertainties, which could cause actual results to differ materially for those indicated by the forward looking statements. Examples of forward looking statements include, but are not limited to (i) projections of revenues, income or loss, earning or loss per share, capital expenditures, dividends, capital structure and other financial items, (ii) statements of the plans and objectives of the Company or its management or Board of Directors, including the introduction of new products, or estimates or predictions of actions by customers, suppliers, competitors or regulatory authorities, (iii) statements of future economic performance, and (iv) statements of assumptions underlying other statements and statements about the Company or its business.

This document and any documents incorporated by reference herein also identify important factors which could cause actual results to differ materially from those indicated by forward looking statements. These risks and uncertainties include price competition, the decisions of customers, the actions of competitors, the effects of government regulation, possible delays in the introduction of new products and services, customer acceptance of products and services, the Company’s ability to secure debt and/or equity financing on reasonable terms, and other factors which are described herein and/or in documents incorporated by reference herein.

The cautionary statements made above and elsewhere by the Company should not be construed as exhaustive or as any admission regarding the adequacy of disclosures made by the Company. Forward looking statements are beyond the ability of the Company to control and in many cases the Company cannot predict what factors would cause results to differ materially from those indicated by the forward looking statements.

Item 1. Description of Business

BlastGard ^® International, Inc., a Colorado corporation, operates through its wholly-owned subsidiary, BlastGard Technologies, Inc., a Florida corporation established in September 2003. BlastGard ^® International, Inc. acquired BlastGard Technologies, Inc. effective January 31, 2004, in a transaction that was accounted for as a reverse acquisition, which is a capital transaction and not a business combination.

We have developed and designed proprietary blast mitigation materials. Patent-pending BlastWrap ^® has been designed to mitigate blasts and suppress flash fires resulting from explosions, regardless of the material or compound causing the explosion. We believe that this technology can be used to create new finished products or designed to retrofit existing products. While the need for this technology has always been present, the security and safety concerns resulting from the September 11, 2001 terrorist acts make the timing of BlastGard ^® ’s emergence even more important.

Recent Developments

In June 2005, we received an order for 190 BlastGard ^® MTR blast mitigated trash receptacles from the Washington Metropolitan Area Transit Authority (Metro). The blast mitigated trash receptacles were installed throughout the Washington, D.C., area in MetroRail stations. Metro took delivery and installation of the trash receptacles during the second half of 2005. We recognized approximately $735,000 in gross revenue from this initial order. In addition, we announced other orders of MTRs from the Naval Supply Systems Command, The Department of Homeland Security, the National Railroad Passenger Corporation (“Amtrak”) and the Naval EOD Technology Division. In February, 2006, Amtrak placed a second order for additional MTR’s. We will recognize approximately $828,000 in gross revenue in 2006 from this order.

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On August 22, 2005, the Company engaged The Investor Relations Group, Inc. (IRG), based in New York City, to serve as its financial relations and corporate communications company. IRG will strive to increase investor awareness of BlastGard ^® within the U.S. market by individually and personally introducing BlastGard ^® and its management to pre-qualified investment professionals. IRG will also focus on increasing public awareness of BlastGard ^® by providing an extensive array of public relations services, including obtaining media placements in television, radio, magazine, newspapers and trade media outlets.

On September 8, 2005, the Company entered into a Term of Collaboration agreement with Media Metrica Ltd. to develop required blast-mitigated internal systems for the RE:NEW project for Media Metrica Ltd. of London. Media Metrica has created an innovative on-street product that combines recycling, blast mitigation and outdoor advertising. This product will spearhead recycling in urban centers and, simultaneously, act as a premium outdoor advertising platform. With security becoming an ever-growing concern in urban centers across the globe, BlastGard ^® and Media Metrica are working jointly on these new proprietary modular units that will mitigate the effects of an explosion within the units, and suppress the principal hazards of blast, fragmentation, heat, flash and fireball. In addition to developing and manufacturing the RE:NEW units, BlastGard will be involved with marketing these products in combination with BlastGard’s MTR units in the USA upon completion of all three development phases. Tests on Phase II Module were completed in March 2006. Additional design modifications and the completion of Phase III testing should be completed within 90 days.

On October 24, 2005, the Company entered into a five-year alliance agreement with Nordisk Aviation Products, Inc. (“Nordisk”), headquartered in Cape Canaveral, Florida. Nordisk is a manufacturer, repair and leasing company of Unit Loading Devices (“ULD”) engaged in developing, supplying and supporting ULD equipment for the commercial passenger and air freight/cargo airline industry as well as the military, including its engineering support, and Worldwide Service Network. The purpose of the Alliance is to combine Nordisk Services products with the BlastGard ^® Technology to offer enhanced blast mitigated products to the ULD marketplace with respect to both existing ULD’s and newly manufactured ULD’s. There are an estimated 600,000 containers in service in the fleet today with approximately 40,000 new units sold each year. Each unit has an average useful life of about 5 years, and we estimate that the total number of units in service will continue to rise over the next 10 years. We are working with the largest ULD container manufacturer in the world to develop a low-cost solution for ‘semi-hardened’ blast mitigation ULD containers that may vastly improve the chances of aircraft survival in the event of a reoccurrence of an airplane explosion in midair as occurred in Lockerbie, Scotland.

In March, 2006, the UK Defence Ordnance Safety Group (DOSG) agreed to proceed with testing of BlastWrap ^® as the key ingredient in a new class of Insensitive Munitions (IM) packaging solutions. This novel packaging system will be designed to prevent mass detonations in ammunition storage and transport by the elimination of sympathetic detonation, which results when one detonating unit or energetic material initiates the next, and so on, in a chain reaction. It is also anticipated these IM solutions will dramatically improve fast cook off (the initiation of a unit of ammunition or other energetic store in the event of a fuel fire) and slow cook off (the initiation of a unit of ammunition or other energetic material in the event of a slower but more sustained thermal event) performance as well as meet all of the other IM packaging specifications of NATO and the US military. With DOSG funding in place to support the testing and the manufacturing of the boxes, management believes that successful test results in the coming months would be a prestigious achievement for our Company, allowing us to get our technology into the UK military and establish important precedent for other militaries.

Armor Systems International, Inc. (ASI) has developed an armor that is lighter than traditional hardened steel solutions, and, importantly, that uses widely available “COTS” materials. These weight savings quickly translate into higher vehicle performance often without the need to upgrade suspension, drive-train and cooling systems. Their newest high performance armor stops high caliber armor piercing rounds as well as large FSPs (fragment simulating projectiles), a key to stopping fragments from roadside IEDs (improvised explosive devices). In October 2005, the client completed tests on a vehicle mine “skid plate” blast package using BlastWrap ^® integrated with ASI’s armor and the mitigating capability of BlastWrap ^® on tests of 4, 8 and 12 pound charges was very significant. Additional work is underway on light weight pipeline protection systems.

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We have also been working on further development of a series of products for vehicle protection and for improved blast mitigation protection of barriers, walls, revetments and bunkers (including overhead protection from inbound mortars) for the US military. The two other companies involved with BlastGard are Geocell Systems, Inc. of San Francisco and Colt Rapid Mat LLC of Hartford, CT.

In early 2006, BlastGard submitted proposals to the Nigerian Army, which has requested from BlastGard new IM packaging solutions as well as training support to protect against such future disastrous events in their weapons depots, due to problems they have had with the handling, storage and transport of munitions and ammunition, particularly at Ikeja and Kaduna, In early August last year, BlastGard conducted a series of demonstrations (at a firing range in Nigeria near the Benin border) for the Nigerian Army Ordnance Corps (NAOC). These simple demonstrations proved the basic effectiveness of BlastWrap ^® , for the reduction of blast pressure and impulse and for the prevention of sympathetic detonation. BlastGard has submitted proposals for BlastWrap ^® , for IM packaging, for training programs, for rapid deployment wall and bunker systems, for fire resistance products, and we anticipate oil pipeline protection systems quotations soon for initial funding by the Nigerian government by the third quarter of 2006.

In late 2005, to assess the vulnerability of oil and gas pipelines to explosive attack, the Company conducted a series of explosive tests at Bakersfield, CA. The tests graphically illustrate the phenomenon of high explosive breaching of oil pipelines. We tested 24” OD X .375” wall API-5L X42 grade steel line pipe with welded .375” thick end plates (to seal the pipe). The assembly was then filled with water to represent the appropriate hydraulic shock transmission characteristics of a filled oil transmission line. A 2 pound charge of C4 was placed directly on the surface of the pipe and detonated. The charge punched a 6” diameter hole in the side of the pipe and produced a high pressure wave in the fluid in the tube which split the end plate welds and distorted the plates. This is a classic example of “shock holing”. We then placed a 10-1/8” square section of 3” thick BlastWrap ^® onto an identical section of (filled) line pipe, and placed a second 2 pound charge of C4 directly onto the BlastWrap ^® , and fired the charge. The pipe was only slightly dented. We are developing this protection system with an impenetrable tough surface material, which will make it very difficult for terrorists to destroy these exposed oil pipelines using current methods. The oil pipe line test shows the remarkable ability of BlastWrap ^® to prevent shock holing and this capability can be applied to many applications: aircraft fuselages, bridge pillars, suspension cables for bridges, electricity substations and “hardened” buildings.

We are also finalizing the specifications for our new product, the BlastGard PBM ^™ (Pipe Bomb Mitigator). This already-tested pipe bomb mitigation device is one-man portable, able to fit into the trunk of a police squad car, stops all lethal horizontal fragments from a pipe bomb and reduces blast pressures and fireball from such a threat. We expect to commence marketing this as a new product in the second quarter of 2006. Final tests are scheduled for April 2006.

Company History

BlastGard ^® International, Inc. was incorporated as IDMedical.com, Inc. in June 1999 under the laws of the State of Colorado for the purpose of developing and storing personal medical histories on the Internet. The online medical records business was unsuccessful, and in February 2002, IDMedical.com, Inc. acquired a technology provider, as described below.

In February 2002, IDMedical.com, Inc. acquired 100 percent of the issued and outstanding common stock of ToolTrust Corporation, a Nevada corporation, from the shareholders of ToolTrust, in a share exchange pursuant to an Agreement and Plan of Reorganization dated October 19, 2001 (the “Reorganization”). At the time of the Reorganization, ClearDialog Communications, Inc. (“ClearDialog”) and LocalToolbox Corporation (“LocalToolbox”) were wholly-owned subsidiaries of ToolTrust.

In May 2002, IDMedical.com, Inc. entered into share exchange agreements with certain former shareholders of ClearDialog and LocalToolbox, who were parties to the Reorganization. Pursuant to the

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share exchanges, the former shareholders are deemed to have reacquired their shares of ClearDialog and LocalToolbox in exchange for the return of shares of IDMedical.com, Inc. common stock. As a result of the transactions, ToolTrust no longer owned ClearDialog and LocalToolbox.

IDMedical.com, Inc. formed a subsidiary, IDMedical, Inc., as part of the Reorganization for the purpose of attempting to salvage the online medical records business, but was unsuccessful in its efforts to do so. The IDMedical, Inc. subsidiary is no longer in business.

In September 2002, IDMedical.com, Inc. changed its name to Opus Media Group, Inc. During 2002, the ToolTrust Corporation subsidiary was unsuccessful in its efforts to pursue a joint venture music label with recording artist Michael J. Jackson. Due in large part to the perceived negative public scrutiny surrounding Mr. Jackson, the company was unable to raise the necessary funds to launch the music label. The ToolTrust Corporation subsidiary is no longer in business. In September 2003, the name was changed again to Opus Resource Group, Inc.

In February 2003, Opus Resource Group, Inc. (“Opus”) entered into an agreement with a separate company called BlastGard, Inc., which was formed in 2000 by The Verde Partners Limited Partnership (“Verde”), C&L Trust, and James F. Gordon (who held a 33% minority interest). The principals of Verde were Steven Stucker and Sam Gettle, and the principal of C&L Trust was Charles D. McPhail. In 2002, John H. Waddell, Jr. and Michael J. Gordon became officers and directors of BlastGard, Inc. As described in more detail below, Messrs. James F. Gordon, Michael J. Gordon and John H. Waddell, Jr. subsequently in 2003 formed BlastGard Technologies, Inc., which is now a subsidiary of BlastGard ^® International, Inc., and these individuals are now officers and directors of BlastGard ^® International, Inc.

Pursuant to the agreement with BlastGard, Inc., Opus issued 66,667 shares (adjusted to reflect stock splits) of restricted stock to BlastGard, Inc. in exchange for the right to distribute and sell BlastGard, Inc. products in China. BlastGard, Inc. held licenses from Verde to use two patents for a technology intended to mitigate blasts and suppress flash fires resulting from explosions. After the date of the agreement with Opus, BlastGard, Inc.’s license agreement to utilize patents owned by Verde was not renewed because management of BlastGard, Inc. and Verde could not agree on the value of the Verde technology. Opus never distributed or sold any BlastGard, Inc. products. As a result, Opus and BlastGard, Inc. mutually agreed to rescind their agreement and the 66,667 shares of common stock issued to BlastGard, Inc. were returned to Opus and cancelled in January 2004. There has been no continuing relationship with Verde or its principals. See “Item 3” regarding a lawsuit involving Verde Partners as Plaimtiff and us and certain of our officers as defendants.

In September 2003, James F. Gordon, John L. Waddell, Jr. and Michael J. Gordon formed a new company called BlastGard Technologies, Inc. (“BTI”) for the purpose of pursuing a new technology that was created by James F. Gordon and John H. Waddell, Jr. for use in the blast mitigation solutions industry. These individuals chose to use the “BlastGard” name solely because of their personal affinity for the name. BTI is a development stage company that was created to develop, design, manufacture, and market proprietary blast mitigation materials. In September 2003, BTI had granted a license to BlastGard, Inc. to permit BlastGard Inc. to manufacture and sell products utilizing BTI’s new technology, but BlastGard, Inc. failed to secure adequate funds to perform under the agreement and the agreement was cancelled in December 2003.

BTI is in the blast mitigation solutions industry, as was BlastGard, Inc., but BlastGard, Inc. is not a predecessor to BTI. BlastGard, Inc. attempted to commercialize a 12 year old technology that was different from BTI’s new technology, but BlastGard, Inc. was never successful. BlastGard, Inc. had no material business and no material assets. BlastGard, Inc. ceased all activities in 2003, was formally dissolved in 2004 and is no longer in business. As described below, in January 2004 BTI was acquired by Opus and the management of BTI became the management of Opus, and in February 2004 Opus acquired all of the intellectual property relating to the name “BlastGard” from BlastGard, Inc.

On January 31, 2004, pursuant to an Agreement and Plan of Reorganization (“Reorganization Agreement”), Opus Resource Group, Inc. acquired 100% of the issued and outstanding common stock of

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BlastGard Technologies, Inc. (“BTI”), a Florida corporation, from BTI’s shareholders, in exchange for an aggregate of 18,200,000 (adjusted to reflect a subsequent stock split) shares of Opus common stock. The reorganization was a reverse acquisition which resulted in the former shareholders of BTI (including John L. Waddell, Jr.; James F. Gordon; and Michael J. Gordon) having a controlling interest in Opus, and BTI became a wholly-owned subsidiary of Opus. On March 31, 2004, Opus changed its name to BlastGard ^® International, Inc.

In July 2003 Opus had loaned $245,000 to BlastGard, Inc. to be used to make license payments to Verde. By February 2004, BlastGard, Inc. had no resources to repay the $245,000 loan. Because Opus had just acquired BlastGard Technologies, Inc. and because our new management team had a personal affinity for the name “BlastGard,” Opus acquired from BlastGard, Inc. all of the intellectual property relating to the BlastGard name (i.e., the trademark, copyright material, artwork, logo design, and web site domain name), and in exchange Opus forgave $45,000 in debt owned to Opus by BlastGard, Inc. The $45,000 value was arbitrarily determined by management and agreed upon by BlastGard, Inc. BlastGard, Inc. ceased all activities in 2003, was formally dissolved in 2004 and is no longer in business. We wrote-off the remaining $200,000 as bad debt when BlastGard, Inc. was dissolved.

Since January 31, 2004, we have focused exclusively on the business plan of BTI. BTI’s patent-pending BlastWrap ^® technology is designed to mitigate blasts and suppress fires resulting from explosions. BTI acquired a patent application for BlastWrap ^® , in January 2004, from co-inventors John L. Waddell, Jr., our COO and President, and James F. Gordon, our CEO, who assigned the patent application to BTI in consideration of the consummation of the Reorganization Agreement. For accounting purposes, we assigned no monetary value to the patent application that was assigned to BTI. Our current management team was the management team of BTI prior to the reorganization.

Introduction

An explosion results from the rapid conversion of chemical energy into rapidly expanding high-pressure gases. The rapidly expanding gases compress the surrounding air much like a piston and create a shock wave that travels ahead of the explosive gases. The “overpressure” (pressure above ambient) in a shock wave acts to “pre-condition” the air as it passes through to make the following accelerated gas “piston” more damaging. This high intensity, short duration overpressure wave transfers impulse (momentum) stresses, damages or destroys structures in its path. Impulse follows the shock wave but lingers and decays with time. The negative phase is a partial vacuum that “whips” lighter structures to magnify damage. A shock wave can be likened to an initial hard punch, while the impulse is more like a powerful bulldozer. Any reduction in the effective power of the shock wave will increase the target’s capability to withstand the destructive impulse.

Blast Solutions

Blast management solutions generally fall into one of two categories: hardening or mitigation. Hardening is a method of blast mitigation by which an object is placed around an explosive material to contain the blast, and is generally accomplished through the use of armor, mass or both. Armor is used primarily for its ballistic properties, with enhanced protection levels achieved by increasing mass (thickness and/or weight). Hardening solutions include steel armor plate, various synthetic fibers (Kevlar ^™ , Spectra ^™ , etc.) and fiber-reinforced composites. Most blast containment systems employ hardening.

Although some energy is absorbed through deformation, hardening systems have the negative effect of reflecting blast, which by the laws of physics actually magnifies blast effect up to eight times. This is because the shock waves reflecting off a solid surface add to the incident one, which creates a destructive synergism of much greater gas density, temperature, pressure, and overpressure duration—which all contribute to impulse (the “piston”). Reflected energy is a significant problem, particularly in confined spaces. Hardening, which essentially is trying to overmatch or resist a blast, has been widely practiced throughout the years even though it is limited in its capabilities.

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Mitigation (or attenuation) of blast effects is the dissipation of blast energy so that acoustic and shock waves, peak overpressure, reflected peak overpressure, impulse and afterburn (the rapid burning of combustible materials in the “hot zone”, including soot, occurring so fast that it adds to blast effect from the original explosive) are reduced. This reduction is accomplished through both physical and chemical processes that are triggered when a blast occurs. The remaining energy is transmitted at a slower, more sustainable level. The amount of reflected energy is significantly reduced with mitigation. Unlike hardening systems, the performance of our products is not related directly to material thickness and therefore we believe our products have a greater range of uses producing the same or better effectiveness against blast effects.

BlastWrap ^® Background

BlastWrap ^® is a concept for assemblies (not a chemical compound) from which blast protection products are built to save lives and reduce damage to valuable assets from explosions. BlastWrap ^® is designed to not only substantially reduce blast impulse and pressure (including reflected pressure and impulse), but quenches fireballs and suppresses post-blast fires. Lethal fragments may be captured by adding anti-ballistic armor layers on the product surface away from a blast.

Our BlastGard ^® technology is designed to mitigate blast and rapid combustion phenomena through numerous mechanisms. The relative contribution of each mechanism depends upon the intensity and nature of the impinging hazard. Shock wave attenuation, for example, is dominant in mitigating mechanical explosions. Our products attempt to emulate unconfined conditions and accelerate attenuating processes that occur in free air. Thus BlastWrap ^® does not try to resist blasts (which physically intensify blast phenomena); it mitigates them. BlastWrap ^® can be used as part of confining assemblies (containers and blast walls). In effect, BlastWrap ^® is a ‘virtual vent’.

BlastWrap ^® Technology Components

Our BlastWrap™ products are made from two flexible films arranged one over the other and joined by a plurality of seams filled with attenuating filler material (volcanic glass bead or other suitable two-phase materials), configurable (designed for each application) with an extinguishing coating. Together, this combination of materials is designed to mitigate a blast while at the same time eliminate fireballs or flame fronts produced by the blast.

We believe that this system is unique because it:

Our BlastGard ^® Technology extracts heat, decelerates both blast wind and shock waves, and quenches the hot gases in all blasts and fireballs. BlastWrap ^® does not interact with the explosive elements, and is therefore not altered by them. However, after a single intense detonation, BlastWrap ^® must be replaced.

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Key BlastWrap ^® Features

Key BlastWrap ^® Benefits

BlastWrap ^® is light in weight. It can be used to protect against outdoor explosions. Because of the Montreal protocols banning production of Halon extinguishing agents, BlastWrap ^® technology offers a light weight and environmentally acceptable blast suppression means available for most applications; and, it can even be adapted to function underwater.

BlastWrap ^® products are inherent sound absorbers and thermal insulators, and are typically fire-tolerant. Any or all of these qualities are readily enhanced by bonding to common materials, thereby further extending the wide range of applications which BlastWrap ^® can fulfill through a single product.

The performance of BlastWrap ^® proprietary technology is independent of scenario and environment, which means that it does not matter where the physical location is, how the basic product form is used or the environment in which the event takes place. The basic product form can be used as a stand-alone material (as linings, curtain barriers, or as structural material), or can be laminated or otherwise affixed to a wide range of product forms such as insulation (thermal and acoustic), ballistic armor such as KEVLAR™ (a Dupont trademark), decorative stone, or packaging materials. BlastWrap ^® products can thus provide blast and fire protection in flooring, wall, and roof constructions, in packaging, in storage cabinets and other containment structures, and aboard all types of vehicles, ships, and aircraft.

Intellectual Property Rights

Explosive devices are increasingly being used in asymmetric warfare to cause destruction to property and loss of life. These explosive devices sometimes can be disrupted, but often there is insufficient warning of an attack. Our BlastWrap ^® products were created around this core concept. The BlastWrap ^® patent application was filed with the U.S. Patent and Trademark Office on July 31, 2003. The BlastWrap ^® patent application was filed with Argentina on March 12, 2004; with Kuwait on July 28, 2004 and we also filed an application for this technology under the Patent Cooperation Treaty (PCT) on February 27, 2004. Under the PCT, we will have patent protection in most industrialized countries when the patent is issued in each individual country. A substantial number of countries have been added to the list of PCT members, including almost all of the former Soviet republics and China; thus the new claims will be protected in more than 40 countries. A second patent application for “Blast mitigating container assemblies” was filed with the U.S. Patent and Trademark Office on April 29, 2004 and a new U.S. Continuation-In-Part patent application for “Blast mitigating container assemblies” on January 26, 2005. We also filed an application for this “Blast mitigating container assemblies” technology under the Patent Cooperation Treaty (PCT) on January 26, 2006.

BlastWrap ^® Testing

BlastWrap ^® prototypes have been evaluated in different test series, which have ranged from semi-quantitative screenings to third-party instrumented trials. We have consistently observed blast effect

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reductions of at least 50% in virtually every activity in which BlastWrap ^® has been involved. These tests have indicated that impulse (momentum transfer) and peak pressure are reduced by nearly 50%. Impulse is the most destructive explosive-related hazard for structures and vehicles.

Significance of Test Results

No BlastWrap ^® tests have been in small-scale. Every test series has involved standard products or test facilities simulating service conditions—munitions containers, air cargo containers, steel vessels comparable in size to commercial aircraft fuel tanks and large secondary storage units, and vehicles, all with charge weights reflecting actual hazards. Management believes that the test results provide evidence that BlastWrap ^® can protect vehicles, structures, and ships against very intense blasts. Tests have also shown that certain design features (such as deflectors), combined with additional BlastWrap ^® material, can accomplish protection against larger blasts.

Applications

Our BlastGard ^® Technology works indoors or out, vented or un-vented, wet or dry, clean or dirty, damaged or intact, and against strong or weak blasts from solid explosives or flammable fluids. It is a lightweight, space-efficient custom-engineered technology that can be produced with additional layers for insulation, fragment/ballistic protection, environmental protection or impact and cushioning barriers. Significantly, no new or high-cost fabrication technologies or materials are required to produce BlastWrap ^® . In addition, because of the Montreal protocol’s ban of Halon extinguishing agents, we believe that our BlastGard ^® Technology is the only blast and fire suppression means available for most applications, including adaptation for underwater use. It is an inherently effective sound absorber and thermal insulator.

Because BlastWrap ^® is customizable and offers protection against explosions of all types, its potential for application cuts across a wide range of industries and government agencies. Some potential applications for BlastGard ^® Technology include:

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13 Product Lines Identified For BlastWrap ^® - Four Completed and Finished Products

Our core product, BlastWrap ^® , is a finished product that we are currently manufacturing for R&D testing by non-affiliated third-parties. The primary application for BlastWrap ^® is to further customize it for different applications and uses.

Our technology can be customized to fit the need of an industry or a specific customer. We have examined the various markets susceptible to explosions, and have developed finished products to market to businesses and agencies at risk. While designing finished products engineered with BlastWrap ^® , we have taken into account that some products must be portable, while others will remain at a fixed location. Some products have been designed to contain identified explosive agents, while others are designed to mitigate unidentified explosive threats.

All products can be designed to conform to the United States Bureau of Alcohol, Tobacco and Firearm’s requirements for explosive materials. These requirements outline the design parameters for any container based upon the explosive material to be housed, as follows:

With these standards in mind, we have developed the following product lines to address the needs of the customers and targeted markets:

1. First Responder

        This product is a man-portable ring and blanket assembly used by first responders (police, bomb squads, fire departments, etc) to a suspicious device report. The lightweight product can be set up in

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seconds to protect people and the surrounding area from blast pressure, fragments and fireball effects in case of detonation. The basic unit design of this product has several variants each using different materials. We are continuing R&D to develop lower cost light weight versions using novel new anti-ballistic materials. An extension of this design will then be ported into a new Explosive Ordnance Disposal (EOD) barricade designs and to some extent into insensitive munitions packaging designs as an extension of this product development.

2. Bomb Squad Assistant

The In-Situ Detonation box, or Bomb Squad Assistant, is a single-design and less sophisticated product intended to provide outside covering for the First Responder unit, providing either additional protection or for in-situ detonation of improvised explosive devices (IED’s) when desirable or necessary.

3. Explosive Storage Units – ESU

The explosives storage units (ESU) safely store highly detonable materials in a container, which prevents sympathetic detonation and afterburn. Additional customized uses of this product are foreseen in the research, such as for explosives storage and transport/handling and DOD contract markets. Future designs will incorporate the best practices of contracts concluded, thus creating a shorter product development timeline for future finished products.

4. BlastMag-2

With these magazines already in service at several locations, there are numerous applications in similar plants worldwide as well as product variants for many other industries.

5. BlastMag-3

Portable magazines come in numerous sizes but the basic design remains the same, and they are all designed to be Type 3 compliant. Portable magazines are used in a variety of industries including but not limited to the military, law enforcement, mining, fireworks, research facilities, and munitions manufacturing/handling.

6. BlastMag-5

Plastic ready boxes, which are Type 5 compliant, are the most prolific of all products to be used by both military/law enforcement and commercial customers. The ready boxes are typically used to carry blasting caps, detonation cord and other less threatening explosives in smaller quantities. Obvious military/law enforcement uses as well as industries such as munitions manufacturing, handling, fireworks, mining and others use similar, less safe boxes on a regular basis. Further product development is currently underway on new iterations of these products

7. Lining – Automotive / Distributed Power

Auto fuel tank linings using BlastWrap ^® can be used to protect conventional fuel powered vehicles and more importantly new fuel cell automobiles and distributed fuel cell power generation. The risks of fuel cell technology are discussed in the Automobile Industry section herein.

8. Lining – Twin-Aisle (containerized) Aircraft

LD3 Cargo Containers are used primarily on twin aisle/wide body aircraft such as the B747. These luggage or cargo containers are manufactured by a few well-established companies throughout the world. The market is extremely competitive with low margins; however, BlastGard ^® International has now concluded a strategic relationship with the largest of those manufacturers, Nordisk Aviation

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Products. A revolutionary new container design incorporating BlastWrap ^® , which we intend to bring to market in the very near future, will be an attractive solution to the substantial cost, weight and safety concerns highlighted in recent years in twin-aisle commercial aircraft and cargo safety.

9. Lining – Single-Aisle (non-containerized) Aircraft

Working in conjunction with aircraft and shipping manufacturers, we are designing products and component assemblies to be used in the cargo holds of single-aisle aircraft. Due to the heightened security surrounding aircraft safety, we are diligently working to demonstrate the effectiveness of our product on this large sector (~70%) of the commercial fleet.

10. Weapons (insensitive munitions) Containers

Weapons containers require specialty design. We are developing a family of these containers at our expense for evaluation and testing by US, UK and other military clients. Although we do not have a development or supply contract with any military agencies at this time, we anticipate important prototype testing of these designs will ensue in 2006. This product line will have numerous products for military weapons including bombs, rockets, medium and large caliber ammunition and missiles.

11. Trash Receptacle

We have two models of mitigated trash receptacle, the BlastGard ^® MTR 91 and MTR 101. These containers have been designed and proof tested to drastically mitigate blast pressures and thermal output and to capture bomb fragments. Another iteration of this product under current development is the BlastGard Mitigated Bomb Receptacle (MBR).

12. Vehicle IED and Mine Protection

Military vehicles (HMMWVs, HEMMT, M915, FMTV, etc.) are or can be “up-armored” for IED and land mine protection. BlastGard ^® and Colt Rapid Mat LLC have just developed and are now offering a new product called Blast and Thermal Protection System (BTPS). These specialty fiberglass cased BlastWrap ^® products are easy to retro-fit to armored vehicles to provide protection for occupants from blast thermal output and head, neck and spine injuries from blast pressures.

13. Rapid Deployment Fortification Wall (RDFW), Bunker and Over-Head Protection from Mortars and Rockets for Temporary Accommodation Units

This design is a facing for fortification walls, revetments and bunkers and a covering for the roof of bunkers and temporary accommodations/barracks and other structures. Successful testing is concluded for 81mm mortar threats, and additional tests will likely proceed in 2006 on larger threats like the 120mm mortar, the 122mm rocket and possibly even the 152mm and/or 155mm artillery shells. In these applications, this product is designed to mitigate blast pressures, rapidly quench blast thermal output and capture bomb fragments.

We have developed either finished products or working prototypes of BlastWrap ^® products for each of the 13 product lines described above. All of these products have been and will continue to be tested and evaluated in-house, by third-parties and by interested clients and strategic partners. Prototypes may require further modifications based on the test results and client and partner feed-back. However, we have four products that are completed, finished products, available for sale – (1) the First Responder, (2) the BlastGard ^® MTR (mitigated trash receptacle), (3) the BTPS, and (4) the wall, bunker and overhead protection products. We are manufacturing and marketing all of these products now.

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Manufacturing

We have three distinct production types:

Serial Production

Manufacturing is sub-contracted to a BlastGard-licensed and qualified production facility, ideally in close proximity to the customer. This method facilitates customer interaction in design, quality and distribution to affect the greatest level of satisfaction and usefulness of the BlastWrap ^® product. BlastWrap ^® products likely to be built using Serial Production include:

First Responder – Once an approved and tested design is finalized, serial production can commence at sub-contracted production facilities in proximity to each of the customers.

Bomb Squad Assistant – The base unit of this product is of simple design and will be produced at several sub-contract production facilities.

BlastWrap ^® Mag-5 – The basic unit design of this product will take existing ready boxes and retrofit them with BlastWrap ^® protection. These products can be produced at existing fabricators trained and licensed to use BlastGard ^® Technology or can be sub-contracted to existing BlastGard ^® sub-contract production facilities.

BlastWrap ^® Mag-3 – Even though the sizes of a magazine will vary based on each customer’s needs, the basic design remains the same and can be produced at an existing magazine fabrication facility (which receives training and licensing from BlastGard ^® ) or at a BlastGard ^® sub-contract production facility near the customer.

Contract Manufacturing

Although the Production/Engineering team in BlastGard ^® ’s Technology Center will design these items, we will sub contract manufacturing and assembly. This will be at our discretion to ensure quality and adherence to custom design requirements. BlastWrap ^® products likely to be built with Contract Manufacturing include:

Explosive Storage Units (ESU) - ESUs will be fabricated at a sub-contract facility with oversight by our engineers due to the nature of the highly customized and regulated design parameters required by the DOD and other regulating entities. In addition, designs may require testing, which will need to be administered by our personnel.

BlastWrap ^® Mag-2 - Design and production of this product will take place at BlastGard ^® ’s preferred sub-contractor due to complex design requirements and the need for BlastGard ^® personnel to test product designs.

OEM production (Original Equipment Manufacturer)

OEM production requires licensing agreements with contractors for a specific industry product. There will be several licensing agreements issued on a limited and non-exclusive basis to provide end-users with an appropriate number of well-located OEM producers. Once qualified and licensed by BlastGard ^® , OEM

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producers will be directed to produce and maintain quality standards per end user requirements. BlastWrap ^® products to be manufactured with OEM Production will likely include:

Lining – Automotive/Distributed Power (Royalty) - Once design and testing has been completed by our engineering and design team, we will work closely with the auto manufacturers or their already well-established OEM parts manufacturers to fabricate auto fuel tanks with BlastWrap ^® protection. We will receive per unit royalties from the manufactures of this product, oversee training and work with end users on design requirements.

Lining - LD3 Container (LD3 Container- Royalty) - We will design and train container manufacturers in the fabrication and installation of BlastWrap ^® components. We will receive a per-unit royalty for the use of its patented technology and design.

Lining - Aircraft (B747- 400- Royalty)- Once design and testing has been completed by our engineering and design team, we will work closely with the certified and widely dispersed air frame sub-contractors to integrate the use of BlastWrap ^® into their internal systems, such as fuel tanks, cargo holds, cabin, fuselage, etc. Aircraft manufactures, similar to auto manufactures, typically require several suppliers of each part. Therefore the license agreement for air frame sub-contractors will need to be limited and non-exclusive providing us royalties on a per-unit basis as well as continued design, manufacturing, and installation consulting.

Weapons Container - Once the design and testing of each product is complete, we will license and train personnel on the fabrication of the various products within the line. The Contractor chosen will manufacture this product line in-house for each of their munitions manufacturing and handling needs. The contractor will pay a per unit royalty to us for use of its design and patented product. In return, we will be retained on a consulting and design basis as part of the license agreement.

Current manufacturing arrangements for First Responder, the BlastGard ^® MTR (mitigated trash receptacle), BTPS and the Wall, Bunker and Temporary Accommodation Units

As noted above we have four products that we consider to be completed and finished products. Manufacturing arrangements for those products follow:

Pro-Form Packaging, Inc., located in Dunellen, New Jersey manufactures BlastWrap ^® and the MTR and MBR lids and ships to Centerpoint Manufacturing for installation.

Centerpoint Manufacturing, Inc., located in Theodore, Alabama manufactures the BlastGard ^® MTR receptacles and will manufacture the BlastGard Mitigated Bomb Receptacles (MBR) as well. We entered into a five year exclusive alliance agreement with Centerpoint Manufacturing in October 2004 for the joint development of reinforced, blast mitigated trash receptacles. We are not contractually bound to use Pro-Form Packaging to manufacture the receptacle lids, and we believe that there are alternative manufacturers in the United States.

Futura Composites, B.V., located in Heerhugowaard, Holland, manufactures the First Responder rings. We are not contractually bound to use Futura Composites, B.V., and are exploring alternatives for manufacture in North America.

T.G. Faust, Inc. located in Reading, Pennsylvania manufactures the fragment blankets used with the First Responder. We are not contractually bound to use T. G. Faust to manufacture the fragment blankets, and we believe that there are alternative manufacturers in the United States.

Geocell Systems, Inc. of San Francisco, California manufactures the RDFW for walls, revetments and bunkers in their plant in Park Hills, Missouri. Geocell is the exclusive manufacturer of this patented product and we believe that it is committed to working closely with BlastGard ^® International on the mutual efforts noted above. It may become desirable for BlastGard ^® to establish a contract for this manufacturing and commercial arrangement with Geocell Systems, Inc. in 2006.

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Colt Rapid Mat LLC is the manufacturer of the BTPS in their plant in Delhi, Louisiana. We are not contractually bound to use Colt Rapid Mat LLC to manufacture the BTPS, and we believe that there are alternative manufacturers in the United States. It may become desirable for BlastGard ^® to establish a contract for this manufacturing and commercial arrangement with Colt Rapid Mat LLC in 2006.

Quality Assurance

Sub-contractors and OEM producers have been and will continue to be trained, qualified and monitored to obtain and sustain a license from BlastGard ^® . We will ensure through continuous review of qualified producers and sub-contractors, and through end user/customer surveys, that design and quality standards are being maintained to specification. Licensing agreements will stipulate that we will have the right to withhold future contracts until mutually agreed upon standards of quality are achieved. End-users and customers will be partnered in agreeing to and setting quality standards for end products.

Purchasing

We rely on various suppliers to furnish the raw materials and components used in the manufacturing of our products. Management believes that there are numerous alternative suppliers for all of the key raw material and virtually all component needs.

Marketing Analysis

Overall Market

The market for blast solutions includes commercial industries (accidental explosions of chemicals, terrorist threats, demilitarization, etc.), militaries (weapons storage and transport, barriers, revetments and bunkers and vehicle protection), and governments and municipalities (bomb explosions and threats). We have examined each of these markets to identify areas and industries within each that will benefit most from BlastGard ^® Technology.

We have divided the Commercial Market into nine viable sectors as follows:

1. Energetic Materials (blasting agents, propellants, explosives)/Explosive Manufacturers/Pyrotechnic Manufacturers

‘Energetic materials’ is a term used to encompass a wide range of materials that release intense heat during decomposition or combustion reactions.

Manufacturers of such devices are in need of protection against hazardous explosive situations in the manufacture, transport and storage of these materials.

While energetic manufacturers are a focus for BlastGard ^® technology, the related industries are also target markets. For all groups, both regulatory and insurance factors require strict storage and handling measures that involve confinement or separation, BlastWrap ^® products being specifically conceived for such roles. The propellant, pyrotechnic, and explosive manufacturing groups are viewed as prime markets for BlastWrap ^® .

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2. Oil and Gas/Petrol Chemical/Chemical/Process Industries

To combat the unique explosions associated with oil, gas and chemical companies, BlastWrap ^® can be updated and deployed to clients in these sectors to address the problems involving explosive materials specific to the oil and gas industry with a convenient structural and/or architectural technology that would suppress explosions and minimize post-blast fire hazards with the following features:

3. Manufacturing of munitions

The full range of our products, from wall protection, barriers, and partitions to containers, can be used to enhance the safety and productivity of facilities that manufacture explosives, propellants, munitions and pyrotechnics. A number of specialty units are being designed to meet the needs of this market segment, such as the Weapons Container. Additionally, BlastWrap ^® is easily retrofitted into existing containers and storage magazines.

4. Commercial Transport

Throughout the world, commercial companies ship explosive materials via air, train, bus or sea vessel. As determined by the National Highway Transportation Safety Administration (NHTSA), roughly 10% of goods shipped (in terms of tonnage) are classified as hazardous, meaning they can cause damage to other materials being transported, the transport container and supporting personnel. Such shipped products not only require insurance but also risk loss of money and injury.

We believe that BlastWrap ^® offers the ability to convert these standardized shipping containers into explosives storage units complying with the technical requirements of the US Bureau of Alcohol, Tobacco, & Firearms Type 2 magazines. This would be accomplished through universally available containers for which numerous trailers, lift systems, stacking provisions, and international standards exist.

While actively searching for and detecting explosives is a right step in the protection of our ports, it is clear that it cannot be the only step. BlastWrap ^® provides a solution that is not dependent on identifying the threat ahead of time, and therefore we believe a significant opportunity is present.

5. Commercial Aviation

Testing in the UK by an agency of the Ministry of Defence under the auspices of the UK Civil Aviation Authority (CAA) proved that our technology performs better than any other system tested in blast effect mitigation. BlastWrap ^® deals with all of the blast effects - the incident and reflected shocks, the Mach Stem shocks, the blast impulse, the blast flame front and blast after-burn. In spite of the many dollars expended in this area, political, governmental and scientific differences of opinion between UK and US authorities on the best way to address these threats have simply stymied any meaningful solution being implemented for twin-aisle aircraft luggage containers.

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BlastWrap ^® is not armor; however, properly configured, it does prevent fuselage shock holing, the critical factor in an aircraft’s structural survival. In addition, BlastWrap ^® quenches thermal output very rapidly thereby addressing the other critical aircraft survival factor. Rapid cooling is critical, as any spilled flammable fluids or materials as well as escaping gas will re-ignite if heat is present. Our new container design addresses both of these critical factors. In addition, it is a much lower capital cost than the “hardened containers” on the market. Finally, our design has a very small weight penalty, drastically lower overall weight gain (compared to the “hardened containers”) from standard LD3 containers thereby reducing the fuel and/or cargo penalty. The operating cost impact will be extremely low with our LD3.

There are numerous other applications within the commercial aviation market for our BlastGard ^® Technology, from lining the interior of an aircraft to providing an on-board ‘detonation center’ (e.g. outfitting a bathroom with BlastWrap ^® in the event a bomb, such as a shoe bomb, were to make its way onto a plane). While we will continue to pursue these various applications of the technology, we believe the best and most direct approach for sales within this market will be to market our new LD3 cargo containers lined with BlastWrap ^® .

There are an estimated 600,000 containers in service in the fleet today. There are approximately 40,000 units sold each year and each unit has an average useful life of 5 years. The total number of units in service will likely continue to rise over the next 10 years.

Working with the world’s largest LD3 container manufacturer, Nordisk Aviation Products, Inc. we have developed a low-cost highly effective solution for a new class of ‘semi-hardened’ blast mitigation LD3 containers. Blast mitigating LD3 containers do not yet exist. Over the last 10 years, the FAA, Galaxy and TelAir, have built and tested “hardened LD3 containers” (containers that fully contain the blast inside the container walls). However, these products are simply not commercially viable due to the extremely high capital and operating costs associated with the materials utilized and the significant excess weight.

Our new design differs from the hardened containers in the following ways:

6. Research Facilities/Laboratories

Universities and research facilities work with explosive elements on a daily basis, from conducting tests to exploring new materials and compounds. Such installations are in need of mitigation protection in storage and to prevent sympathetic detonation or damage to property or persons. These products can reduce potential damage for personnel and property during the use and storage of the explosive elements.

While an interesting and possibly large market, due to the specific requirements and needs of each facility/laboratory, we believe sales opportunities the next two years are limited, as sales personnel and resources must be dedicated to this market space.

7. Automotive & Distributed Power Generation

World manufacturing capacity for cars and trucks is now more than 70 million vehicles per year. All of the major manufacturers are exploring the feasibility of fuel cell powered cars and trucks. It is likely that these initiatives will meet success somewhere in the next 5 to 7 years. It is also likely that BlastWrap ^® can be a critical OEM component in such systems, but most likely by way of working with the tank contractors/manufacturers who will have the hydrogen storage components of such systems. Our initial efforts with Ford Motor have resulted in this direction.

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As to the future, we believe that post-collisions fires will surely increase as alternative fuel vehicles are introduced in greater numbers, particularly the fuel cell vehicles. The fuel cell vehicle is typically powered by liquefied petroleum gas (LPG), liquefied natural gas (LNG), compressed natural gas (CNG), ethanol, methanol, electric battery, or dimethyl ether (DME). Fuel cell engines are compelling and are looked upon positively since they are essentially ‘zero-pollution engines’, and their efficiency is substantially greater (~double) than the other alternative fuel concepts. In 1998, there were approximately 274,000 LPG-using vehicles and nearly 140,000 of the other types (Oil & Gas Journal, July 12, 1999).

Despite their positive factors, the proponents of fuel cell vehicles have so far not seriously comprehended nor provided protection for the increased fire hazard posed by ‘alternative fuels’. Several alternative fuels introduce a new potential hazard, namely explosions. We believe that the automobile industry will soon realize that implementing effective and active blast fire safety measures to limit probable life and financial loss is smart business. Providing higher levels of safety for life and property can only result in greater consumer confidence and higher corporate profits.

Unlike diesel and gasoline, which cannot explode, commercially viable fuels for fuel cells can. At least for the remainder of this decade, fuel cells will use either hydrogen or methanol. Hydrogen must be produced from methanol in order for methanol to be used (this conversion will take place in a subsystem aboard the vehicle), thus substantial quantities of hydrogen will be present on all fuel-cell vehicles.

Common to all of the alternative fuels is the fact that they will require much larger fuel capacities than gasoline or diesel, in order to provide the same amount of energy (gasoline and diesel have much more energy per pound). Larger fuel tanks on vehicles mean that more tank and piping will be vulnerable to rupture in accidents, and larger sized components make tanks intrinsically weaker. In an accident (or rupture of a connection, etc., in a pressurized fuel system), fuel will be atomized and will be mixed in a relatively confined location where hot ignition sources will be present. This is the ideal environment for explosions and fireballs to develop. These hazards are not only present in the vehicle, but also in the fuel distribution infrastructure. Thus service stations, storing and dispensing the fuels, along with tanker trucks hauling the fuels, will each pose hazards on roads and in built-up communities. Design and construction details are crucial to the safe operation of high-pressure and/or cryogenic fluid systems, so numerous leak/fire/explosion events with widespread use of alternative fuel power generation are inevitable.

We believe that BlastWrap ^® products for fuel tank systems can prevent most major post-crash fires for vehicles. Major explosions are more likely to be infrequent, even for vehicles using hydrogen as a fuel. However, fireballs and explosions involving natural gas (whether compressed or liquefied), propane, hydrogen and fuel cells will increase in number every year, and certainly could easily exceed the annual number of fatal fire incidents that involved Ford Pintos and GM pickup trucks, which were manufactured with vulnerable side tanks.

Whether for a car, fuel tanker-trailer, gas station facility, warship, ocean going tanker, aircraft, commercial building or product in a residential home, BlastWrap ^® can be employed to protect against fireballs and explosions. These capabilities can be tailored to provide complete tank systems, which serve both in their primary role of storing flammable fluids, and in preventing accidents or hostile action from causing major disasters. The basic BlastWrap ^® assembly is simply adapted for the distinctly different service requirements. If the fuel ignites, the fireball then gets rapidly quenched, keeping the area cool. If there is a fuel spill outside that ignites (such as from another vehicle), BlastWrap ^® tanks will insulate and protect the internal fuel from outside fire.

While we believe significant market opportunity exists, we also recognize that significant barriers to entry also exist. Furthermore, we cannot predict with any certainty when fuel cells will be deployed on a large-scale commercial basis. We do however believe this will be an important market to watch over the next five to 7 years. Alignment with one or several strategic partners will be necessary and desirable.

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8. Entertainment

We believe that BlastWrap ^® offers a unique ability to protect actors, stunt people, sets, and valuable equipment against blast effects. One specialty firm that creates explosions and fireballs for movies informed BlastGard ^® that roughly 1 stunt person is hurt each day in incidents involving explosives and pyrotechnics. The former California State Fire Marshal informed BlastGard ^® management that studios wished to conduct larger explosions on sound stages near Hollywood to keep production costs down, but are not able to do so because of severe constraints on charge sizes. With competition to create ever-greater blast effects in movie and TV spectaculars, we believe that BlastGard ^® can capitalize on this opportunity by allowing industry players the ability to safely perform such events on Hollywood back-lots.

BlastGard ^® Technology can be used to create an assortment of props and structures, either as integral walls or worked into the landscape or sound stage. Most “Hollywood” explosions use black powder and gasoline in various combinations, with some additives or special-purpose materials such as detonating cord. The low explosive power of these materials would make BlastWrap ^® ’s protection role, including protection of cameras, relatively simple.

BlastGard ^® can also provide blast protection of vehicles. Vehicle flipping or vehicle destruction is fairly commonplace in films, and the charges used in connection with these stunts are comparatively small. BlastWrap ^® can protect stunt personnel and can be concealed or disguised, thereby enabling dramatic destruction sequences without injuring the performers.

As attractive as this market may be, it is not part of our initial marketing strategy. Total sales, in terms of quantity, are not likely large; however, we will respond to inquiries from the entertainment industry, and are aware of the promotional value for BlastWrap ^® products that are used in connection with “blockbuster” movies.

9. Mining

Mining is a potentially significant market for our products. In this industry, large quantities of detonators and explosives are used every day. All of these require suitable storage and transport. High explosives are used in some fields, especially in metallurgical ores, which have harder formations.

The greater mining industry opportunity is in the mines themselves, where BlastWrap ^® can be used as it would be in the oil industry: stopping and suppressing dust and gas explosions before significant injury and damage can develop. For example, methane gas is a very real and challenging hazard in coalmines. The cutting machinery and electrical power components can easily ignite flammable dusts and dust/gas mixtures, leading to disasters.

Mining will not be an initial target market for us. Profit margins are estimated to be low when compared to the potential of numerous other industries.

Military Market

It is understood in the defense industry that keeping up with cutting edge technology is crucial for the protection of military personnel. We are actively seeking the opportunity to showcase BlastWrap ^® to the military high command.

BlastWrap ^® does not distinguish between accidents and hostile action; it always functions when there is blast pressure and when a fireball is generated.

We believe that using BlastWrap ^® in buildings, onboard ships, or in vehicles, barracks, and command posts can efficiently achieve effective blast mitigation at a low cost. In addition, BlastWrap ^® can be used in a variety of ways within each of these categories. From lining compartments in research and testing facilities to encasing engines to insulating launch installations, we believe that BlastWrap ^® will provide protection across a variety of platforms.

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Other BlastWrap ^® uses would include munitions manufacturing, handling, (load/assembly/pack facilities) and storage (a very broad range from large depots to small magazines), explosives/munitions transport (again a wide array of small caliber ammunition to large rockets and missiles), military structures (wide range), military vehicles (IED and land mine protection), shields/revetments and broad demilitarization efforts. Although this market is huge, it is difficult to assess since typical military mind-set has been to accept the dangers of Q-D (quantity/distance offsets) in transport and use, and even in storage when in any conflict.

We have divided the Military Market into the following sectors:

1. Military Logistics

In times of both war and peace, military institutions require a substantial sealift capability to transport potentially explosive and hazardous materials.

As an example of the amount of munitions carried on a single ship, the average US-flag ship carried an average 23,390 tons of dry cargo per ship in the Gulf War—the equivalent of 1,772 containers using the above 13.2 tons/container number. Thus, the loss of any of the sealift ships mentioned above would result in the loss of a month’s worth (or more) of munitions for the group conducting the shipping. BlastGard ^® Technology can be used to protect these sealifts from sympathetic detonation within, offensive attacks from the enemy or friendly fire mistakes.

2. Defense/Storage of On-Base Munitions

The US Department of Defense (DOD) components are all major prospective markets for BlastWrap ^® . Additionally, demilitarization (“demil”—the destruction of excess or spent munitions) is a major activity at numerous bases, munitions facilities, and test ranges. Most important to our marketing plan is to take advantage of the numerous, substantial opportunities created by base closures and “dense-packing” of munitions, people, and high-value assets.

Our products make munitions storage a large potential market because munitions stored within BlastWrap ^® -lined spaces would be shifted from the type 1.1 (mass-detonating) category, which triggers the requirement for maximum separation, to the type 1.2 (non-mass-detonating) or 1.4 (insensitive) categories. The 1.2 and 1.3 categories require much less stringent storage requirements.

3. Military Vehicles

Our products offer a means of protecting vehicles against ground mine blasts, regardless of vehicle type or size, from small mini-pickups to heavy tractor-trailer combinations, both armored and “soft-skinned”.

Since World War 2, the majority of vehicle losses have been due to ground mines. Since the Arab-Israeli War of 1973, more than 90% of vehicles lost have been due to mines, however, in the War on Terror, we have seen in recent years a significant increase in vehicle loss due to IED’s.

The trend in all modern armies is toward smaller and lighter vehicles, with thinner armor or none at all. This trend reflects the worldwide conflict situation, where hostilities involve guerilla or other dismounted forces widely scattered in friendly terrain (the 1990-1 Persian Gulf campaign was the last major clash of heavy armored forces). These smaller vehicles, such as the HMMWV “Humvee”, are almost always destroyed by modern mines. Truck cabs of all sizes are also destroyed by almost every type of anti-vehicle mine, not just damaged. Since these vehicles are predominant in “peace-keeping” forces and rapid deployment groups, the fatality and major injury percentage is very high compared with tanks.

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We believe that BlastWrap ^® in a simple casing offers the capability of mitigating all seven mechanisms for achieving a vehicle “kill”. These mechanisms include total vehicle destruction (major disintegration, internal explosion, fire), incapacitating the crew (“g”-force accelerations that cause serious injury), loss of mobility (destroying wheels, tracks, and/or drive train), loss of vehicle control (steering damage or severe vehicle deformation), and immobilizing through fuel loss (fuel tank or fuel line rupture). There are numerous locations for BlastWrap ^® products that would provide the necessary protection, including exterior attachments, substitutions for existing vehicle “skins”, and behind-armor BlastWrap ^® material to mitigate internal blast effect and suppress internal fires. Our efforts with Colt Rapid Mat LLC are specifically focused on this application, especially for the US Marine Corps.

4. Defense/Combat Systems

An additional area of focus for us is in the Defense market is major DOD system developments and upgrades. This includes the Air force’s production of combat aircraft, the Navy’s combat fleet and the Army’s ‘Future Combat Systems’ (FCS) family of C-130 air-transportable vehicles. While the DOD presents a viable market for the use of blast mitigation products that offer substantial system survivability, reduced weight, and other advantages, the organization’s purchase cycles are too uncertain and invariably prolonged, and the cost of participation for a contractor is very high.

We are quite interested in participating in aircraft and vehicle programs when its efforts and materials are paid as a subcontractor, and/or when there is tangible marketing value that can be clearly defined if we are involved in such programs. One such area is in retrofits and replacement programs for the Army’s medium and heavy truck fleets (dominated by Oshkosh and Stewart & Stevenson).

We have limited influence within this market.

5. Naval Vessels

Newer warships primarily use gas turbine engines, which use the same fuel as jet aircraft. These engines are confined in a noise/heat reducing enclosure. Most of the remaining types use diesel engines, as do most military vehicles and trucks.

Diesel or kerosene-type fuels’ vapors can generate explosive pressure in confined spaces. This is less of a problem in ground combat vehicles (where pool fires are more of a threat), but is a serious problem aboard a ship. Both accidents and hostile action can generate a fuel mist in a confined space, which can then ignite the flammable mix. The most likely severe hazard scenario is a fireball involving a fuel mist.

BlastWrap ^® in locations distributed around a shipboard or a vehicle engine compartment can suppress fireballs and minimize heating of metal surfaces by a flash fire. Using BlastWrap ^® can manage fireballs and flash fires created in fuel mists that could rapidly incapacitate personnel in the compartment. If the compartment is open to outside air (through a hull rupture, missile entrance, or to another compartment), any Halon fire systems, if used, will rapidly escape and the compartment fire will rapidly become uncontrollable.

While BlastWrap ^® can be effectively applied on board and throughout naval ships, this target market will not be pursued during our initial marketing push.

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Government/ Municipal Market

We have divided the Government/Municipal Market into the following sectors:

1. Law Enforcement/Security

The most common type of improvised explosive device (IED) encountered by fire/rescue and law enforcement personnel in the US is the pipe bomb. The most common explosive materials used in these devices are black powder or smokeless powder with a det cap.

In 1999, the National Institute of Justice conducted a survey to determine what technologies are needed by State and local law enforcement agencies to combat terrorism. Participants in the interviews and group discussions noted more than 100 unmet technology needs. Of those, the second most common need among all law enforcement agencies was the means to detect, analyze, disarm and disable explosives. The fourteenth most requested technology was a containment vessel and vehicle for explosive devices. It was requested that these devices be capable of containing the fragments of the device for investigative purposes and be affordable. One bomb technician noted that his agency’s containment vessels cost in excess of $100,000 each and as a result, too few were available. The study showed, that technology needs expressed were remarkably similar across the country with minor regional differences and that affordability appeared to be an overriding concern of all law enforcement agencies.

Recognizing an immediate need and the ability to provide a cost effective solution, we have developed the First Responder . The First Responder is a new and effective man-portable ring and blanket system unit that can be used to handle hazardous situations by law enforcement, fire/rescue and bomb squads. The BlastWrap ^® lined First Responder handles all of the threats of the classic North American IAD, the pipe bomb using lightweight materials. The First responder can be stored easily in the trunk of a law enforcement vehicle or locker compartment on a fire rescue vehicle. The BlastWrap ^® First Responder has been designed using guidance from the NYPD Bomb Squad and the LA County Sheriff’s Dept. We believe that The First Responder will be an effective means to mitigate blast and fire effects at a fraction of the cost of existing or competing technologies and devices.

2. Government Buildings/Structures (Embassies)

The explosion, that ripped through the Alfred P. Murrah Federal Building in Oklahoma City on April 19, 1995 killed 168 people, injured more than 500 others and damaged more than 300 buildings. While the probability of becoming the victim of a terrorist attack has changed recently, it still remains low, but the cost of such an attack continues to skyrocket. According to The Sentinel (Vol. 1, No. 3, Third Quarter 1993), a publication of the Industrial Risk Insurers, explosion has the highest average dollar loss of all hazardous events. Therefore, another cost factor entering today’s construction and building operation economy is blast mitigation costs. With the recent events of September 11, 2001, insurance costs have risen dramatically as the threat of terrorism becomes a reality. We believe that BlastWrap ^® may help companies reduce these costs and related liabilities from unexpected explosions.

3. Research Facilities and Laboratories

Research facilities deal with a large amount of explosive and hazardous materials. Both universities and government facilities work with explosive elements on a daily basis, from conducting tests to exploring new materials and compounds. Such installations are in need of mitigation protection in storage and to prevent sympathetic detonation or damage to property or persons. BlastWrap ^® is ideally suited for these environments. These products can reduce potential damage for personnel and property during the use and storage of the explosive elements.

Marketing Strategy

We believe that we are positioned to fill the expansive needs associated with blast and fire mitigation across numerous industries throughout the world. We have only begun to address the many uses and designs in which BlastWrap ^® can be effectively applied.

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We believe that our BlastGard ^® Technology can provide blast mitigation solutions for numerous industries across various market segments. However, we recognize that some industries will have significant barriers to entry and/or long lead times or conversely, provide an immediate revenue source. Having limited resources, we have researched each target market, ranked each market and divided the markets into two groups; markets that will require a strategic partnership to penetrate and markets we will sell directly to. We have developed a three-pronged approach to market our BlastGard ^® Technology.

The three-pronged approach will maximize market penetration while minimizing cost. Our approach is to:

Competition

The market for blast containment and mitigation is not well defined. Competitors range from niche architectural and engineering firms that provide specialized design and construction techniques for buildings to fire systems manufacturers. We have identified the top nine established companies that offer blast mitigation solutions, each of which may be a potential competitor in one or more of the various markets that we are pursuing. Each of these companies has been in business longer, and has substantially greater resources than BlastGard ^® :

Governmental Regulation

We are not aware of any existing or probable governmental regulations that would affect our business, except to the extend that we voluntarily design products to meet various governmental guidelines. For example, our products can be designed to conform to the United States Bureau of Alcohol, Tobacco and Firearm’s requirements for the containment of explosive materials.

Research and Development

In 2005 and 2004, we spent approximately $234,000 and $148,000, respectively, on research and development related activities. To date our products or prototypes of our products have been provided by us at no charge to potential customers for their own evaluation and testing done at their expense.

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Employees

As of the filing date of this Form 10-KSB, we had four full time officers and employees. Additional sales and marketing personnel may be hired in the future as our sales efforts require such additional personnel.

SEC Reports Available on Website

The SEC maintains an Internet site ( http://www.sec.gov ) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Our Annual Reports on Form 10-KSB, Quarterly Reports on Form 10-QSB, Current Reports on Form 8-K and other SEC filings are available on the SEC’s website as well as our company website at www.blastgardintl.com .

RISK FACTORS

An investment in our common stock involves major risks. Before you invest in our common stock, you should be aware that there are various risks, including those described below. You should carefully consider these risk factors together with all of the other information included in this Form 10-KSB before you decide to purchase shares of our common stock.

Purchase of our stock is a highly speculative you could lose your entire investment. We have been operating at a loss since inception, and you cannot assume that our plans will either materialize or prove successful. In the event our plans are unsuccessful, you may lose all or a substantial part of your investment. The purchase of our stock must be considered a highly speculative investment.

We have incurred substantial losses from inception and we have only recently begun to generate revenues; failure to achieve significant revenues and profitability in the future would cause the market price for our common stock to decline significantly. We have generated net losses from inception. We have an accumulated retained deficit of $4,733,889 and a shareholders’ deficit of $407,120 as of December 31, 2005, and we have only recently begun to generate revenues. If we don’t achieve significant revenues and profitability, our ability to continue as a going concern could be jeopardized and the market price for our common stock could decline significantly. In this respect, see “Note 1 – Going Concern” in our Notes to Financial Statements contained under Item 7.

If we do not generate adequate revenues in 2006, we will need to raise capital to continue our operations. We estimate that we will require $1.5 million to carry out our business plan during calendar 2006, and we had $361,225 in cash on hand and $232,440 in other current assets at the beginning of 2006. However, unless we generate adequate revenues from operations during 2006, we will likely require additional financing to continue our operations, and such financing may not be available at that time on terms satisfactory to us, if at all.

If we are unable to compete effectively with our competitors, we will not be successful generating revenues or attaining profits. The blast mitigation industry is highly competitive. Our ability to generate revenues and profitability is directly related to our ability to compete with our competitors. Currently, we believe that we have a competitive advantage because of our unique technology, our product performance, product mix and price. Our beliefs are based only on our research and development testing and we currently have only four completed and finished products. We face competition in our markets from competing technologies and direct competition from additional companies that may enter this market with greater financial resources than we have. If we are unable to compete effectively, we will not be successful in generating revenues or attaining profits.

We have not yet hired sales and marketing personnel, which may hinder our ability to generate revenues. Our primary sales focus is to distribute our products through strategic partners, direct sales and through information and education by our executive officers. Through our executive officers, we have entered into agreements with several strategic partners and our officers have been working with them to

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attempt to generate significant sales, although we can provide no assurances that these efforts will be successful. In the future, we may develop our own sales and marketing department in the event that management believes that such efforts would be meaningful and within our budget requirements. The failure to form a sales and marketing department and hire qualified sales personnel may adversely affect our sales efforts and could cause us not to meet operating projections.

Loss of key personnel could cause a major disruption in our day-to-day operations and we could lose our relationships with third-parties with whom we do business. Our future success depends in a significant part upon the continued service of our executive officers as key management personnel. Competition for such personnel may be intense, and to be successful we must retain our key managerial personnel. The loss of key personnel or the inability to hire or retain qualified replacement personnel could have cause a major disruption in our day-to-day operations and we could lose our relationships with third-parties with whom we do business, which could adversely affect our financial condition and results of operations.

If future market acceptance of our products is poor, we will not be able to generate adequate sales to achieve profitable operations . Our future is dependent upon the success of the current and future generations of one or more of the products we sell or propose to sell. We have four products available for sale as of March 2006 and four additional products are scheduled for testing during the remainder of the first half of 2006. As of the date of this Form 10-KSB, there have been limited sales of any of our products. If future market acceptance of our products is poor, we will not be able to generate adequate sales to achieve profitable operations.

Dependence on outside manufacturers and suppliers could disrupt our business if they fail to meet our expectations. Currently, we rely on outside manufacturers and suppliers for our finished products and intend to rely on outside supplies for our other intended products. We have entered into preliminary agreements with several outside suppliers and with a contract manufacturer for the manufacture of our products. In the event that any of our suppliers or manufacturers should become too expensive or suffer from quality control problems or financial difficulties, we would have to find alternative sources.

Our products may be subject to technological obsolescence, which would adversely affect our business by increasing our research and development costs and reducing our ability to generate sales . Considerable research is underway into blast mitigation. Discovery of another new technology could replace or result in lower than anticipated demand for our products and could materially adversely effect our operations.

We may not be able to successfully use or defend our intellectual property rights, which would prevent us from developing an advantage over our competitors. We rely on a combination of patent applications, trademarks, copyright and trade secret laws, and confidentiality procedures to protect our intellectual property rights, which we believe will give us a competitive advantage over our competitors. However, we have not been granted any patents and we may never be granted any patents if our applications are denied. Even if a patent is issued, use of our technology may infringe upon patents issued to third-parties, which would subject us to the cost of defending the patent and possibly requiring us to stop using the technology or to license it from a third party. If a third party infringes on a patent issued to us, we will bear the cost of enforcing the patent. If we are not able to successfully use or defend our intellectual property rights, we may not be able to develop an advantage over our competitors.

We do not expect to be able to pay cash dividends in the foreseeable future, so you should not make an investment in our stock if you require dividend income. The payment of cash dividends, if any, in the future rests within the discretion of its Board of Directors and will depend, among other things, upon our earnings, our capital requirements and our financial condition, as well as other relevant factors. We have not paid or declared any cash dividends upon our Common Stock since our inception and by reason of our present financial status and our contemplated future financial requirements does not contemplate or anticipate making any cash distributions upon our Common Stock in the foreseeable future.

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We have a limited market for our common stock which causes the market price to be volatile and to usually decline when there is more selling than buying on any given day. Our common stock currently trades on the over the counter bulletin board under the symbol “BLGA.” However, at most times in the past, our common stock has been thinly traded and as a result the market price usually declines when there is more selling than buying on any given day. As a result, the market price has been volatile, and the market price may decline immediately if you decide to place an order to sell your shares.

The market price of our common stock is highly volatile and several factors that are beyond our control, including our common stock being historically thinly traded, could adversely affect its market price. Our common stock has been historically thinly traded and the market price has been highly volatile. For these and other reasons, our stock price is subject to significant volatility and will likely be adversely affected if our revenues or earnings in any quarter fail to meet the investment community’s expectations. Additionally, the market price of our common stock could be subject to significant fluctuations in response to:

Future sales of common stock into the public market place will increase the public float and may adversely affect the market price. Substantially all of our common stock is either in the public float, subject to a current registration statement declared effective in August 2005 or restricted common stock currently available for sale by management personnel and others under Rule 144 of the Securities Act of 1933, as amended. In general, under Rule 144, a person who has held stock for one year may, under certain circumstances, sell within any three-month period a number of shares which is not greater than one percent of the then outstanding shares of common stock. Under certain circumstances, the sale of shares which have been held for two years by a person who is not affiliated with us is also permitted without limitation under Rule 144(k). Future sales of common stock or the availability of common stock for sale may have an adverse effect on the market price of our thinly traded common stock, which in turn could adversely affect our ability to obtain future funding as well as create a potential market overhang.

“Penny Stock” regulations may adversely affect your ability to resell your stock in market transactions. The SEC has adopted penny stock regulations which apply to securities traded over-the-counter. These regulations generally define penny stock to be any equity security that has a market price of less than $5.00 per share or an equity security of an issuer with net tangible assets of less than $5,000,000 as indicated in audited financial statements, if the corporation has been in continuous operations for less than three years. Subject to certain limited exceptions, the rules for any transaction involving a penny stock require the delivery, prior to the transaction, of a risk disclosure document prepared by the SEC that contains certain information describing the nature and level of risk associated with investments in the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Monthly account statements must be sent by the broker-dealer disclosing the estimated market value of each penny stock held in the account or indicating that the estimated market value cannot be determined because of the unavailability of firm quotes. In addition, the rules impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and institutional accredited investors (generally institutions with assets in excess of $5,000,000). These practices require that, prior to the purchase, the broker-dealer determined that transactions in penny stocks were suitable for the purchaser and obtained the purchaser’s written consent to the transaction.

Our common stock is currently subject to the penny stock regulations. Compliance with the penny stock regulations by broker-dealers will likely result in price fluctuations and the lack of a liquid market for the common stock, and may make it difficult for you to resell your stock in market transactions.

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