Corporate Description

Defense Industries International is a leading manufacturer and global provider of personal military and civilian protective equipment and supplies. Defense Industries' subsidiary, Export Erez Ltd., was formed and registered in 1983.

Defense Industries' main products include body armor, bomb disposal suits and bullet proof vests and jackets; ballistic helmets, plates, wall covers and one-way protective windows; personal military equipment, battle pouch units and combat harness units; dry storage units, liquid logistics, tents and vehicle covers; and winter suits, sleeping bags and backpacks.

Defense Industries' products are used by military, law enforcement, border patrol enforcement and other special security forces, corporations, non-governmental organizations and individuals throughout the world. Customers include the Israel Defense Forces, the North Atlantic Treaty Organization (NATO), the United Nations Peacekeeping Forces and other U.N. organizations.

Defense Industries manufactures its own products, thereby enabling it to offer highly competitive pricing and to fulfill product orders on a rapid and efficient basis. Its manufacturing facilities meet American EQNET and international ISO 9002 standards. Quality control in the Company's manufacturing facilities is performed according to ISO 9002; MIL.STD.105D; MIL-I-45208A (for the U.S. Armed Forces); AQAP (for the German Armed Forces and NATO); and the National Institute of Justice (N.I.J.)

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Products

Bullet Proof Vests - vast experience in the manufacturing of bullet resistant vests for law enforcement, military and security forces, as well as emergency and rescue squads around the world. All vests meet or exceed US Mil Standard, European Countries Standards and the US National Institute of Justice Standard 0101.03. The vests use Dupont Kevlar 129 and Allied Spectra Shieldª and have been designed to provide maximum body protection with minimum weight.

Body Armor - upgraded bullet proof vests to meet threat levels III and IV - plates are made from the most advanced ballistic composite materials that can easily be placed into pockets on the vest giving it protection to front, back, collar, groin or sides. The composite plates can be delivered as "stand-alone" or in conjunction with the vest to defend against high powered bullets fired from every known rifle that is used and exists today.

Tactical Vests - combat-proven ballistic protection. Lightweight and proven protection against fragmentation and flame. Protects against burns from explosions.

Bomb Disposal Suits - The suit is made of the most advanced ballistic material available today. Hard armor plates are added to further enhance the vest's protective capabilities in the chest, groin, and collar areas up to threat level IV as per NIJ standards.

Ballistic Wall Coverings - recently awarded a patent on this technology.

A composite fabric with singular ballistic properties to act as a wall-covering shield. Prevents explosive blasts and after-shock waves from blowing out walls that surround the detonation. The applied Ballistic Wall Coverings stretches under the impact of the blast, distributing the stresses caused, and prevents the concrete brick fragments from penetrating into the building.

Management believes that this segment which currently accounts for only 10% of sales has the potential to grow to 50% of sales.

Dry Storage - Another "hot" area of potential rapid growth. The Company's controlled dry-storage system allows for the storing of mobile ground and air-borne equipment. The system offers total outdoor protection against rust and corrosion and thereby reduces equipment maintenance cost and time.

In addition to the dry storage for cars, tanks, artillery, engines and accessories, the company produces storage systems for every type of aircraft and helicopter. The coverings are made of urethane or other appropriate materials that are adjustable to the climactic conditions under which the equipment is stored. The dehumidifier maintains air inside the cover at corrosion-prevention levels.

It should also be noted that this dry storage system creates a biological and chemical barrier from deadly bio-chemical and poisonous gas.

In light of the highly mobile military operations that may need bases in hostile countries, this production segment offers huge growth potential in the foreseeable future .

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Recent Press Releases

March 02: March 28 - DFNS - Defense Industries International, Inc. commences trading under the symbol DFNS.

April 02 - April 1 - DFNS activates international website - www.defenseindustries.net

May 02 - May 9 - DFNS contacts vFinance Investments, the investment banking of vFinance, Inc. (OTC-BO-VFIN) as corporate financial advisor to the company.

May 17 - DFNS announces record revenue and record net income for Q1 02. Revenue increased to $2.6 mil US last year's comparative period of $1 mil, representing an increase of 140%, after tax net income increased to $309K or .02 versus $13K or .01 from comparable Q last year.

May 21 - DFNS wins largest contract in its history for a minimum of $13 million from a world-renowned international peace keeping organization (in our opinion UN). The order is primarily for bullet proof vests and ballistic helmets.

June 02 - June 26 - DFNS announces new order for bullet proof vests. An initial order for $500K of its custom designed bullet proof vests from a new customer located in South Asia. Management assumes subsequent orders to be quite substantial.

July 02 - July 25 - DFNS enters vehicle protection market. The division will manufacture antiballistic ceramic removable plates which can be placed on the doors and windows of a vehicle to protect the occupants of the vehicle. A newly equipped manufacturing facility has been completed in order to meet the anticipated order flow.

Aug 02 - August 15 - DFNS reports record revenue and earnings for Q2. Revenue exploded 186% versus last year's comparative period - $2.7 million compared to $940K. Net income/sh surged 240% versus last year's comparative period - $243K compared to $72K.

August 29 - Defense Industries announces opening of subsidiary in South America. DFNS receives multiple "new" orders; $650K from South America and a $1.5 million in follow on orders expected next quarter and another $250K follow on order from South East Asia. The company owns a 7,000 square foot facility in SA, which will house production and shipping of a full array of DFNS products.

Great release - demonstrates worldwide expectance of their products. These "new" orders also build upon the 02 projections. If the new order flow continues, DFNS's current share price may very well be the spring board for higher share valuations.

Sept 02 - September 13 - DFNS announces initial order from the Government of Chile for $300K for its custom designed bullet proof vests. Subsequent follow on orders are expected.

September 27 - DFNS forms joint venture with Freedom Medical to distribute certain protective products manufactured by DFNS. Freedom's data base of clients include government municipalities, police, fire departments and other first responders. Freedom's website: www.freedommedical.com

October 1 - DFNS appoints new director to board in order to increase independence and diversity. Mr. Hassan has extensive electronics and military experience.

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Management Objectives

1. Pursue strategic acquisitions - in order to consolidate the highly fragmented industry.

2. Focus on internal growth - greater comprehensive portfolio of products to satisfy all customers' protective equipment needs.

3. Capitalize on increased demand for company products. As a result of the terrorist attacks of 9-11, other world events and increased emphasis on safety and protection.

4. Expand marketing efforts - create better global brand and recognition awareness of DFNS and products.

5. Expand distribution network and product offerings.

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QUESTION AND ANSWER

Questions by William Velmer, Editor of S. A. Advisory (19 years) and www.saadvisory (7 years), and Peter Zoltan, Vice President of Business Development of DFNS.

W. Velmer: What segment of your current business model offers the greatest growth potential during the next 18 months?

Peter Zoltan: As a "new" product, the Ballistic Wall Coverings could grow to over 50% of sales if the products is received as we anticipate. The other area of growth is our Bullet Proof Vest - higher quality and lower cost, and higher gross margins. We believe that our penetration into law enforcement on an international level offers us the greatest revenue and profit potential for a superior products that can stand up and surpass any of our competitors. It should be noted that our gross margins are higher because we are totally vertigrated within our manufacturing. We do it all.

W. Velmer: Is the company currently seeking an acquisition candidate that complements DFNS's current business plan?

Peter Zoltan: We are currently looking to acquire a manufacturing and warehouse facility within the US. This scenario will yield better distribution for our law enforcement products that we feel offers superior growth for our company during the next few years. We are also actively investigating numerous other candidates that surely compliment our existing product mix.

W. Velmer: From previous press releases, contracts with NATO, UN and IDG are quite evident. Do you have any business relationship with the US Government?

Peter Zoltan: We are really not at liberty to discuss informal or formal agreements with the DOD or any other law enforcement or security force within the US. Any agreements with the US Governmental agencies would not be directly with an off shore company, but through an intermediary. Please note that once we establish facilities within the US borders that the method of awarding contracts becomes more transparent and we believe will become plentiful.

W. Velmer: When does DFNS intend to introduce products into the US either under existing labels or a joint venture with a well established brand in order to achieve more rapid product awareness and saleability?

Peter Zoltan: There are plans for both, and we are 60 to 90 days away from implementation.

W. Velmer: On May 13, 2002, DFNS announced a contract for $13 million from a "well known" peacekeeping organization. How much will be billed during 02?

Peter Zoltan: This contract is over the next two years!

W. Velmer: In order to continue your recent rate of growth, does DFNS have any intention to tap the equity market place in the form of a secondary in order to raise additional working capital?

Peter Zoltan: We hope to raise additional capital within the next couple of quarters. We will only sell straight equity - no convertibles, and may consider bank financing. Since DFNS desires rapid revenue and earnings growth, then it must tap the financial market place in order to achieve its stated goals. It should be noted that the offered equity most likely will be a private offering to a select and qualified group of investors. Our intention is to sell restricted stock at a price equal to the free trading shares at that time. We will most likely look to secure around US$3 - $5 million.

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OVERVIEW

From the above "Select Financial Data", it is relatively easy to conclude that DFNS is growing as fast as a "speeding bullet". From actual revenue from 01 through estimated 03, we have growth of 100%/yr. This growth surge, of course, results for the "horror of 9-11", the commitment of war on terrorism here and abroad and the technological advancements in body armor and bullet proof vests for the civilian, as well as the military environment.

The Body Armor and Bullet Proof Vest industrial segment has hit full stride with respect to weight, protective fortitude and cost effectiveness. The "Killer Application" for protection against deadly explosives and the deadly force of fire arms is upon us. In addition, tactical vests, bomb disposal suits and ballistic wall coverings have also come of age and provide additional safety and security for the civilian and military market place.

Management supplied us with revenue and earnings estimates for the balance of 02 and 03. These numbers especially geared toward 02 do not include the recently announced contracts. It is in our opinion that the number may very likely exceed the printed numbers within Select Financial Data. If we look 12 months out, we conclude that earnings will be roughly .15/sh (July 1, 02 - June 30, 03), using management estimates, but in our opinion, these numbers may be too low.

If a company grows by 100%/year, what PE value does one assign? This company has been around for 19 years, only public for 9 months, is relatively obscure and, of course, falls into the micro-cap arena. The industry is growing rapidly (Armor Holding AH & DHB Industries), and a slowdown is not foreseen for at least 5 years and one should not forget that any one of these companies could attempt a tender offer of one of its peers.

DFNS, as small as it may be, may become a global player in defensive garb. The company supplies products to the UN, NATO and IDF, countries in South East Asia and South America have recently become clients of this "little mouse that roars."

So how do we value DFNS? If we use "PEG", that is, PE equal growth, we get a $15.00 stock - too aggressive. If we use 17% of 100% growth rate, this may be a more palatable PE valuation when one considers the current market nervousness. Based upon a PE of 17 and an earnings estimate of .15 during the next 12 months, we calculate a share valuation of $2.55, a 466% appreciation from current levels.

As mentioned earlier, these values are generated from management and have not taken in account the recently announced "new" contracts (see August 29, 02 Press Release), any acquisitions or joint ventures and additional "new" contracts that are pending. One should read between the lines!

If we assume that DFNS earns .25 during 03 and assign the same PE multiple of 17, the resulting share price is $4.25, a 844% appreciation from current levels.

We assume that during the next six months that DFNS will raise additional working capital via the sale of "new" equity - mostly in the form of a private transaction, in order to raise $3 - $5 million for anticipated growth and expansion through the world!

Please review graph 1, 2 and 3. It is quite obvious that these graphic pictures explain why DFNS is in the right industry at the right time.

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1. Vests are more flexible and lighter 2. They fit better and are more comfortable 3. Vests are more ballistically protective 4. Mandating the wearing of vests

BULLISH FACTS TO CONSIDER

1. $379 billion military spending request for fiscal year - see graph 2.

2. Government funding from the Bullet Proof Vest partnership through 2004 is guaranteed to be $50 million annually for the exclusive purchase of body armor. A high replacement rate of body armor - see graph 3.

3. The number of military and law enforcement personnel is increasing dramatically resulting from terrorist threat, new "Homeland Security" measures, and increased peripheral demand is being generated from ancillary personnel at airports, power plants, arenas and large corporations.

4. The Homeland Security budget anticipated to rise to $38 billion - the funds would supply first response teams with the tools to implement our continual attack strategy against terrorism. These monies would cover 30K new federal airport security workers, 300 more FBI agents, plus additional police, fireman and medical personnel.

OVERVIEW II
WHY BUY DFNS SHARES?

1. Management highly qualified.

2. Product mix diverse, innovative and cost effective.

3. Earning potential during next 18 months appears highly favorable.

4. Portfolio diversification.

5. The industry for protective gear and safety equipment for civilian and military application is growing rapidly with numerous "Killer Applications."

6. Worldwide recognition and acceptance growing daily.

7. Innovative product design secured by patent, i.e., Ballistic Wall Coverings, a potential show STOPPER!

8. The countless stats that fortify growth in the US alone - see graph 1, 2, and 3.

9. The vastness of Worldwide Demand equals BILLIONS!!

10. We are at the beginning of a once-in-a-generation, long-term up tick in US defense spending!

11. In addition, during the next 12 to 18 months we envision a 400 to 700%+ appreciation potential - very Bullish.

12. A great defense play for speculative accounts.

13. New Consultant - Extremely Bullish - the Honorable John Krings recognized as a national leader in defense and aviation. He was appointed to the level of assistant to the Secretary of Defense by President Reagan. He planned, managed and executed significant F-4, F-15, and F-18 test programs. He will be an influential lobbyist for the company and its cutting edge products. See complete bio from current press release - October 14, 2002.

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Overview III

Recently in the print media, as well as network and cable television broadcasting, a major competitor has been targeted by a union that would like to unionize the company (possibly spreading inaccurate and misleading claims). In addition, claims that bullet proof vests are defected and now the usual shareholders lawsuit. All this drama bodes well for DFNS to secure additional contracts for civilian and military protective gear. DFNS has no lawsuits, no union problems and absolutely no questions about the dependability and reliability of their protective gear. These three positive elements concerning DFNS only add to our BULLISH ATTITUDE towards the overall success of DFNS.

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Disclosure

S. A. Advisory, and advisory firm, acts as a consultant to DFNS as of November 4, 2002. We have been paid $25,000 worth cash and stock to produce this anecdotal research report and to distribute it via media channels in order for investors to be made aware of its business plan, as well as future revenue and earnings estimates. We may buy, sell, or hold shares in this issue at any time. This fee is a one time cost to the company. We are not obligated to the company in any way once this report is released. We currently own 12,500 shares of DFNS which were purchased in the open market.

Before investing, consult the company for questions that you may have concerning DFNS.