UseSECURITIES theseAND linksEXCHANGE toCOMMISSION rapidly review the document DIGITALNET HOLDINGSWASHINGTON, INCD.C. TABLE OF CONTENTS 20549

SECURITIESFORM AND EXCHANGE COMMISSION Washington, D.C. 20549 10-Q

FORM 10-Q

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Quarter Ended June 30, 2004
	OR

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 2003
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From To

[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from __________________ to __________________

Commission File Number: 000-50420

DIGITALNET HOLDINGS, INC. (Exact name of registrant as specified in its ~~charter~~Charter)

Delaware (State or other jurisdiction of incorporation or organization) 52-2339233 (I.R.S. Employer Identification No.)


Delaware		52-2339233
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
2525 Network Place, Herndon, Virginia		20171
(Address of principal executive offices)		(Zip Code)

~~2525~~(703) ~~Network~~563-7500 ~~Place, Herndon, VA 20171~~ (~~Address~~Registrant's oftelephone ~~principal~~number, ~~executive~~including ~~offices)~~area code)

Indicate by check mark whether the registrant (~~703~~1) ~~563-7500~~ has filed all reports required to be filed by Section 13 or 15(~~Registrant's~~d) ~~telephone~~of ~~number,~~the ~~including~~Securities ~~area~~Exchange ~~code~~Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_|

Indicate by check mark whether the registrant ~~(1) has~~is ~~filed~~an ~~all~~accelerated ~~reports~~filer ~~required to be filed by Section 13 or 15~~(d)as ofdefined ~~the~~in ~~Securities~~Rule ~~Exchange~~12B-2 ~~Act~~ of ~~1934 during the~~ ~~preceding 12 months (or for such shorter period that~~ the ~~registrant~~Exchange ~~was required to file such reports~~Act)~~, and (2) has been subject to such filing requirements for the past 90 days~~. Yes o |_| No ý |X|

~~Indicate~~As byof ~~check~~July ~~mark~~31, ~~whether~~2004, ~~the~~there ~~registrant~~were is16,342,780 anshares ~~accelerated~~outstanding ~~filer~~of ~~(as~~the ~~defined~~registrant’s incommon ~~Rule 12B-2~~stock, ofpar value ~~the~~$0.001 ~~Exchange Act)~~per share. ~~Yes o No ý~~

As ofDIGITALNET October 31HOLDINGS, 2003, there were 16,290,158 shares outstanding of the registrant's common stock, par value $0INC.001TABLE perOF share. CONTENTS

DIGITALNET HOLDINGS, INC. TABLE OF CONTENTS

		Page No.
PART I:	FINANCIAL INFORMATION	3
Item 1.	Consolidated Financial Statements (Unaudited)	3
	Consolidated Balance Sheets as of December 31, 2003 and June 30, 2004 (Unaudited)	3
	Consolidated Statements of Operations (Unaudited) for the three and six months ended June 30, 2003 and
	2004	4
	Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2003 and 2004	5
	Notes to Consolidated Financial Statements (Unaudited)	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	21
Item 4.	Controls and Procedures	21
PART II:	OTHER INFORMATION	22
Item 1.	Legal Proceedings	22
Item 2.	Changes in Securities and Use of Proceeds	22
Item 3.	Defaults upon Senior Securities	22
Item 4.	Submission of Matters to a Vote of Security Holders	22
Item 5.	Other Information	22
Item 6.	Exhibits and Reports on Form 8-K	22
SIGNATURES		24

PART I: FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Consolidated Balance Sheets as of December 31, 2002 and September 30, 2003 (Unaudited)
		Consolidated Statements of Operations (Unaudited) for the Three months Ended September 30, 2002 and 2003 and the Nine Months Ended September 30, 2002 and 2003
		Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2002 and 2003
		Notes to Consolidated Financial Statements (Unaudited)
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk
	Item 4.	Controls and Procedures
PART II: OTHER INFORMATION
	Item 1.	Legal Proceedings
	Item 2.	Changes in Securities and Use of Proceeds
	Item 3.	Defaults upon Senior Securities
	Item 4.	Submission of Matters to a Vote of Security Holders
	Item 5.	Other Information
	Item 6.	Exhibits and Reports on Form 8-K
		Signatures
		Certifications

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (Unaudited)

DIGITALNET HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS (dollarsDOLLARS inIN thousandsTHOUSANDS, exceptEXCEPT perPER shareSHARE dataDATA)

		December 31, 2002			September 30, 2003
		December 31, 2003			June 30, 2004
					(unaudited)
ASSETS:
Assets
Current assets:
Cash and cash equivalents	~~Cash and cash equivalents~~	$	323,~~894~~635		$	168,~~928~~739
	Accounts receivable (net of allowance for doubtful accounts of $3,454 and $2,483 at December 31, 2002 and September 30, 2003, respectively)		64,023			53,354
Accounts receivable (net of allowance for doubtful accounts
	Inventory, net		7,803			12,439
of $2,526 and $2,995 at December 31, 2003 and June 30, 2003,
	Prepaid expenses and other current assets		3,589			5,501
respectively)			66,197			70,459
Total current assets			79,309			88,222
Inventory			7,692			5,509
	Other assets		5,939			6,099
Prepaid expenses and other current assets			9,162			3,967
	Property and equipment, net		13,222			12,252
Total current assets			106,686			88,674
	Intangible assets, net		188,311			179,023
Other assets			8,438			6,994
Total assets		$	286,781		$	285,596
Property and equipment, net			12,008			10,260
LIABILITIES, REDEEMABLE CONVERTIBLE SECURITIES AND SHAREHOLDERS EQUITY (DEFICIT):
Intangible assets, net			173,128			216,094
Current liabilities:
Total assets		$	300,260		$	322,022
	Accounts payable	$	4,859		$	9,444
Liabilities and stockholders' equity
	Accrued expenses		49,941			38,096
Current liabilities:
	Deferred revenues		3,441			8,125
Accounts payable		$	7,621		$	7,051
	Current portion of long-term debt		48,549			—
Accrued expenses			35,029			33,040
Total current liabilities			106,790			55,665
Deferred revenues			5,630			2,149
Long term debt, net of current portion			78,453			125,000
Current portion of long-term debt			--			4,000
Other liabilities			5,051			6,758
Total current liabilities			48,280			46,240
Class A redeemable convertible preferred stock, $0.01 par value; 96,790 shares authorized; 61,376 shares issued and outstanding as of December 31, 2002 and September 30, 2003			61,739			64,552
Long-term debt, net of current portion			81,250			96,250
Class B redeemable convertible preferred stock, convertible preferred stock, $0.01 par value; 33,500 shares authorized; 33,500 shares issued and outstanding as of December 31, 2002 and September 30, 2003			33,698			35,233
Other liabilities			11,277			10,242
Commitments and contingencies
Shareholders' equity (deficit):
Stockholders' equity:
	Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued or outstanding		—			—
Preferred stock, $0.001 par value; 5,000,000 shares authorized; no
	Common stock, $0.001 par value, 100,000,000 shares authorized; 6,733,026 shares issued and outstanding as of December 31, 2002 and September 30, 2003		7			7
shares issued or outstanding			--			--
	Additional paid-in capital		4,636			1,776
Common stock, $0.001 par value; 100,000,000 shares authorized;
	Warrants		379			379
16,290,158 and 16,336,425 shares issued and outstanding as of
	Deferred compensation		(175	)		(973	)
December 31, 2003 and June 30, 2004, respectively			17			17
	Notes receivable from management		(1,027	)		(848	)
Additional paid-in capital			173,478			173,650
	Accumulated deficit		(2,770	)		(1,953	)
Warrants			379			254
Total shareholders' equity (deficit)			1,050			(1,612	)
Deferred compensation			(888	)		(653	)
Total liabilities, redeemable convertible securities and shareholders' equity (deficit)		$	286,781		$	285,596
Accumulated deficit			(13,533	)		(3,978	)
Total stockholders' equity			159,453			169,290
Total liabilities and stockholders' equity		$	300,260		$	322,022

See ~~Accompanying~~accompanying ~~Notes~~notes.

DIGITALNET HOLDINGS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (dollarsDOLLARS inIN thousandsTHOUSANDS, exceptEXCEPT perPER shareSHARE dataDATA)

		Three Months Ended September 30,						Nine Months Ended September 30,
		Three months ended June 30						Six months ended June 30,
		2002			2003			2002			2003
		2003			2004			2003			2004
Revenues		$	—82,410		$	8697,~~082~~572		$	—160,312		$	~~246~~178,~~394~~296
Costs of revenues			—			68,214			—			195,034
Costs of revenues (includes depreciation expense of $1,394 and $746 for the
Gross profit			—			17,868			—			51,360
three months ended June 30, 2003 and 2004, respectively, and $3,258 and $1,878
Operating Expenses
for the six months ended June 30, 2003 and 2004, respectively)			64,936			74,899			126,820			136,842
	Selling, general and administrative (including stock-based compensation of $205 and $690 for the three months and nine months ended September 30, 2003, respectively)		732			8,493			1,480			25,864
Gross profit			17,474			22,673			33,492			41,454
	Acquisition and related expenses		—			—			475			—
Operating expenses:
	Amortization of intangibles		—			2,649			—			7,947
Selling, general and administrative (includes depreciation expense of $537 and $338
Total operating expenses			732			11,142			1,955			33,811
for the three months ended June 30, 2003 and 2004, respectively, and $706 and $559
Income (loss) from operations			(732	)		6,726			(1,955	)		17,549
for the six months ended June 30, 2003 and 2004, respectively, and stock-based
Other income and (expense)
compensation of $96 and $66 for the three months ended June 30, 2003 and 2004, respectively,
	Interest income		6			25			13			105
and $485 and $144 for the six months ended June 30, 2003 and 2004, respectively)			8,916			10,151			17,371			17,855
	Interest expense		—			(7,626	)		—			(15,767	)
Acquisition and related expenses			--			--			--			(366	)
	Other expense, net		—			(7	)		—			(40	)
Amortization of intangibles			2,649			2,282			5,298			4,163
Total other income and (expense)			6			(7,608	)		13			(15,702	)
Total operating expenses			11,565			12,433			22,669			21,652
Income (loss) before provision for income taxes			(726	)		(882	)		(1,942	)		1,847
Income from operations			5,909			10,240			10,823			19,802
Provision (benefit) for income taxes			—			(244	)		—			1,030
Other income (expense):
Net income (loss)		$	(726	)	$	(638	)	$	(1,942	)	$	817
Interest income			33			63			80			176
Dividends on preferred stock			—			(1,487	)		—			(4,348	)
Interest expense			(4,037	)		(2,295	)		(8,141	)		(4,385	)
Net loss attributable to common stockholders		$	(726	)	$	(2,125	)	$	(1,942	)	$	(3,531	)
Other, net			(39	)		(3	)		(33	)		12
Net loss per common share:
Total other income (expense)			(4,043	)		(2,235	)		(8,094	)		(4,197	)
Basic and diluted net loss attributable to common stockholders per common share		$	(0.31	)	$	(0.38	)	$	(0.95	)	$	(0.63	)
Income before provision for income taxes			1,866			8,005			2,729			15,605
Basic and diluted weighted average common shares outstanding			2,349,679			5,661,372			2,052,509			5,582,116
Provision for income taxes			765			3,076			1,274			6,050
Pro Forma earnings (loss) per common share:
Net income		$	1,101		$	4,929		$	1,455		$	9,555
	Pro Forma basic earnings (loss) per common share	$	(0.31	)	$	(0.07	)	$	(0.95	)	$	0.09
Dividends and accretion on preferred stock			(1,449	)		--			(2,861	)		--
	Pro Forma basic weighted average common shares outstanding		2,349,679			9,458,517			2,052,509			9,379,261
Net income (loss) attributable to common stockholders		$	(348	)	$	4,929		$	(1,406	)	$	9,555
	Pro Forma diluted earnings (loss) per common share	$	(0.31	)	$	(0.07	)	$	(0.95	)	$	0.08
Net income (loss) per common share:
	Pro Forma diluted weighted average common shares outstanding		2,349,679			9,458,517			2,052,509			10,421,557
Basic net income (loss) attributable to common stockholders per common share		$	(0.06	)	$	0.30		$	(0.25	)	$	0.59
Basic weighted average common shares outstanding			5,581,628			16,303,454			5,541,831			16,296,806
Diluted net income (loss) attributable to common stockholders per common share		$	(0.06	)	$	0.30		$	(0.25	)	$	0.58
Diluted weighted average common shares outstanding			5,581,628			16,488,706			5,541,831			16,481,409

See ~~Accompanying~~accompanying ~~Notes~~notes.

DIGITALNET HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (dollarsDOLLARS inIN thousandsTHOUSANDS)

		Nine Months Ended September 30,
		Six Months Ended June 30
		2002			2003
		2003			2004
Cash flows from operating activities:
Net income (loss)		$	(1,942	)	$	817
Net income		$	1,455		$	9,555
	Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation	~~Depreciation~~		63,964			52,~~939~~437
	Loss on disposal of assets		—			45
Loss (gain) on sale of equipment			41			(12	)
Amortization of intangible assets	~~Amortization of intangible assets~~		—5,298			74,~~947~~163
	Amortization and write-off of deferred financing costs		—			6,192
Amortization of deferred financing costs			2,021			375
	Amortization and write-off of discounts on debt		—			898
Amortization of discount on debt			360			--
Amortization of deferred compensation	~~Amortization of deferred compensation~~		—485			~~690~~144
Deferred income taxes	~~Deferred income taxes~~		—1,274			16,~~030~~050
Changes in operating assets and liabilities, net of effect of acquisitions
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable	~~Accounts receivable~~		—5,187			113,~~351~~622
Inventory	~~Inventory~~		—(6,043	)		(42,~~636~~183	)
Prepaid expenses and other assets	~~Prepaid expenses and other assets~~		20(3,060	)		(31,~~307~~665	)
	Accounts payable and accrued expenses		798			2,789
Accounts payable, accrued expenses and other liablities			(6,159	)		(10,396	)
Deferred revenues	~~Deferred revenues~~		—7,909			5(3,~~709~~481	)
	Other liabilities		—			422
Net cash provided by operating activities			12,732			16,305
Net cash provided by (used in) operating activities			(1,118	)		35,886
Cash flows from investing activities:
Cash flows from investing activities:
Purchases of property and equipment			(3,554	)		(2,047	)
Purchase of property and equipment			—			(5,024	)
Proceeds from sale of equipment			10			1,813
Proceeds from sale of equipment			—			10
Acquisitions, net of cash acquired			(9,477	)		(50,105	)
Purchase of DigitalNet Government Solutions, LLC., net of cash acquired			—			(11,778	)
Net cash collected on behalf of and due to our predecessor's parent			4,800			--
Net cash collected on behalf of and due to Getronics parent			—			1,981
Net cash used in investing activities			(8,221	)		(50,339	)
Net cash used in investing activities			—			(14,811	)
Cash flows from financing activities:
Cash flows from financing activities:
Net borrowings (repayments) under revolving credit facility			(3,900	)		19,000
Proceeds from issuance of 9% senior notes due 2010			—			125,000
Repayments on term loan facility			(1,250	)		--
Debt issuance costs			—			(5,320	)
Proceeds from stock option excerises			--			138
Payments under revolving credit facility			—			(3,900	)
Payments on management notes receivable			119			--
Payments on term loan			—			(80,000	)
Net cash (used in) provided by financing activities			(5,031	)		19,138
Payments on subordinated bridge note			—			(44,000	)
Net decrease in cash and cash equivalents			(520	)		(14,896	)
Proceeds from issuance of common stock, net of offerings costs			624			—
Cash and cash equivalents, beginning of period			3,894			23,635
Payments on management notes receivable			70			179
Cash and cash equivalents, end of period		$	3,374		$	8,739
Net cash provided by (used in) financing activities			694			(8,041	)
Supplemental disclosures of cash flow information:
Net increase (decrease) in cash and cash equivalents			(424	)		13,034
Cash paid for interest		$	6,330		$	4,166
Cash and cash equivalents (beginning of period)			463			3,894
Cash and cash equivalents (end of period)		$	39		$	16,928
Supplemental Disclosure (Cash Flow Information)
Cash paid for interest		$	—		$	6,617

See ~~Accompanying~~accompanying ~~Notes~~notes.

DigitalNet Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Description of Business and Basis of Presentation

DigitalNet Holdings, Inc. (DigitalNet or the Company) ~~was~~is ~~incorporated~~a inprovider ~~September 2001, under the laws~~ of ~~the~~strategic ~~state~~consulting ofservices, managed ~~Delaware.~~network ~~On November 26~~services, ~~2002,~~information ~~the~~security ~~Company~~solutions, ~~completed~~and ~~its~~application ~~acquisition~~development ofand integration ~~Getronics~~services ~~Government~~to ~~Solutions, L~~U.LS.C. ~~(now~~defense, ~~DigitalNet~~intelligence ~~Government~~and ~~Solutions,~~civilian ~~LLC~~federal ~~or DGS)~~government agencies. ~~DGS's~~Substantially ~~results~~all of ~~operations have been included in~~ the Company'’s ~~consolidated~~revenues ~~statements~~are ofderived ~~operations~~ from contracts with the ~~date of acquisition~~U.S. ~~Prior to this acquisition~~government, ~~the~~directly ~~Company~~as ~~was~~a ~~involved~~prime ~~primarily~~contractor inor ~~developing~~as ~~its~~a ~~business plan, recruiting personnel, raising capital, and identifying and evaluating operating assets for acquisition~~subcontractor.

~~DigitalNet,~~The ~~through~~accompanying ~~its~~unaudited ~~ownership~~consolidated offinancial ~~DGS,~~statements ishave abeen ~~provider~~prepared pursuant to the rules and regulations of ~~managed~~the ~~network~~Securities ~~services,~~and Exchange Commission. Certain information and ~~security~~note ~~solutions~~disclosures normally included in the annual financial statements, ~~and~~prepared ~~application~~in accordance ~~development~~with accounting principles generally accepted in the United States, have been condensed or omitted pursuant to those rules and ~~integration~~regulations, ~~services~~although the Company believes that the disclosures made are adequate to Umake the information presented not misleading.S. ~~defense~~In the opinion of management, the accompanying unaudited condensed ~~intelligence~~consolidated financial statements reflect all necessary adjustments (all of which are of a normal and ~~civilian~~recurring ~~federal~~nature) ~~government~~that ~~agencies~~are necessary for fair presentation for the periods presented. The ~~Company's~~results ~~comprehensive~~of ~~information~~operations ~~technology~~for ~~services~~the ~~and~~six ~~solutions~~months ~~allow~~ended ~~federal~~June ~~government~~30, ~~clients~~2004 are not necessarily indicative of the results to ~~outsource~~be expected for the ~~design,~~full fiscal year. It is ~~implementation,~~suggested ~~integration,~~that ~~management~~these ~~and~~unaudited ~~security~~condensed ofconsolidated ~~their~~financial ~~computer~~statements ~~networks~~be read in conjunction with the audited consolidated financial statements and ~~systems~~the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.

~~The~~Certain ~~Company's~~prior ~~operations~~year ~~are~~amounts ~~subject~~have tobeen ~~certain~~reclassified ~~risks and uncertainties including, among others, the susceptibility of the Company's services~~ to ~~rapid~~conform technological change, dependence on contracts with federal government agencies, dependence on significant customers, dependence on revenues derived from contracts awarded through competitive bidding, existence of contracts with fixed pricing, dependence on subcontractors to ~~fulfill~~the ~~contractual obligations,~~ current ~~and~~year potential competitors with greater resources, dependence on key management personnel, ability to recruit and retain employees, dependence on intellectual property, lack of operating history, and uncertainty of future profitability and possible fluctuations in financial resultspresentation.

~~The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission~~2. ~~Certain~~Stock ~~information~~Based and note disclosures normally included in the annual financial statements, prepared in accordance with accounting principles generally accepted in the United States, have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information presented not misleading. Compensation

InThe ~~the~~Company ~~opinion~~accounts offor ~~management,~~stock based employee compensation arrangements using the ~~accompanying~~intrinsic value ~~unaudited~~method ~~condensed~~in ~~consolidated~~accordance ~~financial~~with ~~statements~~provisions ~~reflect~~of ~~all~~Accounting ~~necessary~~Principles ~~adjustments~~Board Opinion (~~all~~APB) No. of25, ~~which~~Accounting ~~are~~for ofStock aIssued ~~normal~~to Employees, and ~~recurring~~complies ~~nature)~~with the disclosure ~~that~~provisions ~~are~~of ~~necessary~~SFAS ~~for~~No. ~~fair~~123, ~~presentation~~Accounting for ~~the~~Stock ~~periods~~Based ~~presented~~Compensation. ~~The~~Under ~~results~~APB Opinion ofNo. ~~operations~~25, ~~for~~compensation ~~the~~cost ~~three~~is ~~months~~generally ~~and~~recognized ~~nine~~based ~~months~~on ~~ended~~the ~~September 30~~difference, ~~2003~~if ~~are~~any, on ~~not~~the ~~necessarily~~date ~~indicative~~of grant between the fair value of the Company’s stock and the amount an ~~results~~employee must pay to beacquire ~~expected~~the ~~for~~stock. In December 2002, the ~~full~~Financial ~~fiscal~~Accounting Standards ~~year~~Board (FASB) issued SFAS No. It148, isAccounting ~~suggested~~for ~~that~~Stock ~~these~~Based Compensation—Transition ~~unaudited~~and ~~condensed~~Disclosure, ~~consolidated~~which ~~financial~~prescribes ~~statements~~certain bedisclosures ~~read~~and provides inguidance ~~conjunction~~on ~~with~~how to transition from the ~~Company's~~intrinsic ~~final~~value ~~initial~~method ~~public~~of accounting for ~~offering~~stock ~~(IPO)~~based ~~prospectus~~employee ~~filed~~compensation ~~with~~under APB No. 25 to the ~~SEC~~fair onvalue ~~October 10,~~method ~~2003~~of ~~(File~~accounting of SFAS No. ~~333-107764)~~ 123, ~~which~~Accounting ~~includes~~for ~~consolidated~~Stock ~~financial~~Based ~~statements~~Compensation, ~~and~~if ~~the~~a ~~notes~~company ~~thereto~~so elects. The Company continues to account for ~~the~~its ~~year~~stock based compensation in accordance with APB ~~ended~~No. ~~December 31,~~25 ~~2002~~and its related interpretations.

InFor ~~March 2003~~the three and six months ended June 30, 2003 there would be no effect on the net loss attributable to common stockholders if the Company ~~effected~~had aapplied ~~one-for-eight~~the ~~reverse~~fair ~~stock~~value ~~split~~method of SFAS No. 123. ~~Accordingly,~~The ~~all~~following ~~share~~table illustrates the effect on the net income attributable to common shareholders and the net income attributable to common stockholders per common share ~~amounts~~if ~~have~~the ~~been~~Company ~~retroactively~~had ~~adjusted~~applied tothe fair value method of SFAS No. 123 for the ~~give~~three ~~effect~~and tosix ~~this~~months ~~event~~ended June 30, 2004 (dollars in thousands, except per share data).

2.6 ~~Initial Public Offering~~

In October 2003, the Company completed its initial public offering (IPO) of common stock issuing 5,750,000 shares of common stock at $17.00 per share, which generated estimated proceeds, net of estimated offering costs, of approximately $89.1 million. The net proceeds of the IPO, together with the proceeds of $848,000 from the repayment of certain management notes, were used to redeem $43.8 million in aggregate principal amount of outstanding 9% senior notes due 2010 for approximately $47.7 million, or 109% of the aggregate principal amount of the notes being redeemed, and

	Three months ended June 30,			Six months ended June 30,
	2004			2004
	(unaudited)			(unaudited)
Net income attributable to common stockholders, as reported	$	4,929		$	9,555
Add: Stock-based employee compensation cost, net of related tax effects,
included in the determination of net income		40			88
Deduct: Stock-based employee compensation expense determined under fair
value based method, net of related tax effects		(170	)		(270	)

Pro forma net income attributable to common stockholders	$	4,799		$	9,373

Net income per common share:
Basic income attributable to common stockholders per common share- as reported	$	0.30		$	0.59
Diluted income attributable to common stockholders per common share- as reported	$	0.30		$	0.58
Basic income attributable to common stockholders per common share- pro forma	$	0.29		$	0.58
Diluted income attributable to common stockholders per common share- pro forma	$	0.29		$	0.57

6 In accordance with SFAS No. 123, the fair values of options were estimated at the grant date using a Black Scholes option pricing model with the following weighted average assumptions: risk-free interest rate of approximately 3%; no dividends; expected life of the options of four years; and volatility from 42% to 74%. The effect of applying the fair value method prescribed by SFAS No. 123 as described above is not necessarily representative of the effects on the reported net income for future years due to, among other things, the vesting period of the stock options and the fair value of additional stock option grants in future years.

$27.0 million was used to purchase all of the outstanding Class B Preferred Stock. In connection with the redemption of the 9% senior notes due 2010, the Company will recognize a charge of approximately $3.~~9 million~~ inAccounts ~~the~~Receivable ~~fourth quarter of 2003, attributable to the premium paid to redeem the 9% senior notes due 2010~~ and aSignificant charge of approximately $1.9 million related to the write-off of deferred financing costs related to the notes redeemed. The Company will also recognize a benefit to income attributable to common stockholders in the fourth quarter of 2003 of approximately $7.7 million related to the excess of the carrying amount of the Class B Preferred Stock over the purchase price paid for the Class B Preferred Stock. Customers

AtAccounts ~~the~~receivable ~~completion~~consisted of the ~~IPO,~~following ~~the~~as ~~Class A Preferred Stock, including accrued dividends, converted into 3,807,132 shares~~ of ~~common stock. Upon conversion in~~ the ~~fourth~~dates ~~quarter~~indicated ~~of 2003,~~(dollars the Company will recognize a beneficial conversion feature related to the Class A Preferred Stock and record a dividend of approximately $11.2 million. In the fourth quarter of 2003, the Company will also recognize approximately $10.6 million of stock-based compensation in ~~connection~~thousands): ~~with the IPO.~~

3. Significant Customers

	December 31, 2003			June 30, 2004
				(unaudited)
Billed and currently billable accounts receivable	$	65,302		$	70,351
Unbilled accounts receivable		3,421			3,103
Allowance for doubtful accounts		(2,526	)		(2,995	)

Account receivable, net	$	66,197		$	70,459

~~The~~For ~~Company~~the ~~had~~three noand ~~revenues~~six ~~prior~~months toended June ~~its~~30, ~~acquisition~~2003, ofrevenues ~~DGS.~~from ~~Revenues~~the ~~generated~~Company’s ~~from~~subcontract ~~contracts~~ with ~~the~~Lockheed ~~federal~~Martin ~~government~~on orthe National ~~prime~~Aeronautics ~~contractors~~and ~~doing~~Space ~~business with~~Administration ~~the~~(NASA) ~~federal~~Consolidated ~~government~~Space ~~have~~Operations Contract ~~accounted~~(CSOC) ~~for~~represented ~~substantially~~approximately ~~all~~14% of ~~the~~total ~~Company's~~ revenues. ~~Revenues~~The ~~from~~Company had no contracts representing greater than 10% of total revenues ~~were~~for asthe ~~follows~~three ~~(dollars~~and insix months ~~thousands):~~ended June 30, 2004.

	Three Months Ended September 30, 2003				Nine Months Ended September 30, 2003
	Revenue		Percent		Revenue		Percent
	(unaudited)				(unaudited)
National Aeronautics and Space Administration (NASA) Consolidated Space Operations Contract (CSOC)	$	11,444	13	%	$	33,357	14	%

4. ~~Accounts Receivable~~ Acquisitions

~~Accounts~~On April ~~receivable~~1, ~~consists~~2004, the Company acquired all of the ~~following~~outstanding stock of User Technology Associates, Inc. (~~dollars~~UTA) in ~~thousands):~~a transaction accounted for using the purchase method of accounting. UTA’s results of operations have been included in the Company’s consolidated statement of operations from the date of its acquisition. At closing, consideration for the acquisition consisted of $50.0 million in cash. This consideration was subject to adjustment based upon a final determination of the amount of net working capital, as defined, as of the date of acquisition. As a result of this final determination, the purchase price was reduced by $0.6 million, and the seller paid this amount to the Company in July 2004. Accordingly, the Company included this amount in the determination of the aggregate purchase price for the acquisition.

	December 31, 2002			September 30, 2003
				(unaudited)
Billed and currently billable accounts receivable	$	57,750		$	53,735
Unbilled accounts receivable		9,727			2,102
Allowance for doubtful accounts		(3,454	)		(2,483	)
Account receivable, net	$	64,023		$	53,354

The aggregate consideration was determined as follows (dollars in thousands) (unaudited):

The amounts included in currently billable accounts receivable represent amounts that were billed in the subsequent reporting period. They are billings for services rendered prior to period-end that were billed once necessary billing data had been collected and an invoice produced. Unbilled accounts receivable represent amounts that are not yet billable based upon contract terms. At December 31, 2002, the unbilled accounts receivable related primarily to accounts due under contracts that had not yet received formal government funding at year-end due to delayed appropriations bills. The Company is precluded from billing for its services until the government has formally funded the contract. Substantially all of the unbilled accounts receivable are expected to be billed and collected within 90 days of the balance sheet date.

Cash paid to seller at closing	$	50,000
Working capital adjustment		(609	)
Transaction costs and other		993

	$	50,384

7 Based upon its preliminary assessment, the Company has allocated the purchase price based upon the estimated fair values of the assets acquired and the liabilities assumed. The purchase consideration has been allocated on a preliminary basis as follows (dollars in thousands) (unaudited):

5. Acquisitions

Tangible assets acquired	$	8,732
Deferred income taxes		208
Non-compete agreement		35
Customer relationships		6,543
Goodwill		40,550
Liabilities assumed		(5,684	)

	$	50,384

OnThe goodwill ~~November 26,~~recorded ~~2002,~~is ~~the~~expected ~~Company~~to ~~acquired~~be ~~all~~fully ofdeductible ~~the membership interests of DGS from Getronics Wang Co. LLC (Getronics Parent) in a transaction accounted~~ for ~~using~~income ~~the~~tax ~~purchase method of accounting~~purposes. ~~DGS'~~The ~~results of operations have been included in the Company's consolidated statements of operations from the date of its acquisition. At~~customer ~~closing,~~relationships ~~consideration for the acquisition consisted of 33,500 shares of Class B Preferred Stock~~ and ~~$183.4 million~~non-compete inagreement ~~cash.~~intangibles ~~This~~are ~~consideration~~being ~~was~~amortized ~~subject~~using ~~to adjustment based upon a final determination of~~ the ~~amount of net working capital, depreciable assets~~ accelerated and ~~accrued~~straight-line ~~contract losses~~method, ~~as defined~~respectively, asover of10 ~~the~~and ~~date of acquisition. During 2003, the Company paid approximately $8.~~3 ~~million~~ ~~in cash as additional consideration as a result of these adjustments. Accordingly~~years, ~~the Company has included this amount in the determination of the aggregate purchase price for the acquisition~~respectively.

~~The~~In ~~aggregate~~connection ~~consideration~~with ~~was~~the ~~determined~~UTA asacquisition ~~follows~~in ~~(dollars~~April 2004, the Company recognized approximately $0.5 million in ~~thousands)~~liabilities ~~(unaudited):~~as the cost of abandoning certain leased UTA facilities and terminating certain UTA employees. The accrual consisted primarily of lease costs and severance and other employee termination costs related to the consolidation of certain operations and a duplicate facility. Payments related to these obligations will be made through March 2005.

Fair value of Class B preferred stock	$	33,500
Cash paid to seller		191,702
Transaction costs and other		11,389
	$	236,591

~~Based upon its preliminary assessment, the Company has allocated the purchase price based upon the estimated fair values of the assets acquired and the liabilities assumed~~5. ~~During~~Accrued the nine months ended September 30, 2003, the Company revised certain of its estimates related primarily to certain accounts receivable contingently due to the Company, the NASA CSOC contract obligation and the lease costs and severance related to abandoned DGS facilities and terminated DGS employees. The purchase price allocation has been adjusted as of September 30, 2003 to reflect the revisions to these estimates. The Company plans to complete its assessment of the assets and liabilities acquired during November 2003 and will reflect any adjustments to the purchase price allocation in its financial statements as of December 31, 2003. Items subject to adjustment include deferred income taxes and certain lease obligations and other liabilities. Expenses

~~The~~Accrued ~~purchase~~expenses ~~consideration~~consisted ~~has~~of ~~been~~the ~~allocated~~following onas aof ~~preliminary~~the ~~basis~~dates asindicated ~~follows~~ (dollars in thousands) ~~(unaudited)~~:

		December 31, 2003		June 30, 2004
Cash	$	5,873
Accounts receivable		63,259
				(unaudited)
Other assets		8,315
Accrued compensation and benefits		$	11,923	$	13,860
Property and equipment		13,849
Accrued contract costs			7,303		3,653
Non-compete agreements		41
Accrued acquisition and related costs			2,738		2,555
Software		527
Accrued interest			3,616		3,461
Customer relationships		33,547
Other			9,449		9,511
Goodwill		153,654
Total accrued expenses		$	35,029	$	33,040
Net deferred income taxes		1,165
Liabilities		(43,639	)
	$	236,591

In connection with the DigitalNet Government Solutions, LLC (DGS) acquisition in November 2002, the Company recognized approximately $8.2 million in liabilities related to the abandonment of certain leased DGS facilities and the termination of certain DGS employees. The accrual consisted primarily of lease costs and severance and other employee termination costs related to the expiration of a contract and the consolidation of certain other operations. For the six months ended June 30, 2004, the Company charged approximately $1.4 million against the accrual for amounts paid.

~~The~~In ~~goodwill~~connection with the DGS acquisition, the Company consolidated its facilities resulting in the closure of its Bethesda, Maryland office. As a result, the Company recorded isa restructuring ~~expected~~charge tofor bethe ~~fully~~related ~~deductible~~lease costs of approximately $446,000, which had been included in acquisition and related expenses for ~~income~~the ~~tax~~year ~~purposes~~ended December 31, 2002. The office ~~change~~space inhas been sublet to a tenant that had an option to terminate the ~~carrying~~sublease ~~value~~in certain ofcircumstances. ~~goodwill~~The ~~for~~option to terminate this lease expired during the ~~nine~~six months ended ~~September~~ June 30, ~~2003~~2004, isand as a result, the liability for the abandoned facility was reduced ~~follows~~by ~~(dollars~~approximately $366,000 with the related benefit included in ~~thousands):~~acquisition and related expenses in the statement of operations for the six months ended June 30, 2004.

Balance at December 31, 2002		$	154,996
Purchase accounting adjustments:
	Accounts receivable (unaudited)		(1,599	)
	Liabilities and other (unaudited)		257
Balance at September 30, 2003 (unaudited)		$	153,654

6.	Initial Public Offering

In ~~connection~~October ~~with the DGS acquisition in November 2002~~2003, the Company ~~recognized~~completed ~~approximately~~the ~~$8.9 million~~initial inpublic ~~liabilities~~offering as(IPO) ~~the cost~~ of ~~abandoning~~its ~~certain~~common ~~leased DGS~~stock, ~~facilities~~issuing ~~and~~5,750,000 ~~terminating~~shares ~~certain~~of ~~DGS~~common ~~employees~~stock at $17.00 ~~The~~per ~~accrual~~share, ~~consisted~~which ~~primarily~~generated proceeds, net of ~~lease~~offering costs, ~~and~~of ~~severance~~approximately ~~and~~$89.1 ~~other~~million. ~~employee~~The ~~termination~~net ~~costs~~proceeds ~~related~~of to the ~~termination of approximately 70~~IPO, ~~employees~~together ~~in connection~~ with the ~~expiration~~proceeds of ~~the~~$848,000 ~~INS~~from ~~contract and~~ the ~~consolidation~~repayment of certain ~~other~~management ~~operations.~~notes, were ~~During~~used ~~the~~to ~~nine~~redeem ~~months~~approximately ~~ended~~$43.8 ~~September 30,~~million ~~2003,~~in ~~the~~aggregate ~~Company~~principal ~~increased~~amount ~~its estimate~~ of the outstanding ~~lease~~9% ~~costs~~senior ~~related~~notes todue ~~the~~2010 ~~abandoned~~issued ~~DGS~~by ~~facilities~~DigitalNet, ~~and~~Inc., ~~increased~~a ~~its~~wholly-owned ~~estimate~~ subsidiary of the ~~severance~~Company, ~~costs~~for by approximately $147.2 7 million, and $~~262,000,~~27.0 ~~respectively,~~million ~~resulting~~was ~~in total~~used ~~liabilities~~to ~~recognized~~purchase all of ~~approximately~~the ~~$10~~Company’s outstanding Class B Preferred Stock.~~3 million.~~ ~~For~~At the ~~nine~~completion ~~months~~of ~~ended September 30~~the IPO, ~~2003,~~all of the ~~Company~~outstanding ~~charged~~Class ~~approximately~~A ~~$2.0 million~~Preferred ~~against~~Stock, ~~the~~including ~~accrual~~accrued ~~for~~dividends, ~~amounts~~converted ~~paid~~into shares of common stock.

~~The DGS pre-acquisition November 25, 2002 balance sheet included $14~~7.~~6 million~~ ofEarnings ~~accounts~~Per receivable that are collected by the Company but remitted to Getronics Parent. Because the Company is only collecting these accounts receivable on behalf of Getronics Parent, they were not included as acquired assets in the DGS purchase price allocation and accordingly do not appear on the December 31, 2002 balance sheet. In addition, the Company did not record a liability related to these amounts in the DGS purchase price allocation as the Company does not have an obligation to pay the Getronics Parent in the event that the accounts receivable are not collected. During the nine months ended September 30, 2003 the Company collected approximately $14.6 million of such accounts receivable. As of September 30, 2003, the Company had not yet remitted approximately $2.0 million of the collections to Getronics Parent, which has been included in accounts payable in the accompanying consolidated balance sheet as of September 30, 2003. Share

6 Statement of Financial Accounting Standards (SFAS) No. ~~Accrued~~128, ~~Expenses~~ Earnings Per Share, requires the presentation of basic and diluted earnings per share. Basic earnings (loss) per common share is computed by dividing income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period. The diluted earnings (loss) per common share data is computed using the weighted average number of common shares outstanding plus the dilutive effect of common stock equivalents, unless the common stock equivalents are anti-dilutive.

~~Accrued~~In connection ~~expenses~~with ~~consists~~the Company’s IPO, the Class A Preferred Stock, including accrued dividends, converted into 3,807,132 shares of common stock and a portion of the ~~following~~net proceeds ~~(dollars~~from the IPO were used to purchase all of the outstanding shares of Class B Preferred Stock. For the three and six months ended June 30, 2003, the effect of the outstanding shares of Class A Preferred Stock and Class B Preferred Stock converting into shares of common stock was not included in ~~thousands):~~the computation of diluted loss per common share as the effect would have been anti-dilutive. For the three and six months ended June 30, 2003, the outstanding shares of unvested Reserved Stock, Carried Stock and Restricted Stock were not included in the computation of basic loss per common share and the treasury stock effect of those unvested shares was not included in the computation of diluted loss per common share prior to vesting because the effect would have been anti-dilutive. In addition, warrants to purchase 94,868 shares of common stock that were outstanding as of June 30, 2003 were excluded from the computation of diluted loss per common share for the three and six months ended June 30, 2003 as their effect would have been anti-dilutive. In June 2004, a portion of these warrants were exercised resulting in the issuance of 31,249 common shares.

	December 31, 2002		September 30, 2003
			(unaudited)
Accrued compensation and benefits	$	11,651	$	13,502
Accrued acquisition and related costs		6,702		3,469
Accrued DGS purchase consideration		8,215		—
Accrued contract costs		9,388		6,805
Accrued NASA CSOC contract obligation		5,276		2,616
Other		8,709		11,704
Total accrued expenses	$	49,941	$	38,096

9 The following details the computation of the net loss per common share for the periods indicated (dollars in thousands, except per share data):

7. Debt

	Three months ended June 30,					Six months ended June 30,
	2003			2004		2003			2004
	(unaudited)			(unaudited)		(unaudited)			(unaudited)
Net income	$	1,101		$	4,929	$	1,455		$	9,555
Dividends on preferred stock		(1,449	)		--		(2,861	)		--

Net (loss) income attributable to common stockholders	$	(348	)	$	4,929	$	(1,406	)	$	9,555

Weighted average common share calculation:
Basic weighted average common shares outstanding		5,581,628			16,303,454		5,541,831			16,296,806
Treasury stock effect of options and warrants		--			185,252		--			184,603

Diluted weighted average common shares outstanding		5,581,628			16,488,706		5,541,831			16,481,409
Net (loss) income per common share:
Basic (loss) income per common share	$	(0.06	)	$	0.30	$	(0.25	)	$	0.59
Diluted (loss) income per common share	$	(0.06	)	$	0.30	$	(0.25	)	$	0.58

~~Debt~~8. ~~consists~~Commitments ofand ~~the following (dollars in thousands):~~ Contingencies

		December 31, 2002			September 30, 2003
					(unaudited)
Senior Secured Credit Facility:
	Revolving Credit Facility	$	3,900		$	—
	Term Loan		80,000			—
	Discount on Term Loan		(561	)		—
Subordinated Bridge Note			44,000			—
Discount on Subordinated Bridge Note			(337	)		—
9% Senior Notes due 2010			—			125,000
Total		$	127,002		$	125,000
Less: Current portion			48,549			—
Long-term portion		$	78,453		$	125,000

Audit Review

OnSubstantially ~~July 3,~~all ~~2003,~~payments ~~DigitalNet, Inc.,~~to ~~a wholly owned subsidiary of~~ the Company, ~~issued~~on ~~$125.0 million~~government incost ~~aggregate~~reimbursable ~~principal~~contracts ~~amount~~are ~~of 9% senior notes due 2010 (the~~provisional ~~Notes).~~payments ~~The~~that ~~net~~are ~~proceeds~~subject ~~were applied~~ to ~~repay~~adjustment ~~the~~upon ~~indebtedness~~audit ~~under~~by ~~the~~certain ~~subordinated~~government ~~bridge~~audit ~~note and the term loan~~agencies. The ~~Concurrent~~Company’s ~~with~~incurred ~~the~~cost ~~completion~~submissions ofhave ~~the~~been ~~sale~~completed ofand ~~the~~audited ~~Notes, the Company obtained its~~through ~~current~~December ~~revolving credit facility (the 2003 Credit Facility) which provides up to $50.0 million in borrowings. There were no borrowings outstanding as of September 30~~31, ~~2003 under the 2003 Credit Facility~~2002. The ~~Company was in compliance with the financial covenants of the~~ 2003 ~~Credit~~incurred ~~Facility~~cost asaudit offor ~~September 30, 2003. In connection with~~ the ~~termination of the previous credit facility and the repayment of the outstanding indebtedness under the subordinated bridge note and the term loan, the~~ Company ~~wrote-off~~is ~~approximately~~not ~~$4.5 million~~expected into ~~previously deferred~~result ~~financing costs. Such write-off has been included~~ in ~~interest~~a ~~expense~~material inadverse ~~the~~effect ~~accompanying~~on ~~statements of operations for~~ the ~~three~~Company’s ~~and~~financial ~~nine~~position ~~months~~or ~~ended~~results ~~September 30, 2003~~of operations.

8. Litigation and ~~Earnings~~Claims ~~Per Share~~

~~Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share, requires the presentation~~The ofCompany ~~basic and diluted earnings per share. Basic earnings (loss) per common share~~ is ~~computed~~periodically byinvolved ~~dividing~~in ~~income~~disputes ~~(loss)~~arising ~~attributable~~from tonormal ~~common~~business ~~stockholders by the weighted average number of common shares outstanding for the period~~activities. ~~The diluted earnings (loss) per common share data is computed using the weighted average number of common shares outstanding plus the dilutive effect of common stock~~In ~~equivalents, unless~~ the ~~common~~opinion ~~stock equivalents are antidilutive. For purposes~~ of ~~computing basic earnings per common share~~management, ~~701,848~~resolution ~~and 1,044,686 shares~~ of ~~unvested~~these ~~common~~matters ~~stock~~will ~~outstanding at September 30, 2002 and September 30, 2003, respectively, purchased by executives and employees of the Company are~~ not ~~treated~~have asa ~~outstanding~~material ~~until they vest. The~~ adverse effect ofupon ~~Class A Preferred~~the ~~Stock~~financial ~~and~~position ~~Class B~~or ~~Preferred~~future ~~Stock~~operating ~~converting~~results ~~into shares~~ of ~~common stock was not included in~~ the ~~computation of diluted loss per common share as the effect would be anti-dilutive. In addition~~Company, ~~options~~ and ~~warrants to purchase 293,893 shares of common~~ ~~stock~~adequate ~~that~~provision ~~were~~for ~~outstanding~~any asprobable oflosses September 30, 2003, were excluded from the computation of diluted loss per common share as their effect would be anti-dilutive. The treasury stock effect of 701,848 and 1,044,686 shares of unvested common stock held by executives and employees as of September 30, 2002 and September 30, 2003, respectively, has ~~also not~~ been ~~included~~ made in the ~~computation~~accompanying ofconsolidated financial ~~diluted loss per common share as their effect would be anti-dilutive~~statements.

At completion of the IPO, the Class A Preferred Stock, including accrued dividends, converted into 3,807,132 shares of common stock and a portion of the net proceeds from the IPO were used to purchase all of the outstanding shares of Class B Preferred Stock9. InRelated ~~addition~~Party ~~the 1,044,686 shares of~~ Transactions

10 The Company had previously entered into a management services agreement with GTCR that terminated at the IPO. During the six months ended June 30, 2004, the Company paid approximately $583,000 that had been accrued through the date of the IPO related to this agreement.

~~unvested~~From March 2003 through December ~~common~~2003, ~~stock~~the ~~outstanding~~Company atissued ~~September~~ four purchase orders totaling approximately $694,000, on a subcontract basis, to a company owned by the son of the Company’s Chairman and Chief Executive Officer. As of June 30, ~~2003~~2004, ~~become~~the ~~fully~~Company ~~vested~~has ~~upon~~paid ~~completion~~approximately $472,000 to the company pursuant to these purchase orders. Through these purchase orders, the company acted as a subcontractor to the Company under two civilian agency contracts, providing professional systems engineering and economic analysis services. These purchase orders were issued in the ordinary course of business and, based on the ~~IPO~~Company’s historic practices with respect to retaining subcontractors to provide services of a similar nature, management believes these services were provided on terms no less favorable than the Company would anticipate receiving from unrelated parties. In addition, in June 2004, the Company accepted a purchase order of approximately $12,000 to provide strategic consulting services to a government agency as a subcontractor to this company.

~~The following~~10 ~~details the computation of the net loss per common share (dollars in thousands, except per share data):~~

			Three Months Ended September 30,						Nine Months Ended September 30,
			2002			2003			2002			2003
			(unaudited)			(unaudited)			(unaudited)			(unaudited)
Net income (loss)			$	(726	)	$	(638	)	$	(1,942	)	$	817
Dividends on preferred stock				—			(1,487	)		—			(4,348	)
Net loss attributable to common stockholders			$	(726	)	$	(2,125	)	$	(1,942	)	$	(3,531	)
Weighted average common share calculation:
	Basic weighted average common shares outstanding			2,349,679			5,661,372			2,052,509			5,582,116
		Conversion of Class A Preferred Stock		—			—			—			—
		Conversion of Class B Preferred Stock		—			—			—			—
		Treasury stock effect of shares of unvested common stock		—			—			—			—
		Treasury stock effect of options and warrants		—			—			—			—
	Diluted weighted average common shares outstanding			2,349,679			5,661,372			2,052,509			5,582,116
Net loss per common share:
	Basic loss per common share		$	(0.31	)	$	(0.38	)	$	(0.95	)	$	(0.63	)
	Diluted loss per common share			(0.31	)		(0.38	)		(0.95	)		(0.63	)

10.

Debt and Guarantor Financial Statements

~~The~~On ~~pro~~July ~~forma~~3, ~~earnings~~2003, ~~(loss)~~the ~~per~~Company ~~common~~issued ~~share~~$125.0 ismillion ~~computed~~in ~~using~~aggregate ~~the~~principal ~~pro~~amount ~~forma~~of ~~net~~its ~~income~~9% senior notes due 2010 (~~loss~~the Notes). ~~attributable~~The toCompany ~~common~~used ~~stockholders~~a ~~and~~portion of the ~~pro~~net ~~forma~~proceeds ~~weighted~~of ~~average common shares~~the ~~outstanding~~IPO ~~during~~to ~~the~~redeem ~~period~~approximately $43.8 ~~The~~million ~~pro~~in ~~forma~~aggregate ~~net~~principal ~~income~~amount ~~(loss)~~of ~~attributable~~the tooutstanding Notes ~~common~~for ~~stockholders~~approximately ~~assumes~~$47.7 million. Concurrent with the ~~conversion~~completion of the ~~Class A~~sale ~~Preferred~~of ~~Stock~~the Notes, ~~into~~the ~~common~~Company ~~stock~~obtained ~~and~~its current revolving credit facility (the ~~purchase~~2003 ofCredit ~~the~~Facility) ~~Class B~~which ~~Preferred~~provides ~~Stock~~up asto if$50.0 ~~each~~million ~~had~~in ~~occurred~~borrowings. atIn ~~the~~April ~~beginning~~2004, ofthe ~~each~~Company borrowed ~~period~~approximately ~~presented~~$29.0 ~~The~~million ~~pro~~in ~~forma~~connection ~~weighted~~with ~~average~~the ~~common~~acquisition ~~shares~~of ~~outstanding~~UTA. ~~assumes~~During the three ~~conversion~~months ended June 30, 2004, the Company repaid approximately $10.0 million of the ~~Class A~~amount ~~Preferred~~borrowed ~~Stock~~under ~~into~~the ~~common~~2003 ~~stock~~Credit atFacility. As of June 30, 2004 the ~~IPO~~Company ~~price~~had approximately $19.0 million of ~~$17~~borrowings outstanding under the 2003 Credit Facility.00 ~~per~~The ~~share~~Company repaid asapproximately of$4.0 million under the ~~date~~2003 ofCredit ~~issuance~~Facility ~~for~~in ~~such~~July 2004.

11 The 2003 Credit Facility contains certain restrictive covenants including, among others, requirements related to operating results and leverage, as well as restrictions related to liens, investments, additional indebtedness, disposition of assets, dividends, distributions, issuances of equity securities, transactions with affiliates, capital expenditures, and certain other changes in our business. The financial covenants include the requirements to maintain a minimum consolidated fixed charge coverage ratio, a minimum net worth, and be below a maximum consolidated total leverage ratio. The Company was in compliance with the financial covenants of the 2003 Credit Facility as of June 30, 2004.

~~preferred~~ The ~~stock.~~Notes ~~The~~were ~~following~~issued ~~details~~by ~~the~~DigitalNet, ~~computation~~Inc., a wholly-owned subsidiary of the ~~pro~~Company, ~~forma~~and ~~earnings~~are guaranteed ~~(loss)~~on ~~per~~a ~~common~~full, ~~share~~unconditional, ~~(dollars~~joint inand ~~thousands~~several basis by DigitalNet Holdings, ~~except~~Inc. and ~~per~~DigitalNet, ~~share~~Inc.‘s ~~data):~~wholly owned domestic subsidiaries, including DGS.

		Three Months Ended September 30,						Nine Months Ended September 30,
		2002			2003			2002			2003
		(unaudited)			(unaudited)			(unaudited)			(unaudited)
Net income (loss)		$	(726	)	$	(638	)	$	(1,942	)	$	817
Dividends on preferred stock			—			—			—			—
Pro forma net income (loss) attributable to common stock holders		$	(726	)	$	(638	)	$	(1,942	)	$	817
Weighted average common share calculation:
Basic weighted average common shares outstanding			2,349,679			5,661,372			2,052,509			5,582,116
	Conversion of Class A Preferred Stock		—			3,797,145			—			3,797,145
Pro forma basic weighted average common shares outstanding			2,349,679			9,458,517			2,052,509			9,379,261
	Treasury stock effect of shares of unvested common stock		—			—			—			947,506
	Treasury stock effect of options and warrants		—			—			—			101,997
Pro forma diluted weighted average common shares outstanding			2,349,679			9,458,517			2,052,509			10,428,764
Pro forma earnings (loss) per common share:
	Pro forma basic earnings (loss) per common share	$	(0.31	)	$	(0.07	)	$	(0.95	)	$	0.09
	Pro forma diluted earnings (loss) per common share		(0.31	)		(0.07	)		(0.95	)		0.08

The following condensed consolidating financial information includes:

9(1) Condensed consolidating balance sheets as of December 31, 2003 and June 30, 2004, condensed consolidating statements of operations for the three and six months ended June 30, 2003 and 2004, and condensed consolidating statements of cash flows for the six months ended June 30, 2003 and 2004 of: (a) DigitalNet Holdings, Inc., ~~Stock-Based~~the ~~Compensation~~ parent company, (b) DigitalNet, Inc., which is the subsidiary issuer, (c) the guarantor subsidiaries, and (d) the Company on a consolidated basis.

~~In December 2002, the Financial Accounting Standards Board~~ (~~FASB~~2) ~~issued~~Elimination ~~SFAS~~entries ~~No. 148,~~necessary ~~"Accounting~~to ~~for~~consolidate ~~Stock-Based Compensation—Transition~~DigitalNet ~~and Disclosure~~Holdings," which prescribes certain disclosures and provides guidance on how to transition from the intrinsic value method of accounting for stock-based employee compensation under Accounting Principles Board (APB) Opinion NoInc. 25, to the ~~fair~~parent ~~value method of accounting of SFAS No. 123~~company, ~~"Accounting~~with ~~for Stock-Based Compensation~~DigitalNet," ~~if a company so elects~~Inc. Inand ~~2003,~~its ~~the~~guarantor ~~Company adopted SFAS No~~subsidiaries. ~~148. The adoption of this standard did not have a material impact on the Company's results of operations or financial position.~~

The ~~Company~~condensed ~~continues~~consolidating tofinancial ~~account~~statements ~~for~~do ~~its~~not ~~stock-based~~present ~~compensation in accordance with APB No. 25 and its related interpretations. In August 2003,~~ the ~~Company~~financial ~~issued~~statements ~~199,025~~of ~~options to purchase common stock to certain employees under~~ the Company'’s ~~Amended and Restated 2003 Stock Incentive Plan. Stock~~non-~~based~~guarantor ~~compensation cost related to stock option grants has been reflected in net income (loss) for the three and nine months ended September 30~~subsidiary, ~~2003,~~because asthis ~~certain~~subsidiary ~~options granted~~ had anno ~~exercise price less than the market value of the underlying common stock~~material ~~on the date of grant. The Company recorded approximately $794~~operations,~~000~~ of deferred compensation relating to the issuance of these options. The deferred compensation is being amortized over the four-year vesting period of the options. For the three and nine months ended September 30assets, ~~2003,~~or ~~the~~liabilities ~~Company~~for ~~recorded compensation expense of approximately $54,000 related to these options. The remaining stock-based compensation expense recorded in~~ the ~~three~~periods ~~and nine months ended September 30, 2003 related to shares of restricted stock held by certain employees~~presented.

12 Investments in consolidated subsidiaries are presented using the equity method of accounting. The principal elimination entries eliminate investments in consolidated subsidiaries and intercompany balances and transactions.

~~The following~~11 ~~table illustrates the effect on the net loss and the net loss per share if the Company had applied the fair value recognition provisions of SFAS No. 123.~~

	Three Months Ended September 30, 2003			Nine Months Ended September 30, 2003
		As of December 31, 2003													As of June 30, 2004 (unaudited)
	(unaudited)			(unaudited)
Balance Sheet		Parent Company			DigitalNet, Inc			Guarantor Subsidiary		Eliminations			Consolidated		Parent Company		DigitalNet, Inc			Guarantor Subsidiaries		Eliminations			Consolidated
Net loss attributable to common stockholders, as reported	$	(2,125	)	$	(3,531	)
Assets		(dollars in thousands)													(dollars in thousands)
Add: Stock-based employee compensation cost, net of related tax effects, included in the determination of net income		205			690
Current assets:
Deduct: Stock-based employee compensation expense determined under fair value based method, net of related tax effects	$	(263	)	$	(748	)
Cash and cash equivalents		$	--		$	23,542		$	93	$	--		$	23,635	$	--	$	8,148		$	591	$	--		$	8,739
Pro forma net loss attributable to common stockholders	$	(2,183	)	$	(3,589	)
Accounts Receivable, net			--			--			66,197		--			66,197		--		--			70,459		--			70,459
Earnings per share:
Intercompany Receivables			172,822			--			--		(172,822	)		--		173,045		--			--		(173,045	)		--
Basic and diluted net loss attributable to common stockholders per common share-as reported	$	(0.38	)	$	(0.63	)
Inventory			--			--			7,692		--			7,692		--		--			5,509		--			5,509
Basic and diluted net loss attributable to common stockholders per common share-pro forma	$	(0.39	)	$	(0.64	)
Prepaids expenses and other current assets			--			6,515			2,647		--			9,162		--		699			3,268		--			3,967
Total current assets			172,822			30,057			76,629		(172,822	)		106,686		173,045		8,847			79,827		(173,045	)		88,674
Other assets			--			8,438			--		--			8,438		--		6,905			89		--			6,994
Property and equipment, net			--			6			12,002		--			12,008		--		2			10,258		--			10,260
Investment in consolidated subsidiaries			--			76,164			--		(76,164	)		--		--		101,018			--		(101,018	)		--
Intangibles assets, net			--			--			173,128		--			173,128		--		--			216,094		--			216,094
Total Assets		$	172,822		$	114,665		$	261,759	$	(248,986	)	$	300,260	$	173,045	$	116,772		$	306,268	$	(274,063	)	$	322,022
Liabilities and stockholder's equity
Current liabilities:
Accounts payable		$	--		$	142		$	7,479	$	--		$	7,621	$	--	$	86		$	6,965	$	--		$	7,051
Accrued expenses			--			6,728			28,301		--			35,029		--		5,349			27,691		--			33,040
Intercompany payables			--			55,503			118,196		(173,699	)		--		--		30,287			146,539		(176,826	)		--
Investment in consolidated subsidiaries			13,369			--			--		(13,369	)		--		3,755		--			--		(3,755	)		--
Deferred revenue			--			--			5,630		--			5,630		--		--			2,149		--			2,149
Current portion of long-term debt			--			--			--		--			--		--		4,000			--		--			4,000
Total current liabilities			13,369			62,373			159,606		(187,068	)		48,280		3,755		39,722			183,344		(180,581	)		46,240
Long-term debt, net of current portion			--			81,250			--		--			81,250		--		96,250			--		--			96,250
Other liabilities			--			--			11,277		--			11,277		--		--			10,242		--			10,242
Stockholder's equity (deficit):			159,453			(28,958	)		90,876		(61,918	)		159,453		169,290		(19,200	)		112,682		(93,482	)		169,290
Total liabilities and stockholders' equity		$	172,822		$	114,665		$	261,759	$	(248,986	)	$	300,260	$	173,045	$	116,772		$	306,268	$	(274,063	)	$	322,022

~~In accordance~~12 with SFAS No. 123, the fair value was estimated at the grant date using a Black-Scholes option pricing model with the following weighted-average assumptions: risk-free interest rate of approximately 3%; no dividends; expected life of the options of four years; and volatility of approximately 50%.

10. Commitments and Contingencies

	Three Months Ended June 30, 2003 (unaudited)														Three Months Ended June 30, 2004 (unaudited)
Statement of Operations	Parent Company		DigitalNet, Inc			Guarantor Subsidiary			Eliminations			Consolidated			Parent Company			DigitalNet, Inc			Guarantor Subsidiaries			Eliminations			Consolidated
	(dollars in thousands)														(dollars in thousands)

Revenues	$	--	$	--		$	82,410		$	--		$	82,410		$	--		$	--		$	97,572		$	--		$	97,572
Costs of Revenues		--		--			64,936			--			64,936			--			--			74,899			--			74,899

Gross Profit		--		--			17,474			--			17,474			--			--			22,673			--			22,673

Operating expenses
Selling, general, and administrative		--		639			8,277			--			8,916			57			1,109			8,985			--			10,151
Acquisition and related expenses		--		--			--			--			--			--			--			--			--			--
Amortization of Intangibles		--		--			2,649			--			2,649			--			--			2,282			--			2,282

Total operating expenses		--		639			10,926			--			11,565			57			1,109			11,267			--			12,433

Income (loss) from operations		--		(639	)		6,548			--			5,909			(57	)		(1,109	)		11,406			--			10,240
Other income (expense):
Interest income		4		9			20			--			33			--			48			15			--			63
Interest expense		--		(4,037	)		--			--			(4,037	)		--			(2,295	)		--			--			(2,295	)
Other income		--		--			(39	)		--			(39	)		--			--			(3	)		--			(3	)
Equity income from consolidated subsidiaries		1,097		6,529			--			(7,626	)		--			4,986			11,418			--			(16,404	)		--

Total other income (expense)		1,101		2,501			(19	)		(7,626	)		(4,043	)		4,986			9,171			12			(16,404	)		(2,235	)

Income (loss) before provision for income taxes		1,101		1,862			6,529			(7,626	)		1,866			4,929			8,062			11,418			(16,404	)		8,005
Provision for income taxes		--		765			--			--			765			--			3,076			--			--			3,076

Net income (loss)	$	1,101	$	1,097		$	6,529		$	(7,626	)	$	1,101		$	4,929		$	4,986		$	11,418		$	(16,404	)	$	4,929

13 ~~Audit Review~~

Substantially all payments to DGS and the Company on government cost reimbursable contracts are provisional payments that are subject to adjustment upon audit by certain government audit agencies. DGS's incurred cost submissions have been completed through December 31, 2002 and have been audited through December 31, 2001. There are no outstanding incurred cost submissions or audits for any of DGS's previously acquired entities. The 2002 incurred cost audit for DGS is not expected to result in a material adverse effect on the Company's financial position or results of operations.

	Six Months Ended June 30, 2003 (unaudited)														Six Months Ended June 30, 2004 (unaudited)
Statement of Operations	Parent Company		DigitalNet, Inc			Guarantor Subsidiary			Eliminations			Consolidated			Parent Company			DigitalNet, Inc			Guarantor Subsidiaries		Eliminations			Consolidated
	(dollars in thousands)														(dollars in thousands)

Revenues	$	--	$	--		$	160,312		$	--		$	160,312		$	--		$	--		$	178,296	$	--		$	178,296
Costs of Revenues		--		--			126,820			--			126,820			--			--			136,842		--			136,842

Gross Profit		--		--			33,492			--			33,492			--			--			41,454		--			41,454

Operating expenses
Selling, general, and administrative		--		1,828			15,543			--			17,371			59			2,271			15,525		--			17,855
Acquisition and related expenses		--		--			--			--			--			--			(366	)		--		--			(366	)
Amortization of Intangibles		--		--			5,298			--			5,298			--			--			4,163		--			4,163

Total operating expenses		--		1,828			20,841			--			22,669			59			1,905			19,688		--			21,652

Income (loss) from operations		--		(1,828	)		12,651			--			10,823			(59	)		(1,905	)		21,766		--			19,802
Other income (expense):
Interest income		9		10			61			--			80			--			148			28		--			176
Interest expense		--		(8,141	)		--			--			(8,141	)		--			(4,385	)		--		--			(4,385	)
Other income		--		--			(33	)		--			(33	)		--			--			12		--			12
Equity income from consolidated subsidiaries		1,446		12,679			--			(14,125	)		--			9,614			21,806			--		(31,420	)		--

Total other income (expense)		1,455		4,548			28			(14,125	)		(8,094	)		9,614			17,569			40		(31,420	)		(4,197	)

Income (loss) before provision for income taxes		1,455		2,720			12,679			(14,125	)		2,729			9,555			15,664			21,806		(31,420	)		15,605
Provision for income taxes		--		1,274			--			--			1,274			--			6,050			--		--			6,050

Net income (loss)	$	1,455	$	1,446		$	12,679		$	(14,125	)	$	1,455		$	9,555		$	9,614		$	21,806	$	(31,420	)	$	9,555

14 ~~Litigation and Claims~~

The Company is periodically involved in disputes arising from normal business activities. In the opinion of management, resolution of these matters will not have a material adverse effect upon the financial position or future operating results of the Company, and adequate provision for any potential losses has been made in the accompanying consolidated financial statements.

	Six Months Ended June 30, 2003 (unaudited)															Six Months Ended June 30, 2004 (unaudited)
Cash Flow	Parent Company			DigitalNet, Inc			Guarantor Subsidiary			Eliminations			Consolidated			Parent Company			DigitalNet, Inc			Guarantor Subsidiaries			Eliminations			Consolidated
	(dollars in thousands)															(dollars in thousands)
Cash flows from operating activities:
Net income (loss)	$	1,455		$	1,446		$	12,679		$	(14,125	)	$	1,455		$	9,555		$	9,614		$	21,806		$	(31,420	)		9,555
Adjustment to reconcile net income (loss) to net cash provided by (used in) operations
Depreciation		--			4			3,960			--			3,964			--			2			2,435			--			2,437
Gain on sale of equipment		--			--			41			--			41			--			--			(12	)		--			(12	)
Amortization of intangible assets		--			--			5,298			--			5,298			--			--			4,163			--			4,163
Amortization of deferred financing costs		--			2,021			--			--			2,021			--			375			--			--			375
Amortization of discount on debt		--			360			--			--			360			--			--			--			--			--
Amortization of deferred compensation		--			485			--			--			485			--			--			144			--			144
Deferred income taxes		--			1,274			--			--			1,274			--			6,050			--			--			6,050
Equity (income) loss from consolidated subsidiaries		(1,446	)		(12,679	)		--			14,125			--			(9,614	)		(21,806	)		--			31,420			--
Changes in operating assests and liabilities, net of effect of acquisitons:
Accounts receivable		--			--			5,187			--			5,187			--			--			3,622			--			3,622
Inventory		--			--			(6,043	)		--			(6,043	)		--			--			2,183			--			2,183
Prepaid expenses and other assets		--			(1,800	)		(1,260	)		--			(3,060	)		--			5,816			(4,151	)		--			1,665
Accounts payable, accrued expenses and other liablities		--			437			(6,596	)		--			(6,159	)		--			(1,379	)		(9,017	)		--			(10,396	)
Deferred revenues		--			--			7,909			--			7,909			--			--			(3,481	)		--			(3,481	)

Net cash provided by (used in) operations		9			(8,452	)		21,175			--			12,732			(59	)		(1,328	)		17,692			--			16,305

Cash flows from investing activities:
Purchases of property and equipment		--			--			(3,554	)		--			(3,554	)		--			--			(2,047	)		--			(2,047	)
Proceeds from sale of equipment		--			--			10			--			10			--			--			1,813			--			1,813
Acquisitions, net of cash acquired		--			--			(9,477	)		--			(9,477	)		--			--			(50,105	)		--			(50,105	)
Net cash collected on behalf of and due to our predecessor's parent		--			--			4,800			--			4,800			--			--			--			--			--

Net cash used in investing activites		--			--			(8,221	)		--			(8,221	)		--			--			(50,339	)		--			(50,339	)

Cash flows from financing activities:
Net borrowings (repayments) under revolving credit facility		--			(3,900	)		--			--			(3,900	)		--			19,000			--			--			19,000
Repayments under term loan facility		--			(1,250	)		--			--			(1,250	)		--			--			--			--			--
Proceeds from stock option exercises		--			--			--			--			--			138			--			--			--			138
Decrease (increase) in intercompany receivables, net		(128	)		15,685			(15,557	)		--			--			(79	)		(33,066	)		33,145			--			--
Payments on management notes receivable		119			--			--			--			119			--			--			--			--			--

Net cash provided by (used in) financing activities		(9	)		10,535			(15,557	)		--			(5,031	)		59			(14,066	)		33,145			--			19,138

Net increase in cash and cash equivalents		--			2,083			(2,603	)		--			(520	)		--			(15,394	)		498			--			(14,896	)
Cash and cash equivalents, beginning of period		--			490			3,404			--			3,894			--			23,542			93			--			23,635

Cash and cash equivalents, end of period	$	--		$	2,573		$	801		$	--		$	3,374		$	--		$	8,148		$	591		$	--		$	8,739

~~11.~~15 ~~Related Party Transactions~~

AtItem December 31, 2002 and September 30, 2003, the Company held notes receivable totaling approximately $12.0 million andManagement's $848,000, respectively,Discussion from certain executives and employees.Analysis Theseof notesFinancial bearCondition interest at 5 percent per annum. The notes were due and paidResults upon completion of the IPO in October 2003. Operations

13 You should read the following discussion of the financial condition and results of operations of DigitalNet Holdings, Inc., in conjunction with the consolidated financial statements and the related notes included in our Annual Report on Form 10-K for the year ended December 31, 2003 filed with the SEC and available directly from the SEC at www.sec.gov and our unaudited consolidated financial statements and related notes included elsewhere in this quarterly report.

~~During~~There are ~~2001~~statements made herein which may not address historical facts and, therefore, could be interpreted to be forward looking statements as that term is defined in the ~~Company~~Private Securities ~~entered~~Litigation ~~into~~Reform aAct ~~management~~of ~~services~~1995. ~~agreement~~These ~~with~~forward ~~GTCR~~looking ~~for~~statements ~~$200~~are based on current expectations,~~000~~ ~~per~~forecasts ~~year.~~and Inassumptions ~~March 2002~~that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in, ~~this~~or ~~amount~~implied ~~increased~~by, the forward looking statements. We have attempted, whenever possible, to ~~$300~~identify these forward looking statements using words such as “may,~~000~~” “will,” ~~per~~“should,” ~~year~~“projects,” “estimates,” “expects,” “plans,” “intends,” “anticipates,” “believes,” and variations of these words and similar expressions. ~~The~~Similarly, statements ~~Company~~herein that describe our business strategy, prospects, opportunities, outlook, ~~incurred~~objectives, ~~approximately~~plans, ~~$225~~intentions or goals are also forward looking statements. Actual results may differ materially from those indicated by such forward looking statements as a result of various important factors,~~000~~ including: funding decisions of U.S. Government projects; government contract procurement, option exercise and termination risks; competitive factors such as pricing pressures and/or competition to hire and retain qualified employees; our ability to identify, execute or effectively integrate future acquisitions; our ability to successfully raise additional capital; changes to the tax laws relating to the treatment and deductibility of goodwill or any change in tax rates; additional costs related to ~~this~~compliance ~~agreement~~with the Sarbanes Oxley Act of 2002, any revised NASDAQ listing standards, SEC rule changes or other corporate governance issues; material changes in laws or regulations applicable to our business and other risk factors described in our Annual Report on Form 10-K for ~~nine~~the ~~months~~year ended ~~September 30~~December 31, 2003. ~~and~~In addition, the statements in this quarterly report are made as of ~~September 30,~~the ~~2003,~~date ~~$575,000~~hereof. ~~was~~We ~~accrued~~expect ~~but~~that ~~unpaid~~subsequent ~~related~~events or developments will cause our views to ~~this~~change. We undertake no obligation to update any of ~~agreement~~the forward looking statements made herein, whether as a result of new information, future events, changes in expectations or otherwise. ~~This~~These ~~agreement~~forward ~~terminated~~looking statements should not be relied upon ~~completion~~as representing our views as of ~~the~~any ~~IPO~~date insubsequent ~~October~~to ~~2003~~the date hereof.

In connection with the acquisition of DGS, the Company entered into certain transitional services agreements with Getronics Parent. Pursuant to these agreements, the Company agreed to provide maintenance services and office space to Getronics Parent. In addition Getronics Parent among other services, agreed to provide the Company with information technology and systems support. These agreements terminate at various dates from March 2003 to November 2004. For the nine months ended September 30, 2003, the Company paid approximately $3.5 million to Getronics Parent for services rendered under these agreements. Overview

~~From~~We ~~March 2003~~are ~~through~~a ~~September~~leading ~~2003,~~provider ~~the~~of ~~Company~~strategic ~~issued~~consulting ~~three~~services, ~~purchase~~managed ~~orders~~network ~~totaling approximately $310~~services,~~000,~~ information onsecurity ~~a subcontract basis~~solutions, toand aapplication ~~company~~development ~~owned by the son of the Company's Chairman~~ and ~~Chief~~integration ~~Executive~~services ~~Officer~~to U.S. ~~As of September 30~~defense, ~~2003~~intelligence, ~~the~~and ~~Company~~civilian ~~has~~federal ~~paid~~government ~~approximately~~agencies ~~$138,000~~as tomeasured ~~the~~by ~~company~~our revenues. ~~pursuant~~Our tocomprehensive ~~these~~information ~~purchase~~technology ~~orders,~~services and ~~management anticipates~~solutions ~~that~~allow ~~any~~our federal ~~remaining~~government ~~work~~clients ~~under~~to ~~these~~outsource ~~orders~~some ~~will~~or beall ~~invoiced and paid in the fourth quarter~~ of ~~2003. Through these purchase orders,~~ the ~~company~~activities ~~acted~~relating ~~as a subcontractor~~ to the ~~Company under~~ ~~two~~design, ~~civilian~~implementation, ~~agency~~integration, ~~contracts~~management, ~~providing~~and ~~professional~~security ~~systems~~of ~~engineering~~their computer networks and ~~economic analysis services~~systems. ~~These~~We ~~purchase~~are ~~orders~~focused ~~were~~on ~~issued~~increasing innetwork ~~the ordinary course of business and~~reliability, ~~based~~reducing onoverall ~~the~~network ~~Company's~~costs, ~~historic~~and ~~practices~~simplifying ~~with~~timely ~~respect~~migration ~~to retaining subcontractors to provide services~~ of amission ~~similar~~critical ~~nature,~~network ~~management~~computing ~~believes these services were provided on terms no less favorable than the~~environments ~~Company~~to ~~would~~new ~~anticipate receiving from unrelated parties~~technologies.

12 On November 26, 2002, we purchased Getronics Government Solutions, L.L.C., ~~Recent~~for ~~Accounting~~$225.2 ~~Pronouncements~~ million of total consideration, consisting of $191.7 million in cash and shares of our Class B Preferred Stock with an aggregate liquidation preference of $33.5 million. A portion of the cash purchase price, and associated transaction costs, were financed by a $63.6 million investment in our common stock and Class A Preferred Stock by GTCR, Ken S. Bajaj and Jack Pearlstein and their family entities, a $44.0 million subordinated bridge loan, and approximately $82.9 million of borrowings under a senior secured credit facility.

InOn July ~~June 2001~~3, ~~the Financial Accounting Standards Board~~2003, orwe ~~FASB,~~applied ~~issued~~the ~~SFAS~~net ~~No. 143,~~proceeds ~~Accounting~~from ~~for~~the ~~Asset~~sale ~~Retirement Obligations.~~of ~~SFAS No~~$125. ~~143~~0 ~~addresses~~million ~~financial~~aggregate principal ~~accounting~~amount ~~and~~of ~~reporting~~9% ~~for~~senior ~~obligations~~notes ~~associated~~due ~~with~~2010 ~~the~~by ~~retirement~~our ~~of tangible long~~wholly-~~lived~~owned ~~assets~~subsidiary, ~~and the~~DigitalNet, ~~associated asset retirement costs~~Inc., ~~This~~to ~~statement~~repay isthe ~~effective~~indebtedness ~~for~~under ~~financial~~our ~~statements~~subordinated ~~issued~~bridge ~~for~~note ~~fiscal~~and ~~years~~a ~~beginning~~term ~~after June 15, 2002~~loan. Concurrent ~~The~~with ~~Company~~the ~~adopted~~completion ~~SFAS~~of ~~No. 143~~the ~~on January 1,~~offering ~~2003~~of ~~and~~the ~~adoption~~9% ofsenior ~~this~~notes ~~standard~~due ~~did~~2010, ~~not~~we ~~have~~entered into aour ~~material~~current ~~impact~~credit onfacility, ~~the~~which ~~Company's~~provides ~~results~~us ofwith ~~operations~~up orto ~~financial~~$50.0 ~~position~~million in borrowings.

InOn ~~April 2002~~October 16, ~~the FASB issued SFAS No. 145~~2003, ~~Rescission~~we ofcompleted ~~FASB~~the ~~Statements~~initial ~~Nos.~~public 4,offering ~~44 and 64, Amendment~~ of ~~FASB~~our ~~Statement~~common ~~No. 13~~stock and ~~Technical~~issued ~~Corrections. Among other things~~5,750,000 ~~SFAS~~shares Noat $17. ~~145~~00 ~~rescinds~~per ~~both SFAS No. 4~~share, ~~Reporting~~ ~~Gains~~which ~~and~~generated ~~Losses~~proceeds, ~~from~~net ~~Extinguishment~~ of ~~Debt,~~offering ~~and the amendment to SFAS No. 4~~costs, ~~and~~ ~~64, Extinguishment~~ of ~~Debt~~ ~~Made~~approximately to$89.1 ~~Satisfy Sinking Fund Requirements~~million. ~~Through~~The ~~this~~net ~~rescission,~~proceeds ~~SFAS~~of ~~No. 145~~our ~~eliminates~~initial ~~the~~public ~~requirement~~offering, ~~that~~together with ~~gains~~proceeds ~~and~~of ~~losses~~$848,000 from the ~~extinguishment~~repayment of ~~debt~~certain ~~be aggregated~~management ~~and~~notes, ifwere ~~material,~~used ~~classified~~to redeem as$43.8 anmillion ~~extraordinary~~in ~~item,~~aggregate ~~net~~principal amount of the ~~related~~outstanding ~~income~~9% ~~tax~~senior ~~effect.~~notes ~~Generally,~~due 2010 ~~SFAS No. 145 is effective~~ for ~~transactions~~approximately ~~occurring after May 15, 2002~~$47.7 ~~Adoption~~million ofand ~~SFAS No~~$27. ~~145~~0 ~~required~~million ~~that~~was ~~the~~used ~~losses~~to ~~incurred~~purchase byall ~~the~~of ~~Company~~our outstanding asClass aB ~~result~~Preferred ofStock. At the ~~early~~completion ~~retirement~~ of ~~debt~~the inIPO, ~~2003~~the beClass ~~reflected~~A asPreferred Stock, aincluding ~~component~~accrued ofdividends, ~~other~~converted ~~income~~into ~~and~~3,807,132 ~~expense~~shares ~~and not~~of ~~treated~~common ~~as an extraordinary item~~stock.

InOn ~~June 2002~~April 1, ~~the~~2004, ~~FASB~~we ~~issued~~acquired ~~SFAS~~all ~~No. 146,~~of ~~Accounting~~the ~~for~~outstanding ~~Costs~~equity securities of ~~Exit~~User orTechnology Associates, ~~Disposal Activities~~Inc. ~~SFAS~~(UTA) Nofor $50. ~~146 nullifies~~0 ~~EITF~~million ~~Issue~~in Nocash. ~~94-3,~~ ~~Liability~~We ~~Recognition~~utilized ~~for~~cash ~~Certain~~on ~~Employee~~hand ~~Termination Benefits~~ and approximately ~~Other~~$29.0 ~~Costs~~million toin ~~Exit~~borrowings anunder ~~Activity~~our ~~(including~~2003 ~~Certain~~Credit ~~Costs Incurred~~Facility into afund ~~Restructuring)~~the purchase price. ~~This~~UTA ~~statement~~provides ~~requires~~information ~~that~~technology anservices ~~exit~~and orsolutions ~~disposal~~to ~~activity~~the ~~related~~federal government ~~cost~~in beareas ~~recognized~~such ~~when~~as ~~the~~managed ~~liability~~network isservices, ~~incurred~~systems ~~instead~~development, ofsystems engineering ~~when~~and anintegration, ~~entity commits~~advanced tocomputing, anand ~~exit~~mission ~~plan~~critical outsourcing. UTA’s ~~The~~financial ~~provisions~~results ofhave ~~SFAS~~been ~~No. 146~~included ~~are~~in ~~effective~~our ~~for~~ financial ~~transactions~~results ~~initiated~~from ~~after~~the ~~December 31,~~date ~~2002~~of acquisition. ~~The Company adopted SFAS~~

1416

No Contracts funded by U. ~~146~~S. government agencies account for substantially all of our revenues. Certain revenues and payments we receive are based on ~~January 1,~~provisional ~~2003~~billings and ~~such~~payments ~~adoption~~that ~~did~~are subject ~~not~~to ~~have~~adjustment aunder ~~material~~audit. ~~impact~~U.S. ongovernment agencies and departments have the right to challenge our ~~results~~cost ofestimates ~~operations~~and allocation methodologies with respect to government contracts. In addition, contracts with such agencies are subject to audit and possible adjustment to give effect to unallowable costs under cost-plus contracts or ~~financial~~to ~~position~~other regulatory requirements affecting both cost-plus and fixed price contracts.

InContract ~~May 2003,~~revenue ~~the~~recognition ~~FASB~~inherently ~~issued~~involves ~~SFAS No~~estimation. ~~150,~~ ~~Accounting~~Examples ~~for~~of ~~Certain~~such ~~Financial~~estimates ~~Instruments~~include ~~with~~the level ~~Characteristics~~ of ~~both~~effort ~~Liabilities~~needed ~~and Equity.~~to ~~This~~accomplish ~~statement~~tasks ~~establishes~~under ~~standards~~the ~~for~~contract, ~~classifying~~the ~~and~~cost ~~measuring~~of asthose ~~liabilities~~efforts, and ~~certain~~the ~~financial~~continual ~~instruments~~assessment ~~that have characteristics~~ of ~~both~~our ~~liabilities~~progress ~~and equity.~~toward ~~The~~completion ~~provisions~~ of ~~this~~the ~~statement~~contract. ~~require~~From ~~that~~time to ~~any~~time, ~~financial~~facts ~~instruments~~arise that ~~are~~require ~~mandatorily~~revisions ~~redeemable~~to onestimated atotal ~~fixed~~costs or ~~determinable~~expected ~~date or upon an event certain to occur be classified as liabilities~~revenues. We ~~This~~recognize ~~statement~~the ~~was~~cumulative ~~effective~~impact ~~immediately~~of ~~for~~any ~~instruments~~revisions ~~entered~~to ~~into~~estimates ~~or modified after May 31, 2003~~ and ~~for all other instruments that exist as of~~ the ~~beginning~~full ofimpact ~~the first~~on ~~interim~~anticipated ~~financial~~losses ~~reporting~~on ~~period~~any ~~beginning~~type ~~after~~of ~~June 15,~~contract ~~2003. The Company adopted SFAS No. 150~~ in the ~~three~~period ~~months~~in ~~ended~~which ~~September 30,~~they ~~2003,~~become ~~and such adoption did not have a material impact on the Company's results of operation or financial position~~known.

InOur ~~December 2002,~~most ~~the~~significant ~~Emerging~~expense ~~Issues~~is ~~Task~~costs ~~Force,~~of ~~or EITF~~revenues, ~~issued~~which ~~EITF~~includes ~~Issue~~the ~~00-21,~~costs ~~Accounting~~of ~~for~~direct ~~Revenue Arrangements with Multiple~~labor, ~~Deliverables.~~subcontractors, ~~EITF~~materials, ~~00-21~~equipment, ~~provides~~depreciation, ~~guidance~~travel, onand ~~determining~~an ~~whether~~allocation aof ~~revenue~~indirect costs. ~~arrangement~~The ~~contains~~depreciation ~~multiple~~included ~~deliverable~~in ~~items~~costs ~~and~~of ifrevenues ~~so,~~primarily ~~requires~~relates ~~that~~to ~~revenue be~~computer ~~allocated~~hardware ~~amongst~~and ~~the~~software ~~different~~that ~~items~~we ~~based~~have onpurchased ~~fair value. EITF 00-21 also requires that revenue~~ on ~~any~~behalf ~~item~~of inour aclients, ~~revenue~~for ~~arrangement~~use ~~with~~by ~~multiple deliverables not delivered completely~~them, ~~must~~and beto ~~deferred~~which ~~until~~we ~~delivery~~retain ~~of the item is completed~~ownership. ~~The~~Indirect ~~guidance~~costs inconsist ~~EITF~~primarily ~~00-21~~of isfringe ~~effective~~benefits, human ~~for~~resources, ~~revenue~~recruiting, ~~arrangements~~and ~~entered~~certain ~~into~~other innon-direct ~~fiscal~~costs ~~periods~~which ~~beginning~~are ~~after~~necessary ~~June 15,~~to ~~2003~~provide direct labor. The ~~Company~~number ~~does~~and ~~not~~types ~~expect~~of ~~that~~personnel, ~~implementation~~their ofsalaries, ~~EITF~~and ~~00-21~~other ~~will~~costs, can have a ~~material~~significant impact on ~~the~~our ~~Company's~~costs ~~results~~ of ~~operations or financial position~~revenues.

13 Our selling, general, and administrative expenses include costs not directly associated with performing work for our clients. ~~Guarantor~~These ~~Financial~~costs ~~Statements~~ include salaries, wages, plus associated fringe benefits, stock-based compensation charges, rent, depreciation, travel, and insurance. Among the functions covered by these expenses are sales, business development, contracts, purchasing, legal, finance, accounting, management, human resources, information systems, and general management. Most of these costs are allowable costs under the cost accounting standards for contracting with the U.S. government and are recoverable under cost plus contracts.

TheResults Notesof issued by DigitalNet, Inc. are guaranteed on a full, unconditional, joint and several basis by DigitalNet Holdings, Inc. and DigitalNet, Inc.'s wholly-owned domestic subsidiaries, including DigitalNet Government Solutions, LLC. Operations

The following ~~condensed~~table ~~consolidating~~sets ~~financial~~forth ~~information~~the ~~includes:~~periods indicated, selected statement of operations data and selected statement of operations data expressed as a percentage of revenue (dollars in thousands).

The condensed consolidating financial statements do not present the financial statements of the Company's non-guarantor subsidiaries, HFS GmbH and Getronics Government Solutions Puerto Rico, Inc., because these subsidiaries had no material operations, assets, or liabilities for the periods presented. Getronics Government Solutions Puerto Rico, Inc. was dissolved in the first quarter of 2003.

	Three months ended June 30,												Six months ended June 30,
	2003			2004			2003			2004			2003			2004			2003			2004
Revenues	$	82,410		$	97,572			100.0	%		100.0	%	$	160,312		$	178,296			100.0	%		100.0	%
Costs of revenues		64,936			74,899			78.8			76.8			126,820			136,842			79.1			76.7

Gross profit		17,474			22,673			21.2			23.2			33,492			41,454			20.9			23.3
Operating expenses:
Selling, general and administrative		8,916			10,151			10.8			10.4			17,371			17,855			10.8			10.0
Acquisition and related expenses		--			--			--			--			--			(366	)		--			-0.2
Amortization of intangibles		2,649			2,282			3.2			2.3			5,298			4,163			3.3			2.3

Total operating expenses		11,565			12,433			14.0			12.7			22,669			21,652			14.1			12.1

Income from operations		5,909			10,240			7.2			10.5			10,823			19,802			6.8			11.1
Other income (expense):
Interest income		33			63			--			0.1			80			176			--			0.1
Interest expense		(4,037	)		(2,295	)		(4.9	)		(2.4	)		(8,141	)		(4,385	)		-5.1			-2.5
Other income, net		(39	)		(3	)		--			--			(33	)		12			--			--

Total other income (expense)		(4,043	)		(2,235	)		(4.9	)		(2.3	)		(8,094	)		(4,197	)		-5.0			-2.4

Income before provision for income taxes		1,866			8,005			2.3			8.2			2,729			15,605			1.7			8.8
Provision for income taxes		765			3,076			0.9			3.2			1,274			6,050			0.8			3.4

Net income	$	1,101		$	4,929			1.3	%		5.1	%	$	1,455		$	9,555			0.9	%		5.4	%

1517

~~Investments~~Three inMonths ~~consolidated~~Ended ~~subsidiaries~~June ~~are~~30, ~~presented~~2004 ~~using~~Compared ~~the~~to ~~equity~~Three ~~method~~Months ofEnded ~~accounting.~~June ~~The~~30, ~~principal~~2003 ~~elimination entries eliminate investments in consolidated subsidiaries and intercompany balances and transactions.~~

		As of December 31, 2002												As of September 30, 2003 (unaudited)
Balance Sheets		Parent Company		DigitalNet, Inc.			Guarantor Subsidiary		Eliminations			Consolidated		Parent Company		DigitalNet, Inc.			Guarantor Subsidiary		Eliminations			Consolidated
		(dollars in thousands)												(dollars in thousands)
Assets
Current assets:
	Cash and cash equivalents	$	—	$	490		$	3,404	$	—		$	3,894	$	—	$	16,855		$	73	$	—		$	16,928
	Accounts receivable, net		—		—			64,023		—			64,023		—		—			53,354		—			53,354
	Intercompany receivables		99,246		68,651			—		(167,897	)		—		100,902		24,447			—		(125,349	)		—
	Inventory, net		—		—			7,803		—			7,803		—		—			12,439		—			12,439
	Prepaids expenses and other current assets		—		1,404			2,185		—			3,589		—		2,684			2,817		—			5,501
Total current assets			99,246		70,545			77,415		(167,897	)		79,309		100,902		43,986			68,683		(125,349	)		88,222
Other assets			—		5,939			—		—			5,939		—		6,099			—		—			6,099
Property and equipment, net			—		13			13,209		—			13,222		—		8			12,244		—			12,252
Investment in consolidated subsidiaries			—		49,254			—		(49,254	)		—		—		76,109			—		(76,109	)		—
Intangibles assets, net			—		—			188,311		—			188,311		—		—			179,023		—			179,023
Total Assets		$	99,246	$	125,751		$	278,935	$	(217,151	)	$	286,781	$	100,902	$	126,202		$	259,950	$	(201,458	)	$	285,596
Liabilities, preferred stock, and stockholder's equity (deficit)					—
Current liabilities:
	Accounts payable	$	—	$	—		$	4,859	$	—		$	4,859	$	—	$	13		$	9,431	$	—		$	9,444
	Accrued expenses		—		1,826			48,115		—			49,941		—		6,769			31,327		—			38,096
	Intercompany payables		—		—			167,897		(167,897	)		—		—		—			125,349		(125,349	)		—
	Investment in consolidated subsidiaries		2,584		—			—		(2,584	)		—		314		—			—		(314	)		—
	Deferred revenues		—		—			3,441		—			3,441		—		—			8,125		—			8,125
	Current portion of long-term debt		—		48,549			—		—			48,549		—		—			—		—			—
Total current liabilities			2,584		50,375			224,312		(170,481	)		106,790		314		6,782			174,232		(125,663	)		55,665
Long-term debt, net of current portion			—		78,453			—		—			78,453		—		125,000			—		—			125,000
Other liabilities			—		471			4,580		—			5,051		—		1,139			5,619		—			6,758
Class A Preferred Stock			61,739		—			—		—			61,739		64,552		—			—		—			64,552
Class B Preferred Stock			33,698		—			—		—			33,698		35,233		—			—		—			35,233
Stockholder's equity (deficit):			1,225		(3,548	)		50,043		(46,670	)		1,050		803		(6,720	)		80,100		(75,795	)		(1,612	)
Total liabilities, preferred stock, and stockholders' equity (deficit)		$	99,246	$	125,751		$	278,935	$	(217,151	)	$	286,781	$	100,902	$	126,201		$	259,951	$	(201,458	)	$	285,596

Revenues. Revenues for the three months ended June 30, 2004 were approximately $97.6 million, compared to revenues of approximately $82.4 million for the three months ended June 30, 2003, representing an increase of approximately $15.2 million, or 18.4%. We estimate the increase was due to an increase of approximately $16.7 million related to work performed under our managed network services revenues, an increase of approximately $8.5 million related to work performed under our strategic consulting engagements and an increase of approximately $1.1 million related to work performed under our application development engagements; partially offset by a decrease of approximately $0.1 million in work related to information security services and by a decrease in revenue from the NASA CSOC contract of approximately $11.0 million.

16 Costs of Revenues. Costs of revenues for the three months ended June 30, 2004 were approximately $74.9 million, or 76.8% of revenues, compared to costs of revenues of approximately $64.9 million, or 78.8% of revenues, for the three months ended June 30, 2003. We estimate the increase in costs was due to an increase of approximately $13.7 million related to work performed under our managed network services contracts, an increase of approximately $6.3 million related to work performed under our strategic consulting engagements and an increase of approximately $1.3 million related to work performed under our application development engagements; partially offset by a decrease in costs from the NASA CSOC contract of approximately $11.4 million. The gross profit percentage increased due primarily to the gross profit realized from the extension of the NASA CSOC contract. The NASA CSOC contract under which performance was scheduled to terminate on December 31, 2003, was extended on a time-and-materials basis through March 31, 2004. The original contract was a fixed price contract that had no gross profit for the three months ended June 30, 2003.

		Three Months Ended September 30, 2003 (unaudited)															Nine Months Ended September 30, 2003 (unaudited)
Statements of Operations		Parent Company			DigitalNet, Inc.			Guarantor Subsidiary			Eliminations			Consolidated			Parent Company			DigitalNet, Inc.			Guarantor Subsidiary			Eliminations			Consolidated
		(dollars in thousands)															(dollars in thousands)
Revenues		$	—		$	—		$	86,082		$	—		$	86,082		$	—		$	—		$	246,394		$	—		$	246,394
Costs of revenues			—			—			68,214			—			68,214			—			—			195,034			—			195,034
	Gross profit		—			—			17,868			—			17,868			—			—			51,360			—			51,360
Operating expenses
	Selling, general, and administrative		12			1,046			7,435			—			8,493			12			2,874			22,978			—			25,864
	Amortization of intangibles		—			—			2,649			—			2,649			—			—			7,947			—			7,947
Total operating expenses			12			1,046			10,084			—			11,142			12			2,874			30,925			—			33,811
Operating income (loss)			(12	)		(1,046	)		7,784			—			6,726			(12	)		(2,874	)		20,435			—			17,549
Other income (expense):
	Interest income		4			16			5			—			25			13			26			66			—			105
	Interest expense		—			(7,626	)		—			—			(7,626	)		—			(15,767	)		—			—			(15,767	)
	Other expense, net:		—			—			(7	)		—			(7	)		—			—			(40	)		—			(40	)
	Equity income (loss) from consolidated subsidiaries		(630	)		7,782			—			(7,152	)		—			816			20,461			—			(21,277	)		—
Total other income (expense)			(626	)		172			(2	)		(7,152	)		(7,608	)		829			4,720			26			(21,277	)		(15,702	)
Income (loss) before provision for income taxes			(638	)		(874	)		7,782			(7,152	)		(882	)		817			1,846			20,461			(21,277	)		1,847
Provision (benefit) for income taxes			—			(244	)		—			—			(244	)		—			1,030			—			—			1,030
Net income (loss)		$	(638	)	$	(630	)	$	7,782		$	(7,152	)	$	(638	)	$	817		$	816		$	20,461		$	(21,277	)	$	817
Dividends on preferred stock			(1,487	)		—			—			—			(1,487	)		(4,348	)		—			—			—			(4,348	)
Net income (loss) attributable to common stockholders		$	(2,125	)	$	(630	)	$	7,782		$	(7,152	)	$	(2,125	)	$	(3,531	)	$	816		$	20,461		$	(21,277	)	$	(3,531	)

Selling, General, and Administrative Expenses. For the three months ended June 30, 2004, selling, general, and administrative expenses were approximately $10.2 million, or 10.4% of revenues, compared to approximately $8.9 million, or 10.8% of revenues, for the three months ended June 30, 2003. This increase was primarily related to our acquisition of UTA.

17 Amortization of Intangibles. For the three months ended June 30, 2004, amortization expense was approximately $2.3 million compared to approximately $2.6 million for the three months ended June 30, 2003. The amortization expense for the three months ended June 30, 2004 was related to the amortization of intangibles resulting from the acquisitions of our predecessor and UTA and the amortization expense for the three months ended June 30, 2003 was solely related to the amortization of intangibles resulting from the acquisition of our predecessor. The decrease in amortization expense is due to our use of an accelerated method of amortization for certain of the intangible assets, partially offset by the increase in amortization from the UTA acquisition.

			Nine Months Ended September 30, 2003 (unaudited)
Statements of Cash Flows			Parent Company			DigitalNet, Inc.			Guarantor Subsidiary			Eliminations			Consolidated
			(dollars in thousands)
Cash flows from operating activities:
Net income (loss)			$	817		$	816		$	20,461		$	(21,277	)	$	817
Adjustment to reconcile net income (loss) to net cash provided by (used in) operations
	Depreciation			—			5			5,934			—			5,939
	Loss on disposal of assets			—			—			45			—			45
	Amortization of intangible assets			—			—			7,947			—			7,947
	Amortization and write-off of deferred financing costs			—			6,192			—			—			6,192
	Amortization and write-off of discount on debt			—			898			—			—			898
	Amortization of deferred compensation			—			637			53			—			690
	Deferred income taxes			—			1,030			—			—			1,030
	Equity (income) loss from consolidated subsidiaries			(816	)		(20,461	)		—			21,277			—
	Changes in operating assests and liabilities, net of effect of acquisition:
		Accounts receivable		—			—			11,351			—			11,351
		Inventory		—			—			(4,636	)		—			(4,636	)
		Prepaid expenses and other assets		—			(1,842	)		(1,465	)		—			(3,307	)
		Accounts payable and accrued expenses		—			4,949			(2,160	)		—			2,789
		Deferred revenues		—			—			5,709			—			5,709
		Other liabilities		—			—			422			—			422
Net cash provided by (used in) operations				1			(7,776	)		43,661			—			35,886
Cash flows from investing activities:
	Purchases of property and equipment			—			—			(5,024	)		—			(5,024	)
	Proceeds from sale of equipment			—			—			10			—			10
	Purchase of DigitalNet Government Solutions, LLC net of cash acquired			—			—			(11,778	)		—			(11,778	)
	Net cash collected on behalf of and due to Getronics parent			—			—			1,981			—			1,981
Net cash used in investing activites				—			—			(14,811	)		—			(14,811	)
Cash flows from financing activities:
	Proceeds from issuance of 9% senior notes due 2010			—			125,000			—			—			125,000
	Debt issuance costs			—			(5,320	)		—			—			(5,320	)
	Payments under revolving credit facility			—			(3,900	)		—			—			(3,900	)
	Payments on term loan			—			(80,000	)		—			—			(80,000	)
	Payments on subordinated bridge note			—			(44,000	)		—			—			(44,000	)
	Decrease (increase) in intercompany receivables, net			(180	)		32,361			(32,181	)		—			—
	Payments on management notes receivable			179			—			—			—			179
Net cash provided by (used in) financing activities				(1	)		24,141			(32,181	)		—			(8,041	)
Net increase (decrease) in cash and cash equivalents				—			16,365			(3,331	)		—			13,034
Cash and cash equivalents, beginning of period				—			490			3,404			—			3,894
Cash and cash equivalents, end of period			$	—		$	16,855		$	73		$	—		$	16,928

Operating Income. For the three months ended June 30, 2004, operating income was $10.2 million, compared to $5.9 million for the three months ended June 30, 2003. The increase in operating income was primarily due to additional gross profit realized from the increases in our managed network services revenues, NASA CSOC gross profit, and the reduction in our amortization expense.

18 Other Income and Expense. For the three months ended June 30, 2004, interest income was approximately $63,000, compared to approximately $33,000 for the three months ended June 30, 2003. This increase was attributable to higher invested cash balances during the period. Interest expense for the three months ended June 30, 2004 was $2.3 million compared to approximately $4.0 million for the three months ended June 30, 2003. The reduction in interest expense is primarily due to the lower outstanding debt balances during the 2004 period.

Provision for Income Taxes. For the three months ended June 30, 2004, our income tax expense was approximately $3.1 million, compared to an income tax expense of approximately $0.8 ~~Item~~million 2for the three months ended June 30, 2003. ~~Management's~~The ~~Discussion~~effective income tax rate was 38% and ~~Analysis~~41% offor ~~Financial~~the ~~Condition~~three months ended June 30, 2004 and ~~Results~~2003, ofrespectively. ~~Operations~~ The higher effective income tax rate for the three months ended June 30, 2003 was due to nondeductible stock-based compensation expense we recorded in the three months ended June 30, 2003.

~~You~~Six Months ~~should~~Ended ~~read~~June ~~the following discussion of the financial condition and results of operations of DigitalNet Holdings~~30, ~~Inc.~~ ~~and~~2004 ~~our~~Compared ~~predecessor,~~to ~~Getronics Government~~Six ~~Solutions,~~Months ~~L.L.C.,~~Ended inJune conjunction with their respective consolidated financial statements and the related notes included in our registration statement on Form S-1 (File No. 333-107764) filed with the SEC and available directly from the SEC at www.sec.gov and the consolidated financial statements and the related notes of DigitalNet Holdings30, ~~Inc.,~~ ~~included~~2003 ~~elsewhere in this quarterly report.~~

~~Because~~Revenues. Revenues wefor ~~had~~the ~~limited~~six ~~operations~~months inended ~~2002~~June 30, ~~management~~2004 ~~believes~~were ~~that~~approximately ~~comparisons~~$178.3 million, compared to revenues of approximately $160.3 million for the ~~results~~six ofmonths ended June ~~operations~~30, 2003, representing an increase of ~~DigitalNet~~approximately ~~Holdings~~$18.0 million, ~~Inc~~ or 11.2%. ~~for~~We estimate the ~~three~~increase ~~and~~was ~~nine~~due ~~months~~to ~~ended~~an increase of approximately $26.5 ~~September 30,~~ million ~~2003~~related to ~~the~~work ~~results~~performed ofunder ~~operations~~our ofmanaged ~~our~~network ~~predecessor~~services revenues, an ~~Getronics~~increase ~~Government~~of ~~Solutions,~~approximately L$10.~~L.C.,~~6 ~~for~~million ~~the~~related ~~three~~to work performed under our strategic consulting engagements and ~~nine~~an ~~months~~increase ~~ended~~of ~~September 30,~~approximately ~~2002~~$3.4 ~~provides~~million related ~~investors~~to ~~with~~work performed under our application development engagements; partially offset by a ~~more~~decrease ~~meaningful~~of ~~depiction~~approximately $4.3 million in work related to information security services and by a decrease in revenue from the NASA CSOC contract of ~~our~~approximately ~~business~~$18.2 million.

~~There are~~18 statements made herein which may not address historical facts and, therefore, could be interpreted to be forward looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, forecasts and assumptions that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in, or implied by, the forward-looking statements. We have attempted, whenever possible, to identify these forward-looking statements using words such as "may," "will," "should," "projects," "estimates," "expects," "plans," "intends," "anticipates," "believes," and variations of these words and similar expressions. Similarly, statements herein that describe our business strategy, prospects, opportunities, outlook, objectives, plans, intentions or goals are also forward-looking statements. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including: funding decisions of U.S. Government projects; government contract procurement, option exercise and termination risks; competitive factors such as pricing pressures and/or competition to hire and retain qualified employees; our ability to identify, execute or effectively integrate future acquisitions; our ability to successfully raise additional capital; changes to the tax laws relating to the treatment and deductibility of goodwill or any change in tax rates; additional costs related to compliance with the Sarbanes-Oxley Act of 2002, any revised NASDAQ listing standards, SEC rule changes or other corporate governance issues; material changes in laws or regulations applicable to our business and other risk factors described in our registration statement on Form S-1. In addition, the statements in this quarterly report are made as of November 21, 2003. We expect that subsequent events or developments will cause our views to change. We undertake no obligation to update any of the forward-looking statements made herein, whether as a result of new information, future events, changes in expectations or otherwise. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to November 21, 2003.

~~Overview~~ Costs of Revenues. Costs of revenues for the six months ended June 30, 2004 were approximately $136.8 million, or 76.7% of revenues, compared to costs of revenues of approximately $126.8 million, or 79.1% of revenues, for the six months ended June 30, 2003. We estimate the increase in costs was due to an increase of approximately $23.6 million related to work performed under our managed network services contracts, an increase of approximately $7.8 million related to work performed under our strategic consulting engagements and an increase of approximately $1.9 million related to work performed under our application development engagements, partially offset by a decrease of approximately $3.6 million related in work related to information security services and by a decrease in costs from the NASA CSOC contract of approximately $19.7 million. The gross profit percentage increased due primarily to the gross profit realized from the extension of the NASA CSOC contract. The NASA CSOC contract under which performance was scheduled to terminate on December 31, 2003, was extended on a time-and-materials basis through March 31, 2004. The original contract was a fixed price contract that had no gross profit for the six months ended June 30, 2003.

WeSelling, General, ~~are~~and aAdministrative ~~leading~~Expenses. ~~provider~~For ofthe ~~managed~~six ~~network~~months ~~services,~~ended ~~information~~June ~~security~~30, ~~solutions~~2004, ~~and application development and integration services to U.S. defense~~selling, ~~intelligence~~general, and ~~civilian~~administrative ~~federal~~expenses ~~government~~were ~~agencies~~approximately as$17.9 ~~measured~~million, byor ~~our~~10.0% of revenues., ~~Our~~compared ~~comprehensive~~to ~~information~~approximately ~~technology~~$17.4 ~~services~~million, ~~and solutions allow our federal government clients to outsource some~~ or ~~all~~10.8% of ~~the~~revenues, ~~activities~~for ~~relating to~~ the ~~design,~~six months ~~implementation,~~ended ~~integration,~~June ~~management~~30, ~~and~~2003. ~~security~~This ofincrease ~~their~~was ~~computer~~primarily ~~networks~~related ~~and~~to ~~systems.~~our Weacquisition ~~are~~of ~~focused on increasing network reliability~~UTA, ~~reducing~~partially ~~overall~~offset ~~network~~by ~~costs,~~a ~~and~~decrease ~~simplifying~~in ~~timely~~stock-based ~~migration~~compensation ~~of mission critical network computing environments to new technologies~~expense.

WeAcquisition ~~purchased~~and ~~Getronics~~Related ~~Government~~Expenses. ~~Solutions~~During the six months ended June 30, ~~L.L.C.~~2004, the liability for ~~$225.2 million~~the abandoned offacility ~~total~~related ~~consideration,~~to ~~consisting~~the consolidation of our facilities in 2002 was reduced by approximately $~~191~~366,000.~~7 million~~ The tenant’s right to terminate the lease expired in ~~cash~~2004 resulting in a benefit included in acquisition and ~~shares~~related ofexpenses ~~our~~in ~~Class B~~the statement of ~~Preferred~~operations ~~Stock~~for ~~with~~the ansix ~~aggregate~~months ~~liquidation~~ended ~~preference~~June of30, ~~$33~~2004.~~5 million.~~ AFor ~~portion~~the ofsix ~~the~~months ~~cash~~ended ~~purchase~~June ~~price~~30, 2003, we did not incur any acquisition, and ~~associated~~related ~~transaction~~expenses.

19 Amortization of Intangibles. For the six months ended June 30, 2004, amortization expense was approximately $4.2 million compared to approximately $5.3 million for the six months ended June 30, 2003. The amortization expense for the six months ended June 30, 2004 was related to the amortization of intangibles resulting from the acquisitions of our predecessor and UTA and the amortization expense for the six months ended June 30, 2003 was solely related to the amortization of intangibles resulting from the acquisition of our predecessor. The decrease in amortization expense is due to our use of an accelerated method of amortization for certain of the intangible assets, partially offset by the increase in amortization from the UTA acquisition.

~~costs,~~ .Operating ~~were~~Income. ~~financed~~For bythe asix months ended June 30, 2004, operating income was $6319.6 8 million, compared ~~investment~~to in$10.8 ~~our~~million ~~common~~for ~~stock~~the ~~and~~six ~~Class A~~months ~~Preferred~~ended ~~Stock~~June ~~by GTCR~~30, ~~Ken S~~2003. ~~Bajaj~~The ~~and~~increase ~~Jack~~in operating ~~Pearlstein~~income ~~and~~was ~~their~~primarily ~~family~~due ~~entities,~~to aadditional gross profit realized from the increases ~~$44.0 million~~in ~~bridge~~our ~~loan~~managed network services revenues, ~~and~~the ~~approximately~~NASA ~~$82.9 million~~CSOC ofgross ~~borrowings~~profit, ~~under~~the reduction in our amortization ~~$105.0 million~~expense ~~senior~~and ~~secured~~the ~~credit~~benefit ~~facility~~recorded related to the reduction in the liability for the abandoned facilities.

OnOther ~~July 3,~~Income ~~2003,~~and weExpense. ~~applied~~For the ~~net~~six ~~proceeds~~months ~~from~~ended ~~the~~June ~~sale~~30, of2004, ~~$125.0 million~~interest 9%income ~~senior~~was approximately ~~notes~~$176,000, ~~due~~compared ~~2010~~ to ~~repay~~approximately $80,000 for the ~~indebtedness~~six ~~under~~months ~~our~~ended ~~subordinated~~June 30, ~~bridge~~2003. ~~note~~This ~~and~~increase ~~our term~~was ~~loan.~~attributable ~~Concurrent~~to ~~with~~higher ~~the~~invested ~~completion~~cash ofbalances during the period. ~~offering~~Interest ofexpense for the 9%six ~~senior~~months ~~notes~~ended ~~due~~June ~~2010~~30, we2004 ~~entered~~was ~~into~~approximately ~~our~~$4.4 million ~~current~~compared ~~credit~~to ~~facility,~~approximately ~~which~~$8.1 ~~provides~~million usfor ~~with~~the upsix tomonths ~~$50~~ended June 30, 2003.~~0 million~~ The reduction in ~~borrowings~~interest expense is primarily due to the lower outstanding debt balances during 2004 period.

OnProvision ~~October 16,~~for ~~2003,~~Income weTaxes. ~~completed~~For ~~our~~the ~~IPO~~six ~~and~~months ~~issued~~ended ~~5,750,000~~June ~~shares of common stock at $17.00 per share~~30, ~~which generated estimated proceeds~~2004, ~~net~~our ofincome ~~estimated~~tax ~~offering~~expense ~~costs, of~~was approximately $896.1 ~~million.~~ ~~The net proceeds of the IPO~~million, ~~together~~compared ~~with the proceeds of $848,000 from the repayment of certain management notes, were used~~ to ~~redeem~~an ~~$43.8 million~~income ~~in aggregate~~tax ~~principal~~expense ~~amount~~ of ~~outstanding 9% senior notes due 2010 for~~ approximately $471.~~7 million, or 109% of the aggregate principal amount of the notes being redeemed, and~~3 ~~$27.0~~ million ~~was~~for ~~used to purchase all of~~ the ~~outstanding~~six ~~Class B~~months ~~Preferred~~ended ~~Stock.~~June ~~We expect to use the remaining proceeds for general corporate purposes~~30, ~~including working capital~~2003. ~~In connection~~The ~~with~~effective ~~the~~income ~~redemption~~tax ofrate ~~the~~was 939% ~~senior notes due 2010, we will recognize a charge of approximately $3.9 million in the fourth quarter of 2003 attributable to the premium paid to redeem~~and ~~the 9~~47% ~~senior~~for ~~notes due 2010 and a charge of approximately $1.9 million related to~~ the ~~write-off~~six ofmonths ~~deferred~~ended ~~financing~~June ~~costs~~30, ~~related~~2004 toand ~~the~~2003, ~~notes redeemed~~respectively. WeThe ~~will~~higher ~~also recognize a~~effective ~~benefit to~~ income ~~attributable~~tax torate ~~common~~for ~~stockholders~~the insix ~~the~~months ~~fourth~~ended ~~quarter~~June of30, 2003 ofwas ~~approximately~~due ~~$7.7 million related~~ to ~~the~~nondeductible stock-based ~~excess~~compensation ofexpense ~~the~~we ~~carrying~~recorded ~~amount~~in of the ~~Class B~~six ~~Preferred Stock~~months ~~over~~ended ~~the~~June ~~purchase~~30, ~~price paid for the Class B Preferred Stock~~2003.

AtLiquidity the completion of the IPO, the Class A Preferred Stock, including accrued dividends, converted into 3,807,132 shares of common stock. Upon conversion in the fourth quarter of 2003, we will recognize a beneficial conversion feature related to the Class A Preferred Stock and ~~record~~Capital aResources ~~dividend of approximately $11.2 million. In the fourth quarter of 2003, we will recognize approximately $10.6 million of stock-based compensation in connection with the IPO.~~

~~Contracts~~Our ~~funded~~primary byliquidity Uand capital resource needs are to finance the costs of our operations, to make capital expenditures, to service our debt and to fund potential acquisitions.S In July 2003, the proceeds from the sale of $125.0 ~~government~~million ~~agencies~~of ~~account~~our ~~for~~subsidiary’s ~~substantially~~9% senior notes due 2010 were used to repay outstanding indebtedness. The proceeds of our initial public offering in October 2003, along with proceeds of approximately $848,000 from the repayment of certain management notes, were used to redeem a portion of the outstanding 9% senior notes due 2010 and to purchase all of our ~~revenues~~outstanding Class B Preferred Stock. ~~Certain~~After ~~revenues~~the ~~and~~redemption ~~payments~~of wea ~~receive~~portion ~~are~~of ~~based~~the on9% ~~provisional~~senior ~~billings~~notes due 2010 and the ~~payments~~purchase ~~that~~of our Class B Preferred Stock, approximately $14.3 million of the proceeds ~~are~~of ~~subject~~our toinitial ~~adjustment~~public ~~under~~offering ~~audit~~were available for general corporate purposes. UOn April 1, 2004, we acquired User Technology Associates, Inc.S for $50.0 ~~government~~million. ~~agencies~~We ~~and~~used ~~departments~~cash ~~have~~on hand, including the ~~right~~remaining toproceeds ~~challenge~~from our ~~cost~~initial ~~estimates~~public offering, and ~~allocation~~borrowed $29.0 ~~methodologies~~million ~~with~~under ~~respect~~our revolving credit facility to ~~government~~fund ~~contracts~~the purchase price. InDuring the three months ended June 30, 2004, we repaid ~~addition~~$10.0 million of the amount borrowed under our revolving credit facility. We repaid $4.0 million under our revolving credit facility in July 2004. Based upon our current level of operations, ~~contracts~~we expect that our cash flow from operations, together with ~~such~~cash ~~agencies~~on hand and amounts we are ~~subject~~able to ~~audit~~borrow ~~and~~under ~~possible~~our ~~adjustment~~credit tofacility, ~~give~~will ~~effect~~be adequate to ~~unallowable~~meet ~~costs~~our ~~under~~anticipated ~~cost-plus~~needs ~~contracts~~for orthe foreseeable future. In addition, we expect that our cash flow from operations will be adequate to ~~other~~meet ~~regulatory~~all ~~requirements~~contractual obligations ~~affecting~~under ~~both~~the ~~cost-plus~~9% senior notes due 2010, our credit facility, our operating leases and ~~fixed-price~~our other ~~contracts.~~contractual cash obligations.

2019

~~Results~~ Cash provided by operations was approximately $16.3 million for the six months ended June 30, 2004 and approximately $12.7 million for the six months ended June 30, 2003. Cash provided by operations for the six months ended June 30, 2004 was comprised of ~~Operations~~our net income of approximately $9.6 million, depreciation, amortization, and other non-cash expense items of approximately $13.2 million, partially offset by an increase in net operating assets and liabilities of approximately $6.4 million. The increase in net operating assets and liabilities was primarily due to a decrease in accounts payable, accrued expenses and other liabilities of approximately $10.4 million due primarily from the payment of employee bonuses, interest, lease and severance costs and the decrease in deferred revenue of approximately $3.5 million; partially offset by a decrease in accounts receivable of approximately $3.6 million, a decrease in inventory of approximately $2.2 million, a decrease in prepaid expenses and other assets of approximately $1.7 million primarily due to the return of approximately $2.0 million of a deposit required under a performance bond on our Metropolitan Washington Airport Authority contract. Cash provided by operations for the six months ended June 30, 2003 was attributable to net income of approximately $1.5 million, depreciation, amortization, and other non-cash expense items of approximately $13.4 million and an increase in net operating assets and liabilities of approximately $2.2 million. The increase in net operating assets and liabilities was primarily due to an increase in inventory of approximately $6.0 million related to an increase in customer delivery orders, an increase in prepaid expenses and other assets of approximately $3.1 million related primarily to professional fees related to planned financing transactions, a decrease in accounts payable and accrued expenses of approximately $6.2 million related to the payment of employee bonuses and interest and usage of the NASA CSOC loss reserve; offset by a decrease in accounts receivable of approximately $5.2 million due to the favorable timing of collections, and an increase in deferred revenues of approximately $7.9 million due to prepayments from customers.

~~The~~Cash used ~~following~~in ~~table~~investing ~~sets~~activities ~~forth~~was approximately $50.3 million for the ~~periods~~six ~~indicated~~months ended June 30, ~~selected~~2004 ~~statement~~and approximately $8.2 million for the six months ended June 30, 2003. Cash used in investing activities for the six months ended June 30, 2004 consisted primarily of expenditures ~~operations~~incurred ~~data~~in ~~(dollars~~connection with the acquisition of UTA and purchases of property and equipment. Cash used in ~~thousands)~~investing activities for the six months ended June 30, 2003 consisted primarily of expenditures incurred in connection with the acquisition of our predecessor and purchases of property and equipment, offset by the accounts receivable collected on behalf of our predecessor’s parent.

		Three Months Ending September 30,						Nine Months Ending September 30,
		Predecessor 2002			DigitalNet 2003			Predecessor 2002			DigitalNet 2003
Revenues		$	91,941		$	86,082		$	274,560		$	246,394
Costs of revenues			71,799			68,214			214,685			195,034
Gross profit			20,142			17,868			59,875			51,360
Operating expenses:
	Selling, general and administrative (including stock-based compensation for the three and nine months ended September 30, 2003 of $205 and $690, respectively)		8,338			8,493			25,377			25,864
	Amortization of Intangibles		—			2,649			—			7,947
Total—operating expenses			8,338			11,142			25,377			33,811
Income from Operations			11,804			6,726			34,498			17,549
Other income and (expense)
	Interest income		522			25			1,678			105
	Interest expense		—			(7,626	)		—			(15,767	)
	Other expense, net		(24	)		(7	)		(16	)		(40	)
Total—other income (expense)			498			(7,608	)		1,662			(15,702	)
Income (loss) before provision for income taxes			12,302			(882	)		36,160			1,847
Provision (benefit) for income taxes			4,641			(244	)		13,643			1,030
Net income (loss)		$	7,661		$	(638	)	$	22,517		$	817
Dividends and accretion on preferred stock			—			(1,487	)		—			(4,348	)
Net income (loss) attributable to common stockholders		$	7,661		$	(2,125	)	$	22,517		$	(3,531	)

Cash provided by financing activities was approximately $19.1 million for the six months ended June 30, 2004 and was related primarily to our net borrowings under our revolving credit facility for our acquisition of UTA. Cash used in financing activities for the six months ended June 30, 2003 was approximately $5.0 million and was related primarily to repayments of debt under our revolving credit facility and term loan facility.

21 Our net working capital was approximately $42.4 million as of June 30, 2004 compared to a net working capital of approximately $58.4 million as of December 31, 2003. The decrease in our net working capital as of June 30, 2004 was due primarily to the acquisition of UTA.

Because our performance under the Immigration and Naturalization Service, or INS, Facilities Operations Support, or FOS, contract ended November 30, 2002 and we anticipate our performance under the NASA CSOC contract will end on December 31, 2003, managementCredit believes that revenues and operating income excluding these contracts presents investors with a more meaningful depiction of our ongoing business. The following table sets forth revenues and costs of revenues, as adjusted, which represent revenues and cost of revenues for the periods indicated, less revenues and costs of revenues derived from our INS/FOS contract and our NASA CSOC contract (dollars in thousands). Facility

		Three Months Ended September 30,				Nine Months Ended September 30,
		Predecessor 2002		DigitalNet 2003		Predecessor 2002		DigitalNet 2003
Revenues (as reported)		$	91,941	$	86,082	$	274,560	$	246,394
	Less: INS/FOS contract		17,476		—		49,080		—
	NASA CSOC contract		11,892		11,444		36,607		33,357
Revenues (as adjusted)		$	62,573	$	74,638	$	188,873	$	213,037
Costs of Revenues (as reported)		$	71,799	$	68,214	$	214,685	$	195,034
	INS/FOS contract		12,209		—		35,318		—
	NASA CSOC contract		11,892		11,444		36,607		33,357
Costs of Revenues (as adjusted)		$	47,698	$	56,770	$	142,760	$	161,677

In July 2003 and in connection with the completion of the offering of our 9% senior notes due 2010, we entered into a credit agreement that provides for a $50.0 million revolving credit facility available for working capital and general corporate purposes, including capital expenditures and acquisitions. The borrowing capacity under this credit facility also provides for the issuance of up to $5.0 million in letters of credit. The available borrowings under this credit facility are based upon a percentage of our eligible billed and unbilled accounts receivable, as defined in the credit agreement. At June 30, 2004, we had $1.0 million in outstanding letters of credit issued under this credit facility related to our leased facility in Herndon, Virginia. At June 30, 2004, we had available, but unused borrowing capacity of $30.0 million under this credit facility. In April 2004, we borrowed $29.0 million in connection with the User Technology Associates, Inc. acquisition. The outstanding borrowings as of June 30, 2004 were $19.0 million. We repaid $4.0 million under our revolving credit facility in July 2004, which resulted in us classifying $4.0 million as a current liability in the accompanying balance sheet as of June 30, 2004. Obligations under the credit facility are secured by substantially all of our assets. The credit facility contains certain restrictive covenants including, among others, requirements related to operating results and leverage, as well as restrictions related to liens, investments, additional indebtedness, disposition of assets, dividends, distributions, issuances of equity securities, transactions with affiliates, capital expenditures, and certain other changes in our business. The financial covenants include the requirements to maintain a minimum consolidated fixed charge coverage ratio, a minimum net worth, and be below a maximum consolidated total leverage ratio. As of June 30, 2004, we were in compliance with these covenants.

~~DigitalNet's~~20 ~~Three Months Ended September 30, 2003 Compared to Predecessor's Three Months Ended September 30, 2002~~

Revenues. RevenuesSenior for the three months ended September 30, 2003 were $86.1 million, compared to revenues of $91.9 million for the three months ended September 30, 2002, representing a decrease of $5.9 million, or 6.4%. Approximately $17.5 million of this decrease was due to the loss of the INS/FOS, contract, which was offset by an estimated increase of approximately $2.9 million in information security solutions contracts and approximately $8.8 million of an estimated increase in work performed under our managed network services contracts. Excluding revenues from both the INS/FOS contract and the NASA CSOC contract, revenues for the three months ended September 30, 2003 were $74.6 million, compared to revenues of $62.6 million for the three months ended September 30, 2002, representing an increase of 19.3%. For the three months ended September 30, 2002, revenues from the INS/FOS contract were $17.5 million. For the three months ended September 30, 2003, revenues from the NASA CSOC contract were $11.4 million compared to $11.9 million for the three months ended September 30, 2002. Because our performance under the INS/FOS contract ended November 30, 2002 and we anticipate our performance under the NASA CSOC contract will end on December 31, 2003, management believes that revenues and operating income excluding these contracts presents investors with a more meaningful depiction of our ongoing business. Notes

~~Costs~~In July of2003, ~~Revenues~~DigitalNet, Inc. ~~Costs~~, ofour ~~revenues~~wholly ~~for~~owned ~~the three months ended September 30~~subsidiary, ~~2003~~issued ~~were~~ $68125.2 0 million, ~~or 79.2%~~in ofaggregate ~~revenues,~~principal ~~compared~~amount ~~to costs~~ of ~~revenues~~9% ofsenior ~~$71.8 million,~~notes ordue ~~78.1%~~July ~~of revenues~~15, ~~for~~2010. ~~the~~The ~~three~~notes ~~months~~are ~~ended~~unsecured obligations ~~September 30~~of DigitalNet, ~~2002~~Inc. ~~Nearly~~The ~~all~~notes ofare ~~this~~guaranteed ~~decrease~~on ina ~~costs~~full, ~~was~~unconditional, ~~due~~joint and toseveral ~~the~~basis ~~loss~~ by ~~our~~DigitalNet ~~predecessor~~Holdings, ~~of the INS/FOS contract~~Inc. ~~Excluding~~and ~~costs~~all of ~~revenues~~DigitalNet, ~~and~~Inc.‘s ~~revenues~~domestic subsidiaries. ~~from~~A ~~both~~portion of the ~~INS/FOS~~net ~~and~~proceeds ~~NASA CSOC contracts, costs~~ of ~~revenues~~our ~~for~~initial ~~the~~public ~~three~~offering ~~months~~were ~~ended~~used ~~September 30,~~to ~~2003~~redeem ~~were~~ $5643.8 million, orin ~~76.1%~~aggregate ofprincipal ~~revenues,~~amount ~~compared~~of toour ~~costs~~outstanding ofnotes ~~revenues~~for approximately of $47.7 million, or ~~76.2~~109% of ~~revenues, for~~ the ~~three~~aggregate ~~months~~principal ~~ended~~amount ~~September 30,~~of ~~2002. For~~ the ~~three~~notes ~~months~~redeemed. ~~ended~~We ~~September 30,~~are ~~2002,~~required ~~costs~~to ofmake ~~revenues~~semi-annual ~~from~~interest ~~the~~payments ~~INS/FOS~~in ~~contract~~arrears ~~were~~on ~~$12.2 million.~~January ~~For~~15 and ~~the~~July ~~three~~15 ~~months ended September 30, 2003, costs~~ of ~~revenues~~each ~~from~~year the ~~NASA CSOC~~notes ~~contract~~are ~~were~~outstanding, ~~$11.4 million~~commencing ~~compared~~on toJanuary ~~$11.9 million for the three months ended September 30~~15, ~~2002~~2004. ~~The~~As ~~costs~~ of June ~~revenue~~30, ~~from~~2004, ~~the~~we ~~NASA~~had ~~CSOC~~approximately ~~contract were reduced by the usage of~~ $081.9 3 million ofin ~~the~~notes ~~loss~~outstanding.

~~contract~~ The ~~accrual~~Company ~~for~~had previously entered into a management services agreement with GTCR that terminated upon the ~~three~~consummation ~~months~~of our initial public offering. During the six months ended ~~September~~ June 30, ~~2003~~2004, ~~compared~~the toCompany paid approximately $~~1.8 million~~583,000 ofthat ~~usage~~had ofbeen accrued through the ~~loss~~date ~~contract~~of ~~accrual~~our ~~for~~initial ~~the~~public ~~three~~offering ~~months~~related ~~ended~~to ~~September 30,~~this ~~2002~~agreement.

~~Selling,~~From ~~General,~~March ~~and~~2003 ~~Administrative~~through ~~Expenses. For~~December 2003, the ~~three~~Company ~~months~~issued ~~ended~~four ~~September 30,~~purchase ~~2003,~~orders ~~selling,~~totaling ~~general~~approximately $694,000, ~~and~~on a ~~administrative~~subcontract ~~expenses~~basis, ~~were~~to ~~$8.5 million,~~a orcompany ~~9.9%~~owned by the son of ~~revenues,~~the ~~compared~~Company’s toChairman ~~$8.3 million,~~and orChief Executive 9Officer.1% As of ~~revenues~~June 30, ~~for~~2004, the ~~three~~Company ~~months~~has ~~ended~~paid ~~September 30~~approximately $472,000 ~~2002~~to the company pursuant to these purchase orders. ~~During~~Through these purchase orders, the ~~three~~company ~~months~~acted ~~ended~~as ~~September 30,~~a ~~2003~~subcontractor to the Company under two civilian agency contracts, weproviding professional ~~incurred~~systems ~~approximately~~engineering $0and economic analysis services.~~2 million~~ inThese ~~stock-based~~purchase ~~compensation~~orders were ~~charges~~issued ~~related~~in tothe ~~shares~~ordinary course of ~~restricted~~business ~~stock~~and, ~~held~~based byon ~~certain~~the ~~employees.~~Company’s ~~Our~~historic ~~predecessor~~practices ~~did~~with ~~not~~respect ~~incur~~to ~~stock-based~~retaining ~~compensation~~subcontractors ~~during~~to ~~the~~provide ~~three~~services ~~months~~of ~~ended~~a ~~September 30~~similar nature, ~~2002.~~management Inbelieves ~~connection~~these ~~with~~services ~~our~~were ~~IPO completed~~provided on ~~October 10,~~terms ~~2003~~no less favorable than the Company would anticipate receiving from unrelated parties. In addition, wein ~~expect~~June to2004, the ~~recognize~~Company ~~additional~~accepted ~~stock-based~~a ~~compensation~~purchase ~~charges~~order of approximately $~~10.6 million~~12,000 ~~during~~to ~~the~~provide ~~fourth~~strategic ~~quarter~~consulting services ofto ~~2003.~~a government agency as a subcontractor to this company.

AmortizationItem of Intangibles3. For theQuantitative three months ended September 30, 2003, amortization expense was $2.6 million. On January 1, 2002, our predecessor adopted SFAS No. 142, Goodwill and OtherQualitative IntangibleDisclosures Assets,about andMarket the goodwill and assembled workforce intangible assets from our predecessor's acquisitions were no longer amortizedRisk. The amortization expense of $2.6 million for the three months ended September 30, 2003 was solely related to the amortization of intangibles resulting from the purchase of our predecessor.

~~Operating~~Our principal ~~Income. For~~exposure ~~the~~to ~~three~~market ~~months~~risk ~~ended~~relates ~~September 30,~~to ~~2003,~~changes ~~operating~~in ~~income~~interest ~~was~~rates. The $681.7 3 million, of ~~compared~~indebtedness tounder our 9% senior notes due 2010 is at a fixed interest rate and only ~~$11~~indebtedness under our credit facility will be subject to changes in interest rates.~~8 million~~ Concurrent ~~for~~with the ~~three~~completion ~~months~~of ~~ended~~the ~~September 30~~offering of our 9% senior notes due 2010, ~~2002.~~we ~~The~~entered into ~~decrease~~our incurrent ~~operating~~credit ~~income~~facility, ~~was~~which ~~primarily~~provides ~~due~~us with up to ~~our~~$50.0 ~~performance~~million ~~ending~~in borrowings. Interest under ~~the~~our ~~INS/FOS~~current ~~contract~~credit facility is based on the British Bankers ~~November 30,~~Association ~~2002~~Interest ~~and~~Settlement ~~the~~Rate ~~increase~~for deposits in ~~amortization~~dollars, ~~expense~~or based on the higher of Bank $2of America, N.~~6 million~~A.‘s ~~During~~prime rate or the ~~three~~federal ~~months~~funds ~~ended~~rate. ~~September~~ As of June 30, ~~2002~~2004, ~~the~~we had ~~INS/FOS~~approximately ~~contract~~$19.0 ~~had~~million aof ~~gross~~borrowings ~~profit~~outstanding under our credit facility, with an interest rate of approximately 4.0%. We repaid $4.0 million under our revolving credit facility in July 2004. Each 1% increase in these rates could add an additional $50.3 2 million to our interest expense, based on an outstanding borrowings under our credit facility of $15.0 million.

OtherItem Income and Expense. For the three months ended September 30, 2003, interest income was approximately $25,000, compared to $0.5 million for the three months ended September 30, 2002. This decrease was attributable to declining interest rates and lower cash balances during the period. Interest expense for the three months ended September 30, 2003 was $7.6 million, which included the write-off of $4.5 million ofControls deferred financing costs attributable to the subordinated bridge note and the term loan repaid with the proceeds from the sale of the 9% senior notes due 2010 and the termination of our previous revolving credit facility. The remaining interest expense was primarily attributable to the interest on the 9% senior notes due 2010. There was no interest expense for the three months ended September 30, 2002. Procedures

~~Provision~~(a) Evaluation of ~~for~~disclosure ~~Income~~controls ~~Taxes~~and procedures. ~~For~~ Our principal executive officer (Chief Executive Officer) and principal financial officer (Chief Financial Officer) have evaluated our disclosure controls and procedures and have concluded that, as of the ~~three~~end ~~months~~of ~~ended~~the ~~September 30~~period covered by this Quarterly Report on Form 10-Q, ~~2003~~these controls and procedures are designed to ensure that information we are required to disclose in this Quarterly Report on Form 10-Q is recorded, ~~our~~processed, ~~income~~summarized ~~tax~~and ~~benefit~~reported ~~was~~within the time periods $0specified in the Securities and Exchange Commission’s rules and Form 10-Q.~~2 million~~ These disclosure controls and procedures include, ~~compared~~without limitation, controls and procedures designed to anensure ~~income~~that ~~tax~~information ~~expense~~required to be disclosed in the reports that we file or submit under the Securities Exchange Act of $41934 (15 USC § 78a et seq.~~6 million~~) ~~for~~is accumulated and communicated to our management, including the ~~three~~principal ~~months~~executive ~~ended~~officer ~~September 30~~and the principal financial officer, as appropriate ~~2002~~to allow timely decisions regarding required disclosure. The principal executive officer and the principal financial officer have also concluded, based upon their evaluation, that there are no significant deficiencies or material weaknesses in these disclosure controls and procedures.

~~DigitalNet's~~(b) Changes in ~~Nine~~internal ~~Months~~controls. ~~Ended~~There ~~September 30,~~were ~~2003~~no ~~Compared~~changes toin ~~Our~~our ~~Predecessor's~~internal controls ~~Nine~~over financial ~~Months~~reporting ~~Ended~~that ~~September 30~~occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, ~~2002~~or is reasonably likely to materially affect our internal control over financial reporting.

~~Revenues. Revenues~~21 for the nine months ended September 30, 2003 were $246.4 million, compared to revenues of $274.6 million for the nine months ended September 30, 2002, representing a decrease of $28.2 million, or 10.3%. Approximately $49.1 million of this decrease was due to the loss of the INS/FOS contract, which was offset by an estimated increase of approximately $6.8 million in information security solutions contracts and approximately $18.4 million of an estimated increase in work performed under our managed network services contracts. Excluding revenues from both the INS/FOS contract and the NASA CSOC contract, revenues for the nine months ended September 30, 2003 were $213.0 million, compared to revenues of $188.9 million for the nine months ended September 30, 2002, representing an increase of 12.8%. For the nine months ended September 30, 2002, revenues from the INS/FOS contract were $49.1 million. For the nine months ended September 30, 2003, revenues from the NASA CSOC contract were $33.4 million compared to $36.6 million for the nine

23PART II. OTHER INFORMATION

months endedItem September 30, 20021. BecauseLegal our performance under the INS/FOS contract ended November 30, 2002 and we anticipate our performance under the NASA CSOC contract will end on December 31, 2003, management believes that revenues and operating income excluding these contracts presents investors with a more meaningful depiction of our ongoing business. Proceedings

~~Costs of Revenues. Costs of revenues for the nine months ended September 30, 2003 were $195.0 million, or 79.2%~~From oftime ~~revenues, compared~~ to ~~costs of revenues of $214.7 million~~time, orwe ~~78.2%~~are ofinvolved ~~revenues,~~in ~~for~~various ~~the~~legal ~~nine~~proceedings ~~months~~concerning ~~ended~~matters ~~September 30,~~arising ~~2002. Nearly all of this decrease~~ in ~~costs was due to~~ the ~~loss by~~ordinary ~~our~~course ~~predecessor~~ of ~~the INS/FOS contract~~business. ~~Excluding~~We ~~costs~~believe ofthat ~~revenues~~any ~~and~~ultimate ~~revenues~~liability ~~from~~arising ~~both~~out ~~the INS/FOS and NASA CSOC contracts, costs~~ of ~~revenues for the nine months ended September 30,~~ ~~2003~~these ~~were~~proceedings ~~$161.7 million,~~will ornot ~~75.9%~~have ofa ~~revenues,~~material ~~compared~~adverse toeffect ~~costs~~on ofour ~~revenues~~financial ofposition ~~$142.8 million,~~ or ~~75.6% of revenues, for the nine months ended September 30, 2002. For the nine~~ ~~months~~results ~~ended September 30, 2002, costs~~ of ~~revenues from the INS/FOS contract were $35~~operations.~~3 million.~~ For the nine months ended September 30, 2003, costs of revenues from the NASA CSOC contract were $33.4 million compared to $36.6 million for the nine months ended September 30, 2002. The costs of revenue from the NASA CSOC contract were reduced by the usage of $3.4 million of the loss contract accrual for the nine months ended September 30, 2003, compared to $5.5 million of usage of the loss contract accrual for the nine months ended September 30, 2002.

Selling,Item General, and Administrative Expenses2. For theChanges ninein months ended September 30Securities, 2003,Use selling,of generalProceeds, and administrative expensesIssuer werePurchases $25.9 million, or 10.5% of revenues,Equity compared to $25.4 million, or 9.2% of revenues, for the nine months ended September 30, 2002. During the nine months ended September 30, 2003, we incurred approximately $0.7 million in stock-based compensation charges related to shares of restricted stock held by certain employees. Our predecessor did not incur stock-based compensation during the nine months ended September 30, 2002. Securities

~~Amortization of Intangibles. For the nine months ended September 30, 2003, amortization expense was~~On ~~$7.9 million.~~April ~~On January~~ 1, ~~2002~~2004, ~~our~~we ~~predecessor~~used ~~adopted~~all ~~SFAS~~of ~~No. 142,~~the ~~Goodwill~~approximately ~~and~~$14.3 ~~Other~~million ~~Intangible~~of ~~Assets,~~remaining ~~and~~proceeds from the ~~goodwill~~October ~~and assembled~~9, ~~workforce~~2003 ~~intangible~~initial ~~assets~~public ~~from~~offering of our ~~predecessor's~~common ~~acquisitions~~stock ~~were~~to nopartially ~~longer~~fund ~~amortized.~~the ~~The amortization expense of~~ $~~7.9~~ 50 million ~~for~~purchase ~~the~~price ~~nine~~of ~~months~~our ~~ended~~acquisition ~~September 30,~~of ~~2003, related~~all toof the ~~amortization~~outstanding ofcommon ~~intangibles~~stock ~~resulting from the purchase~~ of ~~our~~User Technology ~~predecessor~~Associates, Inc.

OperatingItem Income3. For theDefaults nineupon monthsSenior ended September 30, 2003, operating income was $17.5 million, compared to $34.5 million for the nine months ended September 30, 2002. The decrease in operating income was primarily due to our performance ending under the INS/FOS contract on November 30, 2002 and the increase in amortization expense of $7.9 million. During the nine months ended September 30, 2002, the INS/FOS contract had a gross profit of $13.8 million. Securities

~~Other Income and Expense~~None. ~~For~~ the nine months ended September 30, 2003, interest income was approximately $0.1 million, compared to $1.7 million for the nine months ended September 30, 2002. This decrease was attributable to declining interest rates and lower cash balances during the period. Interest expense for the nine months ended September 30, 2003 was $15.8 million, which included the write-off of $4.5 million of deferred financing costs attributable to the subordinated bridge note and the term loan repaid with the proceeds from the sale of the 9% senior notes due 2010 and the termination of our previous revolving credit facility. The remaining interest expense was attributable to the debt we issued in connection with the acquisition of our predecessor in November 2002 and the 9% senior notes due 2010 issued in July 2003 to refinance the debt issued in connection with the acquisition. There was no interest expense for the nine months ended September 30, 2002.

ProvisionItem for Income Taxes4. For theSubmission nineof monthsMatter ended September 30, 2003, our provision for income taxes was $1.0 million, compared to $13.6 millionVote forof theSecurity nine months ended September 30, 2002. Holders

24 Our annual meeting of stockholders was held on June 3, 2004. The only matter presented for a vote at the meeting was the election of eight directors to hold office until the 2005 annual meeting of stockholders and until their successors are duly elected and qualified. Set forth below are the names of each nominee elected, the number of votes cast for each nominee and the number of votes withheld for each nominee. There were no broker non-votes.

DigitalNet's Three and Nine Months Ended September 30, 2002

Name	Votes For	Votes Withheld
Ken S. Bajaj	14,401,766	342,069
Craig A. Bondy	14,700,317	43,518
Philip A. Canfield	14,425,699	318,136
Alan G. Merten	14,426,256	317,579
Edward C. Meyer	14,426,256	317,579
Richard N. Perle	14,725,107	18,728
Bruce V. Rauner	14,700,817	43,018
Stuart J. Yarbrough	14,426,256	317,579

WeItem were founded on September 7, 20015. FromOther inception through November 25, 2002, our operating activities primarily consisted of developing a preliminary business plan, recruiting personnel, engaging in discussions with prospective lenders and strategic investors, identifying potential acquisition targets, and engaging in merger and acquisition discussions and due diligence efforts. After reviewing and evaluating more than 25 companies, we acquired our predecessor, Getronics Government Solutions, L.L.C., on November 26, 2002. Our predecessor's results of operations for the three and nine months ended September 30, 2002 do not include our operating activities. Our operating expenses for the three and nine months ended September 30, 2002 were $732,000 and $1,955,000, respectively. Information

None. ~~Liquidity and Capital Resources~~

OurItem primary liquidity and capital resource needs are to finance the costs of our operations, to make capital expenditures, and to service our debt6. AsExhibits of September 30, 2003, we had cash and cashReports equivalents of approximately $16.9 million, and we had a revolving line of credit that permitted borrowings of up to $50.0 million with a sub-limit of $5.0 million for letters of credit. The applicable interest rate is equal to LIBOR plus a margin rate of 0.325%. As of September 30, 2003, we had approximately $48.0 million available under our line of credit and we were in compliance with the related financial covenants. We believe that the combination of internally generated funds, available bank borrowings and cash on handForm will provide the required liquidity and capital resources for the foreseeable future. Although we have no specific current plans to do so, to the extent we decide to pursue one or more significant strategic acquisitions, we will likely need to incur additional debt or sell additional equity to finance the purchase of those businesses. 8-K

~~On October 16, 2003, we completed our initial public offering~~ (~~IPO~~a) of securities and issued 5,750,000 shares of common stock at $17 per share, which generated estimated proceeds, net of estimated offering costs, of approximately $89.1 million. The proceeds of the offering, together with the proceeds of $848,000 from the repayment of certain management notes, were used to redeem $43.8 million in aggregate principal amount of outstanding 9% senior notes due 2010 for approximately $47.7 million, or 109% of the aggregate principal amount of the notes being redeemed and $27.0 million was used to purchase all of the outstanding Class B Preferred Stock. We expect to use the remaining proceeds for general corporate purposes, including working capital. At the completion of the IPO, the Class A Preferred Stock, including accrued dividends, converted into 3,807,132 shares of common stock. Exhibits

~~Cash provided by operations was approximately $35~~10.~~9 million~~1 ~~for~~Supplemental ~~the nine months ended September 30~~Indenture, ~~2003.~~dated ~~Our~~as ~~predecessor's~~of ~~cash~~April ~~provided by operations was approximately $22.3 million for the nine months ended September 30~~1, ~~2002. Cash provided by operations for the nine months ended September 30~~2004, ~~2003~~among ~~was~~User ~~attributable~~Technology ~~to a net income of approximately $0.8 million~~Associates, ~~depreciation, amortization, and other non-cash expense items of approximately $22~~Inc.7 million and a decrease in net operating assets and liabilities of approximately $12.3 million. The decrease in net operating assets and liabilities was primarily due to a decrease in accounts receivable of approximately $11.4 million, the increase in accounts payable and accrued expenses of approximately $2.8 million related primarily to accrued interest of $2.1 million associated with the 9% senior notes due 2010 and $0.7 million due to an increase in accrued leave due to the seasonal nature of vacation schedules and an increase in deferred revenue of approximately $5.7 million due to prepayments from customers; offset by an increase in inventory of approximately $4.6 million related to an increase in delivery ordersDigitalNet, ~~an increase in prepaid expenses and other assets of approximately $3~~Inc.~~3 million~~ ~~related primarily to prepaid expenses associated with our IPO of $1.7 million,~~ and ~~increases~~Wells inFargo ~~prepaid~~Bank ~~rent and maintenance agreements. Our predecessor's cash provided by operations for the nine months ended September 30~~Minnesota, ~~2002 was attributable to net income of approximately $22.5 million~~NA, ~~depreciation,~~as ~~amortization, and other non-cash expense items of approximately $18~~Trustee.~~1 million and an increase in net operating assets~~

2510.2 Subsidiary Guaranty Agreement, dated as of November 26, 2002, by DigitalNet Government Solutions, LLC and Federal Systems Integration Corporation in favor of Bank of America, NA, as Administrative Agent.

~~and liabilities of approximately $18~~10.3 ~~million.~~ ~~The~~Subsidiary ~~increase~~Guaranty inAgreement ~~net~~Supplement, ~~operating~~dated ~~assets~~as ~~and liabilities was primarily due to an increase in inventory~~ of ~~approximately~~April ~~$1.3 million~~19, ~~related to~~2004, anby ~~increase~~User inTechnology ~~customer orders~~Associates, aInc. ~~decrease~~ in ~~accounts~~favor ~~payable and accrued expenses~~ of ~~approximately~~Bank ~~$5.5 million, primarily due to the payment~~ of ~~severance costs~~America, ~~lease costs and the NASA CSOC contract loss~~NA, ~~and~~as anAdministrative ~~increase in accounts receivable of approximately $11~~Agent.~~2 million.~~

~~Cash used in investing activities was approximately $14~~31.~~8 million~~1 ~~for~~Certification the nine months ended September 30, 2003. Our predecessor's cash used in investing activities was approximately $11.9 million for the nine months ended September 30, 2002. Cash used in investing activities for the nine months ended September 30, 2003 consisted primarily of ~~expenditures~~ ~~incurred~~Chief inExecutive ~~connection~~Officer ~~with~~pursuant ~~the~~to ~~acquisition~~Rule of13a-14 ~~our predecessor, and the purchase~~ of ~~capital equipment for use in our business. Our predecessor's cash used in investing activities for~~ the ~~nine~~ ~~months~~Securities ~~ended~~Exchange ~~September 30,~~Act ~~2002 consisted primarily~~ of ~~purchases of capital equipment~~1934.

~~Cash used in financing activities was approximately $8~~31.~~0 million~~2 ~~for~~Certification ~~the~~of ~~nine~~Chief ~~months~~Financial ~~ended~~Officer ~~September 30,~~pursuant ~~2003.~~to ~~Our~~Rule ~~predecessor's~~13a-14 cash used in financing activities was approximately $16.4 million for the year ended September 30, 2002. Cash used in financing activities for the nine months ended September 30, 2003 consisted primarily of the repayment of debt under ~~our senior secured credit facility and subordinated bridge note and~~ the ~~payment~~Securities ofExchange ~~financing~~Act ~~costs; offset by proceeds from the issuance~~ of ~~9% senior notes due 2010~~1934. ~~Our predecessor's cash used in financing activities for the nine months ended September 30, 2002 consisted of the net cash advanced to our predecessor's parent.~~

~~Our net~~22 working capital deficit was $27.5 million as of December 31, 2002 compared to net working capital of $32.6 million as of September 30, 2003, respectively. The increase in working capital is primarily due to the refinancing of the subordinated bridge facility note and the term loan.

32.1 ~~Related~~Certification ~~Party~~of ~~Transactions~~ Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.

~~Since our formation in September 2001, GTCR, Messrs~~32.2 ~~Bajaj,~~Certification ~~Pearlstein and Hanau and trusts for the benefit~~ of ~~the~~Chief ~~family~~Financial ~~members~~Officer ofpursuant ~~Messrs. Bajaj~~to ~~and Pearlstein~~18 ~~purchased, in the aggregate, 6,688,651 shares of our common stock and 61,376 shares of our Class A Preferred Stock~~U. ~~Messrs~~S. ~~Bajaj,~~C. ~~Pearlstein~~Section ~~and Hanau paid for these purchases in part with promissory notes~~1350, ~~which~~as ~~had~~adopted anpursuant ~~aggregate~~to ~~outstanding~~Section ~~balance,~~906 ~~including~~of ~~interest,~~the ofSarbanes ~~$848,000~~Oxley asAct of ~~September 30, 2003~~2002. ~~These notes were repaid in October 2003 in connection with our IPO.~~

~~GTCR Golder~~(b) ~~Rauner,~~Reports ~~L.L.C~~on ~~and~~Form DigitalNet are parties to a professional services agreement, dated as of September 7, 2001, which entitles GTCR to receive an annual fee of $200,000 until March 7, 2002, and $300,000 thereafter, paid in equal monthly installments, for providing financial and management consulting services to us. As of September 30, 2003, we have accrued, but not paid, $575,000 under the agreement. This agreement also entitles GTCR to receive an investment fee equal to 1% of the purchase price of the common stock and Class A Preferred Stock it purchases from us. No investment fees were due for the nine months ended September 30, 2003 under this agreement. This agreement terminated in October 2003 upon completion of our IPO. 8-K

~~From~~On ~~March 2003~~April ~~through~~1, ~~September 2003~~2004, we ~~have~~filed ~~issued~~a ~~three~~report ~~purchase orders totaling approximately $310,000,~~ on aForm ~~subcontract~~8-K ~~basis,~~regarding ~~to a company owned by~~ the ~~son~~press ofrelease ~~our Chairman and Chief Executive Officer. As of September 30, 2003,~~ we ~~have paid approximately $138,000 to the company pursuant to these purchase orders, and we anticipate that any remaining work under~~issued ~~these~~regarding ~~orders will be invoiced and paid in~~ the ~~fourth~~acquisition ~~quarter~~ of ~~2003.~~all ~~Through these purchase orders,~~ the ~~company~~outstanding ~~acted~~equity assecurities ~~a subcontractor under two~~ of ~~our~~User ~~civilian agency contracts, providing~~Technology ~~professional systems engineering and economic analysis services. These purchase orders were issued in the ordinary course of business and~~Associates, based on our historic practices with respect to retaining subcontractors to provide services of a similar nature, we believe these services were provided on terms no less favorable to us than we would anticipate receiving from unrelated partiesInc.

26 On April 21, 2004, we filed a report on Form 8-K regarding the press release we issued announcing our operating results for the three months ended March 31, 2004, as well as providing initial guidance for the second quarter 2004 and updating guidance for the full year 2004.

~~Commitments~~ 23

The following table summarizes our contractual obligations as of September 30, 2003 that require us to make future cash payments. SIGNATURES

					Year ending December 31,
			Three months ending December 31, 2003
Contractual Cash Obligations	Total				2004		2005		2006		2007 and thereafter
	(dollars in thousands)
9% senior notes due 2010	$	125,000	$	—	$	—	$	—	$	—	$	125,000
Operating leases, net of sublease income		31,603		1,204		4,948		4,921		4,430		16,100
Severance arrangements		2,120		507		1,613		—		—		—
	$	158,723	$	1,711	$	6,561	$	4,921	$	4,430	$	141,100

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

In November 2003, we used a portion of the net proceeds from our IPO to redeem $43.8 million in aggregate principal amount of outstanding 9% senior notes due 2010 for approximately $47.7 million, or 109% of the aggregate principal amount of notes redeemed.

Date: August 4, 2004	DIGITALNET HOLDINGS, INC.
	By: /s/ Ken S. Bajaj
	Ken S. Bajaj
	Chairman, Chief Executive Officer and President
	Director
	(Principal Executive Officer)
	By: /s/ Jack Pearlstein
	Jack Pearlstein
	Chief Financial Officer, Treasurer and Secretary
	(Principal Financial and Accounting Officer)

24 ~~Item 3. Quantitative and Qualitative Disclosures about Market Risk~~

OurExhibit principal exposure to market risk relates to changes in interest rates. At December 31, 2002 and at July 3, 2003, we had outstanding under our senior credit facility $83.9 million and $78.8 million, respectively, of loans with interest rates tied to changes in the British Bankers Association Interest Settlement Rate for deposits in dollars, Bank of America, N.A.'s prime rate or the federal funds rate. After the completion of the offering of the 9% senior notes due 2010, we repaid the outstanding indebtedness under our senior secured credit facility on July 3, 2003. Concurrent with the completion of the offering of the 9% senior notes due 2010, we entered into our current credit facility, which provides us with up to $50.0 million in borrowings. Interest under our current credit facility is tied to changes in the British Bankers Association Interest Settlement Rate for deposits in dollars or based on the higher of Bank of America, N.A.'s prime rate or the federal funds rate. As of September 30, 2003, we had no outstanding borrowings under our current credit facility. The $125.0 million of indebtedness under the 9% senior notes due 2010 is at a fixed interest rate and only any indebtedness under our credit facility will be subject to changes in interest rates. Index

Exhibit ~~Item 4. Controls and Procedures~~ Description

~~(a) Evaluation of disclosure controls and procedures~~10.1 ~~Our~~Supplemental ~~principal executive officer (Chief Executive Officer) and principal financial officer (Chief Financial Officer) have evaluated our disclosure controls and procedures and have concluded that~~Indenture, dated as of ~~the~~April ~~end~~1, ~~of the period covered by this Quarterly Report on Form 10-Q~~2004, ~~these~~among ~~controls~~User ~~and~~Technology ~~procedures are designed to ensure that information required to be disclosed by the Registrant in this Quarterly Report on Form 10-Q is recorded~~Associates, ~~processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and Form 10-Q~~Inc. ~~These disclosure controls and procedures include~~, ~~without limitation~~DigitalNet, ~~controls~~Inc. and ~~procedures~~Wells ~~designed~~Fargo toBank ensure that information required to be disclosed by Registrant in the reports that it files or submits under the Securities Exchange Act of 1934 (15 USC § 78a et seq) is accumulated and communicated to our managementMinnesota, ~~including the principal executive officer and the principal financial officer~~NA, as ~~appropriate to allow timely decisions regarding required disclosure~~Trustee. The principal executive officer and the principal financial officer have also concluded, based upon their evaluation, that there are no significant deficiencies or material weaknesses in these disclosure controls and procedures.

~~(b) Changes in internal controls~~10.2 ~~There~~Subsidiary ~~were~~Guaranty noAgreement, ~~changes~~dated inas ~~our~~of ~~internal~~November ~~controls~~26, ~~over~~2002, ~~financial~~by ~~reporting~~DigitalNet ~~that~~Government ~~occurred during~~Solutions, ~~the~~LLC ~~period~~and ~~covered~~Federal bySystems ~~this~~Integration ~~Quarterly~~Corporation ~~Report~~in onfavor ~~Form 10-Q~~of ~~that~~Bank ~~has~~of ~~materially affected~~America, ~~or is reasonably likely to materially affect~~NA, ~~the~~as ~~Registrant's~~Administrative ~~internal control over financial reporting~~Agent.

2710.3 Subsidiary Guaranty Agreement Supplement, dated as of April 19, 2004, by User Technology Associates, Inc. in favor of Bank of America, NA, as Administrative Agent.

31.1 Certification ~~PART~~of ~~II.~~Chief ~~OTHER~~Executive ~~INFORMATION~~ Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934.

31.2 ~~Item~~Certification 1.of ~~Legal~~Chief ~~Proceedings~~ Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934.

~~From~~32.1 ~~time~~Certification toof ~~time,~~Chief weExecutive ~~are~~Officer ~~involved~~pursuant into ~~various~~18 ~~legal~~U.S.C. ~~proceedings~~Section ~~concerning~~1350, ~~matters~~as ~~arising~~adopted inpursuant ~~the~~to ~~ordinary~~Section ~~course~~906 of ~~business.~~the WeSarbanes-Oxley ~~believe~~Act ~~that any ultimate liability arising out~~ of ~~these proceedings will not have a material adverse effect on our financial position or results of operations~~2002.

32.2 Certification ~~Item~~of 2Chief Financial Officer pursuant to 18 U.S.C. ~~Changes~~Section in1350, ~~Securities~~as ~~and~~adopted ~~Use~~pursuant to Section 906 of ~~Proceeds~~ the Sarbanes-Oxley Act of 2002.

(a) Change in Securities. On August 29, 2003, we issued options to purchase 199,025 shares of common stock to our employees. The weighted average exercise price of these options is $10.18. All of these stock options were granted under our Amended and Restated 2003 Stock Incentive Plan. The issuance of these options was exempt from registration pursuant to Section 4(2) and Rule 701 of the Securities Act.

On July 3, 2003, we offered and sold $125.0 million of 9% senior notes due 2010 to qualified institutional investors in reliance on Rule 144A. The 9% senior notes were also offered and sold in offshore transactions in reliance on Regulation S. Proceeds from the 9% senior note offering were used to repay the outstanding indebtedness under our subordinated bridge facility and our term loan facility.

(b) Use of Proceeds from Registered Securities. On October 9, 2003, in connection with our initial public offering, a Registration Statement on Form S-1 (No. 333-107764) was declared effective by the Securities and Exchange Commission, pursuant to which 5,750,000 shares of our common stock were offered and sold for our account at a price of $17.00 per share, generating gross offering proceeds of $97.8 million. The managing underwriters were Citigroup Global Markets Inc. and UBS Securities LLC. The total underwriting discounts and commissions were approximately $6.8 million, none of which was paid directly or indirectly to our directors or officers or their associates or to persons owning 10% or more of any class of our equity securities or to any affiliate. After deducting underwriting discounts and commissions and estimated offering expenses, our net proceeds from the offering were approximately $89.1 million.

Proceeds from the offering, along with the proceeds of $848,000 from the repayment of certain management notes, were used to redeem $43.8 million in aggregate principal amount of outstanding 9% senior notes due 2010 for approximately $47.7 million, or 109% of the aggregate principal amount of the notes being redeemed, and approximately $27.0 million was used to purchase the Class B Preferred Stock, none of which was paid directly or indirectly to our directors or officers or their associates or to persons owning 10% or more of any class of our equity securities or to any affiliate. We expect to use the remaining proceeds for general corporate purposes, including working capital.

Item 3. Defaults upon Senior Securities

None.

Item 4: Submission of Matter to Vote of Security Holders

None.

Item 5: Other Information

None.

Item 6: Exhibits and Reports on Form 8-K

(a) Exhibits

31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934.
31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14 under the Securities Exchange Act of 1934.
32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K

On October 30, 2003, we filed a report on Form 8-K announcing that we had issued a press release announcing our operating results for the three months and nine months ended September 30, 2003 as well as initial guidance for the fourth quarter 2003, full year 2003, and full year 2004.

On November 5, 2003, we filed a report on Form 8-K to file as an exhibit materials including excerpts from the registrant's earnings call held on October 30, 2003.

SIGNATURES

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

Date:	November 21, 2003	By:	DigitalNet Holdings, Inc.
			/s/ KEN S. BAJAJ Ken S. Bajaj Chairman, Chief Executive Officer and President Director (Principal Executive Officer)
Date:	November 21, 2003
			/s/ JACK PEARLSTEIN Jack Pearlstein Chief Financial Officer, Treasurer and Secretary (Principal Financial and Accounting Officer)

UseSECURITIES theseAND linksEXCHANGE toCOMMISSION rapidly review the document DIGITALNET HOLDINGSWASHINGTON, INCD.C. TABLE OF CONTENTS 20549

SECURITIESFORM AND EXCHANGE COMMISSION Washington, D.C. 20549 10-Q

As ofDIGITALNET October 31HOLDINGS, 2003, there were 16,290,158 shares outstanding of the registrant's common stock, par value $0INC.001TABLE perOF share. CONTENTS

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (Unaudited)

DIGITALNET HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS (dollarsDOLLARS inIN thousandsTHOUSANDS, exceptEXCEPT perPER shareSHARE dataDATA)

DIGITALNET HOLDINGS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (dollarsDOLLARS inIN thousandsTHOUSANDS, exceptEXCEPT perPER shareSHARE dataDATA)

DIGITALNET HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (dollarsDOLLARS inIN thousandsTHOUSANDS)

DigitalNet Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

TheResults Notesof issued by DigitalNet, Inc. are guaranteed on a full, unconditional, joint and several basis by DigitalNet Holdings, Inc. and DigitalNet, Inc.'s wholly-owned domestic subsidiaries, including DigitalNet Government Solutions, LLC. Operations

22Related Party Transactions

23PART II. OTHER INFORMATION

ProvisionItem for Income Taxes4. For theSubmission nineof monthsMatter ended September 30, 2003, our provision for income taxes was $1.0 million, compared to $13.6 millionVote forof theSecurity nine months ended September 30, 2002. Holders

The following table summarizes our contractual obligations as of September 30, 2003 that require us to make future cash payments. SIGNATURES

Filing Compare · DIGITALNET HOLDINGS INC