##### Table of Contents



---

---

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549



---



FORM 10-Q



---



(Mark One)

[X]    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2002

OR

[  ]    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

COMMISSION FILE NUMBER: 333-13105

FIREARMS TRAINING SYSTEMS, INC.
(Exact name of registrant as specified in its charter)

|                                                                        |  |                                                
|----------------------------------------------------------------------- |  | -----------------------------------------------
|DELAWARE
(State or other jurisdiction of
incorporation or organization) |  | 57-0777018
(I.R.S. Employer Identification No.)

7340 MCGINNIS FERRY ROAD
SUWANEE, GEORGIA 30024
(Address of principal executive offices)

TELEPHONE NUMBER (770) 813-0180
(Registrants telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes [ X ] No [  ]

Indicate by check mark whether the registrant is an
accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

Yes [  ] No [ X ]

As of February 13, 2003, there were 70,153,139 shares of the Registrants
Class A Common Stock outstanding.





---



##### Table of Contents



|                                                                                                          |                                                                                                    |  |    |    | 
|--------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------- |  | -- | -- | 
|PART I. FINANCIAL INFORMATION                                                                             |                                                                                                    |  |    |   
|ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:                                                      |                                                                                                    |  |    |   
|                                                                                                          | Condensed Consolidated Statements of Income
Three and nine months ended December 31, 2002 and 2001 |  |    | 3  | 
|                                                                                                          | Condensed Consolidated Balance Sheets
December 31, 2002 and March 31, 2002                         |  |    | 4  | 
|                                                                                                          | Condensed Consolidated Statements of Cash Flows
Nine months ended December 31, 2002 and 2001       |  |    | 5  | 
|                                                                                                          | Notes to Condensed Consolidated Financial Statements                                               |  |    | 6  | 
|ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL
            CONDITION AND RESULTS OF OPERATIONS |                                                                                                    |  | 12 |   
|ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT
            MARKET RISK                            |                                                                                                    |  | 18 |   
|ITEM 4. CONTROLS AND PROCEDURES                                                                           |                                                                                                    |  | 18 |   
|PART II. OTHER INFORMATION                                                                                |                                                                                                    |  |    |   
|ITEM 1. LEGAL PROCEEDINGS                                                                                 |                                                                                                    |  | 19 |   
|ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF THE SECURITY
            HOLDERS                               |                                                                                                    |  | 19 |   
|ITEM 6. EXHIBITS AND REPORTS ON FORM 10-K                                                                 |                                                                                                    |  | 19 |   
|                                                                                                          | SIGNATURES                                                                                         |  |    | 20 | 
|                                                                                                          | Section 302 Certification of CEO                                                                   |  |    | 21 | 
|                                                                                                          | Section 302 Certification of CFO                                                                   |  |    | 22 | 
|Ex. 99.1 Section 906 Certification of CEO                                                                 |                                                                                                    |  | 24 |   
|Ex. 99.2 Section 906 Certification of CFO                                                                 |                                                                                                    |  | 25 |   

Page 2



---

TABLE OF CONTENTS



|                                                                                              |                                                      |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION                                                                
|ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                                          
|                                                                                              | CONDENSED CONSOLIDATED STATEMENTS OF INCOME         
|                                                                                              | CONDENSED CONSOLIDATED BALANCE SHEETS               
|                                                                                              | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                                                                                              | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|                                                                                              | SIGNATURES                                          
|                                                                                              | Section 302 of the Sarbanes-Oxley Act of 2002       
|                                                                                              | Section 302 of the Sarbanes-Oxley Act of 2002       
|EX-10.1 AMENDMENT TO EMPLOYMENT AGREEMENT                                                    
|EX-99.1 SECTION 906 CERTIFICATION OF THE CEO                                                 
|EX-99.2 SECTION 906 CERTIFICATION OF THE CFO                                                 



---



##### Table of Contents






PART I. FINANCIAL INFORMATION




ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




FIREARMS TRAINING SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited, and in thousands except per share data)

|                                                     |                                              |                          |                                   |       |                    |     |                   |       |       |     |        |       |        |     |        |       |        |    | 
|---------------------------------------------------- | -------------------------------------------- | ------------------------ | --------------------------------- | ----- | ------------------ | --- | ----------------- | ----- | ----- | --- | ------ | ----- | ------ | --- | ------ | ----- | ------ | -- | 
|                                                     |                                              |                          |                                   |       | Three months ended |     | Nine months ended
|                                                     |                                              |                          |                                   |       | December 31,       |     | December 31,     
|                                                     |                                              |                          |                                   |       |                    |     |                  
|                                                     |                                              |                          |                                   |       | 2002               |     | 2001              |       | 2002  |     | 2001  
|                                                     |                                              |                          |                                   |       |                    |     |                   |       |       |     |       
|Revenues                                             |                                              | $                        | 12,463                            |       |                    | $   | 15,396            |       |       | $   | 42,660 |       |        | $   | 43,932 |      
|Cost of revenues                                     |                                              |                          | 7,984                             |       |                    |     | 10,744            |       |       |     | 28,544 |       |        |     | 30,113 |      
|                                                     |                                              |                          |                                   |       |                    |     |                   |       |       |     |        |       |        |     |        |      
|Gross margin                                         |                                              |                          | 4,479                             |       |                    |     | 4,652             |       |       |     | 14,116 |       |        |     | 13,819 |      
|                                                     |                                              |                          |                                   |       |                    |     |                   |       |       |     |        |       |        |     |        |      
|Operating expenses:                                  |                                              |                          |                                   |       |                    |     |                   |       |       |     |        |       |        |     |        |      
|                                                     | Selling, general and administrative expenses |                          |                                   | 2,507 |                    |     |                   | 2,776 |       |     |        | 7,957 |        |     |        | 8,472 |       
|                                                     | Research and development expenses            |                          |                                   | 1,007 |                    |     |                   | 1,048 |       |     |        | 2,557 |        |     |        | 2,625 |       
|                                                     | Depreciation and amortization                |                          |                                   | 209   |                    |     |                   | 443   |       |     |        | 719   |        |     |        | 1,382 |       
|                                                     |                                              |                          |                                   |       |                    |     |                   |       |       |     |        |       |        |     |        |      
|                                                     |                                              | Total operating expenses |                                   |       | 3,723              |     |                   |       | 4,267 |     |        |       | 11,233 |     |        |       | 12,479 |   
|                                                     |                                              |                          |                                   |       |                    |     |                   |       |       |     |        |       |        |     |        |      
|Operating income                                     |                                              |                          | 756                               |       |                    |     | 385               |       |       |     | 2,883  |       |        |     | 1,340  |      
|                                                     |                                              |                          |                                   |       |                    |     |                   |       |       |     |        |       |        |     |        |      
|Other income (expense), net:                         |                                              |                          |                                   |       |                    |     |                   |       |       |     |        |       |        |     |        |      
|                                                     | Interest income                              |                          |                                   | 12    |                    |     |                   | 25    |       |     |        | 60    |        |     |        | 217   |       
|                                                     | Interest expense                             |                          |                                   | (55   | )                  |     |                   | (92   | )     |     |        | (163  | )      |     |        | (140  | )     
|                                                     | Other income (expense), net                  |                          |                                   | 22    |                    |     |                   | (31   | )     |     |        | 76    |        |     |        | (62   | )     
|                                                     |                                              |                          |                                   |       |                    |     |                   |       |       |     |        |       |        |     |        |      
|                                                     |                                              |                          | Total other income (expense), net |       |                    | (21 | )                 |       |       | (98 | )      |       |        | (27 | )      |       |        | 15 | 
|                                                     |                                              |                          |                                   |       |                    |     |                   |       |       |     |        |       |        |     |        |      
|Income before provision for income taxes             |                                              |                          | 735                               |       |                    |     | 287               |       |       |     | 2,856  |       |        |     | 1,355  |      
|Provision for income taxes                           |                                              |                          | 222                               |       |                    |     | 63                |       |       |     | 943    |       |        |     | 545    |      
|                                                     |                                              |                          |                                   |       |                    |     |                   |       |       |     |        |       |        |     |        |      
|Net income                                           |                                              |                          | 513                               |       |                    |     | 224               |       |       |     | 1,913  |       |        |     | 810    |      
|Accretion of preferred stock                         |                                              |                          | (75                               | )     |                    |     | (68               | )     |       |     | (221   | )     |        |     | (200   | )    
|                                                     |                                              |                          |                                   |       |                    |     |                   |       |       |     |        |       |        |     |        |      
|Net income applicable to common shareholders         |                                              | $                        | 438                               |       |                    | $   | 156               |       |       | $   | 1,692  |       |        | $   | 610    |      
|                                                     |                                              |                          |                                   |       |                    |     |                   |       |       |     |        |       |        |     |        |      
|Basic earnings per common share                      |                                              | $                        | 0.01                              |       |                    | $   | 0.00              |       |       | $   | 0.02   |       |        | $   | 0.01   |      
|                                                     |                                              |                          |                                   |       |                    |     |                   |       |       |     |        |       |        |     |        |      
|Diluted earnings per common share                    |                                              | $                        | 0.01                              |       |                    | $   | 0.00              |       |       | $   | 0.02   |       |        | $   | 0.01   |      
|                                                     |                                              |                          |                                   |       |                    |     |                   |       |       |     |        |       |        |     |        |      
|Weighted average common shares outstanding  basic   |                                              |                          | 70,153                            |       |                    |     | 70,153            |       |       |     | 70,153 |       |        |     | 70,151 |      
|                                                     |                                              |                          |                                   |       |                    |     |                   |       |       |     |        |       |        |     |        |      
|Weighted average common shares outstanding  diluted |                                              |                          | 71,736                            |       |                    |     | 71,042            |       |       |     | 72,021 |       |        |     | 70,771 |      
|                                                     |                                              |                          |                                   |       |                    |     |                   |       |       |     |        |       |        |     |        |      

The accompanying notes are an integral part of these condensed consolidated statements

Page 3



---



##### Table of Contents






FIREARMS TRAINING SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

|                                                   |                                                                             |                                       |                                             |                             |   |              |         |           |   |        |         |  
|-------------------------------------------------- | --------------------------------------------------------------------------- | ------------------------------------- | ------------------------------------------- | --------------------------- | - | ------------ | ------- | --------- | - | ------ | ------- | -
|                                                   |                                                                             |                                       |                                             |                             |   | December 31, |         | March 31,
|                                                   |                                                                             |                                       |                                             |                             |   | 2002         |         | 2002     
|ASSETS                                             |                                                                             | (unaudited)                           |                                             |                            
|                                                   |                                                                             |                                       |                                             |                            
|Current assets:                                    |                                                                             |                                       |                                             |                             |   |              |         |          
|                                                   | Cash and cash equivalents                                                   |                                       | $                                           | 5,143                       |   |              | $       | 4,252     |  
|                                                   | Restricted cash                                                             |                                       |                                             | 1,753                       |   |              |         | 1,434     |  
|                                                   | Accounts receivable, net                                                    |                                       |                                             | 8,926                       |   |              |         | 10,500    |  
|                                                   | Costs and estimated earnings in excess of billings on uncompleted contracts |                                       |                                             | 3,892                       |   |              |         | 1,816     |  
|                                                   | Unbilled receivables                                                        |                                       |                                             | 456                         |   |              |         | 1,378     |  
|                                                   | Income tax receivable                                                       |                                       |                                             |                            |   |              |         | 4,488     |  
|                                                   | Inventories, net                                                            |                                       |                                             | 12,803                      |   |              |         | 9,434     |  
|                                                   | Prepaid expenses and other current assets                                   |                                       |                                             | 1,382                       |   |              |         | 1,444     |  
|                                                   |                                                                             |                                       |                                             |                             |   |              |         |          
|                                                   |                                                                             |                                       |                                             | Total current assets        |   |              | 34,355  |           |   |        | 34,746  |  
|Property and equipment, net                        |                                                                             |                                       | 2,081                                       |                             |   |              | 1,579   |          
|Intangible assets                                  |                                                                             |                                       | 142                                         |                             |   |              | 26      |          
|                                                   |                                                                             |                                       |                                             |                             |   |              |         |          
|                                                   |                                                                             |                                       |                                             | Total assets                |   | $            | 36,578  |           |   | $      | 36,351  |  
|                                                   |                                                                             |                                       |                                             |                             |   |              |         |          
|                                                   |                                                                             | LIABILITIES AND STOCKHOLDERS DEFICIT |                                             |                             |   |              |         |           |   |       
|Current liabilities:                               |                                                                             |                                       |                                             |                             |   |              |         |          
|                                                   | Accounts payable                                                            |                                       | $                                           | 4,351                       |   |              | $       | 4,430     |  
|                                                   | Accrued liabilities                                                         |                                       |                                             | 3,638                       |   |              |         | 5,053     |  
|                                                   | Accrued interest                                                            |                                       |                                             | 886                         |   |              |         | 861       |  
|                                                   | Income tax payable                                                          |                                       |                                             | 1,155                       |   |              |         |          |  
|                                                   | Billings in excess of costs and estimated earnings on uncompleted contracts |                                       |                                             | 709                         |   |              |         | 285       |  
|                                                   | Deferred revenue                                                            |                                       |                                             | 1,181                       |   |              |         | 902       |  
|                                                   | Warranty and contract costs provision  current                             |                                       |                                             | 2,390                       |   |              |         | 2,258     |  
|                                                   | Current portion of long-term debt and capital lease obligations             |                                       |                                             | 41,064                      |   |              |         |          |  
|                                                   |                                                                             |                                       |                                             |                             |   |              |         |          
|                                                   |                                                                             |                                       |                                             | Total current liabilities   |   |              | 55,374  |           |   |        | 13,789  |  
|Long-term debt, less current portion               |                                                                             |                                       | 137                                         |                             |   |              | 42,977  |          
|Noncurrent deferred income taxes                   |                                                                             |                                       | 20                                          |                             |   |              | 22      |          
|Warranty and contract costs provision  noncurrent |                                                                             |                                       | 661                                         |                             |   |              | 1,467   |          
|Other noncurrent liabilities                       |                                                                             |                                       | 737                                         |                             |   |              | 579     |          
|                                                   |                                                                             |                                       |                                             |                             |   |              |         |          
|Total liabilities                                  |                                                                             |                                       | 56,929                                      |                             |   |              | 58,834  |          
|                                                   |                                                                             |                                       |                                             |                             |   |              |         |          
|Mandatory redeemable preferred stock               |                                                                             |                                       | 27,540                                      |                             |   |              | 27,319  |          
|Stockholders deficit:                             |                                                                             |                                       |                                             |                             |   |              |         |          
|                                                   | Common stock                                                                |                                       |                                             |                            |   |              |         |          |  
|                                                   | Stock warrants                                                              |                                       |                                             | 613                         |   |              |         | 613       |  
|                                                   | Additional paid-in-capital                                                  |                                       |                                             | 122,314                     |   |              |         | 122,314   |  
|                                                   | Accumulated deficit                                                         |                                       |                                             | (170,658                    | ) |              |         | (172,350  | )
|                                                   | Cumulative foreign currency translation adjustment                          |                                       |                                             | (160                        | ) |              |         | (379      | )
|                                                   |                                                                             |                                       |                                             |                             |   |              |         |          
|                                                   |                                                                             |                                       |                                             | Total stockholders deficit |   |              | (47,891 | )         |   |        | (49,802 | )
|                                                   |                                                                             |                                       |                                             |                             |   |              |         |          
|                                                   |                                                                             |                                       | Total liabilities and stockholders deficit |                             | $ | 36,578       |         |           | $ | 36,351 |        
|                                                   |                                                                             |                                       |                                             |                             |   |              |         |          

The accompanying notes are an integral part of these condensed consolidated statements

Page 4



---



##### Table of Contents






FIREARMS TRAINING SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)

|                                                                                         |                                                        |                                                                             |                                                                            |                                           |     |                   |        |        |     |        |       |  
|---------------------------------------------------------------------------------------- | ------------------------------------------------------ | --------------------------------------------------------------------------- | -------------------------------------------------------------------------- | ----------------------------------------- | --- | ----------------- | ------ | ------ | --- | ------ | ----- | -
|                                                                                         |                                                        |                                                                             |                                                                            |                                           |     | Nine months ended
|                                                                                         |                                                        |                                                                             |                                                                            |                                           |     | December 31,     
|                                                                                         |                                                        |                                                                             |                                                                            |                                           |     |                  
|                                                                                         |                                                        |                                                                             |                                                                            |                                           |     | 2002              |        | 2001  
|                                                                                         |                                                        |                                                                             |                                                                            |                                           |     |                   |        |       
|OPERATING ACTIVITIES:                                                                    |                                                        |                                                                             |                                                                            |                                           |     |                   |        |       
|Net income applicable to common shareholders                                             |                                                        | $                                                                           | 1,692                                                                      |                                           |     | $                 | 610    |       
|Adjustments to reconcile net income (loss) to net cash provided by
operating activities: |                                                        |                                                                             |                                                                            |                                           |     |                   |        |       
|                                                                                         | Noncash employee compensation                          |                                                                             |                                                                            |                                          |     |                   |        | 13     |    
|                                                                                         | Change in warranty and contracts cost provision        |                                                                             |                                                                            | (674                                      | )   |                   |        | (1,151 | )  
|                                                                                         | Noncash reduction of debt restructuring liability      |                                                                             |                                                                            | (2,634                                    | )   |                   |        | (2,634 | )  
|                                                                                         | Accretion of mandatory redeemable preferred stock      |                                                                             |                                                                            | 221                                       |     |                   |        | 200    |    
|                                                                                         | Depreciation                                           |                                                                             |                                                                            | 719                                       |     |                   |        | 1,243  |    
|                                                                                         | Amortization of goodwill                               |                                                                             |                                                                            |                                          |     |                   |        | 139    |    
|                                                                                         | Amortization of loan costs and other intangible assets |                                                                             |                                                                            | 134                                       |     |                   |        |       |    
|                                                                                         | (Gain)/loss on disposal of assets                      |                                                                             |                                                                            | 23                                        |     |                   |        | (56    | )  
|                                                                                         | Deferred income taxes                                  |                                                                             |                                                                            | (1                                        | )   |                   |        | 90     |    
|                                                                                         | Changes in assets and liabilities:                     |                                                                             |                                                                            |                                           |     |                   |        |        |    
|                                                                                         |                                                        |                                                                             | Accounts receivable, net                                                   |                                           |     | 1,575             |        |        |     | (3,933 | )    
|                                                                                         |                                                        |                                                                             | Cost and estimated earnings in excess of billings on
uncompleted contracts |                                           |     | (1,726            | )      |        |     | 1,328  |      
|                                                                                         |                                                        |                                                                             | Unbilled receivables                                                       |                                           |     | 578               |        |        |     | 192    |      
|                                                                                         |                                                        |                                                                             | Inventories                                                                |                                           |     | (3,364            | )      |        |     | 1,669  |      
|                                                                                         |                                                        |                                                                             | Prepaid expenses and other current assets                                  |                                           |     | (188              | )      |        |     | 30     |      
|                                                                                         |                                                        |                                                                             | Accounts payable                                                           |                                           |     | (80               | )      |        |     | 76     |      
|                                                                                         |                                                        |                                                                             | Accrued liabilities                                                        |                                           |     | (763              | )      |        |     | 3,299  |      
|                                                                                         |                                                        |                                                                             | Income taxes payable / receivable                                          |                                           |     | 5,696             |        |        |     | 1,515  |      
|                                                                                         |                                                        | Billings in excess of costs and estimated earnings on
uncompleted contracts |                                                                            |                                           | 423 |                   |        |        | (59 | )     
|                                                                                         |                                                        |                                                                             | Deferred revenue                                                           |                                           |     | 274               |        |        |     | 242    |      
|                                                                                         |                                                        |                                                                             | Noncurrent liabilities                                                     |                                           |     | 158               |        |        |     | 228    |      
|                                                                                         |                                                        |                                                                             |                                                                            |                                           |     |                   |        |       
|                                                                                         |                                                        |                                                                             |                                                                            | Total adjustments                         |     |                   | 371    |        |     |        | 2,431 |  
|                                                                                         |                                                        |                                                                             |                                                                            |                                           |     |                   |        |       
|                                                                                         |                                                        |                                                                             |                                                                            | Net cash provided by operating activities |     |                   | 2,063  |        |     |        | 3,041 |  
|                                                                                         |                                                        |                                                                             |                                                                            |                                           |     |                   |        |       
|Cash flows from investing activities:                                                    |                                                        |                                                                             |                                                                            |                                           |     |                   |        |       
|                                                                                         | Change in restricted cash                              |                                                                             |                                                                            | (319                                      | )   |                   |        | 136    |    
|                                                                                         | Additions to property and equipment, net               |                                                                             |                                                                            | (1,024                                    | )   |                   |        | (352   | )  
|                                                                                         | Proceeds from disposal of property and equipment       |                                                                             |                                                                            |                                          |     |                   |        | 59     |    
|                                                                                         |                                                        |                                                                             |                                                                            |                                           |     |                   |        |       
|                                                                                         |                                                        |                                                                             |                                                                            | Net cash used in investing activities     |     |                   | (1,343 | )      |     |        | (157  | )
|                                                                                         |                                                        |                                                                             |                                                                            |                                           |     |                   |        |       
|Cash flows from financing activities:                                                    |                                                        |                                                                             |                                                                            |                                           |     |                   |        |       
|                                                                                         | Repayments of capital lease obligation                 |                                                                             |                                                                            | (27                                       | )   |                   |        | (170   | )  
|                                                                                         |                                                        |                                                                             |                                                                            |                                           |     |                   |        |       
|                                                                                         |                                                        |                                                                             |                                                                            | Net cash used in financing activities     |     |                   | (27    | )      |     |        | (170  | )
|                                                                                         |                                                        |                                                                             |                                                                            |                                           |     |                   |        |       
|Effect of changes in foreign exchange rates                                              |                                                        |                                                                             | 198                                                                        |                                           |     |                   | (164   | )     
|                                                                                         |                                                        |                                                                             |                                                                            |                                           |     |                   |        |       
|Net increase in Cash and Cash Equivalents                                                |                                                        |                                                                             | 891                                                                        |                                           |     |                   | 2,550  |       
|Cash and Cash Equivalents at the Beginning of the Period                                 |                                                        | $                                                                           | 4,252                                                                      |                                           |     | $                 | 1,864  |       
|                                                                                         |                                                        |                                                                             |                                                                            |                                           |     |                   |        |       
|Cash and Cash Equivalents at the End of the Period                                       |                                                        | $                                                                           | 5,143                                                                      |                                           |     | $                 | 4,414  |       
|                                                                                         |                                                        |                                                                             |                                                                            |                                           |     |                   |        |       
|Supplemental disclosures of cash paid (received) for:                                    |                                                        |                                                                             |                                                                            |                                           |     |                   |        |       
|                                                                                         | Interest                                               |                                                                             | $                                                                          | 1,975                                     |     |                   | $      | 780    |    
|                                                                                         | Income taxes                                           |                                                                             | $                                                                          | (4,766                                    | )   |                   | $      | (996   | )  
|Supplemental disclosures of non-cash investing and financing activities:                 |                                                        |                                                                             |                                                                            |                                           |     |                   |        |       
|                                                                                         | Vehicles acquired through capital leases               |                                                                             | $                                                                          | 209                                       |     |                   | $      |       |    

The accompanying notes are an integral part of these condensed consolidated statements

Page 5



---



##### Table of Contents






FIREARMS TRAINING SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1.  BASIS OF PRESENTATION.

The accompanying condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments, consisting of normal recurring adjustments, considered necessary
for a fair presentation have been included. Operating results for the
three-month and nine-month periods ended December 31, 2002 are not necessarily
indicative of the results that may be expected for the year ending March 31,
2003. For further information, refer to the Companys consolidated financial
statements and footnotes thereto for the year ended March 31, 2002.

2.  REVENUE RECOGNITION

A significant amount of the Companys revenue is derived from the sale of
small and supporting arms training simulators and accessories. Revenue from
sales to commercial customers and small governmental agencies is primarily
recognized upon shipment when title passes; as all material commitments have
been fulfilled, the sales price is fixed and determinable and collectibility is
reasonably assured.

A large portion of the Companys small and supporting arms training
simulator revenue is derived from contracts with various large governmental
agencies. Governmental contracts that involve high volume purchases of the
Companys standard systems and related accessories are accounted for as
multiple-element arrangements. These contracts require little or no
modifications to the existing proprietary platform, specify pricing terms by
product and billings generally correspond to the underlying shipment schedule.
Advanced billings related to these contracts are recorded as deferred revenue
and are recognized ratably as units are delivered.

Other governmental contracts require significant customization of the
Companys existing proprietary platform or require the development of new
systems to meet required customer specifications. These contracts are accounted
for under the percentage of completion method, measured by the percentage of
cost incurred to date to the estimated total cost for each contract. Contract
costs include all direct material, direct labor and other costs directly
related to the contract. Selling, general, and administrative costs are charged
to expense as incurred. Changes in job performance, job conditions, and
estimated profitability, including those arising from contract penalty
provisions, and final contract settlements may result in revisions to costs and
income and are recognized in the period in which the revisions are determined

Provisions for estimated losses on uncompleted contracts accounted for
under both methods described above are made in the period in which such losses
are determined.

Revenue from extended warranty sales and customer logistics support sales
are recorded as deferred revenue and are recognized ratably as income over the
lives of the related service agreements, which generally range from one to
three years. Costs associated with these sales are recorded in the period
incurred.

Page 6



---



##### Table of Contents



3.  INVENTORY.

Inventories consist primarily of simulators, computer hardware,
projectors, and component parts. Inventories are valued at the lower of cost on
a moving weighted average or market basis. Cost includes materials, labor, and
factory overhead. Market is defined as net realizable value. During the three
months ended December 31, 2001, the Company recorded approximately $1.7 million
as a reserve for excess inventory related to older, slow-moving products, which
was recorded in cost of sales that was based on an analysis of its readily
saleable inventory. During the nine months ended December 31, 2002, the Company
reduced the reserve through the disposal and write-off of certain obsolete
items of inventory.

Inventories consist of the following (in thousands):

|                |                    |   |              |        |           |   |        |        | 
|--------------- | ------------------ | - | ------------ | ------ | --------- | - | ------ | ------ | 
|                |                    |   | December 31, |        | March 31,
|                |                    |   | 2002         |        | 2002     
|                |                    |   |              |        |          
|Raw materials   |                    | $ | 6,353        |        |           | $ | 8,874  |       
|Work in process |                    |   | 5,485        |        |           |   | 2,668  |       
|Finished Goods  |                    |   | 2,308        |        |           |   | 1,412  |       
|                |                    |   |              |        |           |   |        |       
|                | Inventories, gross |   |              | 14,146 |           |   |        | 12,954 | 
|Less reserves   |                    |   | (1,343       | )      |           |   | (3,520 | )     
|                |                    |   |              |        |           |   |        |       
|                | Inventories, net   |   | $            | 12,803 |           |   | $      | 9,434  | 
|                |                    |   |              |        |           |   |        |       

4.   LONG-TERM CONTRACTS



| |                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Costs and estimated earnings on uncompleted contracts and related amounts
billed as of December 31, 2002 and March 31, 2002, respectively, are as
follows (in thousands):

|                                        |  |              |         |           |  |   |         |  
|--------------------------------------- |  | ------------ | ------- | --------- |  | - | ------- | -
|                                        |  | December 31, |         | March 31,
|                                        |  | 2002         |         | 2002     
|                                        |  |              |         |          
|Costs incurred on uncompleted contracts |  | $            | 21,029  |           |  | $ | 14,305  |  
|Estimated earnings                      |  |              | 12,920  |           |  |   | 6,536   |  
|                                        |  |              |         |           |  |   |         |  
|                                        |  | $            | 33,949  |           |  | $ | 20,841  |  
|Less: billings to date                  |  |              | (30,766 | )         |  |   | (19,310 | )
|                                        |  |              |         |           |  |   |         |  
|                                        |  | $            | 3,183   |           |  | $ | 1,531   |  
|                                        |  |              |         |           |  |   |         |  

Such amounts are included in the following accounts:

|                                                                            |  |              |       |           |  |   |       |  
|--------------------------------------------------------------------------- |  | ------------ | ----- | --------- |  | - | ----- | -
|                                                                            |  | December 31, |       | March 31,
|                                                                            |  | 2002         |       | 2002     
|                                                                            |  |              |       |          
|Costs and estimated earnings in excess of billings on uncompleted contracts |  | $            | 3,892 |           |  | $ | 1,816 |  
|Billings in excess of costs and estimated earnings on uncompleted contracts |  |              | (709  | )         |  |   | (285  | )
|                                                                            |  |              |       |           |  |   |       |  
|                                                                            |  | $            | 3,183 |           |  | $ | 1,531 |  
|                                                                            |  |              |       |           |  |   |       |  

5.  INTANGIBLE ASSETS

The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 142, Goodwill and Other Intangible Assets, effective April 1, 2002.

Intangible assets consist of the following:

|                            |                               |  |              |      |           |  |    |    |  
|--------------------------- | ----------------------------- |  | ------------ | ---- | --------- |  | -- | -- | -
|                            |                               |  | December 31, |      | March 31,
|                            |                               |  | 2002         |      | 2002     
|                            |                               |  |              |      |          
|Amortized intangible assets |                               |  |              |      |           |  |    |   
|                            | Non-compete agreements        |  |              | 33   |           |  |    | 33 |  
|                            | Deferred
financing costs      |  |              | 250  |           |  |    |   |  
|                            | Less accumulated amortization |  |              | (141 | )         |  |    | (7 | )
|                            |                               |  |              |      |           |  |    |   
|                            |                               |  | 142          |      |           |  | 26 |   
|                            |                               |  |              |      |           |  |    |   

Page 7



---



##### Table of Contents



Amortization expense for the three-month and nine-month periods ended
December 31, 2002 was $44,000 and $134,000 respectively. Estimated amortization
expense for the year ending March 31, 2003 will be approximately $180,000.

6.  LONG-TERM DEBT

At December 31, 2002 and March 31, 2002, long-term debt consisted of the
following (in thousands):

|                             |                                                   |   |              |     |           |   |        |        | 
|---------------------------- | ------------------------------------------------- | - | ------------ | --- | --------- | - | ------ | ------ | 
|                             |                                                   |   | December 31, |     | March 31,
|                             |                                                   |   | 2002         |     | 2002     
|                             |                                                   |   |              |     |          
|Working capital  borrowings |                                                   | $ | 130          |     |           | $ | 130    |       
|Long-term debt  Senior      |                                                   |   | 12,000       |     |           |   | 12,000 |       
|Long-term debt  Junior      |                                                   |   | 28,010       |     |           |   | 27,334 |       
|Debt discount                |                                                   |   | 878          |     |           |   | 3,513  |       
|Capital lease obligations    |                                                   |   | 183          |     |           |   | 0      |       
|                             |                                                   |   |              |     |           |   |        |       
|                             |                                                   |   | 41,201       |     |           |   | 42,977 |       
|Less: Current portion        |                                                   |   | (41,064      | )   |           |   | 0      |       
|                             |                                                   |   |              |     |           |   |        |       
|                             | Total long-term debt and capital lease obligation |   | $            | 137 |           |   | $      | 42,977 | 
|                             |                                                   |   |              |     |           |   |        |       

Debt discount represents a non-cash debt restructuring liability, which is
amortized as a reduction in interest expense monthly.

As of September 30, 2002, the working capital borrowings, the long-term
debt  senior, the long-term debt  junior and the debt discount became current
liabilities due to their maturity date of September 30, 2003. The Company does,
however, have an option and currently expects to extend the maturity date for
$40.0 million of the reclassified debt to March 31, 2004.

7.  RELATED PARTY TRANSACTIONS

The Company entered into a consulting agreement, dated October 4, 2000,
with Sugarman Company, LLP, a company in which Randy Sugarman is the managing
partner and has an 80% ownership interest. Under the agreement and in
accordance with the terms of the Companys restructuring in fiscal year 2001,
Mr. Sugarman was engaged by the Company to evaluate its financial position and
operations and make recommendations to senior management regarding changes that
need to be made to improve profitability and liquidity. Mr. Sugarmans services
were performed on an hourly basis, plus out-of-pocket expenses, and the Company
was billed accordingly. From May 16, 2001 until August 9, 2002, Mr. Sugarman
served as Interim Chief Executive Officer and President of the Company. Mr.
Sugarman ceased to be an officer of the Company on August 9, 2002, in
connection with the conclusion of the Companys engagement of Sugarman Company
LLP. The Company incurred consulting fees of $211,000, plus expenses of $47,000
for the nine-month period ended December 31, 2002, and no fees or expenses for
the three-month period ended December 31, 2002, under the consulting agreement.
The Company incurred consulting fees of $86,000 and $288,000 plus expenses of
$111,000 and $151,000 respectively, for consulting services under the agreement
during the three months and nine months ended December 31, 2001.

A group of entities affiliated with Centre Partners Management LLC (the
Centre Entities) are among the Companys largest shareholders. The Centre
Entities hold a seat on the Companys Board of Directors. In addition, the
Centre Entities, and other institutional lenders who are also major
shareholders as a result of a previously disclosed restructuring transaction
(See Part I, Item 1, Restructure Transaction in the Companys Annual Report on
Form 10-K/A Amendment Number 2 for the fiscal year ended March 31,2002 (the
2002 10-K)), were party to a previously disclosed debt restructuring (See Note
3 to the Companys financial statements included in the 2002 10-K) and continue
to be the Companys primary lenders. As a result of the share ownership of the
Centre Entities and their representation on the Board of Directors, the Centre
Entities have the ability to influence the operations of the Company.

Page 8



---



##### Table of Contents



8.  NET INCOME PER COMMON SHARE

Net income
(loss) per share for the three and nine months ended
December 31, 2002 and 2001 were as follows:

(in thousands, except per share amounts)

|                                                                                               |  |                    |        |                   |  |              |        |              |  |   |        |  |  |   |        | 
|---------------------------------------------------------------------------------------------- |  | ------------------ | ------ | ----------------- |  | ------------ | ------ | ------------ |  | - | ------ |  |  | - | ------ | 
|                                                                                               |  | Three months ended |        | Nine months ended
|                                                                                               |  |                    |        |                  
|                                                                                               |  | December 31,       |        | December 31,      |  | December 31, |        | December 31,
|                                                                                               |  | 2002               |        | 2001              |  | 2002         |        | 2001        
|                                                                                               |  |                    |        |                   |  |              |        |             
|Basic:                                                                                         |  |                    |        |                   |  |              |        |              |  |   |        |  |  |   |        | 
|Net income applicable to common shareholders                                                   |  | $                  | 438    |                   |  | $            | 156    |              |  | $ | 1,692  |  |  | $ | 610    | 
|Weighted average common shares outstanding                                                     |  |                    | 70,153 |                   |  |              | 70,153 |              |  |   | 70,153 |  |  |   | 70,151 | 
|                                                                                               |  |                    |        |                   |  |              |        |              |  |   |        |  |  |   |        | 
|Per share amount                                                                               |  | $                  | 0.01   |                   |  | $            | 0.00   |              |  | $ | 0.02   |  |  | $ | 0.01   | 
|                                                                                               |  |                    |        |                   |  |              |        |              |  |   |        |  |  |   |        | 
|Diluted:                                                                                       |  |                    |        |                   |  |              |        |              |  |   |        |  |  |   |        | 
|Net income applicable to common shareholders                                                   |  | $                  | 438    |                   |  | $            | 156    |              |  | $ | 1,692  |  |  | $ | 610    | 
|Weighted average common shares outstanding                                                     |  |                    | 70,153 |                   |  |              | 70,153 |              |  |   | 70,153 |  |  |   | 70,151 | 
|Shares assumed issued upon exercise of dilutive stock
options using the treasury stock method  |  |                    | 625    |                   |  |              | 236    |              |  |   | 711    |  |  |   | 234    | 
|Shares assumed issued upon exercise of dilutive stock
warrants using the treasury stock method |  |                    | 958    |                   |  |              | 653    |              |  |   | 1,157  |  |  |   | 386    | 
|                                                                                               |  |                    |        |                   |  |              |        |              |  |   |        |  |  |   |        | 
|Total                                                                                          |  |                    | 71,736 |                   |  |              | 71,042 |              |  |   | 72,021 |  |  |   | 70,771 | 
|                                                                                               |  |                    |        |                   |  |              |        |              |  |   |        |  |  |   |        | 
|Per share amount                                                                               |  | $                  | 0.01   |                   |  | $            | 0.00   |              |  | $ | 0.02   |  |  | $ | 0.01   | 
|                                                                                               |  |                    |        |                   |  |              |        |              |  |   |        |  |  |   |        | 

Basic and diluted earnings per common share were computed by dividing net
income by the weighted average number of shares of common stock outstanding
during the year. Stock options to purchase 2,092,777 and 1,552,077 shares of
common stock, respectively as well as warrants to purchase 3,246,164 shares of
common stock were excluded for the three-month and nine-month periods ended
December 31, 2002 because they were anti-dilutive. Similarly, stock options to
purchase 2,122,877 shares of common stock and warrants to purchase 3,246,164
shares of common stock were outstanding as of December 31, 2001, but were
excluded for the same reason.

9.  COMMITMENTS AND CONTINGENCIES

Pursuant to applicable Bureau of Alcohol, Tobacco and Firearms (BATF)
regulations, during the quarter ended June 30, 2002, the Company advised the
BATF that approximately 33 weapons that the Company believed were at customer
locations could not be accounted for after the Company conducted a physical
inventory of its weapons. The BATF responded that the Company should confirm
the number of missing weapons and file the formal report required by BATF
regulations. The Company conducted an investigation into this matter and
concluded that the number of weapons missing is 41. The Company has filed the
formal report with the BATF and local law enforcement authorities. Continuing
communications with the BATF indicate that the BATF intends to continue to
monitor the related controls and procedures of the Company, and had intended to
conduct an inspection during the third quarter of the fiscal year ending March
31, 2003. Based on communications to date, and the fact that the BATF did not
conduct the inspection during the third quarter, the Company does not currently
expect the matter to have a material adverse effect on the financial position
or results of operations.

The Companys product warranty accrual reflects managements best estimate
of probable liability under its product warranties. Management determines the
warranty based on known product failures (if any), historical experience, and
other currently available evidence.

Page 9



---



##### Table of Contents



Changes in the product warranty accrual for the nine months ended December 31,
2002 were as follows (in thousands):

|                              |                                                             |   |     |   | 
|----------------------------- | ----------------------------------------------------------- | - | --- | - | 
|Balance  beginning of period |                                                             | $ | 550 |  
|                              | Payments made                                               |   |     |  | 
|                              | Change in liability for warranties issued during the period |   |     |  | 
|                              | Change in liabilities for preexisting warranties            |   |     | 2 | 
|                              |                                                             |   |     |  
|Balance  end of period       |                                                             | $ | 552 |  
|                              |                                                             |   |     |  

10.   RECENTLY ISSUED ACCOUNTING STANDARDS

In November 2002, the Financial Accounting Standards Board (FASB)
issued Interpretation 45, Guarantors Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of Others.The
Interpretation elaborates on the existing disclosure requirements for most
guarantees, including product warranties and loan guarantees such as standby
letters of credit. It also clarifies that at the time a company issues a
guarantee, the company must recognize an initial liability for the fair
value, or market value, of the obligations it assumes under the guarantee
and must disclose that information in its interim and annual financial
statements. The provisions related to recognizing a liability at inception
of the guarantee for the fair value of the guarantors obligations does not
apply to product warranties or to guarantees accounted for as derivatives.
The initial recognition and initial measurement provisions apply on a
prospective basis to guarantees issued or modified after December 31, 2002.
The Companys disclosure of guarantees is included in Note 9 of the Notes to
Financial Statements. The Company believes that adoption of the recognition
and measurement provisions of Interpretation 45 will not have a material
impact on its financial statements.

In November 2002, the Emerging Issues Task Force (EITF) reached a
consensus on Issue No. 00-21, Revenue Arrangements with Multiple
Deliverables. EITF Issue No. 00-21 provides guidance on how to account for
arrangements that involve the delivery or performance of multiple products,
services and/or rights to use assets. The provisions of EITF Issue No. 00-21
will apply to revenue arrangements entered into in fiscal periods beginning
after June 15, 2003. The Company is currently evaluating the impact that
adoption of EITF Issue No. 00-21 will have on its consolidated financial
statements, but does not expect the adoption to have a material impact on
the Companys consolidated financial statements.

In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure  an amendment of FASB
Statement No. 123. SFAS No. 148 amends SFAS No. 123, Accounting for
Stock-Based Compensation, to provide alternative methods of transition for
a voluntary change to the fair value based method of accounting for
stock-based employee compensation. In addition, SFAS No. 148 amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures in
both annual and interim financial statements about the method of accounting
for stock-based employee compensation and the effect of the method used on
reported results. The disclosure requirements apply to all companies for
fiscal years ending after December 15, 2002. The interim disclosure
provisions are effective for financial reports containing financial
statements for interim periods beginning after December 15, 2002. The
adoption of SFAS No. 148 is not expected to have a material impact on the
Companys consolidated financial statements.

In January 2003, the FASB issued Interpretation 46, Consolidation of
Variable Interest Entities.In general, a variable interest entity is a
corporation, partnership, trust, or any other legal structure used for
business purposes that either (a) does not have equity investors with voting
rights or (b) has equity investors that do not provide sufficient financial
resources for the entity to support its activities. Interpretation 46
requires a variable interest entity to be consolidated by a company if that
company is subject to a majority of the risk of loss from the variable
interest entitys activities or entitled to receive a majority of the
entitys residual returns or both. The consolidation requirements of
Interpretation 46 apply immediately to variable interest entities created
after January 31, 2003. The consolidation requirements apply to older
entities in the first fiscal year or interim period beginning after June 15,
2003. Certain of the disclosure requirements apply in all financial
statements issued after January 31, 2003, regardless of when the variable
interest entity was established. The Company is currently evaluating the
provisions of the Interpretation, but believes its adoption will not have a
material impact on its financial statements.

Page 10



---



##### Table of Contents



11.  COMPREHENSIVE INCOME

|                                             |  |                    |     |                   |  |              |     |              |  |   |       |  |  |   |      |  
|-------------------------------------------- |  | ------------------ | --- | ----------------- |  | ------------ | --- | ------------ |  | - | ----- |  |  | - | ---- | -
|                                             |  | Three months ended |     | Nine months ended
|                                             |  |                    |     |                  
|                                             |  | December 31,       |     | December 31,      |  | December 31, |     | December 31,
|                                             |  | 2002               |     | 2001              |  | 2002         |     | 2001        
|                                             |  |                    |     |                   |  |              |     |             
|Net income applicable to common shareholders |  | $                  | 438 |                   |  | $            | 156 |              |  | $ | 1,692 |  |  | $ | 610  |  
|Foreign currency translation adjustment      |  |                    | 84  |                   |  |              | 178 |              |  |   | 219   |  |  |   | (115 | )
|                                             |  |                    |     |                   |  |              |     |              |  |   |       |  |  |   |      |  
|Comprehensive income                         |  | $                  | 522 |                   |  | $            | 334 |              |  | $ | 1,911 |  |  | $ | 495  |  
|                                             |  |                    |     |                   |  |              |     |              |  |   |       |  |  |   |      |  

Page 11



---



##### Table of Contents






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

This Managements Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with the Managements
Discussion and Analysis of Financial Condition and Results of Operations
contained in the Companys most recently filed Form 10-K/A for the fiscal year
ended March 31, 2002.

RESULTS OF OPERATIONS

Three Months Ended December 31, 2002 and 2001:

Net Revenues: Revenues decreased $2.9 million, or 19.1%, to $12.5 million
for the three months ended December 31, 2002 as compared to $15.4 million for
the three months ended December 31, 2001. Sales to U.S. military customers for
the three months ended December 31, 2002, decreased by $3.0 million, or
(43.8%), to $3.8 million. The decrease in U. S. military sales is primarily due
to a government administrative delay in issuing a $3.0 million contract award
from a significant U. S. military customer. Sales to U.S. law enforcement
customers for the three months ended December 31, 2002 increased $0.2 million,
or 11.7% to $1.8 million. Sales to international customers for the three months
ended December 31, 2002 remained constant at $6.8 million. As further discussed
under Analysis of Backlog on page 14, the Companys backlog as of December
31, 2002 was approximately $79.0 million, the highest in the Companys history,
with approximately $21.5 million scheduled for delivery during the remainder of
our 2003 fiscal year. As a result, management expects a significant increase in
net revenue during the quarter ending March 31, 2003.

Cost of Revenues: Cost of revenues decreased $2.7 million, or 25.7%, to
$8.0 million for the three months ended December 31, 2002 as compared to $10.7
million for the three months ended December 31, 2001. As a percentage of
revenues, cost of revenues for the three months ended December 31, 2002
decreased to 64.1% as compared to 69.8% for the three months ended December 31,
2001. Each of the Companys primary lines of business showed improved margins
for the three months ended December 31, 2002 as compared to the three months
ended December 31, 2001. The decrease in cost of revenues as a percentage of
revenues is attributable to several factors: (1) continued product
standardization; (2) improved contract terms and conditions with specific
product acceptance criteria; (3) a higher volume of catalog product sales; (4)
greater efficiency in the manufacturing process; and (5) improved control over
inventory obsolescence. The percentage reduction in cost of revenue reflects
managements efforts to emphasize higher margin contracts and improve
efficiency in the manufacturing process.

Gross Profit: As a result of the foregoing, gross profit remained fairly
constant at $4.5 million for the three months ended December 31, 2002 as
compared to $4.7 million or for the three months ended December 31, 2001, while
increasing as a percentage of revenue from 30.2% for the three months ended
December 31, 2001 to 35.9% for the three months ended December 31, 2002.

Total Operating Expenses: Total operating expenses decreased $0.5 million,
or (12.7%), for the three months ended December 31, 2002. As a percentage of
revenues, total operating expenses increased 2.2% to 29.9% for the three months
ended December 31, 2002 as compared to 27.7% for the three months ended
December 31, 2001. Selling, general and administrative (SG&A) expenses
decreased $0.3 million or (9.7%), to $2.5 million for the three months ended
December 31, 2002 as compared to $2.8 for the three months ended December 31,
2001. The 2002 reduction in SG&A largely reflects the fact that the 2001 period
included certain excess, non-recurring expenses. Research and development
expenses remained constant at $1.0 million for both periods. Depreciation and
amortization expense decreased $0.2 million reflecting the elimination of
amortization of goodwill, which was written-off prior to March 31, 2002.

Operating Income: As a result of the foregoing, operating income increased
$0.4 million to $0.8 million, or 6.1% of revenues, for the three months ended
December 31, 2002 as compared to of $0.4 million or 2.5% of revenues, for the
three months ended December 31, 2001.

Other Income (Expense), net: Net interest expense, which included $54,000
in amortization of deferred financing costs and was reduced by $878,000 in
amortization of debt discount, totaled $43,000, or 0.3% of revenues for the
three months ended December 31, 2002. Net interest expense totaled $67,000, or
0.4% of revenues for the three months ended December 31, 2001, which included
$13,000 in amortization of deferred

Page 12



---



##### Table of Contents



financing costs and was reduced by $878,000 in amortization of debt
discount. Interest expense will continue to be recognized at a much lower
effective interest cost until the original debt maturity date of March 2003.

Provision for Income Taxes: The effective tax rate increased to (30.2%) of
income before taxes for the three months ended December 31, 2002 as compared to
(21.7%) for the three months ended December 31, 2001. The Company has not
recorded a tax benefit for the majority of its deferred tax assets due to
uncertainty of future realization in both periods.

Net Income: As a result of the foregoing, net income increased $0.3
million to $0.5 million, or 4.1% of revenues for the three months ended
December 31, 2002 as compared to $0.2 million, or 1.5% of revenues for the
three months ended December 31, 2001.

Accretion of Preferred Stock: The expense for the accretion of the
preferred stock was a total of $75,000 for the three months ended December 31,
2001 as compared to $68,000 for the three months ended December 31, 2001
related to the preferred stock issued in November, 1998 which was exchanged in
August 2000 for new preferred stock.

Net Income applicable to common shareholders: The net income applicable to
common shareholders increased $0.2 million to $0.4 million ($0.01 per share) or
3.5% of revenue for the three months ended December 31, 2002. This compares to
income of $0.2 million $0.00 per share or 1.0% of revenue for the three months
ended December 31, 2001.

Nine Months Ended December 31, 2002 and 2001:

Net Revenues: Revenues decreased $1.3 million, or (2.9%), to $42.7 million
for the nine months ended December 31, 2002 as compared to $43.9 million for
the nine months ended December 31, 2001. Sales to U.S. military customers for
the nine months ended December 31, 2002, decreased by $0.7 million, or (3.5%),
from $20.8 million to $20.1 million due to a government administrative delay in
issuing a $3.0 million contract award from the Air National Guard. Sales to
U.S. law enforcement customers for the nine months ended December 31, 2002
decreased $0.3 million or (6.1%) to $4.8 million due to continued increased
competition in this market. Sales to international customers for the nine
months ended December 31, 2002 remained fairly constant at $17.6 million.

Cost of Revenues: Cost of revenues decreased $1.6 million, or (5.2%), to
$28.5 million for the nine months ended December 31, 2002 as compared to $30.1
million for the nine months ended December 31, 2001. As a percentage of
revenues, cost of revenues decreased to 66.9% for the nine months ended
December 31, 2002 as compared to 68.5% for the nine months ended December 31,
2001. With the exception of U.S. Military, which showed improvement in the
current quarter, each of the Companys other primary lines of business showed
improved margins for the nine months ended December 31, 2002 as compared to the
nine months ended December 31, 2001. The decrease in cost of revenues as a
percentage of revenues is attributable to several factors: (1) continued
product standardization; (2) improved contract terms and conditions with
specific product acceptance criteria; (3) a higher volume of catalog product
sales; (4) greater efficiency in the manufacturing process; and (5) improved
control over inventory obsolescence. The percentage reduction in cost of
revenue reflects managements efforts to emphasize higher margin contracts and
improve efficiency in the manufacturing process.

Gross Profit: As a result of the foregoing, gross profit increased $0.3
million, or 2.1%, to $14.1 million, or 33.1% of revenues, for the nine months
ended December 31, 2002 as compared to $13.8 million, or 31.5% of revenues, for
the nine months ended December 31, 2001.

Total Operating Expenses: Total operating expenses decreased $1.3 million,
or (10.0%), to $11.2 million for the nine months ended December 31, 2002 as
compared to $12.5 million for the nine months ended December 31, 2001. As a
percentage of revenues, total operating expenses decreased to 26.3% for the
nine months ended December 31, 2002 as compared to 28.4% for the nine months
ended December 31, 2001. Selling, general and administrative (SG&A) expenses
decreased $0.5 million, or (6.1%) to $8.0 million for the nine months ended
December 31, 2002 as compared to $8.5 for the nine months ended December 31,
2001. The 2002 reduction in SG&A largely reflects the fact that the 2001 period
included certain excess, non-recurring expenses and an increased emphasis by
management during the 2002 period to control excess overhead costs. Research
and development expenses remained constant at $2.6 million and 6.0% of revenue
for both of the nine-month periods. Depreciation and amortization expense
decreased $0.7 million reflecting the elimination of amortization of goodwill,
which was written-off prior to March 31, 2002.

Page 13



---



##### Table of Contents



Operating Income: As a result of the foregoing, operating income increased
$1.6 million to $2.9 million, or 6.8% of revenues, for the nine months ended
December 31, 2002 as compared to $1.3 million or 3.1% of revenues, for the nine
months ended December 31, 2001.

Other Income (Expense), net: Net interest expense, which included $162,000
in amortization of deferred financing costs and was reduced by $2,634,000 in
amortization of debt discount, totaled $103,000, or 0.2% of revenues for the
nine months ended December 31, 2002 as compared to net interest income of
$77,000, or 0.2% of revenues for the nine months ended December 31, 2001, which
included $38,000 in amortization of deferred financing costs and was reduced by
$2,634,000 in amortization of debt discount. Interest expense will continue to
be recognized at a much lower effective interest cost until the original debt
maturity date of March 2003.

Provision for Income Taxes: The effective tax rate decreased to 33.0% of
income before taxes for the nine months ended December 31, 2002 as compared to
40.2% for the nine months ended December 31, 2001. The Company has not recorded
a tax benefit for the majority of its deferred tax assets due to uncertainty of
future realization in both periods however, certain of the Companys foreign
subsidiaries had lower operating income in fiscal year 2002 versus fiscal year
2001 resulting in lower tax provisions.

Net Income: As a result of the foregoing, net income increased $1.1
million to $1.9 million, or 4.5% of revenues for the nine months ended December
31, 2002 as compared to $0.8 million, or 1.8% of revenues for the nine months
ended December 31, 2001.

Accretion of Preferred Stock: The expense for the accretion of the
preferred stock was a total of $221,000 for the nine months ended December 31,
2002 as compared to $200,000 for the nine months ended December 31, 2001.

Net Income applicable to common shareholders: The net income applicable to
common shareholders increased $1.1 million to $1.7 million ($0.02 per share) or
4.0% of revenue. This compares to $0.6 million ($0.01 per share) or 1.4% of
revenue for the nine months ended December 31, 2001.

ANALYSIS OF BACKLOG

Backlog represents customer orders that have been contracted for future
delivery. Accordingly, these orders have not yet been recognized as revenue,
but represent future revenue. As of December 31, 2002, the Companys backlog
was approximately $79.0 million, the highest in the history of the Company.
This represents an increase of approximately $11.6 million or 17.2% as compared
to $67.4 million as of September 30, 2002, and an increase
of $42.2 million or
114.7% as compared to $36.8 million as of December 31, 2001. The December 31,
2002 backlog is comprised of $59.9 million from international customers of
FATS, $1.0 million from Simtrans customers and $18.1 million from FATS U.S.
military and law enforcement customers. Approximately $21.5 million of the
contracted orders are scheduled for delivery during the fourth quarter of the
fiscal year ending March 31, 2003.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2002, the Company had negative working capital of $21.0
million compared to a positive $16.4 million as of December 31, 2001. The net
$37.4 million decrease in working capital is primarily the result of a
reclassification of $41.1 million in long-term debt to current liabilities
reflecting the debts maturity date of September 30, 2003. The Company does,
however, have an option and currently expects to extend the maturity date for
$40.0 million of the reclassified debt to March 2004 and is currently in
negotiations with its Lenders to further extend the maturity date by one
additional year.

The Company had a net increase in cash and cash equivalents of $0.9
million for the nine months ended December 31, 2002 compared to $2.5 million
for the nine months ended December 31, 2001. For the period ended December 31,
2002, the Companys operating activities generated cash of approximately $2.1
million, primarily through profitable operations and the collection of an
income tax receivable offset somewhat by increases in inventories and costs and
earnings in excess of billings on uncompleted contracts. The Companys
investing activities used cash of approximately $1.3 million, primarily for
capital expenditures and additions to restricted cash.

As a result of the Restructure Transaction in August 2000, the Company is
not paying principal on its Senior Debt and Junior Debt. The interest on its
Senior Debt and Junior Debt is currently paid in cash based on achieving higher
levels of earnings. This debt will mature in September 2003 unless otherwise
extended at the option of the Company.

Page 14



---



##### Table of Contents



CONCENTRATION OF CREDIT RISK

At December 31, 2002, approximately $6.8 million in accounts receivable or
77.6% of total accounts receivable was due from the Companys top ten
customers, all of which are governmental entities or government prime
contractors.

RECENTLY ISSUED ACCOUNTING STANDARDS

In November 2002, the Financial Accounting Standards Board (FASB) issued
Interpretation 45, Guarantors Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others. The
Interpretation elaborates on the existing disclosure requirements for most
guarantees, including loan guarantees such as standby letters of credit. It
also clarifies that at the time a company issues a guarantee, the company must
recognize an initial liability for the fair value, or market value, of the
obligations it assumes under the guarantee and must disclose that information
in its interim and annual financial statements. The provisions related to
recognizing a liability at inception of the guarantee for the fair value of the
guarantors obligations does not apply to product warranties or to guarantees
accounted for as derivatives. The initial recognition and initial measurement
provisions apply on a prospective basis to guarantees issued or modified after
December 31, 2002. The Companys disclosure of guarantees is included in Note 9
of the Notes to Financial Statements. The Company believes that adoption of the
recognition and measurement provisions of Interpretation 45 will not have a
material impact on its financial statements.

In November 2002, the Emerging Issues Task Force (EITF) reached a
consensus on Issue No. 00-21, Revenue Arrangements with Multiple
Deliverables. EITF Issue No. 00-21 provides guidance on how to account for
arrangements that involve the delivery or performance of multiple products,
services and/or rights to use assets. The provisions of EITF Issue No. 00-21
will apply to revenue arrangements entered into in fiscal periods beginning
after June 15, 2003. The Company is currently evaluating the impact that
adoption of EITF Issue No. 00-21 will have on its consolidated financial
statements, but does not expect the adoption to have a material impact on the
Companys consolidated financial statements.

In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure  an amendment of FASB
Statement No. 123. SFAS No. 148 amends SFAS No. 123, Accounting for
Stock-Based Compensation, to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, SFAS No. 148 amends the disclosure
requirements of SFAS No. 123 to require prominent disclosures in both annual
and interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results.
The disclosure requirements apply to all companies for fiscal years ending
after December 15, 2002. The interim disclosure provisions are effective for
financial reports containing financial statements for interim periods beginning
after December 15, 2002. The adoption of SFAS No. 148 is not expected to have a
material impact on the Companys consolidated financial statements.

In January 2003, the FASB issued Interpretation 46, Consolidation of
Variable Interest Entities. In general, a variable interest entity is a
corporation, partnership, trust, or any other legal structure used for business
purposes that either (a) does not have equity investors with voting rights or
(b) has equity investors that do not provide sufficient financial resources for
the entity to support its activities. Interpretation 46 requires a variable
interest entity to be consolidated by a company if that company is subject to a
majority of the risk of loss from the variable interest entitys activities or
entitled to receive a majority of the entitys residual returns or both. The
consolidation requirements of Interpretation 46 apply immediately to variable
interest entities created after January 31, 2003. The consolidation
requirements apply to older entities in the first fiscal year or interim period
beginning after June 15, 2003. Certain of the disclosure requirements apply in
all financial statements issued after January 31, 2003, regardless of when the
variable interest entity was established. The Company is currently evaluating
the provisions of the Interpretation, but believes its adoption will not have a
material impact on its financial statements.

Page 15



---



##### Table of Contents



CRITICAL ACCOUNTING POLICIES

The SEC has recently issued Financial Reporting Release No. 60,
Cautionary Advice Regarding Disclosure About Critical Accounting Policies
(FRR 60), suggesting companies provide additional disclosure and commentary on
those accounting polices considered most critical. FRR 60 considers an
accounting policy to be critical if it is important to the Companys financial
condition and results, and requires significant judgment and estimates on the
part of management in its application. Refer to footnote 2 to the Companys
financial statements included in Form 10-K/A for the fiscal year ended March
31, 2002 for a complete listing of significant accounting policies. Firearms
Training Systems, Inc. believes the following represents the critical
accounting policies of the Company as contemplated by FRR 60.

Revenue Recognition

Customer contracts that require significant customization of the Companys
existing proprietary platform or require the development of new systems to meet
required customer specifications are accounted for under the percentage of
completion method, measured by the percentage of cost incurred to date to the
estimated total cost for each contract. Accounting for such contracts is
essentially a process of measuring the results of relatively long-term events
and allocating those results to relatively short-term accounting periods. This
involves considerable use of estimates in determining costs and profits and
thereby estimating the timing of revenue recognition and in assigning the
amounts to accounting periods. The process is complicated by the need to
evaluate continually the uncertainties inherent in the performance of contracts
and by the need to rely on estimates of revenues, costs, and the extent of
progress toward completion. The Company continually monitors each of these
estimates based on the most current information available from the project
managers and project engineers assigned to the programs. Changes in job
performance, job conditions, and estimated profitability, including those
arising from contract penalty provisions, and final contract settlements may
result in revisions to costs and revenue and are recognized in the period in
which the revisions are determined. These revisions could materially increase
or decrease profit margins on particular contracts in future periods.

Inventory Reserve

Inventories are valued at the lower of cost on a moving weighted average
or market, cost being determined on the first-in, first-out basis and market is
defined as net realizable value. Management periodically reviews Company
inventory for items that may be deemed obsolete, damaged or for amounts on hand
in excess of anticipated future demand. The underlying assumptions utilized in
assessing the Company inventory change from time-to-time due to change in the
underlying sales mix, the release of new versions of the Companys proprietary
system and overall changes in technology and the market place. As the Company
develops new product lines future charges against income may be necessary to
reduce inventory to its net realizable value.

Contract Cost Provision

Management routinely assesses the Companys performance and estimated cost
to complete ongoing sales contracts. Changes in job performance, job
conditions, and estimated profitability, including those arising from contract
penalty provisions, and final contract settlements may result in revisions to
costs and income. In the event Management anticipates incurring costs in excess
of contract revenues, the Company records a contract cost provision in an
amount equal to the estimated costs in excess of contracted revenues in the
period in which such information becomes apparent.

Warranty Cost Provision

Management periodically estimates expected warranty costs under the
Companys standard product warranty. In determining the estimate, Management
analyzes the relationship of historical standard warranty costs incurred on
historical sales and the underlying product mix comprising the historical
sales. Management, in turn, utilizes this historical information to estimate
expected warranty costs on recent sales within the standard warranty time
frame. Due to the inherent limitations in the estimation process, the potential
for product defects and other unforeseen circumstances by the Company, the
possibility exists that the recorded warranty provision will be inadequate to
offset actual warranty costs incurred resulting in additional charges against
income. Also, actual warranty costs may be significantly lower than expected
resulting in the reduction of the Companys warranty provision generating an
addition to income in future periods.

Page 16



---



##### Table of Contents



COMMITMENTS AND OTHER CONTRACTURAL OBLIGATIONS

Disclosure of Commitments and Other Contractural Obligations
December 31, 2002
(amounts in thousands)

|                              |  |       |        |        |  |             |        |             |  |         |       |       |  |   |       |  |  |   |     | 
|----------------------------- |  | ----- | ------ | ------ |  | ----------- | ------ | ----------- |  | ------- | ----- | ----- |  | - | ----- |  |  | - | --- | 
|                              |  |       |        |        |  | Less than   |        | Within      |  | Within  |       | After
|                              |  | Total |        | 1 year |  | 1 - 3 years |        | 4 - 5 years |  | 5 years
|                              |  |       |        |        |  |             |        |             |  |        
|Long-term debt                |  |       |        |        |  |             |        |             |  |         |       |       |  |   |       |  |  |   |     | 
|Working capital   borrowings |  | $     | 130    |        |  | $           | 130    |             |  | $       | 0     |       |  | $ | 0     |  |  | $ | 0   | 
|Long-term debt  Senior       |  |       | 12,000 |        |  |             | 12,000 |             |  |         | 0     |       |  |   | 0     |  |  |   | 0   | 
|Long-term debt  Junior       |  |       | 28,010 |        |  |             | 28,010 |             |  |         | 0     |       |  |   | 0     |  |  |   | 0   | 
|Debt discount *               |  |       | 878    |        |  |             | 878    |             |  |         | 0     |       |  |   | 0     |  |  |   | 0   | 
|Capital lease obligations     |  |       | 183    |        |  |             | 52     |             |  |         | 108   |       |  |   | 23    |  |  |   | 0   | 
|Other                         |  |       |        |        |  |             |        |             |  |         |       |       |  |   |       |  |  |   |     | 
|Operating lease obligations   |  |       | 3,979  |        |  |             | 804    |             |  |         | 1,572 |       |  |   | 1,369 |  |  |   | 234 | 
|                              |  |       |        |        |  |             |        |             |  |         |       |       |  |   |       |  |  |   |     | 
|Total                         |  | $     | 45,180 |        |  | $           | 41,874 |             |  | $       | 1,680 |       |  | $ | 1,392 |  |  | $ | 234 | 
|                              |  |       |        |        |  |             |        |             |  |         |       |       |  |   |       |  |  |   |     | 



---

|* |  | Balance represents a non-cash debt restructuring liability, which is
amortized as a reduction of expense monthly.
|- |  | -----------------------------------------------------------------------------------------------------------------

RELATED PARTIES AND TRANSACTIONS

A group of entities affiliated with Centre Partners Management LLC (the
Centre Entities) are among the Companys largest shareholders. The Centre
Entities hold a seat on the Companys Board of Directors. In addition, the
Centre Entities, and other institutional lenders who are also major
shareholders as a result of a previously disclosed restructuring transaction
(See Part I, Item 1, Restructure Transaction in the Companys Annual Report on
Form 10-K/A Amendment Number 2 for the fiscal year ended March 31,2002 (the
2002 10-K)), were party to a previously disclosed debt restructuring (See Note
3 to the Companys financial statements included in the 2002 10-K) and continue
to be the Companys primary lenders. As a result of the share ownership of the
Centre Entities and their representation on the Board of Directors, the Centre
Entities have the ability to influence the operations of the Company.

The Company entered into a consulting agreement, dated October 4, 2000,
with Sugarman Company, LLP, a company in which Randy Sugarman is the managing
partner and has an 80% ownership interest. Under the agreement and in
accordance with the terms of the Companys restructuring in fiscal year 2001,
Mr. Sugarman was engaged by the Company to evaluate its financial position and
operations and make recommendations to senior management regarding changes that
need to be made to improve profitability and liquidity. Mr. Sugarmans services
were performed on an hourly basis, plus out-of-pocket expenses, and the Company
was billed accordingly. From May 16, 2001 until August 9, 2002, Mr. Sugarman
served as Interim Chief Executive Officer and President of the Company. Mr.
Sugarman ceased to be an officer of the Company on August 9, 2002, in
connection with the conclusion of the Companys engagement of Sugarman Company
LLP. The Company incurred consulting fees of $211,000, plus expenses of $47,000
for the nine-month period ended December 31, 2002, and no fees or expenses for
the three-month period ended December 31, 2002, under the consulting agreement.
The Company incurred consulting fees of $86,000 and $288,000 plus expenses of
$111,000 and $151,000 respectively, for consulting services under the agreement
during the three months and nine months ended December 31, 2001.

Page 17



---



##### Table of Contents



CERTAIN FORWARD LOOKING STATEMENTS

Certain statements in this filing, and elsewhere (such as in other filings
by the Company with the Commission, press releases, presentations by the
Company or its management and oral statements) constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among other things, (i) those
described above including the timing and size of, and the Companys success in
competing for, new contracts awarded by military and other government
customers; (ii) significant variability in the Companys quarterly revenues and
results of operations as a result of variations in the number and size of the
Companys shipments in a particular quarter while a significant percentage of
its operating expenses are fixed in advance; (iii) concentrations of revenues
from a few large customers who vary from one period to the next; (iv) the high
percentage of sales to military and law enforcement authorities whose orders
are subject to extensive government regulations and termination for a variety
of factors and budgetary constraints; (v) a significant proportion of
international sales which may be subject to political, monetary and economic
risks, including greater credit risks; (vi) the potential for increased
competition; (vii) the Companys ability to attract and retain key personnel
and adapt to changing technologies; and (viii) other factors described in the
Companys Form 10-K/A for the fiscal year ended March 31, 2002 under the
caption Part I. No assurance can be given that actual revenues, operating
income or net income will not be materially different than those reported
above. Prospective investors are cautioned that actual results and experience
may differ materially from the forward-looking statements as a result of many
factors, possibly including changes in economic conditions, competition,
fluctuations in raw materials, and other unanticipated events and conditions.




ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to a number of market risks in the ordinary course
of business, such as foreign currency exchange risk in the fulfillment of
international contracts and interest rate risk associated with the interest
rate cost of its outstanding long-term liabilities. The majority of the
Companys contracts are denominated in U.S. dollars, thus reducing foreign
exchange risk. The Companys net exposure to interest rate risk consists of its
floating rate senior debt and working capital borrowings which are tied to
changes in the prime rate.




ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

As required by new Rule 13a-15 under the Securities Exchange Act of 1934
(the Exchange Act), within the 90 days prior to the date of this report, the
Company carried out an evaluation under the supervision and with the
participation of the Companys management, including the Companys Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of the Companys disclosure controls and procedures. Based
upon that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the Companys disclosure controls and procedures are effective
to ensure that information required to be disclosed by the Company in the
reports it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commissions rules and forms.

Changes in internal controls or other factors

None.

Page 18



---



##### Table of Contents






PART II. OTHER INFORMATION




ITEM 1.  LEGAL PROCEEDINGS

The Company is involved in legal proceedings in the ordinary course of its
business, which in the opinion of management will not have a materially adverse
effect on the Companys financial position, liquidity, or results of operation.




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

On November 7, 2002, the Company held its Annual Stockholders Meeting at
its headquarters in Suwanee, GA. At this meeting 68,874,822 votes were cast
representing 98.2% of all eligible votes.

The following proposal was submitted to the security holders for vote:

Election of one director. Ms. Mary Ann Gilleece was nominated for
re-election to the board of directors. This proposal received 99.7% of the
eligible votes cast to affirm her re-election to the board. Ms. Gilleece
received 68,687,827 votes for re-election with 186,995 votes withheld. In
addition, the term of office as a director of each of William J. Bratton,
Ronavan Mohling, Scott Perekslis and Ronald C. Whitaker continued after the
meeting.




ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

|    |  |                                                                               |  |   |  |                                                                                                                                                                                                                
|--- |  | ----------------------------------------------------------------------------- |  | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Exhibits filed herewith:                                                     
|    |  |                                                                               |  |   |  |                                                                                                                                                                                                                
|    |  | Exhibit 10.1                                                                  |  |  |  | Amendment to Employment Agreement between the
Company and John A. Morelli (for the purpose of extending the
term of the agreement, and establishing the amount and certain
terms related to severance payments)
|    |  |                                                                               |  |   |  |                                                                                                                                                                                                                
|    |  | Exhibit 99.1                                                                  |  | - |  | Certification Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002                                                                                         
|    |  |                                                                               |  |   |  |                                                                                                                                                                                                                
|    |  | Exhibit 99.2                                                                  |  | - |  | Certification Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002                                                                                         
|    |  |                                                                               |  |   |  |                                                                                                                                                                                                                
|(b) |  | No reports on Form 8-K were filed during the quarter ended
December 31, 2001.

Page 19



---



##### Table of Contents






SIGNATURES

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

|                         |  |                                                                                                                      
|------------------------ |  | ---------------------------------------------------------------------------------------------------------------------
|DATED: February 13, 2003 |  |                                                                                                                      
|                        
|                         |  |                                                                                                                      
|                        
|                         |  | FIREARMS TRAINING SYSTEMS, INC.
(Registrant)                                                                         
|                        
|                         |  |                                                                                                                      
|                        
|                         |  | /S/ Ronavan MohlingRonavan Mohling
Chairman of the Board of Directors and
Chief Executive Officer                    
|                        
|                         |  |                                                                                                                      
|                        
|                         |  | /S/ John A. MorelliJohn A. Morelli
Chief Financial Officer and Treasurer
(Principal Financial and Accounting
Officer)

Page 20



---



##### Table of Contents



Certification of CEO Pursuant to
Securities Exchange Act Rule 13a-14
as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002




I, Ronavan Mohling, Chief Executive Officer of Firearms Training Systems, Inc.,
certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Firearms Training
Systems, Inc.;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



| |  | a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | b) evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| |  | c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):



| |  | a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                        

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|                        |  |                                                            
|----------------------- |  | -----------------------------------------------------------
|Date: February 13, 2003 |  |                                                            
|                       
|                        |  |                                                            
|                       
|                        |  | /s/ Ronavan Mohling
Ronavan Mohling
Chief Executive Officer

Page 21



---



##### Table of Contents



Certification of CFO Pursuant to
Securities Exchange Act Rule 13a-14
as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002




I, John A. Morelli, Chief Financial Officer of Firearms Training Systems, Inc.,
certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Firearms Training
Systems, Inc.;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



| |  | a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | b) evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| |  | c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):



| |  | a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                        

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|                        |  |                                                            
|----------------------- |  | -----------------------------------------------------------
|Date: February 13, 2003 |  |                                                            
|                       
|                        |  |                                                            
|                       
|                        |  | /s/ John A. Morelli
John A. Morelli
Chief Financial Officer

Page 22