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



FORM 10-Q/A

(Mark One)

|       |  |                                                                                        
|------ |  | ---------------------------------------------------------------------------------------
|(XBOX) |  | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001

OR

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

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 (BOX)       No (XBOX)

As of November 14, 2001, there were 70,153,139 shares of the Registrants
Class A Common Stock outstanding.

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TABLE OF CONTENTS



|                                     |                                                                                                                    |                                                      |  |  |  |  |  | 
|------------------------------------ | ------------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------- |  |  |  |  |  | 
|EXPLANATORY NOTE                    
|PART I. FINANCIAL INFORMATION       
|                                     | ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                                                               
|                                     |                                                                                                                    | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS     
|                                     |                                                                                                                    | 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                                                
|PART II. OTHER INFORMATION          
|                                     | ITEM 1. LEGAL PROCEEDINGS                                                                                         
|                                     | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                                          
|SIGNATURES                          
|Section 906 Certification of the CEO
|Section 906 Certification of the CFO



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##### Table of Contents



FIREARMS TRAINING SYSTEMS, INC.
INDEX

|        |  |                                                                                                        |  |             |    | 
|------- |  | ------------------------------------------------------------------------------------------------------ |  | ----------- | -- | 
|        |  |                                                                                                        |  | Page number
|        |  |                                                                                                        |  |            
|        |  | EXPLANATORY NOTE                                                                                       |  |             | 3  | 
|       
|       
|       
|       
|        |  |                                                                                                        |  |             |    | 
|       
|       
|       
|       
|PART I  |  | FINANCIAL INFORMATION                                                                                  |  |             |    | 
|       
|       
|       
|       
|        |  |                                                                                                        |  |             |    | 
|       
|       
|       
|       
|ITEM 1. |  | CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:                                                           |  |             |    | 
|       
|       
|       
|       
|        |  |                                                                                                        |  |             |    | 
|       
|       
|       
|       
|        |  | Condensed Consolidated Statements of Operations
Three and Six months ended September 30, 2001 and 2000 |  |             | 4  | 
|       
|       
|       
|       
|        |  |                                                                                                        |  |             |    | 
|       
|       
|       
|       
|        |  | Condensed Consolidated Balance Sheets
September 30, 2001 and March 31, 2001                            |  |             | 5  | 
|       
|       
|       
|       
|        |  |                                                                                                        |  |             |    | 
|       
|       
|       
|       
|        |  | Condensed Consolidated Statements of Cash Flows
Six months ended September 30, 2001 and 2000           |  |             | 6  | 
|       
|       
|       
|       
|        |  |                                                                                                        |  |             |    | 
|       
|       
|       
|       
|        |  | Notes to Condensed Consolidated Financial Statements                                                   |  |             | 7  | 
|       
|       
|       
|       
|        |  |                                                                                                        |  |             |    | 
|       
|       
|       
|       
|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 | 
|       
|       
|       
|       
|        |  |                                                                                                        |  |             |    | 
|       
|       
|       
|       
|PART II |  | OTHER INFORMATION                                                                                      |  |             |    | 
|       
|       
|       
|       
|        |  |                                                                                                        |  |             |    | 
|       
|       
|       
|       
|ITEM 1. |  | LEGAL PROCEEDINGS                                                                                      |  |             | 18 | 
|       
|       
|       
|       
|        |  |                                                                                                        |  |             |    | 
|       
|       
|       
|       
|ITEM 6. |  | EXHIBITS AND REPORTS ON FORM 8-K                                                                       |  |             | 18 | 
|       
|       
|       
|       
|        |  |                                                                                                        |  |             |    | 
|       
|       
|       
|       
|        |  | SIGNATURES                                                                                             |  |             | 19 | 

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EXPLANATORY NOTE

The Companys interim financial statements at September 30, 2001 and for
the three months and six months ended September 30, 2001 have been restated
from amounts previously reported to apply the correct revenue recognition
policy to certain of the Companys sales contracts. Revenue under these
contracts was previously reported upon shipment and passage of title of the
underlying systems and has been revised to reflect the application of the
percentage of completion method of accounting (see Note 9 to the Notes to
Condensed Consolidated Financial Statements).

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##### Table of Contents






PART I. FINANCIAL INFORMATION




ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




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

|                                                     |                                              |                          |                                   |       |                    |     |                  |        |       |        |            |       |       |     |         |        |       |        |  
|---------------------------------------------------- | -------------------------------------------- | ------------------------ | --------------------------------- | ----- | ------------------ | --- | ---------------- | ------ | ----- | ------ | ---------- | ----- | ----- | --- | ------- | ------ | ----- | ------ | -
|                                                     |                                              |                          |                                   |       | Three months ended |     | Six months ended
|                                                     |                                              |                          |                                   |       | September 30,      |     | September 30,   
|                                                     |                                              |                          |                                   |       |                    |     |                 
|                                                     |                                              |                          |                                   |       | (Restated)         |     |                  |        |       |        | (Restated) |       |       |     |        
|                                                     |                                              |                          |                                   |       | (Note 9)           |     |                  |        |       |        | (Note 9)   |       |       |     |        
|                                                     |                                              |                          |                                   |       | 2001               |     | 2000             |        | 2001  |        | 2000      
|                                                     |                                              |                          |                                   |       |                    |     |                  |        |       |        |           
|Revenues                                             |                                              | $                        | 16,897                            |       |                    | $   | 7,368            |        |       | $      | 28,536     |       |       | $   | 17,639  |       
|                                                    
|                                                    
|                                                    
|                                                    
|Cost of Revenues                                     |                                              |                          | 12,210                            |       |                    |     | 9,531            |        |       |        | 19,369     |       |       |     | 16,815  |       
|                                                     |                                              |                          |                                   |       |                    |     |                  |        |       |        |            |       |       |     |         |       
|Gross margin                                         |                                              |                          | 4,687                             |       |                    |     | (2,163           | )      |       |        | 9,167      |       |       |     | 824     |       
|                                                     |                                              |                          |                                   |       |                    |     |                  |        |       |        |            |       |       |     |         |       
|                                                    
|                                                    
|                                                    
|                                                    
|Operating expenses:                                  |                                              |                          |                                   |       |                    |     |                  |        |       |        |            |       |       |     |         |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Selling, general and administrative expenses |                          |                                   | 3,051 |                    |     |                  | 2,040  |       |        |            | 5,696 |       |     |         | 4,076  |      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Research and development expenses            |                          |                                   | 563   |                    |     |                  | 1,151  |       |        |            | 1,577 |       |     |         | 2,471  |      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Depreciation and amortization                |                          |                                   | 459   |                    |     |                  | 589    |       |        |            | 939   |       |     |         | 1,177  |      
|                                                     |                                              |                          |                                   |       |                    |     |                  |        |       |        |            |       |       |     |         |       
|                                                     |                                              | Total operating expenses |                                   |       | 4,073              |     |                  |        | 3,780 |        |            |       | 8,212 |     |         |        | 7,724 |       
|                                                    
|                                                    
|                                                    
|                                                    
|Operating income (loss)                              |                                              |                          | 614                               |       |                    |     | (5,943           | )      |       |        | 955        |       |       |     | (6,900  | )     
|                                                    
|                                                    
|                                                    
|                                                    
|Other income (expense), net:                         |                                              |                          |                                   |       |                    |     |                  |        |       |        |            |       |       |     |         |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Interest income                              |                          |                                   | 23    |                    |     |                  | 38     |       |        |            | 192   |       |     |         | 53     |      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Interest expense                             |                          |                                   | (24   | )                  |     |                  | (2,263 | )     |        |            | (48   | )     |     |         | (4,624 | )    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Other income (expense), net                  |                          |                                   | (64   | )                  |     |                  | (284   | )     |        |            | (31   | )     |     |         | (306   | )    
|                                                     |                                              |                          |                                   |       |                    |     |                  |        |       |        |            |       |       |     |         |       
|                                                     |                                              |                          | Total other income (expense), net |       |                    | (65 | )                |        |       | (2,509 | )          |       |       | 113 |         |        |       | (4,877 | )
|                                                    
|                                                    
|                                                    
|                                                    
|Income (loss) before provision for income taxes      |                                              |                          | 549                               |       |                    |     | (8,452           | )      |       |        | 1,068      |       |       |     | (11,777 | )     
|                                                    
|                                                    
|                                                    
|                                                    
|Provision (benefit) for income taxes                 |                                              |                          | 186                               |       |                    |     | 54               |        |       |        | 482        |       |       |     | (62     | )     
|                                                     |                                              |                          |                                   |       |                    |     |                  |        |       |        |            |       |       |     |         |       
|Net income (loss)                                    |                                              |                          | 363                               |       |                    |     | (8,506           | )      |       |        | 586        |       |       |     | (11,715 | )     
|                                                    
|                                                    
|                                                    
|                                                    
|Accretion of preferred stock                         |                                              |                          | (67                               | )     |                    |     | (74              | )      |       |        | (132       | )     |       |     | (140    | )     
|                                                    
|                                                    
|                                                    
|                                                    
|Gain on extinguishment of Preferred Stock            |                                              |                          | 0                                 |       |                    |     | 1,729            |        |       |        | 0          |       |       |     | 1,729   |       
|                                                     |                                              |                          |                                   |       |                    |     |                  |        |       |        |            |       |       |     |         |       
|Net income (loss) applicable to common shareholders  |                                              | $                        | 296                               |       |                    | $   | (6,851           | )      |       | $      | 454        |       |       | $   | (10,126 | )     
|                                                     |                                              |                          |                                   |       |                    |     |                  |        |       |        |            |       |       |     |         |       
|Basic earnings (loss) per common share               |                                              | $                        | 0.00                              |       |                    | $   | (0.13            | )      |       | $      | 0.01       |       |       | $   | (0.27   | )     
|                                                     |                                              |                          |                                   |       |                    |     |                  |        |       |        |            |       |       |     |         |       
|Diluted earnings (loss) per common share             |                                              | $                        | 0.00                              |       |                    | $   | (0.13            | )      |       | $      | 0.01       |       |       | $   | (0.27   | )     
|                                                     |                                              |                          |                                   |       |                    |     |                  |        |       |        |            |       |       |     |         |       
|Weighted average common shares outstanding  basic   |                                              |                          | 70,153                            |       |                    |     | 53,472           |        |       |        | 70,150     |       |       |     | 37,383  |       
|                                                     |                                              |                          |                                   |       |                    |     |                  |        |       |        |            |       |       |     |         |       
|Weighted average common shares outstanding  diluted |                                              |                          | 70,894                            |       |                    |     | 53,472           |        |       |        | 70,635     |       |       |     | 37,383  |       
|                                                     |                                              |                          |                                   |       |                    |     |                  |        |       |        |            |       |       |     |         |       

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

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

|                                                           |                                                                             |                                             |        |                             |        |               |         |           |        |   |         |  
|---------------------------------------------------------- | --------------------------------------------------------------------------- | ------------------------------------------- | ------ | --------------------------- | ------ | ------------- | ------- | --------- | ------ | - | ------- | -
|                                                           |                                                                             |                                             |        |                             |        | (Restated)    |         |           |        |  
|                                                           |                                                                             |                                             |        |                             |        | (Note 9)      |         |           |        |  
|                                                           |                                                                             |                                             |        |                             |        | September 30, |         | March 31,
|ASSETS                                                     |                                                                             | 2001                                        |        | 2001                       
|                                                           |                                                                             |                                             |        |                            
|Current assets:                                            |                                                                             |                                             |        |                             |        |               |         |          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Cash and cash equivalents                                                   |                                             | $      | 2,818                       |        |               | $       | 1,864     |       
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Restricted cash                                                             |                                             |        | 482                         |        |               |         | 628       |       
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Accounts receivable, net                                                    |                                             |        | 11,279                      |        |               |         | 8,591     |       
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Costs and estimated earnings in excess of billings on uncompleted contracts |                                             |        | 2,317                       |        |               |         | 1,480     |       
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Unbilled receivables                                                        |                                             |        | 330                         |        |               |         | 1,355     |       
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Income tax receivable                                                       |                                             |        | 0                           |        |               |         | 809       |       
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Inventories, net                                                            |                                             |        | 12,742                      |        |               |         | 12,526    |       
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Prepaid expenses and other current assets                                   |                                             |        | 1,251                       |        |               |         | 1,117     |       
|                                                           |                                                                             |                                             |        |                             |        |               |         |          
|                                                           |                                                                             |                                             |        | Total current assets        |        |               | 31,219  |           |        |   | 28,370  |  
|                                                          
|                                                          
|                                                          
|                                                          
|Property and equipment, net                                |                                                                             |                                             | 2,065  |                             |        |               | 2,647   |          
|                                                          
|                                                          
|                                                          
|                                                          
|Other noncurrent assets                                    |                                                                             |                                             | 30     |                             |        |               | 0       |          
|                                                          
|                                                          
|                                                          
|                                                          
|Goodwill, net                                              |                                                                             |                                             | 1,064  |                             |        |               | 1,156   |          
|                                                           |                                                                             |                                             |        |                             |        |               |         |          
|                                                           |                                                                             |                                             |        | Total assets                |        | $             | 34,378  |           |        | $ | 32,173  |  
|                                                           |                                                                             |                                             |        |                             |        |               |         |          
|LIABILITIES AND STOCKHOLDERS DEFICIT                      |                                                                             |                                             |        |                             |        |               |         |          
|                                                          
|                                                          
|                                                          
|                                                          
|Current liabilities:                                       |                                                                             |                                             |        |                             |        |               |         |          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Accounts payable                                                            |                                             | $      | 5,186                       |        |               | $       | 2,902     |       
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Accrued liabilities                                                         |                                             |        | 4,142                       |        |               |         | 3,895     |       
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Accrued interest                                                            |                                             |        | 942                         |        |               |         | 954       |       
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Income tax payable                                                          |                                             |        | 666                         |        |               |         | 0         |       
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Billings in excess of costs and estimated earnings on uncompleted contracts |                                             |        | 0                           |        |               |         | 277       |       
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Deferred revenue                                                            |                                             |        | 1,535                       |        |               |         | 1,633     |       
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Warranty
and contract costs provision reserve  current                     |                                             |        | 1,828                       |        |               |         | 2,816     |       
|                                                           |                                                                             |                                             |        |                             |        |               |         |          
|                                                           |                                                                             |                                             |        | Total current liabilities   |        |               | 14,299  |           |        |   | 12,477  |  
|                                                          
|                                                          
|                                                          
|                                                          
|Long-term debt                                             |                                                                             |                                             | 43,305 |                             |        |               | 43,990  |          
|                                                          
|                                                          
|                                                          
|                                                          
|Noncurrent deferred income taxes                           |                                                                             |                                             | 312    |                             |        |               | 223     |          
|                                                          
|                                                          
|                                                          
|                                                          
|Warranty
and contract costs provision reserve  noncurrent |                                                                             |                                             | 1,780  |                             |        |               | 1,724   |          
|                                                          
|                                                          
|                                                          
|                                                          
|Other noncurrent liabilities                               |                                                                             |                                             | 1,029  |                             |        |               | 796     |          
|                                                           |                                                                             |                                             |        |                             |        |               |         |          
|Total liabilities                                          |                                                                             |                                             | 60,725 |                             |        |               | 59,210  |          
|                                                          
|                                                          
|                                                          
|                                                          
|Mandatory redeemable preferred stock                       |                                                                             |                                             | 27,181 |                             |        |               | 27,049  |          
|                                                          
|                                                          
|                                                          
|                                                          
|Stockholders deficit:                                     |                                                                             |                                             |        |                             |        |               |         |          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Common stock                                                                |                                             |        | 0                           |        |               |         | 0         |       
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Stock warrants                                                              |                                             |        | 613                         |        |               |         | 613       |       
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Additional paid-in-capital                                                  |                                             |        | 122,314                     |        |               |         | 122,273   |       
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Accumulated deficit                                                         |                                             |        | (176,232                    | )      |               |         | (176,686  | )     
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Cumulative foreign currency translation adjustment                          |                                             |        | (223                        | )      |               |         | (286      | )     
|                                                           |                                                                             |                                             |        |                             |        |               |         |          
|                                                           |                                                                             |                                             |        | Total stockholders deficit |        |               | (53,528 | )         |        |   | (54,086 | )
|                                                           |                                                                             |                                             |        |                             |        |               |         |          
|                                                           |                                                                             | Total liabilities and stockholders deficit |        | $                           | 34,378 |               |         | $         | 32,173 |  
|                                                           |                                                                             |                                             |        |                             |        |               |         |          

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

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##### Table of Contents






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

|                                                                                         |                                                    |                                                                             |                                           |        |                  |       |         |        |       |        |  
|---------------------------------------------------------------------------------------- | -------------------------------------------------- | --------------------------------------------------------------------------- | ----------------------------------------- | ------ | ---------------- | ----- | ------- | ------ | ----- | ------ | -
|                                                                                         |                                                    |                                                                             |                                           |        | Six months ended
|                                                                                         |                                                    |                                                                             |                                           |        | September 30,   
|                                                                                         |                                                    |                                                                             |                                           |        |                 
|                                                                                         |                                                    |                                                                             |                                           |        | (Restated)       |       |         |        |      
|                                                                                         |                                                    |                                                                             |                                           |        | (Note 9)         |       |         |        |      
|                                                                                         |                                                    |                                                                             |                                           |        |                  |       |         |        |      
|                                                                                         |                                                    |                                                                             |                                           |        | 2001             |       | 2000   
|                                                                                         |                                                    |                                                                             |                                           |        |                  |       |        
|OPERATING ACTIVITIES:                                                                    |                                                    |                                                                             |                                           |        |                  |       |         |       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Net income (loss)                                                                        |                                                    | $                                                                           | 454                                       |        |                  | $     | (10,126 | )     
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Adjustments to reconcile net income (loss) to net
cash provided by operating activities: |                                                    |                                                                             |                                           |        |                  |       |         |       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Employee stock compensation plan  401(k) plan     |                                                                             |                                           | 6      |                  |       |         | 35     |      
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Employee compensation  other                      |                                                                             |                                           | 4      |                  |       |         | 0      |      
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Gain on extinguishment of Series A preferred stock |                                                                             |                                           | 0      |                  |       |         | (1,729 | )    
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Noncash reduction of debt restructuring liability  |                                                                             |                                           | (1,756 | )                |       |         | (293   | )    
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Noncash financing cost                             |                                                                             |                                           | 0      |                  |       |         | 250    |      
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Amortization of deferred stock-based compensation  |                                                                             |                                           | 0      |                  |       |         | 133    |      
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Accretion of mandatory redeemable preferred stock  |                                                                             |                                           | 132    |                  |       |         | 140    |      
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Depreciation                                       |                                                                             |                                           | 846    |                  |       |         | 1,040  |      
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Amortization of goodwill                           |                                                                             |                                           | 93     |                  |       |         | 137    |      
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Amortization of loan costs                         |                                                                             |                                           | 0      |                  |       |         | 332    |      
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Gain on disposal of assets                         |                                                                             |                                           | (45    | )                |       |         | (7     | )    
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Deferred income taxes                              |                                                                             |                                           | 88     |                  |       |         | 9      |      
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Changes in assets and liabilities:                 |                                                                             |                                           |        |                  |       |         |        |      
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         |                                                    | Accounts receivable, net                                                    |                                           |        | (2,704           | )     |         |        | (121  | )     
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         |                                                    | Unbilled receivables                                                        |                                           |        | 2,540            |       |         |        | 1,208 |       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         |                                                    | Costs
and estimated earnings in excess of billings on uncompleted contracts |                                           |        | (2,340           | )     |         |        | 0     |       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         |                                                    | Inventories                                                                 |                                           |        | (214             | )     |         |        | 1,606 |       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         |                                                    | Prepaid expenses and other current assets                                   |                                           |        | (134             | )     |         |        | 254   |       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         |                                                    | Accounts payable                                                            |                                           |        | 2,278            |       |         |        | 583   |       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         |                                                    | Accrued liabilities                                                         |                                           |        | 1,499            |       |         |        | 3,631 |       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         |                                                    | Income taxes payable / receivable                                           |                                           |        | 1,477            |       |         |        | 1,137 |       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         |                                                    | Billings
in excess of costs and estimated earnings on uncompleted contracts |                                           |        | (277             | )     |         |        | 0     |       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         |                                                    | Deferred revenue                                                            |                                           |        | (97              | )     |         |        | 6     |       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         |                                                    | Warranty and contracts costs
provision reserve                              |                                           |        | (931             | )     |         |        | (202  | )     
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         |                                                    | Noncurrent liabilities                                                      |                                           |        | 232              |       |         |        | 2,655 |       
|                                                                                         |                                                    |                                                                             |                                           |        |                  |       |         |       
|                                                                                         |                                                    |                                                                             | Total adjustments                         |        |                  | 697   |         |        |       | 10,804 |  
|                                                                                         |                                                    |                                                                             |                                           |        |                  |       |         |       
|                                                                                         |                                                    |                                                                             | Net cash provided by operating activities |        |                  | 1,151 |         |        |       | 678    |  
|                                                                                         |                                                    |                                                                             |                                           |        |                  |       |         |       
|Cash flows from investing activities:                                                    |                                                    |                                                                             |                                           |        |                  |       |         |       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Change in restricted cash                          |                                                                             |                                           | 146    |                  |       |         | 296    |      
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Additions to property and equipment, net           |                                                                             |                                           | (263   | )                |       |         | (578   | )    
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Proceeds from disposal of property and equipment   |                                                                             |                                           | 45     |                  |       |         | 0      |      
|                                                                                         |                                                    |                                                                             |                                           |        |                  |       |         |       
|                                                                                         |                                                    |                                                                             | Net cash used in investing activities     |        |                  | (72   | )       |        |       | (282   | )
|                                                                                         |                                                    |                                                                             |                                           |        |                  |       |         |       
|Cash flows from financing activities:                                                    |                                                    |                                                                             |                                           |        |                  |       |         |       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Repayments of long-term debt                       |                                                                             |                                           | (170   | )                |       |         | 0      |      
|                                                                                         |                                                    |                                                                             |                                           |        |                  |       |         |       
|                                                                                         |                                                    |                                                                             | Net cash used in financing activities     |        |                  | (170  | )       |        |       | 0      |  
|                                                                                         |                                                    |                                                                             |                                           |        |                  |       |         |       
|Effect of changes in foreign exchange rates                                              |                                                    |                                                                             | 45                                        |        |                  |       | 115     |       
|                                                                                         |                                                    |                                                                             |                                           |        |                  |       |         |       
|Net Increase in Cash and Cash Equivalents                                                |                                                    |                                                                             | 954                                       |        |                  |       | 511     |       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Cash and Cash Equivalents at the Beginning of the Period                                 |                                                    | $                                                                           | 1,864                                     |        |                  | $     | 1,886   |       
|                                                                                         |                                                    |                                                                             |                                           |        |                  |       |         |       
|Cash and Cash Equivalents at the End of the Period                                       |                                                    | $                                                                           | 2,818                                     |        |                  | $     | 2,397   |       
|                                                                                         |                                                    |                                                                             |                                           |        |                  |       |         |       
|Supplemental disclosures of cash paid (received) for:                                    |                                                    |                                                                             |                                           |        |                  |       |         |       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Interest                                           |                                                                             | $                                         | 547    |                  |       | $       | 0      |      
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Income taxes                                       |                                                                             | $                                         | (1,020 | )                |       | $       | (1,442 | )    

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

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##### 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 period ended September 30, 2001 are not necessarily indicative of
the results that may be expected for the year ending March 31, 2002. For
further information, refer to the Companys consolidated financial statements
and footnotes thereto for the year ended March 31, 2001.

For fiscal year 2002, the Company began classifying commissions paid to
its agents in cost of revenues. The corresponding amount of $26,000 and
$230,000 for the three and six months, respectively, ended September 30, 2000
has been reclassified from selling, general, and administrative expenses to
cost of revenues.

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.
Revenue under these contracts is recognized upon delivery. 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.

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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 basis or market. Cost includes materials, labor, and
factory overhead. Market is defined as net realizable value.

Inventories consist of the following (in thousands):

|                |                    |   |               |        |           |   |        |        | 
|--------------- | ------------------ | - | ------------- | ------ | --------- | - | ------ | ------ | 
|                |                    |   | (Restated)    |        |           |   |       
|                |                    |   | (Note 9)      |        |           |   |       
|                |                    |   | September 30, |        | March 31,
|                |                    |   | 2001          |        | 2001     
|                |                    |   |               |        |          
|Raw materials   |                    | $ | 9,485         |        |           | $ | 7,997  |       
|               
|               
|               
|               
|Work in process |                    |   | 3,366         |        |           |   | 3,998  |       
|               
|               
|               
|               
|Finished Goods  |                    |   | 1,140         |        |           |   | 1,559  |       
|                |                    |   |               |        |           |   |        |       
|                | Inventories, gross |   |               | 13,991 |           |   |        | 13,554 | 
|               
|               
|               
|               
|Less reserves   |                    |   | (1,249        | )      |           |   | (1,028 | )     
|                |                    |   |               |        |           |   |        |       
|                | Inventories, net   |   | $             | 12,742 |           |   | $      | 12,526 | 
|                |                    |   |               |        |           |   |        |       

4. LONG-TERM CONTRACTS

Costs and estimated earnings on uncompleted contracts and related amounts billed
as of September 30, 2001 and March 31, 2001, respectively, are as follows (in
thousands):

|                                        |  |               |        |           |  |   |        |  
|--------------------------------------- |  | ------------- | ------ | --------- |  | - | ------ | -
|                                        |  | (Restated)    |        |           |  |  
|                                        |  | (Note 9)      |        |           |  |  
|                                        |  | September 30, |        | March 31,
|                                        |  | 2001          |        | 2001     
|                                        |  |               |        |          
|Costs incurred on uncompleted contracts |  | $             | 5,257  |           |  | $ | 2,459  |  
|                                       
|                                       
|                                       
|                                       
|Estimated earnings                      |  |               | 3,031  |           |  |   | 1,568  |  
|                                        |  |               |        |           |  |   |        |  
|                                        |  | $             | 8,288  |           |  | $ | 4,027  |  
|                                       
|                                       
|                                       
|                                       
|Less: billings to date                  |  |               | (5,971 | )         |  |   | (2,824 | )
|                                        |  |               |        |           |  |   |        |  
|                                        |  | $             | 2,317  |           |  | $ | 1,203  |  
|                                        |  |               |        |           |  |   |        |  

Such amounts are included in the following accounts:

|                                                                            |  |               |       |           |  |   |       |  
|--------------------------------------------------------------------------- |  | ------------- | ----- | --------- |  | - | ----- | -
|                                                                            |  | September 30, |       | March 31,
|                                                                            |  | 2001          |       | 2001     
|                                                                            |  |               |       |          
|Costs and estimated earnings in excess of billings on uncompleted contracts |  | $             | 2,317 |           |  | $ | 1,480 |  
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Billings in excess of costs and estimated earnings on uncompleted contracts |  |               | 0     |           |  |   | (277  | )
|                                                                            |  |               |       |           |  |   |       |  
|                                                                            |  | $             | 2,317 |           |  | $ | 1,203 |  
|                                                                            |  |               |       |           |  |   |       |  

5. LONG-TERM DEBT

At September 30, 2001 and March 31, 2001, long-term debt consisted of the
following (in thousands):

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|                             |       |   |               |        |           |   |        |        | 
|---------------------------- | ----- | - | ------------- | ------ | --------- | - | ------ | ------ | 
|                             |       |   | September 30, |        | March 31,
|                             |       |   | 2001          |        | 2001     
|                             |       |   |               |        |          
|Working capital  borrowings |       | $ | 30            |        |           | $ | 200    |       
|                            
|                            
|                            
|                            
|Long-term debt  Senior      |       |   | 12,000        |        |           |   | 12,000 |       
|                            
|                            
|                            
|                            
|Long-term debt  Junior      |       |   | 26,007        |        |           |   | 24,765 |       
|                            
|                            
|                            
|                            
|Debt
Discount                |       |   | 5,268         |        |           |   | 7,025  |       
|                             |       |   |               |        |           |   |        |       
|                             | Total |   | $             | 43,305 |           |   | $      | 43,990 | 
|                             |       |   |               |        |           |   |        |       

As of September 30, 2001, the Company was out of compliance with the
capital expenditure covenants of its debt agreements. The Company has obtained
a waiver from the banks.

6. RELATED PARTY TRANSACTIONS

The Company has 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
are performed on an hourly basis, plus out-of-pocket expenses, and the Company
is billed accordingly. Since May 16, 2001, Mr. Sugarman has served as Interim
Chief Executive Officer and President of the Company. As of September 30, 2001
and 2000, the Company incurred consulting fees of $202,000 and $0, plus
expenses of $40,000 and $0 for consulting services under the agreement for the
fiscal years 2002 and 2001, respectively.

7. NEW ACCOUNTING STANDARDS

In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141, Business Combinations (SFAS No. 141)
and Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets (SFAS No. 142).

SFAS No. 141 addresses financial accounting and reporting for business
combinations. This statement requires the purchase method of accounting to be
used for all business combinations, and prohibits the pooling-of-interests
method of accounting. This statement is effective for all business combinations
initiated after June 30, 2001 and supercedes APB Opinion No. 16, Business
Combinations as well as FASB Statement of Financial Accounting Standards No.
38, Accounting for Pre-acquisition Contingencies of Purchased Enterprises.

SFAS No. 142 addresses how intangible assets that are acquired
individually or with a group of other assets should be accounted for in
financial statements upon their acquisition. This statement requires goodwill
to be periodically reviewed for impairment rather than amortized, for fiscal
years beginning after December 15, 2001. SFAS No. 142 supercedes APB Opinion
No. 17, Intangible Assets. As of September 30, 2001, the Company has
$1,094,000 of recorded net goodwill, which will be subject to the new
standards. The Company is currently recording goodwill amortization expense of
$182,000 per year. Such amortization expense will no longer be recorded upon
adoption of this statement and impairment testing will be required to assess
its carrying value going forward. The Company will adopt this standard in the
first quarter of fiscal year 2003. However, the Company will continue to assess
the carrying value of goodwill prior to the adoption of this statement on a
quarterly basis.

SFAS No. 143 addresses financial accounting and reporting for legal
obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. In June 2001 the Financial Accounting
Standards Board approved Statement of Financial Accounting Standard No. 143,
Accounting for Asset Retirement Obligations. The statement is effective for
the Companys 2004 fiscal year and is not expected to have a material effect on
its financial position or results of operations.

SFAS No. 144 addresses financial accounting and reporting for the
impairment or disposal of long-lived assets and establishes a single accounting
model for the impairment or disposal of long-lived assets. In August 2001 the

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##### Table of Contents



Financial Accounting Standards Board approved Statement of Financial
Accounting Standard No. 144, Accounting for the Impairment or Disposal of
Long-lived Assets. The statement supersedes FASB Statement No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of and supercedes accounting and reporting under APB Opinion
No. 30 for the disposal of a segment of a business. The statement is effective
for the Companys 2003 fiscal year and is not expected to have a material
effect on its financial position or results of operations.

8. NET INCOME (LOSS) PER COMMON SHARE

Net income (loss) per share for the three and six months ended September 30, 2001 and 2000 were as follows:
(in thousands, except per share amounts)

|                                                                                               |  |                    |        |                    |  |                  |        |                  |  |   |        |  |  |   |         |  
|---------------------------------------------------------------------------------------------- |  | ------------------ | ------ | ------------------ |  | ---------------- | ------ | ---------------- |  | - | ------ |  |  | - | ------- | -
|                                                                                               |  | (Restated)         |        |                    |  |                  |        | (Restated)       |  |   |        | 
|                                                                                               |  | (Note 9)           |        |                    |  |                  |        | (Note 9)         |  |   |        | 
|                                                                                               |  | Three months ended |        | Three months ended |  | Six months ended |        | Six months ended
|                                                                                               |  | September 30,      |        | September 30,      |  | September 30,    |        | September 30,   
|                                                                                               |  | 2001               |        | 2000               |  | 2001             |        | 2000            
|                                                                                               |  |                    |        |                    |  |                  |        |                 
|Basic:                                                                                         |  |                    |        |                    |  |                  |        |                  |  |   |        |  |  |   |         |  
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Net income (loss) attributable to common shareholders                                          |  | $                  | 296    |                    |  | $                | (6,851 | )                |  | $ | 454    |  |  | $ | (10,126 | )
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Weighted average common shares outstanding                                                     |  |                    | 70,153 |                    |  |                  | 53,472 |                  |  |   | 70,150 |  |  |   | 37,383  |  
|                                                                                               |  |                    |        |                    |  |                  |        |                  |  |   |        |  |  |   |         |  
|Per share amount                                                                               |  | $                  | 0.00   |                    |  | $                | (0.13  | )                |  | $ | 0.01   |  |  | $ | (0.27   | )
|                                                                                               |  |                    |        |                    |  |                  |        |                  |  |   |        |  |  |   |         |  
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Diluted:                                                                                       |  |                    |        |                    |  |                  |        |                  |  |   |        |  |  |   |         |  
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Net income (loss) attributable to common shareholders                                          |  | $                  | 296    |                    |  | $                | (6,851 | )                |  | $ | 454    |  |  | $ | (10,126 | )
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Weighted average common shares outstanding                                                     |  |                    | 70,153 |                    |  |                  | 53,472 |                  |  |   | 70,150 |  |  |   | 37,383  |  
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Shares assumed issued upon exercise of dilutive stock
options using the treasury stock method  |  |                    | 235    |                    |  |                  | 0      |                  |  |   | 232    |  |  |   | 0       |  
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Shares assumed issued upon exercise of dilutive stock
warrants using the treasury stock method |  |                    | 506    |                    |  |                  | 0      |                  |  |   | 253    |  |  |   | 0       |  
|                                                                                               |  |                    |        |                    |  |                  |        |                  |  |   |        |  |  |   |         |  
|Total                                                                                          |  |                    | 70,894 |                    |  |                  | 53,472 |                  |  |   | 70,635 |  |  |   | 37,383  |  
|                                                                                               |  |                    |        |                    |  |                  |        |                  |  |   |        |  |  |   |         |  
|Per share amount                                                                               |  | $                  | 0.00   |                    |  | $                | (0.13  | )                |  | $ | 0.01   |  |  | $ | (0.27   | )
|                                                                                               |  |                    |        |                    |  |                  |        |                  |  |   |        |  |  |   |         |  

Basic and diluted earnings per common share were computed by dividing net
loss by the weighted average number of shares of common stock outstanding
during the year. Stock options to purchase 2,291,200 shares of common stock as
well as warrants to purchase 3,246,164 shares of common stock were excluded for
the three months ended September 30, 2001 as they were all anti-dilutive. The
effect of all of the stock options and warrants was excluded for the three and
six months ended September 30, 2000 as a loss was recorded and amounts were
anti-dilutive.

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##### Table of Contents



9. RESTATEMENT

The Companys interim financial statements at September 30, 2001 and for
the three months and six months ended September 30, 2001 have been restated
from amounts previously reported to apply the correct revenue recognition
policy applied to certain of the Companys sales contracts. Revenue under these
contracts was previously reported upon shipment and passage of title and has
been revised to reflect the application of the percentage of completion method
of accounting as these contracts call for significant customization of the
Companys proprietary system. The following table shows the line items that
have been restated in the Companys Condensed Consolidated Statements of
Operations, Condensed Consolidated Balance Sheets and Condensed Consolidated
Statements of Cash Flows:

SUMMARY OF CHANGES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)

|                                      |  |                    |        |                    |  |               |        |          |  |  |        |               |  |  |        | 
|------------------------------------- |  | ------------------ | ------ | ------------------ |  | ------------- | ------ | -------- |  |  | ------ | ------------- |  |  | ------ | 
|                                      |  | Three months ended |        | Six months ended  
|                                      |  | September 30, 2001 |        | September 30, 2001
|                                      |  |                    |        |                   
|                                      |  |                    |        |                    |  | As previously |        |          |  |  |        | As previously
|                                      |  | Restated           |        | reported           |  | Restated      |        | reported
|                                      |  |                    |        |                    |  |               |        |         
|Revenues                              |  |                    | 16,897 |                    |  |               | 15,863 |          |  |  | 28,536 |               |  |  | 26,911 | 
|                                     
|                                     
|                                     
|                                     
|Cost of Revenues                      |  |                    | 12,210 |                    |  |               | 11,457 |          |  |  | 19,369 |               |  |  | 18,246 | 
|                                     
|                                     
|                                     
|                                     
|Gross Margin                          |  |                    | 4,687  |                    |  |               | 4,406  |          |  |  | 9,167  |               |  |  | 8,665  | 
|                                     
|                                     
|                                     
|                                     
|Operating income                      |  |                    | 614    |                    |  |               | 333    |          |  |  | 955    |               |  |  | 453    | 
|                                     
|                                     
|                                     
|                                     
|Income before taxes                   |  |                    | 549    |                    |  |               | 268    |          |  |  | 1,068  |               |  |  | 566    | 
|                                     
|                                     
|                                     
|                                     
|Provision for income taxes            |  |                    | 186    |                    |  |               | 91     |          |  |  | 482    |               |  |  | 312    | 
|                                     
|                                     
|                                     
|                                     
|Net income                            |  |                    | 363    |                    |  |               | 177    |          |  |  | 586    |               |  |  | 254    | 
|                                     
|                                     
|                                     
|                                     
|Net income applicable to shareholders |  |                    | 296    |                    |  |               | 110    |          |  |  | 454    |               |  |  | 122    | 
|                                     
|                                     
|                                     
|                                     
|Earnings per share  basic            |  |                    | 0.00   |                    |  |               | 0.00   |          |  |  | 0.01   |               |  |  | 0.00   | 
|                                     
|                                     
|                                     
|                                     
|Earnings per share  diluted          |  |                    | 0.00   |                    |  |               | 0.00   |          |  |  | 0.01   |               |  |  | 0.00   | 

CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

|                                                                            |  |                    |          |          |  |               |          |  
|--------------------------------------------------------------------------- |  | ------------------ | -------- | -------- |  | ------------- | -------- | -
|                                                                            |  | September 30, 2001
|                                                                            |  |                   
|                                                                            |  |                    |          |          |  | As previously
|                                                                            |  | Restated           |          | reported
|                                                                            |  |                    |          |         
|Costs
and estimated earnings in excess of billings on uncompleted contracts |  |                    | 2,317    |          |  |               | 0        |  
|Unbilled receivables                                                        |  |                    | 330      |          |  |               | 1,021    |  
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Inventories, net                                                            |  |                    | 12,742   |          |  |               | 13,865   |  
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Total assets                                                                |  |                    | 34,378   |          |  |               | 33,875   |  
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Income taxes payable                                                        |  |                    | 666      |          |  |               | 496      |  
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Accumulated deficit                                                         |  |                    | (176,232 | )        |  |               | (176,564 | )
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Total stockholders deficit                                                 |  |                    | (53,528  | )        |  |               | (53,860  | )
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Total liabilities and equity                                                |  |                    | 34,378   |          |  |               | 33,875   |  

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

|                     |  |                    |       |          |  |               |        |  
|-------------------- |  | ------------------ | ----- | -------- |  | ------------- | ------ | -
|                     |  | September 30, 2001
|                     |  |                   
|                     |  |                    |       |          |  | As previously
|                     |  | Restated           |       | reported
|                     |  |                    |       |         
|Net income (loss)    |  |                    | 454   |          |  |               | 122    |  
|                    
|                    
|                    
|                    
|Unbilled receivables |  |                    | 2,540 |          |  |               | 1,825  |  
|                    
|                    
|                    
|                    
|Inventories          |  |                    | (214  | )        |  |               | (1,337 | )
|                    
|                    
|                    
|                    
|Income taxes payable |  |                    | 1,477 |          |  |               | 1,307  |  
|                    
|                    
|                    
|                    
|Deferred
Future      |  |                    | (97   | )        |  |               | (374   | )

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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 for the fiscal year
ended March 31, 2001.

The Company has restated its financial statements for the three months and
six months ended September 30, 2001 as further discussed in Note 9 to the
Consolidated Condensed Financial Statements.

RESULTS OF OPERATIONS

Three Months Ended September 30, 2001 and 2000:

Net Revenues: Revenues increased $9.5 million, or 129.3%, to $16.9 million
for the three months ended September 30, 2001 as compared to $7.4 million for
the three months ended September 30, 2000. Sales to U.S. military customers for
the three months ended September 30, 2001, increased by $6.6 million, or
382.1%, to $8.3 million. The increase in military sales is due to several large
deliveries of items to customers that were in the Companys backlog of sales as
of June 30, 2001. Sales to U.S. law enforcement customers for the three months
ended September 30, 2001 increased $0.7 million, or 45.8% to $2.0 million.
Sales to international customers for the three months ended September 30, 2001
increased $2.5 million, or 64.5%, to $6.5 million due to several large
deliveries of items to customers that were in the Companys backlog of sales as
of June 30, 2001.

Cost of Revenues: Cost of revenues increased $2.7 million, or 28.1%, to
$12.2 million for the three months ended September 30, 2001 as compared to $9.5
million for the three months ended September 30, 2000. As a percentage of
revenues, cost of revenues for the three months ended September 30, 2001
decreased to 72.3% as compared to 129.0% for the three months ended September
30, 2000. The decrease in cost of revenues as a percentage of revenues is
attributable to a higher volume of revenues to cover fixed costs and provision
of an accrual of approximately $2.7 million for the three months ended
September 30, 2000. For the three months ended September 30, 2001, the Company
utilized $0.1 million of this accrual of which approximately $3.0 million
remains as of September 30, 2001. No such accruals were necessary in fiscal
year 2002. For fiscal year 2002, the Company began classifying commissions paid
to its agents in cost of revenues. The corresponding amount of $26,000 for the
three months ended September 30, 2000 has been reclassified from selling,
general, and administrative expenses to cost of revenues.

Gross Profit: As a result of the foregoing, gross profit increased $6.8
million, or 316.7%, to $4.7 million, or 27.7% of revenues, for the three months
ended September 30, 2001 as compared to ($2.1) million, or (29.4%) of revenues,
for the three months ended September 30, 2000.

Total Operating Expenses: Total operating expenses increased $0.3 million,
or 7.8%, for the three months ended September 30, 2001. As a percentage of
revenues, total operating expenses decreased to 24.1% for the three months
ended September 30, 2001 as compared to 51.3% for the three months ended
September 30, 2000. Selling, general and administrative (SG&A) expenses
increased $1.0 million, or 49.6%. This increase in SG&A is due primarily to
increases in employee compensation costs, including a provision for severance
costs for personnel reduction at the Companys Simtran subsidiary and a reserve
for legal fees regarding recent claims made by certain customers of the
Companys former subsidiary, Dart International concerning the DVD component of
the electronic archery system. Management intends to defend these and any
similar claims related to Dart products vigorously. In the opinion of
management, these proceedings will not have a material adverse effect on the
Companys financial position, liquidity or results of operations.

Research and development expenses decreased $0.6 million, or 51.1%,
primarily attributable to the Companys reduction in expenditures for research
and development activities relating to new products and product lines.
Depreciation and amortization expense decreased $0.1 million due to the
impairment of long-lived assets in fiscal year 2001, which lowered the basis of
long-lived assets and goodwill.

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Operating Income: As a result of the foregoing, operating income increased
$6.5 million to an income of $0.6 million, or 3.6% of revenues, for the three
months ended September 30, 2001 as compared to an operating loss of $5.9
million or (80.7%) of revenues, for the three months ended September 30, 2000.

Other
Income (Expense), net: Net interest expense totalled $1,000, or
0.0% of revenues for the three months ended September 30, 2001 as compared to
interest expense of $2,263,000, or 30.2% of revenues for the three months
ended September 30, 2000. The reduction in interest expense is attributable to
the debt restructuring completed by the Company in August 2000. In conjunction
with the debt restructuring, the Companys outstanding indebtedness was
exchanged for new borrowings, common stock, and mandatory redeemable preferred
stock. The sum of all future principal and interest payments due under the new
agreements exceeded the carrying value of the old debt, and thus no gain was
recognized on the transaction in accordance with SFAS No. 15. The excess of the
carrying amount of the old borrowings exceeded the fair value of the new
borrowings, common stock, and mandatory redeemable preferred stock and was
allocated proportionately to the new debt and preferred stock. During the
three months ended September 30, 2001, the excess amount allocated to debt was
reduced by approximately $878,000, resulting in a corresponding reduction of
interest expense. Interest expense for the three months ended September 30,
2000 also included fees associated with the debt restructuring of approximately
$606,000. Interest expense will continue to be recognized at a much lower
effective interest cost until the debt matures in March of 2003.

Provision for Income Taxes: The effective tax rate increased to (33.9%) of
income before taxes for the three months ended September 30, 2001 as compared
to 0.6% of loss before taxes for the three months ended September 30, 2000. The
Company has not recorded a tax benefit for the majority of its operating losses
due to uncertainty of future realization in both periods; however, certain of
the Companys foreign subsidiaries had higher operating income in fiscal year
2001 and fiscal year 2002, resulting in additional tax provisions.

Net Income: As a result of the foregoing, net income increased $8.9
million to a net income of $0.4 million, or 2.1% of revenues for the three
months ended September 30, 2001 as compared to a net loss of $8.5 million, or
(115.4%) of revenues for the three months ended September 30, 2000.

Accretion of Preferred Stock: The expense for the accretion of the
preferred stock issued in August 2000 was a total of $67,000 for the three
months ended September 30, 2001 as compared to $74,000 for the three months
ended September 30, 2000 for the preferred stock issued in November, 1998 and
exchanged in August 2000 for new preferred stock..

Net Income applicable to common shareholders: The net income applicable to
common shareholders increased $7.1 million to $0.3 million ($0.00 per share) or
1.8% of revenue. This compares to a loss of $6.9 million ($0.13 per share) or
(93.0%) of revenue for the three months ended September 30, 2000, which
included a gain on extinguishment of preferred stock of $1.7 million.

Six Months Ended September 30, 2001 and 2000:

Net Revenues: Revenues increased $10.9 million, or 61.8%, to $28.5 million
for the six months ended September 30, 2001 as compared to $17.6 million for
the six months ended September 30, 2000. Sales to U.S. military customers for
the six months ended September 30, 2001, increased by $10.7 million, or 325.9%,
to $14.0 million. Sales to U.S. law enforcement customers for the six months
ended September 30, 2001 decreased $0.4, million, or 11.1% to $3.5 million.
Sales to international customers for the six months ended September 30, 2001
increased $1.0 million, or 10.7%, to $10.7 million.

Cost of Revenues: Cost of revenues increased $2.5 million, or 15.2%, to
$19.3 million for the six months ended September 30, 2001 as compared to $16.8
million for the six months ended September 30, 2000. As a percentage of
revenues, cost of revenues decreased to 67.8% for the six months ended
September 30, 2001 as compared to 95.3% for the six months ended September 30,
2000. The decrease in cost of revenues as a percentage of revenues is
attributed to a higher volume of revenues to cover fixed costs; the inclusion
of an accrual of approximately $2.7 million in fiscal year 2001 (during the six
months ended September 30, 2001, the Company utilized approximately $1.0
million of this accrual of which approximately $3.0 million remains as of
September 30, 2001), that was

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associated with costs to complete the warranty provisions of certain
contracts as well as to accrue for anticipated losses on existing contracts;
and a $0.5 million write-off of inventory during the second quarter of fiscal
year 2001 that was determined to be unrealizable due to changes in anticipated
sales volume related to a particular product. For fiscal year 2002, the Company
began classifying commissions paid to its agents in cost of revenues. The
corresponding amount of $230,000 for the six months ended September 30, 2000
has been reclassified from selling, general, and administrative expenses to
cost of revenues.

Gross Profit: As a result of the foregoing, gross profit increased $8.3
million, or 1,012.5%, to $9.1 million, or 32.2% of revenues, for the six months
ended September 30, 2001 as compared to $0.8 million, or 4.7% of revenues, for
the six months ended September 30, 2000.

Total Operating Expenses: Total operating expenses increased $0.5 million,
or 6.3%, for the six months ended September 30, 2001. As a percentage of
revenues, total operating expenses decreased to 28.8% for the six months ended
September 30, 2001 as compared to 43.8% for the six months ended September 30,
2000. Selling, general and administrative (SG&A) expenses increased $1.6
million, or 39.7%. This increase in SG&A is due primarily to increases in
employee compensation costs, including $0.3 million related to the separation
agreement with the Companys former President and CEO and a provision for
severance costs for personnel reduction at the Companys Simtran subsidiary and
a reserve for legal fees regarding recent claims made by certain customers of
the Companys former subsidiary, Dart International concerning the DVD
component of the electronic archery system. Management intends to defend these
and any similar claims vigorously. In the opinion of management, these
proceedings will not have a material adverse effect on the Companys financial
position, liquidity or results of operations. Research and development expenses
decreased $0.9 million, or (36.2%), primarily attributable to the Companys
reduction in expenditures for research and development activities relating to
new products and product lines. Depreciation and amortization expense decreased
$0.2 million due to the impairment of long-lived assets in fiscal year 2001,
which lowered the basis of long-lived assets and goodwill.

Operating Income: As a result of the foregoing, operating income increased
$7.9 million to an income of $1.0 million, or 3.3% of revenues, for the six
months ended September 30, 2001 as compared to an operating loss of $6.9
million or (39.1%) of revenues, for the six months ended September 30, 2000.

Other
Income (Expense), net: Net interest income totalled $0.1 million, or
0.5% of revenues for the six months ended September 30, 2001 as compared to
interest expense of ($4.6) million, or (25.9%) of revenues for the six months
ended September 30, 2000. The reduction in interest expense is attributable to
the debt restructuring completed by the Company in August 2000. In conjunction
with the debt restructuring, the Companys outstanding indebtedness was
exchanged for new borrowings, common stock, and mandatory redeemable preferred
stock. The sum of all future principal and interest payments due under the new
agreements exceeded the carrying value of the old debt, and thus no gain was
recognized on the transaction in accordance with SFAS No. 15. The excess of
the carrying amount of the old borrowings exceeded the fair value of the new
borrowings, common stock, and mandatory redeemable preferred stock and was
allocated proportionately to the new debt and preferred stock. During the six
months ended September 30, 2001, the excess amount allocated to debt was
reduced by approximately $1.8 million, resulting in a corresponding reduction
of interest expense. Interest expense for the six months ended September 30,
2000 also included fees associated with the restructuring of approximately
$606,000. Interest expense will continue to be recognized at a much lower
effective interest cost until the debt matures in March of 2003.

Provision for Income Taxes: The effective tax rate increased to 45.1% of
income before taxes for the six months ended September 30, 2001 as compared to
0.5% of loss before taxes for the six months ended September 30, 2000. The
Company has not recorded a tax benefit for the majority of its operating losses
due to uncertainty of future realization in both periods; however, certain of
the Companys foreign subsidiaries had higher operating income in fiscal year
2001 and fiscal year 2002, resulting in additional tax provisions.

Net Income: As a result of the foregoing, net income increased $12.3
million to a net income of $0.6 million, or 2.1% of revenues for the six months
ended September 30, 2001 as compared to a net loss of $11.7 million, or (66.8%)
of revenues for the six months ended September 30, 2000.

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Accretion of Preferred Stock: The expense for the accretion of the
preferred stock issued in August 2000 was a total of $132,000 for the six
months ended September 30, 2001 as compared to $140,000 stock for the six
months ended September 30, 2000 for the preferred stock issued in November, 1998
and exchanged in August 2000 for new preferred.

Net Income applicable to common shareholders: The net income applicable to
common shareholders increased $10.6 million to $0.5 million ($0.00 per share)
or 1.6% of revenue. This compares to the six months ended September 30, 2000 of
a loss of $10.1 million ($0.27 per share) or (57.4%) of revenue, which included
a Gain on Extinguishment of Preferred Stock of $1.7 million.

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 potential revenue. As of September 30, 2001, the Company had a
backlog of approximately $45.8 million, as compared to $39.0 million as of
September 30, 2000, comprised of $18.8 million from international customers of
FATS, $1.3 from Simtrans Canadian customers, $25.5 million from FATS U.S.
military and law enforcement customers and $0.2 million from FATS Hunter and
Sports customers. Approximately $28.9 million of the contracted orders are
scheduled for delivery during fiscal year 2002.

LIQUIDITY AND CAPITAL RESOURCES AND GOING CONCERN CONSIDERATIONS

The Companys continuation as a going concern is dependent upon its
ability to (a) continue production work on existing contracts; (b) obtain new
contracts for future delivery; and (c) generate sufficient cash flow to meet
working capital obligations on a timely basis.

Managements plans in response to the above objectives are to (1) continue
to reinforce cost control measures through implementation of Lean Enterprise
concepts. Lean Enterprises is an integrated set of industrial principles and
methods first developed out of a groundbreaking study of the post-World War II
Japanese automobile industry. The Lean Enterprise concept enables companies to
find the best way to specify value for the customer, to identify the value
stream for each product, to cause the product to flow smoothly from concept to
customer, to permit the customer to pull value as needed from the producer, and
to make a move toward perfection. The concepts of value, value stream, flow,
pull, and perfectionare deployed by means of lean techniquesfor product
development, production, purchasing, and customer support; (2) remain focused
on revenue maximization of standard products with higher margin potentials
within the domestic and international law enforcement business segment; (3)
minimize capital expenditures in non-strategic areas; (4) continue to improve
inventory turns and lower inventory investment; and (5) continually negotiate
more favorable contract terms and conditions to reduce extended or prolonged
payment cycles.

As of September 30, 2001, the Company had working capital of $16.9 million
compared to $15.8 million as of September 30, 2000. The net $1.1 million
increase in working capital is primarily the result of the Companys improved
cash flow from operations as a result of its improved profitability, its
reduction of inventories and reduction of its unbilled receivables. The
Companys spending year-to-date as of September 30, 2001 for capital
expenditures was $0.3 million. The expenditures were primarily for
manufacturing machinery, data processing equipment and software. As of
September 30, 2001, the Company was out of compliance with the capital
expenditure covenants of its debt agreements. The Company has obtained a waiver
from the banks.

The Company had a net increase in cash and cash equivalents of $0.9
million for the six months ended September 30, 2001 compared to a net increase
of $0.5 million for the six months ended September 30, 2000. For the period
ended September 30, 2001, the Companys operating activities generated cash of
approximately $1.2 million. Cash flow from operations increased despite the
increase in expenditures for inventory in the current fiscal year as compared
to the same period in the prior fiscal year. Also, the Company is recording a
reduced amount of interest expense as discussed in the Other Income (Expense),
net section under RESULTS OF OPERATIONS. The Companys investing activities
used cash of approximately $0.3 million for capital expenditures.

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In August 2000, the Company restructured its debt agreements (the
Restructure Transaction) by entering into a Second Amended and Restated
Credit Agreement (the New Credit Agreement) and Partial Exchange Agreement
with Bank of America, N.A. and other lenders. The New Credit Agreement replaced
the Companys previous credit facility, including the Tranche A and B loans and
Revolving credit facility. In accordance with the New Credit Agreement, the
unpaid principal of approximately $70,772,000 and accrued interest of
approximately $5,312,000 under the old facility was converted to 40,235,548
shares of Class A common stock, 20,463.716 shares of Series B mandatory
redeemable preferred stock, approximately $11,496,000 in senior secured loans,
and approximately $22,034,000 of junior secured loans. All borrowings under the
new agreements mature on March 31, 2003 but may be extended for one additional
year at the Companys option for a 1.0% fee. The senior loans bear interest at
prime plus 1.0%, payable quarterly in cash. The junior loans bear interest at
10.0%, payable quarterly in cash or in PIK (Paid In Kind) notes payable with
the same terms, depending on interest coverage ratios, as defined.

As a result of the Restructure Transaction in August 2000, the Company is
not currently paying interest or principal, other than interest on its Senior
Debt and a portion of the Junior Debt, in cash. The remaining interest on
Junior Debt is being recorded as additional notes payable. This debt will
mature in March 2003 unless otherwise extended at the option of the Company.

CONCENTRATION OF CREDIT RISK

At September 30, 2001, approximately $6.7 million in accounts receivable
or 59.1% of total accounts receivable was due from the Companys top ten
customers, $1.5 million of which was secured by performance letters of credit.
The remaining $5.2 million is due from governmental entities.

NEW ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141, Business Combinations (SFAS No. 141)
and Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets (SFAS No. 142).

SFAS No. 141 addresses financial accounting and reporting for business
combinations. This statement requires the purchase method of accounting to be
used for all business combinations, and prohibits the pooling-of-interests
method of accounting. This statement is effective for all business combinations
initiated after June 30, 2001 and supercedes APB Opinion No. 16, Business
Combinations as well as FASB Statement of Financial Accounting Standards No.
38, Accounting for Pre-acquisition Contingencies of Purchased Enterprises.

SFAS No. 142 addresses how intangible assets that are acquired
individually or with a group of other assets should be accounted for in
financial statements upon their acquisition. This statement requires goodwill
to be periodically reviewed for impairment rather than amortized, for fiscal
years beginning after December 15, 2001. SFAS No. 142 supercedes APB Opinion
No. 17, Intangible Assets. As of September 30, 2001, the Company has
$1,094,000 of recorded net goodwill, which will be subject to the new
standards. The Company is currently recording goodwill amortization expense of
$182,000 per year. Such amortization expense will no longer be recorded upon
adoption of this statement and impairment testing will be required to assess
its carrying value going forward. The Company will adopt this standard in the
first quarter of fiscal year 2003. However, the Company will continue to assess
the carrying value of goodwill prior to the adoption of this statement on a
quarterly basis.

SFAS No. 143 addresses financial accounting and reporting for legal
obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. In June 2001 the Financial Accounting
Standards Board approved Statement of Financial Accounting Standard No. 143,
Accounting for Asset Retirement Obligations. The statement is effective for
the Companys 2004 fiscal year and is not expected to have a material effect on
its financial position or results of operations.

SFAS No. 144 addresses financial accounting and reporting for the
impairment or disposal of long-lived assets and establishes a single accounting
model for the impairment or disposal of long-lived assets. In August 2001 the
Financial Accounting Standards Board approved Statement of Financial Accounting
Standard No. 144, Accounting

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##### Table of Contents



for the Impairment or Disposal of Long-lived Assets. The statement
supersedes FASB Statement No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of and supercedes accounting
and reporting under APB Opinion No. 30 for the disposal of a segment of a
business. The statement is effective for the Companys 2003 fiscal year and is
not expected to have a material effect on its financial position or results of
operations.

RELATED PARTIES AND TRANSACTIONS

A group of entities affiliated with Centre Partners Management LLC (the
Centre Entities) are among the Companys largest shareholders. Centre
Entities holds a seat on the Companys Board of Directors. In addition, the
Centre Entities were party to the debt restructuring further discussed in the
footnotes to the Companys financial statements included in the Form 10-K for
the period ended March 31, 2001 and continue to be one of the Companys primary
lenders. As a result, the Centre Entities have the ability to influence the
operations of the Company.

The Company has 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
are to be performed on an hourly basis, plus out-of-pocket expenses, and the
Company is billed accordingly. Since May 16, 2001, Mr. Sugarman has served as
Interim Chief Executive Officer and President of the Company. For the three
months ended September 30, 2001 and 2000, respectively, the Company incurred
consulting fees of $0.1 million and $0.0 million that were included in
operating expenses. For the six months ended September 30, 2001 and 2000,
respectively, the Company incurred consulting fees of $0.2 million and $0.0
million that were included in operating expenses.

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 for the fiscal year ended March 31, 2001 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.

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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.




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 6. EXHIBITS AND REPORTS ON FORM 8-K

|    |  |                                                                                                                                      
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Exhibits                                                                                                                             
|   
|   
|   
|   
|    |  |                                                                                                                                      
|   
|   
|   
|   
|    |  | 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
September 30, 2001.                                                       

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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:  August 14, 2002

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

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