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

_____________

FORM 10-Q



(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002

OR

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

COMMISSION FILE NUMBER: 333-13105

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

|                                |  |                                     
|------------------------------- |  | ------------------------------------
|DELAWARE                        |  | 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 [X] |  | No [  ]

As of November 6, 2002, there were 70,153,139 shares of the Registrants
Class A Common Stock outstanding.

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TABLE OF CONTENTS



|                                                                                                                                          |                                                                                                       |  |  |  |  |  |  | 
|----------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION                                                                                                            
|ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                                                                                      
|                                                                                                                                          | Condensed Consolidated Statements of OperationsThree and six months ended September 30, 2002 and 2001
|                                                                                                                                          | Condensed Consolidated Balance SheetsSeptember 30, 2002 and March 31, 2002                           
|                                                                                                                                          | Condensed Consolidated Statements of Cash Flows Six months ended September 30, 2002 and 2001         
|                                                                                                                                          | Notes to Condensed Consolidated Financial Statements                                                 
|ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                            
|ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                                       
|ITEM 4. CONTROLS AND PROCEDURES                                                                                                          
|PART II. OTHER INFORMATION                                                                                                               
|ITEM 1. LEGAL PROCEEDINGS                                                                                                                
|ITEM 6. EXHIBITS AND REPORTS ON FORM 10-K                                                                                                
|SIGNATURES                                                                                                                               
|Certification of CEO Pursuant to Securities Exchange Act Rule 13a-14 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|Certification of CFO Pursuant to Securities Exchange Act Rule 13a-14 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|EX-99.1 CERTIFICATION OF THE CEO                                                                                                         
|EX-99.2 CERTIFICATION OF THE CFO                                                                                                         



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FIREARMS TRAINING SYSTEMS, INC.
INDEX

|         |  |                                                                                                        |  |            
|-------- |  | ------------------------------------------------------------------------------------------------------ |  | -----------
|         |  |                                                                                                        |  | Page number
|         |  |                                                                                                        |  |            
|PART I.  |  | FINANCIAL INFORMATION                                                                                  |  | 3          
|        
|ITEM 1.  |  | CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:                                                           |  |            
|        
|         |  | Condensed Consolidated Statements of Operations
Three and six months ended September 30, 2002 and 2001 |  | 3          
|        
|         |  | Condensed Consolidated Balance Sheets
September 30, 2002 and March 31, 2002                            |  | 4          
|        
|         |  | Condensed Consolidated Statements of Cash Flows
Six months ended September 30, 2002 and 2001           |  | 5          
|        
|         |  | Notes to Condensed Consolidated Financial Statements                                                   |  | 6          
|        
|ITEM 2.  |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS                  |  | 11         
|        
|ITEM 3.  |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK                                             |  | 16         
|        
|ITEM 4.  |  | CONTROLS AND PROCEDURES                                                                                |  | 17         
|        
|PART II. |  | OTHER INFORMATION                                                                                      |  | 17         
|        
|ITEM 1.  |  | LEGAL PROCEEDINGS                                                                                      |  | 17         
|        
|ITEM 6.  |  | EXHIBITS AND REPORTS ON FORM 10-K                                                                      |  | 17         
|        
|         |  | SIGNATURES                                                                                             |  | 18         

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PART I. FINANCIAL INFORMATION




ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




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

|                                                     |                                              |                          |                                   |       |                    |     |                  |       |       |     |        |       |       |    |        |       |       |     | 
|---------------------------------------------------- | -------------------------------------------- | ------------------------ | --------------------------------- | ----- | ------------------ | --- | ---------------- | ----- | ----- | --- | ------ | ----- | ----- | -- | ------ | ----- | ----- | --- | 
|                                                     |                                              |                          |                                   |       | Three months ended |     | Six months ended
|                                                     |                                              |                          |                                   |       | September 30,      |     | September 30,   
|                                                     |                                              |                          |                                   |       | 2002               |     | 2001             |       | 2002  |     | 2001  
|                                                     |                                              |                          |                                   |       |                    |     |                  |       |       |     |       
|Revenues                                             |                                              | $                        | 17,005                            |       |                    | $   | 16,897           |       |       | $   | 30,197 |       |       | $  | 28,536 |      
|Cost of Revenues                                     |                                              |                          | 11,203                            |       |                    |     | 12,210           |       |       |     | 20,560 |       |       |    | 19,369 |      
|                                                     |                                              |                          |                                   |       |                    |     |                  |       |       |     |        |       |       |    |        |      
|Gross margin                                         |                                              |                          | 5,802                             |       |                    |     | 4,687            |       |       |     | 9,637  |       |       |    | 9,167  |      
|Operating expenses:                                  |                                              |                          |                                   |       |                    |     |                  |       |       |     |        |       |       |    |        |      
|                                                     | Selling, general and administrative expenses |                          |                                   | 3,010 |                    |     |                  | 3,051 |       |     |        | 5,450 |       |    |        | 5,696 |      
|                                                     | Research and development expenses            |                          |                                   | 714   |                    |     |                  | 563   |       |     |        | 1,550 |       |    |        | 1,577 |      
|                                                     | Depreciation and amortization                |                          |                                   | 244   |                    |     |                  | 459   |       |     |        | 510   |       |    |        | 939   |      
|                                                     |                                              |                          |                                   |       |                    |     |                  |       |       |     |        |       |       |    |        |      
|                                                     |                                              | Total operating expenses |                                   |       | 3,968              |     |                  |       | 4,073 |     |        |       | 7,510 |    |        |       | 8,212 |    
|                                                    
|Operating income                                     |                                              |                          | 1,834                             |       |                    |     | 614              |       |       |     | 2,127  |       |       |    | 955    |      
|                                                    
|Other income (expense), net:                         |                                              |                          |                                   |       |                    |     |                  |       |       |     |        |       |       |    |        |      
|                                                     | Interest income                              |                          |                                   | 15    |                    |     |                  | 23    |       |     |        | 48    |       |    |        | 192   |      
|                                                     | Interest expense                             |                          |                                   | (59   | )                  |     |                  | (24   | )     |     |        | (108  | )     |    |        | (48   | )    
|                                                     | Other income (expense), net                  |                          |                                   | (19   | )                  |     |                  | (64   | )     |     |        | 54    |       |    |        | (31   | )    
|                                                     |                                              |                          |                                   |       |                    |     |                  |       |       |     |        |       |       |    |        |      
|                                                     |                                              |                          | Total other income (expense), net |       |                    | (63 | )                |       |       | (65 | )      |       |       | (6 | )      |       |       | 113 | 
|                                                    
|Income before provision for income taxes             |                                              |                          | 1,771                             |       |                    |     | 549              |       |       |     | 2,121  |       |       |    | 1,068  |      
|Provision for income taxes                           |                                              |                          | 602                               |       |                    |     | 186              |       |       |     | 721    |       |       |    | 482    |      
|                                                     |                                              |                          |                                   |       |                    |     |                  |       |       |     |        |       |       |    |        |      
|Net income                                           |                                              |                          | 1,169                             |       |                    |     | 363              |       |       |     | 1,400  |       |       |    | 586    |      
|                                                    
|Accretion of preferred stock                         |                                              |                          | (74                               | )     |                    |     | (67              | )     |       |     | (146   | )     |       |    | (132   | )    
|                                                     |                                              |                          |                                   |       |                    |     |                  |       |       |     |        |       |       |    |        |      
|Net income applicable to common shareholders         |                                              | $                        | 1,095                             |       |                    | $   | 296              |       |       | $   | 1,254  |       |       | $  | 454    |      
|                                                     |                                              |                          |                                   |       |                    |     |                  |       |       |     |        |       |       |    |        |      
|Basic earnings per common share                      |                                              | $                        | 0.02                              |       |                    | $   | 0.00             |       |       | $   | 0.02   |       |       | $  | 0.01   |      
|                                                     |                                              |                          |                                   |       |                    |     |                  |       |       |     |        |       |       |    |        |      
|Diluted earnings per common share                    |                                              | $                        | 0.02                              |       |                    | $   | 0.00             |       |       | $   | 0.02   |       |       | $  | 0.01   |      
|                                                     |                                              |                          |                                   |       |                    |     |                  |       |       |     |        |       |       |    |        |      
|Weighted average common shares outstanding  basic   |                                              |                          | 70,153                            |       |                    |     | 70,153           |       |       |     | 70,153 |       |       |    | 70,150 |      
|                                                     |                                              |                          |                                   |       |                    |     |                  |       |       |     |        |       |       |    |        |      
|Weighted average common shares outstanding  diluted |                                              |                          | 71,953                            |       |                    |     | 70,894           |       |       |     | 72,139 |       |       |    | 70,635 |      
|                                                     |                                              |                          |                                   |       |                    |     |                  |       |       |     |        |       |       |    |        |      

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

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

|                                                           |                                                                             |                                             |        |                             |        |               |         |           |        |   |         |  
|---------------------------------------------------------- | --------------------------------------------------------------------------- | ------------------------------------------- | ------ | --------------------------- | ------ | ------------- | ------- | --------- | ------ | - | ------- | -
|                                                           |                                                                             |                                             |        |                             |        | September 30, |         | March 31,
|ASSETS                                                     |                                                                             | 2002                                        |        | 2002                       
|                                                           | (unaudited)                                                                 |                                             |       
|                                                           |                                                                             |                                             |        |                            
|Current assets:                                            |                                                                             |                                             |        |                             |        |               |         |          
|                                                           | Cash and cash equivalents                                                   |                                             | $      | 4,498                       |        |               | $       | 4,252     |       
|                                                           | Restricted cash                                                             |                                             |        | 979                         |        |               |         | 1,434     |       
|                                                           | Accounts receivable, net                                                    |                                             |        | 12,437                      |        |               |         | 10,500    |       
|                                                           | Income tax receivable                                                       |                                             |        | 17                          |        |               |         | 4,488     |       
|                                                           | Unbilled receivables                                                        |                                             |        | 836                         |        |               |         | 1,378     |       
|                                                           | Costs and estimated earnings in excess of billings on uncompleted contracts |                                             |        | 2,536                       |        |               |         | 1,816     |       
|                                                           | Inventories, net                                                            |                                             |        | 10,441                      |        |               |         | 9,434     |       
|                                                           | Prepaid expenses and other current assets                                   |                                             |        | 1,388                       |        |               |         | 1,444     |       
|                                                           |                                                                             |                                             |        |                             |        |               |         |          
|                                                           |                                                                             |                                             |        | Total current assets        |        |               | 33,132  |           |        |   | 34,746  |  
|                                                          
|Property and equipment, net                                |                                                                             |                                             | 2,039  |                             |        |               | 1,579   |          
|Intangible assets                                          |                                                                             |                                             | 186    |                             |        |               | 26      |          
|                                                           |                                                                             |                                             |        |                             |        |               |         |          
|                                                           |                                                                             |                                             |        | Total assets                |        | $             | 35,357  |           |        | $ | 36,351  |  
|                                                           |                                                                             |                                             |        |                             |        |               |         |          
|LIABILITIES AND STOCKHOLDERS DEFICIT                      |                                                                             |                                             |        |                             |        |               |         |          
|Current liabilities:                                       |                                                                             |                                             |        |                             |        |               |         |          
|                                                           | Accounts payable                                                            |                                             | $      | 3,144                       |        |               | $       | 4,430     |       
|                                                           | Accrued liabilities                                                         |                                             |        | 3,107                       |        |               |         | 5,053     |       
|                                                           | Accrued interest                                                            |                                             |        | 895                         |        |               |         | 861       |       
|                                                           | Income taxes payable                                                        |                                             |        | 1,007                       |        |               |         |          |       
|                                                           | Deferred revenue                                                            |                                             |        | 1,142                       |        |               |         | 902       |       
|                                                           | Billings in excess of costs and estimated earnings on uncompleted contracts |                                             |        | 521                         |        |               |         | 285       |       
|                                                           | Warranty and contract costs provision reserve  current                     |                                             |        | 2,411                       |        |               |         | 2,258     |       
|                                                           | Current portion of long-term debt and capital lease obligations             |                                             |        | 41,938                      |        |               |         |          |       
|                                                           |                                                                             |                                             |        |                             |        |               |         |          
|                                                           |                                                                             |                                             |        | Total current liabilities   |        |               | 54,165  |           |        |   | 13,789  |  
|                                                          
|Long-term debt and capital lease obligations               |                                                                             |                                             | 149    |                             |        |               | 42,977  |          
|Noncurrent deferred income taxes                           |                                                                             |                                             | 18     |                             |        |               | 22      |          
|Warranty and contract costs provision reserve  noncurrent |                                                                             |                                             | 1,298  |                             |        |               | 1,467   |          
|Other noncurrent liabilities                               |                                                                             |                                             | 675    |                             |        |               | 579     |          
|                                                           |                                                                             |                                             |        |                             |        |               |         |          
|Total liabilities                                          |                                                                             |                                             | 56,305 |                             |        |               | 58,834  |          
|                                                           |                                                                             |                                             |        |                             |        |               |         |          
|Mandatory redeemable preferred stock                       |                                                                             |                                             | 27,465 |                             |        |               | 27,319  |          
|                                                           |                                                                             |                                             |        |                             |        |               |         |          
|Stockholders deficit:                                     |                                                                             |                                             |        |                             |        |               |         |          
|                                                           | Common stock                                                                |                                             |        |                            |        |               |         |          |       
|                                                           | Stock warrants                                                              |                                             |        | 613                         |        |               |         | 613       |       
|                                                           | Additional paid-in-capital                                                  |                                             |        | 122,314                     |        |               |         | 122,314   |       
|                                                           | Accumulated deficit                                                         |                                             |        | (171,096                    | )      |               |         | (172,350  | )     
|                                                           | Cumulative foreign currency translation adjustment                          |                                             |        | (244                        | )      |               |         | (379      | )     
|                                                           |                                                                             |                                             |        |                             |        |               |         |          
|                                                           |                                                                             |                                             |        | Total stockholders deficit |        |               | (48,413 | )         |        |   | (49,802 | )
|                                                           |                                                                             |                                             |        |                             |        |               |         |          
|                                                           |                                                                             | Total liabilities and stockholders deficit |        | $                           | 35,357 |               |         | $         | 36,351 |  
|                                                           |                                                                             |                                             |        |                             |        |               |         |          

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

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

|                                                                                  |                                                        |                                                                   |                                           |        |                  |      |       |        |        |       |  
|--------------------------------------------------------------------------------- | ------------------------------------------------------ | ----------------------------------------------------------------- | ----------------------------------------- | ------ | ---------------- | ---- | ----- | ------ | ------ | ----- | -
|                                                                                  |                                                        |                                                                   |                                           |        | Six months ended
|                                                                                  |                                                        |                                                                   |                                           |        | September 30,   
|                                                                                  |                                                        |                                                                   |                                           |        |                 
|                                                                                  |                                                        |                                                                   |                                           |        | 2002             |      | 2001 
|                                                                                  |                                                        |                                                                   |                                           |        |                  |      |      
|OPERATING ACTIVITIES:                                                             |                                                        |                                                                   |                                           |        |                  |      |       |       
|Net income applicable to common shareholders                                      |                                                        | $                                                                 | 1,254                                     |        |                  | $    | 454   |       
|Adjustments to reconcile net income to net cash provided by operating activities: |                                                        |                                                                   |                                           |        |                  |      |       |       
|                                                                                  | Noncash employee compensation                          |                                                                   |                                           |       |                  |      |       | 10     |       
|                                                                                  | Change in inventory reserve                            |                                                                   |                                           | (1,925 | )                |      |       |        |       
|                                                                                  | Noncash reduction of debt restructuring liability      |                                                                   |                                           | (1,756 | )                |      |       | (1,756 | )     
|                                                                                  | Accretion of mandatory redeemable preferred stock      |                                                                   |                                           | 146    |                  |      |       | 132    |       
|                                                                                  | Depreciation                                           |                                                                   |                                           | 510    |                  |      |       | 846    |       
|                                                                                  | Amortization of goodwill                               |                                                                   |                                           |       |                  |      |       | 93     |       
|                                                                                  | Amortization of loan costs and other intangible assets |                                                                   |                                           | 90     |                  |      |       |       |       
|                                                                                  | (Gain) / loss on disposal of assets                    |                                                                   |                                           | 23     |                  |      |       | (45    | )     
|                                                                                  | Deferred income taxes                                  |                                                                   |                                           | (4     | )                |      |       | 88     |       
|                                                                                  | Changes in assets and liabilities:                     |                                                                   |                                           |        |                  |      |       |        |       
|                                                                                  |                                                        | Accounts receivable, net                                          |                                           |        | (1,935           | )    |       |        | (2,704 | )    
|                                                                                  |                                                        | Unbilled receivables                                              |                                           |        | 542              |      |       |        | 2,540  |      
|                                                                                  |                                                        | Costs and earnings in excess of billings on uncompleted contracts |                                           |        | (711             | )    |       |        | (2,340 | )    
|                                                                                  |                                                        | Inventories                                                       |                                           |        | 926              |      |       |        | (214   | )    
|                                                                                  |                                                        | Prepaid expenses and other current assets                         |                                           |        | (193             | )    |       |        | (134   | )    
|                                                                                  |                                                        | Accounts payable                                                  |                                           |        | (1,289           | )    |       |        | 2,278  |      
|                                                                                  |                                                        | Accrued liabilities                                               |                                           |        | (1,297           | )    |       |        | 1,499  |      
|                                                                                  |                                                        | Income taxes payable / receivable                                 |                                           |        | 5,532            |      |       |        | 1,477  |      
|                                                                                  |                                                        | Deferred revenue                                                  |                                           |        | 331              |      |       |        | (97    | )    
|                                                                                  |                                                        | Billings in excess of costs and earnings on uncompleted contracts |                                           |        | 135              |      |       |        | (277   | )    
|                                                                                  |                                                        | Warranty and contracts costs provision                            |                                           |        | (17              | )    |       |        | (931   | )    
|                                                                                  |                                                        | Noncurrent liabilities                                            |                                           |        | 69               |      |       |        | 232    |      
|                                                                                  |                                                        |                                                                   |                                           |        |                  |      |       |       
|                                                                                  |                                                        |                                                                   | Total adjustments                         |        |                  | (823 | )     |        |        | 697   |  
|                                                                                  |                                                        |                                                                   |                                           |        |                  |      |       |       
|                                                                                  |                                                        |                                                                   | Net cash provided by operating activities |        |                  | 431  |       |        |        | 1,151 |  
|                                                                                  |                                                        |                                                                   |                                           |        |                  |      |       |       
|Cash flows from investing activities:                                             |                                                        |                                                                   |                                           |        |                  |      |       |       
|                                                                                  | Change in restricted cash                              |                                                                   |                                           | 455    |                  |      |       | 146    |       
|                                                                                  | Additions to property and equipment, net               |                                                                   |                                           | (757   | )                |      |       | (263   | )     
|                                                                                  | Proceeds from disposal of property and equipment       |                                                                   |                                           |       |                  |      |       | 45     |       
|                                                                                  |                                                        |                                                                   |                                           |        |                  |      |       |       
|                                                                                  |                                                        |                                                                   | Net cash used in investing activities     |        |                  | (302 | )     |        |        | (72   | )
|                                                                                  |                                                        |                                                                   |                                           |        |                  |      |       |       
|Cash flows from financing activities:                                             |                                                        |                                                                   |                                           |        |                  |      |       |       
|                                                                                  | Repayments of long-term debt                           |                                                                   |                                           |        |                  |      |       | (170   | )     
|                                                                                  |                                                        |                                                                   |                                           |        |                  |      |       |       
|                                                                                  |                                                        |                                                                   | Net cash used in financing activities     |        |                  |     |       |        |        | (170  | )
|                                                                                  |                                                        |                                                                   |                                           |        |                  |      |       |       
|Effect of changes in foreign exchange rates                                       |                                                        |                                                                   | 117                                       |        |                  |      | 45    |       
|                                                                                  |                                                        |                                                                   |                                           |        |                  |      |       |       
|Net Increase in Cash and Cash Equivalents                                         |                                                        |                                                                   | 246                                       |        |                  |      | 954   |       
|Cash and Cash Equivalents at the Beginning of the Period                          |                                                        | $                                                                 | 4,252                                     |        |                  | $    | 1,864 |       
|                                                                                  |                                                        |                                                                   |                                           |        |                  |      |       |       
|Cash and Cash Equivalents at the End of the Period                                |                                                        | $                                                                 | 4,498                                     |        |                  | $    | 2,818 |       
|                                                                                  |                                                        |                                                                   |                                           |        |                  |      |       |       
|Supplemental disclosures of cash paid (received) for:                             |                                                        |                                                                   |                                           |        |                  |      |       |       
|                                                                                  | Interest                                               |                                                                   | $                                         | 1,076  |                  |      | $     | 547    |       
|                                                                                  | Income taxes                                           |                                                                   | $                                         | (4,766 | )                |      | $     | (1,020 | )     
|Supplemental disclosures of non-cash investing and financing activities:          |                                                        |                                                                   |                                           |        |                  |      |       |       
|                                                                                  | Vehicles acquired through capital leases               |                                                                   | $                                         | 222    |                  |      | $     |       |       

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

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

1.     BASIS OF PRESENTATION.

The accompanying condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments, consisting of normal recurring adjustments, considered necessary
for a fair presentation have been included. Operating results for the
three-month and six-month periods ended September 30, 2002 are not necessarily
indicative of the results that may be expected for the year ending March 31,
2003. For further information, refer to the Companys consolidated financial
statements and footnotes thereto included in the Companys Annual Report on
Form 10-K/A for the year ended March 31, 2002.

2.     REVENUE RECOGNITION

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

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

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

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

Revenue from extended warranty sales and customer logistics support sales
is recorded as deferred revenue and is 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 or market basis. Cost includes materials, labor, and
factory overhead. Market is defined as net realizable value.

Inventories consist of the following (in thousands):

|                |                    |   |               |        |           |   |        |        | 
|--------------- | ------------------ | - | ------------- | ------ | --------- | - | ------ | ------ | 
|                |                    |   | September 30, |        | March 31,
|                |                    |   | 2002          |        | 2002     
|                |                    |   |               |        |          
|Raw materials   |                    | $ | 6,570         |        |           | $ | 8,874  |       
|Work in process |                    |   | 4,795         |        |           |   | 2,668  |       
|Finished goods  |                    |   | 677           |        |           |   | 1,412  |       
|                |                    |   |               |        |           |   |        |       
|                | Inventories, gross |   |               | 12,042 |           |   |        | 12,954 | 
|Less reserves   |                    |   | (1,601        | )      |           |   | (3,520 | )     
|                |                    |   |               |        |           |   |        |       
|                | Inventories, net   |   | $             | 10,441 |           |   | $      | 9,434  | 
|                |                    |   |               |        |           |   |        |       

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):

|                                        |  |               |         |           |  |   |         |  
|--------------------------------------- |  | ------------- | ------- | --------- |  | - | ------- | -
|                                        |  | September 30, |         | March 31,
|                                        |  | 2002          |         | 2002     
|                                        |  |               |         |          
|Costs incurred on uncompleted contracts |  | $             | 21,190  |           |  | $ | 14,305  |  
|Estimated earnings                      |  |               | 9,356   |           |  |   | 6,536   |  
|                                        |  |               |         |           |  |   |         |  
|                                        |  | $             | 30,546  |           |  | $ | 20,841  |  
|Less: billings to date                  |  |               | (28,531 | )         |  |   | (19,310 | )
|                                        |  |               |         |           |  |   |         |  
|                                        |  | $             | 2,015   |           |  | $ | 1,531   |  
|                                        |  |               |         |           |  |   |         |  

Such amounts are included in the following accounts:

|                                                                            |  |               |       |           |  |   |       |  
|--------------------------------------------------------------------------- |  | ------------- | ----- | --------- |  | - | ----- | -
|                                                                            |  | September 30, |       | March 31,
|                                                                            |  | 2002          |       | 2002     
|                                                                            |  |               |       |          
|Costs and estimated earnings in excess of billings on uncompleted contracts |  | $             | 2,536 |           |  | $ | 1,816 |  
|Billings in excess of costs and estimated earnings on uncompleted contracts |  |               | (521  | )         |  |   | (285  | )
|                                                                            |  |               |       |           |  |   |       |  
|                                                                            |  | $             | 2,015 |           |  | $ | 1,531 |  
|                                                                            |  |               |       |           |  |   |       |  

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5.     INTANGIBLE ASSETS

The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 142, Goodwill and Other Intangible Assets, during the quarter ended June
30, 2002.

Intangible assets consist of the following:

|                            |                               |  |               |     |           |  |    |    |  
|--------------------------- | ----------------------------- |  | ------------- | --- | --------- |  | -- | -- | -
|                            |                               |  | September 30, |     | March 31,
|                            |                               |  | 2002          |     | 2002     
|                            |                               |  |               |     |          
|Amortized intangible assets |                               |  |               |     |           |  |    |   
|                            | Non-compete agreements        |  |               | 33  |           |  |    | 33 |  
|                            | Deferred Financing Costs      |  |               | 250 |           |  |    |   |  
|                            | Less accumulated amortization |  |               | (97 | )         |  |    | (7 | )
|                            |                               |  |               |     |           |  |    |   
|                            |                               |  | 186           |     |           |  | 26 |   
|                            |                               |  |               |     |           |  |    |   

Amortization expense for the three-month and six-month periods ended
September 30, 2002 was $45,000 and $90,000 respectively. Estimated amortization
expense for the year ended March 31, 2003 will be approximately $180,000.

6.     LONG-TERM DEBT

At September 30, 2002 and March 31, 2002, long-term debt consisted of the
following (in thousands):

|                             |                                                   |   |               |     |           |   |        |        | 
|---------------------------- | ------------------------------------------------- | - | ------------- | --- | --------- | - | ------ | ------ | 
|                             |                                                   |   | September 30, |     | March 31,
|                             |                                                   |   | 2002          |     | 2002     
|                             |                                                   |   |               |     |          
|Working capital  borrowings |                                                   | $ | 130           |     |           | $ | 130    |       
|Long-term debt  Senior      |                                                   |   | 12,000        |     |           |   | 12,000 |       
|Long-term debt  Junior      |                                                   |   | 28,010        |     |           |   | 27,334 |       
|Debt discount                |                                                   |   | 1,756         |     |           |   | 3,513  |       
|Capital lease obligations    |                                                   |   | 191           |     |           |   | 0      |       
|                             |                                                   |   |               |     |           |   |        |       
|                             |                                                   | $ | 42,087        |     |           | $ | 42,977 |       
|Less: Current portion        |                                                   |   | (41,938       | )   |           |   | 0      |       
|                             |                                                   |   |               |     |           |   |        |       
|                             | Total long-term debt and capital lease obligation |   | $             | 149 |           |   | $      | 42,977 | 
|                             |                                                   |   |               |     |           |   |        |       

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

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

7.     RELATED PARTY TRANSACTIONS

The Company entered into a consulting agreement, dated October 4, 2000,
with Sugarman Company, LLP, a company in which Randy Sugarman is the managing
partner and has an 80% ownership interest. Under the agreement and in
accordance with the terms of the Companys restructuring in fiscal year 2001,
Mr. Sugarman was engaged by the Company to evaluate its financial position and
operations and make recommendations to senior management regarding changes that
need to be made to improve profitability and liquidity. Mr. Sugarmans services
were performed on an hourly basis, plus out-of-pocket expenses, and the Company
was billed accordingly. From May 16, 2001 until August 9, 2002, Mr. Sugarman
served as Interim Chief Executive Officer and President of the Company. Mr.
Sugarman ceased to be an officer of the Company on August 9, 2002, in
connection with the conclusion of the Companys engagement of Sugarman Company
LLP. The Company incurred consulting fees of $77,000 and $211,000, plus
expenses of $17,000 and $47,000 respectively, for the three-month and six-month
periods ended September 30, 2002 under the consulting agreement. The Company
incurred consulting fees of $86,000 and $202,000 plus expenses of $18,000 and
$40,000 respectively, for consulting services under the agreement during the
three months and six months ended September 30, 2001.

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A group of entities affiliated with Centre Partners Management LLC (the
Centre Entities) are among the Companys largest shareholders. The Centre
Entities hold a seat on the Companys Board of Directors. In addition, the
Centre Entities, and other institutional lenders who are also major
shareholders as a result of a previously disclosed restructuring transaction
(See Part I, Item 1, Restructure Transaction in the Companys Annual Report on
Form 10-K/A Amendment Number 2 for the fiscal year ended March 31,2002 (the
2002 10-K)), were party to a previously disclosed debt restructuring (See Note
3 to the Companys financial statements included in the 2002 10-K) and continue
to be the Companys primary lenders. As a result of the share ownership of the
Centre Entities and their representation on the Board of Directors, the Centre
Entities have the ability to influence the operations of the
Company.8.      COMMITMENTS AND CONTINGENCIES

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

9.     NET INCOME PER COMMON SHARE

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

|                                                                                               |  |                    |        |                  |  |               |        |               |  |   |        |  |  |   |        | 
|---------------------------------------------------------------------------------------------- |  | ------------------ | ------ | ---------------- |  | ------------- | ------ | ------------- |  | - | ------ |  |  | - | ------ | 
|                                                                                               |  | Three months ended |        | Six months ended
|                                                                                               |  |                    |        |                 
|                                                                                               |  | September 30,      |        | September 30,    |  | September 30, |        | September 30,
|                                                                                               |  | 2002               |        | 2001             |  | 2002          |        | 2001         
|                                                                                               |  |                    |        |                  |  |               |        |              
|Basic:                                                                                         |  |                    |        |                  |  |               |        |               |  |   |        |  |  |   |        | 
|Net income attributable to common shareholders                                                 |  | $                  | 1,095  |                  |  | $             | 296    |               |  | $ | 1,254  |  |  | $ | 454    | 
|                                                                                               |  |                    |        |                  |  |               |        |               |  |   |        |  |  |   |        | 
|Weighted average common shares outstanding                                                     |  |                    | 70,153 |                  |  |               | 70,153 |               |  |   | 70,153 |  |  |   | 70,150 | 
|                                                                                               |  |                    |        |                  |  |               |        |               |  |   |        |  |  |   |        | 
|Per share amount                                                                               |  | $                  | 0.02   |                  |  | $             | 0.00   |               |  | $ | 0.02   |  |  | $ | 0.01   | 
|                                                                                               |  |                    |        |                  |  |               |        |               |  |   |        |  |  |   |        | 
|Diluted:                                                                                       |  |                    |        |                  |  |               |        |               |  |   |        |  |  |   |        | 
|Net income attributable to common shareholders                                                 |  | $                  | 1,095  |                  |  | $             | 296    |               |  | $ | 1,254  |  |  | $ | 454    | 
|                                                                                               |  |                    |        |                  |  |               |        |               |  |   |        |  |  |   |        | 
|Weighted average common shares outstanding                                                     |  |                    | 70,153 |                  |  |               | 70,153 |               |  |   | 70,153 |  |  |   | 70,150 | 
|Shares assumed issued upon exercise of dilutive stock
options using the treasury stock method  |  |                    | 687    |                  |  |               | 235    |               |  |   | 753    |  |  |   | 232    | 
|Shares assumed issued upon exercise of dilutive stock
warrants using the treasury stock method |  |                    | 1,113  |                  |  |               | 506    |               |  |   | 1,233  |  |  |   | 253    | 
|                                                                                               |  |                    |        |                  |  |               |        |               |  |   |        |  |  |   |        | 
|Total                                                                                          |  |                    | 71,953 |                  |  |               | 70,894 |               |  |   | 72,139 |  |  |   | 70,635 | 
|                                                                                               |  |                    |        |                  |  |               |        |               |  |   |        |  |  |   |        | 
|Per share amount                                                                               |  | $                  | 0.02   |                  |  | $             | 0.00   |               |  | $ | 0.02   |  |  | $ | 0.01   | 
|                                                                                               |  |                    |        |                  |  |               |        |               |  |   |        |  |  |   |        | 

The number of shares of stock assumed to have been bought back by the
Company for computational purposes under the treasury stock method has been
calculated by dividing gross proceeds from all weighted average stock options
outstanding during the period, as if exercised, by the average common share
market price during the period. The average common share market price used in
the above calculation was $0.56 and $0.65, for the three and six month periods
ended September 30, 2002 and $0.33 and $0.26, for the three and six month
periods ended September 30, 2001, respectively.

Options to purchase 1,552,077 shares of common stock for the three month
period ended September 30, 2002 and 1,551,877 shares of common stock for the
six month period ended September 30, 2002, and warrants to purchase 3,246,164
shares of

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common stock were outstanding as of September 30, 2002 but were not included in
the computation of the 2002 diluted EPS because the exercise price of the
options and warrants was greater than the average market value of the common
shares.

Options to purchase 2,291,200 shares of common stock and warrants to
purchase 3,246,164 shares of common stock were outstanding as of September 30,
2001 but were not included in the computation of the 2001 diluted EPS because
the exercise price of the options and warrants was greater than the average
market value of the common shares.

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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/A for the fiscal year
ended March 31, 2002.

RESULTS OF OPERATIONS

Three Months Ended September 30, 2002 and 2001:

Net Revenues: Revenues increased $0.1 million, or 0.6%, to $17.0 million
for the three months ended September 30, 2002 as compared to $16.9 million for
the three months ended September 30, 2001. Sales to U.S. military customers for
the three months ended September 30, 2002, increased by $0.5 million, or 5.5%,
to $8.8 million. The rise in U.S. military sales is due to increased levels of
weapon simulation training with the U.S. Navy. Sales to U.S. law enforcement
customers for the three months ended September 30, 2002 decreased $0.1 million,
or 5.9% to $1.8 million. Sales to international customers for the three months
ended September 30, 2002 decreased $0.2 million, or 3.4%, to $6.3 million
reflecting reduced customer contract delivery and installation schedules for
the current three-month period.

Cost of Revenues: Cost of revenues decreased $1.0 million, or 8.2%, to
$11.2 million for the three months ended September 30, 2002 as compared to
$12.2 million for the three months ended September 30, 2001. As a percentage of
revenues, cost of revenues for the three months ended September 30, 2002
decreased to 65.9% as compared to 72.3% for the three months ended September
30, 2001. The decrease in cost of revenues as a percentage of revenues is
attributable primarily to a better mix of higher margin revenues.

Gross Margin: As a result of the foregoing, gross margin increased $1.1
million, or 23.8%, to $5.8 million, or 34.1% of revenues, for the three months
ended September 30, 2002 as compared to $4.7 million, or 27.7% of revenues, for
the three months ended September 30, 2002.

Total Operating Expenses: Total operating expenses decreased $0.1 million,
or 2.6%, for the three months ended September 30, 2002. As a percentage of
revenues, total operating expenses decreased to 23.3% for the three months
ended September 30, 2002 as compared to 24.1% for the three months ended
September 30, 2001. The decrease in operating expenses is primarily due to a
reduction in depreciation and amortization costs partially offset by an
increase in research and development plus bid & proposal activities.

Operating Income: As a result of the foregoing, operating income increased
$1.2 million to $1.8 million, or 10.8% of revenues, for the three months ended
September 30, 2002 as compared to $0.6 million or 3.6% of revenues, for the
three months ended September 30, 2001.

Other Income (Expense), net: Net interest expense, which included $54,000
in amortization of deferred financing costs and was reduced by $878,000 in
amortization of debt discount, totaled $44,000, or 0.3% of revenues for the
three months ended September 30, 2002. Net interest expense totaled $1,000, or
0.0% of revenues for the three months ended September 30, 2001, which included
$13,000 in amortization of deferred financing costs and was reduced by $878,000
in amortization of debt discount.

Provision for Income Taxes: The effective tax rate increased to (34.0%) of
income before taxes for the three months ended September 30, 2002 as compared
to (33.9%) for the three months ended September 30, 2001. The Company has not
recorded a tax benefit for the majority of its deferred tax assets due to
uncertainty of future realization.

Net Income: As a result of the foregoing, net income increased $0.8
million to $1.2 million, or 6.9% of revenues for the three months ended
September 30, 2002 as compared to $0.4 million, or 2.1% of revenues for the
three months ended September 30, 2001.

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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 $74,000 for the three
months ended September 30, 2002 as compared to $67,000 for the three months
ended September 30, 2001 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 $0.8 million to $1.1 million ($0.02 per share) or
6.4% of revenue. This compares to net income of $0.3 million ($0.00 per share)
or 1.8% of revenue for the three months ended September 30, 2001.

Six Months Ended September 30, 2002 and 2001:

Net Revenues: Revenues increased $1.7 million, or 5.8%, to $30.2 million
for the six months ended September 30, 2002 as compared to $28.5 million for
the six months ended September 30, 2001. Sales to U.S. military customers for
the six months ended September 30, 2002, increased by $2.2 million, or 16.0%,
to $16.3 million reflecting increased revenue from the U.S. Navy and U.S. Air
Force. Sales to U.S. law enforcement customers for the six months ended
September 30, 2002 decreased $0.5, million, or 14.4% to $3.0 million. Sales to
international customers for the six months ended September 30, 2002 increased
$83 thousand, or 0.8%, to $10.8 million.

Cost of Revenues: Cost of revenues increased $1.2 million, or 6.1%, to
$20.6 million for the six months ended September 30, 2002 as compared to $19.4
million for the six months ended September 30, 2001. As a percentage of
revenues, cost of revenues remained fairly constant at 68.1% for the six months
ended September 30, 2002 as compared to 67.9% for the six months ended
September 30, 2001.

Gross Margin: As a result of the foregoing, gross margin increased $0.5
million, or 5.1%, to $9.6 million, or 31.9% of revenues, for the six months
ended September 30, 2002 as compared to $9.2 million, or 32.1% of revenues, for
the six months ended September 30, 2001.

Total Operating Expenses: Total operating expenses decreased $0.7 million,
or 8.5%, for the six months ended September 30, 2002. As a percentage of
revenues, total operating expenses decreased to 24.9% for the six months ended
September 30, 2002 as compared to 28.8% for the six months ended September 30,
2001. Selling, general and administrative (SG&A) expenses decreased $0.2
million, or 4.3%. The decrease in total operating expenses is primarily due to
reductions in SG&A costs and depreciation and amortization on a year to date
basis compared to the previous year.

Operating Income: As a result of the foregoing, operating income increased
$1.2 million to $2.1 million, or 7.0% of revenues, for the six months ended
September 30, 2002 as compared to $1.0 million or 3.3% of revenues, for the six
months ended September 30, 2001.

Other Income (Expense), net: Net interest expense which included $108,000
in amortization of deferred financing costs and was reduced by $1,756,000 in
amortization of debt discount totaled $60,000, or (0.2%) of revenues for the
six months ended September 30, 2002. Net interest income totaled $144,000, or
0.5% of revenues for the six months ended September 30, 2001 which included
$25,000 in amortization of deferred financing costs and was reduced by
$1,757,000 in amortization of debt discount.

Provision for Income Taxes: The effective tax rate decreased to 34.0% of
income before taxes for the six months ended September 30, 2002 as compared to
45.1% of income before taxes for the six months ended September 30, 2001. The
Company has not recorded a tax benefit for the majority of its deferred tax
assets due to uncertainty of future realization.

Net Income: As a result of the foregoing, net income increased $0.8
million to $1.4 million, or 4.6% of revenues for the six months ended September
30, 2002 as compared to $0.6 million, or 2.1% of revenues for the six months
ended September 30, 2001.

Accretion of Preferred Stock: The expense for the accretion of the
preferred stock issued in August 2000 was a total of $146,000 for the six
months ended September 30, 2002 as compared to $132,000 for the six months
ended

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September 30, 2001 for the preferred stock issued in November, 1998 and
exchanged in August 2000 for new preferred stock.

Net Income Applicable to Common Shareholders: Net income applicable to
common shareholders increased $0.8 million to $1.3 million ($0.02 per share) or
4.2% of revenue for the six months ended September 30, 2002. This compares to
net income of $0.5 million ($0.01 per share) or 1.6% of revenue for the six
months ended September 30, 2001.

ANALYSIS OF BACKLOG

Backlog represents customer orders that have been contracted for future
delivery. Accordingly, these orders have not yet been recognized as revenue,
but represent future revenue. As of September 30, 2002, the backlog increased
to $67.4 million, or a 47.2% increase compared to $45.8 million as of September
30, 2001. The backlog as of September 30, 2002 is comprised of $45.4 million
from international customers, $1.3 million from Simtrans Canadian customers
and $20.7 million from U.S. military and law enforcement customers.
Approximately $28.1 million of the contracted orders are scheduled for delivery
during the remainder of fiscal year 2003.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2002, the Company had negative working capital of
$21.0 million compared to positive $20.1 million as of March 31, 2002. The net
$41.1 million decrease in working capital is primarily the result of
reclassification of $41.9 million in long-term debt to current liabilities due
to the debts maturity date of September 30, 2003. The Company does, however,
have an option and currently expects to extend the maturity date for $40.0
million of the reclassified debt to September 30, 2004.

The Company had a net increase in cash and cash equivalents of $0.2
million for the six months ended September 30, 2002 compared to a net increase
of $0.9 million for the six months ended September 30, 2001. For the period
ended September 30, 2002, the Companys operating activities generated cash of
approximately $0.6 million. Cash flow from operations increased primarily due
to a tax refund of approximately $4.9 million and a reduction of inventory
partially offset by a reduction in accounts payable and accrued liabilities,
and an increase in accounts receivable.

Investing activities reduced cash by approximately $500,000 for the six
months ended September 30, 2002 primarily due to a $1.0 million acquisition of
property and equipment partially offset by $500,000 reduction in restricted
cash.

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 September 2003 unless otherwise extended at the option of the
Company.

CONCENTRATION OF CREDIT RISK

At September 30, 2002, approximately $8.3 million in accounts receivable
or 66.5% of total accounts receivable was due from the Companys top ten
customers, of which none was secured by performance letters of credit. Each of
these top 10 customers are either governmental entities or prime contractors to
governmental agencies.

CRITICAL ACCOUNTING POLICIES

In December, 2001, the SEC issued Financial Reporting Release No. 60,
Cautionary Advice Regarding Disclosure About Critical Accounting Policies (FRR
60), suggesting companies provide additional disclosure and commentary on those
accounting polices considered most critical. FRR 60 considers an accounting
policy to be critical if it is important to the Companys financial condition
and results, and requires significant judgment and estimates on the part of
management in its application. Refer to footnote 2 in the disclosures to the
Companys financial statements included in Form 10-K/A for the fiscal year
ended March 31, 2002 for a complete listing of significant accounting policies.
The Company believes the following represents its critical accounting policies
as

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contemplated by FRR 60.

Revenue Recognition

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

Impairment of Long-Lived Assets

Management periodically assesses the recoverability of the Companys
long-lived assets whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In assessing the
recoverability of long-lived assets management assesses the historical cash
flow associated with that asset in conjunction with undiscounted future cash
flow projections. The undiscounted future cash flow analysis is based on
numerous assumptions including, but not limited to, sales history and future
estimated sales demand. In the event the undiscounted cash flow analysis does
not support the underlying assets carrying value, the asset is written-down to
its estimated fair market value.

Inventory Reserve

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

Contract Cost Provision

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

Warranty Cost Provision

Management periodically estimates expected warranty costs under the
Companys standard product warranty. In determining the estimate, management
analyzes the relationship of historical standard warranty costs incurred on
historical sales and the underlying product mix comprising the historical
sales. Management, in turn, utilizes this historical information to estimate
expected warranty costs on recent sales within the standard warranty time
frame. Due to the inherent limitations in the estimation process, the potential
for product defects and other unforeseen circumstances by the Company, the
possibility exists that the recorded warranty provision will be inadequate to

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offset actual warranty costs incurred resulting in additional charges against
income. Also, actual warranty costs may be significantly lower than expected
resulting in the reduction of the Companys warranty provision generating an
addition to income in future periods.

COMMITMENTS AND OTHER CONTRACTURAL OBLIGATIONS

Disclosure of Commitments and Other Contractural Obligations
September 30, 2002
(amounts in thousands)

|                             |  |       |        |        |  |             |        |             |  |         |       |       |  |   |       |  |  |   |     | 
|---------------------------- |  | ----- | ------ | ------ |  | ----------- | ------ | ----------- |  | ------- | ----- | ----- |  | - | ----- |  |  | - | --- | 
|                             |  |       |        |        |  | Less than   |        | Within      |  | Within  |       | After
|                             |  | Total |        | 1 year |  | 1 - 3 years |        | 4 - 5 years |  | 5 years
|                             |  |       |        |        |  |             |        |             |  |        
|Long-term debt              
|Working capital borrowings   |  | $     | 130    |        |  | $           | 130    |             |  | $       | 0     |       |  | $ | 0     |  |  | $ | 0   | 
|Long-term debt Senior        |  |       | 12,000 |        |  |             | 12,000 |             |  |         | 0     |       |  |   | 0     |  |  |   | 0   | 
|Long-term debt Junior        |  |       | 28,010 |        |  |             | 28,010 |             |  |         | 0     |       |  |   | 0     |  |  |   | 0   | 
|Debt discount *              |  |       | 1,756  |        |  |             | 1,756  |             |  |         | 0     |       |  |   | 0     |  |  |   | 0   | 
|Capital lease obligations    |  |       | 191    |        |  |             | 46     |             |  |         | 107   |       |  |   | 38    |  |  |   | 0   | 
|Other                        |  |       | 0      |        |  |             | 0      |             |  |         | 0     |       |  |   | 0     |  |  |   | 0   | 
|Operating lease obligations  |  |       | 3,983  |        |  |             | 885    |             |  |         | 1,584 |       |  |   | 1,374 |  |  |   | 140 | 
|                            
|Acquisition earn-out payment |  |       | 0      |        |  |             | 0      |             |  |         | 0     |       |  |   | 0     |  |  |   | 0   | 

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

RELATED PARTIES AND TRANSACTIONS

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

The Company entered into a consulting agreement, dated October 4, 2000,
with Sugarman Company, LLP, a company in which Randy Sugarman is the managing
partner and has an 80% ownership interest. Under the agreement and in
accordance with the terms of the Companys restructuring in fiscal year 2001,
Mr. Sugarman was engaged by the Company to evaluate its financial position and
operations and make recommendations to senior management regarding changes that
need to be made to improve profitability and liquidity. Mr. Sugarmans services
were performed on an hourly basis, plus out-of-pocket expenses, and the Company
was billed accordingly. From May 16, 2001 until August 9, 2002, Mr. Sugarman
served as Interim Chief Executive Officer and President of the Company. Mr.
Sugarman ceased to be an officer of the Company on August 9, 2002, in
connection with the conclusion of the Companys engagement of Sugarman Company
LLP. The Company incurred consulting fees of $77,000 and $211,000, plus
expenses of $17,000 and $47,000 respectively, for the three-month and six-month
periods ended September 30, 2002 under the consulting agreement. The Company
incurred consulting fees of $86,000 and $202,000 plus expenses of $18,000 and
$40,000 respectively, for consulting services under the agreement during the
three months and six months ended September 30, 2001.

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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.




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.

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

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

Changes in internal controls or other factors

None.




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.

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




ITEM 6. EXHIBITS AND REPORTS ON FORM 10-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

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|    |  |                                                                                                                                                                
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  | 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, 2002.                                                                                 




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: November 6, 2002



| | FIREARMS TRAINING SYSTEMS, INC.
(Registrant)
| | --------------------------------------------



| | /S/ Ronavan Mohling
Ronavan Mohling
Chairman of the Board of Directors and
Chief Executive Officer
| | --------------------------------------------------------------------------------------------------



| | /S/ John A. Morelli
John A. Morelli
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
| | ----------------------------------------------------------------------------------------------------------------------

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

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

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

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

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

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



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

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



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

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

Date: November 6, 2002



| | /s/ Ronavan Mohling
Ronavan Mohling
Chief Executive Officer
| | -----------------------------------------------------------

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

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

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

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

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

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



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

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



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

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

Date: November 6, 2002



| | /s/ John A. Morelli
John A. Morelli
Chief Financial Officer
| | -----------------------------------------------------------

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