##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 0-23585
 
 SM&A
  California
(State or other jurisdiction of incorporation or organization)
    
    33-0080929
(I.R.S. Employer Identification No.)4695 MacArthur Court, 8th Floor, Newport Beach, California
(Address of principal executive offices)
    
    92660
(Zip Code)
 (949) 975-1550
 Not applicable
  þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
  o þ
  Common Stock, no par value18,707,209 shares outstanding as of June 30, 2006




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##### 



SM&A
 INDEX
 PagePART I. FINANCIAL INFORMATIONCautionary Statement Related to Forward Looking Statements
    
    
    3How to Obtain SM&A SEC Filings
    
    
    3Item 1.
    
    Financial Statements:Condensed Consolidated Balance Sheets as of June 30, 2006 (unaudited) and December 31, 2005
    
    
    4Condensed Consolidated Statements of Income for the three and six months ended June 30, 2006 and 2005 (unaudited)
    
    
    5Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2006 and 2005 (unaudited)
    
    
    6Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    17Item 4.
    
    Controls and Procedures
    
    
    17PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    18Item 1A.
    
    Risk Factors
    
    
    18Item 2.
    
    Changes in Securities, Use of Proceeds and Issuer Purchase of Equity Securities
    
    
    20Item 3.
    
    Defaults Upon Senior Securities
    
    
    20Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    20Item 5.
    
    Other Information
    
    
    21Item 6.
    
    Exhibits
    
    
    22Signatures
    
    
    
    
    24EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32
  2




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CAUTIONARY STATEMENT RELATED TO FORWARD LOOKING STATEMENTS
 This Quarterly Report on Form 10-Q includes certain forward-looking statements as defined
within Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, relating to revenue, revenue composition, earnings, projected
plans, performance, contract procurement, demand trends, future expense levels, trends in average
headcount and gross margins, and the level of expected capital expenditures. Such forward-looking
statements are based on the beliefs of, estimates made by, and information currently available to
SM&A management and are subject to certain risks, uncertainties and assumptions. Any statements
contained herein (including without limitation statements to the effect that the Company or
management estimates, expects, anticipates, plans, believes, projects, continues,
may, will, could, or would or statements concerning potential or opportunity or
variations thereof or comparable terminology or the negative thereof) that are not statements of
historical fact should be construed as forward-looking statements. The actual results of SM&A may
vary materially from those expected or anticipated in these forward-looking statements. The
realization of such forward-looking statements may be impacted by certain important unanticipated
factors including those discussed in Risk Factors under Item 1A, and Managements Discussion and
Analysis of Financial Condition and Results of Operations, at pages 12-16. Because of these and
other factors that may affect SM&As operating results, past performance should not be considered
as an indicator of future performance, and investors should not use historical results to
anticipate results or trends in future periods. The Company undertakes no obligation to publicly
release the results of any revisions to these forward-looking statements that may be made to
reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated
events. Readers should carefully review the risk factors described in this and other documents
that SM&A files from time to time with the Securities and Exchange Commission (SEC), including
subsequent Current Reports on Form 8-K , Quarterly Reports on Form 10-Q and Annual Reports on Form
10-K.
 
 HOW TO OBTAIN SM&A SEC FILINGS
 All reports filed by SM&A with the SEC are available free of charge via EDGAR through the SEC
website at www.sec.gov. In addition, the public may read and copy materials filed by the Company
with the SEC at the SECs public reference room located at 450 Fifth St., N.W., Washington, D.C.
20549. SM&A also provides copies of its Forms 8-K, 10-K, 10-Q, Proxy and Annual Report at no charge
to investors upon request and makes electronic copies of its most recently filed reports available
through its website at www.smawins.com as soon as reasonably practicable after filing such material
with the SEC.
 3




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SM&A
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (in thousands)
 As RestatedJune 30,
    
    
    December 31,2006
    
    
    2005(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    10,728
    
    
    $
    19,103Investments
    
    
    5,050
    
    
    
    4,950Accounts receivable, net
    
    
    14,940
    
    
    
    10,435Prepaid expenses and other current assets
    
    
    698
    
    
    
    380Prepaid income taxes
    
    
    
    
    
    
    924Deferred income taxes
    
    
    411
    
    
    
    319Total current assets
    
    
    31,827
    
    
    
    36,111Fixed assets, net
    
    
    3,309
    
    
    
    2,571Other assets
    
    
    53
    
    
    
    60$
    35,189
    
    
    $
    38,742LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    702
    
    
    $
    762Accrued compensation and related benefits
    
    
    2,413
    
    
    
    2,129Income taxes payable
    
    
    368
    
    
    
    Net liabilities of discontinued operations
    
    
    201
    
    
    
    396Total current liabilities
    
    
    3,684
    
    
    
    3,287Deferred income taxes
    
    
    
    
    
    
    56Other liabilities
    
    
    552
    
    
    
    539Total liabilities
    
    
    4,236
    
    
    
    3,882Commitments and contingenciesShareholders equity:Preferred stock
    
    
    
    
    
    
    Common stock, no par value
    
    
    39,760
    
    
    
    46,126Accumulated deficit
    
    
    (8,807
    )
    
    
    (11,266
    )Total shareholders equity
    
    
    30,953
    
    
    
    34,860$
    35,189
    
    
    $
    38,742
  4




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SM&A
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 (in thousands, except per share data)
 (UNAUDITED)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,As Restated
    
    
    
    
    
    
    As Restated2006
    
    
    2005
    
    
    2006
    
    
    2005Revenue
    
    $
    18,277
    
    
    $
    20,261
    
    
    $
    35,992
    
    
    $
    40,506Cost of revenue
    
    
    10,268
    
    
    
    11,583
    
    
    
    20,842
    
    
    
    23,106Gross margin
    
    
    8,009
    
    
    
    8,678
    
    
    
    15,150
    
    
    
    17,400Selling, general and administrative expenses
    
    
    6,086
    
    
    
    6,783
    
    
    
    11,414
    
    
    
    11,803Operating income
    
    
    1,923
    
    
    
    1,895
    
    
    
    3,736
    
    
    
    5,597Interest income, net
    
    
    252
    
    
    
    118
    
    
    
    444
    
    
    
    203Income before income taxes
    
    
    2,175
    
    
    
    2,013
    
    
    
    4,180
    
    
    
    5,800Income tax expense
    
    
    895
    
    
    
    823
    
    
    
    1,721
    
    
    
    2,073Net income
    
    $
    1,280
    
    
    $
    1,190
    
    
    $
    2,459
    
    
    $
    3,727Net income per share:Basic
    
    $
    0.07
    
    
    $
    0.06
    
    
    $
    0.13
    
    
    $
    0.18Diluted
    
    $
    0.07
    
    
    $
    0.06
    
    
    $
    0.12
    
    
    $
    0.18Shares used in calculating net income per
share:Basic
    
    
    19,170
    
    
    
    20,370
    
    
    
    19,492
    
    
    
    20,317Diluted
    
    
    19,372
    
    
    
    20,879
    
    
    
    19,706
    
    
    
    20,980
  5




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SM&A
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands)
 (UNAUDITED)
 Six Months EndedJune 30,As Restated2006
    
    
    2005CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    2,459
    
    
    $
    3,727Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    377
    
    
    
    278Deferred income taxes
    
    
    (148
    )
    
    
    244Excess tax benefits from stock-based compensation
    
    
    
    
    
    
    1,603Stock-based compensation expense
    
    
    629
    
    
    
    1,346Changes in operating assets and liabilities:Accounts receivable
    
    
    (4,505
    )
    
    
    (2,482
    )Prepaid income taxes
    
    
    924
    
    
    
    (732
    )Prepaid expenses and other assets
    
    
    (311
    )
    
    
    (98
    )Accounts payable
    
    
    (60
    )
    
    
    (641
    )Accrued compensation and related benefits
    
    
    284
    
    
    
    2,809Income taxes payable
    
    
    368
    
    
    
    (565
    )Other liabilities
    
    
    13
    
    
    
    124Net cash provided by operating activities
    
    
    30
    
    
    
    5,613CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of investments
    
    
    (100
    )
    
    
    Purchases of fixed assets
    
    
    (1,115
    )
    
    
    (1,121
    )Net cash used in investing activities
    
    
    (1,215
    )
    
    
    (1,121
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from issuance of common stock
    
    
    264
    
    
    
    1,413Excess tax benefits from stock-based compensation
    
    
    3
    
    
    
    Payment for repurchase of shares
    
    
    (7,262
    )
    
    
    (3,481
    )Net cash used in financing activities
    
    
    (6,995
    )
    
    
    (2,068
    )Net increase in cash and cash equivalents from continued operations
    
    
    (8,180
    )
    
    
    2,424Net cash used in discontinued operations by operating activities
    
    
    (195
    )
    
    
    (271
    )Net increase in cash and cash equivalents
    
    
    (8,375
    )
    
    
    2,153Cash and cash equivalents at beginning of period
    
    
    19,103
    
    
    
    22,148Cash and cash equivalents at end of period
    
    $
    10,728
    
    
    $
    24,301
  6




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SM&A
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 For the Three and Six Months Ended June 30, 2006 and 2005
 (UNAUDITED)
 Note 1. Basis of Presentation and Significant Accounting Policies
    Recent Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes. Accounting
for Income Taxes.
 Significant Accounting Policies
 Revenue Recognition.
 Cash and Cash Equivalents.
 Investments.
 Stock-Based Compensation Accounting for Stock Issued to Employees Accounting for Stock-Based Compensation
 7




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Concentrations of Credit Risk and Major Customers
  Note 2. Restatement of Financial Statements
  Note 3. Net Income Per Share
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Denominator for basic income per share:weighted average shares outstanding
during the period
    
    
    19,170
    
    
    
    20,370
    
    
    
    19,492
    
    
    
    20,317Incremental shares attributable to
dilutive outstanding stock options
    
    
    202
    
    
    
    509
    
    
    
    214
    
    
    
    663Denominator for diluted income per share:
    
    
    19,372
    
    
    
    20,879
    
    
    
    19,706
    
    
    
    20,980
  8




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Note 4. Investments in Marketable Securities
  Note 5. Stock-Based Compensation
 Accounting
for Stock-Based Compensation  Transition and Disclosures
 Three Months Ended
    
    
    Six Months EndedJune 30, 2005
    
    
    June 30, 2005Net income, as reported
    
    $
    1,190
    
    
    $
    3,727Stock-based compensation expense related to
share buyback of $2.1 million and $2.2
million, respectively, net of tax
    
    
    1,254
    
    
    
    1,346Deduct: Total stock-based employee
compensation expense determined under fair
value based method for all awards
    
    
    (1,734
    )
    
    
    (2,515
    )Tax benefit
    
    
    711
    
    
    
    1,031Total stock-based employee compensation expense
    
    
    (1,023
    )
    
    
    (1,484
    )Pro forma net income
    
    $
    1,421
    
    
    $
    3,589Net income per share:Basic  as reported
    
    $
    0.06
    
    
    $
    0.18Basic  pro forma
    
    $
    0.07
    
    
    $
    0.18Diluted  as reported
    
    $
    0.06
    
    
    $
    0.18Diluted  pro forma
    
    $
    0.07
    
    
    $
    0.17
   Three Months Ended June 30,
    
    Six Months Ended June 30,2006
    
    2005
    
    2006
    
    2005Stock price volatility
    
    
    82.09
    %
    
    
    87.56
    %
    
    
    82.49
    %
    
    
    88.41
    %Risk-free interest rate
    
    
    4.95
    %
    
    
    3.69
    %
    
    
    4.88
    %
    
    
    3.83
    %Expected life (in years)
    
    
    3.13
    
    
    
    3.05
    
    
    
    3.11
    
    
    
    3.15Forfeiture rate
    
    
    12.18
    %
    
    
    12.83
    %
    
    
    12.29
    %
    
    
    11.86
    %Stock dividend yield
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AWeighted-average fair value per option granted
    
    $
    3.59
    
    
    $
    5.13
    
    
    $
    4.28
    
    
    $
    5.02
 9




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Weighted-
    
    
    Weighted-Average
    
    
    AggregateAverage
    
    
    Fair Value of
    
    
    IntrinsicShares
    
    
    Exercise Price
    
    
    Options Granted
    
    
    ValueOutstanding at of December 31, 2005
    
    
    1,538,898
    
    
    $
    7.56Granted
    
    
    237,227
    
    
    
    7.53
    
    
    $
    4.28Exercised
    
    
    (6,750
    )
    
    
    1.49Cancelled, Forfeited or Expired
    
    
    (37,500
    )
    
    
    9.31Outstanding at June 30, 2006
    
    
    1,731,875
    
    
    
    7.54
    
    
    
    
    
    
    $
    1,257,000Exercisable at June 30, 2006
    
    
    1,036,686
    
    
    $
    7.40
    
    
    
    
    
    
    $
    1,207,000
  Note 6. Revolving Line of Credit
 th
 Note 7. Income Taxes
  Note 8. Stockholders Equity
   Note 9. Related Parties
  10




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Note 10. Discontinued Operations
  Note 11. Commitment and Contingencies
  11




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Results of Operations
  Three Months Ended June 30,2006
    
    2005
    
    Change$
    
    %
    
    $
    
    %
    
    $
    
    %Revenue
    
    $
    18.3
    
    
    
    100.0
    
    
    $
    20.3
    
    
    
    100.0
    
    
    ($
    2.0
    )
    
    
    (9.9
    )Cost of revenue
    
    
    10.3
    
    
    
    56.3
    
    
    
    11.6
    
    
    
    57.1
    
    
    
    (1.3
    )
    
    
    (11.2
    )Gross margin
    
    
    8.0
    
    
    
    43.7
    
    
    
    8.7
    
    
    
    42.9
    
    
    
    (0.7
    )
    
    
    (8.0
    )Selling, general and administrative expenses
    
    
    6.1
    
    
    
    33.3
    
    
    
    6.8
    
    
    
    33.5
    
    
    
    (0.7
    )
    
    
    (10.3
    )Operating income
    
    
    1.9
    
    
    
    10.4
    
    
    
    1.9
    
    
    
    9.4
    
    
    
    0.0
    
    
    
    0.0Interest income
    
    
    0.3
    
    
    
    1.6
    
    
    
    0.1
    
    
    
    0.5
    
    
    
    0.2
    
    
    
    200.0Income tax expense
    
    
    0.9
    
    
    
    4.9
    
    
    
    0.8
    
    
    
    3.9
    
    
    
    0.1
    
    
    
    12.5Net income
    
    $
    1.3
    
    
    
    7.1
    
    
    $
    1.2
    
    
    
    5.9
    
    
    $
    0.1
    
    
    
    8.3
 Three Months Ended June 30, 2006 Compared to Three Months Ended June 30, 2005
 Revenue.
  Gross Margin.
 Selling, General and Administrative Expenses.
 12




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations (continued)
  Operating Income
 Income Tax Expense
 13




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations (continued)
 Results of Operations
  Six Months Ended June 30,2006
    
    2005
    
    Change$
    
    %
    
    $
    
    %
    
    $
    
    %Revenue
    
    $
    36.0
    
    
    
    100.0
    
    
    $
    40.5
    
    
    
    100.0
    
    
    
    ($4.5
    )
    
    
    (11.1
    )Cost of revenue
    
    
    20.8
    
    
    
    57.8
    
    
    
    23.1
    
    
    
    57.0
    
    
    
    (2.3
    )
    
    
    (10.0
    )Gross margin
    
    
    15.2
    
    
    
    42.2
    
    
    
    17.4
    
    
    
    43.0
    
    
    
    (2.2
    )
    
    
    (12.6
    )Selling, general and administrative expenses
    
    
    11.4
    
    
    
    31.7
    
    
    
    11.8
    
    
    
    29.1
    
    
    
    (0.4
    )
    
    
    (3.4
    )Operating income
    
    
    3.7
    
    
    
    10.3
    
    
    
    5.6
    
    
    
    13.8
    
    
    
    (1.9
    )
    
    
    (33.9
    )Interest income
    
    
    0.4
    
    
    
    1.1
    
    
    
    0.2
    
    
    
    0.5
    
    
    
    0.2
    
    
    
    100.0Income tax expense
    
    
    1.7
    
    
    
    4.7
    
    
    
    2.1
    
    
    
    5.2
    
    
    
    (0.4
    )
    
    
    (19.0
    )Net income
    
    $
    2.5
    
    
    
    6.9
    
    
    $
    3.7
    
    
    
    9.1
    
    
    
    ($1.2
    )
    
    
    (32.4
    )
 Six Months Ended June 30, 2006 Compared to Six Months Ended June 30, 2005
 Revenue.
  Gross Margin.
 Selling, General and Administrative Expenses.
 14




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations (continued)
  Operating Income
 Income Tax Expense
 15




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations (continued)
 Capital Resources and Liquidity
     th
  16




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Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Controls
  17




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PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
 ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS
 In addition to the other information in this Quarterly Report on Form 10-Q , the following
factors should be considered carefully in evaluating our business and prospects.
 Our business depends substantially on the defense industry.
  
    
    Loss of political support for current or increased levels of spending;
    
    Changes of presidential administration, particularly changes from one political party to
another, that typically result in a mass reordering of priorities that reduce new proposal
activity for up to a year;
    
    Threat scenarios evolving away from global conflicts to regional conflicts;
    
    Spending for ongoing operations, such as the war on terrorism, the occupation of Iraq,
downward pressure on spending for procurement of new systems and research and development
spending; and
    
    Cancellation of programs or emphasis on government shifting programs.
  We rely on a relatively limited number of clients.
  The markets in which we operate are highly competitive.
  18




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Item 1A. Risk Factors (continued)
 We rely heavily upon our key senior management personnel and our ability to recruit and maintain
skilled professionals.
   Quarterly results may fluctuate.
  Our stock price is subject to significant volatility.
  
    
    Quarterly fluctuations in results of operations;
    
    Adverse circumstances affecting the introduction, or market acceptance of new services we offer;
    
    Announcements of new services by competitors;
    
    Announcements of poor operating results by us or our competitors;
    
    Loss of key employees;
    
    Changes in the regulatory environment or market conditions affecting the defense and aerospace industry;
    
    Changes in earnings estimates and ratings by analysts;
    
    Lack of market liquidity resulting from a relatively small amount of public stock float;
    
    Changes in generally accepted accounting principles;
    
    Sales of common stock by existing holders; and
    
    The announcement of proposed acquisitions and dispositions.
 We cannot guarantee that future acquisitions, mergers or investments in other companies will be
successful.
  
    
    the diversion of our managements attention from our existing business while evaluating
acquisitions, investments and other prospective business combinations and thereafter while
assimilating the operations and personnel of the new business;
    
    adverse short-term effects on our operating results;
    
    the inability to successfully and rapidly integrate the new businesses, personnel and
products with our existing business, including financial reporting, management and
information technology systems;
    
    higher than anticipated costs of integration;
    
    unforeseen operating difficulties and expenditures;
    
    the need to manage a significantly larger business;
    
    potential dilution to our shareholders to the extent we use our common stock as currency for an acquisition;
 19




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Item 1A.Risk Factors (continued)
 
    
    the assumption of liabilities;
    
    the use of a substantial amount of our available cash to consummate an acquisition;
    
    difficulties inherent in the implementation and application of the provisions of the
Sarbanes-Oxley Act of 2002 to the operations of a privately-held entity acquired by the
Company; and
    
    loss of employees of an acquired business, including employees who may have been
instrumental to the success or growth of that business.
  Principal shareholder has significant control.
  
 Item 2. Changes in Securities, Use of Proceeds and Issuer Purchase of Equity Securities
 Issuer Purchases of Equity Securities
  Total Numberof Shares
    
    ApproximatePurchased as
    
    Dollar Value ofPart of a
    
    Shares ThatTotal Number
    
    Average
    
    Publicly
    
    May Yet Beof Shares
    
    Price Paid
    
    Announced
    
    PurchasedPeriod
    
    Purchased
    
    Per Share
    
    Plan
    
    Under The PlanBeginning balance
    
    
    1,813,166
    
    
    $
    8.10
    
    
    
    1,813,166
    
    
    $
    5,317,099January 1, 2006 to January 31, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,317,099February 1, 2006 to February 28, 2006
    
    
    1,700
    
    
    
    6.93
    
    
    
    1,814,866
    
    
    
    15,305,320March 1, 2006 to March 31, 2006
    
    
    204,100
    
    
    
    6.67
    
    
    
    2,018,966
    
    
    
    13,944,395April 1, 2006 to April 30, 2006
    
    
    199,800
    
    
    
    6.41
    
    
    
    2,218,766
    
    
    
    12,663,859May 1, 2006 to May 31, 2006
    
    
    575,600
    
    
    
    6.21
    
    
    
    2,794,366
    
    
    
    9,092,096June 1, 2006 to June 30, 2006
    
    
    172,700
    
    
    
    6.00
    
    
    
    2,967,066
    
    
    
    8,056,006Total
    
    
    2,967,066
    
    
    $
    7.40
    
    
    
    2,967,066
    
    
    $
    8,056,006
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
 (a)
    
    The Annual Meeting of Shareholders was held on June 6 and June 20, 2006.(b)
    
    Elected all of our Directors:William C. Bowes, J. Christopher Lewis, Dwight L. Hanger, Steven S. Myers, Joseph B.
Reagan, Robert Rodin, John P. Stenbit and Robert J. Untracht.
 20




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##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders (continued)
 (c)(i) Election of eight directors as follows:
 For
    
    WithheldWilliam C. Bowes
    
    
    18,133,906
    
    
    
    711,378J. Christopher Lewis
    
    
    18,435,087
    
    
    
    410,197Dwight L. Hanger
    
    
    18,141,856
    
    
    
    703,428Steven S. Myers
    
    
    18,308,062
    
    
    
    537,222Joseph B. Reagan
    
    
    17,414,409
    
    
    
    1,430,875Robert Rodin
    
    
    18,435,087
    
    
    
    410,197John P. Stenbit
    
    
    18,138,718
    
    
    
    706,566Robert J. Untracht
    
    
    18,141,856
    
    
    
    703,428
 (c)(ii)To approve the amendment to the Amended & Restated Employee Stock Purchase Plan.
 For: 14,986,112
    
    Against: 468,558
    
    Abstain: 14,341Broker Non-Vote: 3,376,273
 (c)(iii) To approve the reincorporation from California to Delaware.
 For: 10,020,626
    
    Against: 5,445,889
    
    Abstain: 2,496Broker Non-Vote: 3,376,273
 
 Item 5. Other Information
   21




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##### Table of Contents



Item 6. Exhibits
 INDEX TO EXHIBITS  (Numbered in accordance with item 601 of Regulation S-K)
 2.1
    
    Stock Purchase and Sale Agreement, by and among the Registrant, Steven Myers Holding Inc. and
L-3 Communications Corporation. (1)2.2
    
    Amendment No.1 to Stock Purchase and Sale Agreement, by and among the Registrant, Steven
Myers Holding Inc. and L-3 Communications Corporation. (2)3.1
    
    Amended and Restated Articles of Incorporation. (3)3.2
    
    Amended and Restated Bylaws of the Registrant. (4)10.1
    
    Amended and Restated 1997 Stock Option Plan and related form of Stock Option Agreement. (5)10.2
    
    Second Amended and Restated Equity Incentive Plan. (6)10.3
    
    Amended and Restated Employee Stock Purchase Plan. (7)10.4
    
    Office Facility Lease. (8)10.5
    
    Amendment No. 1 to Office Facility Lease. (9)10.6
    
    Employment Agreement of Steven S. Myers. (10)10.7
    
    Amendment No. 1 to Employment Agreement of Steven S. Myers. (11)10.8
    
    Amendment No. 2 to Employment Agreement of Steven S. Myers. (12)10.9
    
    Amendment No. 3 to Employment Agreement of Steven S. Myers.(13)10.10
    
    Amendment No. 4 to Employment Agreement of Steven S. Myers. (14)10.11
    
    Amendment No. 5 to Employment Agreement of Steven S. Myers. (15)10.12
    
    Amendment No. 6 to Employment Agreement of Steven S. Myers. (16)10.13
    
    Employment Agreement of Cathy L. Wood. (17)10.14
    
    Amendment No. 1 to Employment Agreement of Cathy L. Wood. (18)10.15
    
    Amendment No. 2 to Employment Agreement of Cathy L. Wood. (19)10.16
    
    Amendment No. 3 to Employment Agreement of Cathy L. Wood. (20)10.17
    
    Amendment No. 4 to Employment Agreement of Cathy L. Wood. (21)10.18
    
    Amendment No. 5 to Employment Agreement of Cathy L. McCarthy (formerly Wood). (22)10.19
    
    Employment Agreement of Bennett C. Beaudry. (23)10.20
    
    Amendment No. 1 to Employment Agreement of Bennett C. Beaudry. (24)10.21
    
    Amendment No. 2 to Employment Agreement of Bennett C. Beaudry. (25)10.22
    
    Amendment No. 3 to Employment Agreement of Bennett C. Beaudry. (26)10.23
    
    Accounts Receivable Loan Agreement dated January 10, 2002, by and between the Registrant and
City National Bank, a national banking association. (27)10.24
    
    Commercial Guaranty dated January 10, 2002, executed by Steven Myers & Associates, Inc. in
favor of City National Bank, a national banking association. (28)10.25
    
    Revolving Loan Agreement dated October 14, 2003, by and between the registrant and City
National Bank, a national association. (29)10.26
    
    Revolving Note dated April 10, 2003, executed by SM&A, in favor of City National Bank. (30)10.27
    
    Renewal of Revolving Note dated April 27, 2004, executed by SM&A, in favor of City National Bank. (31)10.28
    
    Renewal of Revolving Note dated April 29, 2005, executed by SM&A, in favor of City National Bank. (32)
 22




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##### Table of Contents



Item 6. Exhibits (continued)
 10.29
    
    Renewal of Revolving Note dated April 24, 2006, executed by SM&A, in favor of City National Bank. (33)10.30
    
    Consultant Agreement of Bowes Enterprises. (34)10.31
    
    Consultant Agreement of Joseph B. Reagan. (35)21.1
    
    Subsidiaries of the Registrant. (36)31.1
    
    Certificate of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (37)31.2
    
    Certificate of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (38)32
    
    Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(39)
 Footnote #
 
 (1)
    
    Filed on November 27, 2001as Exhibit 10.1 to the registrants Current Report on Form 8-K and
incorporated herein by reference.(2)
    
    Filed on December 14, 2001 as Exhibit 10.1 to the registrants Current Report on Form 8-K and
incorporated herein by reference.(3)
    
    Filed on March 15, 2002 as Exhibit 3.1 to the registrants Annual Report on Form 10-K and
incorporated herein by reference.(4)
    
    Filed on May 3, 2002 as Exhibit 3.2 to the registrants Quarterly Report on Form 10-Q and
incorporated herein by reference.(5)
    
    Filed on April 17, 2001 as Exhibit 10.1 to the registrants Annual Report on Form 10-K and
incorporated herein by reference.(6)
    
    Filed on February 24, 2006, as Exhibit 10.2 to the registrants Annual Report on Form 10-K and
incorporated herein by reference.(7)
    
    Filed on April 29, 2002 as Exhibit C to the registrants Annual Proxy Statement on Form 14A
and incorporated herein by reference.(8)
    
    Filed on November 21, 1997 as Exhibit 10.3 to the registrants Registration Statement
333-4075 on Form S-1 (Registration No. 333-4075) and incorporated herein by reference.(9)
    
    Filed on October 22, 2004 as Exhibit 10.25 to the registrants Quarterly Report on Form
10-Q and incorporated herein by reference.(10)
    
    Filed on April 17, 2001 as Exhibit 10.17 to the registrants Annual Report on Form 10-K and
incorporated herein by reference.(11)
    
    Filed on March 15, 2002 as Exhibit 10.7 to the registrants Annual Report on Form 10-K and
incorporated herein by reference.(12)
    
    Filed on May 3, 2002 as Exhibit 10.8 to the registrants Quarterly Report on Form 10-Q and
incorporated herein by reference.(13)
    
    Filed on March 11, 2003 as Exhibit10.7 to the registrants Annual Report on
Form 10-K and incorporated herein by reference.(14)
    
    Filed on February 6, 2004 as Exhibit 10.8 to the registrants Annual Report on Form 10-K
and incorporated herein by reference.(15)
    
    Filed on October 22, 2004 as Exhibit 10.21 to the registrants Quarterly Report on Form
10-Q and incorporated herein by reference.(16)
    
    Filed on April 21, 2006 as Exhibit 99.1 to the registrants Current Report on Form 8-K and
incorporated herein by reference.(17)
    
    Filed on March 15, 2002 as Exhibit 10.8 to the registrants Annual Report on Form 10-K and
incorporated herein by reference.(18)
    
    Filed on November 4, 2002 as Exhibit 10.10 to the registrants Quarterly Report on Form 10-Q
and incorporated herein by reference.(19)
    
    Filed on March 11, 2003 as Exhibit 10.10 to the registrants Annual Report on Form 10-K and
incorporated herein by reference.(20)
    
    Filed on February 6, 2004 as Exhibit 10.12 to the registrants Annual Report on Form 10-K
and incorporated herein by reference.(21)
    
    Filed on October 22, 2004 as Exhibit 10.22 to the registrants Quarterly Report on Form 10-Q
and incorporated herein by reference.(22)
    
    Filed on April 21, 2006 as Exhibit 99.1 to the registrants Current Report on Form 8-K and
incorporated herein by reference.(23)
    
    Filed on November 4, 2002 as Exhibit 10.11 to the registrants Quarterly Report on Form 10-Q
and incorporated herein by reference(24)
    
    Filed on March 11, 2003 as Exhibit 10.12 to the registrants Annual Report on Form 10-K
and incorporated herein by reference.(25)
    
    Filed on February 6, 2004 as Exhibit 10.15 to the registrants Annual Report on Form 10-K
and incorporated herein by reference.(26)
    
    Filed on October 8, 2004 as Exhibit 99.1 to the registrants current Report on Form 8-K and
incorporated herein by reference.(27)
    
    Filed on January 25, 2002 as Exhibit 99.2 to the registrants Current Report on Form 8-K and
incorporated herein by reference.(28)
    
    Filed on January 25, 2002 as Exhibit 99.3 to the registrants Current Report on Form 8-K and
incorporated herein by reference.(29)
    
    Filed on February 6, 2004 as Exhibit 10.18 to the registrants Annual Report on Form 10-K
and incorporated herein by reference.(30)
    
    Filed on July 31, 2003 as Exhibit 10.16 to the registrants Quarterly Report on Form 10-Q and
incorporated herein by reference.(31)
    
    Filed on July 21, 2004 as Exhibit 10.20 to the registrants Quarterly Report on Form 10-Q
and incorporated herein by reference.(32)
    
    Filed on July 14, 2005 as Exhibit 10.25 to the registrants Quarterly Report on Form 10-Q
and incorporated herein by reference.(33)
    
    Filed on May 15, 2006 as Exhibit 10.29 to the registrants Quarterly Report on Form 10-Q
and incorporated herein by reference.(34)
    
    Filed on October 22, 2004 as Exhibit 10.23 to the registrants Quarterly Report on Form
10-Q and incorporated herein by reference.(35)
    
    Filed on October 22, 2004 as Exhibit 10.24 to the registrants Quarterly Report on Form 10-Q
and incorporated herein by reference.(36)
    
    Filed on March 11, 2003 as Exhibit 21.1 to the registrants Annual Report on Form 10-K and
incorporated herein by reference.(37)
    
    Filed herewith.(38)
    
    Filed herewith.(39)
    
    Filed herewith. 23




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SIGNATURES
  SM&A(Registrant)Dated: August 8, 2006
    
    /s/ STEVE D. HANDYSteve D. HandySenior Vice President, Chief Financial Officer and SecretaryDated: August 8, 2006
    
    /s/ STEVEN S. MYERSSteven S. MyersChairman and Chief Executive Officer
 24