<PAGE>   1

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                  FORM 10-Q/A

Mark One

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

       For Quarterly Period Ended June 30, 1998

                                       or

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

For the Transition period from                 to
                               ---------------    ----------------
Commission File Number 000-08193

                            SENSYS TECHNOLOGIES INC.
                 (FORMERLY KNOWN AS DAEDALUS ENTERPRISES, INC.)
                 ----------------------------------------------
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                        <C>
         Delaware                                               38-1873250
         --------                                               ----------
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                              Identification No.)

</TABLE>
                 8419 Terminal Road, Newington, Virginia  22122-1430
                 ----------------------------------------------------
                (Address of principal executive offices)   (Zip Code)

          Registrant's telephone number, including area code (703) 550-7000

       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, and (2) has been subject to such filing
requirements for the past 90 days.

                                Yes  X         No
                                   ------        ------

       As of July 31, 1998, there were 3,961,271 shares of the Registrant's
Common Stock, par value $.01 per share, outstanding.


<PAGE>   2


                   SENSYS TECHNOLOGIES INC. AND SUBSIDIARIES

                                     INDEX

<TABLE>
<CAPTION>
PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements (Unaudited)
-------
                                                                                  Pages
                                                                                  -----
<S>                                                                             <C>
Condensed Consolidated Balance Sheet at
     June 30, 1998 and September 30, 1997.......................................  1 - 2

Condensed Consolidated Statement of Operations for the
     Three Months Ended June 30, 1998 and June 30, 1997........................       3

Condensed Consolidated Statement of Operations for the
     Nine Months Ended June 30, 1998 and June 30, 1997.........................       4

Condensed Consolidated Statement of Cash Flows for the
     Nine Months Ended June 30, 1998 and June 30, 1997..........................      5

Condensed Consolidated Statement of Stockholders' Equity for the
     Nine Months Ended June 30, 1998............................................      6

Notes to Condensed Consolidated Financial Statements............................  7 - 9


Item 2.    Management's Discussion and Analysis of Results of
-------    Operations and Financial Condition...................................10 - 12


PART II.  OTHER INFORMATION

Item 1.    Legal Proceedings....................................................     13
------

Item 4.    Submission of Matters to a Vote of Security Holders..................     13
------

Item 5.    Other Information....................................................13 - 14
------

Item 6.    Exhibits and Reports on Form 8-K.....................................14 - 16
------

Signatures .....................................................................     17
</TABLE>


<PAGE>   3

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

SENSYS TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>

(In Thousands, Except Share and Per Share Data)
<S>                                               <C>                        <C>
                                                        June 30,               September 30,
                                                         1998                       1997
                                                       -----------             -------------
ASSETS                                                  (Unaudited)                  *
CURRENT ASSETS
  Cash and cash equivalents                        $        2,544             $          140
  Accounts receivable                                       2,439                      2,916
  Unbilled contract costs, net                              3,462                      6,198
  Inventories  (Note 3)                                       723                        111
  Deferred tax asset                                          302                        264
  Other current assets                                         79                        108
  Refundable and prepaid income taxes                         378                         75
                                                       -----------              -------------

                 TOTAL CURRENT ASSETS                       9,927                      9,812

PROPERTY AND EQUIPMENT                                      1,593                        932

OTHER ASSETS
  Costs in excess of net assets acquired                      413                          -
  Land and building held for sale                           1,500                          -
  Deferred tax asset                                          169                          -
  Other assets                                                 61                         60
                                                       -----------              -------------

                 TOTAL ASSETS                           $  13,663            $        10,804
                                                       ===========              =============


</TABLE>

* The year-end balance sheet data was summarized from audited financial
statements, but does not include all disclosures required by generally accepted
accounting principles.

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

                                     - 1 -

<PAGE>   4


CONDENSED CONSOLIDATED BALANCE SHEET, continued

<TABLE>
<CAPTION>

                                                                                   June 30,                      September 30,
                                                                                     1998                               1997
                                                                               -------------                     -------------
LIABILITIES AND STOCKHOLDERS' EQUITY                                             (Unaudited)                             *
CURRENT LIABILITIES
<S>                                                                        <C>                               <C>
  Note payable - line of credit (Note 4)                                   $        1,100                     $        3,911
  Accounts payable                                                                  2,597                              2,880
  Accrued salaries, benefits, and related expenses                                  1,628                              1,213
  Other accrued expenses                                                              706                                174
  Current portion of mortgage debt                                                     21                                  -
  Capital leases                                                                       43                                 76
                                                                               -----------                       ------------

          TOTAL CURRENT LIABILITIES                                                 6,095                              8,254

LONG-TERM LIABILITIES
  Mortgage debt                                                                       202                                  -
  Capital leases                                                                      120                                 14

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY (Notes 2 and 5)
  Common Stock, at June 30, 1998, $.01 par value, authorized
   5,000,000 shares; issued and outstanding 3,961,271 shares;
  at September 30, 1997, authorized 3,000,000, issued and
  outstanding 1,867,383 shares                                                         40                                 19
  Additional capital                                                                6,858                              1,286
  Retained earnings                                                                   348                              1,231
                                                                               -----------                       ------------

                                                                                    7,246                              2,536
                                                                               -----------                       ------------

                 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                   $    13,663                       $     10,804
                                                                               ===========                       ============


</TABLE>
* The year-end balance sheet data was summarized from audited financial
statements, but does not include all disclosures required by generally accepted
accounting principles.

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

                                     - 2 -

<PAGE>   5

SENSYS TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(In Thousands, Except Share and Per Share Data)

<TABLE>
<CAPTION>
                                                               Three Months                      Three Months
                                                                   Ended                             Ended
                                                                 June 30,                          June 30,
                                                                  1998                               1997
                                                             ----------------                 ------------------
                                                               (Unaudited)                         (Unaudited)
<S>                                                           <C>                                  <C>
REVENUE
  Contract revenue                                            $         3,756                      $            5,782

COSTS AND EXPENSES
  Cost of revenues                                                      3,349                                   5,430
  General and administrative expenses                                     933                                     674
  Restructuring costs (Note 6)                                            879                                       -
                                                              ----------------                     ------------------

                 Total costs and expenses                               5,161                                   6,104
                                                              ----------------                     ------------------

LOSS FROM OPERATIONS                                                  (1,405)                                   (322)

OTHER INCOME (EXPENSES)
  Interest expense, net                                                   (9)                                    (90)
                                                              ----------------                     ------------------

LOSS BEFORE INCOME TAXES                                              (1,414)                                   (412)

INCOME TAX BENEFIT                                                        499                                     154
                                                              ----------------                     ------------------

NET LOSS                                                      $          (915)                     $             (258)
                                                              ================                     ==================

PER SHARE AMOUNT (Note 8)
  Basic and diluted earnings (loss) per share                 $         (0.26)                     $           (0.14)
                                                              ================                     ==================

</TABLE>

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

                                     - 3 -

<PAGE>   6

SENSYS TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(In Thousands, Except Share and Per Share Data)

<TABLE>
<CAPTION>
                                                           Nine Months                        Nine Months
                                                              Ended                              Ended
                                                            June 30,                           June 30,
                                                              1998                               1997
                                                      ------------------                ---------------------
                                                          (Unaudited)                         (Unaudited)
<S>                                                  <C>                               <C>
REVENUE
  Contract revenue                                   $         16,095                  $         16,868

COSTS AND EXPENSES
  Cost of revenues                                             13,992                            15,078
  General and administrative expenses                           2,431                             1,920
  Restructuring costs (Note 6)                                    879                                 -
                                                      ------------------               ---------------------

       Total costs and expenses                                17,302                            16,998
                                                      ------------------               ---------------------

LOSS FROM OPERATIONS                                           (1,207)                             (130)

OTHER INCOME (EXPENSES)
  Interest expense, net                                         (156)                              (245)
                                                      ------------------               ---------------------

LOSS BEFORE INCOME TAXES                                      (1,363)                              (375)

INCOME TAX BENEFIT                                               480                                140
                                                      ------------------               ---------------------

NET LOSS                                              $         (883)                  $           (235)
                                                      ==================               =====================

PER SHARE AMOUNT (Note 8)
  Basic and diluted earnings (loss) per share         $        (0.32)                  $          (0.13)
                                                      ==================               ====================

</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.

                                     - 4 -

<PAGE>   7

SENSYS TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>


                                                                                 Nine Months            Nine Months
                                                                                    Ended                  Ended
                                                                                   June 30,              June 30,
                                                                                     1998                  1997
                                                                         ---------------------------------------------
                                                                                 (Unaudited)            (Unaudited)

<S>                                                                        <C>                         <C>
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                        $           2,729           $         685

                                                                         ---------------------------------------------

Cash flows from investing activities:
 Merger expenses, net of cash acquired                                                 (124)                       -
 Acquisitions of property and equipment                                                (299)                    (326)
                                                                         ---------------------------------------------

            NET CASH USED IN INVESTING ACTIVITIES                                      (423)                    (326)
                                                                         ---------------------------------------------

Cash flows from financing activities:

 Net (payments) proceeds under line of credit                                        (3,690)                   1,163
 Principal payments on mortgage debt                                                    (22)                       -
 Principal payments on capital lease obligations                                        (26)                     (99)
 Net proceeds of private placement of common stock                                    3,777                        -
 Proceeds of stock option exercises                                                      59                        -
                                                                         ---------------------------------------------

            NET CASH PROVIDED BY FINANCING ACTIVITIES                                     98                   1,064
                                                                         ---------------------------------------------

Increase in cash and cash equivalents                                      $           2,404           $          53
                                                                         =============================================

Supplemental schedule of non-cash investing and financing activities:

Equipment acquired with capital lease obligations                          $             120          $            -
                                                                         =============================================

Details of the merger (Note 2)
     Fair value of assets acquired                                         $           3,373          $            -
                                                                                                      ================
     Fair value of liabilities assumed                                                 1,485                       -
                                                                           ------------------         ----------------
     Net assets acquired                                                               1,888                       -
     Merger expenses                                                                    (131)                      -
                                                                           ------------------
     Stock issued in connection with the                                   $           1,757          $            -
                                                                         =============================================

</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.

                                     - 5 -

<PAGE>   8

SENSYS TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

For the nine months ended June 30, 1998

(In Thousands, Except Share and Per Share Data)

(Unaudited)
<TABLE>
<CAPTION>
                                                                               Additional                               Total
                                                               Common            Paid-in          Retained          Stockholders'
                                                                Stock            Capital          Earnings             Equity
                                                        ---------------     ---------------    -------------      --------------
<S>                                                      <C>                <C>                <C>                <C>
BALANCE AT SEPTEMBER 30, 1997                            $          19      $         1,286    $       1,231      $       2,536

Net loss                                                                                               (883)               (883)
Issuance of stock, net of related expenses of $6 (Note              15                3,762                               3,777
Merger, including par value adjustment (Note 2)                      5                1,752                               1,757
Exercise of stock options                                            1                   58                                  59
                                                        ---------------     ---------------    -------------      --------------

BALANCE AT JUNE 30, 1998                                 $          40      $         6,858    $         348      $       7,246
                                                        ===============     ===============    =============      ==============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.

                                      - 6 -
<PAGE>   9


                            SENSYS TECHNOLOGIES INC.

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

1.  BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information for commercial and industrial companies and with the
instructions to Form 10-Q and Rule 10-01 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
accruals) considered necessary for fair presentation have been included.
Operating results for the three and nine-month periods ended June 30, 1998 are
not necessarily indicative of the results that may be expected for the fiscal
year ending September 30, 1998. Intercompany accounts and transactions have
been eliminated in consolidation. For further information, refer to Daedalus
Enterprises, Inc.'s Annual Report on Form 10-K for the year ended July 31, 1997
and S. T. Research Corporation's 1997 consolidated financial statements and
footnotes thereto incorporated by reference to the Company's Form 8-K filed on
June 15, 1998.

2.   ACQUISITION

On June 9, 1998, Daedalus Enterprises, Inc. ("DEI") merged with S. T. Research
Corporation ("STR"). In connection with the merger, DEI changed its name to
Sensys Technologies Inc. (the "Company"). While DEI was the legal acquiror, the
merger was accounted for as a reverse acquisition purchase whereby STR was
deemed to have acquired DEI for financial reporting purposes. Consistent with
the reverse acquisition accounting treatment, the historical financial
statements presented for periods prior to the merger date are the financial
statements of STR except for stockholders' equity which has been retroactively
restated for the equivalent number of shares of the legal acquiror. An
adjustment has also been made to adjust the par value of the outstanding shares
with an offset to additional paid-in capital. Because of the accounting
treatment herein described, the financial statements differ from the
consolidated financial statements of DEI as previously reported. The operations
of DEI have been included in the financial statements from the date of the
merger. In connection with the merger, the Company changed its fiscal year-end
from July 31 to September 30.

The average market value of the DEI Common Stock for a reasonable period of
time before and after the announcement of the merger determined the purchase
price for accounting purposes. The average market value of DEI stock used to
record the purchase was $3.25 per share and there were 540,751 shares issued
and outstanding at the merger date. The aggregate value of the stock used to
record the purchase was $1,757. In addition, direct expenses of the purchase of
$131, consisting of legal, accounting and other fees were included in the
purchase price recorded.

The Company recorded costs in excess of net assets acquired of $413 which will
be amortized over a ten-year period on a straight line basis. In addition, the
Company repaid DEI's existing note payable to its bank in the amount of $879.

                                     - 7 -


<PAGE>   10


The following unaudited pro forma information shows the results of operations
of the Company and DEI for the nine months ended June 30, 1998 and 1997,
assuming the companies had combined as of October 1, 1996.

<TABLE>
<CAPTION>
                                                          1998          1997
                                                          ----          ----
        <S>                                           <C>            <C>
        Revenue                                       $ 17,318       $  19,052
        Net loss                                      $ (1,167)      $    (317)
        Basic earnings (loss) per share               $  (0.35)      $    (0.13)
</TABLE>

This pro forma information does not purport to be indicative of the results
that actually would have been obtained if the companies had been combined
during the periods presented and is not intended to be a projection of future
results.

3.  INVENTORIES

Inventories are valued at the lower of cost or market using the first-in,
first-out method and consisted of the following:

<TABLE>
<CAPTION>
                                                         June 30,          September 30,
                                                           1998                1997
                                                 -----------------     ----------------
          <S>                                      <C>                    <C>      
          Materials                                 $        703          $         107
          Work in process                                     20                      4
                                                    --------------        -------------
                                                    $        723          $         111
                                                    ==============        =============
</TABLE>

4.   NOTE PAYABLE - LINE OF CREDIT

On June 30, 1998, the Company's bank loan agreement, which includes the
Company's line of credit, was amended and extended to September 30, 1998.

5.   STOCK ISSUANCE

On January 30, 1998, STR completed a private placement, whereby it issued
582,000 shares of common stock. The common stock was issued for cash of $6.50
per share for aggregate proceeds of $3,783. When restated for the exchange
ratio used in the merger of 2.58 shares, the Company's equivalent number of
shares issued was 1,501,560 and the issuance price was $2.52. The proceeds were
used to repay outstanding bank borrowings under STR's line of credit.

6.   RESTRUCTURING COSTS

During the third quarter of fiscal 1998, the Company recorded nonrecurring
charges of $879 in connection with the ongoing restructuring of the Company's
operations. The restructuring will combine, integrate, and reengineer Company's
processes, policies and procedures. Costs incurred consisted primarily of
severance costs and other employee benefits, professional fees and relocation
expenses. Total restructuring costs included in other accrued expenses at June
30, 1998 was $655.

                                     - 8 -


<PAGE>   11


7.   EARNINGS (LOSS) PER SHARE

The computation of net earnings (loss) per share is based on the weighted
average number of shares of common stock outstanding during the periods
presented. The weighted average number of shares used in the computation was
3,539,374 and 1,867,383 for the three-month periods ended June 30, 1998 and
1997, respectively. The weighted average number of shares used in the
computation was 2,771,746 and 1,867,383 for the nine-month periods ended June
30, 1998 and 1997, respectively. No adjustments were made to either net
earnings (loss) or the number of shares outstanding in calculating earnings
(loss) per share as such adjustments would have been antidilutive. The weighted
average shares outstanding were adjusted to reflect the conversion of STR
common stock in connection with the merger.

8.   NEW ACCOUNTING PRONOUNCEMENTS

On June 15, 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133).
SFAS 133 establishes a new model for accounting for derivatives and hedging.
The new standard requires enhanced disclosure of accounting policies for
derivative financial instruments and derivative commodity instruments in the
footnotes to the financial statements. In addition, the standard expands
disclosure requirements to include quantitative and qualitative information
about market risk inherent in market risk sensitive instruments.

The FASB recently issued Statement of Financial Accounting Standards No. 132,
Employers' Disclosures about Pensions and Other Postretirement Benefits (SFAS
132). This statement significantly changes current financial statement
disclosure requirements from earlier statements. Some of the more significant
effects of SFAS 132 which will affect the Company's disclosures are that it:

    (1)  standardizes the disclosure requirements for pensions and other
         postretirement benefits and presents them in one footnote;

    (2)  requires that additional information be disclosed regarding changes in
         the benefit obligation and fair values of plan assets;

    (3)  eliminates certain disclosures that are no longer considered useful,
         including general descriptions of the plans and;

    (4)  revises disclosures about defined-contribution plans.

The Company believes that the adoption of these statements will not have a
material effect on the Company's consolidated financial statements.

9.   CONTINGENCIES

The Company is a party to certain legal proceedings occurring in the ordinary
course of business. Based upon information presently available to it, the
Company does not believe that the final outcome of any of these matters will
have a materially adverse effect on the consolidated financial position,
results of operations or liquidity of the Company.

                                     - 9 -


<PAGE>   12


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

The following discussion provides information which management believes is
relevant to an assessment and understanding of the Company's operations and
financial condition. This discussion should be read in conjunction with the
condensed consolidated financial statements and accompanying notes.

On June 9, 1998, Daedalus Enterprises, Inc. ("DEI") merged with S. T. Research
Corporation ("STR"). In connection with the merger, DEI changed its name to
Sensys Technologies Inc. (the "Company"). The merger was accounted for as a
reverse acquisition purchase whereby STR was deemed to have acquired DEI for
financial reporting purposes. Consistent with the reverse acquisition
accounting treatment, the historical financial statements presented for periods
prior to the merger date are the financial statements of STR and differ from
the consolidated financial statements of DEI as previously reported. The
operations of DEI have been included in the financial statements from the date
of the merger. In connection with the merger, the Company changed its fiscal
year-end from July 31 to September 30.

RESULTS OF OPERATIONS

Revenue for the nine months ended June 30, 1998 was $16,095 compared to $16,868
for the nine months ended June 30, 1997, resulting in a $773 or a 4.6%
decrease.  Revenue for the three months ended June 30, 1998, was $3,756
compared to $5,782 for the three months ended June 30, 1997, resulting in a
$2,026 or a 35.0% decrease. The decreases were primarily due to the expiration
of certain long-term contracts coupled with the delay in the start-up of newly
awarded contracts.

The total amounts of contracts in backlog, as of June 30, 1998 and 1997, were
approximately $10,684 and $15,692, respectively, including both the uncompleted
portion of contracts in progress and contracts awarded but not yet started. The
majority of the backlog at June 30, 1998 is expected to be completed within a
year.

Cost of revenue, as a percentage of revenue, decreased from 89.4% for the nine
months ended June 30, 1997 to 86.9% for the nine months ended June 30, 1998 and
decreased from 93.9% in the third quarter of fiscal 1997 to 89.2% for the third
quarter of fiscal 1998. The decrease in cost of revenue as a percentage of
revenue was the result of the reduction in the number of loss contracts and
lower margin contracts. The Company attributes this improvement to its efforts
to focus on its more profitable core businesses.

During the first nine months of fiscal 1998, general and administrative
expenses increased from $1,920 to $2,431, a $511 or a 26.6% increase from the
first nine months of fiscal 1997. The increase was primarily the result of an
increase in non-customer funded research and development expense which
increased from $699 in the first nine months of fiscal 1997 to $959 in the
first nine months of fiscal 1998. Additionally, during the comparable
nine-month periods, travel expense increased related to business development
efforts in international markets and bad debt expense increased. General and
administrative expenses increased from $674 in the third quarter of fiscal 1997
to $933 in the third quarter of fiscal 1998, a $259 or a 38.4% increase. The
increase was primarily the result of increased research and development
activity in the three months ended June 30, 1998. Research and development
increased from $275 in the third quarter of fiscal 1997 to $487 in the third
quarter of fiscal 1998.

During the third quarter of fiscal 1998, the Company recorded nonrecurring
charges of $879 in connection with the ongoing restructuring of the Company's
operations. The restructuring will combine, integrate, and reengineer Company's
processes, policies and procedures. Costs incurred consisted primarily of
severance costs and other employee benefits, professional fees and relocation
expenses, among others. The Company

                                     - 10 -


<PAGE>   13


anticipates that it will incur additional restructuring costs as it completes
its restructuring during the fourth quarter of fiscal 1998 but at this time, it
cannot reasonably estimate such costs.

Net interest expense of $245 for the nine months ended June 30, 1997, decreased
36.3% to $156 for the nine months ended June 30, 1998. Net interest expense of
$90 for the three months ended June 30, 1997, decreased 90.0% to $9 for the
three months ended June 30, 1998. The decreases were a result of a repayment of
the Company's outstanding line of credit borrowings due to proceeds of $3,783
from STR's private placement of common stock, completed on January 30, 1998.

Income tax expense consists of federal and state income taxes. The Company's
effective income tax rate was 35% for the three and nine months ending June 30,
1998 and was 37% for the three and nine months ending June 30, 1997. The rate
varied from the statutory rate primarily due to state taxes.

Net loss increased from $235 for the first nine months of fiscal 1997 to $883
for the first nine months of fiscal 1998. Net loss increased from $258 for the
third quarter of fiscal 1997 to $915 for the third quarter of fiscal 1998. The
increases in net loss were a result of the items discussed above.

LIQUIDITY AND SOURCES OF CAPITAL

Cash flows provided by operating activities was $2,729 for the nine months
ended June 30, 1998. This was primarily a result of a decrease in net unbilled
contract costs as a result of lower revenue in the period.

Cash flows used in investing activities of $423 for the nine months ended June
30, 1998 included payment of the expenses related to the acquisition of DEI of
$124 and capital expenditures of $299. The Company anticipates that it will
continue to incur capital expenditures at this rate through the end of the
fourth quarter of fiscal 1998.

On January 30, 1998, STR completed a private placement, whereby it issued
582,000 shares of common stock. The common stock was issued for cash of $6.50
per share for aggregate proceeds of $3,783. When restated for the exchange
ratio used in the merger, the Company's equivalent number of shares issued was
1,501,560 and the issuance price was $2.52. The proceeds were used to pay
outstanding bank borrowings under the Company's line of credit. Subsequent to
the merger, the Company also repaid DEI's existing note payable to bank in the
amount of $879. Cash flows provided by financing activities of $98 for the nine
months ended June 30, 1998 were primarily a result of the proceeds on the
private placement offset by the subsequent repayment of outstanding borrowings.

Inventories, property and equipment, land and building held for sale, and costs
in excess of net assets acquired increased from September 30, 1997 to June 30,
1998 primarily due to the acquisition of DEI.

On June 30, 1998, the Company's bank loan agreement was amended and extended to
September 30, 1998. The Company believes that its existing funds, amounts
generated by operations, and amounts available for borrowing under its loan
agreement will be sufficient to meet its working capital needs through fiscal
1998. Management is in the process of negotiating a new credit facility,
however, no assurances can be made that such an agreement will be made.

                                     - 11 -


<PAGE>   14


NEW ACCOUNTING PRONOUNCEMENTS

On June 15, 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133).
SFAS 133 establishes a new model for accounting for derivatives and hedging.
The new standard requires enhanced disclosure of accounting policies for
derivative financial instruments and derivative commodity instruments in the
footnotes to the financial statements. In addition, the standard expands
disclosure requirements to include quantitative and qualitative information
about market risk inherent in market risk sensitive instruments.

The FASB recently issued Statement of Financial Accounting Standards No. 132,
Employers' Disclosures about Pensions and Other Postretirement Benefits (SFAS
132). This statement significantly changes current financial statement
disclosure requirements from earlier statements. Some of the more significant
effects of SFAS 132 which will affect the Company's disclosures are that it:

    (1)  standardizes the disclosure requirements for pensions and other
         postretirement benefits and presents them in one footnote;

    (2)  requires that additional information be disclosed regarding changes in
         the benefit obligation and fair values of plan assets;

    (3)  eliminates certain disclosures that are no longer considered useful,
         including general descriptions of the plans and; 

    (4)  revises disclosures about defined-contribution plans.

The Company believes that the adoption of these statements will not have a
material effect on the Company's consolidated financial statements.

                                          - 12 -


<PAGE>   15


PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

The Company is a party to certain legal proceedings occurring in the ordinary
course of business. Based upon information presently available to it, the
Company does not believe that the final outcome of any of these matters will
have a materially adverse effect on the consolidated financial position,
results of operations or liquidity of the Company.

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

DEI held its annual meeting of shareholders on June 9, 1998 (the "Annual
Meeting"). There were 540,751 DEI shares issued and outstanding at the time of
the Annual Meeting (prior to the merger with STR). The following three agenda
items were submitted to a vote of security holders at the Annual Meeting:

(a)     Election of Directors.

The shareholders elected each of the following persons to serve as members of
the Board of Directors, with the numbers of votes for, against and withheld set
forth opposite each name:

<TABLE>
<CAPTION>
Name                         Votes For             Votes Withheld
----                         ---------             --------------
<S>                           <C>                   <C>
John D. Sanders               392,918               5,601

Thomas R. Ory                 392,918               5,601

William S. Panschar           392,918               5,601

Philip H. Power               392,918               5,601

Charles G. Stanich            392,918               5,601
</TABLE>

At the Board of Directors meeting held June 9, 1998, subsequent to the Annual
Meeting and the effective time of the merger with STR, Messrs. Panschar and
Stanich resigned from the Board, and the Board appointed S. Kent Rockwell, Adm.
James Busey IV, Charles Bernard and S.R. Perrino to the Board, all as
contemplated by the Agreement and Plan of Merger dated as of December 23, 1997
by and among DEI, STR, and DEI Merger Sub, Inc.

(b)     Amendment and Restatement of the Certificate of Incorporation.

The shareholders approved the proposal to amend and restate the Company's
charter to increase the number of authorized shares of common stock, par value
$.01, to five million (5,000,000) and change the name of DEI to Sensys
Technologies Inc. The voting results were:

        In Favor, 363,286;  Against, 1,300; Votes Withheld, 100.

                                     - 13 -


<PAGE>   16



(c)     Amendment to the Company's Long-Term Incentive Plan.

The shareholders approved the proposal to amend the Company's Long-Term
Incentive Plan (the "Plan") by increasing the number of shares issuable under
the Plan from 64, 000 to 400,000 and increasing the limit on the number of
shares that may be subject to options granted to any salaried employee in any
three consecutive fiscal years from 25,000 to 100,000 with the following votes:

In Favor, 343,310; Against, 18,676; Votes Withheld, 700.

ITEM 5. OTHER INFORMATION

The Company filed a Report on Form 8-K on June 15, 1998 relating to the merger
of DEI and STR. At that time, the required financial and pro forma information
was not included. In lieu of providing the required financial information in a
Form 8-K/A, the Company is including such information under Item 5 of this Form
10-Q. The required interim financial statements of DEI are incorporated herein
by reference to the Company's Quarterly Report on Form 10-Q for the quarter
ended April 30, 1998, filed on June 16, 1998. 

The following sets forth certain financial information of the Company on an
unaudited pro forma combined basis after giving effect to the merger on a
"reverse acquisition purchase" basis (as if the STR had acquired DEI). The
unaudited Pro Forma Combined Statement of Operations includes the results of
operations of DEI, prior to the merger, and the Company for the respective
periods presented and gives effect to pro forma adjustments as if the merger had
occurred at the beginning of the period presented. The unaudited Pro Forma
Combined Statement of Operations is not necessarily indicative of the operating
results that would have been achieved had the merger been consummated at the
beginning of the period presented and should not be construed as representative
of future operations. The unaudited pro forma combined statement of operations
for the year ended September 30, 1997 was included in the Company's Registration
Statement on Form S-4 Amendment No. 2 filed with the Securities and Exchange
Commission on May 12, 1998, (File No. 333-47333) which is incorporated herein by
reference. An unaudited pro forma balance sheet has not been provided as the
merger is already reflected in the Company's condensed consolidated balance
sheet as of June 30, 1998.

                                     - 14 -



<PAGE>   17

PRO FORMA COMBINED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>

                                                       Sensys                   DEI
                                                       For The                 For The
                                                     Nine Months             Nine Months
                                                       Ended                    Ended
                                                      June 30,                April 30,                              Pro Forma
                                                       1998                     1998             Adjustments         Combined
                                                    -------------          -------------       -------------       -------------
<S>                                                 <C>                  <C>                 <C>                  <C>
REVENUE
  Contract revenue                                     $16,095               $1,223                                $     17,318

COSTS AND EXPENSES
  Cost of revenues                                      13,992                1,014           $       (30) a             14,976
  General and administrative expenses                    2,431                  815                  (184) b              3,062
  Restructuring costs                                      879                    -                                         879
                                                    -----------          -----------            ----------          ------------
         Total costs and expenses                       17,302                1,829                  (214)               18,917
                                                    -----------          -----------            ----------         -------------

INCOME (LOSS) FROM OPERATIONS                           (1,207)               (606)                   214                (1,599)

OTHER INCOME (EXPENSES)
  Interest expense                                        (156)                (47)                                        (203)
                                                    -----------          -----------           -----------         -------------

INCOME (LOSS) BEFORE INCOME TAXES                       (1,363)               (653)                   214                (1,802)

INCOME TAX BENEFIT (PROVISION)                             480                    -                   155 c                 635
                                                    -----------          -----------                               -------------


NET INCOME (LOSS)                                    $    (883)         $     (653)           $       369          $     (1,167)
                                                    ===========          ===========           ===========         =============

PER SHARE AMOUNT
  Basic and diluted earnings (loss) per share        $   (0.32)         $    (1.22)                                $      (0.35)
                                                    ===========          ===========                               =============

WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING
  Basic and diluted                                  2,771,746             534,451                                    3,306,197

</TABLE>

                                     - 15 -

<PAGE>   18

Adjustments to the Pro Forma Combined Statement of Operations for the nine
months ended June 30, 1998 in connection with the merger are presented below:


     <TABLE>
     <CAPTION>
                                                                                   Increase in income
                                                                                   ------------------
     <S>                                                                            <C>
     a.  As a result of recording land and building and machinery and
         equipment at fair market value and assigning new useful lives,
         depreciation expense is decreased on a pro forma basis.                        $    30



     b.  Merger related expenses, included in DEI's results of operations,
         are eliminated.                                                                $   184



     c.  Pro forma income tax effect of consolidating the companies, which
         includes the tax effect of pro forma adjustments as well as the tax
         benefit of utilizing DEI's current year losses to reduce taxable
         income of the Company.                                                         $   155
     </TABLE>


Note: The results of the operations of DEI for the period June 9, 1998 to June
30, 1998 are included in the historical results of the Company. DEI revenue and
net loss for this period was $92 and $215, respectively.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

<TABLE>
<CAPTION>
(a)    Exhibits:
     <S>      <C>
     3.1      Amended and Restated Certificate of Incorporation (incorporated by
              reference to Exhibit 3.1 to Form 8-K filed with the Securities and
              Exchange Commission on June 15, 1998, File No. 000-08193).

     3.2      By-Laws, as amended (incorporated by reference to Exhibit 3.2 to Form
              8-K filed with the Securities and Exchange Commission on June 15,
              1998, File No. 000-08193).

     27       Financial Data Schedule.

     99.1     Interim Financial Statements of Daedalus Enterprises, Inc.
              (incorporated by reference to the Company's Quarterly Report on Form
              10-Q for the quarter ended April 30, 1998, filed with the Securities
              and Exchange Commission on June 16, 1998, File No. 000-08193).

     99.2     Unaudited Pro Forma Combined Statement of Operations for the year
              ended September 30, 1997 (incorporated by reference to the Company's
              Registration Statement of Form S-4 Amendment No. 2 filed with the
              Securities and Exchange Commission on May 12, 1998, File No.
              333-47333).
</TABLE>

(b) Reports on Form 8-K. Form 8-K filed on June 15, 1998 related to the merger
    between DEI and STR.


                                     - 16 -


<PAGE>   19





                                   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 officers thereunto duly authorized.

                                                 SENSYS TECHNOLOGIES INC.


February 10, 1999                   By:         /s/ S. Kent Rockwell
                                       ---------------------------------
                                                 S. Kent Rockwell
                                                 Vice-Chairman and 
                                                 Chief Executive Officer

                                    By:         /s/ Robert R. Bower
                                       ---------------------------------
                                                 Robert R. Bower
                                       Chief Financial Officer & Treasurer

                                     - 17 -