##### 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 28, 2009
 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 000-08193
 ARGON ST, INC.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    38-1873250(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 12701 Fair Lakes Circle, Suite 800, Fairfax, Virginia 22033    (703) 322-0881
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



ARGON ST, INC. AND SUBSIDIARIES
FORM 10-Q QUARTERLY REPORT
 FOR THE THREE AND NINE MONTHS ENDED JUNE 28, 2009
 TABLE OF CONTENTS
 PART I. FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Condensed Consolidated Balance Sheets at June 28, 2009 and September 30, 2008
    
    
    3Condensed Consolidated Statements of Earnings for the
three and nine months ended June 28, 2009 and June 29, 2008
    
    
    4Condensed Consolidated Statements of Cash Flows for the
nine months ended June 28, 2009 and June 29, 2008
    
    
    5Condensed Consolidated Statements of Stockholders Equity for the nine months ended
June 28, 2009
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7-13Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14-26Item 3. Quantitative and Qualitative Disclosures about Market Risks
    
    
    26Item 4. Controls and Procedures
    
    
    26PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    27Item 1A. Risk Factors
    
    
    27Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    27Item 3. Defaults Upon Senior Securities
    
    
    27Item 4. Submission of Matters to a Vote of Security Holders
    
    
    27Item 5. Other Information
    
    
    27Item 6. Exhibits
    
    
    28Signatures
    
    
    29Exhibits
    
    
    30-32EX-31.1EX-31.2EX-32.1
  2




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##### Table of Contents



ARGON ST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
 June 28, 2009
    
    
    September 30, 2008(unaudited)ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    28,962
    
    
    $
    15,380Accounts receivable, net
    
    
    124,205
    
    
    
    104,859Inventory, net
    
    
    5,009
    
    
    
    3,757Deferred income tax asset
    
    
    5,177
    
    
    
    4,534Deferred project costs
    
    
    1,534
    
    
    
    3,412Prepaids and other
    
    
    1,402
    
    
    
    2,004TOTAL CURRENT ASSETS
    
    
    166,289
    
    
    
    133,946Property, equipment and software, net
    
    
    28,510
    
    
    
    27,558Goodwill
    
    
    173,948
    
    
    
    173,948Intangibles, net
    
    
    3,036
    
    
    
    4,055Other assets
    
    
    637
    
    
    
    831TOTAL ASSETS
    
    $
    372,420
    
    
    $
    340,338LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESAccounts payable and accrued expenses
    
    $
    30,834
    
    
    $
    29,133Accrued salaries and related expenses
    
    
    15,229
    
    
    
    10,283Deferred revenue
    
    
    8,800
    
    
    
    4,361Income taxes payable
    
    
    2,770
    
    
    
    Other liabilities
    
    
    169
    
    
    
    132TOTAL CURRENT LIABILITIES
    
    
    57,802
    
    
    
    43,909Deferred income tax liability, long term
    
    
    1,196
    
    
    
    1,900Deferred rent and other liabilities
    
    
    1,516
    
    
    
    2,085Commitments and contingenciesSTOCKHOLDERS EQUITYCommon stock:$.01 Par Value, 100,000,000 shares authorized,
22,912,119 and 22,775,423 shares issued
at June 28, 2009 and September 30, 2008
    
    
    229
    
    
    
    228Additional paid in capital
    
    
    225,711
    
    
    
    222,349Treasury stock at cost, 1,219,077 and 1,126,245 shares at
June 28, 2009 and September 30, 2008
    
    
    (19,923
    )
    
    
    (18,425
    )Retained earnings
    
    
    105,889
    
    
    
    88,292TOTAL STOCKHOLDERS EQUITY
    
    
    311,906
    
    
    
    292,444TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    372,420
    
    
    $
    340,338
  3




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ARGON ST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)
(In thousands, except share and per share amounts)
 For the Three Months Ended
    
    
    For the Nine Months EndedJune 28, 2009
    
    
    June 29, 2008
    
    
    June 28, 2009
    
    
    June 29, 2008CONTRACT REVENUES
    
    $
    91,005
    
    
    $
    83,165
    
    
    $
    270,603
    
    
    $
    245,880COST OF REVENUES
    
    
    72,732
    
    
    
    68,415
    
    
    
    219,274
    
    
    
    201,764GENERAL AND ADMINISTRATIVE
EXPENSES
    
    
    6,400
    
    
    
    5,325
    
    
    
    18,316
    
    
    
    15,445RESEARCH AND DEVELOPMENT
EXPENSES
    
    
    2,341
    
    
    
    1,587
    
    
    
    6,478
    
    
    
    5,098INCOME FROM OPERATIONS
    
    
    9,532
    
    
    
    7,838
    
    
    
    26,535
    
    
    
    23,573INTEREST INCOME (EXPENSE), NET
    
    
    5
    
    
    
    444
    
    
    
    (21
    )
    
    
    598INCOME BEFORE INCOME TAXES
    
    
    9,537
    
    
    
    8,282
    
    
    
    26,514
    
    
    
    24,171PROVISION FOR INCOME TAXES
    
    
    2,945
    
    
    
    3,103
    
    
    
    8,917
    
    
    
    9,204NET INCOME
    
    $
    6,592
    
    
    $
    5,179
    
    
    $
    17,597
    
    
    $
    14,967EARNINGS PER SHARE (Basic)
    
    $
    0.30
    
    
    $
    0.24
    
    
    $
    0.81
    
    
    $
    0.69EARNINGS PER SHARE (Diluted)
    
    $
    0.30
    
    
    $
    0.24
    
    
    $
    0.80
    
    
    $
    0.68WEIGHTED-AVERAGE SHARES OUTSTANDINGBasic
    
    
    21,687,149
    
    
    
    21,546,554
    
    
    
    21,689,761
    
    
    
    21,703,242Diluted
    
    
    22,005,663
    
    
    
    21,913,142
    
    
    
    21,995,851
    
    
    
    22,098,271
  4




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ARGON ST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(In thousands)
 Nine Months EndedJune 28, 2009
    
    
    June 29, 2008Cash flows from operating activitiesNet income
    
    $
    17,597
    
    
    $
    14,967Adjustments to reconcile net income to net cash used in operating activities:Depreciation and amortization
    
    
    6,174
    
    
    
    6,015Claims resolution
    
    
    640
    
    
    
    Amortization of deferred costs
    
    
    126
    
    
    
    127Deferred income tax expense (benefit)
    
    
    (1,348
    )
    
    
    (632
    )Stock-based compensation
    
    
    2,812
    
    
    
    2,553Other
    
    
    314
    
    
    
    9Change in:Accounts receivable
    
    
    (19,614
    )
    
    
    (15,935
    )Inventory
    
    
    (1,367
    )
    
    
    (1,249
    )Prepaids and other
    
    
    2,120
    
    
    
    941Deferred rent and other
    
    
    2,520
    
    
    
    1,554Accounts payable and accrued expenses
    
    
    1,461
    
    
    
    (3,826
    )Accrued salaries and related expenses
    
    
    4,946
    
    
    
    537Deferred revenue
    
    
    4,439
    
    
    
    (2,145
    )Net cash provided by operating activities
    
    
    20,820
    
    
    
    2,916Cash flows from investing activitiesAcquisitions of property, equipment and software
    
    
    (6,438
    )
    
    
    (8,432
    )Cash paid for acquisitions
    
    
    
    
    
    
    (5,300
    )Reduction in restricted cash
    
    
    
    
    
    
    1,800Deposits and other assets
    
    
    68
    
    
    
    Proceeds from note receivable and other
    
    
    
    
    
    
    325Net cash used in investing activities
    
    
    (6,370
    )
    
    
    (11,607
    )Cash flows from financing activitiesStock repurchases
    
    
    (1,498
    )
    
    
    (7,898
    )Payments on capital leases
    
    
    (45
    )
    
    
    (104
    )Tax benefit of stock option exercises
    
    
    179
    
    
    
    167Proceeds from exercise of stock options
    
    
    245
    
    
    
    514Proceeds from employee stock purchase plan exercises
    
    
    251
    
    
    
    284Net cash used in financing activities
    
    
    (868
    )
    
    
    (7,037
    )Net increase (decrease) in cash and cash equivalents
    
    
    13,582
    
    
    
    (15,728
    )Cash and cash equivalents, beginning of period
    
    
    15,380
    
    
    
    22,965Cash and cash equivalents, end of period
    
    $
    28,962
    
    
    $
    7,237Supplemental disclosureIncome taxes paid
    
    $
    7,353
    
    
    $
    7,794Interest expense paid
    
    $
    38
    
    
    $
    21
  5




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ARGON ST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (unaudited)
(In thousands, except share data)
 TotalCommon Stock
    
    
    Common Stock
    
    
    Additional Paid in
    
    
    
    
    
    
    Retained
    
    
    StockholdersNumber of Shares
    
    
    Par Value
    
    
    Capital
    
    
    Treasury Stock
    
    
    Earnings
    
    
    EquityBalance, September 30, 2008
    
    
    22,775,423
    
    
    $
    228
    
    
    $
    222,349
    
    
    $
    (18,425
    )
    
    $
    88,292
    
    
    $
    292,444Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,597
    
    
    
    17,597Shares issued upon exercise
of stock options
    
    
    46,880
    
    
    
    
    
    
    
    245
    
    
    
    
    
    
    
    
    
    
    
    245Restricted stock units vested
    
    
    75,825
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    Employee stock purchase plan
    
    
    13,991
    
    
    
    
    
    
    
    251
    
    
    
    
    
    
    
    
    
    
    
    251Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    2,688
    
    
    
    
    
    
    
    
    
    
    
    2,688Stock repurchase
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,498
    )
    
    
    
    
    
    
    (1,498
    )Tax benefit on stock option
exercises and restricted stock
    
    
    
    
    
    
    
    
    
    
    179
    
    
    
    
    
    
    
    
    
    
    
    179Balance, June 28, 2009
    
    
    22,912,119
    
    
    $
    229
    
    
    $
    225,711
    
    
    $
    (19,923
    )
    
    $
    105,889
    
    
    $
    311,906
  6




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1. BASIS OF PRESENTATION
      7




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2. EARNINGS PER SHARE
  For the three months ended
    
    For the nine months endedJune 28, 2009
    
    June 29, 2008
    
    June 28, 2009
    
    June 29, 2008Net income
    
    $
    6,592
    
    
    $
    5,179
    
    
    $
    17,597
    
    
    $
    14,967Weighted average shares outstanding  basic
    
    
    21,687,149
    
    
    
    21,546,554
    
    
    
    21,689,761
    
    
    
    21,703,242Basic earnings per share
    
    $
    0.30
    
    
    $
    0.24
    
    
    $
    0.81
    
    
    $
    0.69Effect of dilutive securities:Net shares issuable upon exercise of stock options and awards
    
    
    318,514
    
    
    
    366,588
    
    
    
    306,090
    
    
    
    395,029Weighted average shares outstanding  diluted
    
    
    22,005,663
    
    
    
    21,913,142
    
    
    
    21,995,851
    
    
    
    22,098,271Diluted earnings per share
    
    $
    0.30
    
    
    $
    0.24
    
    
    $
    0.80
    
    
    $
    0.68
  3. STOCK-BASED COMPENSATION
   For the three months
    
    
    For the nine months endedJune 28,
    
    
    June 29,
    
    
    June 28,
    
    
    June 29,2009
    
    
    2008
    
    
    2009
    
    
    2008Cost of revenues
    
    $
    679
    
    
    $
    644
    
    
    $
    1,921
    
    
    $
    1,812General and administrative expense
    
    
    327
    
    
    
    288
    
    
    
    891
    
    
    
    741Total pre-tax stock-based compensation included in income from operations
    
    
    1,006
    
    
    
    932
    
    
    
    2,812
    
    
    
    2,553Income tax expense (benefit) recognized for stock-based compensation
    
    
    (250
    )
    
    
    (225
    )
    
    
    (707
    )
    
    
    (536
    )Total stock-based compensation expense, net of tax
    
    
    756
    
    
    $
    707
    
    
    $
    2,105
    
    
    $
    2,017
 8




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Stock Option Activity
  Weighted-AverageWeighted-
    
    Remaining
    
    AggregateNumber
    
    Average
    
    Contractual
    
    Intrinsicof Shares
    
    Exercise Price
    
    Term
    
    ValueShares under option, September 30, 2008
    
    
    1,623,967
    
    
    $
    18.18Options granted
    
    
    167,000
    
    
    
    18.62Options exercised
    
    
    (46,630
    )
    
    
    5.27Options cancelled and expired
    
    
    (37,285
    )
    
    
    23.00Shares under option, June 28, 2009
    
    
    1,707,052
    
    
    
    18.47
    
    
    
    5.71
    
    
    $
    9,043Options vested at June 28, 2009
    
    
    1,173,429
    
    
    
    16.94
    
    
    
    4.89
    
    
    
    7,866As of June 28, 2009, options that are
vested and expected to vest prior to
expiration
    
    
    1,684,472
    
    
    $
    18.37
    
    
    
    5.69
    
    
    $
    9,043
 9




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Restricted Share Activity
  Weighted-Number
    
    Average Grantof Shares
    
    Date Fair ValueUnvested shares, September 30, 2008
    
    
    291,975
    
    
    $
    22.01Awards granted
    
    
    146,600
    
    
    
    18.43Awards vested
    
    
    (76,075
    )
    
    
    20.83Awards forfeited
    
    
    (12,050
    )
    
    
    20.12Unvested shares, June 28, 2009
    
    
    350,450
    
    
    $
    20.84
   4. ACCOUNTS RECEIVABLE
  June 28,
    
    
    September 30,2009
    
    
    2008Billed and billable
    
    $
    58,660
    
    
    $
    42,794Unbilled costs and fees
    
    
    58,115
    
    
    
    54,838Unfavorable indirect rate variance
    
    
    1,644
    
    
    
    Retainages
    
    
    6,026
    
    
    
    7,438Reserve
    
    
    (240
    )
    
    
    (211
    )Accounts receivable, net
    
    $
    124,205
    
    
    $
    104,859
  10




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5. INVENTORY
  June 28,
    
    
    September 30,2009
    
    
    2008Raw Materials
    
    $
    2,391
    
    
    $
    2,920Component parts, work in process
    
    
    1,066
    
    
    
    812Finished component parts
    
    
    1,646
    
    
    
    4105,103
    
    
    
    4,142Reserve
    
    
    (94
    )
    
    
    (385
    )Inventory, net
    
    $
    5,009
    
    
    $
    3,757
 6. PROPERTY, EQUIPMENT AND SOFTWARE
  June 28,
    
    
    September 30,2009
    
    
    2008Computer, machinery and test equipment
    
    $
    30,516
    
    
    $
    27,549Leasehold improvements
    
    
    12,101
    
    
    
    10,947Computer software
    
    
    5,582
    
    
    
    4,926Furniture and fixtures
    
    
    1,510
    
    
    
    1,726Equipment under capital lease
    
    
    337
    
    
    
    337Construction in progress
    
    
    11,842
    
    
    
    10,47861,889
    
    
    
    55,963Less accumulated depreciation and amortization
    
    
    (33,379
    )
    
    
    (28,405
    )$
    28,510
    
    
    $
    27,558
  7. REVOLVING LINE OF CREDIT
   11




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8. INCOME TAXES
    9. COMMITMENTS AND CONTINGENCIES
   10. SUBSEQUENT EVENTS
 , Subsequent
Events
 11. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
 Business Combinations Business Combinations Accounting for Assets Acquired and Liabilities Assumed in a
Business Combination That Arise from Contingencies
 12




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Determination of the
Useful Life of Intangible Assets
 The
Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an amendment of FASB
Statement No. 115
 Fair Value Measurements, , Effective Date of FASB Statement No. 157
 , Accounting
for Transfers of Financial Assets Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities
 Amendments
to FASB Interpretation No. 46(R)
 The FASB
Accounting Standards Codification TM and the Hierarchy of Generally Accepted Accounting
Principles
 13




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Forward-looking Statements
  Overview
 General
  14




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Revenues
      15




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Three Months Ended
    
    Nine Months EndedContract Type
    
    June 28, 2009
    
    June 29, 2008
    
    June 28, 2009
    
    June 29, 2008Fixed-price contracts
    
    
    52
    %
    
    
    59
    %
    
    
    53
    %
    
    
    59
    %Cost reimbursable
contracts
    
    
    42
    %
    
    
    37
    %
    
    
    41
    %
    
    
    37
    %Time and material
contracts
    
    
    6
    %
    
    
    4
    %
    
    
    6
    %
    
    
    4
    %
  Backlog
     June 28,
    
    
    September 30,2009
    
    
    2008Funded
    
    $
    184,721
    
    
    $
    272,620Unfunded
    
    
    47,498
    
    
    
    54,672Total
    
    $
    232,219
    
    
    $
    327,292
  16




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Cost of Revenues
  General and Administrative Expenses
  Research and Development
   Interest Income and Expense
   Critical Accounting Practices and Estimates
 General
  Revenue and Cost Recognition
 General
 Accounting for Performance of Construction-Type and Production-Type Contracts.
 17




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Indirect rate variance
     18




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Award Fee Recognition
  Goodwill
 Goodwill and Other Intangible Assets
 Long-Lived Assets (Excluding Goodwill)
 Accounting for the Impairment or Disposal of
Long-Lived Assets
 Accounts Receivable
  Stock-Based Compensation
  19




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Historical Operating Results
 Three months ended June 28, 2009, compared to three months ended June 29, 2008
  Three months ended
    
    Amount of
    
    %June 28,
    
    June 29,
    
    in crease
    
    increase2009
    
    2008
    
    (decrease)
    
    (decrease)Contract revenues
    
    $
    91,005
    
    
    $
    83,165
    
    
    $
    7,840
    
    
    
    9
    %Cost of revenues
    
    
    72,732
    
    
    
    68,415
    
    
    
    4,317
    
    
    
    6
    %General and administrative expenses
    
    
    6,400
    
    
    
    5,325
    
    
    
    1,075
    
    
    
    20
    %Research and development expenses
    
    
    2,341
    
    
    
    1,587
    
    
    
    754
    
    
    
    48
    %Interest income, net
    
    
    5
    
    
    
    444
    
    
    
    (439
    )
    
    
    -99
    %Provision for income taxes
    
    
    2,945
    
    
    
    3,103
    
    
    
    (158
    )
    
    
    -5
    %Net income
    
    $
    6,592
    
    
    $
    5,179
    
    
    $
    1,413
    
    
    
    27
    %
 Revenues
  Cost of Revenues
  20




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General and Administrative Expenses
  Research and Development Expenses
  Interest Income, net
  Provision for Income Taxes
  Net Income
  21




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Nine months ended June 28, 2009, compared to nine months ended June 29, 2008
  Nine months ended
    
    Amount of
    
    %June 28,
    
    June 29,
    
    in crease
    
    increase2009
    
    2008
    
    (decrease)
    
    (decrease)Contract revenues
    
    $
    270,603
    
    
    $
    245,880
    
    
    $
    24,723
    
    
    
    10
    %Cost of revenues
    
    
    219,274
    
    
    
    201,764
    
    
    
    17,510
    
    
    
    9
    %General and administrative expenses
    
    
    18,316
    
    
    
    15,445
    
    
    
    2,871
    
    
    
    19
    %Research and development expenses
    
    
    6,478
    
    
    
    5,098
    
    
    
    1,380
    
    
    
    27
    %Interest income, net
    
    
    (21
    )
    
    
    598
    
    
    
    (619
    )
    
    
    -104
    %Provision for income taxes
    
    
    8,917
    
    
    
    9,204
    
    
    
    (287
    )
    
    
    -3
    %Net income
    
    $
    17,597
    
    
    $
    14,967
    
    
    $
    2,630
    
    
    
    18
    %
 Revenues
  Cost of Revenues
  General and Administrative Expenses
  22




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##### Table of Contents



Research and Development Expenses
  Interest Income, net
  Provision for Income Taxes
  Net Income
  Analysis of Liquidity and Capital Resources
  Cash
  23




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##### Table of Contents



Cash Flows from Operating Activities
  Cash Flows from Investing Activities
  Cash Flows from Financing Activities
  Line of Credit
   24




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##### Table of Contents



Contractual Billing Provisions
   Contractual Obligations and Commitments
  Total
    
    
    Due in 1
 year
    
    
    Due in 2 
years
    
    
    Due in 3
 years
    
    
    Due in 4 
years
    
    
    Due in 5
 years
    
    
    ThereafterCapital leases
    
    $
    62
    
    
    $
    43
    
    
    $
    19
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating leases
    
    
    37,912
    
    
    
    7,919
    
    
    
    6,980
    
    
    
    6,754
    
    
    
    6,520
    
    
    
    6,114
    
    
    
    3,625Total
    
    $
    37,974
    
    
    $
    7,962
    
    
    $
    6,999
    
    
    $
    6,754
    
    
    $
    6,520
    
    
    $
    6,114
    
    
    $
    3,625
  (in thousands)
    
    Total
    
    Less Than 1 Year
    
    1-3 YearsLetters of credit
    
    $
    2,238
    
    
    $
    2,238
    
    
    
    
  25




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##### Table of Contents



Market Risks
  Cash and Cash Equivalents
  Access to Bank Credit
  Interest Rates
  Foreign Currency
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
  
 ITEM 4. CONTROLS AND PROCEDURES
 (a)
    
    Our management has evaluated, with the participation of our Chief Executive
Officer and Chief Financial Officer, the effectiveness of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934, as amended (Exchange Act)) as of the end of the period covered by this
Quarterly Report on Form 10-Q. Our disclosure controls and procedures are designed to
provide reasonable assurance that the information required to be disclosed in this
Quarterly Report on Form 10-Q has been appropriately recorded, processed, summarized
and reported within the time periods specified in the Securities and Exchange
Commissions rules and forms, and that such information is accumulated and communicated
to our management, including our
Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding
required disclosure. Based on that evaluation, our Chief Executive Officer and Chief
Financial Officer have concluded that our disclosure controls and procedures are
effective at the reasonable assurance level.(b)
    
    During the last quarter, there were no significant changes in our internal
controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under
the Securities Exchange Act of 1934, as amended) that have materially affected these
controls, or are reasonably likely to materially affect these controls subsequent to
the evaluation of these controls.
 26




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##### Table of Contents



PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
  27




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##### Table of Contents



ITEM 6. EXHIBITS
 ExhibitNumber
    
    Description of Exhibit2.1
    
    Agreement and Plan of Merger dated
as of June 7, 2004, by and between
Sensytech, Inc. and Argon
Engineering Associates, Inc.
(incorporated by reference to
Exhibit 2.1 of the Companys
Registration Statement on Form S-4
filed on July 16, 2004,
Registration Statement
No. 333-117430)2.2
    
    Agreement and Plan of Merger, Dated
as of June 9, 2006, by and among
Argon ST, Inc., Argon ST Merger
Sub, Inc., San Diego Research
Center, Incorporated, Lindsay
McClure, Thomas Seay and Harry B.
Lee, Trustee of the HBL and BVL
Trust (incorporated by reference to
the Companys Current Report on
Form 8-K, filed June 14, 2006)2.3
    
    Equity Purchase Agreement by and
among Argon ST, Inc., CSIC Holdings
LLC, Coherent Systems
International, Corp., the
Stockholders of Coherent Systems
International, Corp. and Richard S.
Ianieri, as Seller Representative
(incorporated by reference to
Exhibit 2.1 to the Companys
Current Report on Form 8-K, filed
August 16, 2007)3.1
    
    Amended and Restated Certificate of
Incorporation of the Company
(incorporated by reference to
Exhibit 3.1 of the Companys
Registration Statement on Form S-1
(Registration Statement No.
333-98757) filed on August 26,
2002)3.1.1
    
    Amendment, dated September 28,
2004, to the Companys Amended and
Restated Certificate of
Incorporation (incorporated by
reference to Exhibit 3.1 to the
Companys Current Report on Form
8-K filed October 5, 2004 covering
Items 2.01, 5.01, 5.02, 8.01 and
9.01 of Form 8-K).3.1.2
    
    Amendment, dated March 15, 2005 to
the Companys Amended and Restated
Certificate of Incorporation
(incorporated by reference to
Exhibit 3.1.2 to the Companys
Quarterly Report on Form 10-Q for
the quarterly period ended April 5,
2005, filed May 11, 2005)3.2
    
    Amended and Restated Bylaws of the
Company (incorporated by reference
to Exhibit 3.2 of the Companys
Current Report on Form 8-K, filed
May 12, 2008)4.1
    
    Form of Common Stock Certificate (incorporated by
reference to Exhibit 4.3 to the Companys
Registration Statement on Form S-3 (Registration
Statement No. 333-128211) filed on September 9,
2005)31.1*
    
    Certification of the Companys Chief Executive
Officer pursuant to Rule 13a-14(a)/15d-14(a) under
the Securities Exchange Act31.2*
    
    Certification of the Companys Chief Financial
Officer pursuant to Rule 13a-14(a)/15d-14(a) under
the Securities Exchange Act32.1**
    
    Certification pursuant to Rule 13a-14(b)/15d-14(b)
under the Securities Exchange Act and Section 1350
of Chapter 63 of Title 8 of the United States Code
 
 *
    
    Filed herewith**
    
    Furnished herewith+
    
    Indicates management contract or compensatory plan or arrangement 28




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##### Table of Contents



SIGNATURES
  ARGON ST, INC.(Registrant)By: /s/ Terry L. CollinsTerry L. Collins, Ph.D.Chairman and Chief Executive OfficerBy: /s/ Aaron N. DanielsAaron N. DanielsVice President, Chief Financial Officer, and
Treasurer
  29