##### 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 July 4, 2010
 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 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 12701 Fair Lakes Circle, Suite 800, Fairfax, Virginia 22033
    þ o
  o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
  o þ




---



##### 



ARGON ST, INC. AND SUBSIDIARIES
FORM 10-Q QUARTERLY REPORT
 FOR THE THREE AND NINE MONTHS ENDED JULY 4, 2010
 TABLE OF CONTENTS
 PART I. FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Condensed Consolidated Balance Sheets at July 4, 2010 and September 30, 2009
    
    
    3Condensed Consolidated Statements of Earnings for the three and nine months ended
July 4, 2010 and June 28, 2009
    
    
    4Condensed Consolidated Statements of Cash Flows for the three and nine months ended
July 4, 2010 and June 28, 2009
    
    
    5Condensed Consolidated Statements of Stockholders Equity for the nine months ended
July 4, 2010
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7-14Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15-29Item 3. Quantitative and Qualitative Disclosures about Market Risks
    
    
    29Item 4. Controls and Procedures
    
    
    29PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    30Item 1A. Risk Factors
    
    
    30Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    30Item 3. Defaults Upon Senior Securities
    
    
    30Item 4. (Removed and Reserved)
    
    
    30Item 5. Other Information
    
    
    30Item 6. Exhibits
    
    
    31Signatures
    
    
    32ExhibitsEX-31.1EX-31.2EX-32.1
  2




---



##### Table of Contents



ARGON ST, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
 July 4, 2010
    
    
    September 30, 2009(unaudited)ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    41,720
    
    
    $
    43,108Accounts receivable, net
    
    
    109,082
    
    
    
    116,656Inventory, net
    
    
    10,655
    
    
    
    6,021Income tax receivable
    
    
    6,806
    
    
    
    Deferred project costs
    
    
    613
    
    
    
    2,296Deferred income tax assets
    
    
    5,361
    
    
    
    5,137Prepaids and other
    
    
    1,294
    
    
    
    1,499TOTAL CURRENT ASSETS
    
    
    175,531
    
    
    
    174,717Property, equipment and software, net
    
    
    26,522
    
    
    
    28,042Goodwill
    
    
    173,948
    
    
    
    173,948Intangibles, net
    
    
    2,039
    
    
    
    2,745Other assets
    
    
    432
    
    
    
    573TOTAL ASSETS
    
    $
    378,472
    
    
    $
    380,025LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESAccounts payable and accrued expenses
    
    $
    21,218
    
    
    $
    32,526Accrued salaries and related expenses
    
    
    14,678
    
    
    
    13,887Deferred revenue
    
    
    7,196
    
    
    
    5,504Income taxes payable
    
    
    
    
    
    
    4,784Other current liabilities
    
    
    126
    
    
    
    155TOTAL CURRENT LIABILITIES
    
    
    43,218
    
    
    
    56,856Deferred income tax liabilities, long-term
    
    
    1,362
    
    
    
    1,942Other long-term liabilities
    
    
    3,778
    
    
    
    1,649Commitments and contingencies
    
    
    
    
    
    
    STOCKHOLDERS EQUITYCommon stock:$.01 Par Value, 100,000,000 shares authorized,
23,212,209 and 22,965,952 shares issued
at July 4, 2010 and September 30, 2009, respectively
    
    
    232
    
    
    
    230Additional paid in capital
    
    
    233,277
    
    
    
    227,288Treasury stock at cost, 1,219,077 shares at
July 4, 2010 and September 30, 2009
    
    
    (19,923
    )
    
    
    (19,923
    )Retained earnings
    
    
    116,528
    
    
    
    111,983TOTAL STOCKHOLDERS EQUITY
    
    
    330,114
    
    
    
    319,578TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    378,472
    
    
    $
    380,025
  3




---



##### Table of Contents



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 EndedJuly 4, 2010
    
    
    June 28, 2009
    
    
    July 4, 2010
    
    
    June 28, 2009CONTRACT REVENUES
    
    $
    64,130
    
    
    $
    91,005
    
    
    $
    214,660
    
    
    $
    270,603COST OF REVENUES
    
    
    61,747
    
    
    
    72,732
    
    
    
    183,213
    
    
    
    219,274GENERAL AND ADMINISTRATIVE
EXPENSES
    
    
    9,597
    
    
    
    6,400
    
    
    
    18,356
    
    
    
    18,316RESEARCH AND DEVELOPMENT
EXPENSES
    
    
    2,680
    
    
    
    2,341
    
    
    
    7,959
    
    
    
    6,478INCOME (LOSS) FROM OPERATIONS
    
    
    (9,894
    )
    
    
    9,532
    
    
    
    5,132
    
    
    
    26,535INTEREST INCOME (EXPENSE), NET
    
    
    20
    
    
    
    5
    
    
    
    27
    
    
    
    (21
    )INCOME (LOSS) BEFORE INCOME TAXES
    
    
    (9,874
    )
    
    
    9,537
    
    
    
    5,159
    
    
    
    26,514(BENEFIT) PROVISION FOR INCOME TAXES
    
    
    (5,096
    )
    
    
    2,945
    
    
    
    613
    
    
    
    8,917NET INCOME (LOSS)
    
    $
    (4,778
    )
    
    $
    6,592
    
    
    $
    4,545
    
    
    $
    17,597EARNINGS (LOSS) PER SHARE (Basic)
    
    $
    (0.22
    )
    
    $
    0.30
    
    
    $
    0.21
    
    
    $
    0.81EARNINGS (LOSS) PER SHARE (Diluted)
    
    $
    (0.22
    )
    
    $
    0.30
    
    
    $
    0.20
    
    
    $
    0.80WEIGHTED-AVERAGE SHARES
OUTSTANDINGBasic
    
    
    21,917,570
    
    
    
    21,687,149
    
    
    
    21,849,546
    
    
    
    21,689,761Diluted
    
    
    21,917,570
    
    
    
    22,005,663
    
    
    
    22,295,946
    
    
    
    21,995,851
  4




---



##### Table of Contents



ARGON ST, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(In thousands)
 For the Nine Months EndedJuly 4, 2010
    
    
    June 28, 2009Cash flows from operating activitiesNet income
    
    $
    4,545
    
    
    $
    17,597Adjustments to reconcile net income to net cash used in
operating activities:Depreciation and amortization
    
    
    7,056
    
    
    
    6,174Claims resolution
    
    
    
    
    
    
    640Amortization of deferred costs
    
    
    126
    
    
    
    126Deferred income tax (benefit)
    
    
    (917
    )
    
    
    (1,348
    )Stock-based compensation
    
    
    4,995
    
    
    
    2,812Other
    
    
    134
    
    
    
    314Change in:Accounts receivable, net
    
    
    7,440
    
    
    
    (19,614
    )Inventory
    
    
    (4,634
    )
    
    
    (1,367
    )Prepaids and other
    
    
    1,888
    
    
    
    2,120Accounts payable and accrued expenses
    
    
    (11,096
    )
    
    
    1,461Accrued salaries and related expenses
    
    
    791
    
    
    
    4,946Deferred revenue
    
    
    1,692
    
    
    
    4,439Income taxes
    
    
    (11,477
    )
    
    
    2,714Other liabilities
    
    
    1,162
    
    
    
    (194
    )Net cash provided by operating activities
    
    
    1,705
    
    
    
    20,820Cash flows from investing activitiesAcquisitions of property, equipment and software
    
    
    (4,833
    )
    
    
    (6,438
    )Other
    
    
    (194
    )
    
    
    68Net cash used in investing activities
    
    
    (5,027
    )
    
    
    (6,370
    )Cash flows from financing activitiesStock repurchases
    
    
    
    
    
    
    (1,498
    )Payments on capital leases
    
    
    (22
    )
    
    
    (45
    )Tax benefit of stock option exercises
    
    
    400
    
    
    
    179Proceeds from exercise of stock options
    
    
    1,499
    
    
    
    245Restricted shares reacquired in net share issuance
    
    
    (212
    )
    
    
    Proceeds from employee stock purchase plan purchases
    
    
    269
    
    
    
    251Net cash provided by (used in) financing activities
    
    
    1,934
    
    
    
    (868
    )Net increase (decrease) in cash and cash equivalents
    
    
    (1,388
    )
    
    
    13,582Cash and cash equivalents, beginning of period
    
    
    43,108
    
    
    
    15,380Cash and cash equivalents, end of period
    
    $
    41,720
    
    
    $
    28,962Supplemental disclosureIncome taxes paid
    
    $
    12,607
    
    
    $
    7,353
  5




---



##### Table of Contents



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, October 1, 2009
    
    
    22,965,952
    
    
    $
    230
    
    
    $
    227,288
    
    
    $
    (19,923
    )
    
    $
    111,983
    
    
    $
    319,578Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,545
    
    
    
    4,545Shares issued upon exercise
of stock options
    
    
    157,642
    
    
    
    1
    
    
    
    1,498
    
    
    
    
    
    
    
    
    
    
    
    1,499Restricted stock units vested
    
    
    75,555
    
    
    
    1
    
    
    
    (213
    )
    
    
    
    
    
    
    
    
    
    
    (212
    )ESPP
    
    
    13,060
    
    
    
    
    
    
    
    269
    
    
    
    
    
    
    
    
    
    
    
    269Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    4,035
    
    
    
    
    
    
    
    
    
    
    
    4,035Tax benefit on stock option
exercises
    
    
    
    
    
    
    
    
    
    
    400
    
    
    
    
    
    
    
    
    
    
    
    400Balance, July 4, 2010
    
    
    23,212,209
    
    
    $
    232
    
    
    $
    233,277
    
    
    $
    (19,923
    )
    
    $
    116,528
    
    
    $
    330,114
  6




---



##### Table of Contents



ARGON ST, INC. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(In thousands, except share and per share amounts)
 1. TENDER OFFER AND SUBSEQUENT MERGER
   2. BASIS OF PRESENTATION
      7




---



##### Table of Contents



ARGON ST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(In thousands, except share and per share amounts)
   3. EARNINGS PER SHARE
  For the three months ended
    
    
    For the nine months endedJuly 4, 2010
    
    
    June 28, 2009
    
    
    July 4, 2010
    
    
    June 28, 2009Net income (loss)
    
    $
    (4,778
    )
    
    $
    6,592
    
    
    $
    4,545
    
    
    $
    17,597Weighted average shares outstanding  basic
    
    
    21,917,570
    
    
    
    21,687,149
    
    
    
    21,849,546
    
    
    
    21,689,761Basic earnings (loss) per share
    
    $
    (0.22
    )
    
    $
    0.30
    
    
    $
    0.21
    
    
    $
    0.81Effect of dilutive securities:Net shares issuable upon exercise of stock
options and awards
    
    
    
    
    
    
    318,514
    
    
    
    446,400
    
    
    
    306,090Weighted average shares outstanding 
diluted
    
    
    21,917,570
    
    
    
    22,005,663
    
    
    
    22,295,946
    
    
    
    21,995,851Diluted earnings (loss) per share
    
    $
    (0.22
    )
    
    $
    0.30
    
    
    $
    0.20
    
    
    $
    0.80
  4. STOCK-BASED COMPENSATION
   8




---



##### Table of Contents



ARGON ST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(In thousands, except share and per share amounts)
 For the three months ended
    
    
    For the nine months endedJune 28,
    
    
    July 4,
    
    
    June 28,July 4, 2010
    
    
    2009
    
    
    2010
    
    
    2009Cost of revenues
    
    $
    1,315
    
    
    $
    678
    
    
    $
    3,580
    
    
    $
    1,921General and administrative expense
    
    
    567
    
    
    
    327
    
    
    
    1420
    
    
    
    891Total pre-tax stock-based compensation included in
income from operations
    
    
    1,882
    
    
    
    1,005
    
    
    
    5,000
    
    
    
    2,812Income tax expense (benefit) recognized for
stock-based compensation
    
    
    (563
    )
    
    
    (250
    )
    
    
    (1,430
    )
    
    
    (707
    )Total stock-based compensation expense, net of tax
    
    $
    1,319
    
    
    $
    755
    
    
    $
    3,570
    
    
    $
    2,105
  Stock Option Activity
  Weighted-AverageWeighted-Average
    
    
    Remaining
    
    
    Aggregate IntrinsicNumber of Shares
    
    
    Exercise Price
    
    
    Contractual Term
    
    
    ValueShares under option, September 30, 2009
    
    
    1,675,872
    
    
    $
    18.50Options granted
    
    
    155,500
    
    
    
    21.23Options exercised
    
    
    (157,642
    )
    
    
    9.51
    
    
    
    
    
    
    $
    2,798Options cancelled and expired
    
    
    (22,870
    )
    
    
    25.24Shares under option, July 4, 2010
    
    
    1,650,860
    
    
    
    19.52
    
    
    
    5.32
    
    
    $
    24,348Options vested at July 4, 2010
    
    
    1,160,503
    
    
    
    18.75
    
    
    
    4.35
    
    
    $
    18,011As of July 4, 2010, options that are
vested and expected to vest prior to
expiration
    
    
    1,642,610
    
    
    $
    19.49
    
    
    
    5.32
    
    
    $
    24,274
 9




---



##### Table of Contents



ARGON ST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(In thousands, except share and per share amounts)
 Restricted Share Activity
  Weighted-AverageGrant Date FairNumber of Shares
    
    
    ValueUnvested shares, September 30, 2009
    
    
    425,663
    
    
    $
    20.37Award shares granted
    
    
    152,250
    
    
    
    21.18Award shares vested
    
    
    (77,555
    )
    
    
    18.31Award shares surrendered for taxes
    
    
    (9,954
    )
    
    
    18.31Award shares forfeited
    
    
    (11,125
    )
    
    
    22.61Unvested shares, July 4, 2010
    
    
    481,279
    
    
    $
    20.94
   5. ACCOUNTS RECEIVABLE
  July 4 ,
    
    
    September 30,2010
    
    
    2009Billed and billable
    
    $
    39,059
    
    
    $
    46,070Unbilled costs and fees
    
    
    63,671
    
    
    
    64,779Retainages
    
    
    6,352
    
    
    
    6,109Reserve
    
    
    
    
    
    
    (302
    )Accounts receivable, net
    
    $
    109,082
    
    
    $
    116,656
  10




---



##### Table of Contents



ARGON ST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(In thousands, except share and per share amounts)
 6. INVENTORY
  July 4,
    
    
    September 30,2010
    
    
    2009Raw Materials
    
    $
    5,490
    
    
    $
    3,212Component parts, work in process
    
    
    3,322
    
    
    
    797Finished component parts
    
    
    2,134
    
    
    
    2,30310,946
    
    
    $
    6,313Reserve
    
    
    (291
    )
    
    
    (291
    )Inventory, net
    
    $
    10,655
    
    
    $
    6,021
 7. PROPERTY, EQUIPMENT AND SOFTWARE
  July 4,
    
    
    September 30,2010
    
    
    2009Computer, machinery and test equipment
    
    $
    37,434
    
    
    $
    29,841Leasehold improvements
    
    
    13,662
    
    
    
    12,238Computer software
    
    
    5,504
    
    
    
    5,575Furniture and fixtures
    
    
    1,516
    
    
    
    1,514Equipment under capital lease
    
    
    170
    
    
    
    337Construction in progress
    
    
    6,694
    
    
    
    11,81364,980
    
    
    
    61,318Less accumulated depreciation and amortization
    
    
    (38,458
    )
    
    
    (33,276
    )$
    26,522
    
    
    $
    28,042
  8. REVOLVING LINE OF CREDIT
   11




---



##### Table of Contents



ARGON ST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(In thousands, except share and per share amounts)
   9. INCOME TAXES
     10. FAIR VALUE OF FINANCIAL INSTRUMENTS
 Fair Value Measurements and Disclosures,
     12




---



##### Table of Contents



ARGON ST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(In thousands, except share and per share amounts)
 11. COMMITMENTS AND CONTINGENCIES
 Sullivan v. Argon ST, Inc., et al.
  12. RELATED PARTY TRANSACTIONS
  13. SUBSEQUENT EVENTS
  14. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
   13




---



##### Table of Contents



ARGON ST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(In thousands, except share and per share amounts)
    14




---



##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
  Forward-looking Statements
  Tender Offer and Merger
  General
  15




---



##### Table of Contents



Revenues
      Three Months Ended
    
    
    Nine Months EndedContract Type
    
    July 4, 2010
    
    
    June 28, 2009
    
    
    July 4, 2010
    
    
    June 28, 2009Fixed-price contracts
    
    
    43
    %
    
    
    52
    %
    
    
    51
    %
    
    
    53
    %Cost reimbursable contracts
    
    
    54
    %
    
    
    42
    %
    
    
    46
    %
    
    
    41
    %Time and material contracts
    
    
    3
    %
    
    
    6
    %
    
    
    3
    %
    
    
    6
    %
 16




---



##### Table of Contents



17




---



##### Table of Contents



Backlog
     July 4,
    
    
    September 30,2010
    
    
    2009Funded
    
    $
    151,882
    
    
    $
    137,947Unfunded
    
    
    84,037
    
    
    
    95,413Total
    
    $
    235,919
    
    
    $
    233,360
  Cost of Revenues
  General and Administrative Expenses
  Research and Development
  18




---



##### Table of Contents



Interest Income and Expense
   Critical Accounting Practices and Estimates
 General
  Revenue and Cost Recognition
 General
 Revenue Recognition  Construction-Type and Production-Type Contracts 
General.
   19




---



##### Table of Contents



.
 Indirect rate variance
      20




---



##### Table of Contents



Award Fee Recognition
  Goodwill
 Goodwill
 Long-Lived Assets (Excluding Goodwill)
 Impairment or Disposal of Long-Lived
Assets
 Accounts Receivable
  Stock-Based Compensation
  21




---



##### Table of Contents



Historical Operating Results
 Three months ended July 4, 2010 compared to three months ended June 28, 2009
  Three months endedAmount of
    
    
    %July 4,
    
    
    June 28,
    
    
    increase
    
    
    increase2010
    
    
    2009
    
    
    (decrease)
    
    
    (decrease)Contract revenues
    
    $
    64,130
    
    
    $
    91,005
    
    
    
    (      $26,875
    )
    
    
    -30
    %Cost of revenues
    
    
    61,747
    
    
    
    72,732
    
    
    
    (10,985
    )
    
    
    -15
    %General and administrative expenses
    
    
    9,597
    
    
    
    6,400
    
    
    
    3,197
    
    
    
    50
    %Research and development expenses
    
    
    2,680
    
    
    
    2,341
    
    
    
    339
    
    
    
    14
    %Interest income, net
    
    
    20
    
    
    
    5
    
    
    
    15
    
    
    
    300
    %Provision for income taxes
    
    
    (5,096
    )
    
    
    2,945
    
    
    
    (8,041
    )
    
    
    -273
    %Net income (loss)
    
    
    ($4,778
    )
    
    $
    6,592
    
    
    
    (      $11,370
    )
    
    
    -172
    %
 Revenues
    22




---



##### Table of Contents



Cost of Revenues
    General and Administrative Expenses
  Research and Development Expenses
  23




---



##### Table of Contents



Provision for Income Taxes
  Net Income
  Nine months ended July 4, 2010 compared to nine months ended June 28, 2009:
  Nine months endedAmount of
    
    
    %July 4,
    
    
    June 28,
    
    
    increase
    
    
    increase2010
    
    
    2009
    
    
    (decrease)
    
    
    (decrease)Contract revenues
    
    $
    214,660
    
    
    $
    270,603
    
    
    $
    (55,943
    )
    
    
    -21
    %Cost of revenues
    
    
    183,213
    
    
    
    219,274
    
    
    
    (36,061
    )
    
    
    -16
    %General and administrative expenses
    
    
    18,356
    
    
    
    18,316
    
    
    
    40
    
    
    
    0
    %Research and development expenses
    
    
    7,959
    
    
    
    6,478
    
    
    
    1,481
    
    
    
    23
    %Interest income, net
    
    
    27
    
    
    
    (21
    )
    
    
    48
    
    
    
    -229
    %Provision for income taxes
    
    
    613
    
    
    
    8,917
    
    
    
    (8,304
    )
    
    
    -93
    %Net income
    
    
    4,545
    
    
    
    17,597
    
    
    
    (13,052
    )
    
    
    -74
    %
 Revenues
   24




---



##### Table of Contents



Cost of Revenues
    General and Administrative Expenses
  25




---



##### Table of Contents



Research and Development Expenses
  Provision for Income Taxes
  Net Income
  Analysis of Liquidity and Capital Resources
  Cash
  Cash Flows
   26




---



##### Table of Contents



Line of Credit
     Contractual Billing Provisions
  27




---



##### Table of Contents



Contractual Obligations and Commitments
  Due in 1
    
    
    Due in 2
    
    
    Due in 3
    
    
    Due in 4
    
    
    Due in 5Total
    
    
    year
    
    
    years
    
    
    years
    
    
    years
    
    
    years
    
    
    ThereafterCapital leases
    
    $
    20
    
    
    $
    20
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating leases
    
    
    33,160
    
    
    
    7,641
    
    
    
    7,383
    
    
    
    7,165
    
    
    
    6,780
    
    
    
    4,191
    
    
    
    Total
    
    $
    33,180
    
    
    $
    7,661
    
    
    $
    7,383
    
    
    $
    7,165
    
    
    $
    6,780
    
    
    $
    4,191
    
    
    
    
  (in thousands)
    
    Total
    
    
    Less Than 1 Year
    
    
    1-3 YearsLetters of credit
    
    $
    2,365
    
    
    $
    1,612
    
    
    $
    753
  Market Risks
  Cash and Cash Equivalents
  Access to Bank Credit
  28




---



##### Table of Contents



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.
 29




---



##### 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. (REMOVED AND RESERVED)
 
 ITEM 5. OTHER INFORMATION
  30




---



##### Table of Contents



ITEM 6. EXHIBITS
 ExhibitNumber
    
    Description of Exhibit2.1
    
    Agreement and Plan of Merger, dated
as of June 30, 2010, among The
Boeing Company, Vortex Merger Sub,
Inc. and Argon ST, Inc.
(incorporated by reference to
Exhibit 2.1 of the Companys
Current Report on Form 8-K, filed
June 30, 2010)2.2
    
    Tender and Voting Agreement, dated as of June 30,
2010, by and among The Boeing Company, Vortex
Merger Sub, Inc. and Terry L. Collins (and certain
affiliates) (incorporated by reference to
Exhibit 2.2 of the Companys Current Report on
Form 8-K, filed June 30, 2010)2.3
    
    Tender and Voting Agreement, dated as of June 30,
2010, by and among The Boeing Company, Vortex
Merger Sub, Inc. and Victor F. Sellier (and certain
affiliates) (incorporated by reference to
Exhibit (e)(3) of the Companys Schedule 14D-9,
filed July 8, 2010)2.4
    
    Tender and Voting Agreement, dated as of June 30,
2010, by and among The Boeing Company, Vortex
Merger Sub, Inc. and Thomas E. Murdock (and certain
affiliates) (incorporated by reference to
Exhibit (e)(4) of the Companys Schedule 14D-9,
filed July 8, 2010)3.1
    
    Amended and Restated Certificate of Incorporation
of Argon ST, Inc. (incorporated by reference to
Exhibit 3.1 of the Companys Current Report on
Form 8-K, filed August 5, 2010)3.2
    
    Amended and Restated By-Laws of Argon ST, Inc.
(incorporated by reference to Exhibit 3.2 of the
Companys Current Report on Form 8-K, filed August
5, 2010)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 31




---



##### Table of Contents



SIGNATURES
  ARGON ST, INC.
(Registrant)By:
    /s/ Terry L. CollinsTerry L. Collins, Ph.D.President and Chief Executive OfficerBy:
    /s/ Aaron N. DanielsAaron N. DanielsChief Financial Officer  32