##### 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 April 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
    
    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 SIX MONTHS ENDED APRIL 4, 2010
 TABLE OF CONTENTS
 PART I. FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Condensed Consolidated Balance Sheets at April 4, 2010 and September 30, 2009
    
    
    3Condensed Consolidated Statements of Earnings for the three and six months ended
April 4, 2010 and March 29, 2009
    
    
    4Condensed Consolidated Statements of Cash Flows for the three and six months ended
April 4, 2010 and March 29, 2009
    
    
    5Condensed Consolidated Statements of Stockholders Equity for the six months ended
April 4, 2010
    
    
    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
    
    
    27Item 4. Controls and Procedures
    
    
    27PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    28Item 1A. Risk Factors
    
    
    28Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    28Item 3. Defaults Upon Senior Securities
    
    
    28Item 4. Submission of Matters to a Vote of Security Holders
    
    
    28-29Item 5. Other Information
    
    
    29Item 6. Exhibits
    
    
    30Signatures
    
    
    31Exhibits
    
    
    32-34EX-31.1EX-31.2EX-32.1
  2




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ARGON ST, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
 April 4, 2010
    
    
    September 30, 2009(unaudited)ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    24,551
    
    
    $
    43,108Accounts receivable, net
    
    
    147,721
    
    
    
    116,656Inventory, net
    
    
    6,598
    
    
    
    6,021Deferred project costs
    
    
    1,304
    
    
    
    2,296Deferred income tax asset
    
    
    5,296
    
    
    
    5,137Prepaids and other
    
    
    1,530
    
    
    
    1,499TOTAL CURRENT ASSETS
    
    
    187,000
    
    
    
    174,717Property, equipment and software, net
    
    
    26,134
    
    
    
    28,042Goodwill
    
    
    173,948
    
    
    
    173,948Intangibles, net
    
    
    2,344
    
    
    
    2,745Other assets
    
    
    485
    
    
    
    573TOTAL ASSETS
    
    $
    389,911
    
    
    $
    380,025LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESAccounts payable and accrued expenses
    
    $
    22,862
    
    
    $
    32,526Accrued salaries and related expenses
    
    
    13,810
    
    
    
    13,887Deferred revenue
    
    
    15,146
    
    
    
    5,504Income taxes payable
    
    
    1,319
    
    
    
    4,784Other current liabilities
    
    
    45
    
    
    
    155TOTAL CURRENT LIABILITIES
    
    
    53,182
    
    
    
    56,856Deferred income tax liability, long-term
    
    
    1,609
    
    
    
    1,942Other long-term liabilities
    
    
    2,869
    
    
    
    1,649Commitments and contingenciesSTOCKHOLDERS EQUITYCommon stock:
$.01 Par Value, 100,000,000 shares authorized,
23,103,807 and 22,965,952 shares issued
at April 4, 2010 and September 30, 2009
    
    
    231
    
    
    
    230Additional paid in capital
    
    
    230,636
    
    
    
    227,288Treasury stock at cost, 1,219,077 shares at
April 4, 2010 and September 30, 2009
    
    
    (19,923
    )
    
    
    (19,923
    )Retained earnings
    
    
    121,307
    
    
    
    111,983TOTAL STOCKHOLDERS EQUITY
    
    
    332,251
    
    
    
    319,578TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    389,911
    
    
    $
    380,025
  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 Six Months EndedApril 4, 2010
    
    
    March 29, 2009
    
    
    April 4, 2010
    
    
    March 29, 2009CONTRACT REVENUES
    
    $
    77,344
    
    
    $
    95,572
    
    
    $
    150,531
    
    
    $
    179,598COST OF REVENUES
    
    
    62,499
    
    
    
    77,695
    
    
    
    121,466
    
    
    
    146,541GENERAL AND
ADMINISTRATIVE
EXPENSES
    
    
    4,355
    
    
    
    6,128
    
    
    
    8,760
    
    
    
    11,916RESEARCH AND
DEVELOPMENT
EXPENSES
    
    
    2,922
    
    
    
    2,366
    
    
    
    5,279
    
    
    
    4,138INCOME FROM
OPERATIONS
    
    
    7,568
    
    
    
    9,383
    
    
    
    15,026
    
    
    
    17,003INTEREST INCOME
(EXPENSE), NET
    
    
    7
    
    
    
    (11
    )
    
    
    7
    
    
    
    (25
    )INCOME BEFORE
INCOME TAXES
    
    
    7,575
    
    
    
    9,372
    
    
    
    15,033
    
    
    
    16,978PROVISION FOR
INCOME TAXES
    
    
    2,869
    
    
    
    3,556
    
    
    
    5,709
    
    
    
    5,973NET INCOME
    
    $
    4,706
    
    
    $
    5,816
    
    
    $
    9,324
    
    
    $
    11,005EARNINGS PER SHARE
(Basic)
    
    $
    0.22
    
    
    $
    0.27
    
    
    $
    0.43
    
    
    $
    0.51EARNINGS PER SHARE
(Diluted)
    
    $
    0.21
    
    
    $
    0.26
    
    
    $
    0.42
    
    
    $
    0.50WEIGHTED-AVERAGE
SHARES
OUTSTANDINGBasic
    
    
    21,865,320
    
    
    
    21,713,793
    
    
    
    21,816,641
    
    
    
    21,691,082Diluted
    
    
    22,295,103
    
    
    
    22,009,828
    
    
    
    22,353,743
    
    
    
    22,016,996
  4




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ARGON ST, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(In thousands)
 For the Six Months EndedApril 4, 2010
    
    
    March 29, 2009Cash flows from operating activitiesNet income
    
    $
    9,324
    
    
    $
    11,005Adjustments to reconcile net income to net cash used in
operating activities:Depreciation and amortization
    
    
    4,622
    
    
    
    4,508Claims resolution
    
    
    
    
    
    
    640Amortization of deferred costs
    
    
    84
    
    
    
    84Deferred income tax expense (benefit)
    
    
    (527
    )
    
    
    448Stock-based compensation
    
    
    3,118
    
    
    
    1,807Other
    
    
    102
    
    
    
    (93
    )Change in:Accounts receivable, net
    
    
    (31,167
    )
    
    
    (26,032
    )Inventory
    
    
    (577
    )
    
    
    (101
    )Prepaids and other
    
    
    961
    
    
    
    1,929Accounts payable and accrued expenses
    
    
    (9,404
    )
    
    
    7,855Accrued salaries and related expenses
    
    
    (77
    )
    
    
    2,689Deferred revenue
    
    
    9,642
    
    
    
    3,653Income taxes
    
    
    (3,430
    )
    
    
    238Other liabilities
    
    
    698
    
    
    
    (217
    )Net cash provided by (used in) operating activities
    
    
    (16,631
    )
    
    
    8,413Cash flows from investing activitiesAcquisitions of property, equipment and software
    
    
    (2,365
    )
    
    
    (4,452
    )Other activity
    
    
    (204
    )
    
    
    66Net cash used in investing activities
    
    
    (2,569
    )
    
    
    (4,386
    )Cash flows from financing activitiesStock repurchases
    
    
    
    
    
    
    (1,498
    )Payments on capital leases
    
    
    (18
    )
    
    
    (30
    )Tax benefit of stock option exercises
    
    
    188
    
    
    
    4Proceeds from exercise of stock options
    
    
    416
    
    
    
    171Restricted shares reacquired in net share issuance
    
    
    (212
    )
    
    
    Proceeds from employee stock purchase plan exercises
    
    
    269
    
    
    
    251Net cash provided by (used in) financing activities
    
    
    643
    
    
    
    (1,102
    )Net increase (decrease) in cash and cash equivalents
    
    
    (18,557
    )
    
    
    2,925Cash and cash equivalents, beginning of period
    
    
    43,108
    
    
    
    15,380Cash and cash equivalents, end of period
    
    $
    24,551
    
    
    $
    18,305Supplemental disclosureIncome taxes paid
    
    $
    9,447
    
    
    $
    5,253
  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, 2009
    
    
    22,965,952
    
    
    $
    230
    
    
    $
    227,288
    
    
    $
    (19,923
    )
    
    $
    111,983
    
    
    $
    319,578Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,324
    
    
    
    9,324Shares issued upon exercise
of stock options
    
    
    49,240
    
    
    
    
    
    
    
    416
    
    
    
    
    
    
    
    
    
    
    
    416Restricted stock units
vested
    
    
    75,555
    
    
    
    1
    
    
    
    (212
    )
    
    
    
    
    
    
    
    
    
    
    (211
    )ESPP
    
    
    13,060
    
    
    
    
    
    
    
    269
    
    
    
    
    
    
    
    
    
    
    
    269Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    2,687
    
    
    
    
    
    
    
    
    
    
    
    2,687Tax benefit on stock option
exercises
    
    
    
    
    
    
    
    
    
    
    188
    
    
    
    
    
    
    
    
    
    
    
    188Balance, April 4, 2010
    
    
    23,103,807
    
    
    $
    231
    
    
    $
    230,636
    
    
    $
    (19,923
    )
    
    $
    121,307
    
    
    $
    332,251
  6




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




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ARGON ST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(In thousands, except share and per share amounts)
 2. EARNINGS PER SHARE
  For the three months ended
    
    
    For the six months endedApril 4, 2010
    
    
    March 29, 2009
    
    
    April 4, 2010
    
    
    March 29, 2009Net income
    
    $
    4,706
    
    
    $
    5,816
    
    
    $
    9,324
    
    
    $
    11,005Weighted average shares outstanding  basic
    
    
    21,865,320
    
    
    
    21,713,793
    
    
    
    21,816,641
    
    
    
    21,691,082Basic earnings per share
    
    $
    0.22
    
    
    $
    0.27
    
    
    $
    0.43
    
    
    $
    0.51Effect of dilutive securities:Net shares issuable upon exercise of stock options
and awards
    
    
    429,783
    
    
    
    296,035
    
    
    
    537,102
    
    
    
    325,914Weighted average shares outstanding  diluted
    
    
    22,295,103
    
    
    
    22,009,828
    
    
    
    22,353,743
    
    
    
    22,016,996Diluted earnings per share
    
    $
    0.21
    
    
    $
    0.26
    
    
    $
    0.42
    
    
    $
    0.50
  3. STOCK-BASED COMPENSATION
   For the three months ended
    
    
    For the six months endedApril 4,
    
    
    March 29,
    
    
    April 4,
    
    
    March 29,2010
    
    
    2009
    
    
    2010
    
    
    2009Cost of revenues
    
    $
    1,198
    
    
    $
    666
    
    
    $
    2,259
    
    
    $
    1,244General and administrative expense
    
    
    504
    
    
    
    332
    
    
    
    859
    
    
    
    563Total pre-tax stock-based compensation included in
income from operations
    
    
    1,702
    
    
    
    998
    
    
    
    3,118
    
    
    
    1,807Income tax expense (benefit) recognized for stock-based compensation
    
    
    (481
    )
    
    
    (258
    )
    
    
    (868
    )
    
    
    (478
    )Total stock-based compensation expense, net of tax
    
    $
    1,221
    
    
    $
    740
    
    
    $
    2,250
    
    
    $
    1,329
 8




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ARGON ST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(In thousands, except share and per share amounts)
  Stock Option Activity
  Weighted-AverageWeighted-
    
    
    Remaining
    
    
    AggregateNumber of
    
    
    Average
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Exercise Price
    
    
    Term
    
    
    ValueShares under option, September 30, 2009
    
    
    1,675,872
    
    
    $
    18.50Options granted
    
    
    155,500
    
    
    
    21.23Options exercised
    
    
    (49,240
    )
    
    
    8.46
    
    
    
    
    
    
    $
    780Options cancelled and expired
    
    
    (12,720
    )
    
    
    25.27Shares under option, April 4, 2010
    
    
    1,769,412
    
    
    
    18.97
    
    
    
    5.41
    
    
    $
    14,804Options vested at April 4, 2010
    
    
    1,270,805
    
    
    
    18.01
    
    
    
    4.46
    
    
    $
    12,002As of April 4, 2010, options that are
vested and expected to vest prior to
expiration
    
    
    1,758,449
    
    
    $
    18.93
    
    
    
    5.41
    
    
    $
    14,784
 Restricted Share Activity
  Weighted-Number of
    
    
    Average GrantShares
    
    
    Date Fair ValueUnvested shares, September 30, 2009
    
    
    425,663
    
    
    $
    20.37Award shares granted
    
    
    151,250
    
    
    
    21.16Award shares vested
    
    
    (75,555
    )
    
    
    18.31Award shares surrendered for taxes
    
    
    (9,954
    )
    
    
    18.31Award shares forfeited
    
    
    (5,000
    )
    
    
    22.20Unvested shares, April 4, 2010
    
    
    486,404
    
    
    $
    20.96
   9




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ARGON ST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(In thousands, except share and per share amounts)
 4. ACCOUNTS RECEIVABLE
  April 4 ,
    
    
    September 30,2010
    
    
    2009Billed and billable
    
    $
    65,649
    
    
    $
    46,070Unbilled costs and fees
    
    
    69,388
    
    
    
    64,779Unfavorable indirect rate variance
    
    
    5,481
    
    
    
    Retainages
    
    
    7,425
    
    
    
    6,109Reserve
    
    
    (222
    )
    
    
    (302
    )Accounts receivable, net
    
    $
    147,721
    
    
    $
    116,656
  5. INVENTORY
  April 4,
    
    
    September 30,2010
    
    
    2009Raw Materials
    
    $
    2,889
    
    
    $
    3,212Component parts, work in process
    
    
    1,800
    
    
    
    797Finished component parts
    
    
    2,200
    
    
    
    2,3036,889
    
    
    $
    6,313Reserve
    
    
    (291
    )
    
    
    (291
    )Inventory, net
    
    $
    6,598
    
    
    $
    6,021
 10




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ARGON ST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(In thousands, except share and per share amounts)
 6. PROPERTY, EQUIPMENT AND SOFTWARE
  April 4,
    
    
    September 30,2010
    
    
    2009Computer, machinery and test equipment
    
    $
    37,099
    
    
    $
    29,841Leasehold improvements
    
    
    13,127
    
    
    
    12,238Computer software
    
    
    5,580
    
    
    
    5,575Furniture and fixtures
    
    
    1,516
    
    
    
    1,514Equipment under capital lease
    
    
    337
    
    
    
    337Construction in progress
    
    
    5,268
    
    
    
    11,81362,927
    
    
    
    61,318Less accumulated depreciation and amortization
    
    
    (36,793
    )
    
    
    (33,276
    )$
    26,134
    
    
    $
    28,042
  7. REVOLVING LINE OF CREDIT
    8. INCOME TAXES
   11




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ARGON ST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(In thousands, except share and per share amounts)
   9. FAIR VALUE OF FINANCIAL INSTRUMENTS
 Fair Value Measurements and Disclosures,
     10. COMMITMENTS AND CONTINGENCIES
  11. RELATED PARTY TRANSACTIONS
  12. SUBSEQUENT EVENTS
 .
 13. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
  12




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ARGON ST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(In thousands, except share and per share amounts)
    13




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##### Table of Contents



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
      Three Months Ended
    
    Six Months EndedContract Type
    
    April 4, 2010
    
    March 29, 2009
    
    April 4, 2010
    
    March 29, 2009Fixed-price contracts
    
    52%
    
    55%
    
    53%
    
    56%Cost reimbursable
contracts
    
    45%
    
    40%
    
    44%
    
    39%Time and material
contracts
    
    3%
    
    5%
    
    3%
    
    5%
  15




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Backlog
     April 4,
    
    
    September 30,2010
    
    
    2009Funded
    
    $
    167,963
    
    
    $
    137,947Unfunded
    
    
    90,843
    
    
    
    95,413Total
    
    $
    258,806
    
    
    $
    233,360
 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
 Revenue Recognition  Construction-Type and Production-Type Contracts 
General.
 17




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Indirect rate variance
     18




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Award Fee Recognition
  Goodwill
 Goodwill
 Long-Lived Assets (Excluding Goodwill)
 Impairment or Disposal of Long-Lived
Assets
 Accounts Receivable
  19




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Stock-Based Compensation
  Historical Operating Results
 Three months ended April 4, 2010 compared to three months ended March 29, 2009
  Three months endedAmount of
    
    
    %April 4,
    
    
    March 29,
    
    
    increase
    
    
    increase2010
    
    
    2009
    
    
    (decrease)
    
    
    (decrease)Contract revenues
    
    $
    77,344
    
    
    $
    95,572
    
    
    
    ($18,228
    )
    
    
    -19
    %Cost of revenues
    
    
    62,499
    
    
    
    77,695
    
    
    
    (15,196
    )
    
    
    -20
    %General and administrative expenses
    
    
    4,355
    
    
    
    6,128
    
    
    
    (1,773
    )
    
    
    -29
    %Research and development expenses
    
    
    2,922
    
    
    
    2,366
    
    
    
    556
    
    
    
    23
    %Interest income, net
    
    
    7
    
    
    
    (11
    )
    
    
    18
    
    
    
    -164
    %Provision for income taxes
    
    
    2,869
    
    
    
    3,556
    
    
    
    (687
    )
    
    
    -19
    %Net income
    
    $
    4,706
    
    
    $
    5,816
    
    
    
    ($1,110
    )
    
    
    -19
    %
 Revenues
    20




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Cost of Revenues
  General and Administrative Expenses
  Research and Development Expenses
  Provision for Income Taxes
  21




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##### Table of Contents



Net Income
  Six months ended April 4, 2010 compared to six months ended March 29, 2009:
  Six months endedAmount of
    
    
    %April 4,
    
    
    March 29,
    
    
    in crease
    
    
    increase2010
    
    
    2009
    
    
    (decrease)
    
    
    (decrease)Contract revenues
    
    $
    150,531
    
    
    $
    179,598
    
    
    $
    (29,067
    )
    
    
    -16
    %Cost of revenues
    
    
    121,466
    
    
    
    146,541
    
    
    
    (25,075
    )
    
    
    -17
    %General and administrative expenses
    
    
    8,760
    
    
    
    11,916
    
    
    
    (3,156
    )
    
    
    -26
    %Research and development expenses
    
    
    5,279
    
    
    
    4,138
    
    
    
    1,141
    
    
    
    28
    %Interest income, net
    
    
    7
    
    
    
    (25
    )
    
    
    32
    
    
    
    -128
    %Provision for income taxes
    
    
    5,709
    
    
    
    5,973
    
    
    
    (264
    )
    
    
    -4
    %Net income
    
    
    9,324
    
    
    
    11,005
    
    
    
    (1,681
    )
    
    
    -15
    %
 Revenues
    22




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##### Table of Contents



Cost of Revenues
  General and Administrative Expenses
  Research and Development Expenses
  Provision for Income Taxes
  23




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##### Table of Contents



Net Income
  Analysis of Liquidity and Capital Resources
  Cash
  Cash Flows
     24




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##### Table of Contents



Line of Credit
     Contractual Billing Provisions
   25




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##### Table of Contents



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
    
    $
    25
    
    
    $
    20
    
    
    $
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating leases
    
    
    34,988
    
    
    
    7,663
    
    
    
    7,444
    
    
    
    7,127
    
    
    
    6,949
    
    
    
    5,749
    
    
    
    56Total
    
    $
    35,013
    
    
    $
    7,683
    
    
    $
    7,449
    
    
    $
    7,127
    
    
    $
    6,949
    
    
    $
    5,749
    
    
    $
    56
  (in thousands)
    
    Total
    
    Less Than 1 Year
    
    1-3 YearsLetters of credit
    
    $
    2,368
    
    
    $
    1,615
    
    
    $
    753
  Market Risks
  Cash and Cash Equivalents
  Access to Bank Credit
  Interest Rates
  26




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##### Table of Contents



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.
 27




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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
  Total Number of
    
    
    Approximate NumberTotal Number of
    
    
    
    
    
    
    Shares Purchased as
    
    
    of Shares that MayShares Purchased
    
    
    Average Price Paid
    
    
    Part of Publicly
    
    
    Yet Be PurchasedPeriod
    
    (1)
    
    
    per Share
    
    
    Announced Plan
    
    
    Under the PlanJanuary 4, 2010 to January 31, 2010
    
    
    385
    
    
    $
    25.85
    
    
    
    
    
    
    
    February 1, 2010 to February 28, 2010
    
    
    82
    
    
    $
    24.69
    
    
    
    
    
    
    
    March 1, 2010 to April 4, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Second quarter fiscal 2010 totals
    
    
    467
    
    
    $
    25.65
    
    
    
    
    
    
    
    
 
 (1)
    
    These amounts represent shares surrendered to satisfy tax withholding obligations in
connection with restricted stock units. 
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  28




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##### Table of Contents



a)
    
    The inspector of election tabulated the following votes for the election of
directors. There were 4,349,242 broker non-votes.
 Nominee for Office
    
    Number of Votes In Favor
    
    Number of Votes WithheldTerry L. Collins
    
    
    17,044,676
    
    
    
    438,588Thomas E. Murdock
    
    
    17,228,159
    
    
    
    255,105Victor F. Sellier
    
    
    16,513,497
    
    
    
    969,767S. Kent Rockwell
    
    
    17,225,472
    
    
    
    257,792David C. Karlgaard
    
    
    17,227,208
    
    
    
    256,056Lloyd A. Semple
    
    
    17,226,388
    
    
    
    256,876Robert McCashin
    
    
    17,221,098
    
    
    
    262,166John Irvin
    
    
    17,224,178
    
    
    
    259,086Peter A. Marino
    
    
    17,227,549
    
    
    
    255,715Maureen Baginski
    
    
    17,193,533
    
    
    
    289,731Delores M. Etter
    
    
    17,227,533
    
    
    
    255,731
 b)
    
    The inspector of election tabulated the following votes for the
proposal to ratify the selection by the Audit Committee of Grant Thornton LLP
as the Companys independent registered public accounting firm for the fiscal
year ending September 30, 2010. There were 1,557,754 broker non-votes.
 Number of Votes In Favor
    
    Number of Votes Against
    
    Abstain20,166,653
    
    58,520
    
    49,579
 
 ITEM 5. OTHER INFORMATION
  29




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##### Table of Contents



ITEM 6. EXHIBITS
 ExhibitNumber
    
    Description of Exhibit3.2
    
    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
February 26, 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 30




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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  31