##### 



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 December 30, 2007
 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.
 )
 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
  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




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##### 



ARGON ST, INC. AND SUBSIDIARIES
FORM 10-Q QUARTERLY REPORT
 FOR THE QUARTER ENDED DECEMBER 30, 2007
 TABLE OF CONTENTS
 PART I. FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Condensed Consolidated Balance Sheets at December 30, 2007 and September 30, 2007
    
    
    3Condensed Consolidated Statements of Earnings for the
fiscal quarters ended December 30, 2007 and December 31, 2006
    
    
    4Condensed Consolidated Statements of Cash Flows for the
fiscal quarters ended December 30, 2007 and December 31, 2006
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    22Item 4. Controls and Procedures
    
    
    23PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    23Item 1A. Risk Factors
    
    
    23Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    23Item 3. Defaults Upon Senior Securities
    
    
    23Item 4. Submission of Matters to a Vote of Security Holders
    
    
    24Item 5. Other Information
    
    
    24Item 6. Exhibits
    
    
    24Signatures
    
    
    26Exhibits
    
    
    27
 2




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##### 



ARGON ST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
 December 30, 2007
    
    
    September 30, 2007(unaudited)ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    7,265
    
    
    $
    22,965Accounts receivable, net
    
    
    111,031
    
    
    
    95,639Inventory, net
    
    
    2,957
    
    
    
    2,927Deferred income tax asset
    
    
    3,944
    
    
    
    3,218Prepaids and other
    
    
    1,179
    
    
    
    3,154TOTAL CURRENT ASSETS
    
    
    126,376
    
    
    
    127,903Property, equipment and software, net
    
    
    24,636
    
    
    
    22,822Goodwill
    
    
    172,372
    
    
    
    170,192Intangibles, net
    
    
    5,334
    
    
    
    5,760Restricted cash
    
    
    1,816
    
    
    
    1,800Other assets
    
    
    905
    
    
    
    1,168TOTAL ASSETS
    
    $
    331,439
    
    
    $
    329,645LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESAccounts payable and accrued expenses
    
    $
    19,996
    
    
    $
    23,796Accrued salaries and related expenses
    
    
    12,239
    
    
    
    12,899Deferred revenue
    
    
    14,137
    
    
    
    12,651Other current liabilities
    
    
    2,933
    
    
    
    681TOTAL CURRENT LIABILITIES
    
    
    49,305
    
    
    
    50,027Deferred income tax liability, long-term
    
    
    2,255
    
    
    
    1,794Deferred rent and other liabilities
    
    
    2,807
    
    
    
    2,988Commitments and contingenciesSTOCKHOLDERS EQUITYCommon stock:$.01 Par Value, 100,000,000 shares
authorized,
22,598,439 and 22,561,639 shares issued
at December 30, 2007 and September 30, 2007
    
    
    226
    
    
    
    226Additional paid in capital
    
    
    217,843
    
    
    
    217,038Treasury stock at cost, 824,145 and 674,145 shares at
December 30, and September 30, 2007, respectively
    
    
    (13,299
    )
    
    
    (10,527
    )Retained earnings
    
    
    72,302
    
    
    
    68,099TOTAL STOCKHOLDERS EQUITY
    
    
    277,072
    
    
    
    274,836TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    331,439
    
    
    $
    329,645
  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 Fiscal Quarter EndedDecember 30, 2007
    
    
    December 31, 2006CONTRACT REVENUES
    
    $
    74,266
    
    
    $
    60,405COST OF REVENUES
    
    
    60,337
    
    
    
    45,754GENERAL AND ADMINISTRATIVE
EXPENSES
    
    
    5,457
    
    
    
    4,727RESEARCH AND DEVELOPMENT EXPENSES
    
    
    1,700
    
    
    
    2,216INCOME FROM OPERATIONS
    
    
    6,772
    
    
    
    7,708INTEREST INCOME, NET
    
    
    120
    
    
    
    330INCOME BEFORE INCOME TAXES
    
    
    6,892
    
    
    
    8,038PROVISION FOR INCOME TAXES
    
    
    2,609
    
    
    
    2,855NET INCOME
    
    $
    4,283
    
    
    $
    5,183EARNINGS PER SHARE (Basic)
    
    $
    0.20
    
    
    $
    0.23EARNINGS PER SHARE (Diluted)
    
    $
    0.19
    
    
    $
    0.23WEIGHTED-AVERAGE SHARES
OUTSTANDINGBasic
    
    
    21,871,285
    
    
    
    22,228,157Diluted
    
    
    22,252,225
    
    
    
    22,724,450
  4




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##### 



ARGON ST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(In thousands)
 Fiscal Quarter EndedDecember 30, 2007
    
    
    December 31, 2006Cash flows from operating activitiesNet income
    
    $
    4,283
    
    
    $
    5,183Adjustments to reconcile net income to net cash used in
operating activities:Depreciation and amortization
    
    
    1,935
    
    
    
    1,893Deferred income tax expense (benefit)
    
    
    (242
    )
    
    
    276Stock-based compensation
    
    
    723
    
    
    
    390Bad debt expense
    
    
    
    
    
    
    30Loss on sale of equipment
    
    
    
    
    
    
    2Change in:Accounts receivable
    
    
    (15,489
    )
    
    
    1,528Inventory
    
    
    (30
    )
    
    
    (340
    )Prepaids and other
    
    
    1,278
    
    
    
    5,745Accounts payable and accrued expenses
    
    
    (5,460
    )
    
    
    (8,786
    )Accrued salaries and related expenses
    
    
    (660
    )
    
    
    (939
    )Other current liabilities
    
    
    (113
    )
    
    
    Deferred revenue
    
    
    966
    
    
    
    (8,962
    )Income taxes payable
    
    
    2,824
    
    
    
    1,649Net cash used in operating activities
    
    
    (9,985
    )
    
    
    (2,331
    )Cash flows from investing activitiesAcquisitions of property, equipment and software
    
    
    (3,323
    )
    
    
    (1,242
    )Proceeds from note receivable and other
    
    
    344
    
    
    
    (55
    )Net cash used in investing activities
    
    
    (2,979
    )
    
    
    (1,297
    )Cash flows from financing activitiesPurchase of treasury stock
    
    
    (2,772
    )
    
    
    Payments on capital leases
    
    
    (46
    )
    
    
    (18
    )Tax benefit of stock option exercises
    
    
    18
    
    
    
    231Proceeds from exercise of stock options
    
    
    64
    
    
    
    425Net cash provided by (used in) financing activities
    
    
    (2,736
    )
    
    
    638Net decrease in cash and cash equivalents
    
    
    (15,700
    )
    
    
    (2,990
    )Cash and cash equivalents, beginning of period
    
    
    22,965
    
    
    
    33,498Cash and cash equivalents, end of period
    
    $
    7,265
    
    
    $
    30,508Supplemental disclosureIncome taxes paid
    
    $
    7
    
    
    $
    699Interest expense paid
    
    $
    7
    
    
    $
    2
  5




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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
      6




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##### 



2. ACQUISITION OF CSIC HOLDINGS LLC
 Business Combinations
   3. EARNINGS PER SHARE
  Fiscal quarter endedDecember 30, 2007
    
    December 31, 2006Net income
    
    $
    4,283
    
    
    $
    5,183Weighted average shares outstanding  basic
    
    
    21,871,285
    
    
    
    22,228,157Basic earnings per share
    
    $
    0.20
    
    
    $
    0.23Effect of dilutive securities:Net shares issuable upon exercise of stock
options and awards
    
    
    380,940
    
    
    
    436,293Weighted average shares outstanding  diluted
    
    
    22,252,225
    
    
    
    22,724,450Diluted earnings per share
    
    $
    0.19
    
    
    $
    0.23
  7




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##### 



4. STOCK-BASED COMPENSATION
 Adoption of SFAS No. 123R
   Quarter EndedDecember 30, 2007
    
    
    December 31, 2006Cost of revenues
    
    $
    528
    
    
    $
    183General and administrative expense
    
    
    195
    
    
    
    207Total pre-tax stock-based compensation included
in income from operations
    
    
    723
    
    
    
    390Income tax expense (benefit) recognized for
stock-based compensation
    
    
    (128
    )
    
    
    (83
    )Total stock-based compensation expense, net of tax
    
    $
    595
    
    
    $
    307
 Stock Options
  Weighted-AverageWeighted-
    
    Remaining
    
    AggregateNumber
    
    Average
    
    Contractual
    
    Intrinsicof Shares
    
    Exercise Price
    
    Term
    
    ValueShares under option, September 30, 2007
    
    
    1,869,243
    
    
    $
    18.94Options granted
    
    
    7,000
    
    
    $
    20.69Options exercised
    
    
    (15,800
    )
    
    $
    4.10
    
    
    
    
    
    
    $
    246Options cancelled and expired
    
    
    (32,050
    )
    
    $
    24.97Shares under option, December 30, 2007
    
    
    1,828,393
    
    
    $
    17.33
    
    
    
    6.5
    
    
    $
    1,408Options vested at December 30, 2007
    
    
    1,133,859
    
    
    $
    14.52
    
    
    
    5.6
    
    
    $
    4,059As of December 30, 2007, options that
are vested and expected to vest prior to
expiration
    
    
    1,413,143
    
    
    $
    15.55
    
    
    
    6.0
    
    
    $
    3,604
 8




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##### 



For the fiscalquarter endedDecember 30,2007Volatility
    
    33.8%  35.9%Risk free rate
    
    4.6%  4.8%Exercise factor
    
    1.2
 Stock Awards
  Weighted-Number
    
    Average Grantof Shares
    
    Date Fair ValueUnvested shares, September 30, 2007
    
    
    21,000
    
    
    $
    21.39Awards granted
    
    
    32,000
    
    
    $
    18.00Awards vested
    
    
    (21,000
    )
    
    $
    21.39Unvested shares, December 30, 2007
    
    
    32,000
    
    
    $
    18.00
  Restricted Shares
  Stock Appreciation Rights
  9




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##### 



5. ACCOUNTS RECEIVABLE
  December 30, 2007
    
    
    September 30, 2007Billed and billable
    
    $
    39,936
    
    
    $
    37,235Unbilled costs and fees
    
    
    56,406
    
    
    
    47,088Unfavorable indirect rate variance
    
    
    2,877
    
    
    
    Retainages
    
    
    12,023
    
    
    
    11,527Reserve
    
    
    (211
    )
    
    
    (211
    )Accounts receivable, net
    
    $
    111,031
    
    
    $
    95,639
  6. INVENTORIES
  December 30, 2007
    
    
    September 30, 2007Raw Materials
    
    $
    1,450
    
    
    $
    1,451Component parts, work in process
    
    
    1,231
    
    
    
    1,223Finished component parts
    
    
    417
    
    
    
    3943,098
    
    
    
    3,068Reserve
    
    
    (141
    )
    
    
    (141
    )Inventory, net
    
    $
    2,957
    
    
    $
    2,927
 7. PROPERTY, EQUIPMENT AND SOFTWARE
  December
    
    
    September30, 2007
    
    
    30, 2007Computer, machinery and test equipment
    
    $
    26,113
    
    
    $
    23,838Leasehold improvements
    
    
    10,260
    
    
    
    9,651Computer software
    
    
    4,274
    
    
    
    3,687Furniture and fixtures
    
    
    1,742
    
    
    
    1,643Equipment under capital lease
    
    
    337
    
    
    
    344Construction in process
    
    
    6,233
    
    
    
    6,00048,959
    
    
    
    45,163Less accumulated depreciation and amortization
    
    
    (24,323
    )
    
    
    (22,342
    )$
    24,636
    
    
    $
    22,822
  10




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##### 



8. GOODWILL
  Balance at September 30, 2007
    
    $
    170,192Acquisition earn-out
    
    
    1,500Adjustments to and identification of the fair value of liabilities
    
    
    680Balance at December 30, 2007
    
    $
    172,372
  9. REVOLVING LINE OF CREDIT
    10. TREASURY STOCK
  11




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##### 



11. INCOME TAXES
 Accounting for
Uncertainty in Income Taxesan Interpretation of FASB Statement No. 109
    12. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
 Fair Value Measurements
 The Fair Value
Option for Financial Assets and Financial Liabilitiesincluding an amendment of FASB Statement No.
115
 12




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##### 



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Forward-looking Statements
  Overview
 General
  Revenues
  13




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##### 



Fiscal Quarter Ended
    
    Fiscal Quarter EndedContract Type
    
    December 30, 2007
    
    December 31, 2006Fixed-price contracts
    
    
    52
    %
    
    
    65
    %Cost reimbursable contracts
    
    
    44
    %
    
    
    27
    %Time and material contracts
    
    
    4
    %
    
    
    8
    %
   Backlog
  14




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##### 



December 30,
    
    
    September 30,2007
    
    
    2007Funded
    
    $
    229,279
    
    
    $
    246,571Unfunded
    
    
    54,982
    
    
    
    58,279Total
    
    $
    284,261
    
    
    $
    304,850
 Cost of Revenues
  General and Administrative Expenses
  Research and Development
   Interest Income and Expense
  15




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##### 



Deferred Revenue
    Critical Accounting Practices and Estimates
 General
  Revenue and Cost Recognition
 General
 Accounting for Performance of Construction-Type and Production-Type Contracts.
 16




---



##### 



Indirect rate variance
      Award Fee Recognition
  17




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##### 



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
 Share-Based Payment Accounting for Stock Issued to
Employees
  18




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##### 



Historical Operating Results
 Fiscal quarter ended December 30, 2007 compared to fiscal quarter ended December 31, 2006
  Fiscal quarter endedDecember 30,
    
    December 31,
    
    Increase2007
    
    2006
    
    (Decrease)Contract revenues
    
    $
    74,266
    
    
    $
    60,405
    
    
    $
    13,861Cost of revenues
    
    $
    60,337
    
    
    $
    45,764
    
    
    $
    14,573General and
administrative expenses
    
    $
    5,457
    
    
    $
    4,727
    
    
    $
    730Research and development
expenses
    
    $
    1,700
    
    
    
    2,216
    
    
    $
    (516
    )Interest income, net
    
    $
    120
    
    
    $
    330
    
    
    $
    (210
    )Provision for income taxes
    
    $
    2,609
    
    
    $
    2,855
    
    
    $
    (246
    )Net income
    
    $
    4,283
    
    
    $
    5,183
    
    
    $
    (900
    )
 Revenues:
  Cost of Revenues:
  General and Administrative Expenses:
  Research and Development Expenses:
  19




---



##### 



Interest Income, net:
  Provision for Income Taxes:
  Net Income:
  Analysis of Liquidity and Capital Resources
 Cash
  Line of Credit
   20




---



##### 



Cash Flows
       21




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##### 



Contractual Obligations and Commitments
  Due in
    
    
    Due in
    
    
    Due in
    
    
    Due in
    
    
    Due inTotal
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    ThereafterCapital leases
    
    $
    201
    
    
    $
    90
    
    
    $
    65
    
    
    $
    37
    
    
    $
    9
    
    
    
    
    
    
    
    Operating leases
    
    
    20,756
    
    
    
    8,261
    
    
    
    4,747
    
    
    
    2,574
    
    
    
    1,932
    
    
    
    1,550
    
    
    
    1,692Acquisition related (a)
    
    
    1,800
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,800
    
    
    
    
    
    
    
    Total
    
    $
    22,757
    
    
    $
    8,351
    
    
    $
    4,812
    
    
    $
    2,611
    
    
    $
    3,741
    
    
    $
    1,550
    
    
    $
    1,692
 
 (a)
    
    In accordance with the CSIC Holdings, LLC purchase agreement, the Company has retained $1.8
million of the purchase price which is expected to be paid in August 2010. The Company
maintains a $1.8 million restricted cash balance to settle this liability.  Market Risks
  Cash and Cash Equivalents:
  Interest Rates:
 
 Foreign Currency:
  ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
  22




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##### 



ITEM 4. CONTROLS AND PROCEDURES
 (a)
    
    Our management has evaluated, with the participation of the 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. Based on this evaluation, our Chief Executive Officer
and Chief Financial Officer have concluded that, as of such date, our disclosure
controls and procedures are effective to ensure that information we are required to
disclose in reports that we file or submit under the Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms and that such information is accumulated and
communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure.(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.
 PART II  OTHER INFORMATION
 ITEM 1. LEGAL PROCEEDINGS
  ITEM 1A. RISK FACTORS
  ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  ApproximateTotal Number of
    
    
    Number of SharesTotal Number
    
    
    Average
    
    
    Shares Purchased as
    
    
    that May Yet Beof Shares
    
    
    Price Paid
    
    
    Part of Publicly
    
    
    Purchased UnderPeriod
    
    Purchased
    
    
    per Share
    
    
    Announced Plan
    
    
    the PlanOctober 1, 2007 to October 31, 2007
    
    
    
    
    
    $
    
    
    
    
    547,900
    
    
    
    1,452,100November 1, 2007 to November 30,
2007
    
    
    
    
    
    
    
    
    
    
    547,900
    
    
    
    1,452,100December 1, 2007 to December 30,
2007
    
    
    150,000
    
    
    
    18.48
    
    
    
    697,900
    
    
    
    1,302,100First quarter fiscal 2008 totals
    
    
    150,000
    
    
    $
    18.48
    
    
    
    697,900
    
    
    
    1,302,100
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  23




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##### 



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  ITEM 5. OTHER INFORMATION
  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 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 13(a)(i) of
the Companys Annual
Report on Form 10-KSB
for the fiscal year
ended September 30,
2001)3.2.1
    
    Amendment, dated as of February 28,
2007, to the Companys Amended and
Restated Bylaws (incorporated by
reference to Exhibit 3.2 to the
Companys Current Report on Form 8-K,
filed March 6, 2007)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)10.1
    
    Second Amended and Restated Line of
Credit Agreement with Bank of America
(incorporated by reference to
Exhibit 10.1 of the Companys
Registration Statement on Form S-1
(Registration Statement
No. 333-98757) filed on August 27,
2002)10.1.1
    
    Fifth Amendment to Second Amended and
Restated Financing and Security
Agreement, dated as of March 31, 2006
(incorporated by reference to
Exhibit 10.1 of the Companys Current
Report on Form 8-K filed April 6,
2006)10.2+
    
    Argon ST, Inc. 2002 Stock Incentive
Plan, as amended (incorporated by
reference to Appendix A to the
Companys definitive proxy statement
on Schedule 14A for its 2006 annual
meeting of stockholders, filed
January 27, 2006)10.2.1
    
    Form of Stock Option Agreement under
Argon ST 2002 Stock Incentive Plan
(incorporated by reference to Exhibit
10.2.1 to the Companys Annual Report
on Form 10-K for the fiscal year
ended September 30, 2005, filed
December 14, 2005)10.3+
    
    Argon Engineering Associates, Inc.
Stock Plan (incorporated by reference
to Exhibit 10.3 to the
 24




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##### 



ExhibitNumber
    
    Description of ExhibitCompanys
Annual Report on Form 10-K for the
fiscal year ended September 30, 2004,
filed December 14, 2004)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 25




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SIGNATURES
  
 By: /s/ Terry L. Collins
 By: /s/ Aaron N. Daniels
  26