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FORM 10-K

For the Fiscal Year Ended September 30, 2003

For the transition period from __________ to ___________

Commission File Number 000-08193

SENSYTECH, INC.

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

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

     Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in

Part III of the Form 10-K or any amendment to this Form 10-K. [   ]

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.)

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     As of December 12, 2003, there were 6,498,178 shares of the Registrant’s Common Stock, par value $.01 per share, outstanding. The aggregate market value of the voting and non-voting shares of the Common Stock held by non-affiliates as of March 31, 2003, (the last business day of registrant’s second quarter of fiscal 2003) was approximately $46,694,000 based on the closing price on that date for the registrant’s common stock on the Nasdaq National Market.

DOCUMENTS INCORPORATED BY REFERENCE

     Part III of this report incorporates by reference specific portions of the Registrant’s Proxy Statement relating to the Annual Meeting of Stockholders to be held on February 17, 2004.

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SENSYTECH, INC. AND SUBSIDIARIES

For the Fiscal Year Ended September 30, 2003
______________

TABLE OF CONTENTS

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PART I

ITEM 1. BUSINESS

     We are a Delaware corporation, which resulted from the merger of Daedalus Enterprises, Inc., which was organized in 1968, and S.T. Research Corporation, which was organized in 1972. These two corporations merged on June 9, 1998, thus creating our company.

     We are a designer, developer and manufacturer of electronics and technology products for the defense and intelligence markets. Specifically, we specialize in integrated passive surveillance, communications and data links, electronic countermeasures and threat simulator systems, and airborne imaging and scanning systems. Our customers include the U.S. Department of Defense, other U.S. federal government agencies, major domestic prime defense contractors (such as Lockheed Martin Corporation and L-3 Communications Corporation), foreign governments and agencies and foreign defense contractors. Many of our products are used in national defense programs for the U.S. federal government intelligence community and approved international customers. As a result, approximately 80.7% of our revenues for the year ended September 30, 2003 were derived from U.S. federal agencies.

     Our products can be found on virtually every U.S. Navy surface and sub-surface combatant, as well as certain international surface combatants. These include major military platforms such as the SSN-688 Los Angeles class, SSN-21 Seawolf class and SSN-774 Virginia class submarines, all U.S. aircraft carriers, MK-V patrol boats, Cyclone class coastal patrol boats, certain U.S. Coast Guard vessels, NASA U-2 aircraft and U.S. special missions aircraft. Our reputation for engineering excellence has allowed us to develop long-term relationships across the defense and intelligence markets. As a result, for the year ended September 30, 2003, approximately 87.2% of our revenues were generated from contracts for which we are the prime contractor, while approximately 44.9% of our revenues were generated from sole or single source contracts. Single source contracts are contracts under which the purchaser purchases products only from us, although other suppliers exist, while sole source contracts are contracts under which the purchaser purchases products from us that only we can supply.

     At September 30, 2003, we employed approximately 220 people, 143 of whom held security clearances and 73 of whom were engineers. For the fiscal year ended September 30, 2003, we generated revenues of $53,183,000 and net income of $4,052,000. For the year ended September 30, 2002, we generated revenues of $32,290,000 and net income of $2,189,000. Our total funded backlog remained relatively constant from $29,571,000 at September 30, 2002 to $29,341,000 at September 30, 2003.

     On November 22, 2002, the Company sold 2 million shares of common stock for net proceeds after costs and underwriter’s commissions of $14,235,000. On December 12, 2002, the underwriters exercised their overallotment option, which provided net proceeds to the Company of $2,232,000 from the sale of an additional 300,000 shares.

     The Company operates through three business segments described below.

DEFENSE SYSTEMS GROUP

     This group designs, develops, manufactures and supports products which intercept, analyze, classify, identify, locate and track microwave signals from radars and weapons which may originate from potentially hostile sources. It provides communication data links and remote targeting systems and provides equipment and systems, that are used to carry out defensive measures against hostile signals or their sources to protect high value assets. The group’s systems are used on military platforms, such as ships, submarines, patrol aircraft, as well as at ground installations. For the fiscal year ended September 30, 2003, approximately 57.5 % of our revenues came from this group, while for the year ended September 30, 2002, approximately 55.9% of our revenues came from this group.

COMMUNICATIONS GROUP

     This group designs, develops, manufactures and supports products which intercept signals and analyze communications in a variety of transmission media, and then identify and locate the sources of these signals and communications. These systems are generally used by operators on board aircraft, ships and ground installations to intercept various kinds of transmissions over

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established communications networks. For the fiscal year ended September 30, 2003, approximately 34.3% of our revenues came from this group, while for the year ended September 30, 2002, approximately 32.5% of our revenues came from this group.

IMAGING GROUP

This group designs, develops, manufactures and supports products that are installed on special purpose aircraft and land vehicles and use multispectral, infrared, and light imaging systems to perform remote surveys. Applications of this technology include environmental pollution, facility inspection, utility monitoring, surface mineral exploration and other special purpose inspections where on-site inspections are not possible or desirable. For the fiscal year ended September 30, 2003, approximately 8.2% of our revenues came from this group, while for the year ended September 30, 2002, approximately 11.6% of our revenues came from this group.

Research and Development

     We believe that our continued success depends, in a large part, on our ability to develop new technology and apply new technology developed by others to solve the problems of our customers. Funding for the development of new or improved products and systems comes in part from internally sponsored research, with the majority of this funding coming from specifically designated development contracts. Our total research and development expenditures consist of the following for the years ended September 30:

Backlog

     Our backlog consists of the following for years ended September 30:

     We define backlog as the funded and unfunded amount provided in our contracts less previously recognized revenue. Contract options are estimated separately and not included in backlog. Backlog does not include the value of contracts where we have been given permission by the customer to begin or continue working, but where a formal contract or contract extension has not yet been signed.

     Our funded backlog does not include the full value of our contracts, because Congress often appropriates funds for a particular program or contract on a yearly or quarterly basis, even though the contract may call for performance that is expected to take a number of years.

     Changes in the amount of our backlog and funded backlog may vary as a result of the execution of new contracts or the extension of existing contracts, exercise of options, reductions from contracts that end or are completed, reductions from the early termination of contracts, and adjustments to estimates of previously included contracts, including the effect of change orders. Changes in the amount of our funded backlog are also affected by the funding cycles of the government. For the same reasons, we believe that period-to-period comparisons of backlog and funded backlog are not necessarily indicative of future revenues that we may receive.

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     Some of our contracts can be extended or increased at the option of the customer. As of September 30, 2003, the potential value of these options, if exercised by the customer, is approximately $41,887,000. We anticipate that a portion of the options will be exercised during the calendar years 2004 through 2008. However, we have no way of knowing whether any of the options will be exercised, or if they are exercised, what the value of any additional order would be.

Government Contracts

     During the fiscal year ended September 30, 2003, approximately 80.7% of our revenues were attributable to contracts with various departments and agencies of the U.S. federal government or subcontracts with its prime contractors. The funding of government programs is subject to Congressional appropriations. Although multi-year contracts may be authorized in connection with major procurements, Congress generally appropriates funds on a fiscal year basis, even though a program may continue for many years. Consequently, programs are often only partially funded initially, and additional funds are committed only as Congress makes further appropriations.

     Generally, government contracts are subject to oversight audits by government representatives. Provisions in these contracts permit termination, in whole or in part, without prior notice, at the government’s convenience. Compensation in the event of a termination is limited to work completed at the time of termination. In the event of termination, the contractor will receive a certain allowance for profit on the work performed. In addition, all contracts with the federal government contain provisions, and are subject to laws and regulations, that give the government rights and remedies not typically found in commercial contracts, including rights that allow the government to:

	•		terminate existing contracts for convenience, which affords the federal government the right to terminate the contract in whole or in part anytime it wants for any reason or no reason, as well as for default;
	•		reduce or modify contracts or subcontracts, if its requirements or budgetary constraints change;
	•		cancel multi-year contracts and related orders, if funds for contract performance for any subsequent year become unavailable;
	•		claim rights in products and systems produced by us;
	•		adjust contract costs and fees on the basis of audits completed by its agencies;
	•		suspend or debar us from doing business with the U.S. federal government; and
	•		control or prohibit the export of our products.

     Our U.S. federal government contracts include fixed-price contracts, cost reimbursement contracts, including, cost-plus-fixed-fee, cost-plus-award fee, and cost-plus-incentive fee, and time and material contracts.

	•		Fixed-price. These contracts are not subject to adjustment by reason of costs incurred in the performance of the contract. With this type of contract, we assume the risk that we will be able to perform at a cost below the fixed-price, except for costs incurred because of contract changes ordered by the customer.
	•		Cost-reimbursement.

	•		Cost-plus-fixed-fee contracts are cost-reimbursement contracts that provide for payment to us of a negotiated fee that is fixed at the inception of the contract. This fixed fee does not vary with actual cost of the contract, but may be adjusted as a result of changes in the work to be performed under the contract. This contract poses less risk than a fixed price contract, but our ability to win future contracts from the procuring agency may be adversely affected if we fail to perform within the maximum cost set forth in the contract.
	•		A cost-plus-award-fee contract is a cost reimbursement contract that provides for a fee consisting of a base

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			amount (which may be zero) fixed at inception of the contract and an award amount, based upon the government’s satisfaction with our performance under the contract. With this type of contract, we assume the risk that we may not be awarded the award fee, or only a portion of it, if we do not perform satisfactorily.
	•		A cost-plus-incentive-fee contract is a cost-reimbursement contract that provides for an initially negotiated fee to be adjusted later by a formula based on the relationship of total allowable costs to total target costs. As is the case with all cost-reimbursement contracts, we assume the risk that, if our costs are not allowable under the terms of the contract or applicable regulations, we may not be able to recover these costs.

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Time-and-Materials. These contracts require us to deliver services on the basis of direct labor hours at specified fixed hourly rates that include all our direct and indirect costs, such as wages, overhead, general and administrative expenses, and profit, and other materials at cost. With respect to these contracts, we assume the risk that we will be able to perform these contracts at these negotiated hourly rates.

     We are subject to various statutes and regulations governing government contracts generally and defense contracts specifically. These statutes and regulations carry substantial penalty provisions including suspension or debarment from government contracting or subcontracting for a period of time, if we are found to have violated any of these regulations. Among the causes for debarment are violations of various statutes, including those related to procurement integrity, export control, government security regulations, employment practices, the protection of the environment, the accuracy of records, and the recording of costs. We carefully monitor all of our contracts and contractual efforts to minimize the possibility of any violation of these regulations.

     As a government contractor, we are subject to government audits, inquiries and investigations. We have experienced minimal audit adjustments over the past ten years. The Defense Contract Audit Agency has completed its audit of our contracts through the fiscal year ended September 30, 1999. We are still subject to adjustment on our performance during subsequent years.

     We believe that the passive surveillance markets in which we participate will continue to be important in future years, as the military branches and intelligence agencies continue to rely upon technological advances for defense and intelligence purposes. We cannot assure you, however, that federal appropriations will continue to exist at their current levels or that our products will be utilized in the future.

Competitive Strengths

     We believe we are well-positioned to address the requirements of our customers in the intelligence community and Department of Defense because we possess the following key competitive strengths:

	•		Significant Supplier to Domestic and Allied Intelligence Agencies. Approximately 10.8% of our revenues for the year ended September 30, 2003 were derived from classified programs of the U.S. federal government and U.S. approved international customers. These programs tend to have higher margins and are generally awarded to a small group of suppliers. Given our expertise and track record with these customers, we believe we are well-positioned to take advantage of the heightened awareness and continued spending for intelligence activities in the wake of the war on terrorism.
	•		Employees with Security Clearances. The strict security clearance requirements for personnel who work on classified programs for the intelligence community and Department of Defense severely limits the number of suppliers that are allowed to bid on those types of programs. Companies wishing to bid on such programs must have employees who have completed the lengthy process necessary to obtain a security clearance. This process requires a candidate to be sponsored by the government for a particular purpose, entails extensive background investigations that typically take between six months to a year and, for restricted access clearance, may require successful completion of polygraph testing. As of September 30, 2003, 143 of our 220 employees have government security clearances, with approximately 20% holding Top Secret/ Sensitive Compartmented Information (TS/SCI) security clearances.

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	•		Engineering and Design Expertise. We have a successful track record of providing our customer needs as demonstrated by our long-term relationships with many of our largest customers. Our predecessor companies and we have provided high quality technical solutions in the intelligence gathering and electronic warfare areas for the Navy and other defense departments for over 25 years. At September 30, 2003, we employed 73 engineers, who represented approximately 33% of our workforce. Since October 1, 1998, we have spent approximately $34.3 million in both customer funded as well as independent research and development.
	•		Established Sole-Source Contract Relationships. We received approximately 44.9% of our revenues for the year ended September 30, 2003 from sole or single source contract relationships. These relationships provide us with opportunities to proactively prepare for and develop follow-on program opportunities through upgrades, new versions of products and additional product sales. We also believe these sole or single source relationships create significant advantages in technology, time to market and start-up costs. This affords us market protection relative to new entrants or competitors. Most of our sole source relationships exist with agencies or departments of the U.S. federal government, so the terms of those contracts are consistent with normal federal government procurement, including provisions for termination for convenience, which allows the U.S. federal government to terminate the contracts at any time for any reason.
	•		Experienced Management Team. Our executives provide us with extensive experience in supporting the intelligence community and Department of Defense. Each of our executive officers has more than 20 years experience in the intelligence and Department of Defense marketplace. With their knowledge, valued relationships and reputations, our management plays a key role in building and sustaining our customer base.

Business Strategy

     Our objective is to profitably grow our business as a premier provider of high quality and state of the art intelligence gathering and electronic warfare technology, products and systems. Our strategies for achieving this objective include:

	•		Expanding Our Customer Base. We intend to capitalize on our long-term relationships with our customers and our reputation within the intelligence community and Department of Defense to attract new customers within those communities. We believe we have a successful performance record and demonstrated technical expertise that gives us credibility with prospective customers and enhances our ability to be successful in bidding on follow-on contracts. As our revenues base grows through internal growth as well as acquisitions, we intend to seek larger contracts, which have historically been awarded to larger suppliers.
	•		Targeting High Growth Segments of the Market. We believe the projected growth in government intelligence gathering and electronic warfare technology products and services spending will offer opportunities for development and delivery of advanced technology solutions for defense and intelligence agencies. We intend to expand our product and service offerings in these areas, particularly where there is a possibility for significant long-term sales. We believe that friendly foreign governments would like to increase their capabilities in these areas, as the events of September 11, 2001, have global security implications.
	•		Attracting and Retaining Highly Skilled Personnel. We intend to continue to attract and retain skilled professionals to ensure we have the capabilities to fulfill our customers’ requirements. We target candidates who have served in the military or as civilian experts in the intelligence community and Department of Defense, and believe we can continue to retain our employees by offering competitive compensation and by providing opportunities for career growth through company-supported education programs and involvement in diverse and challenging engineering developments.
	•		Leveraging Customer Funded Research and Development. Many of our products were or are being developed through funding provided by the customer in the form of research and development contracts. While these contracts tend to be relatively small, they contain provisions for the customer to exercise multi-year options that increase the values of these programs significantly should the customer decide to go into full production. Since October 1, 1998, the U.S. federal government has provided us with approximately $29.8 million under such development contracts.

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			Some of our contracts can be extended or increased at the option of the customer.
	•		Pursuing Strategic Acquisitions. We plan to enhance our internal growth by selectively pursuing strategic acquisitions of businesses that can cost-effectively broaden our technology expertise and our product offerings. We are primarily focused on acquiring businesses that provide value-added solutions for the intelligence community and Department of Defense, but will also consider opportunities to acquire other businesses where we can utilize our reputation and experienced management team to expand our core business areas.

Export Sales

     Export sales are not a significant part of our revenues at this time, but it is our intention to try to expand them. However, because most of our products are classified to one degree or another, we must obtain export licenses from the U.S. federal government to be able to sell them outside of the United States, even to close allies. The granting of the export licenses is solely at the discretion of the U.S. federal government, which can also cancel them at any time. Thus, our ability to expand export sales is partly dependent upon the willingness of the U.S. federal government to grant export licenses for our products as we request them.

Employees

     At September 30, 2003, we employed 220 people, 73 of whom have engineering degrees while 143 have security clearances. Our continued success depends upon our ability to attract and retain highly skilled employees. We believe we are successful in retaining our employees by offering a competitive salary structure, attractive incentive compensation and benefits programs, career growth opportunities, flexible work assignments and the opportunity to perform mission-critical services, often in classified environments. Our current employees are offered an opportunity to respond to new job opportunities before we pursue external recruiting. We consider our relations with employees to be good, and we have never had a work stoppage.

Environmental

     We have incurred no material costs in the past two years related to environmental issues.

ITEM 2. PROPERTIES

     We believe that our leased facilities are suitable for the operations we have in each of them. Each facility is well maintained and capable of supporting higher levels of revenue. The table below sets forth certain information about our principal facilities.

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     Our facilities in Newington, Virginia; Ann Arbor, Michigan; Camarillo, California; Farmingdale, New Jersey; Dunbar, Pennsylvania and Smithfield, Pennsylvania are equipped with equipment used for the design, development and manufacture of our products. Our facilities in Newington include a sensitive compartmented information facility, anechoic chamber, secure test areas, environmental equipment, antennas, as well as general-purpose equipment required to manufacture and test our products. We believe our facilities are adequate for our current business activities and will remain so for the foreseeable future.

     The Communications Group manufactures in its Newington, VA facility. The Defense System Group manufactures in its Newington, VA, Camarillo, CA, Smithfield, PA and Farmindale, NJ facilities. The Imaging Group products are manufactured in the Ann Arbor, MI facility.

ITEM 3. LEGAL PROCEEDINGS

     The Company is not a party to, nor is any of its property the subject of any material pending legal proceedings.

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

     There were no matters submitted to a vote of security holder during the fourth quarter of the Company’s fiscal year ended September 30, 2003.

SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT

     The following is a list of the Executive Officers of the Registrant, including their names, ages and offices held, as of December 12, 2003.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Effective November 20, 2002, the Company’s common stock is traded on The Nasdaq National Market under the symbol “STST”. Prior to that time, it was traded on the Nasdaq SmallCap Market.

     The following table sets forth the range of high and low actual sales prices of our common stock for the periods indicated.

     There were 207 registered holders of our common stock on December 12, 2003. On December 12, 2003, the closing sale price of our common stock on The NASDAQ National Market was $14.35 per share.

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Dividend Policy

     We have not paid any dividends on our common stock during the last two fiscal years or during the current fiscal year. Our line of credit prohibits us from paying cash dividends to holders of our common stock. Further, we currently intend to retain any earnings of our company for the future operation and growth of our business. Therefore, we do not anticipate paying any cash dividends on our common stock in the foreseeable future. However our board of directors, in its discretion, may decide to declare a dividend at an appropriate time in the future. A decision to pay a dividend would depend, among other factors, upon our results of operations, financial condition and cash requirements and the terms of our credit facility and other financing agreements at the time such a payment is considered.

Equity Compensation Plan Information

ITEM 6. SELECTED FINANCIAL DATA

     The following table sets forth the selected consolidated statement of earnings data and balance sheet data for each of the periods indicated. The selected financial data for the years ended September 30, 2003, 2002, 2001, 2000, and 1999 are derived from our audited consolidated financial statements and related notes.

     The selected financial data is presented below and should be read in conjunction with our consolidated financial statements and the notes to our consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Form 10-K.

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1)

We define backlog as the funded and unfunded amounts provided in our contracts, less previously recognized revenue.

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1)

We define backlog as the funded and unfunded amounts provided in our contracts, less previously recognized revenue.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

Forward-looking Statements

     Statements in this filing which are not historical facts are forward-looking statements under the provision of the Private Securities Litigation Reform Act of 1955. All forward-looking statements involve risks and uncertainties. These statements are based upon numerous assumptions about future conditions that could prove not to be accurate. Actual events, transactions or results may materially differ from the anticipated events, transactions or results described in such statements. The Company’s ability to consummate such transactions and achieve such events or results is subject to certain risks and uncertainties. In addition to those specifically mentioned above, such risks and uncertainties include, but are not limited to, the existence of demand for, and acceptance of the Company’s products and services, regulatory approvals, export approvals, economic conditions both domestically and internationally, the impact of competition and pricing, results of financing efforts and other factors affecting the Company’s business that are beyond the Company’s control. All of the forward-looking statements should be considered in light of these factors. You should not put undue reliance on any forward-looking statements. The Company undertakes no obligation to update these forward-looking statements to reflect new information, future events or otherwise, except as provided by law.

Overview

     The Company is a designer, developer and manufacturer of electronics, communications and technology products for the defense and intelligence markets. Specifically, the Company specializes in integrated passive surveillance, communications and data links, electronic countermeasures and threat simulators, and airborne imaging and scanning systems. Its products are developed for use primarily by U.S. federal government customers and U.S. approved foreign governments, including U.S. defense and intelligence agencies, foreign governments agencies, and civilian agencies.

     A substantial portion of the Company’s revenues is derived from contracts with the U.S. federal government. For the fiscal years ended September 30, 2003 and 2002, approximately 80.7% and 80.4%, respectively, of its revenues were derived from contracts with the U.S. federal government. For these same periods, approximately 87.2% and 80.0%, respectively, of its revenues were generated from contracts for which the Company was the prime contractor, and approximately 44.9% and 62.1%, respectively, of its revenues were generated from sole or single source contracts. Single source contracts are contracts under which the purchaser purchases products only from the Company, although other suppliers exist, while sole source contracts are contracts under which the purchaser purchases products from the Company that only it can supply. The percentage reduction in sole or single source contracts is the result of classifying all revenues of ST Production Systems, Inc., as derived from competitive contracts. All of these contracts were acquired in February 2002 as part of the assets acquired from FEL Corporation. In addition during these time periods, approximately 10.8% and 26.7%, respectively, of the Company’s revenues were generated from contracts relating to classified programs of the U.S. federal government and select international contracts.

     To estimate revenues for performance under U.S. federal government fixed-price and cost-reimbursement contracts, including customer-funded research and development, the Company uses the percentage of completion method of accounting under which estimated revenues are determined on the basis of completion to date (i.e., the total contract amount multiplied by percent of performance to date less revenue value recognized in previous periods). The Company records revenues under cost-reimbursement contracts as costs are incurred and it includes estimated earned fees in the proportion that costs incurred to date bear to total estimated costs. The Company increases or decreases fees under certain U.S. federal government contracts in accordance with cost or performance incentive provisions which measure actual performance against established targets or other criteria.

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The Company includes such incentive fee awards or penalties, which historically are not material, in revenues at the time the amounts can be reasonably determined. The Company recognizes anticipated probable losses at the time they become known. The Company’s future operating results may be affected if actual contract costs incurred differ from its current estimates of total contract costs.

     The Company’s revenues are primarily derived from fixed-price contracts, under which it performs specific tasks for a fixed price. Under fixed-price contracts the Company assumes the risk of cost overruns, assuming no change orders can be negotiated, and receives the benefit of cost savings. All of the Company’s U.S. federal government contracts, whether it is the prime contractor or a subcontractor, are subject to audit and cost controls. As a result, the U.S. federal government contracting authorities typically have the right to object to the Company’s costs as not allowable or as unreasonable, which can result in it bearing all or a portion of these costs itself rather than recovering them from the U.S. federal government. The Defense Contract Audit Agency has completed its audit of our contracts through the fiscal year ended September 30, 1999. We are still subject to adjustment on our performance during subsequent years.

     The Company expenses operating costs such as cost of revenues, general and administrative, independent research and development expenses, and bid and proposal costs in the period incurred. The major components of these costs are compensation, materials, and overhead. Intangible assets are amortized over their useful lives.

     The Company’s results of operations, particularly its revenues, gross profit and cash flow, may vary significantly from period to period depending on a number of factors, including the progress of contract performance, revenues earned on contracts, the timing of customer orders and billing of other direct costs, timing of receipt of significant change orders, the commencement and completion of contracts during any particular quarter, the timing of government contract awards, the term of each contract that it has been awarded, foreign budget reallocations, currency fluctuations, and general political and economic conditions. Because a significant portion of the Company’s expenses, such as personnel and facilities costs, are fixed in the short term, successful contract performance and variation in the volume of activity, as well as in the number of contracts commenced or completed during any period may cause significant variations in operating results. As a result of the factors above, period-to-period comparisons of its revenues and operating results may not be meaningful.

Year Ended September 30, 2003 Compared to Year Ended September 30, 2002

Revenues:

     Revenues increased $20,893,000, or 64.7%, to $53,183,000 for the year ended September 30, 2003 from $32,290,000 for the year ended September 30, 2002. The increase was due primarily to new contract awards or modifications of existing contracts in the Communications Group, the Imaging Group and the Defense Systems Group of approximately $7,760,000, $584,000 and $12,549,000, respectively. For the year ended September 30, 2003 the Company derived, directly or indirectly, 80.7% of its revenue from federal agencies in the intelligence community and the Department of Defense, compared to 80.4% for the year ended September 30, 2002. For the year ended September 30, 2003, the Company’s four largest non-classified revenue producing contracts were the AN/SLQ-25A Surface Ship Torpedo Defense System, the AN/SLQ-4A Radio Terminal Set, the AN/DPT 2-B Based Payload for Lead In Fighter Hawk Radar Emulator, and Hyperspectral Imaging System, which collectively contributed 35.5% of revenue.

     Customer funded development, which is included in revenue, increased $2,824,000 or over 100% to $3,444,000 for the year ended September 30, 2003 from $620,000 for the year ended September 30, 2002. Major increases for the year came from the MIL-ADF program and the Surface Ship Torpedo Defense Systems program, which represents approximately 61% of the customer funded development in fiscal year 2003.

     For the year ended September 30, 2003, the Company derived approximately 13.8% of its revenues from contracts with U.S. approved foreign countries, of which no country represented 10% or more of the revenues. The Company’s foreign sales contracts require payment in US dollars, so those sales are not affected by foreign currency fluctuations. The Company intends to increase the amount of foreign sales it makes in the future.

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Cost of Revenues:

     Cost of revenues increased $15,759,000, or 63.4%, to $40,614,000 for the year ended September 30, 2003 from $24,855,000 for the year ended September 30, 2002. This was primarily attributed to an increase in labor of $3,274,000 and an increase in materials of $8,975,000 to support the increase in production activities, which was a significant part of the growth in revenues. The Company recorded an inventory write down of $1,074,000 in 2003 for certain component parts in inventory, no such write down was incurred in 2002. Additionally, fringe benefits, occupancy costs and depreciation increased by $1,846,000 mainly as a result of a full year of use of the Company’s NJ facility, which began its operations in February 2002. Cost of revenues as a percentage of revenues decreased to 76.4% for the year ended September 30, 2003 from 77.0% for the year ended September 30, 2002.

General and Administrative Expenses:

     General and administrative expenses increased $2,094,000, or 55.4%, to $5,876,000 for the year ended September 30, 2003 from $3,782,000 for the year ended September 30, 2002. The increase was due principally to the additional salaries and benefits of $783,000 and other related expenses of new and existing employees and to an increased internal research and development expense of $225,000.

     For the year ended September 30, 2003, internal research and development was $1,019,000 compared to $794,000 for the year ended September 30, 2002 and represented 17.3% and 21.0% of general and administrative expense, respectively.

Interest Income and Interest Expense:

     Interest income increased $86,000, or over 100%, to $122,000 for the year ended September 30, 2003 from $36,000 for the year ended September 30, 2002. The increase was primarily the result of the income earned on a higher invested balance of excess cash during the period. Interest expense increased $10,000, or 25%, to $50,000 for the year ended September 30, 2003 from $40,000 for the year ended September 30, 2002. The increase was primarily due to interest expense incurred during the first three months of fiscal year 2003.

Other Income and Other Expenses:

     Net other income decreased $38,000, or 63.3%, to $22,000 for the year ended September 30, 2003. The decrease was primarily due to sublease income of $17,000 in fiscal 2003 compared to $78,000 in fiscal 2002.

Income Tax Expense:

     Income tax expense consists of federal and state income taxes. Income tax expense increased $1,215,000, or 80.0%, to $2,735,000 for the year ended September 30, 2003, from $1,520,000 for the year ended September 30, 2002. The increase was primarily due to increased and improved profitability in 2003. The Company’s effective tax rates were approximately 40.3% and 41.0% for the years ended September 30, 2003 and 2002, respectively, and varies from the federal statutory rate primarily due to state taxes and certain nondeductible expenses. The Company’s new Pennsylvania production facility is within the Keystone Opportunity Zone. The Company is exempt from Pennsylvania state and local taxes for a period of ten years. As a result, the Company believes its effective tax rate will be reduced by approximately 1-2% in 2004.

Net Income:

     Net income increased $1,863,000, or 85.1%, to 4,052,000 for the year ended September 30, 2003 from $2,189,000 for the year ended September 30, 2002. The increase is due primarily to an increase in revenues and increased cost performance during the year. Net income as a percentage of revenue was 7.6% and 6.8% for the years ended September 30, 2003 and 2002, respectively.

Year Ended September 30, 2002 Compared to Year Ended September 30, 2001

Revenues:

     Revenues increased $15,899,000, or 97.0%, to $32,290,000 for the year ended September 30, 2002 from $16,391,000 for the year ended September 30, 2001. The increase was due primarily to new contract awards in the Communications Group and the Imaging Group of approximately $9,184,000, in addition to revenues attributable to ST Production Systems, Inc., the subsidiary that holds the assets we acquired from FEL Corporation and which we include as part of our Defense Systems Group, of approximately $10,896,000 since the date of the FEL asset acquisition. This increase was partially offset by a decrease in other Defense Systems Group revenue of $4,181,000.

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For the year ended September 30, 2002 we derived, directly or indirectly, 80.4% of our revenue primarily from federal agencies in the intelligence community and the Department of Defense, compared to 88.9% for the year ended September 30, 2001. For the year ended September 30, 2002, our four largest revenue producing contracts were the AN/SLQ-25A Surface Ship Torpedo Defense System, the AN/SLQ-4A Radio Terminal Set, the AN/BLQ-10 (V)1 and (V)2, and Hyperspectral Imaging System, which contributed 36.4% of revenue.

     Customer funded development, which is included in revenue, decreased $7,338,000, or 92.2%, to $620,000 for the year ended September 30, 2002 from $7,958,000 for the year ended September 30, 2001. The decrease resulted from the U.S. Navy cancellation of the Advanced Integrated Electronic Warfare System, for which Lockheed Martin was the prime contractor. Consistent with U.S. Navy direction, all subcontractors to Lockheed Martin for this program were, in turn, cancelled to achieve an orderly shut down of the program. Our subcontract with Lockheed Martin for development of portions of the system was cancelled at this time.

     For the year ended September 30, 2002, we derived approximately 15.7% of our revenues from contracts with U.S. approved foreign countries. Our foreign sales contracts require payment in US dollars, so we are not affected by foreign currency fluctuations. We intend to increase the amount of foreign sales we make in the future.

Cost of Revenues:

     Cost of revenues increased $13,111,000, or 111.6%, to $24,855,000 for the year ended September 30, 2002 from $11,744,000 for the year ended September 30, 2001. The increase was attributed to costs associated with the revenues generated by ST Production Systems, Inc., which has higher associated costs than the revenues generated in our Communications and Imaging Groups. Cost of revenues as a percentage of revenues increased to 77.0% for the year ended September 30, 2002 from 71.6% for the year ended September 30, 2001.

General and Administrative Expenses:

     General and administrative expenses increased $881,000, or 30.4%, to $3,782,000 for the year ended September 30, 2002 from $2,901,000 for the year ended September 30, 2001. The increase was due principally to the added salaries and related benefits of new employees hired for ST Production Systems, Inc. of approximately $291,000 and to increases in salaries and benefits to our existing employees.

     For the year ended September 30, 2002, internal research and development was $794,000 compared to $892,000 for the year ended September 30, 2001 and represented 21.0% and 30.7% of general and administrative expense, respectively.

Interest Income and Interest Expense:

     Net interest income decreased $143,000, or 101.4%, to net interest expense of $4,000 for the year ended September 30, 2002 from $141,000 of net interest income for the year ended September 30, 2001. The decrease was the result of lower invested balances, lower rates of return on investments during 2002 and interest expense of $32,000 incurred on our line of credit.

Other Income:

     Other income decreased $56,000, or 48.3%, to $60,000 for the year ended September 30, 2001. The decrease was primarily due to sublease income of $78,000 in fiscal 2002 compared to $112,000 in fiscal 2001.

Income Tax Expense:

     Income tax expense consists of federal and state income taxes. Income tax expense increased $741,000, or 95.1%, to $1,520,000 for the year ended September 30, 2002, from $779,000 for the year ended September 30, 2001. The increase was primarily due to increased and improved profitability in 2002. Our effective tax rates were 41% and 38.9% for the years ended September 30, 2002 and 2001, respectively. Our effective tax rate varies from the federal statutory rate primarily due to state taxes and certain nondeductible expenses.

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Net Income:

     Net income increased $965,000, or 78.8% to $2,189,000 for the year ended September 30, 2002 from $1,224,000 for the year ended September 30, 2001. The increase was the result of an increase in revenues that was partially offset by an increase in costs and expenses.

Liquidity and Capital Resources

     Historically, the Company’s primary source of liquidity is cash provided by operations and its line of credit. The Company’s liquidity requirements depend on a number of factors, including the timing of production under its federal government and foreign sales contracts. On November 22, 2002, the Company sold 2 million shares of common stock for net proceeds, after costs and underwriters commissions, of $14,235,000. On December 12, 2002, the underwriters exercised their overallotment option , which provided net proceeds to the Company of $2,232,000 from the sale of an additional 300,000 shares. The Company used a portion of the proceeds to pay off the line of credit and has not had a need to borrow since that date. The Company had cash and cash equivalents of $13,445,000 at September 30, 2003, as compared to $700,000 at September 30, 2002. The increase was primarily due to the net proceeds of $16,467,000 received from the sale of 2.3 million shares of common stock and cash provided by operating activities. The increase was partially offset by cash used in investing activities and the repayment of the line of credit.

     Cash provided by operating activities was approximately $774,000 for the year ended September 30, 2003, compared to cash used in operating activities of approximately $3,347,000 for the year ended September 30, 2002, an increase of approximately $4,121,000. The primary reasons for this increase were an increase in net income, a net decrease in unbilled accounts receivable, a decrease in inventories, and an increase in accounts payable and other accrued expenses. The increase was offset in part by an increase in accounts receivable and a decrease in billing in excess of costs and income taxes payable.

     Cash used in operating activities was approximately $3,447,000 for the year ended September 30, 2002, compared to cash provided by operating activities of approximately $3,292,000 for the year ended September 30, 2001, a decrease of approximately $6,723,000. The primary reasons for this decrease were changes in working capital. The changes in working capital was largely a result of an increase in billed and unbilled accounts receivables and an increase in inventory. The decrease was partially offset by increases in accounts payable, other accrued expenses and billing in excess of cost.

     Cash used in investing activities was approximately $1,878,000, $3,447,000 and $290,000 for the years ended September 30, 2003, 2002 and 2001, respectively. Cash used in 2002 included the acquisition of certain assets of FEL Corporation compared to only capital expenditures for property and equipment for 2003 and 2001.

     The Company’s budget for capital expenditures in 2004 is approximately $2,800,000, exclusive of any potential acquisition of businesses. The Company continues to seek complimentary businesses to acquire. There can be no assertions that such acquisitions will occur in 2004.

     Cash provided by financing activities was approximately $13,849,000 during the year ended September 30, 2003, compared to cash provided by financing activities of approximately $3,132,000 for the year ended September 30, 2002, an increase of $10,717,000. The increase was primarily due to the net proceeds of $16,467,000 received from the sale of 2.3 million shares of common stock. The increase was partially offset by cash used for the repayment of the line of credit.

     Cash provided by financing activities was approximately $3,132,000 during the year ended September 30, 2002, compared to cash used in financing activities of approximately $152,000 for the year ended September 30, 2001, an increase of $3,368,000. The increase primarily resulted from the net draws and repayments on the Company’s line of credit of approximately $2,900,000 and receipt of proceeds from stock option exercises of approximately $316,000. In fiscal 2001, cash used in financing activities was primarily the result of payments for the purchase of treasury stock.

     The Company entered into a line of credit and related note payable with Bank of America in February 2001. Effective February 2002, the Company renewed the line of credit and the amount available under the line of credit was increased from $5,000,000 to $10,000,000. Effective February 28, 2003, the Company renewed its line of credit and increased the availability to $15,000,000. The line of credit is for one year and is set to expire on February 28, 2004. The total borrowing base generally cannot exceed the sum of 90% of qualified government accounts receivable and 80% of qualified non-government accounts receivable. Total letters of credit at September 30, 2003 were $1,180,000.

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The line of credit is available to finance the performance of government contracts, to support the issuance of stand-by letters of credit, and for short-term working capital purposes. At September 30, 2003, there were no borrowings under the line of credit. The borrowing base at September 30, 2003 was $9,663,000.

     The bank agreement establishes the interest rate at the LIBOR plus 200 to 285 basis points, determined by the Company’s ratio of funded debt to earnings before interest, taxes, depreciation and amortization. All borrowings under the line of credit are collateralized by the Company’s accounts receivable, equipment, contracts, and general intangibles. The agreement also contains various covenants as to dividends restrictions, working capital, tangible net worth, earnings and debt-to-equity ratios. Unused commitment fees of one quarter or one percent per annum are required.

Related Party Transactions

     The Company has entered into an agreement with Rockwell Venture Capital, Inc, a privately owned company controlled by S. Kent Rockwell, to rent an aircraft used for Company business. The Company believes that the terms of the rental agreement are at least as favorable as those it could obtain from an unrelated third party. For the year ended September 30, 2003, the Company recorded expenses of $169,000 for the use of the aircraft of which $51,000 was unpaid as of the end of the year.

Market Risks

     In addition to the risks inherent in its operations, the Company is exposed to financial, market, political and economic risks. The following discussion provides additional detail regarding its exposure to credit, interest rates and foreign exchange rates.

Cash and Cash Equivalents:

     All unrestricted, highly liquid investments purchased with a remaining maturity of three months or less are considered to be cash equivalents. The Company maintains cash and cash equivalents with various financial institutions in excess of the amount insured by the Federal Deposit Insurance Corporation. It believes that any credit risk related to these cash and cash equivalents is minimal.

Interest Rates:

     The Company’s line of credit financing provides available borrowing to it at variable interest rates. There were no outstanding borrowings at September 30, 2003. Accordingly, the Company does not believe that any movement in interest rates would have a material impact on future earnings or cash flows. However, if the Company were to significantly increase borrowing under the current line of credit agreement, future interest rate changes could potentially have a material impact.

Foreign Currency:

     The Company has contracts to provide services to U.S. approved foreign countries. Its foreign sales contracts require payment in U.S. dollars, so it is not affected by foreign currency fluctuations.

Contractual Obligations and Commitments

     Contractual Cash Obligations:

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     Other Commercial Commitments:

Cost Associated with Exit Activity

     On July 15, 2003, the Company announced its intention to close the facility in Farmingdale, New Jersey and move these operations to Uniontown, Pennsylvania. In September 2003, the Company signed a lease for a 60,000 square foot facility for its Uniontown, Pennsylvania operations. The term of the lease is for ten years with two five year options. The Company anticipates this move to be completed by February 2004. Employees not transferring from the New Jersey location will receive severance pay and/or retention bonuses, providing they leave the Company in accordance with the Company’s transition plan. The cost associated with the severance and retention plan is estimated to be approximately $269,000. The severance cost expensed and accrued for the year ended September 30, 2003 is $123,000. Other exit costs associated with the transition are estimated to be $893,000. Other costs consist of principally training, relocation and moving costs. Other exit costs in the amount of $139,000 were expensed for the year ended September 30, 2003. The cost of the severance and retention plan and the other exit costs are reported in the cost of revenues and general and administrative expense line items of the Consolidated Statement of Income.

Critical Accounting Policies and Estimates

     The Company’s consolidated financial statements are based on the application of significant accounting policies, which require management to make significant estimates and assumptions. The Company believes that the following are some of the more critical judgment areas in the application of its accounting policies that affect its financial position and results of operations.

Revenue Recognition:

     Most of the Company’s sales are generated under U.S. Federal government fixed-price and cost-type contracts, which require revenue recognition judgments. Revenues are primarily recognized on the percentage of completion basis. In doing so, the Company makes important judgments in estimating revenue, cost and progress towards completion. The Company has an internal process where it monitors contract performance and cost on a monthly basis. Each quarter, management reviews, among other items, progress against schedule, project staffing, risks and issues, subcontract management, incurred and estimated costs, and disposition of prior action items. These judgments underlie the Company’s determinations regarding overall contract value, contract profitability, and timing of revenue recognition. Revenue and cost estimates are revised periodically based on changes in circumstances. To the extent that a revised estimate affects contract profit or revenue previously recognized, the Company records the effect of the revision in the period in which the facts requiring the revision become known. If the estimated cost to complete exceeds the value of the contract, a reserve for estimated loss is recognized immediately. It is reasonably possible that future operating results may be affected if actual contract costs incurred differ from total contract costs currently estimated by management. Revenue under time and material contracts is based on hours incurred multiplied by approved loaded labor rates plus other costs incurred plus general and administrative expenses allocated to other costs incurred. The Company has no reason to believe that costs and estimated earnings in excess of billings on uncompleted contracts are not fully realizable.

     The Company is currently recording the AN/SLQ-25A Surface Ship Torpedo Defense System contract at zero gross margin. Revenue from this contract amounted to 21.8% in 2003 and 18.8% in 2002 of the Company’s revenues. This contract was acquired as part of the acquisition of certain assets of FEL Corporation and was performing at a potential loss at the date of acquisition. The Company has favorably performed under the contract since the date of acquisition and management has worked with the customer to reduce any potential loss through change orders approved to date. While management currently estimates that the contract will be profitable, the profitability is dependent upon change orders, expected by management, but that have not yet been finalized.

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Change orders are under continuous negotiation with the customer. When these change orders are received, the Company will reassess the contract based on current estimates, and such reassessments are currently expected to result in increases to the margins recorded on the contract. Such increases would impact operations in the period such change orders are finalized as well as future periods. If such change orders are not finalized under currently expected terms, or if the Company does not perform as expected under the contract, contract losses may be required to be accrued. Management expects the change orders to be received in 2004 and the first half of 2005.

Accounts Receivable :

     The Company is required to estimate the collectibility of its trade receivables. Judgment is required in assessing the realization of receivables, and the reserve requirements are based on the best facts available to the Company. Since most of the Company’s sales are generated under U.S. Federal government contracts, its allowance for doubtful accounts is not significant.

Inventories :

     The Company records its inventories at the lower of cost or market. In assessing the ultimate realization of inventories, the Company is required to make judgments as to future demand requirements and compare these with the current or committed inventory levels. Inventory is generally purchased to fulfill a specific contract commitment. During the year ended September 30, 2003, the Company wrote down inventory by $1,074,000. The inventory was purchased, built and configured for a specific project, and such project has been delayed and has not yet been awarded. As a result, the Company wrote down the inventory based on expected uses in the next twelve months. The Company has allocated and will continue to allocate this inventory to other business objectives when given the opportunity.

Income Taxes:

     The Company currently has deferred tax assets resulting from net operating loss carryforwards, which will reduce taxable income in future periods. The utilization of the net operating loss carryforward is limited by Internal Revenue Service guidelines to an annual maximum amount. At September 30, 2003 and 2002, the Company did not provide a valuation allowance as it believed it was more likely than not that the remaining net deferred tax assets will be realized, principally based on forecasted taxable income.

Accounting Pronouncements

     In June 2002, the Financial Accounting Standards Board (the “FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No.146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS No.146 nullifies Emerging Issues Task Force (EITF) Issue 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity,” under which a liability for an exit cost was recognized at the date of an entity’s commitment to an exit plan. SFAS No.146 requires that a liability for a cost associated with an exit or disposal activity be recognized at fair value when the liability is incurred. The provisions of the statement are effective for exit or disposal activities that are initiated after December 31, 2002.

     In November 2002, the FASB issued Interpretation No. 45, (“FIN 45”) “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” which elaborates on disclosures to be made by a guarantor in its annual financial statements about its obligations under certain guarantees that it has issued It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. This interpretation does not prescribe a specific approach for subsequently measuring the guarantor’s recognized liability over the term of the related guarantee. This interpretation also incorporates, without change, the guidance in FASB Interpretation No. 34, “Disclosure of Indirect Guarantees of Indebtedness of Others,” which is being superseded. The initial recognition and initial measurement provisions of this interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002 and the disclosure requirements in this interpretation are effective for financial statements of annual periods ending after December 15, 2002.

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     In January 2003, FASB Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities,” which addresses consolidation and disclosure by business enterprises of variable interest entities. The consolidation requirements of FIN 46 apply to existing variable interest entities in the first fiscal year or interim period beginning after June 15, 2003. FIN 46 does not have any impact on the consolidation financial statements or disclosures of the Company as it does not have any variable interest entities.

     In April 2003, the FASB issued Statement No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities (“SFAS No, 149”). SFAS No. 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133. The provisions of SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003, with certain exceptions, and for hedging relationships designated after June 30, 2003. SFAS No. 149 is not expected to have any impact on the consolidated financial statements or disclosures of the Company as it does not have any derivative instruments or hedging activities.

     In May 2003, the FASB issued Statement No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” (“SFAS No. 150”). SFAS No. 150 changes the accounting for certain financial instruments that, under previous guidance, issuers could account for as equity. At present, the Company has not issued financial instruments with characteristics of both liabilities and equity.

ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk

     The information called for by this item is provided under Item 7 – “ Management’s Discussion and Analysis of Financial Conditional and Results of Operations.”

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Sensytech, Inc. and Subsidiaries:

     In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, stockholders’ equity and cash flows present fairly, in all material respects, the financial position of Sensytech, Inc. and its subsidiaries at September 30, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2003 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
December 16, 2003

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SENSYTECH, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

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

24

SENSYTECH, INC. AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS

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

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SENSYTECH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY