ARGON ST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW (unaudited)
(In Thousands)

	Fiscal Quarter Ended
	December 31, 2006			January 1, 2006
Cash flows from operating activities
Net income	$	5,183		$	5,603
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization		1,893			1,373
Deferred income tax expense (benefit)		276			(68	)
Stock-based compensation		390			368
Bad debt expense		30			—
Loss on sale of equipment		2			—
Change in:
Accounts receivable		1,528			(9,764	)
Inventory		(340	)		(311	)
Deferred projects costs		5,534			—
Prepaids and other		211			(281	)
Accounts payable and accrued expenses		(8,786	)		(11,108	)
Accrued salaries and related expenses		(939	)		(150	)
Deferred revenue		(8,962	)		(202	)
Income taxes payable		1,649			3,180
Net cash used in operating activities		(2,331	)		(11,360	)
Cash flows from investing activities
Acquisitions of property, equipment and software		(1,242	)		(729	)
Cash acquired in Radix acquisition		-			1,107
Deposits and other assets		(60	)		299
Proceeds from sale of equipment		5			-
Net cash (used in) provided by investing activities		(1,297	)		677
Cash flows from financing activities
Repayment on line of credit, net of borrowings		-			(11,000	)
Payment on note payable		—			(56	)
Payments on capital leases		(18	)		(3	)
Tax benefit on stock option exercises		231			530
Proceeds from exercise of stock options		425			606
Proceeds from secondary offering		-			46,768
Net cash provided by financing activities		638			36,845
Net (decrease) in cash and cash equivalents		(2,990	)		26,162
Cash and cash equivalents, beginning of period		33,498			4,064
Cash and cash equivalents, end of period	$	30,508		$	30,226
Supplemental disclosure
Income taxes paid	$	699		$	—
Interest expense paid	$	2		$	127