SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
NOVEMBER 24, 1997 (AUGUST 26, 1997)
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ADVANCED COMMUNICATION SYSTEMS, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
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(STATE OR OTHER JURISDICTION OF INCORPORATION)
0-22737 54-1421222
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(COMMISSION FILE NUMBER) (IRS EMPLOYER IDENTIFICATION NO.)
10089 LEE HIGHWAY, FAIRFAX, VIRGINIA 22030
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(703) 934-8130
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
1
<PAGE>
On September 26, 1997, Advanced Communication Systems, Inc. , a Delaware
corporation ("ACS") filed a Current Report on Form 8-K with respect to the
September 12, 1997 acquisition (the "Acquisition") of all the outstanding shares
of RF Microsystems, Inc. a California corporation ("RFM") from REMEC, Inc., a
California corporation ("REMEC"). Such 8-K was filed without the financial
statements and pro forma financial information required by Item 7 of Form 8-K,
as it was impracticable to do so at that time. This Current Report on Form 8-K/A
provides such required information.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) The audited financial statements of RF Microsystems,
Inc. ("RFM"), including independent auditors' report thereon, as of January 31,
1997, and for the nine months then ended, and the unaudited financial statements
of RFM for the six month periods ended July 31, 1997 and 1996, are included at
Exhibit 99(a) and incorporated herein by reference.
(b) Pro forma unaudited financial information for ACS giving
effect to the Acquisition as of and for the nine months ended June 30, 1997 and
for the fiscal year ended September 30, 1996, are included at Exhibit 99(b) and
incorporated herein by reference.
(c) Exhibits:
99(a) Audited financial statements of RFM, including
independent auditors' report thereon, as of January 31, 1997
and for the nine months then ended, and the unaudited
financial statements of RFM for the six month periods ended
July 31, 1997 and 1996
99(b) Unaudited pro forma financial information for
ACS giving effect to the Acquisition as of, and for the nine
months ended June 30, 1997 and for the fiscal year ended
September 30, 1996.
SIGNATURE
Pursuant to the requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 24, 1997 Advanced Communication Systems, Inc.
/S/ Dev Ganesan
----------------------------------------
Dev Ganesan
Chief Financial Officer
2
EXHIBIT 99(a)
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
RF Microsystems, Inc.
We have audited the accompanying balance sheet of RF Microsystems, Inc. as of
January 31, 1997, and the related statements of income and retained earnings and
cash flows for the nine months then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The Company is a wholly-owned subsidiary of REMEC. The Company's results of
operations and its cash flows are not necessarily indicative of those that would
have been achieved by the Company had it operated on a stand-alone basis.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of RF Microsystems, Inc. at
January 31, 1997 and the results of its operations and its cash flows for the
nine months then ended in conformity with generally accepted accounting
principles.
/S/
Ernst & Young LLP
San Diego, California
October 13, 1997
3
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RF Microsystems, Inc.
Balance Sheet
January 31, 1997
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash $ 1,000
Accounts receivable, net of allowance for doubtful accounts of $28,000 1,166,000
Prepaid expenses and other current assets 37,000
-----------------
Total current assets 1,204,000
Property, plant and equipment, at cost:
Computer equipment 29,000
Furniture and fixtures 6,000
Office and other equipment 104,000
-----------------
139,000
Less accumulated depreciation and amortization (40,000)
-----------------
99,000
Intangible asset, net of accumulated amortization of $10,000 210,000
-----------------
$1,513,000
=================
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 64,000
Accrued compensation and related 202,000
Accrued expenses 124,000
-----------------
Total current liabilities 390,000
Advances from parent 942,000
Shareholder's equity:
Common shares - no par value, 1,000,000 shares authorized;
1,000 shares issued and outstanding 23,000
Retained earnings 158,000
-----------------
Total shareholder's equity 181,000
-----------------
$1,513,000
=================
See accompanying notes.
</TABLE>
4
<PAGE>
RF Microsystems, Inc.
Statement of Income and Retained Earnings
For the nine months ended January 31, 1997
Contract revenues $ 4,770,000
Operating expenses:
Direct costs of contract revenues 3,259,000
Indirect costs of contract revenues and general and
administrative expenses 1,248,000
--------------
Total operating expenses 4,507,000
Income from operations before provision for income taxes 263,000
Provision for income taxes 105,000
--------------
Net income 158,000
Retained earnings, beginning of period -
Retained earnings, end of period $ 158,000
==============
See accompanying notes.
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RF Microsystems, Inc.
Statement of Cash Flows
For the nine months ended January 31, 1997
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net income $ 158,000
Adjustments to reconcile net income to net cash used for operating activities:
Depreciation and amortization 50,000
Provision for doubtful accounts 49,000
Changes in operating assets and liabilities:
Accounts receivable (281,000)
Prepaid expenses and other current assets 30,000
Accounts payable and accrued expense (5,000)
Accrued compensation and related 15,000
Accrued expenses 10,000
Advances from parent 594,000
-----------------
Net cash provided by operating activities 620,000
INVESTING ACTIVITIES
Acquisition of property, plant and equipment (37,000)
-----------------
Net cash used for investing activities (37,000)
FINANCING ACTIVITIES
Payments under capital lease obligations (40,000)
Payments on notes payable (542,000)
-----------------
Net cash used for financing activities (582,000)
Decrease in cash 1,000
Cash at beginning of period -
-----------------
Cash at end of end of period $ 1,000
=================
</TABLE>
See accompanying notes.
6
<PAGE>
RF MICROSYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
Effective April 30, 1996, REMEC Inc. ("REMEC" or "Parent") acquired all of the
outstanding common stock of RF Microsystems, Inc. (the "Company") from STM
Wireless, Inc. in a transaction that was accounted for as a purchase.
Immediately after the closing of the acquisition, the assets and operations of
the Company related to the design and manufacture of microwave systems and
components were transferred to one of REMEC's other wholly owned subsidiaries.
Accordingly, the accompanying financial statements of the Company reflect the
allocation of REMEC's purchase price on a "push down" basis to the remaining
assets and operations.
The Company provides technical and engineering services under contracts with the
U.S. Government and its agencies and prime contractors to the U.S. Government in
the areas of communications, navigation, electronic warfare and data processing.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONCENTRATION OF CREDIT RISK
Accounts receivable are principally from U.S. Government Agencies and prime
contractors to the U.S. Government. Credit is extended based on an evaluation
of the customer's financial condition and generally collateral is not required.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost less accumulated depreciation
and amortization. Depreciation is provided using the straight-line method over
the estimated useful lives of the assets which range from three to seven years.
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RF MICROSYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTANGIBLE ASSETS
In connection with REMEC's purchase of RF Microsystems in 1996, the Company
recorded $220,000 in goodwill as an intangible asset representing the excess of
REMEC's purchase price over the deemed fair value of net assets acquired related
to the operations retained by the Company. The goodwill is being amortized over
15 years.
REVENUE RECOGNITION
Revenues from government contracts are recognized under the
percentage-of-completion method on a cost plus basis.
INCOME TAXES
The Company's results of operations for the nine month period from May 1, 1996
through January 31, 1997 have been included in the consolidated federal income
tax return and state income tax returns of REMEC. The provision for income taxes
included on the accompanying income statement represents management's estimate
of the provision for income taxes that would have been recorded had the Company
operated on a stand-alone basis.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
about the future that effect the amounts reported in the consolidated financial
statements. These estimates include assessing the collectability of accounts
receivable, the usage and recoverability of long-lived assets and the incurrence
of losses on long-term contracts. Actual results could differ from those
estimates.
LONG-LIVED ASSETS
In March 1995, the Financial Accounting Standards Board issued Statement No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of, which requires impairment losses to be recognized for
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows are not sufficient to recover the assets'
carrying amount. There was no effect on the Company's financial position or
results of operations related to application of Statement No. 121.
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RF MICROSYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. RELATED PARTY TRANSACTIONS
Included in indirect costs of contract revenues and general and administrative
expense in the accompanying income statement are certain administrative overhead
expenses totaling approximately $105,000 charged to the Company by REMEC.
4. INCOME TAXES
The Company has a deferred tax asset at January 31, 1997 of approximately
$65,000 related to reserves and accrued expenses. The Company has recorded a
valuation allowance for the full balance of the deferred tax asset as management
believes realization of the asset is uncertain.
The current provision for taxes based on income from operations consists of the
following at January 31, 1997:
AMOUNT PERCENT
----------------- ----------------
Federal $89,000 34%
State 16,000 6%
----------------- ----------------
$105,000 40%
================= ================
5. COMMITMENTS
The Company leases office facilities under operating leases which expire on
various dates through 2002. Facilities rent expense under operating leases for
the nine months ended January 31, 1997 totaled approximately $140,000. Minimum
future obligations under non-cancelable operating leases are as follows for
years ending January 31:
1998 $ 94,000
1999 54,000
2000 56,000
2001 57,000
2002 59,000
--------------
$320,000
==============
6. SUBSEQUENT EVENT
On August 26, 1997, REMEC entered into a definitive agreement to sell all of the
outstanding common stock of the Company to ACS, Inc. This transaction closed on
September 12, 1997.
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<PAGE>
RF MICROSYSTEMS, INC.
INTERIM BALANCE SHEET
JULY 31, 1997
(IN THOUSANDS)
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $1
Contract receivables 1,534
Prepaid expenses 24
-----------
Total current assets 1,559
-----------
Property and equipment, net 288
Other assets 203
-----------
Total assets $2,050
===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable $16
Accrued expenses 313
Advances from parent 1,413
-----------
Total current liabilities 1,742
Total stockholder's equity 308
-----------
Total liabilities and stockholder's equity $2,050
===========
The accompanying notes are an integral part of these unaudited interim
financial statements.
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<PAGE>
RF MICROSYSTEMS, INC.
INTERIM STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
SIX MONTHS ENDED JULY 31
1997 1996
------------ -------------
Revenues $3,078 $2,567
Direct Costs 2,150 1,560
Indirect, general and administrative expenses 682 869
---------- ---------
Income from operations 246 138
Interest expense - -
Other income, net - -
---------- ---------
Income before taxes 246 138
Provision for income taxes 96 54
---------- ---------
Net income $150 $84
========== =========
The accompanying notes are an integral part of these unaudited interim
financial statements.
11
<PAGE>
RF MICROSYSTEMS, INC.
INTERIM STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
SIX MONTHS ENDED JULY 31
1997 1996
-------- --------
Cash flows from operating activities:
Net income $150 $84
Adjustments to reconcile net income to net cash provided by
operating activities-
Depreciation and amortization 32 20
Changes in assets and liabilities:
Contract receivables (368) 941
Prepaid expenses 13 15
Accounts payable and accrued expenses (61) (548)
Advances from parent 448 (258)
------- -------
Net cash provided by operating activities 214 254
------- -------
Cash flows from investing activities:
Purchases of property and equipment (214) -
------- -------
Net cash used in investing activities (214) -
------- -------
Net increase in cash - 254
Cash and cash equivalents, beginning of year 1 82
------- -------
Cash and cash equivalents, end of period $1 $336
======= =======
The accompanying notes are an integral part of these unaudited interim
financial statements.
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<PAGE>
RF MICROSYSTEMS, INC.
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
JULY 31, 1997
1. The interim financial statements included herein have been prepared by RF
Microsystems, Inc. (the Company"), without audit. In the opinion of management,
all adjustments, consisting of normal recurring adjustments, necessary for a
fair presentation of interim period results have been included. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted. These unaudited interim financial statements should be read in
conjunction with the Company's financial statements and notes thereto for its
nine months ended January 31, 1997, included elsewhere in this filing. The
results of operations for the six month period ended July 31, 1997, are not
necessarily indicative of the results to be expected for the full fiscal year
ending January 31, 1998.
2. On August 26, 1997, Advanced Communication Systems, Inc. entered into a
definitive agreement to buy all of the outstanding common stock of the Company.
This transaction was closed on September 12, 1997.
13
EXHIBIT 99(b)
ADVANCED COMMUNICATION SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The accompanying unaudited pro forma condensed consolidated financial statements
give effect to the acquisition of RF Microsystems, Inc. ("RFM") as described
below.
Effective August 26, 1997, Advanced Communication Systems, Inc. ("ACS") acquired
all of the outstanding common stock of RFM in exchange for cash consideration of
$5,000,000. The acquisition has been accounted for as a purchase, and
accordingly, the total purchase price has been allocated to the acquired assets
and liabilities assumed at their estimated fair values in accordance with the
provisions of Accounting Principles Board Opinion No. 16. The estimated excess
of the purchase price over the net assets acquired is being carried as goodwill
and will be amortized over its estimated life of 15 years. The charge of
$1,910,000 resulting from the write-off of purchased in-process research and
development cost has been excluded from the pro forma condensed consolidated
statements of operations.
RFM's fiscal year ended is January 31, while the fiscal year ended of ACS is
September 30. The unaudited pro forma condensed consolidated balance sheet of
ACS as of June 30, 1997, has been prepared by combining the consolidated balance
sheet of ACS as of June 30, 1997, with the balance sheet of RFM as of June 30,
1997. The unaudited pro forma condensed consolidated statement of operations for
the fiscal year ended September 30, 1996, has been prepared by combining ACS's
consolidated statement of operations for the fiscal year ended September 30,
1996, with RFM's statement of operations for the twelve months ended December
31, 1996. The unaudited pro forma condensed consolidated statement of operations
for the nine months ended June 30, 1997, has been prepared by combining ACS's
consolidated statement of operations for the nine months ended June 30, 1997,
with RFM's statement of operations for the nine months ended June 30, 1997. ACS
and RFM, on a combined basis, are referred to herein as the "Company".
The unaudited pro forma condensed consolidated balance sheet as of June 30,
1997, has been prepared to reflect the acquisition of RFM as if it had occurred
on June 30, 1997. The unaudited pro forma condensed consolidated statements of
operations, with appropriate adjustments, have been prepared to reflect the
acquisition of RFM as if it had occurred at the beginning of the periods
presented.
The unaudited pro forma condensed consolidated financial statements have been
prepared by the Company's management and should be read in conjunction with the
historical financial statements of ACS and RFM and the related notes hereto. The
unaudited pro forma condensed consolidated statements of operations are not
necessarily indicative of the results of operations that may have actually
occurred had the acquisition occured on the dates specified, or of the future
results of the combined Company. The pro forma adjustments are based upon
available information and certain adjustments the management of ACS believes
are reasonable. In the opinion of management, all adjustments have been made
that are necessary to present fairly the unaudited condensed consolidated
financial statements.
14
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ADVANCED COMMUNICATION SYSTEMS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
ACS RFM PRO FORMA
HISTORICAL HISTORICAL(A) ADJUSTMENTS COMBINED
---------- -------------- -------------- ------------
ASSETS
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $1,916 $1 $5,413 (F), (G) $7,330
Contract receivables 9,820 1,537 - 11,357
Other receivables 204 - - 204
Prepaid expenses 767 25 - 792
---------- -------------- -------------- ------------
Total current assets 12,707 1,563 5,413 19,683
---------- -------------- -------------- ------------
Property and equipment, net 792 284 1,076
Other assets:
Notes receivable, stockholders 483 - - 483
Other related party receivables 368 - - 368
Software development costs, net 554 - - 554
Other assets 227 203 1,628 (B) 2,058
---------- -------------- -------------- ------------
Total other assets 1,632 203 1,628 3,463
---------- -------------- -------------- ------------
Total assets $15,131 $2,050 $7,041 $24,222
========== ============== ============== ============
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C> <C>
Current Liabilities:
Accounts payable $4,845 $184 - $5,029
Accrued expenses 6,041 314 - 6,355
Billings in excess of revenue 387 - - 387
Deferred income tax liability 72 - - 72
Payable to stockholders 3,887 - (3,887) (F) 0
Advances from parent - 1,281 (1,281) (E) 0
---------- -------------- -------------- ------------
Total current liabilities 15,232 1,779 (5,168) 11,843
Total stockholders' equity (deficit) (101) 271 (1,910) (C) 12,379
(271) (D)
14,390 (F)
---------- -------------- -------------- ------------
Total liabilities and stockholders' equity $15,131 $2,050 $7,041 $24,222
========== ============== ============== ============
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
</TABLE>
15
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ADVANCED COMMUNICATION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET
JUNE 30, 1997
(A) Information obtained from the June 30, 1997 unaudited balance sheet of RFM
prepared from internal accounting records.
(B) Reflects goodwill originating from the purchase of all outstanding stock of
RFM. Represents the allocation of the excess purchase price using the purchase
method of accounting for the transaction after adjusting the assets acquired and
the liabilities assumed to their respective fair values.
(C) Reflects the one-time write-off of in-process research and development
identified in the purchase price allocation. The charge will be taken in the
quarter and fiscal year ended September 30, 1997.
(D) Eliminates the equity of RFM upon consolidation with ACS.
(E) Eliminates the intercompany obligations that were not assumed in the
acquisition.
(F) Reflects net proceeds of ACS's initial public offering on July 2, 1997, and
the S Corporation distribution made.
(G) Reflects consideration paid to effect the acquisition using proceeds from
the initial public offering.
16
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ADVANCED COMMUNICATION SYSTEMS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
ACS RFM PRO FORMA
HISTORICAL HISTORICAL (A) ADJUSTMENTS (E) COMBINED
----------- --------------- ----------------- -------------
<S> <C> <C> <C> <C>
Revenues $35,510 $4,614 - $40,124
Direct Costs 25,179 3,237 - 28,416
Indirect, general and administrative expenses 8,066 1,150 69 (B) 9,285
----------- --------------- ----------------- -------------
Income from operations 2,265 227 (69) 2,423
Interest expense (136) - - (136)
Other income, net 60 - - 60
----------- --------------- ----------------- -------------
Income before taxes 2,189 227 (69) 2,347
Provision for income taxes 33 92 (27) (C) 98
----------- --------------- ----------------- -------------
Net income $2,156 $135 ($42) $2,249
=========== =============== ================= =============
Pro forma statements of operations data: (Note D)
Income before taxes as reported $2,189 $227 ($69) $2,347
Pro forma tax provision 854 92 (27) (C) 919
----------- --------------- ----------------- -------------
Pro forma net income $1,335 $135 ($42) $1,428
=========== =============== ================= =============
Pro forma net income per share $0.31 - - $0.33
=========== =============== ================= =============
Pro forma weighted average shares outstanding 4,378 - - 4,378
=========== =============== ================= =============
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
</TABLE>
17
<PAGE>
ADVANCED COMMUNICATION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 30, 1997
(A) Information obtained from the unaudited internal accounting records of RFM
for the nine months ended June 30, 1997.
(B) Amortization of goodwill on a straight line basis over fifteen years.
(C) Reduction of federal and state income tax expense resulting from the
additional amortization expense.
(D) Prior to June 25, 1997, ACS elected to be treated as an S Corporation and
was not subject to federal and state income taxes. The pro forma statement of
operations data reflects federal and state income taxes based on applicable
rates as if ACS had not elected S Corporation status for the periods indicated.
(E) The statement of operations presentation excludes the effect of a $1,910,000
charge to operations taken at the time of acquisition for purchased research and
development costs related to acquired technology that has not reached
technological feasibility and that has no alternative future use. The statement
of operations presentation also excludes consideration of integration costs and
potential cost savings because ACS has not completed its comprehensive review of
RFM's business, operations, capitalization and management.
18
<PAGE>
ADVANCED COMMUNICATION SYSTEMS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED SEPTEMBER 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
ACS RFM PRO FORMA
HISTORICAL HISTORICAL (A) ADJUSTMENTS (E) COMBINED
-------------- -------------- ---------------- -------------
<S> <C> <C> <C> <C>
Revenues $31,665 $5,942 - $37,607
Direct Costs 19,307 3,950 - 23,257
Indirect, general and administrative expenses 10,253 1,683 92 (B) 12,028
-------------- -------------- -------------- -------------
Income from operations 2,105 309 (92) 2,322
Interest expense (257) - - (257)
Other income, net 57 - - 57
-------------- -------------- -------------- -------------
Income before taxes 1,905 309 (92) 2,122
Provision for income taxes 0 121 (36) (C) 85
-------------- -------------- -------------- -------------
Net income $1,905 $188 ($56) $2,037
============== ============== ============== =============
Pro forma statements of operations data: (Note D)
Income before taxes as reported $1,905 $309 ($92) $2,122
Pro forma tax provision 743 121 (36) (C) 828
-------------- -------------- -------------- -------------
Pro forma net income $1,162 $188 ($56) $1,294
============== ============== ============== =============
Pro forma net income per share $0.27 - $0.00 $0.30
============== ============== ============== =============
Pro forma weighted average shares outstanding 4,361 - - 4,361
============== ============== ============== =============
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
</TABLE>
19
<PAGE>
ADVANCED COMMUNICATION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1996
(A) Information obtained from the unaudited internal accounting records of RFM
for the twelve months ended December 31, 1996.
(B) Amortization of goodwill on a straight-line basis over fifteen years.
(C) Reduction of federal and state income tax expense resulting from the
additional amortization expense.
(D) Prior to June 25, 1997, ACS elected to be treated as an S Corporation and
was not subject to federal and state income taxes. The pro forma statement of
operations data reflects federal and state income taxes based on applicable
rates as if ACS had not elected S Corporation status for the periods indicated.
(E) The statement of operations presentation excludes the effect of a $1,910,000
charge to operations taken at the time of acquisition for purchased research and
development costs related to acquired technology that has not reached
technological feasibility and that has no alternative future use. The statement
of operations presentation also excludes consideration of integration costs and
potential cost savings because ACS has not completed its comprehensive review of
RFM's business, operations, capitalization and management.
20
