ADVANCED COMMUNICATION SYSTEMS INC, S-1, 1998-04-24

ADVANCED COMMUNICATION SYSTEMS INC
S-1, 1998-04-24
COMPUTER INTEGRATED SYSTEMS DESIGN

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 24, 1998

REGISTRATION NO. 333-
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------

ADVANCED COMMUNICATION SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE
(STATE OR OTHER JURISDICTION
OF INCORPORATION OR ORGANIZATION)

7373
(PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)

54-1421222
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)

10089 LEE HIGHWAY
FAIRFAX, VA 22030
(703) 934-8130
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

GEORGE A. ROBINSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ADVANCED COMMUNICATION SYSTEMS, INC.
10089 LEE HIGHWAY
FAIRFAX, VA 22030
(703) 934-8130
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------

Copies to:

ELIZABETH R. HUGHES, ESQ.
VENABLE, BAETJER AND HOWARD, LLP
1800 MERCANTILE BANK & TRUST BUILDING
2 HOPKINS PLAZA
BALTIMORE, MD 21201
(410) 244-7400
WILLIAM L. WALSH, JR., ESQ.
VENABLE, BAETJER AND HOWARD, LLP
2010 CORPORATE RIDGE
SUITE 400
MCLEAN, VA 22102
(703) 760-1600
PETER B. TARR, ESQ.
BRENT B. SILER, ESQ.
HALE AND DORR LLP
1455 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20004
(202) 942-8400

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement is declared effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ____

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. [ ] ____

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. [ ] ____

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
CALCULATION OF REGISTRATION FEE
================================================================================

<TABLE>
<S> <C> <C> <C> <C>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------------
Common Stock, $0.01 par value.. 2,903,750 Shares $13.125 $38,111,718 $11,243
============================================================================================================================
</TABLE>

(1) Includes 378,750 shares of Common Stock which may be purchased by the
Underwriters solely to cover over-allotments, if any.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457 under the Securities Act of 1933. The above calculation is based
on the average of the high and low sales prices of the Common Stock on the
Nasdaq National Market on April 22, 1998.
------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD, NOR MAY
OFFERS TO BUY BE ACCEPTED, PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED APRIL 24, 1998

2,525,000 SHARES

ADVANCED COMMUNICATION SYSTEMS, INC.

COMMON STOCK
------------------
Of the 2,525,000 shares of Common Stock (the "Common Stock") of Advanced
Communication Systems, Inc. ("ACS" or the "Company") offered hereby, 2,000,000
shares are being sold by the Company and 525,000 shares are being sold by the
Selling Stockholders. See "Principal and Selling Stockholders." The Company will
receive no proceeds from the sale of shares by the Selling Stockholders.

The Common Stock is traded on the Nasdaq National Market under the symbol
"ACSC." On April 23, 1998, the last sale price of Common Stock as reported on
the Nasdaq National Market was $12.375 per share. See "Price Range of Common
Stock."
------------------

SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN MATTERS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
===================================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDERS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share......................... $ $ $ $
- -------------------------------------------------------------------------------------------------------------------
Total (3)......................... $ $ $ $
===================================================================================================================
</TABLE>

(1) The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."

(2) Before deducting estimated offering expenses of $400,000, all of which will
be paid by the Company.

(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 378,750 additional shares of Common Stock on the same terms and
conditions set forth above solely to cover over-allotments, if any. If such
option is exercised in full, the total Price to Public, Underwriting
Discount and Proceeds to Company will be $ , $
and $ , respectively. See "Underwriting."
------------------
The Common Stock is offered by the several Underwriters, subject to prior
sale, when, as and if issued to and accepted by them and subject to certain
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer or to reject any orders in whole or in part. It is expected that
delivery of the shares of Common Stock will be made on or about ,
1998.

A.G. EDWARDS & SONS, INC.
LEGG MASON WOOD WALKER
INCORPORATED
SCOTT & STRINGFELLOW, INC.

THE DATE OF THIS PROSPECTUS IS , 1998
<PAGE> 3

DESCRIPTION OF GRAPHIC

ABOUT THE COMPANY

<TABLE>
<S> <C>
COMMUNICATION SYSTEMS
The Company designs, develops, integrates
and implements complete communication
systems. The Company provides program and
[Picture of satellite dish] financial management support for large-scale
system procurement. Another capability
includes innovative business process
re-engineering.
INFORMATION TECHNOLOGY
The Company designs, installs and provides
support services for information management
and LAN/WAN systems. The Company is a
Microsoft Certified Solution Provider, [Drawing of information being transmitted
Banyan Vines Systems Integrator, Lotus from a ship at sea to shore via satellite]
Business Partner and Novell Authorized
Reseller. The Company also provides
multimedia training, Internet/intranet
solutions and database support.
SYSTEMS INTEGRATION
The Company provides COTS solutions for
customer-specific communication and
information system needs. Other capabilities
[Picture of fiber optic cable] include "one-stop shopping" for radio
equipment, satellite time, LAN/WAN
management and customer-specified
applications.
</TABLE>

PRODUCTS

The Company's products focus on networked, efficient standards-based
information exchange, using COTS computers and Company developed software.
ISALTS and INFORMATION 2000 compress, store and forward logistics and other
critical data by time-sharing radios or other information transfer media. BGIXS
uses COTS technology to permit PC-to-PC transfer of tactical data between a
headquarters host and supporting forces using satellite links. The
Company-developed information exchange systems allow the use of either
communication satellites or high frequency transmission for networked shared
media data exchange.

------------------------

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK, INCLUDING
SYNDICATE COVERING TRANSACTIONS AND THE IMPOSITION OF A PENALTY BID. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON
THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 103 OF REGULATION M. SEE
"UNDERWRITING."
2
<PAGE> 4

PROSPECTUS SUMMARY

The following summary should be read in conjunction with, and is qualified
in its entirety by, the more detailed information and the Financial Statements
and Notes thereto appearing elsewhere in this Prospectus. Investors should
consider carefully the risk factors related to the purchase of the Common Stock
of the Company. See "Risk Factors." Unless otherwise indicated, the information
in this Prospectus assumes that the Underwriters' over-allotment option will not
be exercised. References herein to fiscal years are to the Company's fiscal year
which ends on September 30. Unless the context otherwise requires, the "Company"
refers to Advanced Communication Systems, Inc. and its subsidiaries. A glossary
of acronyms used in this Prospectus appears on page 52.

THE COMPANY

Advanced Communication Systems, Inc. provides communications and
information technology services and solutions, predominantly to U.S. government
agencies and to a lesser extent commercial and international customers. The
Company operates primarily in three interrelated areas: communication systems
design and support, information technology services ("IT Services") and systems
integration. The Company believes that, from its inception in 1987, it has been
a leader in U.S. Navy satellite communications. The Company's revenues have
increased each year since fiscal 1987 and grew at a compound annual rate of
43.2% during the last five fiscal years, substantially all through internal
growth, reaching $52.2 million for fiscal 1997. Additionally, for the six month
period ended March 31, 1998, the Company's revenues grew 54.0% over the
comparable prior six month period, increasing to $32.6 million. The Company's
total funded and unfunded backlog was $217.6 million as of March 31, 1998. See
"Business -- Backlog."

The Company's primary objective is to provide superior communications and
information technology services and solutions to its clients. Consistent with
this objective, the Company completed three significant strategic acquisitions
since its initial public offering in July 1997. In February 1998, the Company
acquired Advanced Management Incorporated ("AMI"), a provider of a wide range of
information technology services, including complex computer solutions and
management services, to a variety of government and commercial entities,
including clients outside the Company's traditional Department of Defense
("DOD") client base. In November 1997, the Company acquired Integrated Systems
Control, Inc. ("ISC"), a provider of technical and engineering services to the
DOD, primarily the U.S. Navy, in the areas of communications and information
technology. In August 1997, the Company acquired RF Microsystems, Inc. ("RFM"),
a provider of technical and engineering services to the DOD in the areas of
communications, navigation, electronic warfare and digital signal systems. The
Company believes that such acquisitions: (i) allow the Company to participate in
increasingly large and complex procurement programs; (ii) increase its
opportunities to cross-sell products and services to existing customers; (iii)
bring new strength to the Company's technical capabilities through the
cross-utilization of technology and engineering skills; and (iv) increase the
overall depth and experience of the Company's management. See
"Business -- Overview."

The three main areas of the Company's business summarized below are
communication systems, IT Services and systems integration. The Company believes
that the convergence of its unique strengths in communications and information
technologies has positioned the Company to address space and computer-based
communications markets as an end-to-end provider of total solutions.

- COMMUNICATION SYSTEMS. The Company designs, engineers, develops,
integrates, installs and operates satellite and computer-based
communication systems. It provides satellite communications
engineering and technical services and program and system support
primarily to program directorates and field activities of the U.S.
Navy. Recently, the Company has expanded its communication systems
business capabilities to provide a full range of systems engineering
procurement and support for the Command, Control, Communication,
Computer and Intelligence ("C4I") initiatives of the DOD. In addition,
the Company has expanded its staff to include experts in program and
financial management, and now provides support in these areas to its
communication systems customers. The Company believes this combination
of skills and capabilities is one of the factors that distinguishes it
from its competitors in the communications
3
<PAGE> 5

systems business. The Company's communications systems business
represented 63.8% of revenues for the six month period ended March 31,
1998.

- IT SERVICES. The Company provides a full range of services and
support in the areas of information management technology, information
processing, network design and operations, database design and
management, Internet and intranet services and multimedia training
services. It provides these services to a wide range of customers,
including the DOD, other federal agencies and commercial enterprises.
The advanced technical capabilities gained by the Company while
performing services for government customers have provided the Company
with expertise in the information technology area, which the Company
is leveraging to develop its commercial business. The Company's IT
Services business represented 25.2% of revenues for the six month
period ended March 31, 1998.

- SYSTEMS INTEGRATION. The Company provides systems integration
services for communication systems and, to a lesser extent, acts as a
value-added reseller of computer hardware and software to both
government and commercial customers. The Company's strategy in this
business area is to concentrate on providing total communication
systems integration solutions. Most of this communication systems
integration business is performed under its contracts (the "GSA
Schedule Contracts") with the General Services Administration ("GSA"),
which permit the Company to sell approved products to U.S. government
agencies and contractors without further competitive bidding. The
Company's systems integration business represented 11.0% of revenues
for the six month period ended March 31, 1998.

Growth in the Company's business is being driven in part by the increasing
trend in government and commercial organizations to focus on their core
competencies and to outsource non-core functions such as information technology.
In addition, the U.S. military is placing greater emphasis on increasing
productivity while using fewer resources by employing systems that act as "force
multipliers." Solutions and technologies such as those offered by the Company
permit the use of fewer personnel and assets and result in more effective
performance at lower levels of spending. Federal Sources, Inc., an independent
market research firm specializing in the U.S. federal market, estimates that the
U.S. government has budgeted $28 billion in its fiscal year 1998 for information
technology services and products, including approximately $10 billion budgeted
by the DOD. The Company believes that the commercial information technology
market is significantly larger than the government market.

The Company believes it has established a reputation in the industry for
delivering creative solutions to complex problems through the use of highly
skilled personnel and the most current technology. The Company has managed large
and complex federal contracts and believes this capability positions it to
capitalize on the expected future growth in outsourcing, both in the United
States and internationally. To do so, the Company plans to continue to employ
the following strategies: (i) maintain leadership in the military satellite
communications industry; (ii) expand existing services and customer base; (iii)
expand through additional strategic acquisitions and the use of teaming
relationships; and (iv) develop additional international and commercial
business.

Advanced Communication Systems, Inc. is a Delaware corporation incorporated
in 1987. Its principal executive offices are located at 10089 Lee Highway,
Fairfax, Virginia 22030, and its telephone number is (703) 934-8130.

4
<PAGE> 6

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company................... 2,000,000 shares
Common Stock offered by the Selling Stockholders...... 525,000 shares
Common Stock to be outstanding after the offering
(1)................................................. 8,579,000 shares
Use of Proceeds....................................... The net proceeds of this offering will
be used to repay existing bank debt and
for general corporate purposes,
including potential acquisitions. See
"Use of Proceeds."
Nasdaq National Market symbol......................... "ACSC"
</TABLE>

- ---------------
(1) Based on shares outstanding as of April 15, 1998. Includes 25,000 shares
which will be issued upon exercise of an option by one of the Selling
Shareholders and sold in this offering. Does not include an aggregate of
738,500 shares of Common Stock reserved for issuance by the Company upon the
exercise of stock options as of April 15, 1998, of which options to purchase
99,700 shares will be exercisable at the closing of this offering at a
weighted average exercise price of $6.34. See "Management -- Stock Plans and
Agreements" and Note 12 of Notes to the Company's Consolidated Financial
Statements.

5
<PAGE> 7

SUMMARY FINANCIAL DATA

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, SIX MONTHS ENDED MARCH 31,
------------------------------------------------------------ -----------------------------
PRO FORMA PRO FORMA
COMBINED COMBINED
1993 1994 1995 1996 1997 (1) 1997 (2) 1997 1998 1998 (3)
------- ------- ------- ------- -------- --------- ------- ------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................ $12,223 $19,106 $23,724 $31,665 $52,194 $88,620 $21,130 $32,550 $40,635
Direct costs............ 7,050 11,418 14,815 19,307 37,687 60,325 14,746 20,990 25,960
Indirect, general and
administrative
expenses.............. 4,612 7,177 8,202 10,253 11,128 21,452 5,025 8,821 11,336
Write-off of acquired
in-process R & D
costs................. -- -- -- -- 1,910 -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- -------
Income from
operations............ 561 511 707 2,105 1,469 6,843 1,359 2,739 3,339
Interest expense........ (92) (125) (185) (257) (136) (2,047) (134) (378) (942)
Other income, net....... 14 52 52 57 153 153 44 15 15
------- ------- ------- ------- ------- ------- ------- ------- -------
Income before taxes..... 483 438 574 1,905 1,486 4,949 1,269 2,376 2,412
Pro forma income taxes
(4)................... 193 175 229 743 571 1,883 495 879 892
------- ------- ------- ------- ------- ------- ------- ------- -------
Pro forma net income
(4)................... $ 290 $ 263 $ 345 $ 1,162 $ 915 $ 3,066 $ 774 $ 1,497 $ 1,520
======= ======= ======= ======= ======= ======= ======= ======= =======
Pro forma net income per
share -- basic (4).... $ 0.28 $ 0.20 $ 0.59 $ 0.18 $ 0.23 $ 0.24
Pro forma net income per
share -- diluted
(4)................... $ 0.27 $ 0.19 $ 0.58 $ 0.18 $ 0.23 $ 0.23
Pro forma weighted
average shares
outstanding --
basic (5)............. 4,212 4,682 5,157 4,246 6,438 6,438
Pro forma weighted
average shares
outstanding -- diluted
(5)................... 4,361 4,767 5,242 4,346 6,558 6,558
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1998
-------------------------
ACTUAL AS ADJUSTED (6)
------- ---------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital............................................. $18,136 $18,220
Total assets................................................ 56,788 56,788
Total debt.................................................. 24,930 1,902
Stockholders' equity........................................ 18,955 41,983
</TABLE>

- ---------------
(1) Includes a one-time, non-cash charge reflecting the write-off of acquired
in-process research and development costs in connection with the acquisition
of RFM totaling $1.9 million. Excluding such charge, the Company's income
from operations, pro forma net income and pro forma net income per
share -- diluted would have been $3.4 million, $2.1 million and $0.44,
respectively, for the year ended September 30, 1997.
(2) Gives effect to the acquisition of AMI, RFM and ISC assuming such
transactions had occurred on October 1, 1996 and the exclusion of the
acquired in-process research and development costs of $1.9 million. See
"Unaudited Pro Forma Condensed Consolidated Statements of Operations."
(3) Gives effect to the acquisition of AMI assuming such transaction had
occurred on October 1, 1997. See "Unaudited Pro Forma Condensed Consolidated
Statements of Operations."
(4) Prior to June 25, 1997, the Company elected to be treated as an S
corporation and was not subject to federal and certain state income taxes.
The pro forma income taxes data reflects federal and state income taxes
based on estimated tax rates, as if the Company had elected C corporation
status for the periods indicated. Amounts for the six month period ended
March 31, 1998 are based on actual results.
(5) See Note 2 of the Notes to the Company's Consolidated Financial Statements.
Amounts for the six month period ended March 31, 1998 are based on actual
weighted shares outstanding.
(6) Gives effect to the sale of the 2,000,000 shares of Common Stock offered by
the Company hereby at an assumed price of $12.375 per share, after deducting
the estimated underwriting discount and estimated offering expenses, and the
application of the net proceeds therefrom. See "Use of Proceeds."

6
<PAGE> 8

RISK FACTORS

Prospective investors should carefully consider the following risk factors
relating to the Company and the Common Stock, in addition to the other
information contained in this Prospectus. Certain statements contained in this
Prospectus that are not related to historical results are forward-looking
statements. Actual results may differ materially from those projected or implied
in the forward-looking statements. Factors that could cause or contribute to
such differences include, but are not limited to, the following risk factors.

CONCENTRATION OF REVENUES

For fiscal 1995, 1996 and 1997 and the six months ended March 31, 1998,
approximately 99%, 90%, 92% and 91%, respectively, of the Company's revenues
were derived from contracts or subcontracts funded by the U.S. government,
virtually all of which were funded by the DOD. The Company expects that U.S.
government contracts are likely to continue to account for a significant portion
of its revenues in the future. Accordingly, the Company's financial performance
may be adversely affected by changing U.S. government procurement practices and
policies and declines in U.S. defense spending. Among the factors that could
have a material adverse effect upon the Company's ability to win new contracts
with the U.S. government, or retain existing contracts, are budgetary
constraints, changes in government funding levels, programs, policies or
requirements, technological developments, the adoption of new laws or
regulations and general economic conditions. In addition, certain of the
Company's contracts individually contribute a significant percentage of its
revenues. The Company's two largest contracts, both with the U.S. Navy,
generated approximately 46% of its revenues for fiscal 1997 and approximately
29% of its revenues for the six month period ended March 31, 1998, including one
contract that generated approximately 32% of its revenues for fiscal 1997 and
approximately 18% of its revenues for the six month period ended March 31, 1998.
Although the Company is currently focusing on expanding its customer base to
increase its non-military and non-government sales, a relatively small number of
large U.S. government contracts are likely to continue to account for a
significant percentage of the Company's revenues in the future. Termination of
these contracts or the Company's inability to renew or replace them when they
expire could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business -- Government Contracts."

GOVERNMENT CONTRACTING RISKS

Government contracts, including the Company's GSA Schedule Contracts, by
their terms, generally can be terminated at any time by the government without
cause. If a government contract is so terminated, the Company generally would be
entitled to receive compensation for the services provided or costs incurred up
to the time of termination and a negotiated amount of the profit on the contract
to the date of termination. Termination of any of its large government contracts
could have a material adverse effect on the Company's business, financial
condition and results of operations.

Government contracts require compliance with various contract provisions
and procurement regulations. The adoption of new or modified procurement
regulations could have a material adverse effect on the Company's business,
financial condition and results of operations or increase its costs of competing
for or performing government contracts. Any violation of these regulations could
result in the termination of the contracts, imposition of fines and/or debarment
from award of additional government contracts. Most government contracts are
subject to modification or termination for the convenience of the government in
the event of changes in funding, and the Company's contract costs and revenues
are subject to adjustment as a result of audits by the Defense Contract Audit
Agency (the "DCAA") and other government auditors. The award of government
contracts also is subject to protest by competitors which can result in the
re-opening of the bidding process, unanticipated legal costs or the award of a
contract to a competitor.

Government contracts generally are awarded to the Company through a formal
competitive bidding process in which the Company has many competitors. Upon
expiration, government contracts may be subject to a competitive rebidding
process. There can be no assurance that the Company will be successful in
winning contract awards or renewals in the future. The Company's failure to
renew or replace such contracts when they expire could have a material adverse
effect on its business, financial condition and results of operations.

7
<PAGE> 9

A significant portion of the Company's revenues in fiscal 1997
(approximately 22%) and in the six months ended March 31, 1998 (approximately
13%) were generated through small business set-aside programs. The Company no
longer is eligible to participate in some of these programs and, as its revenues
and size expand, it will lose its eligibility to participate in more of these
programs. There can be no assurance that the Company will be able to replace
revenues from these contracts.

The Company also derives significant revenues from sales under the GSA
Schedule Contracts. For fiscal 1997 and the six months ended March 31, 1998,
approximately 26% and 16%, respectively, of the Company's revenues were derived
from the GSA Schedule Contracts. The government has no obligation to purchase
any significant amount of goods or services under the contracts and there can be
no assurance as to the actual level of sales that will be derived from the
contracts. The GSA Schedule Contracts are fixed price contracts, which imposes
greater financial risk on the Company than a cost reimbursement or time and
materials contract. Failure to anticipate technical problems, estimate costs
accurately or control costs during performance of a fixed price contract may
reduce the Company's profit or cause a loss. In addition, the GSA Schedule
Contracts are renewable every five years by the government. The Company's
current GSA Schedule Contracts expire in March 1999. There can be no assurance
that the GSA Schedule Contracts will be renewed, and the Company's inability to
renew or replace the GSA Schedule Contracts could have a material adverse effect
on its business, financial condition and results of operations. See
"Business -- Government Contracts."

VARIABILITY OF QUARTERLY OPERATING RESULTS AND SEASONALITY

The Company's revenues and earnings may fluctuate from quarter to quarter
based on such factors as the number, size and scope of projects, expenditures
required by the Company, delays, employee utilization rates, adequacy of
provisions for losses, accuracy of estimates of resources required to complete
ongoing projects and general economic conditions. Demand for the Company's
products and services in each of the markets it serves can vary significantly
from quarter to quarter due to revisions in customer budgets or schedules and
other factors beyond the Company's control. In addition, the Company's sales
tend to be seasonal, with the Company's fourth quarter generally accounting for
the greatest proportion of revenues each year, based to a large extent on the
uneven government purchasing patterns. Due to all of the foregoing factors, it
is possible that in some future period the Company's results of operations will
fall below the expectations of securities analysts and investors. In this event,
the market price of the Common Stock would likely be materially adversely
affected. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Quarterly Results of Operations."

RISKS ASSOCIATED WITH ACQUISITION STRATEGY

A part of the Company's business strategy calls for growth through
acquisitions. Consistent with such strategy, the Company made three significant
strategic acquisitions since its public offering in July 1997, including the
acquisition of AMI in February 1998. The successful integration of the Company
and AMI, ISC and RFM is important to the future financial performance of the
Company. There can be no assurance that the anticipated benefits from such
acquisitions will be realized, that the Company will operate the acquired
businesses profitably in the future or that the Company will be able to
integrate the operations, products or personnel gained through any such
acquisitions without a material adverse effect on the business, financial
condition and results of operations of the Company. Accordingly, operating
expenses associated with acquired businesses may have a material adverse effect
on the business, financial condition and results of operations of the Company.
In addition, identifying and pursuing future acquisition opportunities will
require a significant amount of management time and skill. There can be no
assurance that the Company will be able to identify suitable acquisition
candidates, consummate any acquisition on acceptable terms or successfully
integrate acquired business operations. Future acquisitions could result in the
issuance of additional shares of capital stock or the incurrence of additional
indebtedness, could entail the payment of consideration in excess of book value
and could have a dilutive effect on the Company's net income per share. Many
business acquisitions must be accounted for under the purchase method of
accounting. Consequently, such acquisitions may generate significant goodwill or
other intangible assets. Acquisition of these businesses would typically result
in substantial amortization charges to the Company. Acquisitions could also
involve significant charges reflecting

8
<PAGE> 10

write-offs of acquired in-process research and development. As a result of
acquisitions, the Company wrote off $1.9 million of in-process research and
development in fiscal 1997 and on a pro forma basis would have recorded
amortization expenses of $552,000 for acquisition-related intangible assets. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Overview" and "Business -- Business Strategy."

MANAGEMENT OF GROWTH

The Company's revenues have increased over the past five fiscal years at a
compound annual rate of 43.2%. Continued growth could place a significant strain
on the Company's limited personnel, management, financial controls and other
resources. The Company's ability to manage any future expansion effectively will
require it to attract, retain, train, motivate and manage new employees
successfully, to integrate new management and employees into its overall
operations and to continue to improve its operational, financial and management
systems and controls and facilities. The Company's failure to manage any
expansion effectively could have a material adverse effect on the Company's
business, financial condition and results of operations.

BACKLOG NOT INDICATIVE OF REVENUES

Many of the Company's contracts are multi-year contracts and contracts with
option years, and portions of these contracts are carried forward from one year
to the next as part of the Company's contract backlog. The estimated backlog
under a government contract is not necessarily indicative of revenues that will
actually be realized under that contract. Congress normally appropriates funds
for a given program on a fiscal year basis, even though actual contract
performance may take many years. As a result, contracts ordinarily are only
partially funded at the time of award, and additional monies are normally
committed to the contract by the procuring agency as appropriations are made by
Congress in subsequent fiscal years. There can be no assurance that Congress
will appropriate funds or that procuring agencies will commit funds to the
Company's contracts for their anticipated terms. In addition, most of the
Company's government contracts have a base term of one year and a number of
option years. There can be no assurance that the government will extend a
contract through its option years. Many of the Company's large contracts require
that the Company supply services upon request, and the Company receives no
payments under these contracts until such services are requested and performed.
There can be no assurance that cancellations or scope adjustments of these
contracts might not occur or that the Company's services under these contracts
will be requested at the anticipated levels in the future. See
"Business -- Government Contracts" and "Business -- Backlog."

NEED TO ATTRACT AND RETAIN PROFESSIONAL STAFF

The Company's success will depend in part upon its ability to attract,
retain, train and motivate highly skilled employees, particularly in the area of
information technology. There is significant competition for employees with the
communication and information technology skills required to perform the services
the Company offers. In addition, the Company must often comply with provisions
in government contracts which require employment of persons with specified
levels of education, work experience and security clearances. There can be no
assurance that the Company will be successful in attracting a sufficient number
of highly skilled employees in the future. Only five of the Company's key
personnel are subject to noncompetition agreements. The loss of its key
technical personnel or its inability in the future to attract key employees or
to relocate them as required by customers could have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Business -- Employees."

COMPETITION

The Company experiences significant competition in all of the areas in
which it does business. In general, the markets in which it competes are not
dominated by a single company or a small number of companies; instead, a large
number of companies offer services that overlap and are competitive with those
offered by the Company. Many of its competitors are significantly larger and
have greater financial resources than the Company, and some of these competitors
are divisions or subsidiaries of large, diversified companies that have

9
<PAGE> 11

access to the financial resources of their parent companies. There can be no
assurance that the Company will be able to compete successfully. See
"Business -- Competition."

RISKS ASSOCIATED WITH ENTRY INTO COMMERCIAL BUSINESS

The Company is pursuing a strategy to increase the sales of its services in
the commercial market, although the Company and its management have limited
experience in this market. To date, the Company's sales to customers other than
the U.S. government have been made almost exclusively to military agencies of
other countries and to a lesser extent civilian buyers. Commercial contracts
accounted for 3.8% of the Company's revenues for fiscal 1997 and 6.6% for the
six months ended March 31, 1998. There can be no assurance that the Company will
be able to compete successfully in the civilian markets or continue to make
sales to defense agencies outside the United States.

Most of the Company's existing commercial contracts are fixed price
contracts, and the Company expects this will continue to be true with respect to
new commercial contracts. The Company may fail to anticipate technical problems,
estimate costs accurately or control costs during performance of a fixed price
contract, any of which may reduce the Company's profit or cause a loss under
such contracts. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Overview," "Business -- Business Strategy" and
"Business -- Government Contracts."

INTERNATIONAL EXPANSION

As part of its growth strategy, the Company is seeking opportunities to
expand into international markets. To date, the Company has limited experience
in marketing and distributing its products internationally. International
business accounted for 3.7% of the Company's revenues for fiscal 1997 and 1.5%
for the six months ended March 31, 1998. In marketing its products and services
internationally, the Company will face new competitors, some of which may have
established a strong presence in those markets. In addition, the ability of the
Company to market its products in foreign countries will be dependent on the
Company's ability to adapt its products to operate in foreign languages and to
provide the functionality desired by customers in those countries. There can be
no assurance that the Company will be successful in so adapting its products. In
addition to the uncertainty as to the Company's ability to establish an
international presence, there are certain difficulties and risks inherent in
doing business on an international level, such as compliance with regulatory
requirements and changes in these requirements, export restrictions, tariffs and
other trade barriers, limited protection of intellectual property rights,
difficulties in staffing and managing international operations, longer payment
cycles, problems in collecting accounts receivable, political instability,
fluctuations in currency exchange rates and potentially adverse tax
consequences. There can be no assurance that one or more of these factors will
not have a material adverse effect on any international operations established
by the Company, and consequently, on the Company's business, financial condition
and results of operations. See "Business -- Business Strategy."

TECHNOLOGICAL CHANGES

The Company operates principally in the communications and information
technology services industry, which changes rapidly and is highly competitive.
Even if the Company remains abreast of the latest developments and available
technology, technological advances and/or the introduction of new products and
services in the communications and information technology services industry
could adversely affect the Company. There are many large and successful
companies in the communications and information technology services industry,
many of which have greater resources than the Company. The Company's future
success will depend significantly on its ability to develop and deliver
technologically advanced quality products and services. The cost of developing
such products and services could adversely affect the Company's future results
of operations.

10
<PAGE> 12

DEPENDENCE ON KEY PERSONNEL

The Company's success depends to a significant degree on its key management
personnel, especially George A. Robinson, Charles G. Martinache, Thomas A.
Costello and Dev Ganesan. The loss of any one of these individuals could have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company does not have employment agreements with any
of these individuals, except for Mr. Ganesan. See "Management -- Employment
Agreement." The Company does not maintain key man life insurance policies on any
members of management.

PROPRIETARY INFORMATION

Much of the Company's business is derived from work product, software
programs, methodologies and other information in which it has a proprietary
interest. Although the Company seeks to protect this data with trademarks,
copyrights and confidentiality agreements, there can be no assurance that these
measures will prevent the unauthorized disclosure or use of the Company's
technical knowledge, practices or procedures, or that others may not
independently develop similar knowledge, practices or procedures. In addition,
the government may acquire certain proprietary rights to software programs and
other products that result from the Company's services under government
contracts or subcontracts and may disclose such information to third parties,
including competitors of the Company. Disclosure or loss of control over its
proprietary information could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company may also be
subject to litigation to defend against claimed infringement of the rights of
others or to determine the scope and validity of the intellectual property
rights of others. Any such litigation would be costly and divert management's
attention, either of which could have a material adverse effect on the Company's
business, financial condition and results of operations. Adverse determinations
in such litigation could result in the loss of the Company's proprietary rights,
subject the Company to significant liabilities, require the Company to seek
licenses from third parties or prevent the Company from selling its services,
any one of which could have a material adverse effect on the Company's business,
financial condition and results of operations.

CONTROL BY EXECUTIVE OFFICERS AND DIRECTORS; ANTI-TAKEOVER PROVISIONS

Upon the completion of this offering, the founders and principal officers
of the Company, Messrs. George A. Robinson, Charles G. Martinache and Thomas A.
Costello, will beneficially own approximately 27.7% of the outstanding shares of
Common Stock. Consequently, Messrs. Robinson, Martinache and Costello, if they
act together, will be able to exert significant influence over corporate matters
requiring stockholder approval, including the election of directors. See
"Principal and Selling Stockholders."

The directors of the Company are authorized to issue, without stockholder
approval, up to 1,000,000 shares of Preferred Stock. Such Preferred Stock may
have rights senior to the Common Stock. This Preferred Stock may have the effect
of delaying or preventing a change in control, may decrease the amount of
earnings and assets available for distribution to the holders of the Common
Stock or may adversely affect the rights and powers, including voting rights, of
the holders of the Common Stock. In certain circumstances, such issuance could
have the effect of decreasing the market price of the Common Stock. Further,
certain provisions of Delaware law, including Section 203 of the Delaware
General Corporation Law ("DGCL"), could delay or make more difficult a merger,
tender offer or proxy contest involving the Company. See "Description of Capital
Stock -- Preferred Stock" and "Description of Capital Stock -- Certain
Provisions of Delaware Law."

SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS

Upon the closing of this offering, the Company will have 8,579,000 shares
of Common Stock outstanding (assuming no exercise of the Underwriters'
over-allotment option or options outstanding under the Company's stock option
plans). The 2,525,000 shares of Common Stock sold in this offering as well as
the 2,875,000 shares sold in the Company's initial public offering will be
freely tradable without restriction or limitation under the Securities Act of
1933, except for shares purchased by "affiliates" (as is defined in

11
<PAGE> 13

Rule 144 under the Securities Act of 1933). All of the remaining 3,179,000
shares of Common Stock may be sold in the public market, subject in some cases
to the volume and other limitations of Rule 144 promulgated under the Securities
Act of 1933. The Company, together with certain of its stockholders (who will
hold in the aggregate 2,822,700 shares after the closing of the offering), have
agreed not to sell or otherwise dispose of any of their shares for a period of
180 days after the date of this Prospectus, subject to certain exceptions,
without the prior written consent of A.G. Edwards & Sons, Inc. The restriction
on the Company is subject to exceptions for the issuance of shares pursuant to
the Company's existing stock plans and as payment for acquisitions by the
Company. The Company has filed registration statements on Form S-8 registering
an aggregate of 1,038,500 shares of Common Stock subject to outstanding stock
options and Common Stock issuable pursuant to the Company's stock option plans
and employee stock purchase plan. If not otherwise subject to a lock-up
agreement, shares purchased pursuant to these plans generally would be available
for resale in the public market. At closing the Company will have outstanding
options to purchase an aggregate of 343,550 shares of Common Stock, 99,700 of
which will be exercisable at the closing of this offering. In connection with
the acquisition of ISC, the Company granted certain registration rights with
respect to the registration of 475,000 shares of Common Stock under the
Securities Act of 1933. See "Description of Capital Stock -- Registration
Rights." Sales of substantial amounts of Common Stock in the public markets,
pursuant to Rule 144 or otherwise, or the availability of such shares for sale,
could adversely affect the prevailing market prices for the Common Stock and
impair the Company's ability to raise additional capital through the sale of
equity securities in the future. See "Management -- Stock Plans and Agreements"
and "Shares Eligible for Future Sale."

VOLATILITY OF STOCK PRICE

There has historically been significant volatility in the market price of
securities of technology companies. In addition, the stock market in recent
years has experienced significant price and volume fluctuations that often have
been unrelated or disproportionate to the operating performance of particular
companies. Many factors that have influenced trading prices, such as actual or
anticipated operating results, growth rates, changes in estimates by analysts,
market conditions in the industry, announcements by competitors, regulatory
actions and general economic conditions, will vary from period to period. As a
result of the foregoing, the Company's operating results from time to time may
be below the expectations of securities analysts and investors. Any such event
would likely result in a material adverse effect on the market price of the
Common Stock.

PAYMENT OF DIVIDENDS

The Company does not anticipate declaring or paying cash dividends in the
foreseeable future. In addition, the Company's existing credit facility contains
provisions which prohibit the payment of dividends. See "Dividend Policy."

YEAR 2000 COMPLIANCE COSTS

Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. To distinguish 21st
century dates from 20th century dates, these date code fields must be able to
accept four digit entries. The Company has evaluated its information technology
infrastructure for Year 2000 compliance. The Company does not expect that the
cost to modify its information technology infrastructure to be Year 2000
compliant will be material to its financial condition or results of operations.
The Company does not anticipate any material disruption in its operations as a
result of any failure by the Company to be in compliance. No assurance can be
given, however, that unanticipated or undiscovered Year 2000 compliance problems
will not have a material adverse effect on the Company's financial condition,
results of operations and business. In addition, the Company has limited
information concerning the compliance status of its customers or suppliers. In
the event that any of the Company's significant customers or suppliers do not
successfully and timely achieve Year 2000 compliance, the Company's financial
condition, results of operations and business could be materially adversely
affected.

12
<PAGE> 14

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,000,000 shares of
Common Stock being offered by the Company at an assumed price of $12.375 per
share will be approximately $22.9 million ($27.3 million if the over-allotment
option granted to the Underwriters is exercised in full) after deducting the
estimated underwriting discount and estimated expenses to be paid by the
Company. The Company will not receive any of the proceeds from the sale of the
525,000 shares of Common Stock offered by the Selling Stockholders.

The Company intends to use the net proceeds of the offering to repay
outstanding amounts on its line of credit. The Company's outstanding principal
line of credit consists of two separate facilities, permitting the Company to
borrow up to an aggregate of $35 million. The first facility bears interest at
either the bank's prime rate or at a London interbank offered rate ("LIBOR") for
one, two or three month periods, plus a percentage, not more than 2.2%, which
depends on the Company's historical financial performance. The second facility
bears interest at either the bank's prime rate or at a LIBOR rate plus a
percentage, not more than 2.45%, which depends on the Company's historical
financial performance. Each facility expires on February 28, 2000. Borrowings
under the bank line of credit to date have been used to finance the acquisition
of AMI and for working capital needs. As of March 31, 1998, the outstanding
balance on the line of credit was approximately $23.3 million and the weighted
average interest rate for the six month period ended March 31, 1998 was
approximately 8.2%.

Any remaining net proceeds received by the Company from the offering will
be used for working capital and general corporate purposes, including possible
acquisitions of complementary businesses. The Company does not currently have
any agreements or commitments with respect to any potential acquisitions, nor
are any negotiations regarding any acquisitions ongoing. Pending such uses, the
Company intends to invest the net proceeds from the offering in investment
grade, interest-bearing instruments.

DIVIDEND POLICY

The Company does not anticipate declaring or paying cash dividends in the
foreseeable future. In addition, the Company's existing credit facilities
prohibit the payment of dividends. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and Note 10 of Notes to the Company's Consolidated Financial
Statements.

13
<PAGE> 15

PRICE RANGE OF COMMON STOCK

Prior to the quotation of the Common Stock on the Nasdaq National Market
beginning on June 27, 1997, there was no established trading market for the
Common Stock. The following table sets forth the high and low sale prices of the
Common Stock as reported by the Nasdaq National Market, where the Common Stock
trades under the Symbol "ACSC."

<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
FISCAL YEAR ENDED SEPTEMBER 30, 1997
Third Quarter (from June 27, 1997).................... $ 8.250 $7.500
Fourth Quarter........................................ 13.000 7.500
FISCAL YEAR ENDED SEPTEMBER 30, 1998
First Quarter......................................... $12.750 $8.000
Second Quarter........................................ 12.000 8.000
Third Quarter (through April 23, 1998)................ 14.938 11.500
</TABLE>

On April 23, 1998, the closing price of the Company's Common Stock was
$12.375 per share. As of April 17, 1998, there were approximately 54 holders of
record of Common Stock. The Company believes that there are over 3,000
beneficial owners of Common Stock.

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
March 31, 1998 on an actual and as adjusted basis. This table should be read in
conjunction with the Company's Consolidated Financial Statements and related
Notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
MARCH 31, 1998
-------------------------
ACTUAL AS ADJUSTED (1)
------- ---------------
(IN THOUSANDS)
<S> <C> <C>
Total debt.................................................. $24,930 $ 1,902
Stockholders' equity
Preferred stock, $.01 par value, 1,000,000 shares
authorized, no shares issued and outstanding.......... -- --
Common Stock, $.01 par value, 40,000,000 shares
authorized, 9,450,000 shares issued, actual (2),
11,475,000 shares issued, as adjusted................. 95 115
Paid-in capital........................................ 17,692 40,700
Retained earnings...................................... 1,205 1,205
Less cost of 2,901,625 shares of treasury stock........ (37) (37)
------- -------
Total stockholders' equity........................... 18,955 41,983
------- -------
Total capitalization.............................. $43,885 $43,885
======= =======
</TABLE>

- ---------------
(1) Gives effect to the sale of the 2,000,000 shares of Common Stock offered by
the Company hereby at an assumed price of $12.375 per share, after deducting
the estimated underwriting discount and estimated offering expenses, and the
application of the net proceeds therefrom. See "Use of Proceeds."
(2) Includes 25,000 shares which will be issued upon the exercise of an option
by one of the Selling Shareholders and sold in this offering. Does not
include an aggregate of 738,500 shares of Common Stock reserved for issuance
by the Company upon the exercise of stock options as of April 15, 1998, of
which options to purchase 99,700 shares will be exercisable at a weighted
average exercise price of $6.34. See "Management -- Stock Plans and
Agreements" and Note 12 of Notes to the Company's Consolidated Financial
Statements.

14
<PAGE> 16

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

The following unaudited pro forma condensed consolidated statement of
operations have been prepared by the Company's management and should be read in
conjunction with the historical financial statements of the Company, AMI and ISC
and the related notes thereto. 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 acquisitions occurred on the
dates specified, or of the future results of the combined companies. The pro
forma adjustments are based upon available information and certain adjustments
that the management of the Company believes are reasonable. In the opinion of
the Company's management, all adjustments have been made that are necessary to
present fairly the unaudited pro forma condensed consolidated financial
statements.

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1997
--------------------------------------------------------------------------
PRO FORMA PRO FORMA
COMPANY (1) RFM (2) ISC (3) AMI (4) ADJUSTMENTS (5) COMBINED
----------- ------- ------- ------- --------------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Revenues..................... $52,194 $4,614 $12,180 $23,165 $(3,533)(6) $88,620
Direct costs................. 37,687 3,237 6,505 14,794 (1,898)(6) 60,325
Indirect, general and
administrative expenses.... 11,128 1,150 4,975 4,720 (521)(7) 21,452
Write-off of acquired
in-process R&D costs....... 1,910(6) -- -- -- (1,910)(8) --
------- ------ ------- ------- ------- -------
Income from operations....... 1,469 227 700 3,651 796 6,843
Interest expense............. (136) -- (218) (1) (1,692)(9) (2,047)
Other income, net............ 153 -- -- 1,219 (1,219)(10) 153
------- ------ ------- ------- ------- -------
Income before taxes.......... 1,486 227 482 4,869 (2,115) 4,949
Pro forma tax provision
(benefit).................. 571 92 183 1,850 (813)(11) 1,883
------- ------ ------- ------- ------- -------
Pro forma net income......... $ 915 $ 135 $ 299 $ 3,019 $(1,302) $ 3,066
======= ====== ======= ======= ======= =======
Pro forma net income per
share -- basic............. $ 0.20 $ 0.59
Pro forma net income per
share -- diluted........... $ 0.19 $ 0.58
Pro forma weighted-average
shares
outstanding -- basic....... 4,682 475(12) 5,157
Pro forma weighted average
shares
outstanding -- diluted..... 4,767 475(12) 5,242
</TABLE>

- ---------------
(1) Represents the historical results of operations of the Company.
(2) Represents the pre-acquisition results of operations of RFM for the nine
months ended June 30, 1997.
(3) Represents the historical results of operations, derived from the audited
statement of income of ISC for the twelve months ended September 30, 1997
included herein.
(4) Represents the historical results of operations, derived from the audited
statement of income of AMI for the year ended December 31, 1997 included
herein.
(5) Gives effect to the acquisition of AMI, RFM and ISC assuming such
transactions had occurred on October 1, 1996 and the exclusion of a
one-time, non-cash change reflecting the write-off of acquired in-process
research and development costs in connection with the acquisition of RFM
totalling $1.9 million. See "Unaudited Pro Forma Condensed Consolidated
Statements of Operations."
(6) Elimination of intercompany transactions between the Company and RFM and
ISC.
(7) Reflects (i) elimination of intercompany transactions between the Company
and RFM and ISC of $1,438,000, (ii) increase in amortization of intangible
assets totalling $552,000, principally goodwill, resulting from the
acquisitions of AMI, ISC and RFM and (iii) an increase in indirect expenses
totalling $365,000 relating to additional compensation of $65,000 payable
pursuant to employment contracts with key employees and corporate
allocation of $300,000 of costs previously billable under cost-plus
contracts which are no longer billable under time-and-material contracts.
(8) Reflects the write-off of acquired in-process research and development
costs.
(9) Represents the increase in interest expense due to the borrowings under the
credit facility used for the acquisition of AMI.

15
<PAGE> 17

(10) Represents the elimination of interest and investment income relating to
assets distributed to the stockholders of AMI prior to the AMI acquisition.
(11) Represents the tax effect of the pro forma adjustments.
(12) Reflects the issuance of 475,000 shares of the Company's common stock in
exchange for all of the outstanding common stock of ISC.

<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31, 1998
----------------------------------------------------
PRO FORMA PRO FORMA
COMPANY(1) AMI(2) ADJUSTMENTS(3) COMBINED
---------- ------ -------------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues..................................... $32,550 $8,085 $ -- $40,635
Direct costs................................. 20,990 4,970 -- 25,960
Indirect, general and administrative
expenses................................... 8,821 2,210 305(4) 11,336
------- ------ ------- -------
Income from operations....................... 2,739 905 (305) 3,339
Interest expense............................. (378) -- (564)(5) (942)
Other income, net............................ 15 1,065 (1,065)(6) 15
------- ------ ------- -------
Income before taxes.......................... 2,376 1,970 (1,934) 2,412
Pro forma tax provision (benefit)............ 879 729 (716)(7) 892
------- ------ ------- -------
Pro forma net income......................... $ 1,497 $1,241 $(1,218) $ 1,520
======= ====== ======= =======
Pro forma net income per share -- basic...... $ 0.23 $ 0.24
Pro forma net income per share -- diluted.... $ 0.23 $ 0.23
Pro forma weighted average shares
outstanding -- basic....................... 6,438 6,438
Pro forma weighted average shares
outstanding -- diluted..................... 6,558 6,558
</TABLE>

- ---------------
(1) Represents the historical results of operations of the Company.
(2) Represents the historical pre-acquisition results of operations of AMI for
the four month period beginning October 1, 1997 through January 31, 1998.
(3) Adjustments to reflect the Company's acquisitions as if they had occurred on
October 1, 1997.
(4) Includes amortization of intangible assets ($181,000), principally goodwill,
resulting from the acquisition and reflects an increase in indirect expenses
relating to additional compensation ($22,000) payable pursuant to employment
contracts with key employees and corporate allocation ($102,000) of costs,
previously billable under cost-plus contracts, which are no longer billable
under time-and-material contracts.
(5) Represents the increase in interest expense due to the borrowings under the
credit facility used for the acquisition of AMI.
(6) Represents the elimination of interests and investment income relating to
assets distributed to the stockholders of AMI prior to the acquisition of
AMI.
(7) Represents the tax effect of the pro forma adjustments.

16
<PAGE> 18

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data should be read in
conjunction with the Company's Consolidated Financial Statements and the Notes
thereto included elsewhere herein. The Statement of Operations Data set forth
below with respect to fiscal 1995, 1996 and 1997 and the Balance Sheet Data as
of September 30, 1996 and 1997 are derived from, and are qualified by reference
to, the financial statements of the Company audited by Arthur Andersen LLP
included elsewhere in this Prospectus. The Statement of Operations Data set
forth below with respect to fiscal 1994 are derived from audited financial
statements of the Company not included in the Prospectus. The Statement of
Operations Data set forth below with respect to fiscal 1993 and the Balance
Sheet Data as of September 30, 1993 and 1994 are derived from reviewed financial
statements of the Company not included in the Prospectus. The unaudited
Statement of Operations Data for the six months ended March 31, 1997 and 1998
and the Balance Sheet Data as of March 31, 1998 are derived from the unaudited
consolidated financial statements of the Company included elsewhere in this
Prospectus, which, in the opinion of management, contain all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the results of operations for such periods.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, MARCH 31,
----------------------------------------------- -----------------
1993 1994 1995 1996 1997(1) 1997 1998
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................. $12,223 $19,106 $23,724 $31,665 $52,194 $21,130 $32,550
Direct costs............................. 7,050 11,418 14,815 19,307 37,687 14,746 20,990
Indirect, general and administrative
expenses............................... 4,612 7,177 8,202 10,253 11,128 5,025 8,821
Write-off of acquired in-process R&D
costs.................................. -- -- -- -- 1,910 -- --
------- ------- ------- ------- ------- ------- -------
Income from operations................... 561 511 707 2,105 1,469 1,359 2,739
Interest expense......................... (92) (125) (185) (257) (136) (134) (378)
Other income, net........................ 14 52 52 57 153 44 15
------- ------- ------- ------- ------- ------- -------
Income before taxes...................... 483 438 574 1,905 1,486 1,269 2,376
Pro forma income taxes (2)............... 193 175 229 743 571 495 879
------- ------- ------- ------- ------- ------- -------
Pro forma net income (2)............. $ 290 $ 263 $ 345 $ 1,162 $ 915 $ 774 $ 1,497
======= ======= ======= ======= ======= ======= =======
Pro forma net income per share-basic..... $ 0.28 $ 0.20 $ 0.18 $ 0.23
Pro forma net income per share-diluted... $ 0.27 $ 0.19 $ 0.18 $ 0.23
Pro forma weighted average shares
outstanding -- basic (3)............... 4,212 4,682 4,246 6,438
Pro forma weighted average shares
outstanding -- diluted (3)............. 4,361 4,767 4,346 6,558
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, MARCH 31,
-------------------------------------------- ------------------------
1993 1994 1995 1996 1997 ACTUAL AS ADJUSTED(4)
------ ------ ------ ------- ------- ------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)

<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital......................... $2,231 $2,616 $2,716 $ 5,387 $ 9,526 $18,136 $18,220
Total assets............................ 4,454 6,798 6,987 13,117 26,212 56,788 56,788
Total debt.............................. 1,359 2,031 1,821 2,688 -- 24,930 1,902
Stockholders' equity.................... 1,626 2,006 2,497 4,375 13,828 18,955 41,983
</TABLE>

17
<PAGE> 19

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements based on
management's current expectations, estimates and projections about the Company's
industry, management's beliefs and certain assumptions made by management. These
forward-looking statements involve risks and uncertainties, and actual results
may differ materially from those anticipated or expressed in such statements.
Potential risks and uncertainties include, among others, those set forth under
the "Risk Factors" section of this prospectus. Except as required by law, the
Company undertakes no obligation to update any forward-looking statement,
whether as a result of new information, future events or otherwise.

OVERVIEW

The Company's primary objective is to provide superior communications and
information technology services and solutions to its clients. Consistent with
this objective, the Company completed three significant acquisitions since its
initial public offering in July 1997. The Company acquired AMI in February 1998,
ISC in November 1997 and RFM in August 1997. Since the respective dates of the
acquisitions, the Company has integrated these acquired entities in order to
draw on the Company's base of technical expertise and capabilities in designing
solutions for government and commercial clients. The Company believes that such
acquisitions: (i) allow the Company to participate in increasingly large and
complex procurement programs; (ii) increase its opportunities to cross-sell
products and services to existing customers; (iii) bring new strength to the
Company's technical capabilities through the cross-utilization of technology and
engineering skills; and (iv) increase the overall depth and experience of the
Company's management. See "Risk Factors -- Risks Associated with Acquisition
Strategy" and "Business -- Overview."

Prior to fiscal 1994, virtually all of the Company's revenues were derived
from contracts with the U.S. Navy for systems engineering, design, integration,
services and support for satellite communications. Beginning in fiscal 1994, the
Company began to develop applications for its technical capabilities outside its
traditional U.S. Navy business. For example, the Company's GSA Schedule
Contracts have fueled significant growth in the systems integration area as the
U.S. government's trend toward using readily available software and hardware
expands the need for systems integration services, such as those offered by the
Company.

The Company's backlog, including both funded and unfunded backlog, was
$217.6 million at March 31, 1998. Two five-year U.S. Navy contracts awarded in
fiscal 1996 involve services estimated at approximately $136 million and were
the main contributors to the increase in backlog from 1995 to 1996. The
Company's acquisitions of AMI, ISC and RFM were primarily responsible for the
increase in backlog from 1997 to 1998. Many of the Company's contracts are
funded from year to year, based primarily on the procuring company's or agency's
fiscal requirements. The estimated backlog under a government contract is not
necessarily indicative of revenues that will actually be realized under that
contract. See "Risk Factors -- Backlog Not Indicative of Revenues" and
"Business -- Backlog."

18
<PAGE> 20

Revenues, by dollar and percentage, from the Company's three interrelated
business areas and three major types of customers are given below:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------------------------------------------
1995 1996 1997
------------------- ------------------- -------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
SERVICES PROVIDED
Communications Systems.. $17,785 75% $20,422 65% $30,854 59%
IT Services............. 4,634 19 8,008 25 7,563 15
Systems Integration..... 1,305 6 3,235 10 13,777 26
------- -------- ------- -------- ------- --------
Total.......... $23,724 100% $31,665 100% $52,194 100%
======= ======== ======= ======== ======= ========
CUSTOMER TYPE
U.S. Government......... $23,483 99% $28,606 90% $48,284 92%
Commercial.............. 219 1 849 3 1,997 4
International........... 22 0 2,210 7 1,913 4
------- -------- ------- -------- ------- --------
Total.......... $23,724 100% $31,665 100% $52,194 100%
======= ======== ======= ======== ======= ========

<CAPTION>
SIX MONTHS ENDED MARCH 31,
-----------------------------------------
1997 1998
------------------- -------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
SERVICES PROVIDED
Communications Systems.. $12,415 59% $20,762 64%
IT Services............. 3,697 17 8,214 25
Systems Integration..... 5,018 24 3,574 11
------- -------- ------- --------
Total.......... $21,130 100% $32,550 100%
======= ======== ======= ========
CUSTOMER TYPE
U.S. Government......... $19,929 94% $29,886 91%
Commercial.............. 403 2 2,162 7
International........... 798 4 502 2
------- -------- ------- --------
Total.......... $21,130 100% $32,550 100%
======= ======== ======= ========
</TABLE>

The Company's operating margin is affected by, among other things, the mix
of contract types (cost reimbursement, fixed-price or time and materials) as
well as the proportion of revenues from higher margin commercial and
international sales. A significant portion of the Company's contracts are cost
reimbursement contracts, under which the Company is reimbursed for all actual
costs, plus a fee or profit. The financial risks under these contracts generally
are lower than those associated with other types of contracts, and margins also
are typically lower. The Company has also been awarded fixed-price contracts by
the government. Such contracts carry higher financial risks because the Company
must deliver the contracted services below the fixed price in order to earn a
profit. For those companies with low cost structures, these contracts offer the
opportunity for higher profit margins. The following table summarizes the
percentage of revenues attributable to each contract type for the periods
indicated:

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED SEPTEMBER 30, MARCH 31,
-------------------------------- -------------------
1995 1996 1997 1997 1998
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Cost Reimbursement................... 77% 68% 59% 62% 48%
Fixed-Price.......................... 16 25 35 32 29
Time and Materials................... 7 7 6 6 23
------ ------ ------ ------ ------
Total...................... 100% 100% 100% 100% 100%
====== ====== ====== ====== ======
</TABLE>

Revenues on cost plus fixed fee contracts are recognized to the extent of
costs incurred plus a proportionate amount of fees earned. Revenues on time and
materials contracts are recognized at the contractual rates as labor hours and
direct expenses are incurred. Revenues on fixed-price contracts are recognized
on the percentage-of-completion method based on costs incurred in relation to
total estimated costs.

The Company's two significant U.S. Navy communication systems contracts and
programs accounted for approximately 29.0% of revenues for the six months ended
March 31, 1998. See "Business -- Company Operations -- Communication Systems."
Although the Company intends to expand its commercial and international sales, a
relatively small number of contracts are likely to continue to account for a
significant portion of the Company's future revenues. For fiscal 1997 and the
six months ended March 31, 1998, approximately 26% and 16.1%, respectively, of
the Company's revenues were derived from sales under the GSA Schedule Contracts.
The GSA Schedule Contracts are renewable every five years by the government.
Termination of any of these contracts or the Company's inability to renew or
replace them when they expire could have a material adverse effect on the
Company's business, financial condition and results of operations. See "Risk
Factors -- Government Contracting Risks."

19
<PAGE> 21

The Company generally uses commercially available products in its systems
integration business, which are generally available from several sources. The
Company has generally been able to obtain adequate supplies from its current
suppliers in a timely manner. The Company believes that, in most cases,
alternate vendors can be found if its current suppliers are unable to fulfill
its needs.

During fiscal 1997, and the six months ended March 31, 1998, revenues from
international business amounted to approximately 4% and 2%, respectively, of
revenues. The vast majority of the Company's international business revenues are
derived from sales of the Company's products to foreign navies and the
performance of services related to such sales. Because international business to
date has had higher profit margins than U.S. government business, an inability
to obtain future international business could adversely affect the Company's
financial condition and results of operations. Because both the Company's
expenses and its revenues from its international business are generally
denominated in U.S. dollars, the Company does not believe that its operations
are subject to material risks associated with currency fluctuations.

RESULTS OF OPERATIONS

The following table sets forth certain statement of operations data as a
percentage of revenues for the periods indicated:

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED SEPTEMBER 30, MARCH 31,
------------------------- --------------
1995 1996 1997(1) 1997 1998
----- ----- ------- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Direct costs..................................... 62.4 61.0 72.2 69.8 64.5
Indirect, general and administrative expenses.... 34.6 32.4 21.3 23.8 27.1
Write-off of acquired in-process R&D costs....... -- -- 3.7 -- --
----- ----- ------ ----- -----
Income from operations........................... 3.0 6.6 2.8 6.4 8.4
Other income (expense), net...................... (0.6) (0.6) -- (0.4) (1.1)
----- ----- ------ ----- -----
Income before taxes.............................. 2.4 6.0 2.8 6.0 7.3
Pro forma income taxes(2)........................ 1.0 2.3 1.0 2.4 2.7
----- ----- ------ ----- -----
Pro forma net income(2).......................... 1.4% 3.7% 1.8% 3.6% 4.6%
===== ===== ====== ===== =====
</TABLE>

- ---------------
(1) Includes a one-time, non-cash charge reflecting the write-off of acquired
in-process research and development costs incurred in connection with the
acquisition of RFM totaling $1.9 million. Excluding such charge, the
Company's income from operations and pro forma net income, as a percentage
of revenues, would have been 6.5% and 5.4%, respectively, for the year ended
September 30, 1997.
(2) Prior to June 25, 1997, the Company elected to be treated as an S
corporation and was not subject to federal and certain state income taxes.
The pro forma income taxes data reflects federal and state income taxes
based on estimated tax rates, as if the Company had elected C Corporation
status for the periods indicated. See Note 2 of the Company's Consolidated
Financial Statements. Amounts for the six month period ended March 31, 1998
are based on actual results.

SIX MONTHS ENDED MARCH 31, 1998 COMPARED TO SIX MONTHS ENDED MARCH 31, 1997

Revenues increased 54.0%, or $11.4 million, to $32.6 million for the six
months ended March 31, 1998, from $21.1 million for the same period in 1997. The
increase was principally due to an increase in revenues from communication
systems, primarily under contracts with the U.S. Navy, resulting from the
Company's acquisitions of RFM and ISC, and information technology services,
resulting from the acquisition of AMI.

Direct costs include labor costs, related fringe benefits, subcontract
costs, material costs and other non-overhead costs directly related to a
contract. Direct costs increased to $21.0 million for the six months ended March
31, 1998 from $14.7 million for the same period in 1997 due primarily to
increased revenues from the Company's acquisitions. Direct costs, expressed as a
percentage of revenues, decreased to 64.5% for the six months ended March 31,
1998 from 69.8% for the same period in 1997, primarily due to a decrease in the

20
<PAGE> 22

proportion of revenues coming from systems integration services. These services
have higher direct costs than the other services the Company provides because
the contracts generally require the Company to purchase hardware components as
part of the services.

Indirect, general and administrative expenses include fringe benefits,
overhead, selling and administrative costs, depreciation and amortization, bid
and proposal costs and research and development expenses. Indirect expenses
increased to $8.8 million for the six months ended March 31, 1998 from $5.0
million for the same period in 1997. The increase was due primarily to the
higher level of revenues discussed above. Indirect expenses, expressed as a
percentage of revenues, increased to 27.1% for the six months ended March 31,
1998 from 23.8% for the comparable period last year, due to the amortization of
intangible assets, primarily goodwill, resulting from the acquisition of RFM,
ISC and AMI.

Income from operations increased 101.5%, to $2.7 million for the six months
ended March 31, 1998, from $1.4 million for the same period in 1997, primarily
due to increased communication systems and IT Services revenues from the
acquisition of AMI, ISC and RFM. As a percentage of revenues, income from
operations increased to 8.4% for the six months ended March 31, 1998, from 6.4%
for the comparable period in the prior year, principally attributable to
increased revenues from fixed price and time-and-material contracts which
typically carry higher margins.

Other income (expense), net, consists of interest expense, offset in part
by interest income from short-term deposits of cash. Interest expense was
$378,000 and $134,000 for the six-month periods ended March 31, 1998 and 1997,
respectively. The increase in interest expense resulted primarily from $19.5
million borrowed to fund the AMI acquisition. Interest income was $15,000 and
$44,000 for the six months ended March 31, 1998 and 1997, respectively.

The Company's effective tax rate was 37.0% for the six months ended March
31, 1998. The Company's pro forma effective tax rate was 39.0% for the six
months ended March 31, 1997. This decrease is primarily due to lower state
taxes.

FISCAL 1997 COMPARED TO FISCAL 1996

Revenues increased 64.8%, or $20.5 million, to $52.2 million for fiscal
1997, from $31.7 million for fiscal 1996. The increase was due to a $10.0
million increase in revenues from communication systems, primarily under
contracts with the U.S. Navy, and a $10.5 million increase in revenues from
systems integration services.

Direct costs increased to $37.7 million for fiscal 1997 from $19.3 million
for fiscal 1996. Direct costs, expressed as a percentage of revenues, increased
to 72.2% for fiscal 1997 from 61.0% for fiscal 1996, primarily due to an
increased proportion of revenues coming from systems integration services. These
services have higher direct costs because the contracts generally require the
Company to purchase hardware components as part of the services.

Indirect expenses increased to $11.1 million for fiscal 1997 from $10.3
million for fiscal 1996. The increase was due primarily to the higher level of
revenues discussed above. Indirect expenses, expressed as a percentage of
revenues, decreased to 21.3% for fiscal 1997 from 32.4% for fiscal 1996, due to
the higher proportion of systems integration revenues, which typically have
lower associated indirect expenses.

Based on the results of a third-party appraisal, the Company recorded a
write-off of $1.9 million in the fourth quarter of 1997 to expense in-process
research and development costs related to the acquisition of RFM, because the
acquired in-process research and development had not yet reached technological
feasibility and had no alternative future uses.

Income from operations decreased 30.2%, to $1.5 million for fiscal 1997,
from $2.1 million for fiscal 1996, primarily due to the $1.9 million in-process
research and development write-off incurred in connection with the RFM
acquisition. Excluding the $1.9 million write-off, income from operations
increased 60.5%, to $3.4 million for fiscal 1997. This increase was primarily
due to increased revenues from U.S. Navy contracts and systems integration.
Excluding the in-process research and development write-off, as a percentage of

21
<PAGE> 23

revenues, income from operations decreased slightly to 6.5% for fiscal 1997,
from 6.6% for fiscal 1996, primarily attributable to lower high-margin
international revenues.

Other income (expense), net, consists of interest expense offset by
interest income from short-term deposits of cash. Interest expense was $136,000
and $257,000 for fiscal 1997 and 1996, respectively. Interest income was
$153,000 and $57,000 for fiscal 1997 and 1996, respectively. The increase in
interest income and decrease in interest expense during fiscal 1997 was
attributable to the paydown of debt and short-term investments of initial public
offering proceeds.

The Company's pro forma effective tax rate was 38.4% and 39.0% for fiscal
1997 and 1996, respectively.

FISCAL 1996 COMPARED TO FISCAL 1995

Revenues increased 33.3%, or $7.9 million, to $31.7 million for fiscal
1996, from $23.7 million for fiscal 1995. The increase was due to a $6.0 million
increase in revenues from communication systems and IT Services, primarily under
contracts with the U.S. Navy, and a $1.9 million increase in revenues from
systems integration services.

Direct costs increased to $19.3 million for fiscal 1996 from $14.8 million
for fiscal 1995. Direct costs, expressed as a percentage of revenues, decreased
to 61.0% for fiscal 1996 from 62.4% for fiscal 1995, primarily due to increased
revenues from international fixed price contracts which generally have lower
direct costs as a percentage of revenues. This decrease as a percentage of
revenue was partially offset by the higher direct costs attributable to systems
integration services.

Indirect expenses increased to $10.3 million for fiscal 1996 from $8.2
million for fiscal 1995. The increase was due primarily to the higher level of
revenues discussed above. Indirect expenses, expressed as a percentage of
revenues, decreased to 32.4% for fiscal 1996 from 34.6% for fiscal 1995, because
a higher proportion of revenues came from systems integration services.

Income from operations increased 197.7%, to $2.1 million for fiscal 1996,
from $707,000 for fiscal 1995. As a percentage of revenues, income from
operations increased to 6.6% in fiscal 1996 from 3.0% in fiscal 1995. This
increase was due primarily to a shift in the Company's revenue mix, with an
increased proportion of revenues coming from higher margin international,
systems integration and commercial sales.

Interest expense was $257,000 and $185,000 for fiscal 1996 and 1995,
respectively. Interest income was $57,000 and $52,000 for fiscal 1996 and 1995,
respectively.

The Company's pro forma effective tax rate was 39.0% and 40.0% for fiscal
1996 and 1995, respectively.

QUARTERLY RESULTS OF OPERATIONS

The Company's revenues and earnings may fluctuate from quarter to quarter
based on such factors as the number, size and scope of projects, expenditures
required by the Company, delays, employee utilization rates, adequacy of
provisions for losses, accuracy of estimates of resources required to complete
ongoing projects, general economic conditions and acquisition related charges.
Demand for the Company's products and services in each of the markets it serves,
particularly its systems integration business, can vary significantly from
quarter to quarter due to revisions in customer budgets or schedules and other
factors beyond the Company's control. In addition, the Company's sales tend to
be seasonal, with the Company's fourth quarter generally representing the
highest quarterly revenues in the fiscal year, based to a large extent on the
uneven government purchasing patterns. Additionally, a change in revenue mix
from quarter to quarter may result in fluctuating earnings, as experienced by
the Company on the sale of higher margin products to international customers in
the quarters ending December 31, 1995 and March 31, 1996.

The following tables set forth certain unaudited statement of operations
data for the last ten quarters, and such data expressed as a percentage of
revenues for each quarter. This data has been derived from the Company's
unaudited quarterly financial statements. In management's opinion, these
quarterly financial statements have been prepared on a basis consistent with the
audited financial statement contained elsewhere herein, and include all
adjustments, consisting only of normal recurring adjustments, which the Company
22
<PAGE> 24

considers necessary for a fair presentation of the information presented, when
read in conjunction with the Company's Consolidated Financial Statements and
Notes thereto appearing elsewhere herein. The results of trends are not
necessarily indicative of the results to be expected for any future periods.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------------------
FISCAL 1996 FISCAL 1997
------------------------------------------ ------------------------------------------
DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30,
1995 1996 1996 1996 1996 1997 1997 1997
-------- -------- -------- --------- -------- -------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................... $5,775 $7,261 $7,215 $11,415 $9,066 $12,064 $14,379 $16,685
Direct costs............... 3,331 3,864 4,475 7,638 6,038 8,708 10,432 12,509
Indirect, general and
administrative
expenses................. 2,027 2,748 2,358 3,121 2,442 2,583 3,040 3,063
Write-off of acquired
in-process R&D costs..... -- -- -- -- -- -- -- 1,910
------ ------ ------ ------- ------ ------- ------- -------
Income from operations..... $ 417 $ 649 $ 382 $ 656 $ 586 $ 773 $ 907 $ (797)(1)
====== ====== ====== ======= ====== ======= ======= =======
(AS A PERCENTAGE OF REVENUES)
Revenues................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Direct costs............... 57.7 53.2 62.0 66.9 66.6 72.2 72.6 75.0
Indirect, general and
administrative
expenses................. 35.1 37.9 32.7 27.4 26.9 21.4 21.1 18.4
Write-off of acquired
in-process R&D costs..... -- -- -- -- -- -- -- 11.4
------ ------ ------ ------- ------ ------- ------- -------
Income from operations..... 7.2% 8.9% 5.3% 5.7% 6.5% 6.4% 6.3% (4.8)%(1)
====== ====== ====== ======= ====== ======= ======= =======

<CAPTION>
THREE MONTHS ENDED
-------------------
FISCAL 1998
-------------------
DEC. 31, MAR. 31,
1997 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Revenues................... $14,170 $18,380
Direct costs............... 9,131 11,859
Indirect, general and
administrative
expenses................. 3,933 4,888
Write-off of acquired
in-process R&D costs..... -- --
------- -------
Income from operations..... $ 1,106 $ 1,633
======= =======
Revenues................... 100.0% 100.0%
Direct costs............... 64.4 64.5
Indirect, general and
administrative
expenses................. 27.8 26.6
Write-off of acquired
in-process R&D costs..... -- --
------- -------
Income from operations..... 7.8% 8.9%
======= =======
</TABLE>

- ---------------
(1) The three month period ended September 30, 1997 includes a one-time,
non-cash charge for acquired in-process research and development costs
incurred in connection with the acquisition of RFM totaling $1.9 million.
Excluding such charge, the Company's income from operations would have been
$1.1 million and income from operations as a percentage of revenues would
have been 6.7%.

LIQUIDITY AND CAPITAL RESOURCES

Since the Company's inception in 1987, it has generally financed its
working capital needs through internally generated funds, supplemented by
borrowings under the Company's revolving credit facility with a commercial bank
and the proceeds from the Company's initial public offering in July 1997.

The Company used cash from operating activities of $3.3 million for the six
months ended March 31, 1998, resulting primarily from net income, increases in
contract receivables and decreases in accrued expenses and accounts payable. The
increase in contract receivables was due to increases in revenue recognized on
contracts for which billings had not been presented to the customer,
particularly on a contract with the Australian Navy. For the six months ended
March 31, 1997, the Company generated cash from operating activities of $3.2
million resulting primarily from net income, increases in accounts payable and
accrued expenses and partially offset by increases in contract receivables.

The principal use of cash for investing activities has been for the
purchase of computers and equipment and the acquisition of AMI. The purchases of
computers and equipment totaled $765,000 and $350,000 for the six month period
ended March 31, 1998 and 1997, respectively. Further, the Company invested
$686,000 in software development costs for its communication products, including
the latest Microsoft Exchange-based product, INFORMATION 2000, in the six months
ended March 31, 1998. In February 1998, the Company acquired AMI for $19.5
million in cash and additional contingent payments based upon achievement of
certain financial goals.

In February 1998, the Company entered into a revolving credit facility with
a commercial bank, refinancing the Company's then-existing line of credit and
the outstanding commercial bank debt of ISC. This line of credit consists of two
separate facilities, permitting the Company to borrow up to an aggregate of $35
million. The first facility, in an amount up to $15 million, may be used to
finance acquisitions and for working capital and other corporate purposes, and
bears interest at either the bank's prime rate or at LIBOR for one, two or three
month periods, plus a percentage, not more than 2.2%, which depends on the
Company's historical financial performance. The second facility, in an amount up
to $20 million, may be used to finance acquisitions, and bears interest at
either the bank's prime rate or at a LIBOR rate plus a percentage, not more than
2.45%, which depends on the Company's historical financial performance. Each
facility expires on February 28, 2000. The credit agreement contains various
covenants requiring the Company and its

23
<PAGE> 25

subsidiaries, on a consolidated basis, to maintain certain financial ratios,
including debt to net income, minimum net income and minimum net worth. The
credit agreement also prohibits the payment of dividends. As of March 31, 1998,
the Company was in compliance with all covenants contained in the credit
agreement. As of March 31, 1998, the outstanding balance on the line of credit
was $23.3 million and the weighted average interest rate for the six months
ended March 31, 1998 was approximately 8.2%.

The Company consummated the initial public offering of its Common Stock in
July 1997, selling 2,225,000 shares of Common Stock for $7.50 per share
resulting in net proceeds to the Company of approximately $14.4 million.

In connection with the termination of the Company's S corporation status
and its initial public offering, the Board of Directors declared a $6.7 million
dividend of its previously undistributed S corporation earnings in June 1997.
The distribution was made as follows: $3.5 million, in kind, in the form of
contract receivables in June 1997, and $3.2 million in cash in July 1997.

The Company is regularly evaluating potential acquisition candidates. In
February 1998, the Company acquired AMI for $19.5 million in cash and additional
earn-out payments upon achievement of certain financial goals in each of the two
sequential twelve month periods subsequent to the acquisition up to a maximum of
$5.25 million per year. In November 1997, the Company acquired all of the
outstanding capital stock of ISC in exchange for 475,000 shares of the Company's
Common Stock. In August 1997, the Company acquired all of the outstanding
capital stock of RFM for $5.0 million in cash. The consolidated statement of
operations includes a $1.9 million charge taken at the time of the acquisition
of RFM for acquired research and development costs related to acquired
technology that had not reached technological feasibility and that had no
alternative future use. All three acquisitions have been accounted for as
purchases and the financial results of AMI, ISC and RFM have been included in
the results of operations from the dates of the respective acquisitions. For
each of the acquisitions, 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 aggregate purchase price of the acquisitions over
the net assets acquired is being carried as goodwill and intangible assets, in
the aggregate amount of $19.3 million, which will be amortized over their
estimated useful lives.

The Company currently anticipates that its current cash balances, amounts
available under its credit facility and net cash provided by operating
activities will be sufficient to meet its working capital and capital
expenditure requirements for at least the next twelve months. Inflation did not
have a material impact on the Company's revenues or income from operations in
fiscal 1995, 1996 and 1997.

RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS

In June 1997, the Financial Accounting Standards Board (FASB) issued two
SFASs: SFAS No. 130, "Reporting Comprehensive Income," and SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information." As
specified by these statements, the Company will apply these statements beginning
in fiscal 1999 and reclassify its financial statements for earlier periods
provided for comparative purposes.

SFAS 130 establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains, and losses) in a full set
of general-purpose financial statements. This statement requires that all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements.

SFAS 131 establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. This Statement supersedes FASB Statement
No. 14, "Financial Reporting for Segments of a Business Enterprise," but retains
the requirement to report information about major customers. It amends FASB No.
94, "Consolidation of All Majority-Owned Subsidiaries," to remove the special
disclosure requirements for previously unconsolidated subsidiaries. The Company
believes the impact of adopting SFAS 131 is currently not material.

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BUSINESS

OVERVIEW

The Company provides communications and information technology services and
solutions, predominantly to U.S. government agencies and to a lesser extent
commercial and international customers. The Company operates primarily in three
interrelated areas: communication systems design and support, IT Services and
systems integration. The Company believes that, from its inception in 1987, it
has been a leader in U.S. Navy SATCOM. Recently, using its information
management capabilities in such areas as network and database design and
support, the Company has begun to expand its services to the U.S. military and
to develop business with other federal agencies, state and local governments and
commercial and international customers. The Company's revenues have increased
each year since fiscal 1987 and grew at a compound annual rate of 43.2% during
the last five fiscal years, substantially all through internal growth, reaching
$52.2 million for fiscal 1997. Additionally, for the six month period ended
March 31, 1998, the Company's revenues grew 54.0% over the comparable prior six
month period, increasing to $32.6 million. The Company's total funded and
unfunded backlog was $217.6 million as of March 31, 1998.

The Company's primary objective is to provide superior communication and
information technology services and solutions to its clients. Consistent with
this objective, the Company acquired AMI in February 1998, ISC in November 1997
and RFM in August 1997. The Company believes that such acquisitions: (i) allow
the Company to participate in increasingly large and complex procurement
programs; (ii) increase its opportunities to cross-sell products and services to
existing customers; (iii) bring new strength to the Company's technical
capabilities through the cross-utilization of technology and engineering skills;
and (iv) increase the overall depth and experience of the Company's management.

ADVANCED MANAGEMENT INCORPORATED. The Company acquired AMI in February
1998. Founded in 1981, AMI provides a wide range of information technology
services, including complex computer solutions and management services, to a
variety of government and commercial entities, including clients outside the
Company's traditional DOD client base. AMI's clients include the Federal Deposit
Insurance Corporation (the "FDIC"), U.S. Secret Service, General Accounting
Office, U.S. Customs Service, Department of Health and Human Services,
Department of Labor, the U.S. Department of Agriculture and U.S. Army. AMI is
headquartered in McLean, Virginia, and has operations in California,
Connecticut, Georgia, Illinois, Maryland, Massachusetts, Missouri, New York,
Tennessee, Texas, Virginia and Washington, D.C.

INTEGRATED SYSTEMS CONTROL, INC. The Company acquired ISC in November
1997. Founded in 1983, ISC provides technical and engineering services to the
DOD, primarily the U.S. Navy, in the areas of communications and information
technology. Among others, its clients include the Space and Naval Warfare
Systems Center, Defense Information Systems Agency Joint Interoperability
Engineering Office, Naval Air Systems Command, U.S. Coast Guard and the North
Atlantic Treaty Organization ("NATO"). Headquartered in Virginia Beach,
Virginia, ISC has operations in Virginia Beach, San Diego, Charleston and the
Washington, D.C. area and provides support services from a number of sites
worldwide, including Japan, Bahrain, Honolulu, Italy and Guam.

RF MICROSYSTEMS, INC. The Company acquired RFM in August 1997. Founded in
1985, RFM provides technical and engineering services to the DOD in the areas of
communications, navigation, electronic warfare and digital signal systems. Its
clients include the Space and Naval Warfare Systems Center, Naval Air Warfare
Center -- Aircraft Division, Space and Missile Center, Air Force Space Command,
Defense Information Systems Agency and Department of Transportation.
Headquartered in San Diego, RFM has operations in San Diego, the Los Angeles
area, Colorado Springs and the Washington, D.C. area.

INDUSTRY OVERVIEW

Growth in the Company's business is being driven by increasing demand for
satellite-based communications systems and the increasing trend in government
and commercial organizations to focus on their core competencies by outsourcing
non-core functions such as communications and information technology. In
addition, the U.S. military is placing greater emphasis on increasing
productivity while using fewer resources
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by employing systems that act as "force multipliers." Solutions and technologies
such as those offered by the Company permit the more effective use of personnel
and assets and result in increased performance.

Improvements in space and communications technologies have resulted in
modern communications satellites with power, capacity, switching capabilities
and longevity significantly greater than those of their predecessors. These
improvements in performance, together with satellites' inherent geographic
coverage and technical advantages, have made satellite-based communications
increasingly competitive with other communications technologies, broadening the
market for satellite services such as telephony support for cable and network
television, broadband data transmission, paging, earth-sensing and position
location.

Government and business organizations also are increasingly demanding that
information technology systems be designed for interoperability with commercial
off-the-shelf ("COTS") computer hardware and software products and that such
products be usable with existing legacy systems. In addition, concerns over
excessive development costs and the rapid pace of technological change have led
both government and business organizations to demand flexible systems created by
adapting COTS software and hardware, rather than systems that have been built to
customized specifications. This emphasis on system flexibility using readily
available commercial products creates extensive systems integration
opportunities.

Federal Sources, Inc., an independent market research firm specializing in
the U.S. federal market, estimates that the U.S. government has budgeted $28
billion in its fiscal year 1998 for information technology services and
products, including approximately $10 billion budgeted by the DOD. The Company
believes that the commercial information technology market is significantly
larger than the government market.

BUSINESS STRATEGY

To capitalize on opportunities created by these industry developments, the
Company has adopted the following business strategies:

MAINTAIN LEADERSHIP IN MILITARY SATELLITE COMMUNICATIONS INDUSTRY. Since its
inception, the Company has focused on being a leader in the military satellite
communications industry. It now seeks to expand its services in this market by
continuing its early identification of program needs and its support of
government program offices in formulating requirements. In addition, through
incremental investments the Company seeks to leverage its existing products base
to develop lower cost military products with shorter delivery times, including
its products based on its Streamlined Automated Logistics Transmission System
("SALTS") and Battle Group Information Exchange System ("BGIXS") technology. The
Company also believes it can leverage its expertise with the U.S. Navy satellite
communications to expand its presence as a military satellite communications
provider both within the U.S. Navy and other branches of the DOD.

EXPAND EXISTING SERVICES AND CUSTOMER BASE. The Company plans to continue to
expand its capabilities into new but related areas of technology which the
Company believes will allow it to both further penetrate its existing customer
base and develop new customers. For example, the Company has developed and is
marketing high speed data transfer technology and is currently enhancing that
technology to include high frequency communication capability with Internet and
intranet access. The Company's strategy also involves expanding its customer
base beyond the DOD. In particular, the Company seeks to capitalize on the U.S.
government's trend toward using readily available commercial products and
systems integration services by offering such products and services through its
GSA Schedule Contracts. As a result of the Company's acquisitions, it now has
access to two additional GSA Schedule Contracts.

EXPAND THROUGH STRATEGIC ACQUISITIONS AND THE USE OF TEAMING
RELATIONSHIPS. Strategic acquisitions are an integral component of the
Company's growth strategy. The Company has completed three significant
acquisitions and continues to evaluate potential acquisitions of businesses,
technologies and products which are complementary to its core communications
business. See "Business -- Overview." The Company believes that acquisitions
will allow it to develop technical services and products it does not currently
provide, to target markets it does not currently serve and, with its increased
capabilities, successfully pursue larger communication and IT Services
opportunities. For example, the Company's acquisition of AMI provides the
Company access to clients outside its traditional DOD client base, including the
FDIC and the U.S. Customs Service.

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Additionally, the Company is pursuing teaming relationships with significant
industry participants in order to enhance its ability to participate in
additional large and complex procurement programs. Examples of this strategy
include RFM's teaming relationship with Science Applications International
Corporation, and the Company's teaming relationships with British Aerospace and
GE Marconi.

DEVELOP ADDITIONAL COMMERCIAL AND INTERNATIONAL BUSINESS. While servicing its
government customers, the Company has developed many advanced technical
capabilities in areas such as networking, local area network ("LAN") and wide
area network ("WAN") services and database design and support. The Company's
strategy is to market these skills and capabilities in selected commercial
businesses, especially small and medium-sized businesses that are outsourcing
their increasingly complex information technology needs, and to selected foreign
governments desiring to upgrade their communications systems capabilities. ISC's
NATO Services Basic Ordering Agreement, awarded in 1997, provides a new vehicle
by which the Company can provide its services and products to international
clients.

COMPANY OPERATIONS

The Company operates primarily in three interrelated areas: communication
systems, IT Services and systems integration. The Company believes that the
convergence of its unique strengths in communications and information
technologies has positioned the Company to address space and computer-based
communications markets as an end-to-end provider of total solutions. The nature
of those operations areas and the progression of operations within the Company
have resulted in very close ties between the business areas. The distinction
between communications systems and IT Services have become clouded, as the
traditional communications systems have taken on an increasingly information
technology role, with many communications systems becoming fully integrated
information technology systems. Additionally, the business of communication
systems procurement must heavily rely on the information technology
infrastructure in place to manage these multi-faceted programs.

COMMUNICATION SYSTEMS

The Company believes it is recognized as a leader in the satellite
communications industry, providing technical and program management services and
support for satellite communication systems to the U.S. military. It provides
satellite communications engineering and technical services and program and
system support primarily to various program directorates and field activities of
the U.S. Navy. While the Company initially developed a staff of highly qualified
communications engineers and systems analysts to provide state-of-the-art
engineering and technical support services, it has expanded its staff to include
experts in program and financial management as well as professional support
personnel with backgrounds in communication systems. The Company believes this
combination of skills and capabilities is one of the key factors that
distinguishes it from its competitors in the communication systems market. The
Company's communications systems business represented 63.8% of revenues for the
six month period ended March 31, 1998.

ENGINEERING. The Company provides comprehensive communications engineering
support to assist in the development of military communication systems. Many of
its contracts are not project specific, but require that it provide technical
services and support to a variety of projects and programs being run by a
particular U.S. Navy office. In particular instances, the Company may perform
some or all of the technical engineering and other support for a specific U.S.
Navy program or system, or may provide technical review and support services to
assist the U.S. Navy in evaluating or assessing engineering tasks. These
services cover a full range of engineering and technical support, including
requirements analyses, design, hardware and software engineering, studies and
development.

The Company's skills and experience permit it to apply innovative solutions
to communications engineering problems. For example, the Company has developed
receiver, modulator and coder design alternatives for a major U.S. Navy
communication system and has defined satellite payload modifications for a major
military satellite program. The Company's expertise in both military and
commercial satellite programs has enabled it to develop innovative military uses
of commercial satellite systems. For instance, the Company developed the concept
which permitted the U.S. Navy to conduct its first worldwide video
teleconference,

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simultaneously linking all European, Atlantic and Pacific commanders by
satellite with the Pentagon and a major command ship at sea. In addition, the
Company's engineers have operational experience to translate a user's
requirements into practical technical specifications for a communication system.
This experience has enabled the Company's engineers to analyze major U.S. Navy
communication systems, such as High Speed Fleet Broadcast and the Communication
Support System, and project future needs and technology requirements. The
Company's capability to conduct high level theoretical engineering tasks,
coupled with an intimate knowledge of the system under investigation, permits
the Company to assist its customers in avoiding costly troubleshooting efforts
on communication problems related to natural phenomena. Many of these concepts
and techniques which were developed for the U.S. Navy have natural extensions to
other military and commercial applications.

As an extension of the Company's capability to provide total engineering
solutions, the Company supports communication systems after development with a
complete set of in-service engineering skills, which include planning for and
conducting installation, testing operational performance and providing training
and maintenance assistance. The Company provides this engineering support for a
wide variety of communications equipment, such as antennas, receivers,
processors and complete systems. For example, the Company provides installation
check-out for the U.S. Navy's extra high frequency terminals installed on-board
ships and also provides training for ship and submarine crews in their
operation, both in port and, when appropriate, at sea.

PROGRAM PLANNING AND MANAGEMENT. The Company assists DOD program managers in
planning and managing all facets of defense and military programs and hardware
procurement, from determining needs and objectives through development,
acquisition, integration, testing and fielding. These services include
procurement planning and management, financial management, cost estimating and
control and production support.

The Company has a staff specializing in financial management who have
worked with government managers in the Executive Office of the President,
national budget offices, Congressional committees, the Office of the Secretary
of Defense and the Office of the Secretary of the Navy. This staff has supported
several domestic and international government and commercial customers in
communication systems and other areas. The Company has tailored a variety of
project management techniques and tools to customer needs, such as developing
networks which enable simultaneous progressive tracking of over 100 acquisition
documents and developing dependency schedules to track the progress of
industrial manufacturing processes for a major U.S. Navy weapons system. The
dependency schedules were used to identify a production schedule problem for a
shipboard weapons control system, to conduct analyses of the system and to
develop a work-around alternative to maintain the schedule.

Additionally, the Company provides program support to U.S. and foreign
governments in the sale of U.S. military equipment to foreign governments. The
Company believes that this area of expertise presents significant potential for
growth as foreign governments upgrade their communication system capabilities.
The Company has established a presence in this niche market with its experience
in foreign military sales, including advising on compliance with licensing and
security requirements, preparing technical documentation, forecasting and
tracking equipment deliveries and funding obligations, providing program and
financial reviews and reconciling and closing foreign military sales cases. The
Company prepares schedules of available equipment and provides data for existing
and new technologies, recommendations for release of hardware and software, and
guidance on approval or disapproval of commercial export license requests. This
experience is also being applied to provide direct sales to foreign governments.
See "Business -- Products."

The Company's network management and satellite communications expertise
also permit it to develop systems for business users in geographically dispersed
locations. The Company believes that office locations of companies will continue
to become more geographically dispersed and that the commercial market for
systems to link these offices can be a significant opportunity for future
growth.

The following are significant communication systems contracts and programs,
which also include IT Services, emphasizing the nature of the Company's
interrelated business areas:

- The Company is the prime contractor under a five-year cost plus fixed
fee contract awarded by the U.S. Navy in March 1996 and expiring at
the end of fiscal 2000 to provide technical engineering

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and other support services to a U.S. Navy command. The contract had a
backlog of approximately $67.8 million at March 31, 1998. The contract
team includes, as subcontractors, Computer Sciences Corporation,
Booz-Allen and Hamilton, Inc., Tele-Consultants, Inc. and others.

- The Company is the prime contractor under a five-year cost plus fixed
fee contract awarded by the U.S. Navy in August 1996 and expiring in
fiscal 2001 to provide program management support, financial
management support, cost and schedule analysis, information management
support, foreign military sales support, installation and inventory
management and configuration management for the PD 70 Integrated
Command, Control, Communication, Computers and Intelligence ("IC4I")
project and staff offices. The contract had a backlog of approximately
$29.7 million at March 31, 1998.

INFORMATION TECHNOLOGY SERVICES

Through its IT Services business, the Company offers a broad array of
professional information technology services and information systems to
commercial and government markets. The IT Services offered by the Company
include information management systems design and integration; LAN/WAN design,
installation and support; database design and real-time database management;
Internet and intranet services; and multi-media training development. The
advanced technical capabilities gained by the Company while performing services
for government customers has provided expertise in the information technology
area, which the Company is leveraging to develop its commercial business. The
Company is currently focusing on expanding its customer base to include
commercial and international customers. The Company's IT Services business
represented 25.2% of revenues for the six month period ended March 31, 1998.

The Company designs and implements information management systems that
enable its customers to create integrated productivity software and
communication tools which allow uninterrupted transmission of information
throughout a customer's infrastructure. The Company has been designated as a
Microsoft Certified Solution Provider, a Lotus Business Partner, Banyan Vines
Systems Integrator and a Novell Authorized Reseller, designations which permit
the Company to pursue some business opportunities not available to all
competitors because these certifications frequently are cited as eligibility
requirements for commercial bids.

The Company plans and creates conceptual designs, system designs and system
updates, including identifying functional requirements and creating database,
system and subsystem specifications. It performs feasibility and cost-benefit
studies on system alternatives and presents recommendations. The Company
believes that there is a substantial demand for these kinds of services and is
actively seeking to market them to small and midsize companies and to
municipalities.

The Company also provides office automation system services. It analyzes
current office functions and matches them with appropriate office software and
provides integrated office tools to permit data sharing and improve office
efficiency. The Company established the first office automation system for a
major program directorate of the U.S. Navy over ten years ago, using a central
computer with multiple processors and work station terminals, applying
then-available technology to an office environment. As it continued to provide
network services for that office, improving the system through advances in
technology, the Company implemented and now supports a 250 station LAN with five
servers. The Company has applied that same technology to several commercial
customers.

Additionally, the Company provides technical assistance to end users on
system configuration issues, software upgrades and functionality. In 1993, the
Company was awarded a contract to operate the network used by the International
Joint Commission, a quasi-government organization of the U.S. and Canada charged
with protecting the environmental conditions along the border between the two
countries. After successful completion of that three year contract, the Company
was awarded a multi-year contract to continue the network support with expanded
work scope, including software application training.

The Company provides a full range of database support using innovative
solutions to manage databases and present the information back to a variety of
end users at the level and detail specific to their needs. The

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Company has extensive expertise in developing and implementing plans to migrate
data from legacy systems to modern technology products, as well as the design
and implementation of new applications. In fiscal 1997, the Company completed a
major database task for the U.S. Army to provide access to U.S. Army databases
using a data warehousing approach. The Company believes that this successful
implementation will result in additional contracts from the U.S. Army to extend
the data warehousing to additional databases.

The Company has extensive hands-on experience designing complex management,
program and financial databases and graphical user interfaces ("GUI"). The
Defense Technical Information Center ("DTIC") awarded a contract to the Company
to provide a user-friendly interface to be used world-wide to access and search
the DTIC database, which contains data on virtually every technical study
completed for the DOD. The Company has continued to receive assignments to
implement additional GUIs for the DTIC. The current contract with DTIC expires
at the end of fiscal year 1998.

To permit its customers to communicate more efficiently, the Company
develops and implements both external (Internet) and internal (intranet)
connectivity solutions. It conducts needs analyses to define specific objectives
for web sites; designs marketing objectives and strategies; provides design
services for the appearance of web sites; provides technical and project
management services and support; hosts customer web sites on its server; and
provides web site promotional services to create the desired site traffic.

The Company offers a wide range of training services utilizing innovative
techniques and tools, such as computer based training ("CBT") aids, training
videos and on-line performance tools, to promote increased productivity and
efficient use of installed systems. It prepares and conducts CBT seminars for
government and commercial customers and has developed CBT programs covering a
wide variety of subjects as required by customers, including, for example,
identifying persons driving while under the influence of alcohol (for the
National Highway Traffic Safety Administration) and training seamen on the
operation of on-board submarine communication systems. Activities the Company
undertakes as part of its multi-media training services include developing
customized training concepts and plans, including undertaking front-end analyses
of a customer's business and business processes to identify training
requirements and the appropriate training media; developing user and
administrator guides as well as self study work books, wall charts, training
videos and other materials; and surveying and updating curricula for training
courses.

A United Kingdom based subsidiary of the Company was recently awarded ISO
9001 TickIT certification, an internationally recognized endorsement for quality
management and quality assurance. This certification provides assurance to
customers that the process involved in the design, development, maintenance, and
support of software developed by the subsidiary adheres to the ISO 9001 quality
management standard.

An example of a significant IT Services program is represented by two Basic
Ordering Agreements that AMI has in place with the FDIC, with expiration dates
in July and November 1998. In addition, AMI currently has a GSA Schedule
Contract and has been providing various IT Services to the FDIC, including
nationwide WAN/LAN design and implementation, network operations system
migrations, new technologies evaluations, system development life cycle of major
financial application and logistical systems, relational database design and
programming, network monitoring and troubleshooting. The contracts had a backlog
of approximately $23.3 million at March 31, 1998.

SYSTEMS INTEGRATION

The Company provides systems integration for communication systems and to a
lesser extent acts as a value-added reseller of computer hardware, software and
integrated systems to both government and commercial customers. Sales to
government customers are through the Company's GSA Schedule Contracts. Sales to
commercial customers are through direct contracts with other commercial
customers. The Company supports the systems and products it sells by providing
its customers a wide range of services, including employee training,
maintenance, repair and user assistance. The Company offers individual
components of its systems and other products from various vendors for resale
through its GSA Schedule Contracts. The resale business often provides the
opportunity for additional systems integration business. The Company's systems
integration business represented 11.0% of revenues for the six month period
ended March 31, 1998.
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The Company believes that a market opportunity has developed as government
and commercial customers have begun to migrate to systems composed of COTS
hardware and software components. Its strategy has been to anticipate the
systems needs of customers and to develop systems using readily available
commercial hardware and software. This strategy differs from that of many of the
Company's reseller competitors, which traditionally provide individual hardware
and software items for resale without integration, and many of its integration
competitors, which traditionally have developed entire systems. The Company
concentrates on relatively low quantity procurements which are not
cost-competitive for large systems integration companies, applying system
knowledge gained through following technology trends and providing ease of
procurement through GSA Schedule Contracts for government customers and direct
purchase for commercial customers. A recent example of this strategy resulted in
the sale to the U.S. Navy of over $4.0 million of integration work for extra
high frequency communications controllers.

The Company believes it has been successful as a system integrator because
it has targeted certain technologies and systems to offer through the GSA
Schedule Contracts. Expecting that many government agencies were planning to use
Versa-Module European ("VME") technology, the Company focused on offering VME
products and systems, which provide users with a versatile modular computer
system that allows users to combine products and functions. However, recognizing
that technology changes constantly, the Company is now targeting replacement
technology for some of the VME applications and will offer further technology
advances as appropriate. Because of the nature of this systems integration work,
the Company does not have a large investment in VME plant or equipment and can
continue to provide VME technology while pursuing additional technologies.

PRODUCTS

The Company has developed a set of communication systems and software
products which have both military and commercial applications.

ISALTS

The Company believes that its International Streamlined Automated Logistics
Transmission Systems ("ISALTS") which is based on the SALTS technology, is an
example of its ability to adapt its military expertise to commercial uses. The
Company's SALTS technology is designed to provide military and commercial
organizations with the ability to store and forward large amounts of
administrative and logistics data in a compressed, secure format using many
forms of communication media. SALTS provides a near real-time means of
communicating mass data at minimum cost.

The SALTS technology originally was developed by the U.S. Navy as an
alternative data transmission system so that the transmission of logistics and
administrative data would not interfere with the transmission of tactical data
during the Persian Gulf war. Following the Persian Gulf war, the U.S. Navy
contracted with the Company to operate and enhance the SALTS system.
Subsequently, the Company has customized versions of SALTS for other specialized
applications. For example, the U.S. Army's 18th Airborne Corps and the troops
occupying Haiti used it to exchange accounting data. In addition, SALTS
successfully conveyed mission support data during other major military
operations and disaster relief efforts.

The ISALTS program is the Company's major commercial application of its
SALTS technology. The Company has developed a version of the ISALTS software
which it is marketing to friendly foreign governments for their military data
transmission needs. The Company also provides readily available commercial
hardware, installation and ongoing maintenance, software upgrades and other
support services for its ISALTS customers. To date, the Company has installed an
ISALTS system for the UK Royal Navy and is completing the installation of an
ISALTS system for the Royal Australian Navy.

The Company is currently developing its latest version of ISALTS,
INFORMATION 2000. This is Microsoft Exchange-based and thus takes advantage of
existing COTS technology, while adding significant messaging, file transfer and
database query capabilities. The product is expected to be released and
available for sale in late 1998.

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BGIXS

BGIXS was developed by the Company as a way to permit reliable and
efficient data communication (as compared to text communication only) between
land, sea and air units in half-duplex mode using a hub/spoke architecture.
BGIXS uses COTS technology to permit PC-to-PC transfer of tactical data between
a headquarters host and supporting forces using satellite links. Additionally,
BGIXS permits rapid file transfer with guaranteed delivery and provides
multimedia capability. The Company is currently developing an internet
compatible BGIXS product. The U.S. Navy and the UK Royal Navy have purchased
BGIXS systems, and the Company is actively marketing the product to other
foreign military organizations in friendly countries.

ISALTS and BGIXS illustrate the Company's ability to build systems to
satisfy a particular customer's needs and then use the same technology in a
refined and augmented form to create salable products for a different, and
potentially wider, customer base. The Company believes that these technologies
have significant commercial applications.

DEVELOPING TECHNOLOGIES

MICROMACHINING TECHNOLOGY

RFM has sponsored independent research and development in the area of
micromachining technology since 1994. Micromachining technology utilizes the
processing of CMOS and GaAs materials to produce devices such as thermopiles and
associated bridge and display components on a single substrate. Although the
company believes that this technology may have a variety of applications, the
Company is currently focusing on RF power measurement. Using this technology, a
sensor may be placed in a radome of a satellite antenna to accurately monitor
transmitted power. RFM plans to target the market for compact, low cost,
accurate power sensors.

TAGGING TECHNOLOGY

RFM is in the process of leveraging its U.S. Navy experience in the
development of remote tagging devices into a range of commercial and military
applications. This technology will utilize inexpensive tag devices that will be
attached to an item or person of interest. For instance, the tag device may be
used for the tracking of freight or any high value merchandise. The information
incorporated in a tag can be read remotely in response to an interrogation or
the tag can report at predetermined times. For RFM's applications this involves
RF links to the tags and the remoting distances can be a few feet or thousands
of miles depending on the communication link used.

MARKETING

The Company's operations group is primarily responsible for marketing its
services and products, including the development and execution of marketing
plans, proposal presentations and the performance of related tasks. The
Company's marketing activities are conducted by its professional managers who
have technical expertise and whose efforts are supplemented by the Company's
staff of engineers, scientists and analysts. Company personnel use customer
contacts, attend new business briefings sponsored by government agencies and
review publications such as Commerce Business Daily for contracting
opportunities and to learn of new business opportunities. The Company also
participates in several major trade shows, both domestic and international, that
showcase applicable technologies.

One of the Company's primary marketing strategies is to anticipate and
understand the changing needs of its customers and then to be prepared to meet
those needs as they arise in new programs or in new program functions. The
Company believes that its experience in providing services to the U.S. Navy
enhances its ability to understand and anticipate the U.S. Navy's needs. The
Company emphasizes customer satisfaction, as evidenced by its ability to retain
customers such as the U.S. Navy since the Company's inception in 1987. In fiscal
1996, the Company won a major contract recompetition as the prime contractor on
an engineering services and support contract for which it originally served as a
subcontractor. Under this recompete contract,

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the Navy made the award to the Company as the prime contractor, although the
Company is substantially smaller than the prime contractors on the original
contracts.

GOVERNMENT CONTRACTS

In general, the Company's business with the government (as both a prime
contractor and a subcontractor) is performed under cost reimbursement contracts,
time and materials contracts or fixed price contracts. Cost reimbursement
contracts, including cost plus fixed fee contracts, provide for the
reimbursement of costs (to the extent allowed under federal regulations) plus
the payment of a fixed fee. Under time and materials contracts, the Company is
reimbursed for labor hours at negotiated hourly billing rates and is reimbursed
(without fee) for travel and other direct expenses at actual cost plus applied
indirect, general and administrative expense. Under fixed price contracts, it
agrees to perform certain work for a fixed price and, accordingly, realizes the
financial benefit or detriment to the extent that the actual cost of performing
the work differs from the contract price. The majority of the Company's revenues
from government contracts are derived from cost plus fixed fee contracts.

The Company has several multi-year contracts with U.S. government agencies
to provide communication systems services and support, information technology
services and systems integration services and support. Typically, these
contracts require the Company to provide a broad range of services and support,
as requested by the customer, which may include systems engineering, production
support, management information systems services and support and program
operational support. Each contract generally provides an estimate of the number
of staff years that the government agency believes will be utilized each year
under the contract. The Company receives specific work assignments under the
contract on an as-identified basis through the issuance by the U.S. government
of task orders setting out the specific work to be performed, the staff years
allocated to the task and the estimated cost, fee and travel allocated to such
task. Payments are made to the Company incrementally during the performance of
each task. In order to plan for orderly performance under a contract, it is not
unusual, prior to or at the commencement of each government fiscal year during
the term of the contract, for the U.S. government and the Company to define
proposed tasks to be completed under the contract during the coming fiscal year.

Under the Company's GSA Schedule Contracts, government agencies may
purchase, at prices approved by the GSA, hardware and software integration,
systems engineering, automated data processing services, hardware and software,
repair (service and parts) and training, without further competitive bidding.
Products that the Company can provide under the GSA Schedule Contracts must be
approved by the GSA prior to being offered to end-users. Also, at the time the
contract was initially awarded and at each contract renewal, prices to end-users
under the contract are set for the duration of the contract at a specified level
or specified levels varying over time. The contract is a fixed price contract
and does not have any pre-set delivery schedules or obligation to purchase any
significant amount of goods or services. The GSA Schedule Contracts are
renewable every five years and each of the current contract terms expire in
1999. The Company believes that the GSA Schedule Contracts will be renewed,
although there can be no assurance to this effect.

The Company currently has a total of four blanket purchase agreements
("BPAs") with federal agencies. A BPA is a simplified but non-mandatory, fixed
price, contract for the government to purchase products, usually by establishing
charge accounts with qualified sources. Agencies typically enter into BPAs for
similar products with several companies. BPAs generally include a list of
products at established prices, individual purchase limits for authorized
purchasers, and other pre-negotiated terms and conditions. Purchases under BPAs
are often paid for with a government-issued credit card.

In 1996, the GSA authorized agencies to enter into BPAs with GSA Schedule
holders. The GSA-authorized BPAs incorporate many terms and conditions of the
GSA Schedule Contracts, and incorporate many products offered on the GSA
Schedule Contracts, often at lower prices than available on the GSA Schedules.
The Company normally enters into separate agreements with vendors in order to
offer reduced BPA prices to the government. The BPA sales vehicle allows the
Company to focus specific vendor relationships on specific sets of customers.

33
<PAGE> 35

The Company's contracts and subcontracts with federal government agencies
are competitively bid and awarded on the basis of technical merit, personnel
qualifications, experience and price. The Company's business, financial
condition and results of operations could be materially affected by changes in
procurement policies, a reduction in funds available for the services provided
by it and other risks generally associated with federal government contracts.
New government contract awards also are subject to protest by competitors at the
time of award which can result in the re-opening of the bidding process or the
award of a contract to a competitor. None of the Company's current government
contracts is the subject of a bid protest; however, there can be no assurance
that government contracts awarded to it in the future will not be challenged by
competitors.

The Company's contractual costs and revenues also are subject to audits and
adjustments by negotiation between it and the DCAA and other government
auditors. As part of the audit process, the DCAA verifies that all charges made
by a contractor against a contract are legitimate and appropriate. Audits may
result in recalculation of contract revenues and non-reimbursement of some
contract costs and fees. The Company was audited by DCAA for contract
performance through fiscal 1994 under all of its government contracts, which
resulted in immaterial adjustments to its revenues under the contracts audited.
However, there can be no assurance that future audits will not result in
material adjustments to the Company's revenues.

The Company's contracts with the government and its subcontracts with
government prime contractors are subject to termination for the convenience of
the government; termination, reduction or modification in the event of change in
the government's requirements or budgetary constraints; and, when it
participates as a subcontractor, termination for the failure or inability of the
prime contractor to perform its prime contract. If a termination for the
convenience of the government occurs, the government generally is obligated to
pay the costs incurred by the Company under the contract plus a pro rata fee
based upon the work completed.

In addition to the right to terminate, government contracts are conditioned
upon the continuing availability of Congressional appropriations. Congress
usually appropriates funds on a fiscal year basis even though contract
performance may take several years. Consequently, at the outset of a major
program, the contract is usually incrementally funded, and additional funds are
normally committed to the contract by the procuring agency as appropriations are
made by Congress for future fiscal years. In addition, contractors often
experience revenues uncertainties during the first quarter of the government's
fiscal year (beginning October 1) until differences between budget requests and
appropriations are resolved. To date, Congress has funded all years of the
multi-year major program contracts for which the Company has served as prime
contractor or a subcontractor, although there can be no assurance that this will
be the case in the future.

BACKLOG

Many of the Company's contracts are multi-year contracts and contracts with
option years, and portions of these contracts are carried forward from one year
to the next as part of the Company's contract backlog. The Company's total
contract backlog represents management's estimate of the aggregate unearned
revenues expected to be earned by the Company over the life of all of its
contracts, including option periods. Because many factors affect the scheduling
of projects, there can be no assurance as to when revenues will be realized on
projects included in the Company's backlog. In addition, although contract
backlog represents only business which is considered to be firm, there can be no
assurance that cancellations or scope adjustments will not occur. The majority
of backlog represents contracts under the terms of which cancellation by the
customer under the termination for convenience clause would entitle the Company
to all or a portion of its costs incurred and potential fees to the date of
cancellation.

Many of the Company's contracts are funded from year to year, based
primarily on the procuring company's or agency's fiscal requirements. This
results in two different categories of contract backlog: funded
34
<PAGE> 36

and unfunded backlog. "Funded backlog" represents the sum of contract amounts
for which funds have been specifically obligated to contracts by customers,
which in the case of a U.S. government contract requires appropriation by the
U.S. Congress to the applicable agency and allocation to the contract by the
agency. "Unfunded backlog" represents future contract or option amounts that
have not been specifically obligated by customers. "Backlog" is the total of
funded and unfunded backlog.

The following table summarizes the Company's funded and unfunded backlog at
the dates indicated:

<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
------------------------------- ---------
1995 1996 1997 1998
------- -------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BACKLOG COMPONENT
Funded........................... $ 3,255 $ 6,437 $ 5,323 $ 26,421
Unfunded......................... 29,920 132,803 141,314 191,202
------- -------- -------- --------
Total.................. $33,175 $139,240 $146,637 $217,623
======= ======== ======== ========
</TABLE>

The Company believes that approximately 37% of its backlog as of September
30, 1997 will result in revenues in fiscal 1998. However, the Company also
believes that backlog is not necessarily indicative of future revenues. The
Company's backlog typically is subject to large variations from quarter to
quarter as existing contracts are renewed or new contracts are awarded.
Additionally, all U.S. government contracts included in backlog, whether funded
or unfunded, may be terminated at the convenience of the government.

COMPETITION

Because its communication systems business is specialized and the Company
is a leader in the portion of the communication business it pursues, the market
for this business is somewhat less competitive than the markets for its systems
integration and IT Services businesses. In satellite communication systems and
services, the Company competes against technical services companies in the
defense industry, including Computer Sciences Corporation, Science Applications
International Corporation, Booz-Allen and Hamilton, Inc. and SEMCOR. In its
other business areas, the Company competes against a vast array of computer
manufacturers, systems integrators and product resellers and distributors. In
the IT Services area, the Company frequently teams as a subcontractor on large
procurement programs with one of its larger competitors since it can be very
expensive to bid as a prime contractor on such large procurement programs.

The Company believes that the principal competitive factors in the
businesses in which it operates are technical understanding, management
capability, past contract performance, personnel qualifications and price. In
the federal government market, procurement reforms over the past years have
increased the importance of a contractor's past performance in deciding new bid
awards.

EMPLOYEES

The Company believes that its employees and their knowledge and
capabilities are a major asset. The Company has been successful in attracting
and retaining employees skilled in its core business competencies. The Company
intends to continue to employ highly skilled personnel, as well as personnel
knowledgeable concerning the needs and operations of its major customers.

As of March 31, 1998, the Company employed 759 people. The Company believes
that its relations with its employees are good. None of the Company's employees
are covered by collective bargaining agreements.

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<PAGE> 37

There is significant competition for employees with the communication and
information technology skills required to perform the services the Company
offers. The Company's success will depend in part upon its ability to attract,
retain, train and motivate highly skilled employees, particularly in the area of
information technology.

FACILITIES

The Company's headquarters occupies approximately 22,200 square feet at
10089 Lee Highway, Fairfax, Virginia. This space is provided under the terms of
a lease from 10089 Management, a related party to the Company, that expires
August 31, 2003. See "Certain Transactions -- Transactions with Directors and
Executive Officers." In the United States, the Company, including AMI, ISC and
RFM, occupies an aggregate of approximately 155,000 square feet of office space.
In addition to the Company's headquarters, the Company has offices in Arlington,
Virginia; Virginia Beach, Virginia; Charleston, South Carolina; and San Diego,
California. The Company also maintains an office near Plymouth, England. ISC
maintains its headquarters in Virginia Beach, Virginia as well as offices in San
Diego, California; North Charleston, South Carolina; and Arlington, Virginia.
RFM maintains its headquarters in San Diego, California as well as offices in El
Segundo, California; Colorado Springs, Colorado; Lusby, Maryland; and
Alexandria, Virginia. AMI maintains its headquarters in McLean, Virginia and has
facilities in California, Connecticut, Georgia, Illinois, Maryland,
Massachusetts, Missouri, New York, Tennessee, Texas, Virginia and Washington,
D.C. The Company believes that its current facilities are adequate for its
existing needs and that additional suitable space will be available as required.

LEGAL PROCEEDINGS

The Company currently is not a party to any material legal proceedings.

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<PAGE> 38

MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

The following table sets forth certain information regarding the directors,
executive officers and other key employees of the Company.

<TABLE>
<CAPTION>
AGE POSITION
--- --------
<S> <C> <C>
DIRECTORS AND EXECUTIVE
OFFICERS:
George A. Robinson............ 59 President, Chief Executive Officer and Chairman of the Board
of Directors
Charles G. Martinache......... 57 Executive Vice President, Chief Operating Officer and Director
Thomas A. Costello............ 50 Executive Vice President, Chief Technology Officer, Secretary
and Director
Dev Ganesan................... 39 Executive Vice President, Chief Financial Officer and
Treasurer
Wayne Shelton................. 65 Director
Charles R. Collins............ 66 Director

KEY EMPLOYEES:
Kenneth D. Regan.............. 55 President of ACS Services
Kevin R. Adams................ 40 President of ACS Technologies
Howard Sparks................. 60 President of ISC
Dwayne Junker................. 56 President of RFM
John Lin...................... 52 President of AMI
</TABLE>

GEORGE A. ROBINSON. Mr. Robinson was a founder of the Company and has
served as President, Chief Executive Officer and Chairman of the Board of
Directors of the Company since its inception in 1987. From 1986 to 1987, Mr.
Robinson held the position of Vice President for East Coast Operations of
Advanced Digital Systems, Inc., a military communication software development
company. Prior to working at Advanced Digital Systems, Inc., Mr. Robinson spent
over 20 years as a civilian employee in the U.S. Navy Satellite communication
program, most recently as Deputy Director.

CHARLES G. MARTINACHE. Mr. Martinache was a founder of the Company and has
served as Chief Operating Officer and a Director of the Company since 1987. From
1987 to July 1992, Mr. Martinache also held the office of Vice President, and in
July 1992 was made Executive Vice President. From 1986 to 1987, Mr. Martinache
was a program manager for Advanced Digital Systems, Inc. Prior to that, Mr.
Martinache served 23 years in the U.S. Navy as a cryptologic officer.

THOMAS A. COSTELLO. Mr. Costello was a founder of the Company and has
served as Secretary and a Director of the Company since 1987. Mr. Costello also
served as Treasurer of the Company from 1987 to August 1997. From 1987 to 1994,
Mr. Costello held the positions of Senior Vice President and Technical Director,
and in 1995 was made Executive Vice President and Chief Technology Officer of
the Company. From 1983 to 1987, Mr. Costello was a Senior Systems Engineer for
Advanced Digital Systems, Inc. where, among other things, he led the Integrated
Navy SATCOM Architecture study to upgrade existing information exchange
subsystems.

DEV GANESAN. Mr. Ganesan has served as the Chief Financial Officer of the
Company since February 1997 and as Executive Vice President and Treasurer since
August 1997. From June 1994 to January 1997, Mr. Ganesan was employed by GSE
Systems, Inc., a publicly held international software systems and technology
solutions developer, as Vice President of Finance and Accounting. From 1990 to
June 1994, Mr. Ganesan served as the Treasurer and Corporate Controller of U.S.
Lime & Minerals, Inc., a publicly held mineral resources company. From 1987 to
1990, Mr. Ganesan was with Deloitte & Touche, most recently as an audit manager.

37
<PAGE> 39

WAYNE SHELTON. Mr. Shelton has served on the Board of Directors since
August 1997. From January 1995 to June 1997, he served as president of Hughes
Information Systems and as a senior vice president of Hughes Aircraft Company.
From December 1990 to January 1995, Mr. Shelton was president of Hughes
Information Technology Corporation and corporate vice president of Hughes
Aircraft Company. Mr. Shelton is currently a member of the Board of Directors of
ADI Technology, Inc., a software engineering company.

CHARLES R. COLLINS. Mr. Collins has served on the Board of Directors since
August 1997. He is also currently an advisory partner with the law firm Gibson,
Dunn & Crutcher LLP and has held such position since April 1, 1996. From 1990 to
such date, Mr. Collins was a partner with Gibson, Dunn & Crutcher LLP. Mr.
Collins is a general partner of a real estate partnership that filed for
reorganization under Chapter 11 of the U.S. Bankruptcy Code in 1995. The
partnership emerged from reorganization in 1996 and currently is performing
under its obligations, as reorganized. Mr. Collins was not the managing general
partner of the partnership at the time it was put into Chapter 11 and currently
is not the managing general partner.

KENNETH D. REGAN. Mr. Regan joined the Company in October 1997 as Vice
President for International Development and assumed the position of President of
ACS Services, a business unit of the Company focusing on IT Services in January
1998. Before joining the Company, Mr. Regan served for seven years as head of
the Communication and Information Systems Department at the Navy Research and
Development Laboratory Center ("NRaD") in San Diego, California. Prior to
becoming head of the department, he was division head, branch head and program
manager for large communication and surveillance programs at the Naval Ocean
Systems Center and predecessor organizations.

KEVIN R. ADAMS. Mr. Adams has served as President of ACS Technologies
since October 1997. Mr. Adams joined the Company in September 1993 as a Systems
Engineer, and in September 1994 he was made Manager of VME Technologies. In
April 1996, Mr. Adams was promoted to Director of ACS Technologies, a business
unit of the Company focusing on systems integration work, and in May 1997, Mr.
Adams was appointed to the position of Vice President of the Company. From
December 1991 to August 1993, Mr. Adams was employed as an engineer by VisiCom
Laboratories, Inc., a software development company.

HOWARD SPARKS. Mr. Sparks was a founder of ISC and has been President and
a Director of ISC since its inception in 1983. Prior to founding ISC, Mr. Sparks
was a Senior Analyst and Business Manager for Sonalysts, Inc. Mr. Sparks has 38
years of C3I experience.

DWAYNE JUNKER. Mr. Junker joined RFM in 1989 and has served as RFM's
President since November 1997. Prior to becoming President, Mr. Junker served as
Vice President from 1996 to November 1997, C4I Division Vice President from 1994
to 1996, head of the C3I Department from 1992 to 1994 and as Milstar Satellite
Program Manager from 1989 to 1992. Prior to working at RFM, Mr. Junker served 30
years as a Navy Officer specializing in telecommunications and electronics.

JOHN LIN. Mr. Lin is a founder of AMI and has been President of AMI since
its inception in 1981. Mr. Lin has over 25 years experience as a systems
engineer, facilities manager, operating system programmer, application
programmer, office automation designer and network designer and installer. Prior
to founding AMI, Mr. Lin worked for Electronic Data Systems and Planning
Research Corporation.

The Bylaws of the Company provide that the Board of Directors shall consist
of five directors (plus such number of directors as may be directed from time to
time pursuant to the terms of any series of preferred stock that may be issued
and outstanding from time to time). Each director is elected for a one-year term
at each annual meeting of the stockholders. Officers are elected by the Board of
Directors. Each officer serves at the discretion of the Board of Directors.
There are no family relationships among any of the directors or executive
officers.

STOCKHOLDERS AGREEMENT

On May 2, 1997, Messrs. Robinson, Martinache and Costello, individually and
as trustees of certain trusts, entered into a Stockholders Agreement pursuant to
which each has agreed to vote the shares
38
<PAGE> 40

beneficially owned by him to elect each other as directors of the Company and on
other matters as a block as determined by the affirmative vote of the majority
of their shares. Upon completion of this offering, the Stockholders Agreement
will automatically terminate due to Messrs. Robinson, Martinache and Costello as
a group beneficially owning less than forty percent (40%) of the outstanding
Common Stock.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.

Subsequent to the initial public offering in July 1997, the Board of
Directors established a Compensation Committee and an Audit Committee. The
Compensation Committee and Audit Committee are comprised of Messrs. Shelton and
Collins. The Compensation Committee determines the compensation of the Company's
executive officers and administers the 1996 Stock Incentive Plan, the 1997 Stock
Incentive Plan and the Employee Stock Purchase Plan. The Audit Committee makes
recommendations concerning the engagement of independent public accountants,
reviews with the independent public accountants the plan and results of the
audit engagement, reviews the independence of the independent public
accountants, considers the range of audit and non-audit fees and reviews the
adequacy of the Company's internal accounting controls. Neither member of the
Compensation Committee was an officer or employee of the Company during the
fiscal year ending September 30, 1997. Prior to the formation of the
Compensation Committee in August 1997, the functions of the Compensation
Committee were performed by the Board of Directors as a whole. For information
concerning certain transactions and relationships among the Company and the
current members of the Board of Directors, see "Certain Transactions."

DIRECTOR COMPENSATION

Directors who are employees of the Company do not receive any compensation
for their service as directors. The Company pays each director who is not an
employee of the Company: (i) an annual retainer of $15,000, which is paid
quarterly in cash; (ii) a stipend of $1,200 for attending each meeting of the
Board of Directors and each meeting of a committee of the Board of Directors if
such committee meeting is held on a date separate from a meeting of the Board of
Directors; and (iii) reimbursement for his out-of-pocket expenses for attending
these meetings. In addition, Directors who are not employees of the Company
receive options to purchase 5,000 shares of the Company's Common Stock upon
election to the Board of Directors and an additional 5,000 shares upon each
reelection to the Board of Directors. Such options have an exercise price equal
to the current market price on the date of the grant, a term of five years and
vest in three equal annual installments beginning on the date of the grant and
on the first and second anniversary of the grant. All non-vested options are
terminated six months after a member leaves the Board of Directors, other than
by death or disability. On death or disability, all non-vested options
automatically vest.

EXECUTIVE COMPENSATION

The following table presents certain information concerning compensation
earned for services rendered in all capacities to the Company for the years
ended September 30, 1996 and 1997 by the Chief Executive Officer and each of the
other most highly compensated executive officers of the Company whose salaries
and bonuses exceeded $100,000 in fiscal 1997 (the "Named Officers").

39
<PAGE> 41

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------------
NAME AND FISCAL ------------------- NUMBER OF SHARES ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS UNDERLYING OPTIONS COMPENSATION
------------------ ------ -------- -------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
George A. Robinson............................ 1997 $239,578 $113,266 -- $ 4,112(1)
President, Chief Executive 1996 250,000 79,440 -- 4,333(1)
Officer and Chairman of the Board

Charles G. Martinache......................... 1997 214,576 113,266 -- 4,112(1)
Executive Vice President and 1996 225,000 79,440 -- 23,233(2)
Chief Operating Officer

Thomas A. Costello............................ 1997 214,576 113,266 -- 4,112(1)
Executive Vice President, 1996 225,000 79,440 -- 4,967(1)
Chief Technology Officer and Secretary

Dev Ganesan................................... 1997(3) 75,010 50,000 115,000 --
Executive Vice President, Chief Financial
Officer and Treasurer
</TABLE>

- ---------------
(1) Represents matching 401(k) plan contributions by the Company.
(2) Includes matching 401(k) plan contributions by the Company of $4,967 and
$18,266 in moving expenses paid by the Company.
(3) Reflects compensation earned from Mr. Ganesan's date of hire, February 1,
1997, through September 30, 1997.

OPTION GRANTS IN LAST FISCAL YEAR

The following table presents certain information concerning the stock
option grants made to the Named Officers for the fiscal year ended September 30,
1997.

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------- POTENTIAL REALIZABLE VALUE
PERCENTAGE OF AT
NUMBER OF TOTAL ASSUMED RATES OF STOCK
SHARES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ---------------------------
NAME GRANTED FISCAL 1997 SHARE DATE 5% 10%
---- ---------- ------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
George A. Robinson........... -- -- -- N/A N/A N/A
Charles G. Martinache........ -- -- -- N/A N/A N/A
Thomas A. Costello........... -- -- -- N/A N/A N/A
Dev Ganesan.................. 115,000 (2) 51% $6.50 1/1/05 $356,898 $854,833
</TABLE>

- ---------------
(1) Amounts are based on the hypothetical 5% and 10% annual compounded rates of
appreciation of the Common Stock price as prescribed by the Securities and
Exchange Commission and are not intended to forecast future appreciation of
the Company's Common Stock. The Company expresses no opinion regarding
whether this level of appreciation will be realized and expressly disclaims
any representation to that effect.
(2) Mr. Ganesan received such options under the terms of his employment
agreement. Such options have an exercise price of $6.50 per share and a term
of eight years. Options to purchase 28,750 became exercisable in January
1998 and the remainder will become exercisable upon completion of this
offering pursuant to the terms of his employment agreement. See
"Management -- Employment Agreement."

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<PAGE> 42

FISCAL 1997 STOCK OPTION EXERCISES AND YEAR-END OPTION VALUES

The following table presents certain information concerning the value of
options for the fiscal year ended September 30, 1997 by each of the Named
Officers. None of the Named Officers exercised options during the fiscal year
ended September 30, 1997.

<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
YEAR-END FISCAL YEAR-END(1)
-------------------------- --------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- -------------------------- --------------------------
<S> <C> <C> <C> <C>
George A. Robinson................................ -- -- -- --
Charles G. Martinache............................. -- -- -- --
Thomas A. Costello................................ -- -- -- --
Dev Ganesan....................................... -- 115,000 (2) -- $718,750
</TABLE>

- ---------------
(1) Value for "in-the-money" options represent the positive spread between the
exercise prices of outstanding options and the closing price of the
Company's Common Stock on September 30, 1997 on the Nasdaq National Market
of $12.75.
(2) Options to purchase 28,750 became exercisable in January 1998 and the
remainder will become exercisable upon completion of this offering pursuant
to the terms of his employment agreement. See "Management -- Employment
Agreement." Options to purchase 25,000 of such shares will be exercised at
closing and such shares will be sold in this offering.

EMPLOYMENT AGREEMENT

Mr. Ganesan serves as the Executive Vice President, Chief Financial Officer
and Treasurer of the Company pursuant to the terms of an employment agreement
which continues in effect until Mr. Ganesan's termination or separation from the
Company. Under the terms of the employment agreement, Mr. Ganesan receives an
annual salary of $150,000 and was given a one-time signing bonus of $25,000 upon
commencing work with the Company on February 1, 1997. Mr. Ganesan received a
first-year bonus of $25,000 upon the accomplishment of certain mutually agreed
upon objectives. In addition, under the terms of the employment agreement, Mr.
Ganesan received options to purchase 115,000 shares of the Company's Common
Stock. Such options have an exercise price of $6.50 per share, which represents
the fair market value on the date of the grant and a term of eight years. All of
the options will become exercisable upon the completion of this offering
pursuant to the terms of the employment agreement. At the closing of this
offering Mr. Ganesan will exercise options for 25,000 shares which shares will
be sold pursuant to this offering.

There are no other employment agreements in effect with respect to any
directors or executive officers of the Company.

STOCK PLANS AND AGREEMENTS

1996 STOCK INCENTIVE PLAN. The 1996 Stock Incentive Plan of the Company
(the "1996 Plan") was adopted by the Company's Board of Directors in July 1996.
The 1996 Plan permits the Company to grant options to purchase stock, stock
appreciation rights, "performance" awards and restricted and unrestricted stock
up to an aggregate of 337,500 shares of Common Stock to participants in the 1996
Plan. Options for a total of 263,500 shares of Common Stock were granted under
the 1996 Plan, 171,750 of which remain outstanding. The Board of Directors has
determined not to award any additional options or other rights or awards under
the 1996 Plan.

1997 STOCK INCENTIVE PLAN. The 1997 Stock Incentive Plan of the Company
(the "1997 Plan") was adopted by the Company's Board of Directors effective
March 1997 and approved by the Company's stockholders as of March 25, 1997. The
Company has reserved 450,000 shares of Common Stock for issuance pursuant to
grants under the 1997 Plan. Options for a total of 196,800 shares of Common
Stock were granted under the 1997 Plan. The 1997 Plan has a term of 10 years.
The 1997 Plan provides for the grant of stock options, stock appreciation
rights, restricted stock or "performance shares" to directors, employees
(including officers) and consultants of the Company and its subsidiaries.
Pursuant to the 1997 Plan, options may be

41
<PAGE> 43

incentive stock options within the meaning of Section 422 of the Code or
nonstatutory stock options, although incentive stock options may be granted only
to employees. All incentive stock options are nontransferable other than by will
or the laws of descent and distribution.

EMPLOYEE STOCK PURCHASE PLAN. The Company's Employee Stock Purchase Plan
(the "ESPP") was adopted by the Board of Directors in March 1998. A total of
325,000 shares of Common Stock have been reserved for issuance under the ESPP.
The ESPP automatically terminates on the earlier of March 31, 2008 or the
issuance of the maximum number of shares available under the ESPP. The ESPP,
which is intended to qualify under Section 423 of the Code, provides for
consecutive quarterly offering periods. The first offering period commenced on
April 1, 1998. The offering periods start on the first business day of each
offering period and ends on the last business day of the offering period.
Employees of the Company and any subsidiary designated by the Company's Board of
Directors are eligible to participate in the ESPP. However, no employee may be
granted an option under the ESPP who (i) immediately after the grant would own
stock or outstanding options to purchase stock possessing 5% or more of the
total combined voting power or value of all classes of the capital stock of the
Company or any subsidiary or (ii) whose rights to purchase stock under all
employee stock purchase plans of the Company and its subsidiaries accrue at a
rate which exceeds $25,000 in fair market value of the stock for each calendar
year. The ESPP permits participants to purchase Common Stock through payroll
deductions of up to 10% of the participants' base pay. The maximum number of
shares a participant may purchase during a single offering period is 500 shares.
The purchase price of stock under the ESPP is 90% of the lower of the fair
market value of the Common Stock at the beginning of the offering period or at
the end of the offering period.

INDEMNIFICATION ARRANGEMENTS

The Company has entered into indemnification agreements pursuant to which
it agreed to indemnify certain of its directors and officers against judgments,
claims, damages, losses and expenses incurred as a result of the fact that any
director or officer, in his capacity as such, is made or threatened to be made a
party to any suit or proceeding. Such persons will be indemnified to the fullest
extent now or hereafter permitted by the DGCL, as amended. The indemnification
agreements provide for the advancement of certain expenses to such directors and
officers in connection with any such suit or proceeding. The Company's Amended
and Restated Certificate of Incorporation and Amended and Restated Bylaws
provide for the indemnification of officers and directors to the fullest extent
authorized by the DGCL.

42
<PAGE> 44

CERTAIN TRANSACTIONS

TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS

In 1993, the Company entered into a ten year lease with 10089 Management,
the members of which include, among others, Messrs. Robinson, Martinache and
Costello, who collectively own 91% of 10089 Management. Under the terms of the
lease, the Company leases approximately 22,200 square feet at 10089 Lee Highway,
Fairfax, Virginia from 10089 Management for use as the Company's headquarters at
a current rental rate of approximately $27,000 per month. The monthly rental
rate increases annually based upon the annual increase in the Consumer Price
Index. The Company, as tenant, also pays for insurance for the premises and for
increases in real estate taxes over 1993 real estate taxes for the building. The
lease expires on August 31, 2003. This arrangement, in contrast to outright
ownership of the building by the Company, enables the Company to allocate the
cost of its facilities to its government contracts. The Company believes that
the terms of the lease, including the rental rate, are at least as favorable to
the Company as those which could have been negotiated with an unaffiliated third
party. The Company had guaranteed 10089 Management's bank borrowings, but this
guaranty was terminated upon the closing of the Company's initial public
offering. The Company also provides management services for 10089 Management at
no cost.

10089 Management purchased the Company's headquarters building in 1993
using, in part, a loan in the amount of $1,125,000 from a third party
institutional lender, which loan was previously guaranteed by the Company.
Pursuant to the loan agreement, as amended, the guarantee was canceled upon the
Company's initial public offering in July 1997. Also in connection with 10089
Management's acquisition of the Company's headquarters building, the Company
lent to each of Messrs. Robinson, Martinache and Costello approximately $119,000
for use as part of the purchase price for the building. The outstanding balance
of principal and accrued interest in respect of these loans as of September 30,
1997 was $443,000. All loans were repaid in full from the proceeds received by
the makers from the $6.7 million dividend of the Company's previously
undistributed S corporation earnings declared by the Board of Directors in
connection with the termination of the Company's S corporation status and its
initial public offering (the "S Corporation Distribution").

Mr. Martinache received a loan from the Company in 1996 in the amount of
$50,000, bearing interest at a rate equal to 8.75% per annum. This loan was
repaid by Mr. Martinache in full with proceeds received by him from the S
Corporation Distribution.

Charles R. Collins, a director of the Company, is an advisory partner at
the law firm of Gibson Dunn & Crutcher LLP and prior to his election to the
Board of Directors was a partner with the same firm. Gibson Dunn & Crutcher LLP
received legal fees from the Company during the Company's last fiscal year in
connection with the Company's initial public offering in July 1997 and for
certain other legal services.

TERMINATION AGREEMENTS

Immediately prior to the consummation of the Company's initial public
offering, the Company, Messrs. Robinson, Martinache and Costello, as the
majority stockholders, Thomas and Margaret M. Costello and the trusts controlled
by them, Charles and Helen Martinache and the trusts controlled by them and
George and Barbara Robinson and the trusts controlled by them entered into
Termination Agreements pursuant to which certain Stock Redemption Agreements
previously entered into by and between the Company and each other party to the
Termination Agreements were terminated.

FAIRFAX COMMUNICATIONS LTD.

Effective as of April 1, 1997, Fairfax Communications Ltd. became a
subsidiary of the Company pursuant to a transaction in which the Company
purchased all of its outstanding shares of stock. Each of Messrs. Robinson,
Martinache and Costello had owned 26.8% of the outstanding share capital of
Fairfax Communications Ltd. The Company purchased all of the ordinary shares of
Fairfax Communications Ltd. for $46,500 in a transaction intended to qualify as
a tax free reorganization under the Code. The proceeds of the sale were
distributed to the stockholders of Fairfax Communications Ltd., which
stockholders include, among others, Messrs. Robinson, Martinache and Costello,
who each received $12,500. Revenues and operating income of Fairfax
Communications Ltd. are not material.

43
<PAGE> 45

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of March 31, 1998 by: (i) each person
known by the Company to beneficially own five percent or more of the outstanding
shares of Common Stock; (ii) each director and Named Officer of the Company;
(iii) all executive officers and directors as a group; and (iv) all Selling
Stockholders. The address of the stockholders listed below as beneficially
owning more than five percent of the Common Stock is that of the Company's
principal executive offices. Except as indicated in the footnotes to the table,
the persons named in the table have sole voting and investment power with
respect to all shares beneficially owned.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES TO BE
OWNED PRIOR TO BENEFICIALLY OWNED
OFFERING NUMBER OF AFTER OFFERING (1)
------------------- SHARES -------------------
NAME NUMBER PERCENT OFFERED NUMBER PERCENT
---- --------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
EXECUTIVE OFFICERS, DIRECTORS:
George A. and Barbara Robinson (2)......... 947,500 14.5% 100,000 847,500 9.9%
Charles G. Martinache (3).................. 777,750 11.9 100,000 677,750 7.9
Thomas A. and Margaret M. Costello (4)..... 947,500 14.5 100,000 847,500 9.9
Dev Ganesan (5)............................ 86,950 1.3 25,000 61,950 *
Wayne Shelton (6).......................... 4,333 * -- 4,333 *
Charles R. Collins (7)..................... 4,333 * -- 4,333 *
All executive officers and directors as a
group (6 persons)....................... 2,768,366 41.6 325,000 2,443,366 28.3
OTHER 5% STOCKHOLDERS:
FMR Corp. (8).............................. 405,100 6.2% -- 405,100 4.7%
OTHER SELLING STOCKHOLDERS:
Christine Berry (9)........................ 225,000 3.4% 50,000 175,000 2.0%
Gale V. Berry (10)......................... 225,000 3.4 50,000 175,000 2.0
Howard F. Sparks (11)...................... 225,000 3.4 50,000 175,000 2.0
Irene L. Sparks (12)....................... 225,000 3.4 50,000 175,000 2.0
</TABLE>

- ---------------
* Less than one percent of stock outstanding.

(1) Assumes no exercise of the Underwriters' over allotment options.

(2) Includes 421,305 shares owned by the Robinson 1997 Trust No. 1 and 421,305
shares owned by the Robinson 1997 Trust No. 2, both of which George A.
Robinson is the sole trustee, and 104,890 shares owned by George A.
Robinson and Barbara Robinson as joint tenants.

(3) Includes 186,782 shares owned by the Martinache 1997 Trust No. 1 and
190,729 shares owned by the Martinache 1997 Trust No. 2, both of which
Charles G. Martinache is the sole trustee.

(4) Includes: (i) 300,000 shares owned by the Costello 1997 Trust No. 1; (ii)
300,000 shares owned by the Costello 1997 Trust No. 2; (iii) 173,750 shares
owned by Thomas A. Costello Revocable Trust; and (iv) 173,750 shares owned
by Margaret M. Costello Revocable Trust. Margaret M. Costello and Thomas A.
Costello are trustees for the Costello 1997 Trust No. 1 and Costello Trust
No. 2; Thomas A. Costello is the trustee for the Thomas A. Costello
Revocable Trust; and Margaret M. Costello is the trustee for Margaret M.
Costello Revocable Trust.

(5) Includes outstanding options to purchase 86,250 shares of Common Stock
which at the closing of this offering will become exercisable and
concurrently options to purchase 25,000 shares of Common Stock will be
exercised and offered for sale as part of this offering.

(6) Includes outstanding options to purchase 3,333 shares of Common Stock which
are exercisable within 60 days.

(7) Includes outstanding options to purchase 3,333 shares of Common Stock which
are exercisable within 60 days.

(8) The information concerning the shares beneficially owned by FMR Corp. is
based upon Schedule 13G dated February 14, 1998 filed by FMR Corp. together
with Edward C. Johnson 3d, Chairman of FMR

44
<PAGE> 46

Corp., and Abigail P. Johnson, a director of FMR Corp. Fidelity Management
& Research Company ("Fidelity"), a wholly-owned subsidiary of FMR Corp., is
the beneficial owner of 405,100 shares of Common Stock as a result of
acting as investment advisor to various investment companies (the "Funds").
Edward C. Johnson 3d and FMR Corp., through its control of Fidelity, and
the Funds each has sole power to dispose of 405,100 shares owned by the
Funds. Neither Edward C. Johnson 3d nor FMR Corp. has sole power to vote or
direct the voting of the shares owned by the Funds, which power resides in
the Board of Trustees of each of the Funds. The principal business address
of FMR Corp. is 82 Devonshire Street, Boston, Massachusetts 02109.

(9) Includes 112,500 shares owned by the Christine Berry Trust, of which
Christine Berry is the sole trustee, and 112,500 shares owned by the Gale
V. Berry Trust, of which Gale V. Berry is the sole trustee.

(10) Includes 112,500 shares owned by the Gale V. Berry Trust and 112,500 shares
owned by the Christine Berry Trust.

(11) Includes 112,500 shares owned by the Howard F. Sparks Trust, of which
Howard F. Sparks is the sole trustee, and 112,500 shares owned by the Irene
L. Sparks Trust, of which Irene L. Sparks is the sole trustee.

(12) Includes 112,500 shares owned by the Irene L. Sparks Trust and 112,500
shares owned by the Howard F. Sparks Trust.

45
<PAGE> 47

DESCRIPTION OF CAPITAL STOCK

The Company's authorized capital stock consists of 40,000,000 shares of
Common Stock, par value $.01 per share, and 1,000,000 shares of Preferred Stock,
par value $.01 per share. The following brief description of the Company's
capital stock does not purport to be complete and is subject in all respects to
applicable law and the provisions of the Company's Certificate of Incorporation
and Bylaws. Upon completion of this offering, the Company will have 8,579,000
shares of Common Stock outstanding, and no shares of preferred stock
outstanding. As of April 17, 1998 there were 54 holders of Common Stock. The
Company believes that there are over 3,000 beneficial owners of Common Stock.

COMMON STOCK

The holders of Common Stock are entitled to one vote for each share held of
record on all matters to be voted on by stockholders. There is no cumulative
voting with respect to the election of directors, with the result that holders
of more than 50% of the shares voted for the election of directors can elect all
of the directors. The holders of Common Stock are entitled to receive dividends
when, as and if declared by the Board of Directors out of funds legally
available therefor. In the event of liquidation, dissolution or winding up of
the Company, the holders of Common Stock are entitled to share ratably in all
assets remaining available for distribution to them after liabilities and
obligations have been paid in full and after each class of stock, if any, having
preference over the Common Stock has been paid in total amounts to which such
class is entitled, or an amount sufficient for such payments in full has been
set aside. The outstanding shares of Common Stock are, and the shares offered by
the Company in this offering will be, when issued and paid for, fully paid and
nonassessable. Holders of Common Stock do not have preemptive rights. The
rights, preferences and privileges of holders of Common Stock are subject to,
and may be adversely affected by, the rights of the holders of shares of any
series of Preferred Stock which the Company may designate and issue in the
future.

PREFERRED STOCK

Preferred Stock may be issued from time to time in one or more classes or
series with such designations, powers, preferences, rights, qualifications,
limitations and restrictions as may be fixed by the Company's Board of Directors
without stockholder approval. The Board of Directors could issue the Preferred
Stock with voting and/or conversion rights and thereby dilute the voting power
and equity of the holders of the Common Stock and adversely affect the market
price of such stock. The issuance of Preferred Stock could also be used as an
antitakeover measure by the Company without any further action by the
stockholders. The Company has no present plans to issue shares of Preferred
Stock.

REGISTRATION RIGHTS

In connection with the acquisition of ISC, the Company granted certain
rights with respect to the registration of 475,000 shares of Common Stock under
the Securities Act of 1933. Under the terms of the stock purchase agreement
between the Company and the holders of such registerable securities, if the
Company proposes to register any of its securities under the Securities Act of
1933 pursuant to an underwritten public offering, such holders are entitled to
notice of such registration and are entitled to include shares of such Common
Stock therein. These rights are subject to certain conditions and limitations,
including the right of the underwriters of an offering to limit the number of
shares included in such registration in certain circumstances.

CERTAIN PROVISIONS OF DELAWARE LAW

The Company is a Delaware corporation and is subject to Section 203 of the
DGCL ("Section 203"). In general, Section 203 prevents an "interested
stockholder" (defined generally as a person owning 15% or more of the Company's
outstanding voting stock) from engaging in a "business combination" (as defined
in Section 203) with the Company for three years following the date that person
became an interested stockholder unless: (i) before that person became an
interested stockholder, the Board approved the transaction in which the
interested stockholder became an interested stockholder or approved the business

46
<PAGE> 48

combination; (ii) upon completion of the transaction that resulted in the
interested stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the Company outstanding at
the time the transaction commenced (excluding stock held by directors who are
also officers of the Company and by employee stock plans in which employee
participants do not have the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange offer); or
(iii) on or following the date on which that person became an interested
stockholder, the business combination is approved by the Company's Board and
authorized at a meeting of stockholders by the affirmative vote of the holders
of at least 66.7% of the outstanding voting stock of the Company not owned by
the interested stockholder.

Under Section 203, these restrictions do not apply to certain business
combinations proposed by an interested stockholder following the announcement or
notification of one of certain extraordinary transactions which (i) involve the
Company and a person who was not an interested stockholder during the previous
three years or who became an interested stockholder with the approval of a
majority of the directors and (ii) is approved or not approved by a majority of
directors who were directors before any person became an interested stockholder
in the previous three years or who were recommended for election or elected to
succeed such directors by a majority of such directors then in office.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is Continental Stock
Transfer & Trust Company.

47
<PAGE> 49

SHARES ELIGIBLE FOR FUTURE SALE

Upon the closing of this offering, the Company will have 8,579,000 shares
of Common Stock outstanding. The 2,525,000 shares of Common Stock sold in this
offering (assuming no exercise of the Underwriters' over-allotment option or
options outstanding under the Company's stock option plans) as well as the
2,875,000 shares sold in the Company's initial public offering will be freely
tradable without restriction or limitation under the Securities Act of 1933,
except for shares purchased by "affiliates" of the Company as that term is
defined in Rule 144 under the Securities Act of 1933 (which sales would be
subject to certain limitations and restrictions described below). All of the
remaining 3,179,000 shares of Common Stock may be sold in the public market,
subject in some cases to the volume and other limitations of Rule 144
promulgated under the Securities Act of 1933. The Company, together with certain
of its stockholders (who will hold in the aggregate 2,822,700 shares after the
closing of the offering) have agreed not to sell or otherwise dispose of any of
their shares for a period of 180 days after the date of this Prospectus, without
the prior written consent of A.G. Edwards & Sons, Inc. The restriction on the
Company is subject to exceptions for the issuance of shares pursuant to the
Company's existing stock plans and as payment for acquisitions by the Company.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned shares for at least one
year (including the holding period of any prior owner except an affiliate) is
entitled to sell in "brokers' transactions" or to market makers, within any
three-month period a number of shares that does not exceed the greater of (i)
one percent of the number of shares of Common Stock then outstanding
(approximately 85,790 shares immediately after this offering) or (ii) the
average weekly trading volume in the Common Stock during the four calendar weeks
preceding the required filing of a Form 144 with respect to such sale. Sales
under Rule 144 are subject to the availability of current public information
about the Company. Under Rule 144(k), a person who is not deemed to have been an
affiliate of the Company at any time during the 90 days preceding a sale, and
who has beneficially owned the shares proposed to be sold for at least two
years, is entitled to sell such shares without having to comply with the manner
of sale, public information, volume limitation or notice filing provisions of
Rule 144.

The Company has filed registration statements on Form S-8 registering an
aggregate of 1,038,500 shares of Common Stock subject to outstanding stock
options and Common Stock issuable pursuant to the Company's stock option plans
and employee stock purchase plan. If not otherwise subject to a lock-up
agreement, shares purchased pursuant to these plans generally would be available
for resale in the public market. As of April 15, 1998 the Company had
outstanding options to purchase an aggregate of 343,550 shares of Common Stock,
99,700 of which will be exercisable at closing. Options to purchase 25,000
shares held by one of the Selling Shareholders will be exercised at the closing
of the offering and included for sale therein. See "Management -- Stock Plans
and Agreements."

In connection with the acquisition of ISC, the Company granted certain
registration rights with respect to the registration of 475,000 shares of Common
Stock under the Securities Act of 1933. See "Description of Capital
Stock -- Registration Rights."

48
<PAGE> 50

UNDERWRITING

Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company and the Selling Stockholders have agreed to sell to each
of the underwriters named below (the "Underwriters"), for whom A.G. Edwards &
Sons, Inc., Legg Mason Wood Walker, Incorporated and Scott & Stringfellow, Inc.
are acting as representatives (the "Representatives"), and each of the
Underwriters has severally agreed to purchase from the Company and the Selling
Stockholders, the respective number of shares of Common Stock set forth opposite
its name below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
A.G. Edwards & Sons, Inc. ..................................
Legg Mason Wood Walker, Incorporated........................
Scott & Stringfellow, Inc. .................................

---------
Total.................................................. 2,525,000
=========
</TABLE>

In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all 2,525,000 shares of
Common Stock offered hereby if any such shares of Common Stock are purchased. In
the event of a default by any Underwriter, the Underwriting Agreement provides
that, in certain circumstances, purchase commitments of the non-defaulting
Underwriters may be increased or the Underwriting Agreement may be terminated.

The Company and the Selling Stockholders have been advised by the
Representatives that the several Underwriters propose initially to offer such
shares of Common Stock to the public at the public offering price set forth on
the cover page of this Prospectus, and to certain dealers at such price less a
concession not in excess of $ per share. The Underwriters may allow and such
dealers may re-allow a concession not in excess of $ per share to other
dealers. After the initial public offering, the public offering price and such
concessions may be changed.

The Company has granted to the Underwriters an option, expiring 30 days
from the date of this Prospectus, to purchase up to an aggregate of 378,750
additional shares of Common Stock at the public offering price less underwriting
discount set forth on the cover page of this Prospectus. The Underwriters may
exercise such option solely to cover overallotments, if any, made in connection
with the sale of shares of Common Stock that the Underwriters have agreed to
purchase. To the extent the Underwriters exercise such option, each of the
Underwriters will have a firm commitment, subject to certain conditions, to
purchase a number of option shares proportionate to such Underwriter's initial
commitment.

The Company has agreed that it will not sell, without the consent of A.G.
Edwards & Sons, Inc., any Common Stock or any securities convertible into Common
Stock, during the 180 days following the date of this Prospectus except for
certain limited exceptions. The restriction on the Company is subject to
exceptions for the issuance of shares pursuant to the Company's existing stock
plans and as payment for acquisitions by the Company. In addition, certain of
the stockholders of the Company, including each officer and director and the
Selling Stockholders, who will hold in the aggregate 2,822,700 shares after the
closing of this offering have agreed not to sell, without the consent of A.G.
Edwards & Sons, Inc., any Common Stock for the 180 day period. A.G. Edwards &
Sons, Inc. may release shares from these lock-up agreements in whole or in part
in its sole discretion without notice.

49
<PAGE> 51

The Representatives have advised the Company that they do not intend to
confirm sales to any account over which they exercise discretionary authority.

In connection with the offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in accordance
with Rule 104 of Regulation M, pursuant to which such persons may bid for or
purchase Common Stock for the purpose of stabilizing its market price. The
Underwriters also may create a short position for the account of the
Underwriters by selling more Common Stock in connection with the offering than
they are committed to purchase from the Company and the Selling Stockholders,
and in such case may purchase Common Stock in the open market following
completion of the offering to cover all or a portion of such short position. The
Underwriters may also cover all or a portion of such short position, up to
378,750 shares of Common Stock, by exercising the Underwriters' over-allotment
option referred to above. In addition, A.G. Edwards & Sons, Inc., on behalf of
the Underwriters, may impose "penalty bids" under contractual arrangements with
the Underwriters whereby it may reclaim from an Underwriter (or dealer
participating in the offering), for the account of the other Underwriters, the
selling concession with respect to Common Stock that is distributed in the
offering but subsequently purchased for the account of the Underwriters in the
open market. Any of the transactions described in this paragraph may result in
the maintenance of the price of the Common Stock at a level above that which
might otherwise prevail in the open market. None of the transactions described
in this paragraph is required, and, if they are undertaken, they may be
discontinued at any time.

The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.

LEGAL MATTERS

The validity of the securities offered hereby will be passed upon for the
Company by Venable, Baetjer and Howard, LLP, McLean, VA. Certain legal matters
relating to the offering will be passed upon for the Underwriters by Hale and
Dorr LLP, Washington, D.C.

EXPERTS

The audited financial statements of the Company for the three years ended
September 30, 1997 included in this Prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report, and
are included herein in reliance upon the authority of said firm as experts in
giving such reports. The audited financial statements of AMI for the two years
ended December 31, 1997 included in this Prospectus have been audited by Keller
Bruner & Company, L.L.C., as indicated in their report, and are included herein
in reliance upon the authority of said firm as experts in giving such reports.
The audited financial statements of ISC for the two years ended September 30,
1997 included in this Prospectus have been audited by Failes and Associates,
P.C., as indicated in their report, and are included herein in reliance upon the
authority of said firm as experts in giving such reports.

AVAILABLE INFORMATION

This Prospectus, which constitutes a part of a Registration Statement on
Form S-1 (the "Registration Statement") filed by the Company with the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933,
omits certain of the information set forth in the Registration Statement.
Reference is hereby made to the Registration Statement and to the exhibits
thereto for further information with respect to the Company and the securities
offered hereby. Copies of the Registration Statement and the exhibits thereto
are on file at the offices of the Commission and may be obtained upon payment of
the prescribed fee or may be examined without charge at the public reference
facilities of the Commission described below.

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, and, in accordance therewith, files reports, proxy
statements and other information with the Commission. Such

50
<PAGE> 52

reports, proxy statements and other information can be inspected and copied at
the public reference facility maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's regional offices located at Seven World Trade Center, Suite 1300,
New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. The Commission maintains an Internet website that
contains reports, proxy statements and information statements and other
information regarding registrants that file electronically with the Commission.
The address of such web site is http://www.sec.gov. Copies of such material can
be obtained in person from the Public Reference Section of the Commission at its
principal office located at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Company's Common Stock is quoted on the Nasdaq National
Market. Reports, proxy statements and other information concerning the Company
may be inspected at the National Association of Securities Dealers, Inc. at 1735
K Street, N.W., Washington, D.C. 20006.

51
<PAGE> 53

GLOSSARY OF ACRONYMS

<TABLE>
<CAPTION>
ACRONYM DEFINITION
------- ----------
<S> <C>
BGIXS.................. Battle Group Information Exchange System
C3I.................... Command, control, communications and intelligence
C4I.................... Command, control, communications, computer and intelligence
CBT.................... Computer based training
COTS................... Commercial off-the-shelf
CMOS................... Complementary Metal Oxide Semiconductor
DCAA................... Defense Contract Audit Agency
DGCL................... Delaware General Corporation Law
DOD.................... Department of Defense
DTIC................... Defense Technical Information Center
GaAs................... Gallium Arsenide
GSA.................... General Services Administration
GUI.................... Graphical user interface
IC4I................... Integrated command, control, communications, computers and intelligence
ISALTS................. International Streamlined Automated Logistics Transmission System
IT Services............ Information technology services
LAN.................... Local area network
NATO................... North Atlantic Treaty Organization
NRaD................... Navy Research and Development Laboratory Center
SALTS.................. Streamlined Automated Logistics Transmission System
RF..................... Radio Frequency
SATCOM................. Satellite communications
VME.................... Versa-Module European
WAN.................... Wide area network
</TABLE>

52
<PAGE> 54

ADVANCED COMMUNICATION SYSTEMS, INC.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ADVANCED COMMUNICATION SYSTEMS, INC.
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets as of September 30, 1996 and
1997 and March 31, 1998 (unaudited)....................... F-3
Consolidated Statements of Operations for the Years Ended
September 30, 1995, 1996 and 1997 and the Six Month
Periods Ended March 31, 1997 and 1998 (unaudited)......... F-4
Consolidated Statements of Changes in Stockholders' Equity
for the Years Ended September 30, 1995, 1996 and 1997 and
the Six Month Period Ended March 31, 1998 (unaudited)..... F-5
Consolidated Statements of Cash Flows for the Years Ended
September 30, 1995, 1996 and 1997 and the Six Month
Periods Ended March 31, 1997 and 1998 (unaudited)......... F-6
Notes to Financial Statements............................... F-7

ADVANCED MANAGEMENT INCORPORATED
Report of Independent Public Accountants.................... F-21
Balance Sheets as of December 31, 1996 and 1997............. F-22
Statements of Income for the Years Ended December 31, 1996
and 1997.................................................. F-23
Statements of Shareholder's Equity for the Years Ended
December 31, 1996 and 1997................................ F-24
Statements of Cash Flows for the Years ended December 31,
1996 and 1997............................................. F-25
Notes to Financial Statements............................... F-26

INTEGRATED SYSTEMS CONTROL, INC.
Report of Independent Public Accountants.................... F-30
Balance Sheets as of September 30, 1996 and 1997............ F-31
Statements of Income for the Years Ended September 30, 1996
and 1997.................................................. F-32
Statements of Retained Earnings for the Years Ended
September 30, 1996 and 1997............................... F-33
Statements of Cash Flows for the Years Ended September 30,
1996 and 1997............................................. F-34
Notes to Financial Statements............................... F-35
</TABLE>

F-1
<PAGE> 55

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
Advanced Communication Systems, Inc.:

We have audited the accompanying consolidated balance sheets of Advanced
Communication Systems, Inc. (a Delaware corporation) and subsidiaries, as of
September 30, 1996 and 1997, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the three years in
the period ended September 30, 1997. 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 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 audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Advanced Communication Systems,
Inc. and subsidiaries as of September 30, 1996 and 1997, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended September 30, 1997, in conformity with generally accepted
accounting principles.

ARTHUR ANDERSEN LLP

Washington, D.C.
November 7, 1997

F-2
<PAGE> 56

ADVANCED COMMUNICATION SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------- MARCH 31,
1996 1997 1998
--------- --------- -------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 1,177 $ 2,744 $ 802
Contract receivables...................................... 9,987 17,643 27,440
Other receivables......................................... 69 154 621
Income taxes receivable................................... -- 529 --
Inventories............................................... -- 544 677
Prepaid expenses.......................................... 208 296 805
------- ------- -------
Total current assets.................................. 11,441 21,910 30,345
------- ------- -------
Property and equipment, net............................... 571 1,261 5,157
Other assets:
Notes receivable, stockholders............................ 443 -- --
Other related party receivables........................... 138 86 152
Software development costs, net........................... 461 950 1,568
Intangibles, net.......................................... -- 1,706 19,333
Long-term deferred tax asset.............................. -- 147 --
Other non-current assets.................................. 63 152 233
------- ------- -------
Total other non-current assets........................ 1,105 3,041 21,286
------- ------- -------
Total assets..................................... $13,117 $26,212 $56,788
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt......................... $ -- $ -- $ 84
Accounts payable.......................................... 2,125 3,321 2,325
Accrued expenses and other current liabilities............ 3,476 8,838 9,224
Billings in excess of revenue............................. 362 225 245
Income taxes payable...................................... -- -- 331
Deferred income tax liability............................. 91 -- --
------- ------- -------
Total current liabilities............................. 6,054 12,384 12,209
Long-term debt............................................ 2,688 -- 24,846
Deferred income tax liability............................. -- -- 778
------- ------- -------
Total liabilities..................................... 8,742 12,384 37,833
Commitments and contingencies (Notes 4 and 13)
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares
authorized, no shares issued and outstanding............ -- -- --
Common stock, $.01 par value, 40,000,000 shares
authorized, 6,750,000, 8,975,000, and 9,450,000 shares
issued at September 30, 1996, September 30 1997, and
March 31, 1998, respectively............................ 67 90 95
Paid-in capital and accretion............................. 16,506 14,409 17,692
Retained earnings (deficit)............................... 4,520 (382) 1,205
Adjustment for redemption value greater than amounts paid
in by stockholders...................................... (16,438) -- --
Less treasury stock, 3,017,250, 2,945,000 and 2,901,625
shares at September 30, 1996, September 30, 1997, and
March 31, 1998.......................................... (280) (289) (37)
------- ------- -------
Total stockholders' equity............................ 4,375 13,828 18,955
------- ------- -------
Total liabilities and stockholders' equity....... $13,117 $26,212 $56,788
======= ======= =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 57

ADVANCED COMMUNICATION SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, MARCH 31,
--------------------------- ---------------------
1995 1996 1997 1997 1998
------- ------- ------- ----------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues..................................... $23,724 $31,665 $52,194 $21,130 $32,550
Direct costs................................. 14,815 19,307 37,687 14,746 20,990
Indirect, general and administrative
expenses................................... 8,202 10,253 11,128 5,025 8,821
Write-off of acquired in-process R & D costs
(Note 4)................................... -- -- 1,910 -- --
------- ------- ------- ------- -------
Income from operations....................... 707 2,105 1,469 1,359 2,739
Interest expense............................. (185) (257) (136) (134) (378)
Other income, net............................ 52 57 153 44 15
------- ------- ------- ------- -------
Income before taxes.......................... 574 1,905 1,486 1,269 2,376
(Benefit) provision for income taxes......... -- -- (250) -- 879
------- ------- ------- ------- -------
Net income................................... $ 574 $ 1,905 $ 1,736 $ 1,269 $ 1,497
======= ======= ======= ======= =======
Net income per share -- basic........................................................... $ 0.23
=======
Net income per share -- diluted......................................................... $ 0.23
=======
Weighted average shares outstanding -- basic............................................ 6,438
=======
Weighted average shares outstanding -- diluted.......................................... 6,558
=======
Pro forma statement of operations data:
(unaudited): (Note 2)
Income before taxes as reported......... $ 1,905 $ 1,486 $ 1,269
Pro forma tax provision................. 743 571 495
------- ------- -------
Pro forma net income.................... $ 1,162 $ 915 $ 774
======= ======= =======
Pro forma net income per
share -- basic........................ $ 0.28 $ 0.20 $ 0.18
======= ======= =======
Pro forma net income per
share -- diluted...................... $ 0.27 $ 0.19 $ 0.18
======= ======= =======
Pro forma weighted average shares
outstanding -- basic.................. 4,212 4,682 4,246
======= ======= =======
Pro forma weighted average shares
outstanding -- diluted................ 4,361 4,767 4,346
======= ======= =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 58

ADVANCED COMMUNICATION SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
ADJUSTMENT FOR
REDEMPTION
VALUE GREATER
COMMON STOCK THAN AMOUNTS
------------------ PAID-IN RETAINED PAID IN BY TREASURY
SHARES AMOUNT CAPITAL EARNINGS STOCKHOLDERS STOCK TOTAL
--------- ------ -------- -------- --------------- -------- -------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30,
1994......................... 6,750,000 $67 $ 4,864 $ 2,068 $ (4,796) $(197) $ 2,006
Net income..................... -- -- -- 574 -- -- 574
Sale of treasury stock......... -- -- -- -- -- 5 5
Purchase of treasury stock..... -- -- -- -- -- (88) (88)
Adjustment for redemption value
greater than amounts paid in
by stockholders.............. -- -- 593 -- (593) -- --
--------- --- -------- ------- -------- ----- -------
BALANCE AT SEPTEMBER 30,
1995......................... 6,750,000 67 5,457 2,642 (5,389) (280) 2,497
Net income..................... -- -- -- 1,905 -- -- 1,905
Stockholder distributions...... -- -- -- (27) -- -- (27)
Adjustment for redemption value
greater than amounts paid in
by stockholders.............. -- -- 11,049 -- (11,049) -- --
--------- --- -------- ------- -------- ----- -------
BALANCE AT SEPTEMBER 30,
1996......................... 6,750,000 67 16,506 4,520 (16,438) (280) 4,375
Net income..................... -- -- -- 1,736 -- -- 1,736
Sale of common stock from
initial public offering...... 2,225,000 23 14,341 -- -- -- 14,364
Sale of treasury stock......... -- -- -- -- -- 57 57
Purchase of treasury stock..... -- -- -- -- -- (66) (66)
Stockholder distributions...... -- -- -- (6,625) -- -- (6,625)
Translation adjustment......... -- -- -- (13) -- -- (13)
Cancellation of stock
repurchase agreements........ -- -- (16,438) -- 16,438 -- --
--------- --- -------- ------- -------- ----- -------
BALANCE AT SEPTEMBER 30,
1997......................... 8,975,000 90 14,409 (382) -- (289) 13,828
Net income (unaudited)......... -- -- -- 1,497 -- -- 1,497
Issuance of common stock
(unaudited).................. 475,000 5 3,296 -- -- -- 3,301
Sale of treasury stock
(unaudited).................. -- -- -- -- -- 252 252
Expenses attributable to sale
of common stock
(unaudited).................. -- -- (13) -- -- -- (13)
Tax benefit attributable to the
exercise of non-qualified
stock options (unaudited).... -- -- -- 81 -- -- 81
Translation adjustment
(unaudited).................. -- -- -- 9 -- -- 9
--------- --- -------- ------- -------- ----- -------
BALANCE AT MARCH 31, 1998
(UNAUDITED).................. 9,450,000 $95 $ 17,692 $ 1,205 -- $ (37) $18,955
========= === ======== ======= ======== ===== =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 59

ADVANCED COMMUNICATION SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, MARCH 31,
------------------------ -----------------
1995 1996 1997 1997 1998
----- ------ ------- ------- -------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flow from operating activities:
Net income........................................ $ 574 $1,905 $ 1,736 $ 1,269 $ 1,497
Adjustments to reconcile net income to net cash
provided by (used in) operating activities --
Depreciation and amortization................... 330 402 471 201 549
Write-off of acquired in-process R&D Costs...... -- -- 1,910 -- --
Loss on property and equipment.................. 4 2 -- -- --
Changes in assets and liabilities, net of
effects from acquisitions:
Contract receivables......................... (282) (5,328) (9,414) (1,557) (2,249)
Other receivables............................ (3) (18) (85) (128) (406)
Prepaid expenses............................. 50 (125) (84) (307) (94)
Income taxes receivable...................... -- -- (636) -- --
Inventories.................................. -- -- (182) -- (133)
Other related party receivables.............. (53) (37) (218) (123) (66)
Long-term deferred tax asset................. -- -- (147) -- 147
Other assets................................. 17 (21) (80) (54) (27)
Accounts payable............................. (476) 1,439 715 2,278 (2,083)
Accrued expenses and other current
liabilities................................ 306 1,874 4,983 1,574 (1,010)
Billings in excess of revenue................ 78 79 (502) 83 20
Income taxes payable......................... 7 (7) -- -- 942
Deferred income taxes........................ (7) -- (91) -- (363)
----- ------ ------- ------- -------
Net cash provided by (used in) operating
activities............................ 545 165 (1,624) 3,236 (3,276)
----- ------ ------- ------- -------
Cash flows from investing activities:
Collection (advances) of notes
receivable -- stockholders...................... 7 (50) 443 -- --
Purchases of property and equipment............... (270) (370) (678) (350) (765)
Capitalized software development costs............ (240) -- (626) -- (686)
Acquisitions, net of cash acquired................ -- -- (4,438) -- (19,748)
Deferred financing costs.......................... -- -- -- -- (101)
Insurance proceeds from loss of property and
equipment....................................... 23 -- -- -- --
----- ------ ------- ------- -------
Net cash used in investing activities... (480) (420) (5,299) (350) (21,300)
----- ------ ------- ------- -------
Cash flows from financing activities:
Net proceeds (costs) from sale of common stock.... -- -- 14,364 -- (13)
Net repayments from borrowings.................... -- -- -- -- (866)
Net (repayments) borrowings under line of
credit.......................................... (209) 867 (2,701) (2,688) 23,261
Stockholders' distributions....................... -- (27) (3,164) -- --
Purchase of treasury stock........................ (88) -- (66) -- --
Sale of treasury stock............................ 5 -- 57 38 252
----- ------ ------- ------- -------
Net cash (used in) provided by financing
activities............................ (292) 840 8,490 (2,650) 22,634
----- ------ ------- ------- -------
Net (decrease) increase in cash................... (227) 585 1,567 236 (1,942)
Cash and cash equivalents, beginning of year...... 819 592 1,177 1,177 2,744
----- ------ ------- ------- -------
Cash and cash equivalents, end of period.......... $ 592 $1,177 $ 2,744 $ 1,413 $ 802
===== ====== ======= ======= =======
</TABLE>

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

F-6
<PAGE> 60

ADVANCED COMMUNICATION SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION:

Advanced Communication Systems, Inc. (the "Company") was incorporated in 1987 in
the state of Delaware. The Company provides communications and information
technology services and solutions, predominantly to U.S. government agencies and
to a lesser extent commercial and international customers. The Company focuses
its operations in three interrelated areas: communication systems design and
support, information technology services and systems integration. In August
1997, the Company acquired RF Microsystems, Inc. ("RFM") which became a wholly
owned subsidiary of the Company. RFM provides technical and engineering services
to the Department of Defense in the areas of communications, navigation,
electronic warfare and digital signal systems. In fiscal 1998, the Company
acquired Integrated Systems Control, Inc. ("ISC"), a satellite communication
engineering company, and Advanced Management, Incorporated ("AMI"), a provider
of a wide range of information technology services.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF PRESENTATION

The consolidated financial statements include the accounts of Advanced
Communication Systems, Inc. and its wholly owned subsidiaries. All intercompany
transactions have been eliminated.

NET INCOME PER COMMON SHARE

Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings Per Share." This statement
replaces the previously reported primary and fully diluted net income per share
with basic and diluted net income per share. Unlike primary net income per
share, basic net income per share excludes any dilutive effects of stock
options. Diluted net income per share is very similar to the previously reported
fully diluted net income per share. All net income per share amounts have been
restated to conform to SFAS No. 128. No reconciling items existed between the
net income used for basic and diluted net income per share. The only reconciling
item between the shares used for basic and diluted net income related to
outstanding stock options.

PRO FORMA NET INCOME PER SHARE (UNAUDITED)

Prior to June 25, 1997, the Company elected to be treated as an S corporation
and was not subject to federal and certain state income taxes. The pro forma
statement of operations data reflects federal and state income taxes at
applicable rates as if the Company had not elected S corporation status for the
periods indicated. Pro forma net income per share has been computed by dividing
pro forma net income by the pro forma weighted average number of common shares
outstanding during each period.

The pro forma weighted average shares outstanding is based on: (i) the weighted
average shares outstanding during the period assuming the dilutive effect of all
options outstanding; (ii) stock options issued during the twelve months
immediately preceding the offering date (using the treasury stock method and the
initial public offering price of $7.50 per share) for all periods presented,
through the date of the offering; and (iii) the assumed sale of a sufficient
number of shares of the Company's common stock necessary to fund the
distribution of all undistributed S corporation earnings in excess of the
preceding twelve months earnings, through the date of the offering. (Note 12)

INTERIM REPORTING

The financial information as of March 31, 1998 and for the six months ended
March 31, 1997 and 1998 has been prepared by the Company, without audit, and
includes, in the opinion of management, all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of the interim period
results.

F-7
<PAGE> 61
ADVANCED COMMUNICATION SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Operating results for any interim period are not necessarily indicative of the
results for any other period or for the entire year.

MANAGEMENT'S USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

SUPPLEMENTAL STATEMENTS OF CASH FLOWS DATA

The Company paid income taxes in the amount of $1,000, $14,000 and $608,000 and
interest expense of $175,000, $251,000 and $136,000 during the fiscal years
ended September 30, 1995, 1996, and 1997, respectively. The Company paid income
taxes in the amount of $0 (unaudited) and $155,000 (unaudited) and interest
expense of $134,000 (unaudited) and $352,000 (unaudited) for the six months
ended March 31, 1997 and 1998, respectively.

The Company acquired all of the outstanding shares of ISC in exchange for
475,000 shares of the Company's common stock (see Note 4).

REVENUE RECOGNITION

The Company provides services, primarily to the U.S. government, on a
contractual basis. Revenue on cost plus fixed fee contracts is recognized to the
extent of costs incurred plus a proportionate amount of fees earned. Revenue on
time and materials contracts is recognized at the contractual rates as labor
hours and direct expenses are incurred. Revenue on fixed price contracts is
recognized on the percentage-of-completion method based on costs incurred in
relation to total estimated costs. Anticipated contract losses are recognized as
soon as they become known and estimable.

The Company also provides off-the-shelf hardware and software products to the
U.S. government under its GSA Schedule Contracts and to commercial companies.
Related revenue is recognized when products are shipped or when customers have
accepted the products, depending on contractual terms.

CONCENTRATIONS OF CREDIT RISK

Financial instruments which potentially subject the Company to significant
concentrations of credit risk consist of cash and cash equivalents and contract
receivables. The Company maintains cash and cash equivalents in a high credit
quality financial institution. The credit risk with respect to accounts
receivable is mitigated because the majority of the Company's contract
receivables are due from agencies of the U.S. government.

For the years ended September 30, 1995, 1996 and 1997 and the six months ended
March 31, 1997 and 1998, approximately $23,483,000, $28,607,000, $48,284,000,
$19,929,000 (unaudited) and $29,886,000 (unaudited), respectively, of the
Company's revenues were derived from contracts or subcontracts funded by the
U.S. government, most of which were funded by the Department of Defense.
Government contracts can be terminated at any time by the government without
cause, are subject to competitive rebidding process upon expiration, require
compliance with various contract procurement regulations and are subject to
audit by the Defense Contract Audit Agency and other government auditors.

F-8
<PAGE> 62
ADVANCED COMMUNICATION SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
CASH AND CASH EQUIVALENTS

Cash and cash equivalents include short-term investments with original
maturities of three months or less.

INVENTORIES

Inventories are stated at the lower of cost or market. Cost is determined using
the average cost method.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost and are depreciated over their
estimated useful lives, five to seven years, using an accelerated method.
Leasehold improvements are amortized on a straight-line basis over the shorter
of the useful life of the asset or the lease terms.

SOFTWARE DEVELOPMENT COSTS

In compliance with Statement of Financial Accounting Standards ("SFAS") No. 86,
Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed, certain software development costs are capitalized in the accompanying
balance sheets. Capitalization of software development costs begins upon the
establishment of technological feasibility. Capitalization ceases and
amortization of capitalized costs begins when the software product is
commercially available for general release to customers. Amortization of
capitalized software development costs is computed using the straight-line
method over the remaining estimated economic life of the product, not to exceed
five years.

RESEARCH AND DEVELOPMENT EXPENSES

The Company expenses research and development costs as they are incurred.
Research and development expenses for all periods presented were not material
except for acquired in-process research and development costs (Note 4).

INTANGIBLE ASSETS

Intangible assets, net of accumulated amortization, consists of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30, (UNAUDITED)
--------------- MARCH 31, AMORTIZATION
1996 1997 1998 PERIOD
----- ------ ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Goodwill...................................... -- $1,706 $15,127 40 years
Customer relationship......................... -- -- 4,039 16 years
Debt financing costs.......................... -- -- 167 2 years
----- ------ -------
-- $1,706 $19,333
===== ====== =======
</TABLE>

Debt financing costs represents fees and other costs incurred in connection with
the issuance of long term debt. These costs are amortized to interest expense
over term of the related debt using the effective interest rate method.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company reviews its long-lived assets, including software development costs
and property and equipment, for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be fully
recoverable. To determine recoverability of its long-lived assets, the Company
evaluates the

F-9
<PAGE> 63
ADVANCED COMMUNICATION SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
probability that future undiscounted net cash flows, without interest charges,
will be less than the carrying amount of the assets. The Company has determined
that as of September 30, 1996 and 1997 and March 31, 1998, there has been no
impairment in the carrying value of long-lived assets.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial instruments are defined as cash, evidence of an ownership interest in
an entity, or a contract that imposes an obligation to deliver cash or other
financial instruments to a second party. The carrying amounts of current assets
and current liabilities in the accompanying financial statements approximate
fair value due to the short maturity of these instruments.

INCOME TAXES

From inception through September 30, 1989, the Company was subject to corporate
income taxes. On October 1, 1989, the Company elected to be treated as an S
corporation under Subchapter S of the Internal Revenue Code. The Company
recorded a deferred tax liability for the built-in gain on the cumulative
accrual to cash difference as of September 30, 1989. As of September 30, 1996
and 1997, and March 31, 1998 the remaining deferred tax liability is $91,000,
$0, and $0 (unaudited), respectively.

From October 1, 1989 through June 25, 1997, the Company elected to be treated as
an S corporation and was not subject to federal and certain state income taxes.
As a result, no provision for federal and state income taxes has been included
in the historical statements of operations prior to June 25, 1997. On June 25,
1997, in connection with the public offering (Note 3), the S corporation status
was terminated, thereby subjecting future income of the Company to federal and
state income taxes. Subsequent to June 25, 1997, the Company has provided for
federal and state income taxes in the statements of operations at the effective
tax rates.

3. INITIAL PUBLIC OFFERING AND DISTRIBUTION TO STOCKHOLDERS:

In July 1997, the Company consummated the initial public offering of its common
stock (the "Initial Public Offering"), selling 2,225,000 shares of common stock,
including the underwriter's overallotment option of 375,000 shares, for $7.50
per share. The Initial Public Offering resulted in net proceeds to the Company
of approximately $14,400,000 after deducting underwriters discounts and offering
expenses payable by the Company. In connection with the Initial Public Offering,
the Company terminated its S corporation election and made distributions to the
pre-Initial Public Offering stockholders of its undistributed S corporation
earnings of approximately $6,700,000.

4. ACQUISITIONS:

RF MICROSYSTEMS, INC.

Effective August 26, 1997, the Company acquired all of the outstanding common
stock of RF Microsystems, Inc. ("RFM") for cash consideration of $5,000,000. The
acquisition has been accounted for as a purchase, and the financial results of
RFM have been included in the results of operations from the date of
acquisition. 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,
in the amount of $1,671,000, which will be amortized over its estimated useful
life of fifteen years. The consolidated statement of operations includes a
$1,910,000 charge taken at the time of the acquisition for acquired research and
development costs related to acquired technology that has not reached
technological feasibility and that has no alternative future use.

F-10
<PAGE> 64
ADVANCED COMMUNICATION SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. ACQUISITIONS -- (CONTINUED)
The following unaudited pro forma summary presents information as if the
acquisition had occurred at the beginning of each fiscal year presented. The
charge of $1,910,000 related to the write-off of acquired in-process research
and development has been included in the pro forma results for the year ended
September 30, 1997. The pro forma information does not necessarily reflect the
actual results that would have occurred nor is it necessarily indicative of
future results of operations of the combined companies.
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------
1996 1997
------- -----------
<S> <C> <C>
(UNAUDITED)

<CAPTION>
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
Revenues............................................. $37,607 $58,195
Net income........................................... 1,294 1,048
Net income per share -- basic........................ 0.31 0.22
Net income per share -- diluted...................... 0.30 0.22
</TABLE>

FAIRFAX COMMUNICATIONS LIMITED

A common group of stockholders held a substantial interest in both Fairfax
Communications, Limited ("FCL") and the Company. As of September 30, 1996, the
Company had a receivable of $54,000 due from FCL for payroll services which the
Company performs on its behalf. In April 1997, the Company acquired all the
outstanding stock of FCL for $46,500. Revenues and operating income of FCL are
not material.

INTEGRATED SYSTEMS CONTROL, INC. (UNAUDITED)

In November 1997, the Company acquired all the outstanding shares of ISC in
exchange for 475,000 shares of the Company's Common Stock. The acquisition has
been accounted for as a purchase and accordingly the total purchase price has
been allocated to acquired assets and liabilities assumed at their estimated
fair values. The excess of the purchase price over the net assets acquired is
being carried as goodwill, in the amount of approximately $1.3 million, which
will be amortized over its estimated useful life of forty years.

ADVANCED MANAGEMENT, INC. (UNAUDITED)

In February 1998, the Company acquired all the outstanding shares of AMI for
$19,500,000 in cash and additional contingent payment for each of two
consecutive twelve month periods following the closing date of the acquisition
up to a maximum of $5.25 million for each period. The acquisition has been
accounted for as a purchase, and accordingly, the purchase price has been
allocated to the acquired assets and liabilities assumed at their estimated fair
values. The excess of the purchase price over the net assets acquired is being
carried as intangible assets, including goodwill and customer lists, in the
amounts of approximately $12.1 million and $4.1 million, respectively, which
will be amortized over its estimated useful lives ranging from 16 to 40 years.

The following unaudited pro forma summary presents information as if all of the
above acquisitions had occurred at the beginning of each period presented. The
pro forma information does not necessarily reflect the

F-11
<PAGE> 65
ADVANCED COMMUNICATION SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. ACQUISITIONS -- (CONTINUED)
actual results that would have occurred nor is it necessarily indicative of
future results of operations of the combined companies.

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
SEPTEMBER 30, 1997 MARCH 31, 1998
------------------ ----------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
Revenues.................................. $88,620 $40,635
Net income................................ 3,066 1,520
Net income per share -- basic............. 0.59 0.24
Net income per share -- diluted........... 0.58 0.23
</TABLE>

5. CONTRACT RECEIVABLES:

Contract receivables consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, (UNAUDITED)
-------------------- MARCH 31,
1996 1997 1998
------ ------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
U.S. government:
Amounts billed........................ $4,103 $ 2,927 $ 9,996
Recoverable costs and accrued profit
on progress completed; not billed... 5,187 11,860 13,418
------ ------- -------
Subtotal......................... 9,290 14,787 23,414
Commercial customers:
Amounts billed........................ 123 904 1,133
Recoverable costs and accrued profit
on progress completed; not billed... 574 1,952 2,893
------ ------- -------
Subtotal......................... 697 2,856 4,026
------ ------- -------
Total............................ $9,987 $17,643 $27,440
====== ======= =======
</TABLE>

6. PROPERTY AND EQUIPMENT:

Property and equipment consist of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30, (UNAUDITED)
------------------- MARCH 31,
1996 1997 1998
------ ------ -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Land and building........................... $ -- $ -- $3,177
Furniture and equipment..................... 1,561 2,575 5,191
Leasehold improvements...................... 13 18 86
------ ------ ------
1,574 2,593 8,454
Less -- Accumulated depreciation and
amortization.............................. 1,003 1,332 3,297
------ ------ ------
Total property and equipment, net........... $ 571 $1,261 $5,157
====== ====== ======
</TABLE>

F-12
<PAGE> 66
ADVANCED COMMUNICATION SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. SOFTWARE DEVELOPMENT COSTS:

Software development costs consist of the following:

<TABLE>
<CAPTION>
(UNAUDITED)
SEPTEMBER 30,
----------------- MARCH 31,
1996 1997 1998
---- ------ -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cost......................................... $685 $1,311 $1,997
Accumulated amortization..................... 224 361 429
---- ------ ------
Total software development costs, net........ $461 $ 950 $1,568
==== ====== ======
</TABLE>

Software development costs capitalized were $0, $626,000 and $686,000 in the
years ended September 30, 1996 and 1997, and six months ended March 31, 1998,
respectively. Amortization expense for the years ended September 30, 1995, 1996
and 1997 and for the six months ended March 31, 1997 and 1998 was $88,000,
$137,000, $137,000, $68,000 (unaudited) and $68,000 (unaudited), respectively.

8. ACCRUED EXPENSES:

Accrued expenses consist of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30, (UNAUDITED)
------------------- MARCH 31,
1996 1997 1998
------ ------ ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Accrued salaries, benefits and related
taxes..................................... $ 833 $ 984 $1,673
Accrued vacation............................ 411 543 1,149
Accrued bonuses............................. 387 310 121
Accrued subcontractor costs................. 1,726 6,579 5,408
Other....................................... 119 422 873
------ ------ ------
Total accrued expenses...................... $3,476 $8,838 $9,224
====== ====== ======
</TABLE>

9. RELATED-PARTY TRANSACTIONS (SEE NOTE 4):

In 1993, the Company entered into a ten-year lease with a real estate management
company ("10089 Management") to lease its headquarters facility. The owners of
10089 Management include the principal stockholders of the Company. The lease,
which expires on August 31, 2003, requires current rental payments of
approximately $27,000 (unaudited) per month, increased annually based on the
Consumer Price Index.

10089 Management purchased the headquarters facility, using in part a loan of
$1,125,000 from a third party lender, which was guaranteed by the Company. In
March 1997, the loan agreement was amended to cancel the guarantee upon the
initial public offering resulting in net proceeds to the Company of at least
$10,000,000. The remaining purchase price was financed through promissory notes
from various stockholders due to the Company. Accordingly, this guarantee was
terminated upon the closing of the initial public offering in July 1997. The
mortgage requires monthly principal payments of $6,000 plus interest and a
balloon payment for the balance of $750,000 in 1998. The outstanding balance as
of September 30, 1996, was $894,000.

Stockholders' notes receivable at September 30, 1996 and 1997 were $443,000 and
$0, respectively. The loans bore interest at rates ranging from 7.0% to 8.75%
per annum and had maturity dates ranging from 1998 to 2001. Interest was due
annually on the anniversary date of the loans, with principal due at maturity.
One loan for $50,000 was secured by a lien on real estate. Accrued interest
receivable at September 30, 1996 and 1997 of $83,000 and $0, respectively, is
included in related party receivables in the accompanying balance sheets.

F-13
<PAGE> 67
ADVANCED COMMUNICATION SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. RELATED-PARTY TRANSACTIONS (SEE NOTE 4) -- (CONTINUED)
All of the stockholder notes receivable and the related interest receivables
were repaid at the time of the initial public offering.

The Company also provides management services for 10089 Management at no cost.
Included in other related-party receivables are amounts due from 10089
Management for reimbursable operating expenses paid for by the Company.

10. LONG-TERM DEBT:

Notes payable and line of credit consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, (UNAUDITED)
--------------- MARCH 31,
1996 1997 1998
------ ------ -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Lines of Credit:
$5,000,000 line of credit with a commercial
bank expiring February 28, 1998........... $2,688 $ -- $ --
$35,000,000 line of credit with a commercial
bank expiring February 26, 2000........... -- -- 23,261
Notes Payable:
Note payable to bank, interest at 9.9%, due
February 2005, secured by a First Deed of
Trust on an office building............... -- -- 971
Note payable to Urban Business Development
Corporation, interest at 8.575%, due
January 2015, guaranteed by the Small
Business Administration and secured by a
Second Deed of Trust on an office
building.................................. -- -- 698
------ ------ -------
2,688 24,930
Less: Current Maturation......................... -- -- 84
------ ------ -------
$2,688 $ -- $24,846
====== ====== =======
</TABLE>

LINE OF CREDIT (UNAUDITED)

In February 1998, the Company entered into a line of credit arrangement with a
commercial bank, refinancing the Company's then-existing line of credit and the
outstanding commercial bank debt of ISC. This line of credit consists of two
separate facilities, permitting the Company to borrow up to an aggregate of $35
million. The first facility in an amount up to $15 million may be used to
finance acquisitions, working capital, and other corporate purposes, and bears
interest at either the bank's prime rate or at a London interbank offered rate
("LIBOR") for one, two or three month periods, plus a percentage, not more than
2.2%, which depends on the Company's historical financial performance. The
second facility, in an amount up to $20 million, may be used to finance
acquisitions, and bears interest at either the bank's prime rate or at a LIBOR
rate plus a percentage, not more than 2.45%, which depends on the Company's
historical financial performance. Each facility expires on February 28, 2000.
The credit agreement contains various covenants requiring the Company and its
subsidiaries, on a consolidated basis, to maintain certain financial ratios,
including debt to net income, minimum net income and minimum net worth. The
credit agreement also prohibits the payment of dividends.

F-14
<PAGE> 68
ADVANCED COMMUNICATION SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. LONG-TERM DEBT -- (CONTINUED)
As of March 31, 1998, the outstanding balance on its line of credit amounted to
$23.3 million and the weighted average interest rate for the six months ended
March 31, 1998 was approximately 8.2%.

The Company's subsidiary, ISC, had two notes payable totalling $856,000 at the
date of acquisition, secured by accounts receivable, equipment and other assets,
which were repaid using the above mentioned facility in February 1998.

The Company had a line of credit arrangement with a commercial bank under which
it may borrow up to a maximum of $5,000,000. The borrowings were limited to 80%
of the eligible receivables, as defined, and 90% of eligible government
receivables, as defined, and were secured by all assets including inventory,
contract receivables and intangibles. Interest was payable monthly, at the
bank's prime rate plus a percentage, not more than 0.25%. The agreement
contained various covenants requiring the Company to maintain certain financial
ratios, each as defined, including tangible net worth, liabilities to tangible
net worth, funded debt to operating cash flow and debt service. The agreement
also restricted the payment of dividends. The line of credit arrangement expired
on February 28, 1998.

For the years ended September 30, 1995, 1996 and 1997, interest expense related
to the Company's debt was $185,000, $249,000 and $136,000, respectively, at
weighted average interest rates of 9.20%, 8.87% and 8.75% respectively. For the
six months ended March 31, 1997 and 1998, interest expense was $134,000
(unaudited) and $378,000 (unaudited), respectively, at weighted average interest
rates of 8.70% and 8.2%, respectively.

11. INCOME TAXES:

Following the completion of the Initial Public Offering, the Company became
subject to federal and state income taxes. The following unaudited pro forma
information has been determined based upon the provisions of SFAS No. 109. This
information reflects income tax expense (benefit) that the Company would have
incurred had it been subject to federal and state income taxes.
<TABLE>
<CAPTION>
(UNAUDITED)
(PRO FORMA)
YEARS ENDED FOR THE SIX
SEPTEMBER 30, MONTHS ENDED
--------------- MARCH 31,
1996 1997 1998
---- ---- ------------
<S> <C> <C> <C>
(IN THOUSANDS)

<CAPTION>
<S> <C> <C> <C>
Income tax provision (benefit)
Current
Federal.................................... $708 $521 $ 988
State...................................... 87 75 121
Deferred........................................ (52) (25) (230)
---- ---- -----
$743 $571 $ 879
==== ==== =====
</TABLE>

The provision for income taxes results in effective rates which differ from the
federal statutory rate as follows:

<TABLE>
<CAPTION>
(UNAUDITED)
SEPTEMBER 30, MARCH 31,
1997 1998
------------- -----------
<S> <C> <C>
Statutory federal income tax rate.................... 34.0% 34.0%
State income taxes, net of federal tax benefit....... 4.9 4.2
Other................................................ (0.5) (1.2)
---- ----
38.4% 37.0%
==== ====
</TABLE>

F-15
<PAGE> 69
ADVANCED COMMUNICATION SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. INCOME TAXES -- (CONTINUED)
As of September 30, 1997, the Company had net operating loss carryforwards of
approximately $1,007,000, which expire in the year 2012. The benefits of there
carryforwards may be limited in the future in the event of significant changes
in the ownership of the Company. Net operating loss carryforwards may be used to
offset up to 90% of the Company's alternative minimum taxable income. The
provision for the alternative minimum tax will be allowed as a credit carryover
against regular tax in the future in the event regular tax exceeds alternative
minimum tax expense.

Under the provisions of SFAS No. 109, the tax effect of the net operating loss
carryforwards, together with net temporary differences, represents a net
deferred tax asset for which management has reserved certain deferred tax assets
based on their long-term nature. The components of the net deferred tax assets
are as follows:
<TABLE>
<CAPTION>
(UNAUDITED)
SEPTEMBER 30, MARCH 31,
1997 1998
------------- -----------
<S> <C> <C>
(IN THOUSANDS)

<CAPTION>
<S> <C> <C>
Deferred tax assets
Net operating loss carryforwards............... $ 386 $ 338
Write-off of acquired in-process R&D costs..... 729 705
Cash to accrual adjustment (ACS)............... 607 506
Accrued vacation............................... 116 323
Other.......................................... 191 157
------- -------
2,029 2,029
------- -------
Deferred tax liabilities
Unbilled receivables........................... (1,143) (926)
Capitalized software development costs......... (307) (342)
Cash to accrual adjustment (ISC) -- (1,121)
Other.......................................... (46) (80)
------- -------
(1,496) (2,469)
------- -------
Net deferred tax asset (liability).................. 533 (440)
Valuation allowance................................. (386) (338)
------- -------
Long-term deferred tax asset........................ $ 147 $ (778)
======= =======
</TABLE>

12. STOCKHOLDERS' EQUITY:

RECAPITALIZATION AND STOCK SPLIT

On May 5, 1997, the Company amended and restated its Certificate of
Incorporation to increase the number of authorized shares to 40,000,000 shares
of Common Stock, par value $.01 per share, and 1,000,000 shares of Preferred
Stock, par value $.01 per share. In June, 1997, the Board of Directors approved
a stock dividend having the effect of a 6,750-for-1 stock split of the Common
Stock, which was paid to the stockholders effective June 25, 1997. The change in
the Company's Common Stock for the stock dividend has been given retroactive
effect for all periods presented.

STOCK REDEMPTION AGREEMENTS

All of the outstanding shares of common stock and options, upon exercise, were
subject to Stock Redemption Agreements. Under certain circumstances, the Company
was required to buy back the stock at a price equal to fair value, as determined
by the Board of Directors. Adjustment for redemption value greater than amounts

F-16
<PAGE> 70
ADVANCED COMMUNICATION SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12. STOCKHOLDERS' EQUITY -- (CONTINUED)
paid in by stockholders represents the change in the redemption value per share
of outstanding Common Stock in each period. The redemption value per share,
based on the fair market value, was $4.44 and $1.48 as of September 30, 1996 and
1995, respectively. The Stock Redemption Agreements were terminated in
connection with the Initial Public Offering and the corresponding accretion was
removed. All treasury stock purchases were a result of the provisions of these
Stock Redemption Agreements.

STOCK PLANS AND AGREEMENTS

The 1997 Stock Incentive Plan of the Company (the "1997 Plan") was adopted by
the Company's Board of Directors effective March 1997 and by the Company's
stockholders on March 25, 1997. The Company may grant options, stock
appreciation rights, "performance" awards and restricted and unrestricted stock
(collectively, the "Awards") to purchase up to 450,000 shares of Common Stock to
participants in the 1997 Plan. The 1997 Plan has a term of 10 years. Options
granted under the 1997 Plan can have an exercise period of up to 10 years. The
1997 Plan provides for the grant of stock options to directors, employees
(including officers) and consultants of the Company and its subsidiaries.
Pursuant to the 1997 Plan, options may be incentive stock options within the
meaning of Section 422 of the Code or nonstatutory stock options, although
incentive stock options may be granted only to employees. All incentive stock
options are nontransferable other than by will or the laws of descent and
distribution. At September 30, 1997 and March 31, 1998, 341,200 shares and
248,200 shares (unaudited), respectively, are available for grant under this
plan.

The 1996 Stock Incentive Plan of the Company (the "1996 Plan") was adopted by
the Company's Board of Directors and approved by the Company's stockholders
effective July 1996. The Company may grant options, stock appreciation rights,
"performance" awards and restricted and unrestricted stock (collectively, the
"Awards") to purchase up to 337,500 shares of Common Stock to participants in
the 1996 Plan. The 1996 Plan has a term of 10 years. Options granted under the
1996 Plan can have an exercise period of up to 10 years. The 1996 Plan provides
for the grant of stock options to directors, employees (including officers) and
consultants of the Company and its subsidiaries. Pursuant to the 1996 Plan,
options may be incentive stock options within the meaning of Section 422 of the
Code or nonstatutory stock options, although incentive stock options may be
granted only to employees. All incentive stock options are nontransferable other
than by will or the laws of descent and distribution. The Board of Directors has
determined not to grant any additional awards under the 1996 Plan.

In 1996, the Board of Directors granted options under the 1996 Plan to purchase
148,500 shares of Common Stock. These options have an exercise price of $4.44
per share and become exercisable in three equal annual increments beginning on
October 1, 1997, and the options expire on the earlier of January 1, 2000 or
termination of employment.

On January 2, 1997, the Company granted a stock option under the 1996 Plan to
purchase 115,000 shares of Common Stock. The option has an exercise price of
$6.50 per share, a term of eight years and becomes exercisable in four equal
annual installments beginning on January 1, 1998. This option has been included
in the weighted average shares outstanding computation for all periods
presented.

In 1997, the Board of Directors granted options under the 1997 Plan to purchase
108,800 shares of Common Stock. These options have an average exercise price of
$8.10 per share and become exercisable in three equal increments and expire
after seven years or upon termination of employment.

The Company has entered into nonqualified option agreements with various
employees. The per share exercise price of such options was at least 100% of the
fair market value, as determined by the Board of Directors, of a share of Common
Stock as of the respective dates of grant.

F-17
<PAGE> 71
ADVANCED COMMUNICATION SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12. STOCKHOLDERS' EQUITY -- (CONTINUED)
In 1993, the Board of Directors granted options to purchase 101,250 shares of
Common Stock to various employees. The employees were fully vested in the
options upon granting, and the options expire on the earlier of January 1, 1998
or termination of employment. As of September 30, 1995, 1996 and 1997, these
options were exercisable in the amounts of 81,000, 81,000 and 0 shares,
respectively. All sales of treasury stock were a result of the exercise of
options.

The following table summarizes the activity of all the Company's stock options:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE EXERCISE
NUMBER PRICE PER PRICE PER
OF SHARES SHARE SHARE
--------- -------------- ---------
<S> <C> <C> <C>
Shares under option, September 30, 1994.... 87,750 $0.70 $ 0.70
Options exercised..................... (6,750) 0.70 0.70
------- -------------- ------
Shares under option, September 30, 1995.... 81,000 0.70 0.70
Options granted....................... 148,500 4.44 4.44
Options exercised..................... -- 0.70 0.70
------- -------------- ------
Shares under option, September 30, 1996 229,500 0.70 - 4.44 3.12
Options granted....................... 115,000 6.50 6.50
Options granted....................... 108,800 7.50 - 9.875 8.10
Options exercised..................... (81,000) 0.70 0.70
Options forfeited..................... (13,500) 4.44 4.44
------- -------------- ------
Shares under option, September 30, 1997.... 358,800 0.70 - 9.875 6.21
Options granted (unaudited)........... 93,000 8.875 - 12.50 10.70
Options exercised (unaudited)......... (43,375) 4.44 - 6.50 (5.81)
Options forfeited (unaudited)......... (29,750) 4.44 - 12.50 (5.79)
------- -------------- ------
Shares under option, March 31, 1998
(unaudited).............................. 378,675 $4.44 - $12.50 $ 7.39
======= ============== ======
</TABLE>

Options outstanding at September 30, 1997 had a weighted average remaining
contractual life of 4.9 years. The fair value per share of all options issued in
1997, estimated on the date of grant using the Black-Scholes option pricing
model, is $4.85.

The Company adopted the disclosure requirements of SFAS No. 123, Accounting for
Stock-Based Compensation, effective for the Company's September 30, 1997
financial statements. The Company applies Accounting Principles Board Opinion
No. 25 and related interpretations in accounting for its stock plans. No
compensation cost has been recognized for its stock plans based on the intrinsic
value of the stock options at date of grant (i.e., the difference between the
exercise price and the fair value of the Common Stock). Had compensation cost
for the Company's stock-based compensation plans been determined based on the
fair value at the grant dates under those plans consistent with the method of
FASB Statement 123, the Company's

F-18
<PAGE> 72
ADVANCED COMMUNICATION SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12. STOCKHOLDERS' EQUITY -- (CONTINUED)
pro forma net income and pro forma net income per share would have been reduced
to the amounts indicated below:

<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
1997
-------------
<S> <C>
Pro forma net income (in thousands) --
As reported............................................ $ 915
SFAS No. 123 pro forma................................. $ 826
Pro forma net income per share --
As reported............................................ $0.19
SFAS No. 123 pro forma................................. $0.17
</TABLE>

The fair value of each option is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions used for
grants in 1996: no dividend yield; expected volatility of 57.6%; risk-free
interest rates of approximately 6.4%; and average expected lives of 7.5 years.
The volatility factor was based on the volatility percentage of comparable
publicly traded companies because the Company does not have sufficient public
trading history.

13. COMMITMENTS:

LEASE COMMITMENTS

The Company leases office space and equipment under various operating lease
agreements expiring through August 2003. Most leases include a provision for
annual rent adjustments based on changes in various economic indices. Future
minimum lease payments under noncancelable operating leases as of September 30,
1997, were as follows:

<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30, (IN THOUSANDS)
------------- --------------
<S> <C>
1998........................................................ $1,146
1999........................................................ 1,070
2000........................................................ 737
2001........................................................ 465
2002........................................................ 326
Thereafter.................................................. 299
------
Total.................................................. $4,043
======
</TABLE>

During 1993, the Company entered into a lease agreement for office space with a
related party which includes the principal stockholders of the Company (Note 9).
For the years ended September 30, 1995, 1996 and 1997 and for the six months
ended March 31, 1997 and 1998, rent expense related to this lease totaled
$299,000, $309,000, $257,000, $158,000 (unaudited) and $168,000 (unaudited),
respectively. Amounts representing aggregate rent expense on all operating
leases, excluding the related party lease, totaled $1,014,000, $1,183,000,
$1,066,000, $526,000 (unaudited) and $851,000 (unaudited) for the years ended
September 30, 1995, 1996 and 1997 and for the six months ended March 31, 1997
and 1998, respectively.

PROFIT-SHARING PLAN

The Company provides a profit-sharing plan (401(k) plan) which covers
substantially all employees. Under the terms of the plan, the Company may make
discretionary profit-sharing contributions and discretionary

F-19
<PAGE> 73
ADVANCED COMMUNICATION SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. COMMITMENTS -- (CONTINUED)
matching contributions, each determined annually by the Board of Directors.
Contributions charged to expense for the years ended September 30, 1995, 1996
and 1997 and the six months ended March 31, 1997 and 1998, were $320,000,
$368,000, $236,000, $60,000 (unaudited) and $297,000 (unaudited), respectively.

14. SUBSEQUENT EVENTS:

ACQUISITION

As discussed in Note 4, the Company acquired all the outstanding shares of ISC
in November 1997 and all of the outstanding shares of AMI in February 1998.

F-20
<PAGE> 74

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
Advanced Management Incorporated
McLean, Virginia

We have audited the accompanying balance sheets of Advanced Management
Incorporated, as of December 31, 1996 and 1997, and the related statements of
income, shareholder's equity, and cash flows for the years 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 audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Advanced Management
Incorporated as of December 31, 1996 and 1997, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.

KELLER BRUNER & COMPANY, L.L.C.

Bethesda, Maryland
February 13, 1998, except for Note 11, as to which the date is
February 26, 1998

F-21
<PAGE> 75

ADVANCED MANAGEMENT INCORPORATED

BALANCE SHEETS
DECEMBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................... $ 168,346 $ 813,303
Accounts receivable, net.................................... 6,361,598 5,016,407
Prepaid expenses............................................ 1,057,557 181,582
Notes receivable -- shareholder, current maturities......... 26,089 --
----------- -----------
Total current assets................................... 7,613,590 6,011,292
----------- -----------
Investments available for sale.............................. 5,413,249 6,174,464
----------- -----------
Other assets:
Notes receivable -- shareholder, net of current
maturities................................................ 1,894,051 --
Deposits.................................................... 37,711 20,225
----------- -----------
1,931,762 20,225
----------- -----------
Property and equipment, less accumulated depreciation-
$554,597 in 1996; $614,972 in 1997........................ 148,209 97,687
----------- -----------
Total assets........................................... $15,106,810 $12,303,668
=========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable............................................ $ 426,532 $ 485,992
Accrued expenses............................................ 177,765 836,683
Contract contingency allowance.............................. 100,000 100,000
Accrued litigation settlement............................... 1,088,000 --
----------- -----------
Total liabilities...................................... 1,792,297 1,422,675
----------- -----------
Commitments and contingencies
Shareholder's equity:
Common stock -- $5 par value; 1,000 shares authorized,
issued, and outstanding................................... 5,000 5,000
Additional paid-in-capital.................................. 300,000 300,000
Accumulated unrealized gains on investments................. 543,445 411,638
Retained earnings........................................... 12,466,068 10,164,355
----------- -----------
Total shareholder's equity............................. 13,314,513 10,880,993
----------- -----------
Total liabilities and shareholder's equity............. $15,106,810 $12,303,668
=========== ===========
</TABLE>

See Notes to Financial Statements.
F-22
<PAGE> 76

ADVANCED MANAGEMENT INCORPORATED

STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Contract revenue............................................ $20,648,940 $23,164,624
Other revenue............................................... 196,880 --
----------- -----------
20,845,820 23,164,624
Direct contract costs....................................... 13,822,316 14,793,680
----------- -----------
Gross profit...................................... 7,023,504 8,370,944
----------- -----------
Indirect expenses........................................... 3,839,614 3,902,943
Bonuses..................................................... -- 670,000
----------- -----------
3,839,614 4,572,943
----------- -----------
Operating income.................................. 3,183,890 3,798,001
----------- -----------
Other income (expense):
Investment income...................................... 397,834 957,863
Other income........................................... 234,370 261,816
Litigation settlement.................................. (1,088,000) --
Interest expense....................................... (1,907) (1,005)
Other expense.......................................... (103,437) (147,355)
----------- -----------
(561,140) 1,071,319
----------- -----------
Net income........................................ $ 2,622,750 $ 4,869,320
=========== ===========
</TABLE>

See Notes to Financial Statements.
F-23
<PAGE> 77

ADVANCED MANAGEMENT INCORPORATED

STATEMENTS OF SHAREHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
UNREALIZED
ACCUMULATED
COMMON PAID-IN GAINS (LOSSES) RETAINED
STOCK CAPITAL ON INVESTMENTS EARNINGS TOTAL
------ -------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995......... $5,000 300,000 261,209 10,015,478 10,581,687
Unrealized gain on investments..... -- -- 282,236 -- 282,236
Net income......................... -- -- -- 2,622,750 2,622,750
Shareholder distributions.......... -- -- -- (172,160) (172,160)
------ -------- --------- ----------- -----------
BALANCE, DECEMBER 31, 1996......... 5,000 300,000 543,445 12,466,068 13,314,513
Unrealized loss on investments..... -- -- (131,807) -- (131,807)
Net income......................... -- -- -- 4,869,320 4,869,320
Shareholder distributions.......... -- -- -- (7,171,033) (7,171,033)
------ -------- --------- ----------- -----------
BALANCE, DECEMBER 31, 1997......... $5,000 $300,000 $ 411,638 $10,164,355 $10,880,993
====== ======== ========= =========== ===========
</TABLE>

See Notes to Financial Statements.
F-24
<PAGE> 78

ADVANCED MANAGEMENT INCORPORATED

STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income.................................................. $ 2,622,750 $ 4,869,320
Adjustments to reconcile net income to net cash provided by
operating activities --
Depreciation.............................................. 109,867 60,375
Increase (decrease) in allowance for doubtful accounts.... (26,725) 87,966
Realized gains on transfer and sales of investments....... -- (616,220)
Realized loss on sale of investments...................... 74,704 --
Deferred rent............................................. (38,623) --
Changes in assets and liabilities --
(Increase) decrease in --
Accounts receivable.................................. (2,631,929) 1,257,225
Prepaid expenses..................................... (510,408) 817,642
Deposits............................................. 37,295 17,486
Increase (decrease) in --
Accounts payable..................................... 181,875 59,460
Accrued expenses..................................... (347,600) 658,918
Accrued litigation settlement........................ 1,088,000 (1,088,000)
----------- ------------
Net cash provided by operating activities......... 559,206 6,124,172
----------- ------------
Cash flows from investing activities:
Principal payments received on note
receivable -- shareholder................................. 28,223 23,844
Purchases of investment securities.......................... (3,801,861) (16,940,057)
Proceeds from sale of investment securities................. 3,342,731 11,753,460
Purchase of property and equipment.......................... (97,519) (9,853)
----------- ------------
Net cash (used in) investing activities........... (528,426) (5,172,606)
----------- ------------
Cash flows from financing activities:
Distributions to shareholder................................ (172,160) (306,609)
----------- ------------
Net cash (used in) financing activities........... (172,160) (306,609)
----------- ------------
Net increase (decrease) in cash and cash
equivalents.................................... (141,380) 644,957
Cash and cash equivalents:
Beginning................................................... 309,726 168,346
----------- ------------
Ending...................................................... $ 168,346 $ 813,303
=========== ============
Supplemental disclosures of cash flow information:
Cash payments for --
Interest.................................................. $ 1,907 $ 1,005
=========== ============
Income taxes -- state..................................... $ 72,260 $ 1,538
=========== ============
</TABLE>

See Notes to Financial Statements.
F-25
<PAGE> 79

ADVANCED MANAGEMENT INCORPORATED

NOTES TO FINANCIAL STATEMENTS

NOTE 1. NATURE OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Nature of business: Advanced Management Incorporated (the "Company"), is a
Virginia corporation organized on August 10, 1981. The Company engages in
computer consulting, training, computer facility operations, and other computer
related services. Virtually all of the Company's business is currently with
government or quasi-government agencies. The Company's principal market
locations include Washington, D.C. and Leawood, Kansas.

A summary of the Company's significant accounting policies follows:

Basis of accounting: The accompanying financial statements have been prepared
on the accrual basis of accounting in accordance with generally accepted
accounting principles.

Cash and cash equivalents: For purposes of reporting cash flows, the Company
considers all cash accounts which are not subject to withdrawal restrictions or
penalties and money market funds with a maturity of three months or less, as
cash and cash equivalents.

Revenue and cost recognition: The Company's services are performed under
various time-and-material and fixed price contracts. Revenue from
time-and-material contracts is recognized on the basis of man-hours provided
plus other reimbursable contract costs incurred during the period. Revenue from
fixed price contracts is recognized on the percentage of completion method.
Under this method, individual contract revenue earned is based upon the
percentage relationship that contract costs incurred bear to management's
estimate of total contract costs. The Company currently provides for all known
or anticipated losses on contracts.

Allowance for doubtful accounts: The allowance for doubtful accounts is based
on management's evaluation of the collectibility of existing accounts
receivable.

Investments available for sale: The Company has various holdings in bonds,
equity securities and mutual funds. These investments are accounted for under
the fair market value method as required by Statement of Financial Accounting
Standard 115. Under this pronouncement the Company does not reflect unrealized
gains or losses in the statement of operations, rather as an addition or
reduction to the shareholder's equity section of the balance sheet.

Property and equipment: Property and equipment are recorded at cost.
Depreciation has been calculated using accelerated and straight line methods
over the estimated useful lives of the respective assets.

Income taxes: The Company has elected to be treated as an "S" Corporation under
subchapter "S" of the Internal Revenue Code, which provides that, in lieu of
corporation income taxes, the shareholders separately account for their pro-rata
share of the Company's items of income, deductions, losses and credits. As a
result of this election, no income taxes have been recognized in the
accompanying financial statements.

Financial credit risk: The Company maintains its cash in bank deposit accounts
which, at times, may exceed federally insured limits. The Company has not
experienced any losses in such accounts. The Company believes it is not exposed
to any significant credit risk on cash.

Estimates: The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

F-26
<PAGE> 80
ADVANCED MANAGEMENT INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 2. ACCOUNTS RECEIVABLE

The Company's accounts receivable consisted of the following amounts as of
December 31, 1996 and 1997:

<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Billed............................................... $6,187,507 $4,971,953
Unbilled............................................. 172,560 118,541
Other receivables.................................... 1,531 13,879
---------- ----------
6,361,598 5,104,373
Allowance for doubtful accounts................. -- 87,966
---------- ----------
$6,361,598 $5,016,407
========== ==========
</TABLE>

NOTE 3. INVESTMENTS -- AVAILABLE FOR SALE

As of December 31, 1996 and 1997, the Company owned bonds, equity security and
mutual funds that are readily marketable. The cost and fair market value of
these marketable securities were as follows:

<TABLE>
<CAPTION>
1996 1997
------------------------- -------------------------
COST MARKET VALUE COST MARKET VALUE
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Accrued interest:
Smith Barney.................... $ 6,874 $ 6,874 $ 6,880 $ 6,880
Bonds:
NationsBank .................... 1,981,104 1,969,066 2,455,060 2,505,300
Smith Barney.................... 415,000 447,191 415,000 457,330
Equity securities:
Trigon Healthcare............... -- -- 122,403 169,352
Money funds:
Smith Barney.................... 1,968 1,968 -- --
Mutual funds:
American Capital Emerging
Growth--B..................... 121,938 147,497 139,340 172,640
Federated American Lenders
Fund.......................... -- -- 1,086,411 1,049,685
Federated Equity Income Fund.... -- -- 514,735 497,421
Liberty American Lenders
Funds......................... 1,422,036 1,744,675 -- --
MFS--Emerging Growth Class B.... 162,796 304,238 165,478 364,273
Smith Barney.................... 758,088 791,740 857,519 951,583
---------- ---------- ---------- ----------
$4,869,804 $5,413,249 $5,762,826 $6,174,464
========== ========== ========== ==========
</TABLE>

Investment income for the years ended December 31, 1996 and 1997 consists of the
following components:

<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Interest................................................ $330,179 $136,985
Dividends............................................... 14,513 204,658
Capital gains........................................... 127,846 616,220
Capital losses.......................................... (74,704) --
-------- --------
$397,834 $957,863
======== ========
</TABLE>

F-27
<PAGE> 81
ADVANCED MANAGEMENT INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 4. PROPERTY AND EQUIPMENT

Property and equipment consists of the following as of December 31, 1996 and
1997:

<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Furniture and fixtures.................................. $199,963 $199,963
Computer hardware and software.......................... 38,412 48,265
Equipment............................................... 337,190 337,190
Automobiles............................................. 123,972 123,972
Leasehold improvements.................................. 3,269 3,269
-------- --------
702,806 712,659
Less accumulated depreciation and amortization.......... 554,597 614,972
-------- --------
$148,209 $ 97,687
======== ========
</TABLE>

NOTE 5. CONSULTING CONTRACT

The Company has entered into an agreement with Systems Development Group, Inc.
for accounting, contract support, and administration services on an "as needed"
basis. Billings for these services are based on cost plus 25%. During the years
ended December 31, 1996 and 1997, the Company paid $249,593 and $145,000,
respectively, to Systems Development Group, Inc. on these contracts. There were
no outstanding amounts due on these contracts at December 31, 1996 and 1997.

NOTE 6. LEASING ARRANGEMENTS

The Company has entered into a lease commitment for office space.

The total minimum rental commitment under this lease as of December 31, 1997 is
outlined below:

<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
-------------------------
<S> <C>
1998........................................................ $226,655
1999........................................................ 57,079
--------
$283,734
========
</TABLE>

Rent expense for the years ended December 31, 1996 and 1997 charged to
operations totaled $194,169 and $220,054, respectively.

NOTE 7. RETIREMENT PLAN

The Company maintains a qualified 401(k) and profit sharing plan for its
eligible employees. The Company can make discretionary contributions to this
plan of up to 15% of eligible compensation. For the years ended December 31,
1996 and 1997, the Company charged to operations $37,930 and $157,467,
respectively related to this plan.

NOTE 8. RELATED PARTY TRANSACTIONS

The Company loaned to the president of the Company the sum of $2 million for 30
years at an interest rate of 7% in May 1993. Monthly principal and interest
payments amount to $13,306. During 1997, this note was forgiven by the Company
and the remaining principal of $1,896,298 is included as a distribution to the
shareholder.

F-28
<PAGE> 82
ADVANCED MANAGEMENT INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 8. RELATED PARTY TRANSACTIONS -- (CONTINUED)
The Company's distributions to the shareholder totaled $7,171,033 during 1997.
These distributions related to the transfer of investments from the Company's
portfolio of $4,909,793, premiums paid on behalf of the Owner for Officer's Life
Insurance of $364,942, and forgiveness of note of $1,896,298.

A bonus of $670,000 was paid to the shareholder during 1997.

NOTE 9. MAJOR CUSTOMERS

Substantially all of the Company's revenue for the years ended December 31, 1996
and 1997 and accounts receivable at December 31, 1996 and 1997 are derived
through contracts with the U.S. Government.

NOTE 10. CONTINGENCIES

The Company has cost reimbursable type contracts with the federal government.
Consequently, the Company is reimbursed based upon their direct expenses
attributable to the contracts, plus a percentage based upon overhead and general
and administrative expenses. The overhead and general and administrative rates
are estimates. Accordingly, if the actual rates as determined by the Defense
Contract Audit Agency are below the Company's estimates, a refund for the
difference would be due to the federal government. The Company does not
anticipate any significant adjustment.

The Company has undergone a contract audit performed by the Resolution Trust
Corporation (RTC). The preliminary findings by RTC indicate that they had
reimbursed the Company for unsubstantiated travel costs in the amount of
approximately $100,000. This amount has been set up as an allowance and included
on the balance sheets as a contract contingency. The Company is currently
contesting this finding.

On May 27, 1996, the Company's Martinsburg, West Virginia post office contract
was terminated for the convenience of the U.S. Postal Service. This decision by
the U.S. Postal Service resulted in a law suit being filed against the Company
by its displaced West Virginia employees. These former employees alleged that
the Company violated the U.S. Fair Labor Standards Act and the West Virginia
Wage Payment and Collection Act. The suit was settled on May 9, 1997 for the sum
of $1,270,000 of which the Company has accrued and charged $1,020,000 to
operations for the year ended December 31, 1996. The Company's insurance
carrier, Hartford, paid the difference of $250,000.

Four individuals filed a lawsuit against the Company for wrongful termination
and pregnancy discrimination. This suit was settled on June 9, 1997 for a total
of $68,000. This amount was charged to operations for the year ended December
31, 1996.

NOTE 11. SUBSEQUENT EVENTS

Effective January 31, 1998, the Company was acquired by Advanced Communication
Systems, Inc.

The Company distributed approximately $6,200,000 of investments to the
shareholder subsequent to year end.

F-29
<PAGE> 83

INDEPENDENT AUDITOR'S REPORT

To the Stockholders and Directors
Integrated Systems Control, Inc.
Virginia Beach, Virginia

We have audited the accompanying balance sheets of Integrated Systems Control,
Inc. (an S corporation) as of September 30, 1996 and 1997, and the related
statements of income, retained earnings and of cash flows for the years 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.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Integrated Systems Control,
Inc. as of September 30, 1996 and 1997 and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.

FAILES AND ASSOCIATES, P.C.

January 14, 1998

F-30
<PAGE> 84

INTEGRATED SYSTEMS CONTROL, INC.

BALANCE SHEETS
SEPTEMBER 30, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................... $ 36,083 $ 27,670
Accounts receivables -- trade............................... 3,046,071 3,079,260
Loans receivable -- officers................................ 10,000 --
Prepaid expenses............................................ 3,191 26,692
---------- ----------
3,095,345 3,133,622
Property and equipment...................................... 2,371,766 2,361,601
Other assets................................................ 40,458 61,902
---------- ----------
$5,507,569 $5,557,125
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable............................................... $ 614,000 $ 434,000
Current portion of long-term debt........................... 116,498 130,250
Accounts payable -- trade................................... 319,423 126,575
Accrued expenses............................................ 583,524 811,250
---------- ----------
1,633,445 1,502,075
Long-term debt, net......................................... 1,911,420 1,782,953
---------- ----------
3,544,865 3,285,028
---------- ----------
Stockholders' equity:
Common stock, par value $1 per share; 1,000 shares
authorized, issued and outstanding........................ 1,000 1,000
Retained earnings........................................... 1,961,704 2,271,097
---------- ----------
1,962,704 2,272,097
---------- ----------
$5,507,569 $5,557,125
========== ==========
</TABLE>

See Accompanying Notes to Financial Statements
F-31
<PAGE> 85

INTEGRATED SYSTEMS CONTROL, INC.

STATEMENTS OF INCOME
YEARS ENDED SEPTEMBER 30, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Contract revenues........................................... $10,686,969 $12,179,618
----------- -----------
Expenses (including provision for depreciation and
amortization of $210,264 (1996) and $213,212 (1997))
Direct job costs............................................ 5,712,848 6,504,569
Overhead expenses........................................... 3,177,367 3,746,152
General and administrative expenses......................... 1,007,793 1,138,872
Non-allocable items......................................... 48,478 90,710
----------- -----------
Operating income............................................ 740,483 699,315
Interest expense............................................ 221,198 217,586
----------- -----------
Net income............................................. $ 519,285 $ 481,729
=========== ===========
</TABLE>

See Accompanying Notes to Financial Statements
F-32
<PAGE> 86

INTEGRATED SYSTEMS CONTROL, INC.

STATEMENTS OF RETAINED EARNINGS
YEARS ENDED SEPTEMBER 30, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
RETAINED EARNINGS -- BEGINNING.............................. $1,511,345 $1,961,704
Net income.................................................. 519,285 481,729
S corporation cash dividends paid........................... (68,926) (172,336)
---------- ----------
RETAINED EARNINGS -- ENDING................................. $1,961,704 $2,271,097
========== ==========
</TABLE>

See Accompanying Notes to Financial Statements
F-33
<PAGE> 87

INTEGRATED SYSTEMS CONTROL, INC.

STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
----------- ---------
<S> <C> <C>
Cash flows from operating activities
Net income.................................................. $ 519,285 $ 481,729
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 210,264 213,212
Gain (loss) on disposal of fixed assets................... (2,575) 2,107
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable.................................... (1,017,444) (33,189)
Prepaid expense........................................ 2,236 (23,501)
Deposits............................................... (4,933) (23,141)
Increase (decrease) in:
Accounts payable -- trade.............................. 239,047 (192,848)
Accrued expenses....................................... 81,408 227,726
----------- ---------
Net cash provided by operating activities......... 27,288 652,095
----------- ---------
Cash flows from investing activities
Proceeds from sale of fixed asset........................... 2,575 --
Capital expenditures........................................ (227,212) (203,457)
Net cash used in investing activities....................... (224,637) (203,457)
Cash flows from financing activities
Net borrowings (payments) under line-of-credit agreements... 5,000 (180,000)
Proceeds from long-term borrowing........................... 100,000 --
Principal payments on long-term debt........................ (100,154) (114,715)
Repayments from officers.................................... -- 10,000
Cash dividends paid to stockholders......................... (68,926) (172,336)
----------- ---------
Net cash provided used in investing activities.... (64,080) (457,051)
----------- ---------
Net decrease in cash and cash equivalents................... (261,429) (8,413)
Cash and cash equivalents, at beginning of year............. 297,512 36,083
----------- ---------
Cash and cash equivalents, at end of year................... $ 36,083 $ 27,670
=========== =========
Supplemental disclosures of cash flow information
Interest paid............................................... $ 221,198 $ 217,586
State income taxes refunded................................. $ (4,804) $ --
=========== =========
</TABLE>

See Accompanying Notes to Financial Statements
F-34
<PAGE> 88

INTEGRATED SYSTEMS CONTROL, INC.

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND NATURE OF OPERATIONS

NATURE OF OPERATIONS

Integrated Systems Control, Inc. is a Virginia based corporation. The
Company's principal lines of business are communication resource master
planning, implementation support and concept development, as well as, the
design, engineering and analysis of communication systems. The principal markets
of the Company are the United States and allied military forces.

REVENUE RECOGNITION

The principal source of revenue of Integrated Systems Control, Inc. is
contracts for systems engineering services in the government defense industry.
Revenue on cost-plus-fixed-fee contracts is recognized to the extent of costs
incurred plus a proportionate amount of fee earned. Revenue on firm-fixed-price
contracts is recognized on the percentage-of-completion method based on costs
incurred in relation to total estimated costs. Revenue on time-and-material
contracts is recognized based on hours incurred, extended at contract rates plus
materials expense incurred. Anticipated losses are recognized as soon as they
become known.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Depreciation and amortization
is provided using accelerated and straight-line methods over the estimated
useful lives of the assets. Expenditures for major renewals or betterments that
extend the useful lives of property, plant and equipment are capitalized.
Expenditures for maintenance and repairs are charged to expense as incurred.

ADVERTISING

The Company follows the policy of charging the cost of advertising to
expense as incurred. There were no advertising costs incurred for the years
ended September 30, 1996 and 1997.

INCOME TAXES

The Company's stockholders have elected to be taxed as an S Corporation.
Under this election, the Company's net income or loss is reportable by the
stockholders. Therefore, no provision or liability for federal or certain states
income taxes is presented in these statements. The Company operated in one state
which required them to pay income taxes on approximately 13% of the Company's
net income. A (benefit) provision of $-0- (1997) and ($4,804) (1996) for state
income tax has been reflected in general and administrative expenses.

CASH AND CASH EQUIVALENTS

For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.

NOTE 2. USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

F-35
<PAGE> 89
INTEGRATED SYSTEMS CONTROL, INC.

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 3. CONCENTRATION OF CREDIT RISK

The Company maintains its cash in bank deposit accounts at high credit
quality financial institutions. The balances, at times, may exceed Federally
insured limits.

The Company is also subject to concentration of credit risk due to high
dollar value of accounts receivable. The credit risk with respect to accounts
receivable is mitigated because the majority of the Company's receivables are
due from prime contractors conducting business with agencies of the U.S.
Government.

NOTE 4. ACCOUNTS RECEIVABLE -- TRADE

Accounts receivable -- trade consist of the following:

<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Amounts billed, net of allowance for doubtful accounts of
$-0-(1996), $36,226 (1997)................................ $2,774,669 $2,882,630
Recoverable costs and accrued profit on progress
completed -- not billed................................... 271,402 196,630
---------- ----------
$3,046,071 $3,079,260
========== ==========
</TABLE>

Recoverable costs and accrued profit not billed principally comprise
amounts of revenue recognized on contracts for which billings had not been
presented to the contract owners because the amounts were not billable at
balance sheet date. It is anticipated such unbilled amounts will be billed and
collectible in the near future once certain contract commitments have been
fulfilled.

NOTE 5. LOANS RECEIVABLE -- OFFICERS

Loans receivable -- officers represents a note with interest accrued at
8 1/4% per annum. The balances are $10,000 (1996) and $-0- (1997).

NOTE 6. PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Land................................................... $ 231,325 $ 231,325
Building and related fixtures.......................... 1,978,332 1,995,940
Furniture and fixtures................................. 813,855 708,844
Computer equipment and software........................ 283,159 445,642
---------- ----------
3,306,671 3,381,751
Less: Accumulated depreciation and amortization........ 934,905 1,020,150
---------- ----------
$2,371,766 $2,361,601
========== ==========
</TABLE>

F-36
<PAGE> 90
INTEGRATED SYSTEMS CONTROL, INC.

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 7. OTHER ASSETS

Other assets consist of the following:

<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Deposits.................................................... $ 9,562 $32,703
Loan acquisition costs, net of amortization of $3,041 (1996)
and $4,738 (1997)......................................... 30,896 29,199
------- -------
$40,458 $61,902
======= =======
</TABLE>

NOTE 8. ACCRUED EXPENSES

Accrued expenses consist of the following:

<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Payroll..................................................... $258,363 $511,515
Vacation and sick leave..................................... 304,284 275,285
Benefits.................................................... 20,876 24,450
-------- --------
$583,523 $811,250
======== ========
</TABLE>

F-37
<PAGE> 91
INTEGRATED SYSTEMS CONTROL, INC.

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 9. NOTES PAYABLE AND LONG-TERM DEBT

Notes payable consists of the following line of credit arrangements with a
bank. All credit arrangements are secured by accounts receivable, furniture,
fixtures, equipment and various current and future U.S. Government contract
rights.

<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
$1,000,000 maximum borrowing limit, interest accrues monthly
at the prime rate plus one-half percent................... $ 614,000 $ 434,000
========== ==========
Long-term debt consists of the following:
Note payable with bank, balloon payment due February 2005,
payable in monthly installments of $9,062 including
interest at 9.9% (fixed for first five years) secured by a
First Deed of Trust on the office building with a book
value of $2,105,000....................................... $ 989,199 $ 976,898
Note payable with Urban Business Development Corporation,
due January 2015, payable in monthly installments of
$6,537, including interest at 8.575%, also added to
monthly payment is $375 for Small Business Administration
(SBA) service fees (which will be recalculated every five
years based on the principal balance at that time), the
note is guaranteed by the SBA plus secured by a second
deed of trust on the office building and personal
guarantees of the stockholders............................ 722,518 706,847
Note payable with bank, due April 2000, payable in monthly
installments of $6,264, including interest at 9.25%
secured by accounts receivables, furniture, fixtures,
equipment and various government contracts................ 229,443 173,426
Note payable with bank, due April 1999, payable in monthly
installments of $3,169, including interest at 8.75%,
secured by accounts receivable, furniture, fixtures,
equipment and various government contracts................ 86,758 56,032
---------- ----------
2,027,918 1,913,203
Less: current portion.................................. 116,498 130,250
---------- ----------
$1,911,420 $1,782,953
========== ==========
</TABLE>

Annual maturities of long term-debt after September 30, 1997, are as
follows:

<TABLE>
<S> <C>
1998.................................... $ 130,250
1999.................................... 120,199
2000.................................... 77,308
2001.................................... 47,550
Thereafter.............................. 1,537,896
----------
$1,913,203
==========
</TABLE>

NOTE 10. LEASE COMMITMENTS

The Company leases three facilities which are accounted for as
noncancelable operating leases expiring through April 2001. In addition, the
Company rents equipment under noncancelable operating leases expiring on various
dates through November 1999.

F-38
<PAGE> 92
INTEGRATED SYSTEMS CONTROL, INC.

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 10. LEASE COMMITMENTS -- (CONTINUED)
The following is a schedule of future minimum rental payments required
under the above leases as of September 30, 1997:

Rent expense charged to operations was $247,641 (1996) and $363,960 (1997).

NOTE 11. EMPLOYEE BENEFIT PLANS

The Company maintains a qualified 401(k) employee savings and profit
sharing plan for the benefit of substantially all employees. Under the plan,
individual employee contributions are not to exceed the lesser of 15% of total
compensation earned by plan participants during the year or $9,500 (1996 and
1997). The Company matches, within prescribed limits, the contributions of
employees. The Company also has the option to make additional profit sharing
contributions to the plan. Employer contributions to the plan amounted to
$160,106 (1996) and $189,261 (1997).

NOTE 12. SUBSEQUENT EVENTS

Effective November 1, 1997, all of the outstanding common stock of the
company was acquired by Advanced Communications Systems, Inc. (ACS), a company
publicly traded on the NASDAQ exchange. In order to conform with ACS's fiscal
year, the accompanying financial statements have been presented based on a
September 30 year end.

F-39
<PAGE> 93

ADVANCED COMMUNICATION SYSTEMS, INC.

DESCRIPTION OF GRAPHIC

[Picture of: satellite dish, army personnel discussing data presented on
computer terminal;
systems operator sitting at communications lab; systems integrator inserting
communications boards into a chasis; communications equipment]

COMMUNICATION
SYSTEMS

INFORMATION
TECHNOLOGY

SYSTEMS
INTEGRATION

CORPORATE HEADQUARTERS: 10089 LEE HIGHWAY, FAIRFAX, VA 22030
CRYSTAL CITY - ALEXANDRIA - PHILADELPHIA - VIRGINIA BEACH - SAN
DIEGO - CHARLESTON - LOS ANGELES
EL SEGUNDO - COLORADO SPRINGS - LUSBY, MARYLAND - UNITED KINGDOM

(703) 934-8130 FAX: (703) 934-8807 www.advcom.com
<PAGE> 94

================================================================================

NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY, BY ANY
PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER,
SOLICITATION OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE OF THE PROSPECTUS.

------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 7
Use of Proceeds....................... 13
Dividend Policy....................... 13
Price Range of Common Stock........... 14
Capitalization........................ 14
Unaudited Pro Forma Condensed
Consolidated Statement of
Operations.......................... 15
Selected Consolidated Financial
Data................................ 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 18
Business.............................. 25
Management............................ 37
Certain Transactions.................. 43
Principal and Selling Stockholders.... 44
Description of Capital Stock.......... 46
Shares Eligible for Future Sale....... 48
Underwriting.......................... 49
Legal Matters......................... 50
Experts............................... 50
Available Information................. 50
Glossary of Acronyms.................. 52
Index to Financial Statements......... F-1
</TABLE>

2,525,000 SHARES

ADVANCED
COMMUNICATION
SYSTEMS, INC.
COMMON STOCK

------------------------
PROSPECTUS

------------------------
A.G. EDWARDS AND SONS, INC.

LEGG MASON WOOD WALKER
INCORPORATED

SCOTT & STRINGFELLOW, INC.
, 1998

================================================================================
<PAGE> 95

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth an estimate of the expenses expected to be
incurred in connection with the issuance and distribution of the securities
being registered, other than underwriting compensation, all of which will be
paid by the Company:

<TABLE>
<S> <C>
Registration Fee -- Securities and Exchange Commission...... $ 11,243
Filing Fee -- National Association of Securities Dealers,
Inc. ..................................................... 4,311
Listing Fee -- Nasdaq National Market....................... 17,500
Transfer Agent and Registrar Fees and Expenses.............. 10,000
Blue Sky Fees and Expenses (including legal fees)........... 10,000
Legal Fees and Expenses..................................... 90,000
Accounting Fees and Expenses................................ 90,000
Printing and Engraving Expenses............................. 125,000
Miscellaneous............................................... 41,946
--------
Total.................................................. $400,000
========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Company is organized under the laws of the State of Delaware. The DGCL
provides that a Delaware corporation has the power generally to indemnify its
directors, officers, employees and other agents (each, a "Corporate Agent")
against expenses and liabilities (including amounts paid in settlement) in
connection with any proceeding involving such person by reason of his being a
Corporate Agent, other than a proceeding by or in the right of the corporation,
if such person acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the corporation and, with respect to
any criminal proceeding, such person had no reasonable cause to believe his
conduct was unlawful. In the case of an action brought by or in the right of the
corporation, indemnification of a Corporate Agent against expenses is permitted
if such person acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the corporation; however, no
indemnification is permitted in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation,
unless and only to the extent that the Court of Chancery or the court in which
such proceeding was brought shall determine upon application that despite the
adjudication of liability, but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to such indemnification. To the
extent that a present or former director or officer of a corporation has been
successful on the merits or otherwise in the defense of such proceeding, whether
or not by or in the right of the corporation, or in the defense of any claim,
issue or matter therein, the corporation is required to indemnify such person
for expenses in connection therewith. Expenses incurred by a Corporate Agent in
connection with a proceeding may, under certain circumstances, be paid by the
corporation in advance of the final disposition of the proceeding as the
corporation deems appropriate. The power to indemnify and advance the expenses
under the DGCL does not exclude other rights to which a Corporate Agent may be
entitled to under the certificate of incorporation, bylaws, agreement, vote of
stockholders or disinterested directors or otherwise.

The Company's Amended and Restated Certificate of Incorporation and Amended
and Restated Bylaws provide for the indemnification of the officers and
directors of the Company for certain expenses, judgments, fines and payments
incurred by them in connection with the defense or settlement of claims asserted
against them in their capacities as officers and directors of the Company to the
fullest extent authorized by the DGCL, provided that such indemnification is
authorized (i) by a majority vote of the directors who are not parties to the
action, suit or proceeding, even though less than a quorum, (ii) if there are no
such directors, or if such directors so direct, by independent legal counsel in
a written opinion, or (iii) by the stockholders, or (iv) by a court of competent
jurisdiction in the State of Delaware. To the extent, however, that a director
or

II-1
<PAGE> 96

officer of the Company has been successful on the merits or otherwise in defense
of any action, suit or proceeding described above, or in defense of any claim,
issue or matter therein, he or she shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him or her in
connection therewith, without the necessity of authorization in the specific
case. In addition, expenses incurred by a director or officer in defending or
investigating a threatened or pending action, suit or proceeding may be paid by
the Company, upon the determination by the Board of Directors, in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he or she is not entitled to be
indemnified by the Company, provided the Company approves in advance counsel
selected by the director or officer, which approval shall not be unreasonably
withheld. The Company has entered into indemnification agreements to the same
effect with each of its officers and directors.

The Company's Amended and Restated Certificate of Incorporation also
contains provisions which limit the personal liability of directors to the
Company or its stockholders for monetary damages for breach of their fiduciary
duties as directors, except for liability: of any director for any breach of the
director's duty of loyalty to the Company or its stockholders; for acts of
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; for certain unlawful payments of dividends or stock
repurchases under Section 174 of the DGCL; or for any transaction from which the
director derives an improper personal benefit. These provisions do not limit the
rights of the Company or any stockholder to seek an injunction or any other
non-monetary relief in the event of a breach of a director's fiduciary duty. In
addition, these provisions apply only to claims against a director arising out
of his or her role as a director and do not relieve a director from liability
for violations of statutory law, such as certain liabilities imposed on a
director under the federal securities laws.

Under the DGCL, a Delaware corporation has the power to purchase and
maintain insurance on behalf of any Corporate Agent against any liabilities
asserted against and incurred by him in such capacity, whether or not the
corporation has the power to indemnify him against such liabilities under the
DGCL. The Company intends to purchase directors' and officers' insurance.

Reference is made to Sections 102(b)(7) and 145 of the DGCL, in connection
with the above summary of indemnification, insurance and limitation of
liability.

The purpose of these provisions is to assist the Company in retaining
qualified individuals to serve as officers, directors or other Corporate Agents
of the Company by limiting their exposure to personal liability for serving as
such.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Since March 1, 1995, the Company has issued and sold the following
unregistered securities.

1. On September 29, 1995, Sharon Angelone, a former employee of the
Company, exercised an option to purchase 6,750 shares of Common Stock, at
an exercise price of $0.70 per share.

2. On July 15, 1996, the Company granted options to purchase, in the
aggregate, a total of 148,500 shares of Common Stock to 17 employees of the
Company, at an exercise price of $4.44 per share.

3. On December 13, 1996, Douglas Benzel, a former employee of the
Company, exercised an option to purchase 27,000 shares of Common Stock, at
an exercise price of $0.70 per share.

4. On January 2, 1997, the Company granted options to purchase
115,000 shares of Common Stock to Dev Ganesan, Chief Financial Officer, at
an exercise price of $6.50 per share.

5. On February 13, 1997, Sharon Angelone, an former employee of the
Company, exercised an option to purchase 27,000 shares of Common Stock, at
an exercise price of $0.70 per share.

6. On April 1, 1997, Warren Willis, a former employee of the Company,
exercised an option to purchase 27,000 shares of Common Stock, at an
exercise price of $0.70 per share.

II-2
<PAGE> 97

7. On November 26, 1997, the Company issued 475,000 shares of Common
Stock to the shareholders of ISC in connection with its acquisition of all
the outstanding shares of ISC Common Stock. See "Business -- Recent
Acquisitions."

No underwriters were engaged in connection with the foregoing sales and/or
issuances of securities. Such sales were made in reliance upon the exemption
from the registration provisions of the Securities Act of 1933 set forth in Rule
701 and/or in Section 4(2) thereof as transactions not involving a public
offering. The respective purchasers thereof have acquired such shares for their
respective accounts without a view to the distribution thereof.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

<TABLE>
<C> <S>
1.1 -- Form of Underwriting Agreement.
3.1 -- Amended and Restated Certificate of Incorporation of the
Company (Incorporated by reference to Amendment No. 1 to
the Registration Statement on Form S-1 (File No.
333-23959) filed by the Company with the Commission on
May 6, 1997).
3.2 -- Amended and Restated Bylaws of the Company (Incorporated
by reference to Amendment No. 1 to the Registration
Statement on Form S-1 (File No. 333-23959) filed by the
Company with the Commission on May 6, 1997).
4.1 -- Specimen Common Stock Certificate (Incorporated by
reference to Amendment No. 2 to the Registration
Statement on Form S-1 (File No. 333-23959) filed by the
Company with the Commission on May 30, 1997).
5.1 -- Opinion of Venable, Baetjer and Howard, LLP.
10.1 -- Employment Agreement, dated as of January 2, 1997,
between the Company and Dev Ganesan (Incorporated by
reference to the Registration Statement on Form S-1 (File
No. 333-23959) filed by the Company with the Commission
on March 26, 1997).
10.2 -- 1996 Stock Incentive Plan (Incorporated by reference to
Amendment No. 1 to the Registration Statement on Form S-1
(File No. 333-23959) filed by the Company with the
Commission on May 6, 1997).
10.3 -- 1997 Stock Incentive Plan (Incorporated by reference to
Amendment No. 2 to the Registration Statement on Form S-1
(File No. 333-23959) filed by the Company with the
Commission on May 30, 1997).
10.4 -- Employee Stock Purchase Plan.
10.5 -- Form of Indemnity Agreement between the Company and each
of its directors and executive officers (Incorporated by
reference to Amendment No. 2 to the Registration
Statement on Form S-1 (File No. 333-23959) filed by the
Company with the Commission on May 30, 1997).
10.6 -- Credit Agreement, dated as of February 17, 1998, between
the Company and NationsBank, N.A (Incorporated by
reference to Form 8-K filed by the Company with the
Commission on March 13, 1998).
10.7 -- Security Agreement, dated as of February 17, 1998,
between the Company and NationsBank, N.A. (Incorporated
by reference to Form 8-K filed by the Company with the
Commission on March 13, 1998).
10.8 -- Lease Agreement, dated July 16, 1993, including Amendment
1, dated December 1, 1993, Amendment 2, dated January 15,
1994, and Amendment 3, dated March 15, 1994 (Incorporated
by reference to the Registration Statement on Form S-1
(File No. 333-23959) filed by the Company with the
Commission on March 26, 1997).
10.9 -- Contract No. N00039-96-C-0066, effective March 14, 1996,
by and between the Company and Space and Naval Warfare
Systems Command (Incorporated by reference to the
Registration Statement on Form S-1 (File No. 333-23959)
filed by the Company with the Commission on March 26,
1997).+
10.10 -- Contract No. N00039-96-C-0097, effective August 29, 1996,
by and between the Company and Space and Naval Warfare
Systems Command (Incorporated by reference to the
Registration Statement on Form S-1 (File No. 333-23959)
filed by the Company with the Commission on March 26,
1997).+
</TABLE>

II-3
<PAGE> 98
<TABLE>
<C> <S>
10.11 -- Form of Tax Indemnification Agreement to be entered into
by the Company and each of its existing Stockholders
(Incorporated by reference to Amendment No. 3 to the
Registration Statement on Form S-1 (File No. 333-23959)
filed by the Company with the Commission on June 25,
1997).
10.12 -- Stockholders Agreement (Incorporated by reference to
Amendment No. 1 to the Registration Statement on Form S-1
(File No. 333-23959) filed by the Company with the
Commission on May 6, 1997).
11.1 -- Computation of Per Share Earnings for the Six Months
Ended March 31, 1998.
11.2 -- Computation of Per Share Earnings for the Six Months
Ended March 31, 1997.
11.3 -- Computation of Per Share Earnings for the Year Ended
September 30, 1997.
11.4 -- Computation of Per Share Earnings for the Year Ended
September 30, 1996.
21.1 -- List of Subsidiaries of the Registrant.
23.1 -- Consent of Venable, Baetjer and Howard, LLP (included in
its opinion filed as Exhibit 5.1).
23.2 -- Consent of Arthur Andersen LLP.
23.3 -- Consent of Keller Bruner & Company, L.L.C.
23.4 -- Consent of Failes and Associates, P.C.
24.1 -- Power of Attorney (contained on the signature page).
27.1 -- Financial Data Schedule for six months ended March 31,
1998. (For SEC purposes only).
</TABLE>

- ---------------
+ Portions of this document were granted confidential treatment

ITEM 17. UNDERTAKINGS.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 14 above, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.

The undersigned Registrant hereby undertakes (1) that for purposes of
determining any liability under the Securities Act of 1933, the information
omitted from the form of prospectus filed as part of a Registration Statement in
reliance upon Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
of 1933 shall be deemed to be part of this Registration Statement as of the time
it was declared effective and (2) that for the purpose of determining any
liability under the Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

II-4
<PAGE> 99

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Fairfax, Virginia, on the 24th day of
April, 1998.

ADVANCED COMMUNICATION SYSTEMS, INC.

By: /s/ GEORGE A. ROBINSON
-------------------------------------
GEORGE A. ROBINSON
Chairman, President and Chief
Executive Officer

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and appoints
George A. Robinson and Thomas A. Costello, either of whom may act, as their true
and lawful attorneys-in-fact and agents of the undersigned, with full power of
substitution and resubstitution, for and in the name, place and stead of the
undersigned, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this registration statement, to sign
any related registration statement filed pursuant to Rule 462(b) of the
Securities Act of 1933, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as the undersigned
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>

/s/ GEORGE A. ROBINSON President, Chief Executive Officer April 24, 1998
- --------------------------------------------------- and Chairman (Principal Executive
GEORGE A. ROBINSON Officer)

/s/ DEV GANESAN Executive Vice President, April 24, 1998
- --------------------------------------------------- Chief Financial Officer and Treasurer
DEV GANESAN (Principal Financial and
Accounting Officer)

/s/ CHARLES G. MARTINACHE Director April 24, 1998
- ---------------------------------------------------
CHARLES G. MARTINACHE

/s/ THOMAS A. COSTELLO Director April 24, 1998
- ---------------------------------------------------
THOMAS A. COSTELLO

/s/ CHARLES R. COLLINS Director April 24, 1998
- ---------------------------------------------------
CHARLES R. COLLINS

/s/ WAYNE SHELTON Director April 24, 1998
- ---------------------------------------------------
WAYNE SHELTON
</TABLE>

II-5
<PAGE> 100

ADVANCED COMMUNICATION SYSTEMS, INC.

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
PAGE IN
SEQUENTIAL
EXHIBIT NUMBERING
NO. SYSTEM
------- -----------
<C> <S> <C>
1.1 -- Form of Underwriting Agreement.
3.1 -- Amended and Restated Certificate of Incorporation of the
Company (Incorporated by reference to Amendment No. 1 to
the Registration Statement on Form S-1 (File No.
333-23959) filed by the Company with the Commission on
May 6, 1997).
3.2 -- Amended and Restated Bylaws of the Company (Incorporated
by reference to Amendment No. 1 to the Registration
Statement on Form S-1 (File No. 333-23959) filed by the
Company with the Commission on May 6, 1997).
4.1 -- Specimen Common Stock Certificate (Incorporated by
reference to Amendment No. 2 to the Registration
Statement on Form S-1 (File No. 333-23959) filed by the
Company with the Commission on May 30, 1997).
5.1 -- Opinion of Venable, Baetjer and Howard, LLP.
10.1 -- Employment Agreement, dated as of January 2, 1997,
between the Company and Dev Ganesan (Incorporated by
reference to the Registration Statement on Form S-1 (File
No. 333-23959) filed by the Company with the Commission
on March 26, 1997).
10.2 -- 1996 Stock Incentive Plan (Incorporated by reference to
Amendment No. 1 to the Registration Statement on Form S-1
(File No. 333-23959) filed by the Company with the
Commission on May 6, 1997).
10.3 -- 1997 Stock Incentive Plan (Incorporated by reference to
Amendment No. 2 to the Registration Statement on Form S-1
(File No. 333-23959) filed by the Company with the
Commission on May 30, 1997).
10.4 -- Employee Stock Purchase Plan.
10.5 -- Form of Indemnity Agreement between the Company and each
of its directors and executive officers (Incorporated by
reference to Amendment No. 2 to the Registration
Statement on Form S-1 (File No. 333-23959) filed by the
Company with the Commission on May 30, 1997).
10.6 -- Credit Agreement, dated as of February 17, 1998, between
the Company and NationsBank, N.A (Incorporated by
reference to Form 8-K filed by the Company with the
Commission on March 13, 1998).
10.7 -- Security Agreement, dated as of February 17, 1998,
between the Company and NationsBank, N.A. (Incorporated
by reference to Form 8-K filed by the Company with the
Commission on March 13, 1998).
10.8 -- Lease Agreement, dated July 16, 1993, including Amendment
1, dated December 1, 1993, Amendment 2, dated January 15,
1994, and Amendment 3, dated March 15, 1994 (Incorporated
by reference to the Registration Statement on Form S-1
(File No. 333-23959) filed by the Company with the
Commission on March 26, 1997).
10.9 -- Contract No. N00039-96-C-0066, effective March 14, 1996,
by and between the Company and Space and Naval Warfare
Systems Command (Incorporated by reference to the
Registration Statement on Form S-1 (File No. 333-23959)
filed by the Company with the Commission on March 26,
1997).+
</TABLE>
<PAGE> 101

<TABLE>
<CAPTION>
PAGE IN
SEQUENTIAL
EXHIBIT NUMBERING
NO. SYSTEM
------- -----------
<C> <S> <C>
10.10 -- Contract No. N00039-96-C-0097, effective August 29, 1996,
by and between the Company and Space and Naval Warfare
Systems Command (Incorporated by reference to the
Registration Statement on Form S-1 (File No. 333-23959)
filed by the Company with the Commission on March 26,
1997).+
10.11 -- Form of Tax Indemnification Agreement to be entered into
by the Company and each of its existing Stockholders
(Incorporated by reference to Amendment No. 3 to the
Registration Statement on Form S-1 (File No. 333-23959)
filed by the Company with the Commission on June 25,
1997).
10.12 -- Stockholders Agreement (Incorporated by reference to
Amendment No. 1 to the Registration Statement on Form S-1
(File No. 333-23959) filed by the Company with the
Commission on May 6, 1997).
11.1 -- Computation of Per Share Earnings for the Six Months
Ended March 31, 1998.
11.2 -- Computation of Per Share Earnings for the Six Months
Ended March 31, 1997.
11.3 -- Computation of Per Share Earnings for the Year Ended
September 30, 1997.
11.4 -- Computation of Per Share Earnings for the Year Ended
September 30, 1996.
21.1 -- List of Subsidiaries of the Registrant.
23.1 -- Consent of Venable, Baetjer and Howard, LLP (included in
its opinion filed as Exhibit 5.1).
23.2 -- Consent of Arthur Andersen LLP.
23.3 -- Consent of Keller Bruner & Company, L.L.C.
23.4 -- Consent of Failes and Associates, P.C.
24.1 -- Power of Attorney (contained on the signature page).
27.1 -- Financial Data Schedule for six months ended March 31,
1998. (For SEC purposes only).
</TABLE>

- ---------------
+ Portions of this document were granted confidential treatment

<PAGE> 1
EXHIBIT 1.1

2,525,000 Shares
Common Stock
($.01 Par Value)

UNDERWRITING AGREEMENT

_________________, 1998

A.G. Edwards & Sons, Inc.
Legg Mason Wood Walker, Incorporated
Scott & Stringfellow, Inc.
As Representatives of the Several Underwriters
c/o A.G. Edwards & Sons, Inc.
One North Jefferson Avenue
St. Louis, Missouri 63103

The undersigned, Advanced Communication Systems, Inc., a Delaware
corporation (the "Company") and the persons listed on Schedule I hereto (the
"Selling Stockholders"), hereby address you as the representatives (the
"Representatives") of each of the persons, firms and corporations listed on
Schedule II hereto (collectively, the "Underwriters") and hereby confirm their
agreement with the several Underwriters as follows:

1. Description of Shares. The Company proposes to issue and sell
to the Underwriters 2,000,000 shares of its Common Stock, par value $.01 per
share, and the Selling Stockholders propose to sell to the Underwriters a total
of 525,000 shares of the Company's Common Stock, par value $.01 per share, as
set forth on Schedule I hereto (such 2,525,000 shares of Common Stock are
herein referred to as the "Firm Shares"). Solely for the purpose of covering
overallotments in the sale of the Firm Shares, the Company further proposes to
grant to the Underwriters the right to purchase up to an additional 378,750
Shares of Common Stock (the "Option Shares"), as provided in Section 3 of this
Agreement. The Firm Shares and the Option Shares are herein sometimes referred
to as the "Shares" and are more fully described in the Prospectus hereinafter
defined.

2. Purchase, Sale and Delivery of Firm Shares. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company agrees and each Selling
Stockholder agrees, severally and not jointly, to sell to the Underwriters, and
each such Underwriter agrees, severally and not jointly, (a) to purchase from
the Company and from each of the Selling Stockholders, pro rata, at a purchase
price of $____ per share, the number of Firm Shares set forth opposite the
name of such Underwriter in Schedule II hereto and (b) to purchase from the
Company any additional number of Option Shares which such Underwriter may
become obligated to purchase pursuant to Section 3 hereof.
<PAGE> 2
The Company and the Selling Stockholders will deliver definitive
certificates for the Firm Shares at the office of A.G. Edwards & Sons, Inc.,
77 Water Street, New York, New York ("Edwards' Office"), or such other place as
you and the Company may mutually agree upon, for the accounts of the
Underwriters against payment to the Company and the Selling Stockholders of the
purchase price for the Firm Shares sold by them to the several Underwriters by
wire transfer or certified or bank cashiers' check in clearing house (next day
available) funds payable to the order of the Company and the Selling
Stockholders, respectively, and delivered to One North Jefferson Avenue, St.
Louis, Missouri 63103, or at such other place as may be agreed upon between you
and the Company (the "Place of Closing"), at 10:00 a.m., St. Louis time, on
__________-, 1998, or at such other time and date not later than three full
business days thereafter as you and the Company may agree, such time and date
of payment and delivery being herein called the "Closing Date."

The certificates for the Firm Shares so to be delivered will be made
available to you for inspection at Edwards' Office (or such other place as you
and the Company may mutually agree upon) at least one full business day prior
to the Closing Date and will be in such names and denominations as you may
request at least two full business days prior to the Closing Date.

It is understood that an Underwriter, individually, may (but shall not
be obligated to) make payment on behalf of the other Underwriters whose checks
shall not have been received prior to the Closing Date for Shares to be
purchased by such Underwriter. Any such payment by an Underwriter shall not
relieve the other Underwriters of any of their obligations hereunder.

It is understood that the Underwriters propose to offer the Shares to
the public upon the terms and conditions set forth in the Registration
Statement hereinafter defined.

3. Purchase, Sale and Delivery of the Option Shares. The Company
hereby grants options to the Underwriters to purchase from it up to 378,750
Option Shares on the same terms and conditions as the Firm Shares; provided,
however, that such options may be exercised only for the purpose of covering
any overallotments which may be made by them in the sale of the Firm Shares.
No Option Shares shall be sold or delivered unless the Firm Shares previously
have been, or simultaneously are, sold and delivered.

The options are exercisable on behalf of the several Underwriters by
you, as Representatives, at any time, and from time to time, before the
expiration of 30 days from the date of this Agreement, for the purchase of all
or part of the Option Shares covered thereby, by notice given by you to the
Company in the manner provided in Section 13 hereof, setting forth the number
of Option Shares as to which the Underwriters are exercising the options, and
the date of delivery of said Option Shares, which date shall not be more than
three business days after such notice unless otherwise

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<PAGE> 3
agreed to by the parties. You may terminate the options at any time, as to any
unexercised portion thereof, by giving written notice to the Company to such
effect.

You, as Representatives, shall make such allocation of the Option
Shares among the Underwriters as may be required to eliminate purchases of
fractional Shares.

Delivery of the Option Shares with respect to which the options shall
have been exercised shall be made to or upon your order at Edwards' Office (or
at such other place as you and the Company may mutually agree upon), against
payment by you of the per share purchase price to the Company by wire transfer
or certified or bank cashier's check or checks, payable in clearing house (next
day available) funds. Such payment and delivery shall be made at 10:00 a.m.,
St. Louis time, on the date designated in the notice given by you as above
provided for, unless some other date and time are agreed upon, which date and
time of payment and delivery are called the "Option Closing Date." The
certificates for the Option Shares so to be delivered will be made available to
you for inspection at Edwards' Office at least one full business day prior to
the Option Closing Date and will be in such names and denominations as you may
request at least two full business days prior to the Option Closing Date. On
the Option Closing Date, the Company shall provide the Underwriters with such
representations, warranties, opinions and covenants with respect to the Option
Shares as are required to be delivered on the Closing Date with respect to the
Firm Shares.

4. Representations, Warranties and Agreements of the Company and
the Selling Stockholders.

(a) The Company represents and warrants to and agrees with each
Underwriter that:

(i) A registration statement (Registration No. 333-_____)
on Form S-1 with respect to the Shares, including a preliminary
prospectus, and such amendments to such registration statement as may
have been required to the date of this Agreement, has been prepared by
the Company pursuant to and in conformity with the requirements of the
Securities Act of 1933, as amended (the "Act"), and the Rules and
Regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder and has been filed
with the Commission under the Act. Copies of such registration
statement, including any amendments thereto, each related preliminary
prospectus (meeting the requirements of Rule 430 or 430A of the Rules
and Regulations) contained therein, the exhibits, financial statements
and schedules have heretofore been delivered by the Company to you.
If such registration statement has not become effective under the Act,
a further amendment to such registration statement, including a form
of final prospectus, necessary to permit such registration statement
to become effective will be filed promptly by the Company with the
Commission. If such registration statement has become effective under
the Act,

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<PAGE> 4

a final prospectus containing information permitted to be omitted at
the time of effectiveness by Rule 430A of the Rules and Regulations
will be filed promptly by the Company with the Commission in
accordance with Rule 424(b) of the Rules and Regulations. The term
"Registration Statement" as used herein means the registration
statement as amended at the time it becomes or became effective under
the Act (the "Effective Date"), including financial statements and all
exhibits and, if applicable, the information deemed to be included by
Rule 430A of the Rules and Regulations. The term "Prospectus" as used
herein means (i) the prospectus as first filed with the Commission
pursuant to Rule 424(b) of the Rules and Regulations or, (ii) if no
such filing is required, the form of final prospectus included in the
Registration Statement at the Effective Date or (iii) if a Term Sheet
or Abbreviated Term Sheet (as such terms are defined in Rule 434(b)
and 434(c), respectively, of the Rules and Regulations) is filed with
the Commission pursuant to Rule 424(b)(7) of the Rules and
Regulations, the Term Sheet or Abbreviated Term Sheet and the last
Preliminary Prospectus filed with the Commission prior to the time the
Registration Statement became effective, taken together. The term
"Preliminary Prospectus" as used herein shall mean a preliminary
prospectus as contemplated by Rule 430 or 430A of the Rules and
Regulations included at any time in the Registration Statement.

(ii) The Commission has not issued, and is not to the
knowledge of the Company threatening to issue, an order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus
nor instituted proceedings for that purpose. Each Preliminary
Prospectus at its date of issue, the Registration Statement and the
Prospectus and any amendments or supplements thereto contains or will
contain, as the case may be, all statements which are required to be
stated therein by, and in all material respects conform or will
conform, as the case may be, to the requirements of, the Act and the
Rules and Regulations. Neither the Registration Statement nor any
amendment thereto, as of the applicable effective date, and neither
the Prospectus nor any supplement thereto contains or will contain, as
the case may be, any untrue statement of a material fact or omits or
will omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that the Company makes no representation or warranty as to
information contained in or omitted from the Registration Statement or
the Prospectus, or any such amendment or supplement, in reliance upon,
and in conformity with, written information furnished to the Company
by or on behalf of the Underwriters specifically for use in the
preparation thereof.

(iii) The filing of the Registration Statement and the
execution and delivery of this Agreement have been duly authorized by
the Board of Directors of the Company; this Agreement constitutes a
valid and legally binding obligation of the Company enforceable in
accordance with its terms (except to the extent the

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<PAGE> 5
enforceability of the indemnification and contribution provisions of
Section 7 hereof may be limited by public policy considerations as
expressed in the Act as construed by courts of competent jurisdiction,
and except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other laws affecting creditors' rights
generally and by general principles of equity); the issue and sale of
the Shares by the Company and the performance of this Agreement and
the consummation of the transactions herein contemplated will not
result in a violation of the Company's articles of incorporation or
bylaws or result in a breach or violation of any of the terms and
provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any
properties or assets of the Company or its subsidiaries under, any
statute, or under any indenture, mortgage, deed of trust, note, loan
agreement, sale and leaseback arrangement or other agreement or
instrument to which the Company or its subsidiaries is a party or by
which they are bound or to which any of the properties or assets of
the Company or its subsidiaries is subject, or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over the Company or its subsidiaries or their properties,
except to such extent as does not materially adversely affect the
business of the Company and its subsidiaries taken as a whole; no
consent, approval, authorization, order, registration or qualification
of or with any court or governmental agency or body is required for
the consummation of the transactions herein contemplated, except such
as may be required by the National Association of Securities Dealers,
Inc. (the "NASD") or under the Act or Rules and Regulations or any
state securities laws.

(iv) Except as described in the Prospectus, neither the
Company nor its subsidiaries have sustained since the date of the
latest audited financial statements included in the Prospectus any
material loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree.
Except as contemplated in the Prospectus, subsequent to the respective
dates as of which information is given in the Registration Statement
and the Prospectus, the Company and its subsidiaries taken as a whole
have not incurred any material liabilities or material obligations,
direct or contingent, other than in the ordinary course of business,
or entered into any material transactions not in the ordinary course
of business, and there has not been any material change in the capital
stock or long-term debt of the Company and its subsidiaries taken as a
whole or any material adverse change in the condition (financial or
other), net worth, business, affairs, management, prospects or results
of operations of the Company and its subsidiaries taken as a whole.
The Company and its subsidiaries have filed all necessary federal,
state and foreign income and franchise tax returns and paid all taxes
shown as due thereon; all tax liabilities are adequately provided for
on the books of the Company and its subsidiaries except to such extent
as would not materially adversely affect the business of the

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<PAGE> 6
Company and its subsidiaries taken as a whole; the Company and its
subsidiaries have made all necessary payroll tax payments and are
current and up-to-date as of the date of this Agreement; and the
Company and its subsidiaries have no knowledge of any tax proceeding
or action pending or threatened against the Company or its
subsidiaries which might materially adversely affect their business or
property.

(v) Except as described in the Prospectus, there is not
now pending or, to the knowledge of the Company or the Selling
Stockholders, threatened or contemplated, any action, suit or
proceeding to which the Company or its subsidiaries is a party before
or by any court or public, regulatory or governmental agency or body
which might be expected to result (individually or in the aggregate)
in any material adverse change in the condition (financial or other),
business or prospects of the Company and its subsidiaries taken as a
whole, or might be expected to materially and adversely affect
(individually or in the aggregate) the properties or assets thereof;
and there are no contracts or documents of the Company or its
subsidiaries which would be required to be filed as exhibits to the
Registration Statement by the Act or by the Rules and Regulations
which have not been filed as exhibits to the Registration Statement.

(vi) The Company has duly and validly authorized capital
stock as described in the Prospectus; all outstanding shares of Common
Stock of the Company and the Shares conform, or when issued will
conform, to the description thereof in the Registration Statement and
the Prospectus and have been, or, when issued and paid for will be,
duly authorized, validly issued, fully paid and nonassessable; and the
issuance of the Shares to be purchased from the Company hereunder is
not subject to preemptive rights.

(vii) The Company and its subsidiaries have been duly
incorporated and are validly existing as corporations in good standing
under the laws of the states or other jurisdictions in which they are
incorporated, with full power and authority (corporate and other) to
own, lease and operate their properties and conduct their businesses
as described in the Registration Statement; the Company and its
subsidiaries are duly qualified to do business as foreign corporations
in good standing in each state or other jurisdiction in which their
ownership or leasing of property or conduct of business legally
requires such qualification, except where the failure to be so
qualified would not have a material adverse effect on the ability of
the Company and its subsidiaries to conduct their business as
described in the Registration Statement; and the outstanding shares of
capital stock of the Company's subsidiaries have been duly authorized
and validly issued, are fullypaid and nonassessable and are owned by
the Company free and clear of any mortgage, pledge, lien, encumbrance,
charge or adverse claim and are not the subject of any agreement or
understanding with any person; no options, warrants or other rights to
purchase, agreement or other obligations to issue or

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<PAGE> 7
other rights to convert any obligations into shares of capital stock
or ownership interests in the subsidiaries are outstanding.

(viii) Arthur Andersen LLP, an accounting firm which has
certified certain of the financial statements filed with the
Commission as a part of the Registration Statement, is an independent
public accounting firm within the meaning of the Act and the Rules and
Regulations.

(ix) Keller Bruner & Company LLC, an accounting firm which
has certified certain of the financial statements filed with the
Commission as a part of the Registration Statement, is an independent
public accounting firm within the meaning of the Act and the Rules and
Regulations.

(x) Failes & Associates, an accounting firm which has
certified certain of the financial statements filed with
the Commission as a part of the Registration Statement, is an
independent public accounting firm within the meaning of the Act and
the Rules and Regulations.

(xi) The financial statements and schedules of the
Company, including the notes thereto, filed with and as a part of the
Registration Statement, are accurate in all material respects and
present fairly the consolidated financial position of the Company as
of the respective dates thereof and the consolidated results of
operations and statements of cash flow for the respective periods
covered thereby, all in conformity with generally accepted accounting
principles applied on a consistent basis throughout the periods
involved except as otherwise disclosed in the Prospectus. The
selected financial data included in the Registration Statement and
Prospectus present fairly the information shown therein and have been
compiled on a basis consistent with that of the audited financial
statements in the Registration Statement and Prospectus.

(xii) Neither the Company nor any of its subsidiaries is in
default with respect to any contract or agreement to which it is a
party; provided that this representation shall not apply to defaults
which in the aggregate are not materially adverse to the condition,
financial or other, or the business or prospects of the Company and
its subsidiaries taken as a whole.

(xiii) Neither the Company nor any of its subsidiaries is in
violation of any other laws, ordinances or governmental rules or
regulations to which it is subject, and neither the Company nor any of
its subsidiaries has failed to obtain any other license, permit,
franchise, easement, consent, or other governmental authorization
necessary to the ownership, leasing and operation of its properties or
to the conduct of its business, which violation or failure would
materially adversely affect the business, operations, affairs,
properties, prospects, profits or condition (financial or other) of
the Company and its subsidiaries taken as a

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<PAGE> 8
whole. Neither the Company nor any of its subsidiaries has, at any
time during the past five years, (A) made any unlawful contributions
to any candidate for any political office, or failed fully to disclose
any contribution in violation of law, or (B) made any payment to any
state, federal or foreign government official, or other person charged
with similar public or quasi-public duty (other than payment required
or permitted by applicable law).

(xiv) Except as described in the Prospectus, the Company
and its subsidiaries own or possess, or can acquire on reasonable
terms, adequate patents, patent licenses, trademarks, service marks
and trade names necessary to conduct the business now operated by
them, and neither the Company nor any of its subsidiaries has received
any notice of infringement of or conflict with asserted rights of
others with respect to any patents, patent licenses, trademarks,
service marks or trade names which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a
material adverse effect on the conduct of the business, operations,
financial condition or income of the Company and its subsidiaries
taken as a whole.

(xv) The Company and its subsidiaries have good and
marketable title to all property owned by them, free and clear of all
liens, encumbrances, restrictions and defects except such as are
described in the Registration Statement or do not interfere with the
use made and proposed to be made of such property; and any property
held under lease or sublease by the Company or any of its subsidiaries
is held under valid, subsisting and enforceable leases or subleases
with such exceptions as are not material and do not interfere with the
use made and proposed to be made of such property by the Company and
its subsidiaries, and neither the Company nor any of its subsidiaries
has any notice or knowledge of any material claim of any sort which
has been, or may be, asserted by anyone adverse to the Company's or
its subsidiaries' rights as lessee or sublessee under any lease or
sublease described above, or affecting or questioning the Company's or
its subsidiaries' rights to the continued possession of the leased or
subleased premises under any such lease or sublease in conflict with
the terms thereof.

(xvi) Except as described in the Prospectus, there is no
factual basis for any action, suit or other proceeding involving the
Company or its subsidiaries or any of their material assets for any
failure of the Company or its subsidiaries, or any predecessor
thereof, to comply with any requirements of federal, state or local
regulation relating to air, water, solid waste management, hazardous
or toxic substances, or the protection of health or the environment.
Except as described in the Prospectus, none of the property owned or
leased by the Company or its subsidiaries is, to the best knowledge of
the Company, contaminated with any waste or hazardous substances, and
neither the Company nor its subsidiaries may be deemed an "owner or
operator" of a "facility" or "vessel" which owns, possesses,
transports, generates or disposes of a "hazardous substance" as those

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<PAGE> 9
terms are defined in Section 9601 of the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. 9601 et
seq.

(xvii) No labor disturbance exists with the employees of the
Company or its subsidiaries or is imminent which would have a material
adverse effect on the Company and its subsidiaries taken as a whole.

(xviii) The Company has not taken and will not take, directly
or indirectly, any action designed to or which might reasonably be
expected to cause or result in stabilization or manipulation of the
price of the Company's Common Stock, and the Company is not aware of
any such action taken or to be taken by affiliates of the Company.

(xiv) The Company is not an "investment company" or a
company "controlled" by an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.

(xx) The Company has filed with the Commission, on a
timely basis, all documents required to have been filed by the Company
pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act") or the rules and regulations of the Commission
thereunder. Each such document, when filed with the Commission,
conformed in all material respects to the requirements thereunder, and
did not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading.

(b) Each Selling Stockholder severally represents and warrants to
and agrees with each Underwriter and the Company that:

(i) All authorizations and consents necessary for the
execution and delivery by it of this Agreement and the sale and
delivery of the Shares to be sold by such Selling Stockholder
hereunder have been given and are in full force and effect on the date
hereof and will be in full force and effect on the Closing Date (and,
if applicable, the Option Closing Date).

(ii) Such Selling Stockholder has, and on the Closing Date
(and, if applicable, the Option Closing Date) will have good and valid
title to the Shares to be sold by such Selling Stockholder, free and
clear of all liens, mortgages, pledges, encumbrances, claims, equities
and security interests whatsoever, and will have, full right, power
and authority to enter into this Agreement and to sell, assign,
transfer and deliver the Shares to be sold by such Selling Stockholder
hereunder.

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<PAGE> 10

(iii) Upon delivery of and payment for such Shares
hereunder, the several Underwriters will acquire valid and
unencumbered title to such Shares to be sold by such Selling
Stockholder hereunder, free and clear of all liens, mortgages,
pledges, encumbrances, claims, equities and security interests
whatsoever.

(iv) The consummation by such Selling Stockholder of the
transactions contemplated herein and the fulfillment by such Selling
Stockholder of the terms hereof will not result in a violation or
breach of any terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, note, loan agreement, sale and
leaseback arrangement or other agreement or instrument to which such
Selling Stockholder is a party, or of any order, rule or regulation
applicable to such Selling Stockholder of any court or of any
regulatory body of an administrative agency or other governmental body
having jurisdiction.

(v) Such Selling Stockholder has not taken and will not
take, directly or indirectly, any action designed to or which might be
reasonably expected to cause or result in stabilization or
manipulation of the price of the Company's Common Stock, and such
Selling Stockholder is not aware of any such action taken or to be
taken by affiliates of such Selling Stockholder.

(vi) When the Registration Statement becomes effective and
at all times subsequent thereto, such information in the Registration
Statement and Prospectus and any amendments or supplements thereto as
specifically refers to such Selling Stockholder will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading.

(vii) Certificates in negotiable form representing all of
the Shares to be sold by such Selling Stockholder hereunder have been
placed in the custody of Continental Stock Transfer & Trust Company
(the "Custodian") under a Custody Agreement (the "Custody Agreement"),
duly executed and delivered by such Selling Stockholder, with the
Custodians having the authority to deliver the Shares to be sold by
such Selling Stockholder hereunder, and that such Selling Stockholder
has duly executed and delivered a Power of Attorney (the "Power of
Attorney") appointing George A. Robinson, Dev Ganesan and
_____________, any two of whom may act, as such Selling Stockholder's
attorneys-in-fact (the "Attorneys-in-Fact") with the Attorneys-in-Fact
having authority to execute and deliver this Agreement on behalf of
such Selling Stockholder, to determine the purchase price to be paid
by the Underwriters to the Selling Stockholders as provided in Section
2, to authorize the delivery of the Shares to be sold by it hereunder
and otherwise to act on behalf of such Selling Stockholder in
connection with the transactions contemplated by this Agreement and
such Custody Agreement.

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<PAGE> 11

(viii) The Shares represented by the certificates held in
custody for such Selling Stockholder under the Custody Agreement are
subject to the interests of the Underwriters hereunder, and the
arrangements made by such Selling Stockholder for such custody, and
the appointment by such Selling Stockholder of the Custodians under
the Custody Agreement and of the Attorneys-in-Fact by the Power of
Attorney, are to that extent irrevocable.

(ix) The obligations of such Selling Stockholders
hereunder shall not be terminated by operation of law, whether by the
death or incapacity of any individual Selling Stockholder or by the
occurrence of any other event, and if any Selling Stockholder should
die or become incapacitated, or if any other such event should occur
before the delivery of the Shares hereunder, certificates representing
the Shares shall be delivered by or on behalf of each Selling
Stockholder in accordance with the terms and conditions of this
Agreement and of the Custody Agreement, and actions taken by the
Custodians pursuant to the Custody Agreement or by the
Attorneys-in-Fact pursuant to the Power of Attorney shall be as valid
as if such death, incapacity or other event had not occurred,
regardless of whether or not the Custodians or Attorneys-in-Fact, or
any of them, shall have received notice of such death, incapacity or
other event.

(x) Such Selling Stockholder is not prompted to sell
shares of Common Stock by any information concerning the Company or
its subsidiaries which is not included in the Registration Statement.

(c) Any certificate signed by any officer of the Company and
delivered to you or to counsel for the Underwriters shall be deemed a
representation and warranty by the Company to each Underwriter as to the
matters covered thereby; and any certificate signed by or on behalf of the
Selling Stockholders as such and delivered to you or to counsel for the
Underwriters shall be deemed a representation and warranty by the Selling
Stockholders to each Underwriter as to the matters covered thereby.

5. Additional Covenants. The Company and, where expressly
indicated, the Selling Stockholders, covenant and agree with the several
Underwriters that:

(a) If the Registration Statement is not effective under the Act,
the Company will use its best efforts to cause the Registration Statement to
become effective as promptly as possible, and it will notify you, promptly
after it shall receive notice thereof, of the time when the Registration
Statement has become effective. The Company (i) will prepare and timely file
with the Commission under Rule 424(b) of the Rules and Regulations, if
required, a Prospectus containing information previously omitted at the time of
effectiveness of the Registration Statement in reliance on Rule 430A of the
Rules and Regulations or otherwise or a Term Sheet or Abbreviated Term Sheet,
as applicable; (ii) will not file any amendment to the Registration Statement
or supplement to the Prospectus of which the Underwriters shall not previously
have been advised and

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<PAGE> 12
furnished with a copy or to which the Underwriters shall have reasonably
objected in writing or which is not in compliance with the Rules and
Regulations; and (iii) will promptly notify you after it shall have received
notice thereof of the time when any amendment to the Registration Statement
becomes effective or when any supplement to the Prospectus has been filed.

(b) The Company will advise the Underwriters promptly, after it
shall receive notice or obtain knowledge thereof, of any request of the
Commission for amendment of the Registration Statement or for supplement to the
Prospectus or for any additional information, or of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or the use of the Prospectus or of the institution or threatening of
any proceedings for that purpose, and the Company will use its best efforts to
prevent the issuance of any such stop order preventing or suspending the use of
the Prospectus and to obtain as soon as possible the lifting thereof, if
issued.

(c) The Company will cooperate with the Underwriters and their
counsel in endeavoring to qualify the Shares for sale under the securities laws
of such jurisdictions as they may have designated and will make such
applications, file such documents, and furnish such information as may be
necessary for that purpose, provided the Company shall not be required to
qualify as a foreign corporation or to file a general consent to service of
process in any jurisdiction where it is not now so qualified or required to
file such a consent or to subject itself to taxation as doing business in any
jurisdiction where it is not now so taxed. The Company will, from time to
time, file such statements, reports, and other documents, as are or may be
required to continue such qualifications in effect for so long a period as the
Underwriters may reasonably request.

(d) The Company will deliver to, or upon the order of, the
Underwriters, without charge from time to time, as many copies of any
Preliminary Prospectus as they may reasonably request. The Company will
deliver to, or upon the order of, the Underwriters without charge as many
copies of the Prospectus, or as it thereafter may be amended or supplemented,
as they may from time to time reasonably request. The Company consents to the
use of such Prospectus by the Underwriters and by all dealers to whom the
Shares may be sold, both in connection with the offering or sale of the Shares
and for such other purposes and for such period of time thereafter as the
Prospectus is required by law to be delivered in connection with the offering
or sale of the Shares. The Company will deliver to the Underwriters at or
before the Closing Date two signed copies of the Registration Statement and all
amendments thereto including all exhibits filed therewith, and will deliver to
the Underwriters such number of copies of the Registration Statement, without
exhibits, and of all amendments thereto, as they may reasonably request.

(e) If, during the period in which a prospectus is required by law
to be delivered by an Underwriter or dealer, any event shall occur as a result
of which, in the judgment of the Company or in your judgment or in the opinion
of counsel for the

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<PAGE> 13
Underwriters, it becomes necessary to amend or supplement the Prospectus in
order to make the statements therein, in light of the circumstances existing at
the time the Prospectus is delivered to a purchaser, not misleading, or, if it
is necessary at any time to amend or supplement the Prospectus to comply with
any law, the Company promptly will prepare and file with the Commission an
appropriate amendment to the Registration Statement or supplement to the
Prospectus so that the Prospectus as so amended or supplemented will not, in
the light of the circumstances when it is so delivered, be misleading, or so
that the Prospectus will comply with law.

(f) The Company will make generally available to its stockholders
and will file as an exhibit in a report pursuant to the Securities Exchange Act
of 1934, as amended (the "1934 Act"), as soon as it is practicable to do so,
but in any event not later than 15 months after the effective date of the
Registration Statement, an earnings statement in reasonable detail, covering a
period of at least 12 consecutive months beginning after the effective date of
the Registration Statement, which earnings statement shall satisfy the
requirements of Section 11(a) of the Act and Rule 158 of the Rules and
Regulations and will advise the Underwriters in writing when such statement has
been so made available.

(g) The Company will, for a period of five years from the Closing
Date, deliver to the Underwriters at their principal executive offices a
reasonable number of copies of annual reports, quarterly reports, current
reports and copies of all other documents, reports and information furnished by
the Company to its stockholders or filed with any securities exchange pursuant
to the requirements of such exchange or with the Commission pursuant to the
Act or the 1934 Act. The Company will deliver to the Underwriters similar
reports with respect to any significant subsidiaries, as that term is defined
in the Rules and Regulations, which are not consolidated in the Company's
financial statements. Any report, document or other information required to be
furnished under this paragraph (g) shall be furnished as soon as practicable
after such report, document or information becomes available.

(h) The Company will apply the proceeds from the sale of the
Shares as set forth in the description under "Use of Proceeds" in the
Prospectus, which description complies in all respects with the requirements of
Item 504 of Regulation S-K.

(i) The Company will supply you with copies of all correspondence
to and from, and all documents issued to and by, the Commission in connection
with the registration of the Shares under the Act.

(j) Prior to the Closing Date (and, if applicable, the Option
Closing Date), the Company will furnish to you, as soon as they have been
prepared, copies of any unaudited interim consolidated financial statements of
the Company and its subsidiaries for any periods subsequent to the periods
covered by the financial statements appearing in the Registration Statement and
the Prospectus.

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<PAGE> 14

(k) Prior to the Closing Date (and, if applicable, the Option
Closing Date), neither the Company nor any Selling Stockholder will issue any
press releases or other communications directly or indirectly and will hold no
press conferences with respect to the Company or its subsidiaries, the
financial condition, results of operations, business, properties, assets or
liabilities of the Company or its subsidiaries, or the offering of the Shares,
without your prior written consent.

(l) The Company will use its best efforts to obtain approval for
the listing of the Shares to be sold by the Company hereunder, and to maintain
the quotation of the Company's shares, on the Nasdaq National Market.

(m) For a period of 180 days from the date of the Prospectus, the
Company will not, and will use its best efforts to cause its directors and
officers to not directly or indirectly sell, contract to sell or otherwise
dispose of any shares of the Company's Common Stock, any securities
exchangeable for Common Stock or any other rights to acquire such shares
without your prior written consent, except for the Shares sold hereunder and
except for sales of shares of Common Stock by the Company in Permitted
Issuances. For purposes of the foregoing, a "Permitted Issuance" shall mean
any sale or issuance by the Company (i) pursuant to the Company's 1997 Stock
Incentive Plan or Employee Stock Purchase Plan, both described in the
Prospectus, (ii) pursuant to the exercise of options referred to in the
Prospectus, (iii) in an issuance pursuant to a registration statement under the
Securities Act in connection with an acquisition in which the recipients of
such Common Stock or Securities agree that such Common Stock or Securities may
not be transferred or sold by them during the period ending 180 days from the
date of the Prospectus without your prior written consent or (iv) in a private
placement or other unregistered issuance in connection with an acquisition in
which the recipients of such Common Stock or securities agree that 80% of such
Common Stock or securities may not be transferred or sold by them during the
period ending 180 days from the date of the Prospectus without your prior
written consent.

(n) For a period of 180 days from the date of the Prospectus, the
Selling Stockholders will not directly or indirectly sell, contract to sell or
otherwise dispose of any shares of the Company's Common Stock or rights to
acquire such shares without your prior written consent, except for the Shares
sold hereunder.

(o) The Company and its subsidiaries will maintain and keep
accurate books and records reflecting their assets and maintain internal
accounting controls which provide reasonable assurance that (1) transactions
are executed in accordance with management's authorization, (2) transactions
are recorded as necessary to permit the preparation of the Company's financial
statements and to maintain accountability for the assets of the Company and its
subsidiaries, (3) access to the assets of the Company and its subsidiaries is
permitted only in accordance with management's authorization, and (4) the
recorded accounts of the assets of the Company and its subsidiaries are
compared with existing assets at reasonable intervals.

6. Conditions of Underwriters' Obligations. The several
obligations of the Underwriters to purchase and pay for the Shares, as provided
herein, shall be subject to the accuracy in all material respects, as of the
date hereof and as of the Closing Date

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<PAGE> 15
(and, if applicable, the Option Closing Date), of the representations and
warranties of the Company and the Selling Stockholders contained herein, to the
performance in all material respects by the Company and the Selling
Stockholders of their covenants and obligations hereunder, and to the following
additional conditions:

(a) All filings required by Rule 424 and Rule 430A of the Rules
and Regulations shall have been made. No stop order suspending the
effectiveness of the Registration Statement, as amended from time to time,
shall have been issued and no proceeding for that purpose shall have been
initiated or, to the knowledge of the Company or any Underwriter, threatened or
contemplated by the Commission, and any request of the Commission for
additional information (to be included in the Registration Statement or the
Prospectus or otherwise) shall have been complied with to the reasonable
satisfaction of the Underwriters.

(b) No Underwriter shall have disclosed in writing to the Company
on or prior to the Closing Date (and, if applicable, the Option Closing Date),
that the Registration Statement or Prospectus or any amendment or supplement
thereto contains an untrue statement of fact which, in the opinion of counsel
to the Underwriters, is material, or omits to state a fact which, in the
opinion of such counsel, is material and is required to be stated therein or is
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.

(c) On the Closing Date (and, if applicable, the Option Closing
Date), you shall have received the opinion of Venable, Baetjer and Howard, LLP
("Venable"), counsel for the Company, addressed to you and dated the Closing
Date (and, if applicable, the Option Closing Date), to the effect that:

(i) The Company and its subsidiaries have been duly
incorporated and are validly existing as corporations in good standing
under the laws of the states or other jurisdictions in which they are
incorporated, with full power and authority (corporate and other) to
own, lease and operate their properties and conduct their business as
described in the Registration Statement; the Company and its
subsidiaries are duly qualified to do business as foreign corporations
in good standing in each state or other jurisdiction in which their
ownership or leasing of property or conduct of business legally
requires such qualification, except where the failure to be so
qualified would not have a material adverse effect on the ability of
the Company and its subsidiaries to conduct their business as
described in the Registration Statement; and the outstanding shares of
capital stock of the Company's subsidiaries have been duly authorized
and validly issued and, to the knowledge of such counsel, are owned by
the Company free and clear of any mortgage, pledge, lien, encumbrance,
charge or adverse claim and are not the subject of any agreement or
understanding with any person; to the knowledge of such counsel, no
options, warrants or other rights to purchase, agreement or other
obligations to issue or other rights to convert any obligations into
shares of

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<PAGE> 16
capital stock or ownership interests in the subsidiaries are
outstanding.

(ii) The Company has duly and validly authorized capital
stock as set forth under the heading "Capitalization" in the
Prospectus; all outstanding shares of Common Stock of the Company and
the Shares conform to the description thereof in the Prospectus under
the heading "Description of Capital Stock", and the outstanding shares
of Common Stock have been duly authorized and are validly issued,
fully paid and nonassessable; the Shares to be sold by the Company
have been duly authorized and, when delivered and paid for in
accordance with this Agreement, will be validly issued, fully paid and
nonassessable, and the stockholders of the Company have no preemptive
rights with respect to the Shares pursuant to the Company's articles
of incorporation or bylaws or the Delaware General Corporation Law
statute or, to the knowledge of such counsel, otherwise.

(iii) Such counsel has been advised by the staff of the
Commission that the Registration Statement has become effective under
the Act and, to the knowledge of such counsel after due inquiry, no
stop order suspending the effectiveness of the Registration Statement
has been issued and no proceedings for that purpose have been
instituted or are pending or contemplated under the Act.

(iv) The Registration Statement and the Prospectus, and
each amendment or supplement thereto, as of their respective effective
or issue date, comply as to form and are appropriately responsive in
all material respects to the requirements of the Act and the
applicable Rules and Regulations (except that such counsel need
express no opinion as to the financial statements, the notes thereto
or the financial statement schedule, other financial data or
statistical data derived from any of the foregoing).

(v) The descriptions in the Registration Statement and
Prospectus of contracts and other documents filed as exhibits to the
Registration Statement are accurate in all material respects.

(vi) No authorization, approval, consent, order,
registration or qualification of or with any court or governmental
body, authority or agency is required with respect to the Company in
connection with the transactions contemplated by this Agreement,
except such as may be required under the Act or the Rules and
Regulations or as may be required by the NASD or under state
securities laws in connection with the purchase and distribution of
the Shares by the Underwriters.

(vii) The filing of the Registration Statement has been
duly authorized by the Board of Directors of the Company. This
Agreement has been duly

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<PAGE> 17
authorized, executed and delivered by the Company. The performance of
this Agreement and the consummation of the transactions herein
contemplated will not (A) result in a violation of the Company's
articles of incorporation or bylaws or (B) to the knowledge of such
counsel, result in a breach or violation of any of the terms and
provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any
properties or assets of the Company and its subsidiaries under, any
statute, or under any indenture, mortgage, deed of trust, note, loan
agreement, sale and leaseback arrangement, or any other agreement or
instrument to which the Company or its subsidiaries is a party or by
which they are bound or to which any of the properties or assets of
the Company or its subsidiaries are subject, or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over the Company or its subsidiaries or their properties,
except, in the case of any such violation, breach, default, creation
or imposition, to such extent as does not materially adversely affect
the business of the Company and its subsidiaries taken as a whole.

(viii) To the knowledge of such counsel, (A) there are no
material (individually, or in the aggregate) legal, governmental or
regulatory proceedings pending or threatened to which the Company or
its subsidiaries is a party or of which the business or properties of
the Company or its subsidiaries is the subject which are not disclosed
in the Registration Statement and Prospectus; (B) there are no
contracts or documents of a character required to be described in the
Registration Statement or the Prospectus or to be filed as an exhibit
to the Registration Statement which are not described or filed as
required; and (C) there are no statutes or regulations required to be
described in the Registration Statement or Prospectus which are not
described as required.

(ix) To the knowledge of such counsel, the Company and its
subsidiaries hold all licenses, certificates, permits and approvals
from all state, federal and other regulatory authorities, and have
satisfied in all material respects the requirements imposed by
regulatory bodies, administrative agencies or other governmental
bodies, agencies or officials, that are required for the Company and
its subsidiaries lawfully to own, lease and operate its properties and
conduct its business as described in the Prospectus, and each of the
Company and its subsidiaries is conducting its business in compliance
in all material respects with all of the laws, rules and regulations
of each jurisdiction in which it conducts its business.

(x) The statements made in the Registration Statement
under the captions "Capitalization", "Management-Stockholders
Agreement," "Management-Employment Agreement," "Management-Stock Plans
and Agreements," "Management-Indemnification Arrangements", "Certain
Transactions-Termination Agreements," "Certain Transactions-Fairfax
Communications Ltd.," "Description

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<PAGE> 18
of Capital Stock" and "Shares Eligible for Future Sale," to the extent
that they constitute summaries of documents referred to therein or
matters of law or legal conclusions, have been reviewed by such
counsel and are accurate summaries and fairly present the information
disclosed therein.

(xi) The Company is not an "investment company" or a
company "controlled" by an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.

Such counsel shall confirm that in the course of its duties in
connection with the preparation of the Registration Statement and Prospectus,
nothing came to such counsel's attention that would lead them to believe that
either the Registration Statement or Prospectus or any amendment or supplement
thereto (other than the financial statements, the notes thereto or the
financial statement schedule, other financial data or statistical data derived
from any of the foregoing, as to which such counsel need express no opinion)
contains any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.

In rendering the foregoing opinion, such counsel may rely, provided
that the opinion shall state that you and they are entitled to so rely, (1) as
to matters governed by the General Corporation Law statute of the State of
Delaware or involving laws of any jurisdiction other than the Commonwealth of
Virginia or the United States, upon opinions addressed to the Underwriters of
other counsel satisfactory to them and Hale and Dorr LLP ("Hale and Dorr"),
counsel to the Underwriters (2) as to matters governed by the laws of the
United Kingdom, upon opinions of the auditors for the Company's subsidiary
satisfactory to them and Hale and Dorr and (3) as to all matters of fact, upon
certificates and written statements of the executive officers of, and
accountants for, the Company.

(d) On the Closing Date (and, if applicable, the Option Closing
Date), you shall have received the opinion of Venable, counsel to the Selling
Stockholders, addressed to you and dated the Closing Date (and, if applicable,
the Option Closing Date), to the effect that:

(i) Each Selling Stockholder has duly authorized,
executed and delivered the Custody Agreement and Power of Attorney,
(a) appointing Continental Stock Transfer & Trust Company as such
Selling Stockholder's Custodian with authority to take custody of and
deliver the Shares as represented by certificates on behalf of such
Selling Stockholder in connection with the transactions contemplated
by this Agreement and the Custody Agreement, and (b) appointing George
A. Robinson, Dev Ganesan and __________, any two of whom may act, as
such Selling Stockholder's attorneys-in-fact with authority to execute
and deliver this Agreement on behalf of such Selling Stockholder and

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<PAGE> 19
otherwise to act on behalf of such Selling Stockholder in connection
with the transactions contemplated by this Agreement and the Power of
Attorney.

(ii) This Agreement has been duly executed and delivered
on behalf of the Selling Stockholders.

(iii) To such counsel's knowledge, each Selling Stockholder
has full legal right and any approval required by law (other than as
required by the Act, the NASD and state securities and Blue Sky Laws)
to sell, assign, transfer and deliver the Shares to be sold by such
Selling Stockholder.

(iv) To such counsel's knowledge, no consent, approval,
authorization or order of any court, or governmental agency or body is
required for consummation of the transactions contemplated by this
Agreement in connection with the Shares to be sold by each Selling
Stockholder hereunder except such as may be required under the Act or
the Rules and Regulations or as may be required by the NASD or under
state securities laws.

(v) To such counsel's knowledge, each Selling Stockholder
has good and valid title to the Shares being sold by such Selling
Stockholder hereunder, free and clear of all liens, mortgages,
pledges, encumbrances, claims, equities and security interests;

(vi) Upon delivery of the Shares to be sold by each
Selling Stockholder pursuant to this Agreement and payment therefor as
contemplated herein, and assuming that the Underwriters purchase such
Shares in good faith and without notice of an adverse claim, each
Selling Stockholder will have transferred to the Underwriters good and
valid title to the Shares being sold by such Selling Stockholder on
the Closing Date, free and clear of all liens, mortgages, pledges,
encumbrances, claims, equities and security interests whatsoever.

(e) You shall have received on the Closing Date (and, if
applicable, the Option Closing Date), from Hale and Dorr LLP, counsel to the
Underwriters, such opinion or opinions, dated the Closing Date (and, if
applicable, the Option Closing Date) with respect to the incorporation of the
Company, the validity of the Shares, the Registration Statement, the Prospectus
and other related matters as you may reasonably require; the

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<PAGE> 20
Company and Selling Stockholders shall have furnished to such counsel such
documents as they reasonably request for the purpose of enabling them to pass
on such matters.

(f) You shall have received at or prior to the Closing Date from
Hale and Dorr LLP a memorandum or memoranda, in form and substance satisfactory
to you, with respect to the qualification for offering and sale by the
Underwriters of the Shares under state securities or Blue Sky laws of such
jurisdictions as the Underwriters may have designated to the Company.

(g) On the business day immediately preceding the date of this
Agreement and on the Closing Date (and, if applicable, the Option Closing
Date), you shall have received from Arthur Andersen LLP, a letter or letters,
dated the date of this Agreement and the Closing Date (and, if applicable, the
Option Closing Date), respectively, in form and substance satisfactory to you,
confirming that they are independent public accountants with respect to the
Company within the meaning of the Act and the published Rules and Regulations,
and the answer to Item 509 of Regulation S-K set forth in the Registration
Statement is correct insofar as it relates to them, and stating to the effect
set forth in Schedule III hereto.

(h) On the business day immediately preceding the date of this
Agreement and on the Closing Date (and, if applicable, the Option Closing
Date), you shall have received from Keller Bruner & Company LLC, a letter or
letters, dated the date of this Agreement and the Closing Date (and, if
applicable, the Option Closing Date), respectively, in form and substance
satisfactory to you, confirming that they are independent public accountants
with respect to the Company within the meaning of the Act and the published
Rules and Regulations, and the answer to Item 509 of Regulation S-K set forth
in the Registration Statement is correct insofar as it relates to them, and
stating to the effect set forth in Schedule III hereto.

(i) On the business day immediately preceding the date of this
Agreement and on the Closing Date (and, if applicable, the Option Closing
Date), you shall have received from Failes & Associates, a letter or letters,
dated the date of this Agreement and the Closing Date (and, if applicable, the
Option Closing Date), respectively, in form and substance satisfactory to you,
confirming that they are independent public accountants with respect to the
Company within the meaning of the Act and the published Rules and Regulations,
and the answer to Item 509 of Regulation S-K set forth in the Registration
Statement is correct insofar as it relates to them, and stating to the effect
set forth in Schedule III hereto.

(j) Except as contemplated in the Prospectus, (i) neither the
Company nor its subsidiaries shall have sustained since the date of the latest
audited financial statements included in the Prospectus any loss or
interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree; and (ii) subsequent to the respective

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<PAGE> 21
dates as of which information is given in the Registration Statement and the
Prospectus, neither the Company nor its subsidiaries shall have incurred any
liability or obligation, direct or contingent, or entered into transactions,
and there shall not have been any change in the capital stock or long-term debt
of the Company and its subsidiaries or any change in the condition (financial
or other), net worth, business, affairs, management, prospects or results of
operations of the Company or its subsidiaries, the effect of which, in any such
case described in clause (i) or (ii), is in your judgment so material or
adverse as to make it impracticable or inadvisable to proceed with the public
offering or the delivery of the Shares being delivered on such Closing Date
(and, if applicable, the Option Closing Date) on the terms and in the manner
contemplated in the Prospectus.

(k) There shall not have occurred any of the following: (i) a
suspension or material limitation in trading in securities generally on the New
York Stock Exchange or the American Stock Exchange or the establishing on such
exchanges by the Commission or by such exchanges of minimum or maximum prices
which are not in force and effect on the date hereof; (ii) a general moratorium
on commercial banking activities declared by either federal or state
authorities; (iii) the outbreak or escalation of hostilities involving the
United States or the declaration by the United States of a national emergency
or war, if the effect of any such event specified in this clause (iii) in your
judgment makes it impracticable or inadvisable to proceed with the public
offering or the delivery of the Shares in the manner contemplated in the
Prospectus; (iv) any calamity or crisis, change in national, international or
world affairs, act of God, change in the international or domestic markets, or
change in the existing financial, political or economic conditions in the
United States or elsewhere, if the effect of any such event specified in this
clause (iv) makes it impracticable or inadvisable to proceed with the public
offering or the delivery of the Shares in the manner contemplated in the
Prospectus; or (v) the enactment, publication, decree, or other promulgation of
any federal or state statute, regulation, rule, or order of any court or other
governmental authority, or the taking of any action by any federal, state or
local government or agency in respect of fiscal or monetary affairs, if the
effect of any such event specified in this clause (v) in your judgment makes it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares in the manner contemplated in the Prospectus.

(l) You shall have received certificates, dated the Closing Date
(and, if applicable, the Option Closing Date) and signed by the President and
the Chief Financial Officer of the Company stating that (i) they have carefully
examined the Registration Statement and the Prospectus as amended or
supplemented and nothing has come to their attention that would lead them to
believe that either the Registration Statement or the Prospectus, or any
amendment or supplement thereto as of their respective effective or issue
dates, contained, and the Prospectus as amended or supplemented at such Closing
Date, contains any untrue statement of a material fact, or omits to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and,

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<PAGE> 22
that (ii) all representations and warranties made herein by the Company are
true and correct in all material respects at such Closing Date, with the same
effect as if made on and as of such Closing Date, and all agreements herein to
be performed by the Company on or prior to such Closing Date have been duly
performed in all material respects.

(m) The Company and each of the Selling Stockholders shall not
have failed, refused, or been unable, at or prior to the Closing Date (and, if
applicable, the Option Closing Date) to have performed in all material respects
any agreement on their part to be performed or any of the conditions herein
contained and required to be performed or satisfied by them at or prior to such
Closing Date.

(n) The Company and the Selling Stockholders shall have furnished
to you at the Closing Date (and, if applicable, the Option Closing Date) such
other certificates as you may have reasonably requested as to the accuracy, on
and as of such Closing Date, of the representations and warranties of the
Company and the Selling Stockholders herein and as to the performance by the
Company and the Selling Stockholders of their obligations hereunder.

(m) The Nasdaq National Market shall have approved the
Company's Application for Listing of Additional Shares.

All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
to you and to Hale and Dorr, counsel for the several Underwriters. The Company
and Selling Stockholders will furnish you with such conformed copies of such
opinions, certificates, letters and documents as you may request.

If any of the conditions specified above in this Section 6 shall not
have been satisfied at or prior to the Closing Date (and, if applicable, the
Option Closing Date) or waived by you in writing, this Agreement may be
terminated by you on notice to the Company and the Selling Stockholders.

7. Indemnification. (a) The Company will indemnify and hold
harmless each Underwriter and each person, if any, who controls any Underwriter
within the meaning of the Act, against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter or such controlling
person may become subject, under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon an untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, or in any blue sky
application or other document executed by the Company or based on any
information furnished in writing by the Company, filed in any jurisdiction in
order to qualify any or all of the Shares under the securities laws thereof
("Blue Sky Application"), or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to

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<PAGE> 23
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and will reimburse
each Underwriter and each such controlling person for any legal or other
expenses reasonably incurred by such Underwriter or such controlling person in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in the Registration Statement, such
Preliminary Prospectus or the Prospectus, or such amendment or supplement, or
any Blue Sky Application in reliance upon and in conformity with written
information furnished to the Company by you or by any Underwriter through you,
specifically for use in the preparation thereof; and provided, further, that if
any Preliminary Prospectus or the Prospectus contained any alleged untrue
statement or allegedly omitted to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading and
such statement or omission shall have been corrected in a revised Preliminary
Prospectus or in the Prospectus or in an amended or supplemented Prospectus,
the Company shall not be liable to any Underwriter or controlling person under
this subsection (a) with respect to such alleged untrue statement or alleged
omission to the extent that any such loss, claim, damage or liability of such
Underwriter or controlling person results from the fact that such Underwriter
sold Shares to a person to whom there was not sent or given, at or prior to the
written confirmation of such sale, such revised Preliminary Prospectus or
Prospectus or amended or supplemented Prospectus. This indemnity agreement
shall be in addition to any liabilities which the Company may otherwise have.

(b) Each Selling Stockholder will indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of the Act, against any losses, claims, damages or liabilities, joint
or several, to which such Underwriter or controlling person may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, or any Blue Sky Application or arise out of or
are based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was made in the Registration Statement, such Preliminary Prospectus or the
Prospectus, or such amendment or supplement, or any Blue Sky Application, in
reliance upon and in conformity with written information furnished to the
Company or any Underwriter by such Selling Stockholder specifically for use in
the preparation thereof; and will reimburse any legal or other expenses
reasonably incurred by each Underwriter and each person, if any, who controls
any Underwriter within the meaning of the Act, in connection with investigating
or defending any such loss, claim, damage, liability or

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<PAGE> 24
action; provided, however, that the indemnity contained in this subsection (b)
with respect to any Preliminary Prospectus shall not inure to the benefit of
any Underwriter (or to the benefit of any person controlling such Underwriter)
in respect of any action or claim asserted by a person who purchased any Shares
from such Underwriter, if, within the time required by the Act such person was
not sent or given a copy of the Prospectus, as then amended or supplemented.
This indemnity agreement shall be in addition to any liabilities which the
Selling Stockholders may otherwise have.

(c) Each Underwriter will indemnify and hold harmless the Company,
each of its directors, each of its officers who have signed the Registration
Statement and, each person, if any, who controls the Company within the meaning
of the Act, and each Selling Stockholder, against any losses, claims, damages
or liabilities, joint or several, to which the Company or any such director,
officer or controlling person or any such Selling Stockholder may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement, any Preliminary Prospectus, the Prospectus, any
amendment or supplement thereto, or any Blue Sky Application or arise out of or
are based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in the
Registration Statement, such Preliminary Prospectus or the Prospectus, such
amendment or supplement, or any Blue Sky Application in reliance upon and in
conformity with written information furnished to the Company by any such
Underwriter specifically for use in the preparation thereof; and will reimburse
any legal or other expenses reasonably incurred by the Company or any such
director, officer or controlling person or any such Selling Stockholder in
connection with investigating or defending any such loss, claim, damage,
liability or action. This indemnity agreement shall be in addition to any
liabilities which the Underwriters may otherwise have.

(d) Any party which proposes to assert the right to be indemnified
under this Section 7 shall, within ten days after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim is to be made against an indemnifying party under this Section 7,
notify each such indemnifying party of the commencement of such action, suit or
proceeding, enclosing a copy of all papers served, but the omission so to
notify such indemnifying party of any such action, suit or proceeding shall not
relieve such indemnifying party from any liability which it may have to any
indemnified party otherwise than under this Section 7. In case any such
action, suit or proceeding shall be brought against any indemnified party and
it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in, and, to the extent that
it shall wish, jointly with any other indemnifying party, similarly notified,
to assume the defense thereof, with counsel

-24-
<PAGE> 25
reasonably satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to such indemnified
party for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof. The indemnified party shall have the right to employ
its own counsel in any such action, but the fees and expenses of such counsel
shall be at the expense of such indemnified party unless (i) the employment of
counsel by such indemnified party at the expense of the indemnifying party has
been authorized by the indemnifying party, (ii) the indemnified party shall
have been advised by such counsel in a written opinion that there may be a
conflict of interest between the indemnifying party and the indemnified party
in the conduct of the defense, or certain aspects of the defense, of such
action (in which case the indemnifying party shall not have the right to direct
the defense of such action with respect to those matters or aspects of the
defense on which a conflict exists or may exist on behalf of the indemnified
party) or (iii) the indemnifying party shall not in fact have employed counsel
to assume the defense of such action, in any of which events such fees and
expenses to the extent applicable shall be borne by the indemnifying party.
An indemnifying party shall not be liable for any settlement of any action or
claim effected without its consent. Each indemnified party, as a condition of
such indemnity, shall cooperate in good faith with the indemnifying party in
the defense of any such action or claim.

(e) If the indemnification provided for in this Section 7 is for
any reason, other than pursuant to the terms thereof, judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction
and the expiration of time to appeal or the denial of the last right to appeal)
to be unavailable to an indemnified party under subsections (a), (b) or (c)
above in respect of any losses, claims, damages or liabilities (or actions in
respect thereof) referred to therein, then each indemnifying party shall, in
lieu of indemnifying such indemnified party, contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages
or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by the Company, the
Selling Stockholders and the Underwriters from the offering of the Shares. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault, as applicable, of the Company, the Selling Stockholders and the
Underwriters in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities (or actions in respect thereof), as
well as other relevant equitable considerations. The relative benefits
received by, as applicable, the Company, the Selling Stockholders and the
Underwriters shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the Company
and the Selling Stockholders bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the

-25-
<PAGE> 26
table on the cover page of the Prospectus. The relative fault shall be
determined by reference to, among other things, whether the untrue statement of
a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, the Selling Stockholders or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company,
the Selling Stockholders and the Underwriters agree that it would not be just
and equitable if contributions pursuant to this subsection (e) were determined
by pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this subsection (e). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to
above in this subsection (e) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (e), no Underwriter shall be required to
contribute any amount in excess of the underwriting discounts and commissions
applicable to the Shares purchased by such Underwriter. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this subsection
(e) to contribute are several in proportion to their respective underwriting
obligations and not joint.

8. Representations and Agreements to Survive Delivery. All
representations, warranties, and agreements of the Company and the Selling
Stockholders contained in Sections 7 and 11 herein or in certificates delivered
pursuant hereto, and the agreements of the Underwriters contained in Section 7
hereof, shall remain operative and in full force and effect regardless of any
termination or cancellation of this Agreement or any investigation made by or
on behalf of any Underwriter or any controlling person, the Company or any of
its officers, directors or any controlling persons, or the Selling
Stockholders, and shall survive delivery of the Shares to the Underwriters
hereunder.

9. Substitution of Underwriters. (a) If any Underwriter shall
default in its obligation to purchase the Shares which it has agreed to
purchase hereunder, you may in your discretion arrange for you or another party
or other parties to purchase such Shares on the terms contained herein. If
within thirty-six hours after such default by any Underwriter you do not
arrange for the purchase of such Shares, then the Company and the Selling
Stockholders shall be entitled to a further period of thirty-six hours within
which to procure another party or parties reasonably satisfactory to you to
purchase such Shares on such terms. In the event that, within the respective
prescribed periods, you notify the Company and the Selling Stockholders that
you have so arranged for the purchase of such Shares, or the Company and the
Selling Stockholders notify you that they have so arranged for the purchase of
such Shares, you or the Company and the Selling Stockholders shall have the
right to postpone the Closing Date for a period of not more than seven days, in
order to effect whatever changes may thereby be made

-26-
<PAGE> 27
necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your
opinion may thereby be made necessary. The term "Underwriter" as used in this
Agreement shall include any persons substituted under this Section 9 with like
effect as if such person had originally been a party to this Agreement with
respect to such Shares.

(b) If, after giving effect to any arrangements for the purchase
of the Shares of a defaulting Underwriter or Underwriters made by you or the
Company and the Selling Stockholders as provided in subsection (a) above, the
aggregate number of Shares which remains unpurchased does not exceed one tenth
of the total Shares to be sold on the Closing Date, then the Company and the
Selling Stockholders shall have the right to require each non-defaulting
Underwriter to purchase the Shares which such Underwriter agreed to purchase
hereunder and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Shares which such
Underwriter agreed to purchase hereunder) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.

(c) If, after giving effect to any arrangements for the purchase
of the Shares of a defaulting Underwriter or Underwriters made by you or the
Company and the Selling Stockholders as provided in subsection (a) above, the
number of Shares which remains unpurchased exceeds one tenth of the total
Shares to be sold on the Closing Date, or if the Company and the Selling
Stockholders shall not exercise the right described in subsection (b) above to
require the non-defaulting Underwriters to purchase Shares of the defaulting
Underwriter or Underwriters, then this Agreement shall thereupon terminate,
without liability on the part of any non-defaulting Underwriter or the Company
and the Selling Stockholders except for the expenses to be borne by the Company
and the Underwriters as provided in Section 11 hereof and the indemnity and
contribution agreements in Section 7 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.

10. Effective Date and Termination. (a) This Agreement shall
become effective at 1:00 p.m., St. Louis time, on the first business day
following the effective date of the Registration Statement, or at such earlier
time after the effective date of the Registration Statement as you in your
discretion shall first release the Shares for offering to the public; provided,
however, that the provisions of Section 7 and 11 shall at all times be
effective. For the purposes of this Section 10(a), the Shares shall be deemed
to have been released to the public upon release by you of the publication of a
newspaper advertisement relating to the Shares or upon release of telegrams,
facsimile transmissions or letters offering the Shares for sale to securities
dealers, whichever shall first occur.

(b) This Agreement may be terminated by you at any time before it
becomes effective in accordance with Section 10(a) by notice to the Company and
the Selling

-27-
<PAGE> 28
Stockholders; provided, however, that the provisions of this Section 10 and of
Section 7 and Section 11 hereof shall at all times be effective. In the event
of any termination of this Agreement pursuant to Section 9 or this Section
10(b) hereof, the Company and the Selling Stockholders shall not then be under
any liability to any Underwriter except as provided in Section 7 or Section 11
hereof.

(c) This Agreement may be terminated by you at any time at or
prior to the Closing Date by notice to the Company and the Selling Stockholders
if any condition specified in Section 6 hereof shall not have been satisfied on
or prior to the Closing Date. Any such termination shall be without liability
of any party to any other party except as provided in Sections 7 and 11 hereof.

(d) This Agreement also may be terminated by you, by notice to the
Company and the Selling Stockholders, as to any obligation of the Underwriters
to purchase the Option Shares, if any condition specified in Section 6 hereof
shall not have been satisfied at or prior to the Option Closing Date or as
provided in Section 9 of this Agreement.

If you terminate this Agreement as provided in Sections 10(b), 10(c)
or 10(d), you shall notify the Company and the Selling Stockholders by
telephone or telegram, confirmed by letter.

11. Costs and Expenses. The Company and the Selling Stockholders
will bear and pay the costs and expenses incident to the registration of the
Shares and public offering thereof, including, without limitation, (a) the fees
and expenses of the Company's accountants and the fees and expenses of counsel
for the Company, (b) the preparation, printing, filing, delivery and shipping
of the Registration Statement, each Preliminary Prospectus, the Prospectus and
any amendments or supplements thereto (except as otherwise expressly provided
in Section 5(d) hereof) and the printing, delivery and shipping of this
Agreement, the Agreement Among Underwriters, the Selected Dealer Agreement,
Underwriters' Questionnaires and Powers of Attorney and Blue Sky Memoranda, (c)
the furnishing of copies of such documents (except as otherwise expressly
provided in Section 5(d) hereof) to the Underwriters, (d) the registration or
qualification of the Shares for offering and sale under the securities laws of
the various states, including the reasonable fees and disbursements of
Underwriters' counsel relating to such registration or qualification, (e) the
fees payable to the NASD and the Commission in connection with their review of
the proposed offering of the Shares, (f) all printing and engraving costs
related to preparation of the certificates for the Shares, including transfer
agent and registrar fees, (g) all initial transfer taxes, if any, (h) all fees
and expenses relating to the authorization of the Shares for trading on the
Nasdaq National Market, (i) all travel expenses, including air fare and
accommodation expenses, of representatives of the Company in connection with
the offering of the Shares and (j) all of the other costs and expenses incident
to the performance by the Company of the registration and offering of the
Shares; provided, however, that the Underwriters will bear and pay the fees and
expenses of the Underwriters' counsel

-28-
<PAGE> 29
(other than fees and disbursements relating to the registration or
qualification of the Shares for offering and sale under the securities laws of
the various states), the Underwriters' out-of-pocket expenses, and any
advertising costs and expenses incurred by the Underwriters incident to the
public offering of the Shares; and provided, further, that the Selling
Stockholders will bear and pay the fees and expenses of the Selling
Stockholders' counsel.

If this Agreement is terminated by you in accordance with the
provisions of Section 10(c), the Company shall reimburse the Underwriters for
all of their out-of-pocket expenses, including the reasonable fees and
disbursements of counsel to the Underwriters.

12. Default of Selling Stockholders. Failure or refusal by any of
the Selling Stockholders to sell and deliver on the Closing Date the Shares
agreed to be sold and delivered by such Selling Stockholder shall in no manner
relieve the other Selling Stockholders or the Company of their respective
obligations under this Agreement. If any Selling Stockholder should fail or
refuse to sell and deliver his Shares, the remaining Selling Stockholders shall
have the right hereby granted to increase, pro rata or otherwise, the number of
Shares to be sold by them hereunder to the total number of Shares to be sold by
all Selling Stockholders as set forth in Schedule I. If the remaining Selling
Stockholders do not fully exercise the right to increase the number of Shares
to be sold by them, the Underwriters, at your option, will have the right to
elect to purchase or not to purchase the Shares to be sold by the Company and
the remaining Selling Stockholders. In the event the Underwriters purchase the
Shares of the Company and such other Selling Stockholders pursuant to this
Section 12, the Closing Date shall be postponed for a period of not more than
seven days in order that the Registration Statement and Prospectus or other
documents may be amended or supplemented if and to the extent necessary under
the provisions of the Act and the Rules and Regulations or under the securities
laws of any jurisdiction. If the Underwriters determine not to purchase the
Shares of the Company and the other Selling Stockholders, if any, this
Agreement shall terminate and neither the Company nor the Underwriters nor any
other Selling Stockholder shall be under any obligation under this Agreement
except as provided in Section 7 hereof and except for the obligation of the
Company to pay for such expenses as are set forth in Section 11 hereof.
Nothing herein shall relieve a defaulting Selling Stockholder from liability
for his default or from liability under Section 7 hereof or for expenses
imposed by this Agreement upon such Selling Stockholder.

13. Notices. All notices or communications hereunder, except as
herein otherwise specifically provided, shall be in writing and if sent to the
Underwriters shall be mailed, delivered, sent by facsimile transmission, or
telegraphed and confirmed c/o A.G. Edwards & Sons, Inc. at One North Jefferson
Avenue, St. Louis, Missouri 63103, Attention: Syndicate, facsimile number (314)
289-7387, or if sent to the Company shall be mailed, delivered, sent by
facsimile transmission, or telegraphed and confirmed to the

-29-
<PAGE> 30
Company at 10089 Lee Jackson Highway, Fairfax, Virginia 22030, Attention:
George A. Robinson, facsimile number (703) 934-8807, or if sent to any Selling
Stockholder shall be mailed, delivered, sent by facsimile transmission or
telegraphed and confirmed to such Selling Stockholder, c/o the
Attorneys-in-Fact at c/o the Company, 10089 Lee Highway, Fairfax, Virginia
22030. Notice to any Underwriter pursuant to Section 7 shall be mailed,
delivered, sent by facsimile transmission, or telegraphed and confirmed to such
Underwriter's address as it appears in the Underwriters' Questionnaire
furnished in connection with the offering of the Shares or as otherwise
furnished to the Company and the Selling Stockholder.

14. Parties. This Agreement shall inure to the benefit of and be
binding upon the Underwriters and the Selling Stockholders, and the Company and
their respective successors and assigns. Nothing expressed or mentioned in
this Agreement is intended or shall be construed to give any person,
corporation or other entity, other than the parties hereto and their respective
successors and assigns and the controlling persons, officers and directors
referred to in Section 7, any legal or equitable right, remedy or claim under
or in respect of this Agreement or any provision herein contained; this
Agreement and all conditions and provisions hereof being intended to be and
being for the sole and exclusive benefit of the parties hereto and their
respective successors and assigns and said controlling persons and said
officers and directors, and for the benefit of no other person, corporation or
other entity. No purchaser of any of the Shares from any Underwriter shall be
construed a successor or assign by reason merely of such purchase.

A In all dealings with the Company and the Selling Stockholders under
this Agreement you shall act on behalf of each of the several Underwriters, the
Company, and the Selling Stockholders shall be entitled to act and rely upon
any statement, request, notice or agreement on behalf of the Underwriters, made
or given by you on behalf of the Underwriters, as if the same shall have been
made or given in writing by the Uderwriters.

15. Counterparts. This Agreement may be executed by any one or
more of the parties hereto in any number of counterparts, each of which shall
be deemed to be an original, but all such counterparts shall together
constitute one and the same instrument.

16. Pronouns. Whenever a pronoun of any gender or number is used
herein, it shall, where appropriate, be deemed to include any other gender and
number.

17. Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Missouri.

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<PAGE> 31
If the foregoing is in accordance with your understanding, please so
indicate in the space provided below for that purpose, whereupon this letter
shall constitute a binding agreement among the Company, each of the Selling
Stockholders and the Underwriters.

ADVANCED COMMUNICATIONS SYSTEMS, INC.

By:
--------------------------------
Title:
----------------------------

Selling Stockholders Named in Schedule I Hereto

By:
--------------------------------
Attorney-in-Fact

By:
------------------------------
Attorney-in-Fact

Accepted in St. Louis,
Missouri as of the date
first above written, on
behalf of ourselves and each
of the several Underwriters
named in Schedule II hereto.

A.G. EDWARDS & SONS, INC.

By:
----------------------------
Title:
------------------------

-31-
<PAGE> 32

SCHEDULE I

Number of
Selling Stockholders Firm Shares

TOTAL

-32-
<PAGE> 33
SCHEDULE II

Name Number of Shares

A.G. Edwards & Sons, Inc.
Legg Mason Wood Walker, Incorporated
Scott & Stringfellow, Inc

TOTAL

-33-
<PAGE> 34
SCHEDULE III

Pursuant to Section 6(g), (h) and (i) of the Underwriting Agreement,
Arthur Andersen LLP ("AA"), Keller Bruner & Company, LLC and Failes &
Associates each shall furnish letters to the Underwriters to the effect that:

(i) They are independent certified public accountants
with respect to the Company and its subsidiaries within the meaning of the Act
and the applicable Rules and Regulations thereunder.

(ii) In their opinion, the financial statements and any
supplementary financial information and schedules audited (and, if applicable,
prospective financial statements and/or pro forma financial information
examined) by them and included in the Prospectus or the Registration Statement
comply as to form in all material respects with the applicable accounting
requirements of the Act and the applicable Rules and Regulations thereunder;
and, if applicable, they have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of the
unaudited consolidated interim financial statements, selected financial data,
pro forma financial information, prospective financial statements and/or
condensed financial statements derived from audited financial statements of the
Company for the periods specified in such letter, as indicated in their reports
thereon, copies of which have been furnished to the Representatives of the
Underwriters (the "Representatives").

(iii) In the case of AA only, on the basis of limited
procedures, not constituting an audit in accordance with generally accepted
auditing standards, consisting of a reading of the unaudited financial
statements and other information referred to below, performing the procedures
specified by the AICPA for a review of interim financial information as
discussed in SAS No. 71, Interim Financial Information, on the latest available
interim financial statements of the Company and its subsidiaries, inspection of
the minute books of the Company and its subsidiaries since the date of the
latest audited financial statements included in the Prospectus, inquiries of
officials of the Company and its subsidiaries responsible for financial and
accounting matters and such other inquiries and procedures as may be specified
in such letter, nothing came to their attention that caused them to believe
that:

(A) any material modifications should be made to the
unaudited statements of consolidated income, statements of
consolidated financial position and statements of consolidated cash
flows included in the Prospectus for them to be in conformity with
generally accepted accounting principles, or the unaudited statements
of consolidated income, statements of consolidated financial position
and statements of consolidated cash flows included in the Prospectus
do not comply as to form in all material respects with the applicable
accounting

-34-
<PAGE> 35
requirements of the Act and the related published Rules and Regulations
thereunder,

(B) any other unaudited income statement data and balance
sheet items included in the Prospectus do not agree with the
corresponding items in the unaudited consolidated financial statements
from which such data and items were derived, and any such unaudited
data and items were not determined on a basis substantially consistent
with the basis for the corresponding amounts in the audited
consolidated financial statements included in the Prospectus,

(C) the unaudited financial statements which were not
included in the Prospectus but from which were derived any unaudited
condensed financial statements referred to in Clause (A) and any
unaudited income statement data and balance sheet items included in
the Prospectus and referred to in Clause (B) were not determined on a
basis substantially consistent with the basis for the audited
consolidated financial statements included in the Prospectus,

(D) any unaudited pro forma consolidated condensed
financial statements included in the Prospectus do not comply as to
form in all material respects with the applicable accounting
requirements of the Act and the published rules and regulations
thereunder or the pro forma adjustments have not been properly applied
to the historical amounts in the compilation of those statements,

(E) as of a specified date not more than five days prior
to the date of such letter, there have been any changes in the
consolidated capital stock or any increase in the consolidated
long-term debt of the Company and its subsidiaries, or any decreases
in consolidated working capital, net current assets or net assets or
other items specified by the Representative, or any changes in any
items specified by the Representative, in each case as compared with
amounts shown in the latest balance sheet included in the Prospectus,
except in each case for changes, increases or decreases which the
Prospectus discloses have occurred or may occur or which are described
in such letter,

(F) for the period from the date of the latest financial
statements included in the Prospectus to the specified date referred
to in Clause (E) there were any decreases in consolidated net revenues
or operating profit or the total or per share amounts of consolidated
net income or any other changes in any other items specified by the
Representative, in each case as compared with the comparable period of
the preceding year and with any other period of corresponding length
specified by the Representative, except in each case for changes,
decreases or increases which the Prospectus discloses have occurred or
may occur or which are described in such letter, and

-35-
<PAGE> 36

(iv) In addition to the audit referred to in their
report(s) included in the Prospectus and the
limited procedures, inspection of minute
books, inquiries and other procedures
referred to in paragraph (iii) above, they
have carried out certain specified
procedures, not constituting an audit in
accordance with generally accepted auditing
standards, with respect to certain amounts,
percentages and financial information
specified by the Representatives, which are
derived from the general accounting records
of the Company and its subsidiaries for the
periods covered by their reports and any
interim or other periods since the latest
period covered by their reports, which appear
in the Prospectus, or in Part II of, or in
exhibits and schedules to, the Registration
Statement specified by the Representative,
and have compared certain of such amounts,
percentages and financial information with
the accounting records of the Company and its
subsidiaries and have found them to be in
agreement.

-36-

<PAGE> 1
EXHIBIT 5

Venable, Baetjer & Howard, LLP
2010 Corporate Ridge
Suite 400
McLean, VA 22102

April 24, 1998

Advanced Communication Systems, Inc.
10089 Lee Highway
Fairfax, Virginia 22030

Ladies and Gentlemen:

We have acted as counsel for Advanced Communication Systems, Inc. (the
"Company") in connection with a registration statement on Form S-1 of the
Company (the "Registration Statement"), filed with the Securities and Exchange
Commission (the "Commission") pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), pertaining to the registration of 2,525,000
shares of common stock, par value $0.01 per share, of the Company (the
"Shares"), of which 2,000,000 Shares are to be issued and sold by the Company
and 525,000 Shares are to be sold by certain stockholders of the Company
(collectively, the "Selling Stockholders"), as described in the Registration
Statement.

In connection with this opinion, we have considered such questions of
law as we have deemed necessary as a basis for the opinions set forth below,
and we have examined or otherwise are familiar with originals or copies,
certified or otherwise identified to our satisfaction, of the following: (i)
the Registration Statement; (ii) the Certificate of Incorporation and Bylaws,
as amended, of the Company, as currently in effect; (iii) certain resolutions
of the Board of Directors of the Company relating to the issuance of the Shares
and the other transactions contemplated by the Registration Statement; and (iv)
such other documents as we have deemed necessary or appropriate as a basis for
the opinions set forth below. In our examination, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to
us as originals, the conformity to original documents of all documents
submitted to us as certified or photostatic copies and the authenticity of the
originals of such copies. As to any facts material to this
<PAGE> 2
opinion that we did not independently establish or verify, we have relied upon
statements and representations of officers and other representatives of the
Company and others.

Based upon the foregoing, we are of the opinion that:

1. The Shares to be sold by the Company have been duly authorized
for issuance and that when sold, issued, paid for and delivered in the manner
contemplated by the Registration Statement, the Shares will be validly issued,
fully paid and nonassessable.

2. The Shares to be sold by the Selling Stockholders are duly
authorized, validly issued, fully paid and nonassessable.

The law covered by the opinion is limited to the law of the State of
Delaware, without regard to the principles of conflicts of laws thereof, and
based upon and limited to the laws and regulations in effect as of the date
hereof. We assume no obligation to update the opinions set forth herein.

We hereby consent to the filing of this opinion with the Commission as
Exhibit 5 to the Registration Statement. In giving this consent, we do not
thereby admit that we are within the category of persons whose consent is
required under Section 7 of the Securities Act, or the Rules and Regulations of
the Commission thereunder.

Very truly yours,

/s/ VENABLE, BAETJER & HOWARD, LLP

<PAGE> 1
EXHIBIT 10.4

ADVANCED COMMUNICATION SYSTEMS, INC.
EMPLOYEE STOCK PURCHASE PLAN

ARTICLE I
PURPOSE

1.01. PURPOSE. The Advanced Communication Systems, Inc. Employee
Stock Purchase Plan is intended to provide a method whereby employees of
Advanced Communication Systems, Inc. (the "Company") and its subsidiary
corporations will have an opportunity to acquire a proprietary interest in the
Company through the purchase of shares of the Common Stock of the Company. It
is the intention of the Company to have the Plan qualify as an "employee stock
purchase plan" under Section 423 of the Internal Revenue Code of 1986, as
amended (the "Code"). The provisions of the Plan shall be construed so as to
extend and limit participation in a manner consistent with the requirements of
that section of the Code.

ARTICLE II
DEFINITIONS

2.01 BASE PAY. "Base Pay" means regular straight-time earnings
excluding payments for overtime, shift premium, bonuses and other special
payments, commissions and other marketing incentive payments.

2.02 BOARD. "Board of Directors" or "Board" means the Board of
Directors of the Company.

2.03 COMMITTEE. "Committee" means the individuals described in
Article XI.

2.04 COMMON STOCK. "Common Stock" means the common stock of the
Company.

2.05 DESIGNATED SUBSIDIARY CORPORATION. "Designated Subsidiary
Corporation" means a Subsidiary Corporation which is designated by the
Company's Board of Directors to participate in the Plan.

2.06 EMPLOYEE. "Employee" means any person who is employed by the
Company or a Designated Subsidiary Corporation.

2.07 SUBSIDIARY CORPORATION. "Subsidiary Corporation" means any
present or future corporation which would be a "subsidiary corporation" of the
Company as that term is defined in Section 424 of the Code.
<PAGE> 2
ARTICLE III
ELIGIBILITY AND PARTICIPATION

3.01 INITIAL ELIGIBILITY. All Employees are eligible to
participate hereunder, commencing on any Commencement Date.

3.02 COMMENCEMENT OF PARTICIPATION. An eligible Employee may
become a participant by completing an authorization for payroll deduction on
the form provided by the Company and filing it with the office of the Human
Resources Director of the Company prior to the Commencement Date for the
Offering (as such terms are defined below) or, in the case of the first
Offering, prior to such other enrollment deadline established by the Committee.
Payroll deductions for a participant shall commence on the applicable
Commencement Date when his authorization for a payroll deduction becomes
effective and shall end on the Exercise Date of the Offering to which such
authorization is applicable unless sooner terminated by the participant as
provided in Article VIII.

3.03 RESTRICTIONS ON PARTICIPATION. Notwithstanding any provision
of the Plan to the contrary, no Employee shall be granted an option to
participate in the Plan:

(a) if, immediately after the grant, such Employee would
own stock, and/or hold outstanding options to purchase stock, possessing 5% or
more of the total combined voting power or value of all classes of stock of the
Company or any Subsidiary Corporation. (For purposes of this paragraph, the
rules of Section 424(d) of the Code shall apply in determining stock ownership
of any Employee); or

(b) which permits his rights to purchase stock under all
employee stock purchase plans of the Company and its Subsidiary Corporations to
accrue at a rate which exceeds $25,000 in fair market value of the stock
(determined at the time such option is granted) for each calendar year in which
such option is outstanding.

3.04 LEAVE OF ABSENCE. For purposes of participation in the Plan,
a person on leave of absence shall be deemed to be an Employee for the first 90
days of such leave of absence and such Employee's employment shall be deemed to
have terminated at the close of business on the 90th day of such leave of
absence unless such Employee shall have returned to regular full-time or
part-time employment (as the case may be) prior to the close of business on
such 90th day. Termination by the Company of any Employee's leave of absence,
other than termination of such leave of absence on return to full time or part
time employment, shall terminate an Employee's employment for all purposes of
the Plan and shall terminate such Employee's participation in the Plan and
right to exercise any option.

2
<PAGE> 3
ARTICLE IV
OFFERINGS

4.01 QUARTERLY OFFERING PERIODS.

(a) Offering Periods. The Plan will be implemented by
Offerings in consecutive Offering Periods, each constituting a calendar
quarter. Such Offering Periods shall continue until the termination of the
Plan in accordance with Section 12.05. The first such Offering Period shall
begin on the later of (i) April 1, 1998, or (ii) the effective date of the
registration statement filed by the Company for the Plan with the Securities
and Exchange Commission.

(b) Commencement Date. The Commencement Date is the
first business day of an Offering Period.

4.02 REVISED OFFERING PERIODS. In the discretion of the
Committee, quarterly Offering Periods may be divided into monthly Offering
Periods or combined into annual or semi-annual Offering Periods. The maximum
number of shares available during an Offering Period under Section 10.01 shall
be adjusted appropriately.

ARTICLE V
PAYROLL DEDUCTIONS

5.01 AMOUNT OF DEDUCTION. At the time a participant files his
authorization for payroll deduction, he shall elect to have after-tax
deductions made from his pay on each payday during the Offering Period at the
rate of 1, 2, 3, 4, 5, 6, 7, 8, 9 or 10% of his base pay in effect at any such
payday, subject to a minimum of $20 per month.

5.02 PARTICIPANT'S ACCOUNT. All payroll deductions made for a
participant shall be credited to his account under the Plan. A participant may
not make any separate cash payment into such account except when on leave of
absence and then only as provided in Section 5.04.

5.03 CHANGES IN PAYROLL DEDUCTIONS. A participant may discontinue
his participation in the Plan as provided in Article VIII, but no other change
can be made during an Offering and, specifically, a participant may not alter
the amount of his payroll deductions for that Offering. The payroll deduction
form may provide that it shall continue from Offering Period to Offering Period
unless changed by a participant before the beginning of a subsequent Offering
Period.

3
<PAGE> 4
5.04 LEAVE OF ABSENCE. If a participant goes on a leave of
absence, such participant shall have the right to elect: (a) to withdraw the
balance in his or her account pursuant to Section 7.02, (b) to discontinue
contributions to the Plan but remain a participant in the Plan, or (c) remain a
participant in the Plan during such leave of absence, authorizing deductions to
be made from payments by the Company or its Subsidiary Corporations to the
participant during such leave of absence and undertaking to make cash payments
to the Plan at the end of each payroll period to the extent that amounts
payable by the Company and its Subsidiary Corporations to such participant are
insufficient to meet such participant's authorized Plan deductions.

ARTICLE VI
GRANTING OF OPTION

6.01 NUMBER OF OPTION SHARES. On the Commencement Date of each
Offering, subject to the maximum in Section 10.01, a participating Employee
shall be deemed to have been granted a qualified option to purchase on the
Exercise Date of such Offering Period (at the Purchase Price in Section 6.02)
the number of shares of the Company's Common Stock determined by dividing such
Employee's after-tax payroll deductions accumulated during such Offering Period
and retained in the participant's account as of the Exercise Date by the
applicable Purchase Price.

6.02 PURCHASE PRICE. The Purchase Price of Common Stock purchased
with payroll deductions made during an Offering Period for a participant
therein shall be the lower of: (a) 90% of the Fair Market Value of the stock
on the Commencement Date, or (b) 90% of the Fair Market Value of the stock on
the Exercise Date. The Fair Market Value of the stock for this purpose is the
closing price of the stock on the NASDAQ National Market System on that date,
or (in the event the stock was not traded on such date) the nearest prior
business day on which trading of the Company's Common Stock occurred. If the
Common Stock is not listed on the NASDAQ National Market System, Fair Market
Value shall be similarly determined with reference to the principal U.S. Stock
Exchange on which the Common Stock is listed. If the Company's Common Stock is
not admitted to trading on the NASDAQ National Market System or other U.S.
Stock Exchange on any of the aforesaid dates for which closing prices of the
stock are to be determined, then reference shall be made to the fair market
value of the stock on that date, as determined on such basis as shall be
established or specified for the purpose by the Committee.

ARTICLE VII
EXERCISE OF OPTION

7.01 AUTOMATIC EXERCISE. Unless a participant gives written
notice to the Company as hereinafter provided, his option for the purchase of
stock with payroll deductions made during any Offering will be deemed to have
been exercised automatically on the Exercise Date applicable to such Offering,
for the purchase of the number of shares of Common Stock which the accumulated
payroll deductions in his

4
<PAGE> 5
account at that time will purchase at the applicable Purchase Price, subject to
the maximum stated in Section 10.01. Any excess payroll deductions in his
account at that time not utilized to purchase Common Stock will be refunded to
him.

7.02 WITHDRAWAL OF ACCOUNT. By written notice to the Human
Resources Director of the Company, at any time prior to the Exercise Date
applicable to any Offering, a participant may elect to withdraw all of the
accumulated payroll deductions in his account at such time.

7.03 TRANSFERABILITY OF OPTION. During a participant's lifetime,
options held by such participant shall be exercisable only by that participant.

7.04 DELIVERY OF STOCK. As promptly as practicable after the
Exercise Date of each Offering, the Company will arrange for delivery of the
stock purchased upon exercise of his option to an account established for the
participant at a brokerage firm designated by the Company.

7.05 DIVIDENDS. Any cash dividends paid on Company Common Stock
held in a participant's account at a designated brokerage firm shall be
automatically reinvested in Company Common Stock as soon as administratively
practicable by purchases on the open market at prevailing market prices. Such
purchases shall not count towards the limits in Section 10.01.

ARTICLE VIII
WITHDRAWAL

8.01 IN GENERAL. As indicated in Section 7.02, a participant may
withdraw payroll deductions credited to his account under the Plan at any time
by giving written notice to the Human Resources Director of the Company. All
of the participant's payroll deductions credited to his account will be paid to
him promptly after receipt of his notice of withdrawal, and no further payroll
deductions will be made from his pay during such Offering. The Company may, at
its option, treat any attempt to borrow by an Employee on the security of his
accumulated payroll deductions as an election, under Section 7.02, to withdraw
such deductions.

8.02 EFFECT ON SUBSEQUENT PARTICIPATION. A participant's
withdrawal from any Offering will not have any effect upon his eligibility to
participate in any succeeding Offering or in any similar plan which may
hereafter be adopted by the Company.

8.03 TERMINATION OF EMPLOYMENT. Upon termination of the
participant's employment for any reason, including retirement or death (but
excluding continuation of a leave of absence for a period beyond 90 days), the
payroll deductions credited to his account will be returned to him, or, in the
case of his death, to the person or persons entitled thereto under Section
12.01.

5
<PAGE> 6
ARTICLE IX
INTEREST

9.01 NO PAYMENT OF INTEREST. No interest will be paid or allowed
on any money paid into the Plan or credited to the account of any participating
Employee.

ARTICLE X
STOCK

10.01 SHARES SUBJECT TO PLAN. The stock subject to the Plan shall
be shares of the Company's Common Stock, which may be (i) authorized but
unissued shares, (ii) treasury shares and/or (iii) shares purchased on the open
market by a broker designated by the Company. The maximum number of shares of
Common Stock which shall be issued under the Plan, subject to adjustment upon
changes in capitalization of the Company as provided in Section 12.04, shall be
Eighty Thousand (80,000) shares in each Offering plus in each Offering all
unissued shares from prior Offerings, whether offered or not, not to exceed
Three Hundred Twenty-Five Thousand (325,000) shares for all Offerings. No
participant may purchase more than Five Hundred (500) shares in any one
Offering. If the total number of shares for which options are exercised on any
Exercise Date in accordance with Article VI exceeds the maximum number of
shares for the applicable offering, the Company shall make a pro rata
allocation of the shares available for delivery and distribution in as nearly a
uniform manner as shall be practicable and as it shall determine to be
equitable, and the balance of payroll deductions credited to the account of
each participant under the Plan shall be returned to him as promptly as
possible.

10.02 PARTICIPANT'S INTEREST IN OPTION STOCK. The participant will
have no interest in stock covered by his option until such option has been
exercised.

10.03 ISSUANCE OF STOCK. Stock purchased under the Plan will be
issued in a street name and held at a brokerage firm designated by the Company,
which brokerage firm shall maintain an account for each participant reflecting
his or her allocable shares of the Common Stock and any earnings thereon. A
participant may at any time request such brokerage firm to issue a certificate
for the shares of Common Stock allocated to the participant's account.

10.04 RESTRICTIONS ON EXERCISE. The Board of Directors may, in its
discretion, require as conditions to the exercise of any option that the shares
of Common Stock reserved for issuance upon the exercise of the option shall
have been duly listed, upon official notice of issuance, upon a stock exchange,
and that either:

(a) a registration statement under the Securities Act of
1933, as amended, with respect to said shares shall be effective, or

6
<PAGE> 7
(b) the participant shall have represented at the time of
purchase, in form and substance satisfactory to the Company, that it is his
intention to purchase the shares for investment and not for resale or
distribution.

ARTICLE XI
ADMINISTRATION

11.01 APPOINTMENT OF COMMITTEE. The Board of Directors shall
appoint a committee (the "Committee") to administer the Plan, which shall
consist of either (a) the full Board of Directors or (b) no fewer than two
members of the Board of Directors.

11.02 AUTHORITY OF COMMITTEE. Subject to the express provisions of
the Plan, the Committee shall have plenary authority in its discretion to
interpret and construe any and all provisions of the Plan, to adopt rules and
regulations for administering the Plan, and to make all other determinations
deemed necessary or advisable for administering the Plan. The Committee's
determination on the foregoing matters shall be conclusive.

11.03 RULES GOVERNING THE ADMINISTRATION OF THE COMMITTEE. The
Board of Directors may from time to time appoint members of the Committee in
substitution for or in addition to members previously appointed and may fill
vacancies, however caused, in the Committee. The Committee may select one of
its members as its Chairman and shall hold its meetings at such times and
places as it shall deem advisable and may hold telephonic meetings. A majority
of its members shall constitute a quorum. All determinations of the Committee
shall be made by a majority of its members. The Committee may correct any
defect or omission or reconcile any inconsistency in the Plan, in the manner
and to the extent it shall deem desirable. Any decision or determination
reduced to writing and signed by a majority of the members of the Committee
shall be as fully effective as if it had been made by a majority vote at a
meeting duly called and held. The Committee may appoint a secretary and shall
make such rules and regulations for the conduct of its business as it shall
deem advisable.

11.04 LIMITED LIABILITY; INDEMNIFICATION. To the maximum extent
permitted by Virginia law, neither the Company, Board or Committee nor any of
its members shall be liable for any action or determination made in good faith
with respect to this Plan. In addition to such other rights of indemnification
that they may have, the members of the Board and Committee shall be indemnified
by the Company to the maximum extent permitted by Virginia law against any and
all liabilities and expenses incurred in connection with their service in
connection with the Plan in such capacity.

ARTICLE XII
MISCELLANEOUS

12.01 DESIGNATION OF BENEFICIARY. A participant may file a written
designation of a beneficiary who is to receive any cash which is in the
participant's account at the time of the participant's death. Such designation
of beneficiary may be changed by the

7
<PAGE> 8
participant at any time by written notice to the Human Resources Director of
the Company. Upon the death of a participant and upon receipt by the Company
of proof of identity and existence at the participant's death of a beneficiary
validly designated by him under the Plan, the Company shall deliver such cash
to such beneficiary. In the event of the death of a participant and in the
absence of a beneficiary validly designated under the Plan who is living at the
time of such participant's death, the Company shall deliver such cash to the
executor or administrator of the estate of the participant, or if no such
executor or administrator has been appointed (to the knowledge of the Company),
the Company, in its discretion, may deliver such cash to the spouse or to any
one or more dependents of the participant as the Company may designate. No
beneficiary shall, prior to the death of the participant by whom he has been
designated, acquire any interest in the account of the participant under the
Plan.

12.02 TRANSFERABILITY. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option
or to receive stock under the Plan may be assigned, transferred, pledged, or
otherwise disposed of in any way by the participant other than by will or the
laws of descent and distribution. Any such attempted assignment, transfer,
pledge or other disposition shall be without effect, except that the Company
may treat such act as an election to withdraw funds in accordance with Section
7.02.

12.03 USE OF FUNDS. All payroll deductions received or held by the
Company under this Plan may be used by the Company for any corporate purpose
and the Company shall not be obligated to segregate such payroll deductions.

12.04 ADJUSTMENT UPON CHANGES IN CAPITALIZATION.

(a) If, while any options are outstanding, the
outstanding shares of Common Stock of the Company have increased, decreased,
changed into, or been exchanged for a different number or kind of shares or
securities of the Company through reorganization, merger, recapitalization,
reclassification, stock split, reverse stock split or similar transaction,
appropriate and proportionate adjustments may be made by the Committee in the
number and/or kind of shares which are subject to purchase under outstanding
options and on the option exercise price or prices applicable to such
outstanding options. In addition, in any such event, the maximum number and/or
kind of shares which may be offered in the Offerings described in Articles IV
and Section 10.01 hereof shall also be proportionately adjusted. No
adjustments shall be made for stock dividends. For the purposes of this
Paragraph, any distribution of shares to shareholders in an amount aggregating
20% or more of the outstanding shares shall be deemed a stock split and any
distributions of shares aggregating less than 20% of the outstanding shares
shall be deemed a stock dividend.

(b) Upon the dissolution or liquidation of the Company,
or upon a reorganization, merger or consolidation of the Company with one or
more corporations as a result of which the Company is not the surviving
corporation, or upon a sale of

8
<PAGE> 9
substantially all of the property or stock of the Company to another
corporation, the Committee shall take such action as it deems appropriate and
equitable, which action may include, without limitation, one of the following:
(i) refund of payroll deductions for such Offering Period; (ii) shortening of
the Offering Period or (iii) providing that the holder of each option then
outstanding under the Plan will thereafter be entitled to receive at the next
Exercise Date upon the exercise of such option for each share as to which such
option shall be exercised, as nearly as reasonably may be determined, the cash,
securities and/or property which a holder of one share of the Common Stock was
entitled to receive upon and at the time of such transaction. In the event the
Plan is continued after such event, the Board of Directors shall take such
steps in connection with such transactions as the Board shall deem necessary to
assure that the provisions of this Section 12.04 shall thereafter be
applicable, as nearly as reasonably may be determined, in relation to the said
cash, securities and/or property as to which such holder of such option might
thereafter be entitled to receive.

12.05 AMENDMENT AND TERMINATION.

(a) Action by Board. The Board of Directors shall have
complete power and authority to terminate or amend the Plan; provided, however,
that the Board of Directors shall not, without the approval of the stockholders
of the Company (i) amend the Plan in a manner to cause the Plan to fail to meet
the requirements of Code Section 423 or fail to comply with Rule 16b-3 of the
Securities and Exchange Commission, or (ii) increase the maximum number of
shares which may be issued under the Plan or under any Offering (except
pursuant to Sections 4.02 and 12.04). Upon termination of the Plan during an
Offering Period, at the discretion of the Committee, cash balances in
participants accounts may be refunded or the Exercise Date may be accelerated.
Except as provided above, no termination, modification, or amendment of the
Plan may, without the consent of an Employee then having an option under the
Plan to purchase stock, adversely affect the rights of such Employee under such
option.

(b) Automatic Termination. The Plan shall automatically
terminate on the earlier of March 31, 2008, or the issuance of the maximum
number of shares available under the Plan pursuant to Section 10.01.

12.06 TAX WITHHOLDING. At the time an option is exercised or at the
time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any
time, the Company may, but shall not be obligated to, withhold from the
participant's compensation the amount necessary for the Company to meet
applicable withholding obligations.

12.07 DISQUALIFYING DISPOSITION. The Committee may require that a
participant notify the Company of any disposition of shares of Common Stock
purchased under the

9
<PAGE> 10
Plan within a period of two (2) years subsequent to the respective Commencement
Date or one (1) year from the Exercise Date.

12.08 EFFECTIVE DATE. The Plan shall become effective as of April
1, 1998, subject to approval by the holders of the majority of the Common Stock
present and represented at a special or annual meeting of the shareholders held
on or before March 31, 1999. If the Plan is not so approved, the Plan shall be
discontinued, any options which had been issued shall be considered
nonqualified options and any payroll deductions then held by the Company shall
be refunded to the respective Employees.

12.09 NO EMPLOYMENT RIGHTS. The Plan does not, directly or
indirectly, create in any Employee or class of Employees any right with respect
to continuation of employment by the Company, and it shall not be deemed to
interfere in any way with the Company's right to terminate, or otherwise
modify, an Employee's employment at any time.

12.10 EXCLUSION FROM RETIREMENT AND FRINGE BENEFIT COMPUTATION. No
portion of the award of options under this Plan, or the proceeds from the sale
of stock purchased under the Plan, shall be taken into account as "wages,"
"salary" or "compensation" for any purpose, whether in determining eligibility,
benefits or otherwise, under (i) any pension, retirement, profit sharing or
other qualified or non-qualified plan of deferred compensation, (ii) any
employee welfare or fringe benefit plan including, but not limited to, group
insurance, hospitalization, medical, and disability, or (iii) any form of
extraordinary pay including, but not limited to, bonuses, sick pay and vacation
pay.

12.11 EFFECT OF PLAN. The provisions of the Plan shall, in
accordance with its terms, be binding upon, and inure to the benefit of, all
successors of each Employee participating in the Plan, including, without
limitation, such Employee's estate and the executors, administrators or
trustees thereof, heirs and legatees, and any receiver, trustee in bankruptcy
or representative of creditors of such Employee.

12.12 EXPENSES. Expenses of administering the Plan shall be borne
by the Company except that brokerage expenses incurred in connection with the
purchase of shares shall be included as part of the cost of the shares to
participating Employees.

12.13 GOVERNING LAW. The law of the Commonwealth of Virginia will
govern all matters relating to this Plan except to the extent it is superseded
by the laws of the United States.

<PAGE> 1
EXHIBIT 11.1 COMPUTATION OF PER SHARE EARNINGS
For the Six Months Ended March 31, 1998
ADVANCED COMMUNICATION SYSTEMS, INC.
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<S> <C>
Basic:
Total basic weighted average shares outstanding ........ 6,438
======

Net income ............................................. $1,497
======

Net income per share - basic ........................... $0.23
======

Diluted:
Total basic weighted average shares outstanding ........ 6,438
Plus dilutive stock options ............................ 120
------

Total diluted average shares ........................... 6,558
======

Net income per share - diluted ......................... $0.23
======
</TABLE>

<PAGE> 1
EXHIBIT 11.2 - COMPUTATION OF PRO FORMA PER SHARE EARNINGS
For the Six Months Ended March 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<S> <C>
Basic:
Basic weighted average shares outstanding ..................... 3,767

Stock issued to satisfy S corporation
distribution in excess of preceding twelve
months earnings based on the initial public
offering price per share...................................... 479
------

Pro forma total basic weighted average shares outstanding...... 4,246
======

Pro forma net income........................................... $774
======

Pro forma net income per share - basic......................... $0.18
======

Diluted:
Pro forma total basic weighted average shares outstanding...... 4,246
Plus dilutive stock options.................................... 100
------

Pro forma total diluted average shares......................... 4,346
======

Pro forma net income per share - diluted....................... $0.18
======
</TABLE>

<PAGE> 1
EXHIBIT 11.3 - COMPUTATION OF PRO FORMA PER SHARE EARNINGS
For the Year Ended September 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<S> <C>
Basic:
Basic weighted average shares outstanding ..................... 4,285

Stock issued to satisfy S corporation
distribution in excess of preceding twelve
months earnings based on the initial public
offering price per share...................................... 377
------

Pro forma total basic weighted average shares outstanding...... 4,682
======

Pro forma net income........................................... $915
======

Pro forma net income per share - basic......................... $0.20
======

Diluted:
Pro forma total basic weighted average shares outstanding...... 4,682
Plus dilutive stock options.................................... 85
------

Pro forma total diluted average shares......................... 4,767
======

Pro forma net income per share - diluted....................... $0.19
======
</TABLE>

<PAGE> 1
EXHIBIT 11.4 - COMPUTATION OF PRO FORMA PER SHARE EARNINGS
For the Year ended September 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<S> <C>
Basic:
Basic weighted average shares outstanding ..................... 3,733

Stock issued to satisfy S corporation
distribution in excess of preceding twelve
months earnings based on the initial public
offering price per share...................................... 479
------

Pro forma total basic weighted average shares outstanding...... 4,212
======

Pro forma net income........................................... $1,162
======

Pro forma net income per share - basic......................... $0.28
======

Diluted:
Pro forma total basic weighted average shares outstanding...... 4,212
Plus dilutive stock options.................................... 149
------

Pro forma total diluted average shares......................... 4,361
======

Pro forma net income per share - diluted....................... $0.27
======
</TABLE>

<PAGE> 1
EXHIBIT 21.1

Advanced Management,Incorporated,incorporated under the laws of Virginia.

Fairfax Communications Ltd.,a private Limted Company organized under the laws
of England.

Integrated Systems Control,Inc.,incorporated under the laws of Virginia.

RF Microsystems,Inc.,incorporated under the laws of California.

<PAGE> 1
EXHIBIT 23.2

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our report
included in this registration statement of our report dated November 7, 1997,
included in Advanced Communication Systems, Inc.'s Form 10-K for the year ended
September 30, 1997, and to all references to our Firm included in this
registration statement.

/s/ ARTHUR ANDERSEN LLP

Washington, D.C.
April 23, 1998

<PAGE> 1
EXHIBIT 23.3

[KELLER BRUNER & COMPANY, L.L.C. LETTERHEAD]

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our reports
and to all references to our Firm included in or made part of this Registration
Statement.

/s/ KELLER BRUNER & COMPANY, L.L.C.

Bethesda, Maryland
April 24, 1998

<PAGE> 1
EXHIBIT 23.4

Advanced Communication Systems, Inc.
10089 Lee Highway
Fairfax, VA 22030

As independent public accountants, we hereby consent to the use of our report
dated January 14, 1998 (and to all references to our Firm) included in or made a
part of this registration statement.

/s/ FAILES AND ASSOCIATES, P.C.

Failes and Associates, P.C.
Virginia Beach, Virginia
April 22, 1998

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 802
<SECURITIES> 0
<RECEIVABLES> 28,061
<ALLOWANCES> 0
<INVENTORY> 677
<CURRENT-ASSETS> 30,345
<PP&E> 8,454
<DEPRECIATION> 3,297
<TOTAL-ASSETS> 56,788
<CURRENT-LIABILITIES> 12,209
<BONDS> 0
0
0
<COMMON> 95
<OTHER-SE> 18,860
<TOTAL-LIABILITY-AND-EQUITY> 56,788
<SALES> 32,550
<TOTAL-REVENUES> 32,550
<CGS> 20,990
<TOTAL-COSTS> 29,811
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 378
<INCOME-PRETAX> 2,376
<INCOME-TAX> 879
<INCOME-CONTINUING> 1,497
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,497
<EPS-PRIMARY> 0.23
<EPS-DILUTED> 0.23

</TABLE>