EXHIBIT 99(b)
ADVANCED COMMUNICATION SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The accompanying unaudited pro forma condensed consolidated financial statements
give effect to the acquisition of RF Microsystems, Inc. ("RFM") as described
below.
Effective August 26, 1997, Advanced Communication Systems, Inc. ("ACS") acquired
all of the outstanding common stock of RFM in exchange for cash consideration of
$5,000,000. The acquisition has been accounted for as a purchase, and
accordingly, the total purchase price has been allocated to the acquired assets
and liabilities assumed at their estimated fair values in accordance with the
provisions of Accounting Principles Board Opinion No. 16. The estimated excess
of the purchase price over the net assets acquired is being carried as goodwill
and will be amortized over its estimated life of 15 years. The charge of
$1,910,000 resulting from the write-off of purchased in-process research and
development cost has been excluded from the pro forma condensed consolidated
statements of operations.
RFM's fiscal year ended is January 31, while the fiscal year ended of ACS is
September 30. The unaudited pro forma condensed consolidated balance sheet of
ACS as of June 30, 1997, has been prepared by combining the consolidated balance
sheet of ACS as of June 30, 1997, with the balance sheet of RFM as of June 30,
1997. The unaudited pro forma condensed consolidated statement of operations for
the fiscal year ended September 30, 1996, has been prepared by combining ACS's
consolidated statement of operations for the fiscal year ended September 30,
1996, with RFM's statement of operations for the twelve months ended December
31, 1996. The unaudited pro forma condensed consolidated statement of operations
for the nine months ended June 30, 1997, has been prepared by combining ACS's
consolidated statement of operations for the nine months ended June 30, 1997,
with RFM's statement of operations for the nine months ended June 30, 1997. ACS
and RFM, on a combined basis, are referred to herein as the "Company".
The unaudited pro forma condensed consolidated balance sheet as of June 30,
1997, has been prepared to reflect the acquisition of RFM as if it had occurred
on June 30, 1997. The unaudited pro forma condensed consolidated statements of
operations, with appropriate adjustments, have been prepared to reflect the
acquisition of RFM as if it had occurred at the beginning of the periods
presented.
The unaudited pro forma condensed consolidated financial statements have been
prepared by the Company's management and should be read in conjunction with the
historical financial statements of ACS and RFM and the related notes hereto. The
unaudited pro forma condensed consolidated statements of operations are not
necessarily indicative of the results of operations that may have actually
occurred had the acquisition occured on the dates specified, or of the future
results of the combined Company. The pro forma adjustments are based upon
available information and certain adjustments the management of ACS believes
are reasonable. In the opinion of management, all adjustments have been made
that are necessary to present fairly the unaudited condensed consolidated
financial statements.
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ADVANCED COMMUNICATION SYSTEMS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(IN THOUSANDS)
(UNAUDITED)
ACS RFM PRO FORMA
HISTORICAL HISTORICAL(A) ADJUSTMENTS COMBINED
---------- -------------- -------------- ------------
ASSETS
Current assets:
Cash and cash equivalents $1,916 $1 $5,413 (F), (G) $7,330
Contract receivables 9,820 1,537 - 11,357
Other receivables 204 - - 204
Prepaid expenses 767 25 - 792
---------- -------------- -------------- ------------
Total current assets 12,707 1,563 5,413 19,683
---------- -------------- -------------- ------------
Property and equipment, net 792 284 1,076
Other assets:
Notes receivable, stockholders 483 - - 483
Other related party receivables 368 - - 368
Software development costs, net 554 - - 554
Other assets 227 203 1,628 (B) 2,058
---------- -------------- -------------- ------------
Total other assets 1,632 203 1,628 3,463
---------- -------------- -------------- ------------
Total assets $15,131 $2,050 $7,041 $24,222
========== ============== ============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $4,845 $184 - $5,029
Accrued expenses 6,041 314 - 6,355
Billings in excess of revenue 387 - - 387
Deferred income tax liability 72 - - 72
Payable to stockholders 3,887 - (3,887) (F) 0
Advances from parent - 1,281 (1,281) (E) 0
---------- -------------- -------------- ------------
Total current liabilities 15,232 1,779 (5,168) 11,843
Total stockholders' equity (deficit) (101) 271 (1,910) (C) 12,379
(271) (D)
14,390 (F)
---------- -------------- -------------- ------------
Total liabilities and stockholders' equity $15,131 $2,050 $7,041 $24,222
========== ============== ============== ============
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
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ADVANCED COMMUNICATION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET
JUNE 30, 1997
(A) Information obtained from the June 30, 1997 unaudited balance sheet of RFM
prepared from internal accounting records.
(B) Reflects goodwill originating from the purchase of all outstanding stock of
RFM. Represents the allocation of the excess purchase price using the purchase
method of accounting for the transaction after adjusting the assets acquired and
the liabilities assumed to their respective fair values.
(C) Reflects the one-time write-off of in-process research and development
identified in the purchase price allocation. The charge will be taken in the
quarter and fiscal year ended September 30, 1997.
(D) Eliminates the equity of RFM upon consolidation with ACS.
(E) Eliminates the intercompany obligations that were not assumed in the
acquisition.
(F) Reflects net proceeds of ACS's initial public offering on July 2, 1997, and
the S Corporation distribution made.
(G) Reflects consideration paid to effect the acquisition using proceeds from
the initial public offering.
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ADVANCED COMMUNICATION SYSTEMS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
ACS RFM PRO FORMA
HISTORICAL HISTORICAL (A) ADJUSTMENTS (E) COMBINED
----------- --------------- ----------------- -------------
Revenues $35,510 $4,614 - $40,124
Direct Costs 25,179 3,237 - 28,416
Indirect, general and administrative expenses 8,066 1,150 69 (B) 9,285
----------- --------------- ----------------- -------------
Income from operations 2,265 227 (69) 2,423
Interest expense (136) - - (136)
Other income, net 60 - - 60
----------- --------------- ----------------- -------------
Income before taxes 2,189 227 (69) 2,347
Provision for income taxes 33 92 (27) (C) 98
----------- --------------- ----------------- -------------
Net income $2,156 $135 ($42) $2,249
=========== =============== ================= =============
Pro forma statements of operations data: (Note D)
Income before taxes as reported $2,189 $227 ($69) $2,347
Pro forma tax provision 854 92 (27) (C) 919
----------- --------------- ----------------- -------------
Pro forma net income $1,335 $135 ($42) $1,428
=========== =============== ================= =============
Pro forma net income per share $0.31 - - $0.33
=========== =============== ================= =============
Pro forma weighted average shares outstanding 4,378 - - 4,378
=========== =============== ================= =============
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
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ADVANCED COMMUNICATION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 30, 1997
(A) Information obtained from the unaudited internal accounting records of RFM
for the nine months ended June 30, 1997.
(B) Amortization of goodwill on a straight line basis over fifteen years.
(C) Reduction of federal and state income tax expense resulting from the
additional amortization expense.
(D) Prior to June 25, 1997, ACS elected to be treated as an S Corporation and
was not subject to federal and state income taxes. The pro forma statement of
operations data reflects federal and state income taxes based on applicable
rates as if ACS had not elected S Corporation status for the periods indicated.
(E) The statement of operations presentation excludes the effect of a $1,910,000
charge to operations taken at the time of acquisition for purchased research and
development costs related to acquired technology that has not reached
technological feasibility and that has no alternative future use. The statement
of operations presentation also excludes consideration of integration costs and
potential cost savings because ACS has not completed its comprehensive review of
RFM's business, operations, capitalization and management.
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ADVANCED COMMUNICATION SYSTEMS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED SEPTEMBER 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
ACS RFM PRO FORMA
HISTORICAL HISTORICAL (A) ADJUSTMENTS (E) COMBINED
-------------- -------------- ---------------- -------------
Revenues $31,665 $5,942 - $37,607
Direct Costs 19,307 3,950 - 23,257
Indirect, general and administrative expenses 10,253 1,683 92 (B) 12,028
-------------- -------------- -------------- -------------
Income from operations 2,105 309 (92) 2,322
Interest expense (257) - - (257)
Other income, net 57 - - 57
-------------- -------------- -------------- -------------
Income before taxes 1,905 309 (92) 2,122
Provision for income taxes 0 121 (36) (C) 85
-------------- -------------- -------------- -------------
Net income $1,905 $188 ($56) $2,037
============== ============== ============== =============
Pro forma statements of operations data: (Note D)
Income before taxes as reported $1,905 $309 ($92) $2,122
Pro forma tax provision 743 121 (36) (C) 828
-------------- -------------- -------------- -------------
Pro forma net income $1,162 $188 ($56) $1,294
============== ============== ============== =============
Pro forma net income per share $0.27 - $0.00 $0.30
============== ============== ============== =============
Pro forma weighted average shares outstanding 4,361 - - 4,361
============== ============== ============== =============
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
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ADVANCED COMMUNICATION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1996
(A) Information obtained from the unaudited internal accounting records of RFM
for the twelve months ended December 31, 1996.
(B) Amortization of goodwill on a straight-line basis over fifteen years.
(C) Reduction of federal and state income tax expense resulting from the
additional amortization expense.
(D) Prior to June 25, 1997, ACS elected to be treated as an S Corporation and
was not subject to federal and state income taxes. The pro forma statement of
operations data reflects federal and state income taxes based on applicable
rates as if ACS had not elected S Corporation status for the periods indicated.
(E) The statement of operations presentation excludes the effect of a $1,910,000
charge to operations taken at the time of acquisition for purchased research and
development costs related to acquired technology that has not reached
technological feasibility and that has no alternative future use. The statement
of operations presentation also excludes consideration of integration costs and
potential cost savings because ACS has not completed its comprehensive review of
RFM's business, operations, capitalization and management.
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