EX-99 3 ex993csi.txt EX 99.3 PRO FORMA FINANCIAL INFORMATION EXHIBIT 99.3 ESSEX CORPORATION AND COMPUTER SCIENCE INNOVATIONS, INC. PRO FORMA FINANCIAL INFORMATION (UNAUDITED) INTRODUCTION Pursuant to an Agreement and Plan of Merger dated as of April 28, 2004 by and among Essex Corporation, its wholly-owned subsidiary ("Merger Sub"), Computer Science Innovations, Inc., a Florida corporation ("CSI"), and Computer Science Innovations Employee Stock Ownership Plan, Merger Sub was merged with and into CSI with CSI as the surviving corporation (the "Merger"). The merger became effective as of April 30, 2004. Pro forma financial information, prepared as if the transaction was consummated on December 29, 2002 (the beginning of the Company's 52-week fiscal year), is presented as follows. 1. Pro Forma Consolidated Statement of Operations for the Fiscal Year Ended December 28, 2003 (unaudited) 2. Pro Forma Consolidated Statement of Operations for the quarterly period ended March 28, 2004 (unaudited) 3. Pro Forma Consolidated Balance Sheet as of March 28, 2004 (unaudited) 4. Notes to Pro Forma Financial Information (unaudited) ESSEX CORPORATION UNAUDITED and COMPUTER SCIENCE INNOVATIONS, INC. PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE FIFTY-TWO WEEK FISCAL YEAR ENDED DECEMBER 28, 2003 UNAUDITED
Pro Forma HISTORICAL Adjustments Pro Forma ESSEX CSI TOTAL & Eliminations Adjusted Total -------------- ------------- ------------- --------------- -------------- Revenues $ 16,286,210 $ 8,170,889 $ 24,457,099 $ - $ 24,457,099 Cost of goods sold and services provided (10,388,831) (4,501,860) (14,890,691) - (14,890,691) ------------- ------------- ------------- ------------- ------------- Gross Margin 5,897,379 3,669,029 9,566,408 - 9,566,408 Selling, general and administrative expenses (4,905,475) (2,577,712) (7,483,187) (12,000) E1 (7,495,187) Research and development (403,051) - (403,051) - (403,051) Amortization of other intangibles (380,608) - (380,608) (526,000) E1 (906,608) ------------- ------------- ------------- ------------- ------------- Operating Profit (Loss) 208,245 1,091,317 1,299,562 (538,000) 716,562 Interest (expense) income, net (68,653) 4,021 (64,632) - (64,632) ------------- ------------- ------------- ------------- ------------- Income (Loss) Before Income Taxes 139,592 1,095,338 1,234,930 (538,000) 696,930 Provision for income taxes - 406,100 406,100 (406,100) E2 - ------------- ------------- ------------- ------------- ------------- Net Income (Loss) $ 139,592 $ 689,238 $ 828,830 (131,900) D3 $ 696,930 ============= ============= ============= ============= ============= Basic Earnings (Loss) Per Common Share $ 0.02 $ 0.08 ============= ============= Diluted Earnings (Loss) Per Common Share $ 0.01 $ 0.07 ============= ============= Weighted Average Number of Essex Shares Outstanding Basic 8,706,498 8,706,498 Effect of dilution- Stock Options 1,091,456 1,091,456 Diluted 9,797,954 9,797,954 ============= ============= The accompanying notes are an integral part of these statements.
ESSEX CORPORATION UNAUDITED and COMPUTER SCIENCE INNOVATIONS, INC. PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THIRTEEN WEEK PERIOD ENDED MARCH 28, 2004 UNAUDITED
Pro Forma HISTORICAL Adjustments Pro Forma ESSEX CSI TOTAL & Eliminations Adjusted Total -------------- ------------- ------------- --------------- -------------- Revenues: Services and products $ 8,268,551 $ 1,523,818 $ 9,792,369 $ - $ 9,792,369 Purchsed hardware 5,972,554 - 5,972,554 - 5,972,554 ------------- ------------- ------------- ------------- ------------- Total 14,241,105 1,523,818 15,764,923 - 15,764,923 Cost of goods sold and services provided Services and products (6,135,003) (965,674) (7,100,677) - (7,100,677) Purchsed hardware (5,860,082) - (5,860,082) - (5,860,082) ------------- ------------- ------------- ------------- ------------- Total (11,995,085) (965,674) (12,960,759) - (12,960,759) Gross Margin 2,246,020 558,144 2,804,164 - 2,804,164 Selling, general and administrative expenses (1,834,290) (625,266) (2,459,556) (3,000) E1 (2,462,556) Research and development (140,459) - (140,459) (69,000) E1 (209,459) Amortization of other intangibles (35,141) - (35,141) - (35,141) ------------- ------------- ------------- ------------- ------------- Operating Profit (Loss) 236,130 (67,122) 169,008 (72,000) 97,008 Interest (expense) income, net 75,721 1,065 76,786 - 76,786 ------------- ------------- ------------- ------------- ------------- Income (Loss) Before Income Taxes 311,851 (66,057) 245,794 (72,000) 173,794 Provision for (benefit from) income taxes - (24,500) (24,500) 24,500 E2 - ------------- ------------- ------------- ------------- ------------- Net Income (Loss) $ 311,851 $ (41,557) $ 270,294 (96,500) D3 $ 173,794 ============= ============= ============= ============= ============= Basic Earnings (Loss) Per Common Share $ 0.02 $ 0.01 ============= ============= Diluted Earnings (Loss) Per Common Share $ 0.02 $ 0.01 ============= ============= Weighted Average Number of Essex Shares Outstanding Basic 15,006,168 15,006,168 Effect of dilution- Stock Options 1,407,023 1,407,023 Diluted 16,413,191 16,413,191 ============= ============= The accompanying notes are an integral part of these statements.
ESSEX CORPORATION UNAUDITED AND COMPUTER SCIENCE INOVATIONS, INC. PRO FORMA CONSOLIDATED BALANCE SHEET AS OF MARCH 28, 2004 UNAUDITED
PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA ESSEX CSI TOTAL & ELIMINATIONS ADJUSTED TOTAL ------------- ------------- ------------ -------------- -------------- ASSETS ------ CURRENT ASSETS Cash $ 29,512,904 $ 1,737,120 $ 31,250,024 $ (8,225,000) D1 $ 21,425,024 (1,600,000) D4 Accounts receivable, net 9,858,983 1,073,933 10,932,916 - 10,932,916 Refundable income taxes - 95,360 95,360 406,100 E2 476,960 (24,500) E2 Prepayments and other 529,074 23,687 552,761 1,087,876 D1 1,640,637 ------------- ------------- ------------ ------------- ------------ Total Current Assets 39,900,961 2,930,100 42,831,061 (8,355,524) 34,475,537 ------------- ------------- ------------ ------------- ------------ PROPERTY AND EQUIPMENT Computers and special equipment 1,327,126 - 1,327,126 24,000 D1 1,351,126 Furniture, equipment and other 258,987 642,716 901,703 - 901,703 ------------- ------------- ------------ ------------- ------------ 1,586,113 642,716 2,228,829 24,000 2,252,829 Accumulated depreciation and amortization (1,159,759) (504,682) (1,664,441) (12,000) E1 (1,679,441) (3,000) E1 ------------- ------------- ------------ ------------- ------------ 426,354 138,034 564,388 9,000 573,388 ------------- ------------- ------------ ------------- ------------ OTHER ASSETS Patents, net 327,231 - 327,231 - 327,231 Goodwill 2,998,000 - 2,998,000 5,506,000 D1 8,504,000 Other intangibles 15,000 - 15,000 724,000 D1 144,000 (526,000) E1 (69,000) E1 Investment in CSI - - - 8,225,000 D1 - (8,225,000) D2 Other 34,056 15,429 49,485 - 49,485 ------------- ------------- ----------- ------------- ------------ 3,374,287 15,429 3,389,716 5,635,000 9,024,716 ------------- ------------- ----------- ------------- ------------ TOTAL ASSETS $ 43,701,602 $ 3,083,563 $46,785,165 $ (2,711,524) $ 44,073,641 ============= ============= =========== ============= ============
ESSEX CORPORATION UNAUDITED AND COMPUTER SCIENCE INNOVATIONS, INC. PRO FORMA CONSOLIDATED BALANCE SHEET AS OF MARCH 28, 2004 UNAUDITED
PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA ESSEX CSI TOTAL & ELIMINATIONS ADJUSTED TOTAL ------------- ------------- ----------- -------------- -------------- LIABILITIES AND STOCKHOLDERS' EQUITY AUDITED UNAUDITED CURRENT LIABILITIES Accounts payable $ 3,642,948 $ 37,819 $ 3,680,767 $ - $ 3,680,767 Accrued wages and vacation 807,304 465,025 1,272,329 - 1,272,329 Accrued retirement 162,511 - 162,511 - 162,511 Billings in excess of costs 425,000 4,559 429,559 - 429,559 Deferred income taxes - 17,000 17,000 - 17,000 Other accrued expenses 302,705 76,036 378,741 - 378,741 ------------- ------------- ----------- -------------- -------------- Total Current Liabilities 5,340,468 600,439 5,940,907 - 5,940,907 ------------- ------------- ----------- -------------- -------------- SHAREHOLDERS' EQUITY Common stock (Note C) 50,308,053 35,390 50,343,443 (30,390) D2 50,308,053 (5,000) D4 Additional paid-in capital 2,000,000 1,172,437 3,172,437 7,341,876 D1 2,000,000 (7,341,876) D2 (1,172,437) D4 Accumulated retained earnings (deficit) (13,946,919) 1,548,467 (12,398,452) (96,500) D3 (14,175,319) (131,900) D3 (1,125,904) D2 (422,563) D4 Less: Treasury stock - (273,170) (273,170) 273,170 D2 - ------------- ------------- ----------- -------------- -------------- Total Shareholders' Equity 38,361,134 2,483,124 40,844,258 (2,711,524) 38,132,734 ------------- ------------- ----------- -------------- -------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 43,701,602 $ 3,083,563 $46,785,165 $ (2,711,524) $ 44,073,641 ============= ============= =========== ============== ============== The accompanying notes are an integral part of this statement.
ESSEX CORPORATION AND COMPUTER SCIENCE INNOVATIONS, INC. NOTES TO PRO FORMA FINANCIAL INFORMATION (UNAUDITED) Note A: Historical Information The financial information shown for Essex Corporation (Company) represents the information from the Company's 2003 Form 10-K for the fiscal year ended December 28, 2003 and from the 2004 Form 10-Q for the quarterly period ended March 28, 2004. The financial information for Computer Science Innovations, Inc. (CSI) was derived from its audited information for its fiscal years ended March 31, 2004 and 2003 as well as unaudited internal financial information for the three month periods ended March 31, 2004 and 2003. Note B: Agreement to acquire Computer Science Innovations, Inc. (CSI) Effective as of April 30, 2004, under an Agreement and Plan of Merger between the Company and CSI, all of the outstanding stock of CSI was acquired by Essex. Under the terms of the Agreement, the Company paid $8,125,000 in cash. Note C: Common Stock Essex common stock is no par value with 25 million shares authorized. For historical purposes, there were 7,790,398 shares issued and outstanding at December 29, 2002 and 15,241,257 at December 28, 2003. There were 9,797,954 and 16,413,191 diluted weighted average common shares outstanding during fiscal 2003 and in the first quarter of 2004, respectively. Note D: Pro Forma Consolidated Balance Sheet The pro forma consolidated balance sheet has been prepared on the basis of the following assumptions: (1) Essex paid $8.125 million from the proceeds of a secondary offering that was completed in December 2003. In addition, the Company incurred approximately $100,000 of expenses in connection with this transaction. Since this transaction is accounted for as a purchase, the combined entities recognized intangible assets of approximately $6,230,000. Of this amount, approximately $642,000 was assigned to amortizing items such as contracts backlog and proposals. There was approximately $82,000 assigned to items such as employment agreements and intellectual property. The remaining amount of approximately $5,506,000 is goodwill. Such intangible assets and goodwill are recognized as adjustments on the balance sheet. An additional $24,000 was recorded as a fair value adjustment to the property and equipment acquired. The Company recorded a pro forma adjustment of $1,088,000 to prepayments and other to recognize the increase in the net book value between the March 28, 2004 pro forma balance sheet date and the actual date of the merger, April 30, 2004. (2) In the stockholders' equity section, the CSI equity balances as of the date of acquisition have been eliminated. ESSEX CORPORATION AND COMPUTER SCIENCE INNOVATIONS, INC. NOTES TO PRO FORMA FINANCIAL INFORMATION (UNAUDITED) (3) The pro forma income statement adjustment results for the fiscal year ended December 28, 2003 and for the quarter ended March 28, 2004 are carried forward as adjustments to retained deficit. (4) On April 30, 2004, CSI redeemed certain shares of its stock in connection with the acquisition for cash of approximately $1.6 million. Note E: Pro Forma Consolidated Statements of Operations (Unaudited) The Pro Forma Consolidated Statements of Operations have been prepared on the basis of the following assumptions: (1) The amortizable intangible assets of approximately $724,000 were primarily related to contract backlog and proposals which have a short (backlog less than one year, proposals average approximately one year) life. Backlog was completely amortized in 2003 and proposals amortized 50% in 2003 and 25% in the first quarter of 2004. Property and equipment amortization of the fair value adjustment was $12,000 in 2003 and $3,000 in the first quarter of 2004. (2) Income tax benefit has been recognized or eliminated on the basis that the entities will file a consolidated return. Essex has net operating loss carryforwards which are expected to be available to offset taxable operating income generated from this transaction. At this time, Essex fully adjusts its deferred tax asset valuation account to eliminate the recognition of its deferred tax asset. The CSI audited Statement of Income for its fiscal year ended March 31, 2004 was adjusted to be included in the Pro Forma Consolidated Statement of Operations for the fifty-two week fiscal year ended December 28, 2003 to conform to the Essex fiscal year. The CSI statement of income was adjusted to exclude the information for the period January 1 to March 31, 2004 and to include the comparable period for 2003. The Company also reclassified certain CSI overhead expenses from cost of goods sold and services provided to selling, general and administrative expenses in order to conform to the Company's historical financial statement presentation.