8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K/A

Amendment No. 1 to

CURRENT REPORT

Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

Date of Report: May 13, 2005

(Date of earliest Event Reported: February 28, 2005)

ESSEX CORPORATION

(Exact name of Registrant as specified in its charter)

Commission File No. 0-10772

Virginia	54-0846569
(State or other jurisdiction of incorporation or organization)	(IRS Employer ID No.)

9150 Guilford Road Columbia, Maryland	21046-2306
(Address of principal executive office)	(Zip Code)

Registrant’s telephone number, including area code: (301) 939-7000

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ESSEX CORPORATION

Amendment No. 1 to Current Report on Form 8-K

We hereby amend our Current Report on Form 8-K filed on March 4, 2005, which announced the completion on February 28, 2005 of our acquisition of The Windermere Group, LLC, (“Windermere”) and, thereby Windermere’s wholly owned, active subsidiaries, Windermere HDS, LLC, and Windermere Information Technology Systems, LLC through the acquisition of all of the issued and outstanding ownership and membership interests from the Susan Katharine Tate Burrowbridge, LLC, the Elizabeth Tate Winters, LLC, and the Andrew Patrick Tate, LLC, (each a “Seller” and collectively the “Sellers”). The purpose of this amendment is to file The Windermere Group, LLC & Subsidiaries Consolidated Financial Statements as of December 31, 2004 and 2003, together with Report of Independent Auditors and Pro Forma Financial Information (unaudited) for the resulting organization.

Item 1.01 Entry into a Material Definitive Agreement.

The disclosure under Item 2.01 of this current report is also responsive to this Item 1.01 and is incorporated herein by reference.

Item 2.01 Completion of Acquisition or Disposition of Assets

Pursuant to a Purchase Agreement By and Among Essex Corporation, The Windermere Group, LLC,; Windermere HDS, LLC,; Windermere Information Technology Systems, LLC and the Sellers of The Windermere Group, LLC dated and effective February 28, 2005, Essex Corporation acquired all the issued and outstanding ownership and membership interests in Windermere (the “Acquisition”). The terms of the Acquisition are described in Registrant’s original report on Form 8-K filed with the Commission on March 4, 2005.

Item 9.01 Financial Statements and Exhibits

(a) Financial statements of businesses acquired.

(1) Windermere Group, LLC & Subsidiaries Consolidated Financial Statements for the years ended December 31, 2004 and 2003, together with Report of Independent Auditors are attached hereto as Exhibit 99.2 and are incorporated herein by reference.

(b) Pro forma financial information.

Pro Forma Financial Information (unaudited) presenting the effect of the Acquisition as if it had been completed on December 29, 2003 (the beginning of the Company’s fiscal year) for the pro forma consolidated statements of operations are attached hereto as Exhibit 99.3 and are incorporated herein by reference. A pro forma consolidated balance sheet is not presented since the transaction is reflected in the Registrant’s interim consolidated balance sheet filed as part of its Form 10-Q for the quarter ended March 31, 2005, which was filed on May 10, 2005.

2

ESSEX CORPORATION

(c) Exhibits –

Exhibit 2.1	Purchase Agreement By and Among Essex Corporation, The Windermere Group, LLC,; Windermere HDS, LLC,; Windermere Information Technology Systems, LLC and the Sellers of The Windermere Group, LLC dated February 28, 2005 (excluding Exhibits and Schedules), (incorporated by reference from Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed March 4, 2005)
Exhibit 10.1	Promissory Note and Loan Agreement, dated January 6, 2005, previously filed (incorporated by reference from Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed March 4, 2005).
Exhibit 10.2	Amendment to the Note and Loan Agreement, dated January 7, 2005, previously filed (incorporated by reference from Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed March 4, 2005).
Exhibit 23.1	Consent of Goodman & Company, L.L.P., Independent Registered Public Accounting Firm for The Windermere Group, LLC.
Exhibit 99.1	Press release dated March 1, 2005 (incorporated by reference from Exhibit 99.1 to the Registrant’s Current Report on Form 8-K filed March 4, 2005)
Exhibit 99.2	Windermere Group, LLC & Subsidiaries Consolidated Financial Statements for the years ended December 31, 2004 and 2003, together with Report of Independent Auditors
Exhibit 99.3	Pro Forma Financial Information (unaudited)
	•      Consolidated Statement of Operations for the year ended December 31, 2004 •      Consolidated Statement of Operations for the quarter ended March 31, 2005

3

ESSEX CORPORATION

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	ESSEX CORPORATION
	(Registrant)
	/s/ Lisa G. Jacobson
DATE: May 13, 2005	Lisa G. Jacobson
	Executive Vice President & Chief Financial Officer

4

ESSEX CORPORATION

EXHIBIT INDEX

Exhibit Number	Description and Method of Filing
Exhibit 2.1	Purchase Agreement By and Among Essex Corporation, The Windermere Group, LLC, Windermere HDS, LLC, Windermere Information Technology Systems, LLC and the Sellers of The Windermere Group, LLC dated February 28, 2005 (excluding Exhibits and Schedules), previously filed.
Exhibit 10.1	Promissory Note and Loan Agreement, dated January 6, 2005, previously filed.
Exhibit 10.2	Amendment to the Note and Loan Agreement, dated January 7, 2005, previously filed.
Exhibit 23.1	Consent of Goodman & Company, L.L.P., Independent Registered Public Accounting Firm for The Windermere Group, LLC. filed herewith.
Exhibit 99.1	Press Release of the Corporation dated March 1, 2005, previously filed.
Exhibit 99.2	Windermere Group, LLC & Subsidiaries Consolidated Financial Statements for the years ended December 31, 2004 and 2003, together with Report of Independent Auditors filed herewith.
Exhibit 99.3	Pro Forma Financial Information (unaudited) filed herewith.

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements of Essex Corporation on Form S-8 dated September 27, 2004, September 11, 2003, July 19, 2001, March 16, 2001, and May 11, 2000, and on Form S-3 dated May 18, 2001 (SEC File #333-61200), July 25, 2003 (SEC File #333-104819), and November 9, 2004 (SEC File #333-120137) (the “Registration Statements”), of our report dated February 18, 2005(except for the second through fourth paragraphs of Note 14, as to which the date is February 28, 2005, and the fifth paragraph of Note 14, as to which the date is March 1, 2005), on our audits of the consolidated financial statements of The Windermere Group, LLC and Subsidiaries as of and for the years ended December 31, 2004 and 2003, which report appears in the Essex Corporation Form 8-K to be filed on or about May 13, 2005.

/s/ Goodman & Company, L.L.P.

McLean, Virginia

May 13, 2005

EX-99.2

EXHIBIT 99.2

Windermere Group, LLC & Subsidiaries

Consolidated Financial Statements for the years ended December 31, 2004 and 2003,

together with Report of Independent Auditors

Consolidated

Financial Statements

Years Ended

December 31, 2004 and 2003

The Windermere Group, LLC & Subsidiaries

The Windermere Group, LLC & Subsidiaries

Contents

	Page
Report of Independent Auditors	1
Financial Statements
Consolidated Balance Sheets	2
Consolidated Statements of Income	3
Consolidated Statements of Changes in Equity	4
Consolidated Statements of Cash Flows	5
Notes to Consolidated Financial Statements	6 – 13

Report of Independent Auditors

Members

The Windermere Group, LLC & Subsidiaries

We have audited the accompanying consolidated balance sheets of The Windermere Group, LLC & Subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of income, changes in equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the management of The Windermere Group, LLC & Subsidiaries. Our responsibility is to express an opinion of these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards required that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimated made by management, as well as evaluating the overall consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Windermere Group, LLC & Subsidiaries as of December 31, 2004 and 2003, and the results of their consolidated operations and their consolidated cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ Goodman & Company, L.L.P.

McLean, Virginia

February 18, 2005, except for the

second through fourth paragraphs of Note 14,

as to which the date is February 28, 2005,

and the fifth paragraph of Note 14,

as to which the date is March 1, 2005.

1

The Windermere Group, LLC & Subsidiaries

Consolidated Balance Sheets

December 31,	2004		2003
Assets
Current assets
Cash and cash equivalents	$	414,044	$	188,673
Accounts receivable - net		13,377,524		11,748,336
Notes receivable - net		10,000		25,000
Prepaid expenses and other current assets		545,037		504,211
Total current assets		14,346,605		12,466,220
Property and equipment - net		1,465,549		1,336,699
Other assets
Goodwill - net		516,625		591,625
Deposits		104,079		64,166
Financing costs - net		23,509		39,356
	$	16,456,367	$	14,498,066
Liabilities and Members’ Equity
Current liabilities
Lines of credit	$	7,532,358	$	3,756,745
Accounts payable and accrued expenses		4,989,976		3,493,583
Billings in excess of costs and profit		213,629		1,455,050
Long-term debt - current portion		18,757		440,046
Total current liabilities		12,754,720		9,145,424
Long-term liabilities
Long-term liabilities - less current portion		12,579		1,597,327
Total liabilities		12,767,299		10,742,751
Members’ equity		3,689,068		3,755,315
	$	16,456,367	$	14,498,066

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

2

The Windermere Group, LLC & Subsidiaries

Consolidated Statements of Income

December 31,	2004			2003
Contract revenue	$	64,739,948		$	47,700,973
Cost of contract revenue		60,353,717			43,796,767
Operating income		4,386,231			3,904,206
Other expenses
Interest expense		(238,387	)		(333,651	)
Other expenses		(830,392	)		(1,133,811	)
Total other expenses		(1,068,779	)		(1,467,462	)
Net income	$	3,317,452		$	2,436,744

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

3

The Windermere Group, LLC & Subsidiaries

Consolidated Statements of Changes in Equity

Years Ended December 31, 2004 and 2003

	Members’ Equity
Balance - December 31, 2002	$	2,026,506
Net income		2,436,744
Distributions		(707,935	)
Balance - December 31, 2003		3,755,315
Net income		3,317,452
Distributions		(3,383,699	)
Balance - December 31, 2004	$	3,689,068

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

4

The Windermere Group, LLC & Subsidiaries

Consolidated Statements of Cash Flows

December 31,	2004			2003
Cash flows from operating activities
Net income	$	3,317,452		$	2,436,744
Adjustments to reconcile to net cash from operating activities:
Provision for doubtful receivables		535,737			397,390
Depreciation and amortization		627,517			410,135
Write-down of goodwill		75,000			450,000
Interest paid through refinancing transaction		—			64,696
Change in:
Accounts receivable		(2,164,925	)		(1,665,001	)
Prepaid expenses and other current assets		(40,826	)		(126,530	)
Deposits		(39,913	)		14,177
Accounts payable and accrued expenses		1,496,393			(910,921	)
Billings in excess of costs and profit		(1,241,421	)		811,029
Net cash from operating activities		2,565,014			1,881,719
Cash flows from investing activities
Payments received on notes receivable		15,000			25,000
Purchase of property and equipment		(2,642,646	)		(755,324	)
Net cash from investing activities		(2,627,646	)		(730,324	)
Cash flows from financing activities
Proceeds from issuance of long-term debt		—			314,463
Principal payments on long-term borrownings		(272,037	)		(497,742	)
Net borrowings from (repayments on) lines of credit		2,041,613			(768,293	)
Payments from financing costs		—			(6,950	)
Distributions to members		(1,481,573	)		(707,935	)
Net cash from financing activities		288,003			(1,666,457	)
Net change in cash and cash equivalents		225,371			(515,062	)
Cash and cash equivalents - beginning of year		188,673			703,735
Cash and cash equivalents - end of year	$	414,044		$	188,673
Supplemental disclosure of cash flow information
Cash paid for interest	$	250,854		$	326,125
Supplemental disclosures of non-cash investing and financing activities
During 2004, the Company made a nonreciprocal transfer of property to companies controlled by its members through distributions at net carrying value totaling $1,902,126.
During 2004, the Company paid $1,734,000 of outstanding mortgage debt with funds from its line of credit.
During 2003, the Company financed $55,769 of property and equipment.
During 2003, the Company refinanced a mortage payable and used the proceeds as follows:
Cash				$	314,463
Pay-off of note					1,979,600
Accrued interest on loan					64,696
Financing costs					41,241
				$	2,400,000

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

5

The Windermere Group, LLC & Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2004 and 2003

1. Organization and Principles of Consolidation

The consolidated financial statements include the accounts of The Windermere Group, LLC and its wholly-owned subsidiaries, Windermere Information Technology Systems, LLC and Windermere HDS, LLC (collectively referred to as the “Company”). All significant intercompany transactions and accounts have been eliminated in consolidation.

The Windermere Group, LLC, Windermere Information Technology Systems, LLC, and Windermere Retail Services, LLC are Maryland limited liability companies. During September 1999 and February 1998, The Windermere Group, LLC acquired a select set of business contracts, assets and liabilities from HDS, Inc. and Alliant Techsystems, Inc., respectively. These transactions were accounted for under the purchase method (see note 11).

The Company is a comprehensive provider of innovative technology solutions that are both practical and responsive. Service offerings are focused on solutions in information technology; information assurance; and system integration and deployment. Product offerings include QRC hardware design, development, and manufacturing; COTS RF products; and EMI/EMC compliance testing. The Company provides these products and services to both the federal government and commercial sector.

2. Summary of Significant Accounting Policies

Contract Revenue Recognition

The Company generates revenue under various types of contractual arrangements with their customers. Generally, work is performed under three types of contracts: cost-reimbursable, time-and-materials or fixed-price. Revenue on cost-reimbursable contracts is recognized to the extent of contract costs incurred plus a proportionate amount of fee earned. Revenue on time-and-materials contracts is recognized to the extent of fixed hourly rates for direct labor hours expended plus burdened material expense incurred. Revenue on fixed-price contracts is recognized on the percentage-of-completion method based on costs incurred in relation to total estimated costs. Costs and profit estimates are reviewed periodically as the work progresses, and adjustments, if needed, are reflected in the period in which the revisions are made. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Because of inherent uncertainties in estimating costs, it is at least reasonably possible that estimates used will change within the near term.

Services performed which have been authorized but may not have been billed are recorded as unbilled accounts receivables.

In accordance with industry practice, amounts relating to long-term contracts, including indirect cost rate variances and retainages, are classified as current assets although an undeterminable portion of these amounts are not expected to be realized within one year.

6

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Concentration of Credit Risk

At times, the Company may have cash deposits at a financial institution in excess of federally insured limits. In evaluating this credit risk, the Company periodically evaluates the stability of these financial institutions. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents. Accounts receivable consist of amounts primarily due from the federal government, which are not considered subject to credit risk.

Allowance for Doubtful Accounts

The Company provides an allowance for uncollectible accounts based upon prior experience and management’s assessment of the collectability of existing specific accounts.

Property and Equipment

Property, equipment and leasehold improvements are recorded at cost. Expenditures for repairs and maintenance are charged to income as incurred. Additions and betterments are capitalized. The cost and related accumulated depreciation on property and equipment sold or otherwise disposed of are removed from the accounts and any gain or loss is reported as current year’s revenue or expense.

Depreciation is provided for using the straight-line method over the estimated useful lives as follows for the major classes of assets:

Buildings	3 to 10 years
Leasehold improvements	3 to 7 years
Machinery and manufacturing equipment and computers	3 to 5 years
Office furniture, software and development costs	3 to 5 years

Goodwill

The Company no longer amortizes goodwill, but rather tests it at least annually for impairment. Goodwill is also reviewed for impairment at other times during years when events or changes in circumstances indicate that an impairment might be present.

Income Taxes

The Companies were organized as limited liability companies, whereby taxable income or losses are passed through to, and reportable by, the members on their respective income tax returns.

Estimates

The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and may have an impact on future periods.

7

Reclassifications

Certain reclassifications have been made to the 2003 consolidated financial statement balances to conform to the 2004 presentation.

3. Accounts Receivable

Accounts receivable at December 31, were comprised of the following:

	2004			2003
Billed	$	7,387,212		$	6,233,224
Accrued billings		4,591,203			3,948,554
Unbilled		1,900,985			1,775,060
Other		120,287			51,273
		13,999,687			12,008,111
Less - allowance for doubtful accounts		(622,163	)		(259,775	)
	$	13,377,524		$	11,748,336

The activity in the allowance for doubtful accounts was as follows:

	2004			2003
Beginning balance	$	259,775		$	400,000
Provision for doubtful accounts		535,737			257,165
(Charge-offs) recoveries - net		(173,349	)		(397,390	)
Ending balance	$	622,163		$	259,775

4. Financing Costs

During 2004, financing costs of $48,191, which were being amortized over the life of the associated loan, were adjusted to reflect the financing costs associated with the refinancing of the original loan. The amount of amortization charged to expense during 2004 and 2003 was $15,847 and $8,835, respectively.

5. Notes Receivable

The Company had notes receivable with customers for services provided with balances totaling $10,000 and $165,225 at December 31, 2004 and 2003, respectively, at varying interest rates. During 2004, a note receivable of $140,225 was written off along with the corresponding allowance that had been established during 2003 for that note.

8

6. Property and Equipment

Property and equipment consisted of the following at December 31:

	2004			2003
Office furniture	$	328,711		$	205,008
Machinery and manufacturing equipment		975,675			818,592
Computers		1,259,170			777,780
Leasehold improvements		648,253			81,044
Buildings and land		—			1,287,086
Software and development costs		183,869			183,869
		3,395,678			3,353,379
Less - accumulated depreciation		(1,930,129	)		(2,016,680	)
	$	1,465,549		$	1,336,699

During 2004, the Company distributed buildings and land to limited liability companies owned by its members (see note 12). At the time of distribution, the assets had a net book value of $1,902,126 after accumulated depreciation of $698,105. The distribution was accounted for as a nonreciprocal transfer to an entity under common control with the Company at historical cost less accumulated depreciation (net carrying value).

7. Lines of Credit

During 2003, the Company maintained a bank line of credit which provided for borrowings not to exceed $6,000,000 and is payable on demand. Interest accrued at prime plus .5 percent (4.5 percent at December 31, 2003). Borrowings were limited to 90 percent of eligible accounts receivable, as defined in the agreement, from contracts with federal, state, or local governments and 80 percent of all other eligible accounts receivable. The line of credit balance as of December 31, 2003 was $1,386,086.

In addition, the Company maintained an additional line of credit arrangement for specific contracts which provided for borrowings not to exceed $1,000,000. Interest accrued at prime plus 1 percent (5.0 percent at December 31, 2003). Borrowings on this line were limited to 90 percent of billed eligible accounts receivable for these contracts. The line of credit balance as of December 31, 2003 was $763,000.

The lines were collateralized by a lien on all Company assets and cross-collateralized with a note payable (see note 9). The lines were also guaranteed jointly and severally by Windermere Information Technology Systems, LLC (WITS), Windermere Retail Services, LLC, Windermere Products, LLC, Windermere Services, LLC and the President of WITS. The guarantee of the president was limited to $4,000,000 on all debt outstanding to Windermere Group, LLC and related entities. The lines were additionally collateralized by the assignment of a key man life insurance policy on the president in the amount of $1,250,000.

9

During 2004, the Company obtained a revolving bank line of credit agreement that provided for borrowings not to exceed $8,000,000, of which some of the line was used to pay down the previous line of credit for $6,000,000. In addition, the Company negotiated a $2,000,000 overline note arrangement. The agreements were amended near year-end, to provide one revolving line of credit for borrowings not to exceed $10,000,000. The Company relinquished the previous lines of credit. Interest accrues, on the new line of credit agreement, at the prevailing LIBOR rate (London Inter-Bank Offered Rate) for an interest period of one month, 2.956% at December 31, 2004, plus the applicable margin (5.156% at December 31, 2004). The applicable margin ranges from 1.65% to 2.65%, based upon the ratio of funded debt to EBITDA. Borrowings are limited to 90% of eligible government accounts receivables, 80% of eligible commercial accounts receivable and 50% of unbilled eligible accounts receivable, not to exceed $1,000,000. At December 31, 2004, the Company’s borrowing base calculation indicated the Company was eligible to borrow fully against the line. The line is collateralized by certain assets of the Company and is renewable annually. The agreement provides for various debt covenants to be maintained and, as of December 31, 2004, the Company was in compliance with these covenants.

The balance on the lines of credit was $6,455,543 and $2,149,086 for the years ended December 31, 2004 and 2003, respectively. Included in the line of credit on the balance sheet are distributions in excess of cash in the amount of $1,076,815 and $1,607,659 at December 31, 2004 and 2003, respectively.

Interest expense on the lines of credit for the years ended December 31, 2004 and 2003 was $180,674 and $178,434, respectively.

8. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of the following at December 31:

	2004		2003
Accrued salaries and payroll liabilities	$	1,335,488	$	1,101,877
Accrued paid time off		1,005,520		781,142
Trade accounts payable		923,283		636,490
Other accrued liabilities		1,181,487		412,925
Other taxes payable		544,198		561,149
	$	4,989,976	$	3,493,583

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9. Long-Term Debt

Long-term debt consisted of the following at December 31:

	2004			2003
Mortgage note payable, collateralized by a first deed of trust on all assets, excluding receivables, interest at prime plus .5% (4.5% at year end), paid quarterly, maturing October 2008.	$	—		$	1,972,000
Automobile loans, collateralized by vehicles with varing interest terms and maturity dates.		31,336			65,373
		31,336			2,037,373
Less - current portion		(18,757	)		(440,046	)
	$	12,579		$	1,597,327

Estimated future principal repayments on long-term debt for the years ending December 31 are as follows:

2005	$	18,757
2006		12,579
	$	31,336

In August 2004, the Company paid the remaining mortgage note balance with proceeds from a new line of credit (see note 7). Corresponding financing costs that were capitalized in 2003 were adjusted during 2004 to reflect the financing costs associated with the line of credit agreement (see note 4).

10. Long-Term Leases

The Company leases equipment and office space under various operating lease agreements that expire through July 2013. The total rent expense for these leases for the years ended December 31, 2004 and 2003 was approximately $1,249,220 and $1,079,315, respectively. Subsequent to year end, the Company entered into a lease for office space with a related party as further explained in note 14.

Future commitments under noncancelable operating leases (including related party leases) for years ending December 31 are as follows:

2005	$	1,827,951
2006		1,987,212
2007		2,009,106
2008		1,949,092
2009		973,273
Thereafter		2,131,815
	$	10,878,449

11

11. Business Acquisition

In September 1999, the Company agreed to acquire certain assets and liabilities of HDS, Inc. This acquisition was accounted for using the purchase method of accounting. Accordingly, the purchase price was allocated to the net assets acquired based upon their estimated fair value. In addition, the excess of the purchase price over the fair value of the net assets acquired has been recorded as goodwill. Prior to 2002, goodwill was amortized on a straight-line basis over 20 years, and accumulated amortization was $137,925.

As required, the Company adopted FAS 142, “Goodwill and Other Intangible Assets,” as of January 1, 2002. Among other things, the statement prohibits the amortization of goodwill and sets forth a new methodology for periodically assessing and, if warranted, recording the impairment of goodwill.

The Company completed the initial step of the goodwill impairment test required by the new rules and concluded that an impairment of $75,000 and $450,000 was appropriate at December 31, 2004 and 2003, respectively, and reported such impairment as other expenses in the consolidated statements of income for those respective years. At December 31, 2004, the total goodwill and the unimpaired portion were $1,179,550 and $516,625, respectively.

12. Related Party Transactions

During 2004, the Company distributed land and buildings to limited liability companies owned by its members. The land had a book value of $104,297, while the buildings had a net book value of $1,797,829 (after accumulated depreciation of $698,105). The Company capitalized costs on the buildings during 2004 and 2003 in the amount of $1,559,347. The limited liability companies have the same ownership structure as the Company at December 31, 2004. As such, the distribution was accounted for as a nonreciprocal transfer between entities under common control.

13. Employee Benefit Plans

The Company has adopted a 401(k) profit sharing plan covering substantially all employees. Employees become eligible to participate in the plan after 90 days of employment, and may enter the plan on a quarterly basis. Individuals employed at June 1, 1998 were automatically eligible to participate in the plan. Eligible employees may elect to defer up to 75 percent of their pretax annual compensation into the plan. The employer can make a matching discretionary contribution. Employees fully vest in all contributions to the plan immediately upon participation in the plan. The Company has recorded matching contributions to the plan of $379,322 and $315,958 in 2004 and 2003, respectively.

During 2000, the Company enacted a program for employees to participate in any liquidity event generating cash proceeds involving the business area for which those employees work. While the extent of participation rights will be determined at the discretion of the Board of Directors, it is anticipated that participation will be allocated at a rate of 1.625 percent for each $2.5 million of annual revenue. Therefore, when the annual revenue rate reaches $100 million, employees will have participation rights that provide for 65 percent of consideration received in any liquidity event of that business area. Participation rights are calculated at the conclusion of each calendar year. These participation rights will vest over a five-year period with 20 percent vesting on the first anniversary of grant and 20 percent vesting each of the next four anniversaries of grant thereafter. Subsequent to year end, a liquidating event occurred and, as disclosed in the subsequent event footnote, these agreements were rescinded. See Note 14 for additional information.

12

In addition, employees of a business area will have the opportunity to participate in the bonus pool of their business area. The basis for the bonus pool amount will be established in the first year the business area is established. It is currently anticipated that the pool will be calculated in part based on the cumulative cash flow model, with up to 40% of the available cash flow going into the bonus pool of the business area employees. The bonus pool is performance based and is subject to approval and awarded annually at the sole discretion of the Board of Directors. The Board reserves the right to make any modification to the plan.

14. Subsequent Events

In December 2004, the Board of Directors authorized the repurchase of 25 shares of Company stock from Liberty Technologies, Inc. (a company owned by the selling shareholder) subject to the execution of an agreement between the Company and Essex Corporation (Essex). Subsequent to year end, the Company obtained a $25,000,000 loan from Essex to finance the repurchase, and the 25 shares of stock were repurchased for $25,000,000. The Company granted Liberty Technologies, Inc. the rights to certain intellectual properties developed during the selling shareholder’s involvement with the Company.

On February 28, 2005, the Company rescinded the program detailed in note 13, whereby employees were eligible to participate in any liquidity event generating cash proceeds involving the business area for which those employees worked, as a precondition to the purchase of the Company by Essex.

On February 28, 2005, the Company entered into an asset purchase agreement effectively selling certain assets of one division with a net book value of $13,643 to a business owned by a former Company employee. The Company recognized a loss of $13,642 as the amount paid by the acquiring business was $1. The Company also transferred future rights to specific contracts and employees of that division, the value of which had not been determined.

On February 28, 2005, the Company entered into and finalized a purchase agreement with Essex, a publicly traded corporation, whereby Essex agreed to purchase, subject to the terms and conditions of the purchase agreement, all shares of the Company for the purchase price of $69.4 million, plus the earn out and working capital adjustment as defined in the purchase agreement. This agreement generated the liquidating event referred to in note 13.

On March 1, 2005, the Company entered into various lease commitments with a related party. The leases call for annual rental payments of $843,099 with annual rent increases based on the consumer price index. The future commitments under these noncancelable operating leases are included in note 10 under the future commitments detail.

15. Contingencies

A significant portion of the Company’s revenues have been derived from contracts with the U.S. Government. These contract revenues are subject to adjustment upon audit by the Defense Contract Audit Agency. Management does not expect the results of such audits to have a material effect on the Company’s financial position or results of future operations.

* * * * *

13

EX-99.3

EXHIBIT 99.3

ESSEX CORPORATION and SUBSIDIARY

and THE WINDERMERE GROUP, LLC and SUBSIDIARIES

PRO FORMA FINANCIAL INFORMATION (UNAUDITED)

Introduction

Pursuant to a Purchase Agreement dated as of February 28, 2005 by and among Essex Corporation (“Essex” or the “Company”), The Windermere Group, LLC,; Windermere HDS, LLC,; Windermere Information Technology Systems, LLC and the Sellers of The Windermere Group, LLC (“Windermere”), Essex acquired all of the issued and outstanding ownership and membership interests from the Susan Katharine Tate Burrowbridge, LLC, the Elizabeth Tate Winters, LLC, and the Andrew Patrick Tate, LLC (each a “Seller” and collectively the “Sellers”). The merger became effective as of February 28, 2005.

Pro forma financial information, prepared as if the transaction was consummated on December 29, 2003 (the beginning of the Company’s fiscal year), is presented as follows.

1. Pro Forma Consolidated Statement of Operations for the Fiscal Year Ended December 31, 2004 (unaudited)

2. Pro Forma Consolidated Statement of Operations for the quarter ended March 31, 2005 (unaudited)

3. Notes to Pro Forma Financial Information (unaudited)

ESSEX CORPORATION and SUBSIDIARY

and THE WINDERMERE GROUP, LLC AND SUBSIDIARIES

PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE FISCAL YEAR ENDED

DECEMBER 31, 2004

UNAUDITED

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

		HISTORICAL									Pro Forma Adjustments & Eliminations				Pro Forma Adjusted Total
		ESSEX			WINDERMERE			TOTAL
					(Note A)
Revenues:
Services and products		$	55,422		$	64,740		$	120,162		$	(12,151	)	E3	$	105,536
												(2,475	)	E4
Purchased materials			15,049			—			15,049			12,151		E3		27,200
Total			70,471			64,740			135,211			(2,475	)			132,736
Cost of goods sold and services provided
Services and products			(41,261	)		(60,354	)		(101,615	)		14,520		E3		(74,284	)
												1,927		E4
												10,884		E3
Purchased materials			(14,569	)		—			(14,569	)		(10,884	)	E3		(25,453	)
Total			(55,830	)		(60,354	)		(116,184	)		16,447				(99,737	)
Gross Margin			14,641			4,386			19,027			13,972				32,999
Selling, general and administrative expenses			(11,129	)		(830	)		(11,959	)		(161	)	E1		(25,017	)
												(13,670	)	E3
												381		E4
												392		E4
Research and development			(1,038	)		—			(1,038	)		(850	)	E3		(1,888	)
Amortization of other intangibles			(523	)		—			(523	)		(3,019	)	E1		(3,542	)
Operating Income			1,951			3,556			5,507			(2,955	)			2,552
Interest/dividend income (expense), net			332			(238	)		94			5		E4		49
												(50	)	E5
Income Before Income Taxes			2,283			3,318			5,601			(3,000	)			2,601
Provision for income taxes	E2		(10	)		—			(10	)		—		E2		(10	)
Net Income		$	2,273		$	3,318		$	5,591		$	(3,000	)		$	2,591
Basic Earnings Per Common Share		$	0.15												$	0.17
Diluted Earnings Per Common Share		$	0.13												$	0.15
Weighted Average Number of Essex Shares Outstanding
Basic			15,603													15,603
Effect of dilution- Stock options			1,543													1,543
Diluted			17,146													17,146

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

ESSEX CORPORATION and SUBSIDIARY

and THE WINDERMERE GROUP, LLC AND SUBSIDIARIES

PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE QUARTER ENDED

MARCH 31, 2005

UNAUDITED

(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)

		HISTORICAL									Pro Forma Adjustments & Eliminations				Pro Forma Adjusted Total
		ESSEX			WINDERMERE			TOTAL
					(NOTE A)
Revenues:
Services and products		$	23,423		$	11,988		$	35,411		$	(3,303	)	E3	$	31,885
												(223	)	E4
Purchased materials			2,255			—			2,255			3,303		E3		5,558
Total			25,678			11,988			37,666			(223	)			37,443
Cost of goods sold and services provided
Services and products			(16,554	)		(8,794	)		(25,348	)		2,958		E3		(22,126	)
												264		E4
Purchased materials			(2,067	)		—			(2,067	)		(2,958	)	E3		(5,025	)
Total			(18,621	)		(8,794	)		(27,415	)		264				(27,151	)
Gross Margin			7,057			3,194			10,251			41				10,292
Selling, general and administrative expenses			(5,194	)		(2,057	)		(7,251	)		(27	)	E1		(7,218	)
												60		E4
Research and development			(487	)		(136	)		(623	)		—				(623	)
Amortization of other intangibles			(552	)		—			(552	)		(38	)	E1		(590	)
Operating Income			824			1,001			1,825			36				1,861
Interest/dividend income (expense), net			732			(343	)		389			2		E4		76
												(315	)	E5
Income Before Income Taxes			1,556			658			2,214			(277	)			1,937
Provision for income taxes	E2		(20	)		—			(20	)		—		E2		(20	)
Net Income		$	1,536		$	658		$	2,194		$	(277	)		$	1,917
Basic Earnings Per Common Share		$	0.07												$	0.09
Diluted Earnings Per Common Share		$	0.07												$	0.08
Weighted Average Number of Essex Shares Outstanding
Basic			21,006													21,006
Effect of dilution- Stock options			1,601													1,601
Diluted			22,607													22,607

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

ESSEX CORPORATION and SUBSIDIARY

AND

THE WINDERMERE GROUP, LLC and SUBSIDIARIES

NOTES TO PRO FORMA FINANCIAL INFORMATION (UNAUDITED)

Note A: Historical Information

The financial information shown for Essex Corporation and Subsidiary (“Essex” or the “Company”) represents the information from the Company’s Form 10-K for the fiscal year ended December 31, 2004 and from its Form 10-Q for the quarterly period ended March 31, 2005.

The financial information for The Windermere Group, LLC & Subsidiaries (“Windermere”) was derived from its audited information for its fiscal year ended December 31, 2004 as well as unaudited internal financial information for the two months ended February 28, 2005. Windermere financial results for the month of March 2005 are included in the Essex historical column.

Note B: Agreement to acquire The Windermere Group, LLC and Subsidiaries

Effective February 28, 2005, under a Purchase Agreement between the Company and the Sellers, the Company acquired all of the membership interests of Windermere. Under the terms of the Purchase Agreement, the Company initially paid $69.4 million in cash and assumed $15.5 million in liabilities. Windermere paid the $25.3 million principal and accrued interest under the Promissory Note and Loan Agreement (as amended) dated January 7, 2005 from the proceeds of the initial cash payment. The Company also incurred approximately $2.6 million in outside expenses for legal, accounting and other fees.

In addition, Essex has agreed to pay in cash, on May 31, 2006, an “Earn Out” as specified in Section 2.2 of the Purchase Agreement. The maximum additional amount that could be paid is $30.0 million. No effect has been given in the pro forma financial information to the potential additional consideration due to the uncertainty at this time of the ultimate amount of payment, if any.

Note C: Common Stock

Essex common stock is no par value with 50 million shares authorized. For historical purposes, there were 20,917,493 shares issued and outstanding at December 31, 2004 and 21,067,221 at March 31, 2005. There were 17,146,373 and 22,607,240 diluted weighted average common shares outstanding during fiscal 2004 and in the first quarter of 2005, respectively.

Note D: Pro Forma Consolidated Balance Sheet (Unaudited)

A pro forma consolidated balance sheet has not been prepared since the transaction is reflected in the Company’s balance sheet filed with its Form 10-Q for the quarter ended March 31, 2005.

ESSEX CORPORATION and SUBSIDIARY

AND

THE WINDERMERE GROUP, LLC and SUBSIDIARIES

NOTES TO PRO FORMA FINANCIAL INFORMATION (UNAUDITED)

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) Amortizable intangible assets of approximately $6.8 million were primarily related to contracts which have average lives of less than 5 years. A non compete covenant was valued at $603,000 with an estimated life of 4 years. Amortization is calculated on a straight-line basis relative to the monthly operating results of the contract portfolio. Pro forma amortization of other intangibles was $3.0 million in 2004 and $38,000 in the first two months of the first quarter of 2005. Property and equipment pro forma amortization of the fair value adjustment increased depreciation expense by $161,000 in 2004 and $27,000 in the first two months of the first quarter of 2005.

(2) No federal income tax expense has been recognized 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 for the periods shown. State income tax expense has been recognized in states where our net operating loss is not available. At this time, Essex fully adjusts its deferred tax asset valuation account to eliminate the recognition of its deferred tax asset.

(3) The Windermere statement of income was adjusted to reclassify certain Windermere revenues and cost of contract revenue to their respective categories for revenues and cost of goods sold and services provided for (a) services and products and (b) purchased materials. Windermere cost of contract revenue was also reclassified to respective selling, general and administrative expenses or research and development or amortization of other intangibles. These reclassifications were made in order to conform to the Company’s historical financial statement presentation.

(4) In connection and concurrent with the closing of this transaction, Windermere sold two of its operations to the former employees of Windermere. The results of these operations have been eliminated.

(5) Eliminate interest associated with the Essex 2004 stock offering, proceeds for which were used to acquire The Windermere Group.