8-K/A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT

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

Date of Report (Date of Earliest Event Reported): September 30, 2004

HALIFAX CORPORATION

(Exact name of registrant as specified in its charter)

Virginia	1-08964	54-0829246
(State or other jurisdiction of	(Commission File Number)	(I.R.S. Employer
incorporation)		Identification No.)

5250 Cherokee Avenue, Alexandria, Virginia 22312
(Address of principal executive offices/Zip Code)

Registrant’s telephone number, including area code: (703) 658-2400

Former name, former address, and former fiscal year, if changed since last report: N/A

Check the appropriate box below if the Form 8-K filing is intended to satisfy the filing obligation of the registrant under any of the following provisions:

[ ] 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))

FOREWARD-LOOKING STATEMENTS

     Certain statements in this document constitute “forward-looking statements” within the meaning of the Federal Private Securities Litigation Reform Act of 1995. While forward-looking statements sometimes are presented with numerical specificity, they are based on various assumptions made by management regarding future circumstances over many of which we have little or no control. Forward-looking statements may be identified by words including “anticipate,” “believe,” “estimate,” “expect” and similar expressions. Halifax Corporation, a Virginia corporation (“Halifax” or the “Company”), cautions readers that forward-looking statements, including without limitation, those relating to future business prospects, revenues, working capital, liquidity, and income, are subject to certain risks and uncertainties that would cause actual results to differ materially from those indicated in the forward-looking statements. Factors that could cause actual results to differ from forward-looking statements include the concentration of the Company’s revenues, risks related to fluctuation in interest rates and exchange rates, risks involved in contracting with its customers including incurrence of start-up costs prior to receiving revenues and contracts with fixed price provisions, government contracting risks, potential conflicts of interest, difficulties in attracting and retaining management, professional and administrative staff, fluctuation in quarterly results, risks related to acquisitions, including the acquisition of AlphaNational Technology Services, Inc., risks related to the Company’s acquisition strategy, continued favorable banking relationships, the availability of capital to finance operations and planned growth and make payments on outstanding indebtedness, risks related to competition and the Company’s ability to continue to perform efficiently on contracts, and other risks and factors identified from time to time in the Company’s Annual Report on Form 10-K. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected.

     Forward-looking statements are intended to apply only at the time they are made. Moreover, whether or not stated in connection with a forward-looking statement, the Company undertakes no obligation to correct or update a forward-looking statement should we later become aware that it is not likely to be achieved. If the Company were to update or correct a forward-looking statement, you should not conclude that the Company will make additional updates or correction thereafter.

ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS

     As Halifax reported in its Current Report on Form 8-k filed with the Securities and Exchange Commission on October 6, 2004, Halifax acquired all of the outstanding capital stock of AlphaNational Technology Services, Inc., a Texas corporation, in a merger transaction that closed on September 30, 2004. The Amendment to the Current Report on Form 8-K filed with the Securities and Exchange Commission on October 6, 2004 is being filed to provide the financial information required by Item 9.01 of the Current Report on Form 8-K.

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS

(a)	Financial Statement of business acquired. The following audited financial statements are included in this current report as exhibit 99.2 and are hereby incorporated by reference herein:
	(i) Independent Auditor’s Report.
	(ii) Balance Sheets for years ended December 31, 2003 and 2002.
	(iii) Statements of Income for years ended December 31, 2003 and 2002.
	(iv) Statements of Changes in Stockholders’ Equity for the years ended December 31, 2003 and 2002.
	(v) Statements of Cash Flows for the years ended December 31, 2003 and 2002.
	(vi) Notes to Financial Statements.
(b)	Pro-forma Financial Information
	The following pro-forma financial information are included in this current report as exhibit 99.3 and are hereby incorporated by reference herein:
	(i) Unaudited Pro-Forma Combined Condensed Statement of Operations for the six months ended September 30, 2004.
	(ii) Unaudited Pro-Forma Combined Condensed Statement of Operations for the year ended March 31, 2004.
	(iii) Unaudited Pro-Forma Combined Condensed Balance Sheet as of September 30, 2004.
	(iv) Notes to Unaudited Pro-Forma Combined Condensed Financial Statements.
(c)	Exhibits
	The following exhibit is filed herewith:

Exhibit Number	Description
2.1	Agreement and Plan of Merger dated September 30, 2004 by and among AlphaNational Technology Services, Inc., Halifax Corporation, Halifax-AlphaNational Acquisition, Inc., et al. (Schedules and exhibits are omitted pursuant to Regulation S-K, Item 601(b)(2); Halifax agrees to furnish supplementary a copy of such schedules and/or exhibits to the Securities and Exchange Commission upon request.)*

23.1	Consent of Independent Registered Public Accounting Firm
99.1	Press Release dated October 4, 2004*
99.2	Audited Financial Statements
99.3	Unaudited Pro-forma Financial Information
*Previously filed with Current Report on Form 8-K filed the Securities and Exchange Commission on October 6, 2004.

SIGNATURE

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.

	HALIFAX CORPORATION
Date:   December 16, 2004	By:	/s/Joseph Sciacca Joseph Sciacca Vice President, Finance & CFO

EXHIBIT INDEX

Exhibit No.	Description
2.1	Agreement and Plan of Merger dated September 30, 2004 by and among AlphaNational Technology Services, Inc., Halifax Corporation, Halifax-AlphaNational Acquisition, Inc., et al. (Schedules and exhibits are omitted pursuant to Regulation S-K, Item 601(b)(2); Halifax agrees to furnish supplementary a copy of such schedules and/or exhibits to the Securities and Exchange Commission upon request.)*
23.1	Consent of Independent Registered Public Accounting Firm
99.1	Press Release dated October 4, 2004*
99.2	Audited Financial Statements
99.3	Unaudited Pro-forma Financial Information
*Previously filed with Current Report on Form 8-K filed the Securities and Exchange Commission on October 6, 2004.

EX-23.1

Exhibit 23.1

CONSENT OF A REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333-41995 of Halifax Corporation and Subsidiaries on Form S-8 pertaining to the Halifax Corporation 1994 Key Employee Stock Option Plan and Non-Employee Directors Stock Option Plan of our report dated December 5, 2004 with respect to the financial statements of AlphaNational Technology Services, Inc. as of December 31, 2003 and 2002 and the years then ended appearing in this Current Report on Form 8-K-/A of Halifax Corporation.

WEAVER AND TIDWELL, L.L.P.

December 15, 2004

EX-99.2

Exhibit 99.2

ALPHANATIONAL
TECHNOLOGY SERVICES, INC.

FINANCIAL REPORT

DECEMBER 31, 2003 AND 2002

C O N T E N T S

	Page
INDEPENDENT AUDITOR’S REPORT		1
FINANCIAL STATEMENTS
Balance Sheets		2
Statements of Income		3
Statements of Changes in Stockholders’ Equity (Deficit)		4
Statements of Cash Flows		5
Notes to Financial Statements		6

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors
AlphaNational Technology Services, Inc.
Fort Worth, Texas

We have audited the accompanying balance sheets of AlphaNational Technology Services, Inc. as of December 31, 2003 and 2002 and the related statements of income, changes in stockholders’ equity (deficit), 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the balance sheet is 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 AlphaNational Technology Services, Inc. as of December 31, 2003 and 2002, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

WEAVER AND TIDWELL, L.L.P.

Fort Worth, Texas
December 5, 2004

4206

ALPHANATIONAL TECHNOLOGY SERVICES, INC.
BALANCE SHEETS
DECEMBER 31, 2003 AND 2002

	2003		2002
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	3,256	$	97,869
Accounts receivable		667,393		477,773
Inventory, lower of average cost or market		301,053		314,567
Other receivables		16,594		1,875
Prepaid Expenses		—		12,857
Deferred taxes		26,860		8,283
Total current assets		1,015,156		913,224
PROPERTY AND EQUIPMENT, at cost
Land		732,094		732,094
Furniture and fixtures		39,622		39,622
Equipment		366,368		364,369
System software		206,580		206,579
Leasehold improvements		64,185		64,185
		1,408,849		1,406,849
Less accumulated depreciation		603,135		589,446
		805,714		817,403
OTHER ASSETS
Deposits		5,100		11,948
Lexmark customer list - net of amortization		404,761		547,619
		409,861		559,567
TOTAL ASSETS	$	2,230,731	$	2,290,194

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

ALPHANATIONAL TECHNOLOGY SERVICES, INC.
BALANCE SHEETS
DECEMBER 31, 2003 AND 2002

	2003			2002
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES
Checks issued in excess of bank balances	$	27,997		$	—
Current portion of long-term debt		485,402			104,571
Notes payable		481,631			483,408
Note payable to stockholder		17,000			—
Accounts payable		247,638			95,259
Accrued liabilities		176,962			148,891
Income tax payable		193,156			490,035
Other current liabilities		—			16,359
Deferred income		593,676			890,324
Total current liabilities		2,223,462			2,228,847
LONG-TERM DEBT		40,414			80,724
Total liabilities		2,263,876			2,309,571
STOCKHOLDERS’ EQUITY (DEFICIT)
Common stock, $1 par value; authorized 500,000 shares; issued and outstanding 2003 39,000 shares and 2002 issued 121,000 shares		39,000			121,000
Retained earnings (deficit)		(72,145	)		1,444,723
Less cost of common shares reacquired for the treasury; 2002 76,500 shares		—			(1,585,100	)
Total stockholders’ equity (deficit)		(33,145	)		(19,377	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	2,230,731		$	2,290,194

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

Page 2

ALPHANATIONAL TECHNOLOGY SERVICES, INC.
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2003 AND 2002

	2003		2002
REVENUE
Service revenue	$	6,638,522	$	7,438,284
Miscellaneous income		7,134		6,404
Total revenue		6,645,656		7,444,688
COST OF SALES AND SERVICE REVENUES
Technician salaries and wages		773,325		875,416
Contracted services		1,107,352		683,179
Cost of parts		814,922		1,263,540
		2,695,599		2,822,135
Gross profit		3,950,057		4,622,553
OPERATING EXPENSES
Salaries, wages, and payroll taxes		1,923,229		2,036,943
Depreciation and amortization		177,480		188,958
Insurance		264,073		164,408
Rent		176,715		172,776
Other general operating expenses		1,083,456		936,339
		3,624,953		3,499,424
Income from operations		325,104		1,123,129
OTHER INCOME (EXPENSE)
Interest expense		84,551		51,709
Income before income tax expense		240,553		1,071,420
INCOME TAX EXPENSE		81,788		364,283
Net income	$	158,765	$	707,137
Weighted averages shares outstanding		46,944		48,717
Earnings per common share – basic and diluted	$	3.38	$	14.52

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

Page 3

ALPHANATIONAL TECHNOLOGY SERVICES, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 2003 AND 2002

	Common			Retained			Treasury
	Stock			Earnings			Stock			Total
BALANCE,
December 31, 2001	$	121,000		$	737,586			($1,420,000	)		($561,414	)
Repurchase of common stock		—			—			(165,100	)		(165,100	)
Net income					707,137						707,137
BALANCE,
December 31, 2002		121,000			1,444,723			(1,585,100	)		(19,377	)
Repurchase of common stock		—			—			(100,000	)		(100,000	)
Cancellation of treasury stock		(82,000	)		(1,603,100	)		1,685,100			—
Dividends		—			(72,533	)		—			(72,533	)
Net income		—			158,765						158,765
BALANCE,
December 31, 2003	$	39,000			($72,145	)	$	—			($33,145	)

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

Page 4

ALPHANATIONAL TECHNOLOGY SERVICES, INC.
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2002

	2003			2002
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	158,765		$	707,137
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		177,480			188,958
Deferred taxes		(18,577	)		(8,283	)
Change in operating assets and liabilities:
Accounts receivable		(189,620	)		942,458
Other receivables		(14,719	)		10,321
Inventory		13,514			(73,033	)
Prepaids and deposits		19,705			(2,297	)
Checks issued in excess of bank balances		27,997			—
Accounts payable		152,379			(101,841	)
Accrued liabilities		(306,131	)		76,016
Deferred income		(296,648	)		(910,457	)
Net cash provided by (used in) operating activities		(275,855	)		828,979
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(3,693	)		(25,046	)
Net cash used in investing activities		(3,693	)		(25,046	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds on short-term debt		462,039			120,000
Principal payments on debt		(104,571	)		(697,092	)
Distributions to shareholders		(72,533	)		—
Common stock repurchased		(100,000	)		(165,100	)
Net cash provided by (used in) financing activities		184,935			(742,192	)
Net change in cash and cash equivalents		(94,613	)		61,741
CASH AND CASH EQUIVALENTS, beginning of year		97,869			36,128
CASH AND CASH EQUIVALENTS, end of year	$	3,256		$	97,869
SUPPLEMENTARY DISCLOSURE
Interest Paid	$	75,504		$	51,709

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

Page 5

ALPHANATIONAL TECHNOLOGY SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies relative to the carrying value of property and equipment and inventory are indicated in the captions on the balance sheet. Other significant accounting policies are as follows:

Nature of Operations

AlphaNational Technology Services, Inc. (AlphaNational or Company) provides nationwide on-site service on personal computers, printers, fax terminals, typewriters and related products. Services are provided through service contracts for parts and labor repair or time and materials billings. AlphaNational has over 200 technicians strategically located to meet clients’ demands and a central service depot located with the Company’s home office in Fort Worth, Texas.

Revenue Recognition

Revenue is recognized either ratably over the life of maintenance contracts or as service is rendered in the instance of non-contract maintenance. Unearned revenue is stated as deferred income on the balance sheet. The Company bills maintenance contracts either monthly, quarterly, or annually in advance.

Advertising

Advertising costs are expensed as incurred. The amount charged to expense for the years ended December 31, 2003 and 2002 was $354 and $895, respectively.

Depreciation

Depreciation is provided using the straight-line method over the estimated useful lives of the applicable assets, which are generally five to ten years. Leasehold improvements are amortized over eighteen years. The IBM/Lexmark customer list acquired in November 1999 is being amortized over its expected life of seven years. Depreciation and amortization expense charged to operations during the years ended December 31, 2003 and 2002 was $177,480 and $188,958, respectively.

Software Development

The Company capitalizes eligible software development costs associated with computer software used in its development of internet ordering capability. The costs are amortized using the straight-line method over the remaining estimated economic life of the product, which is generally five years.

Inventories

Inventories are stated at the lower of average cost or market. Inventories consist of used parts either purchased in bulk or reclaimed from used machine purchases.

Page 6

ALPHANATIONAL TECHNOLOGY SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES - continued

Cash Flows Presentation

The Company considers all short-term investments with an original maturity of three months or less to be cash equivalents.

Use of Estimates

The preparation of financial statements in conformity 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Accounts Receivable

All receivables considered doubtful have been charged to current operations and it is management’s opinion that no significant amounts are doubtful of collection.

Income Taxes

The Company uses the liability method in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and income tax carrying amounts of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

NOTE 2. OPERATING LEASES

The Company leases its Fort Worth, Texas offices under a long-term operating lease. Future minimum rental payments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year, as of December 31, 2003, are as follows:

2004 $ 64,513

The Company leases small offices in other states under various operating leases. Future minimum rental payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year, as of December 31, 2003, are as follows:

2004 $ 23,280

Rental expense for office space was $176,715 and $172,776 for the years ended December 31, 2003 and 2002, respectively.

Page 7

ALPHANATIONAL TECHNOLOGY SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 3. CONCENTRATION OF CREDIT RISK

The Company operates in one industry segment. The Company receives the majority of its revenue in advance through either month-to-month, quarterly or annual maintenance agreements. Historically, credit losses have been minimal. One major customer accounted for more than 26.18% and 60% of net sales for the years ended December 31, 2003 and 2002, respectively.

NOTE 4. SHORT-TERM NOTES PAYABLE

The Company has a bank revolving line-of-credit which expires on April 28, 2004. Under the terms of the line of credit, the Company may borrow up to $400,000 secured by substantially all of its assets, including a specific assignment of $500,000 key-man life insurance on the lives of the Company’s president and chief financial officer. In addition, the stockholders pledged all stock in the Company as security and have personally guaranteed the loan. During 2003, the Company added an additional line-of-credit to borrow up to $100,000 more under the same terms until March 15, 2004. Upon expiration, the $400,000 line-of-credit was renewed under the same terms through April 28, 2005 without the additional $100,000. As of December 31, 2003 and 2002, the Company had an outstanding balance borrowed against the lines-of-credit of $481,631 and $483,408, respectively. Interest is payable monthly at a variable rate of 1.5% above the highest prime rate published in the Wall Street Journal (5.50% at December 31, 2003). As part of the line-of-credit agreement, deposits to the Company’s lockbox are deposited into the Company’s bank account and the bank drafts 70% of the deposits to pay down the line-of-credit.

During 2003, the Company borrowed $17,000 from a majority stockholder with an agreement to repay the note within one week; therefore, no interest was charged on the note.

NOTE 5. LONG-TERM DEBT

Long-term debt at December 31, 2003 and 2002 consisted of the following:

	2003		2002
Note payable to a financial institution in monthly installments of $6,000 including interest at prime plus 2.5% (6.5% at December 31, 2003), due on demand or January 20, 2006	$	446,816	$	—
Note payable to current stockholders		—		81,295
Note payable to a former stockholder in monthly installments of $3,500 including interest at 6%, due November 2005		79,000		112,000
		525,816		185,295
Less current maturities		485,402		104,571
	$	40,414	$	80,724

Page 8

ALPHANATIONAL TECHNOLOGY SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 5. LONG-TERM DEBT - continued

Future maturities of long-term debt are as follows:
2004	$	485,402
2005		40,414
	$	525,816

NOTE 6. INCOME TAXES

     Income tax expense consists of the following for the years ended December 31, 2003 and 2002:

	2003			2002
Federal
Current	$	108,648		$	372,566
Deferred		(26,860	)		(8,283	)
	$	81,788		$	364,283

The estimated provision for income tax expense differs from the amount calculated by applying the statutory federal income tax rates to income before taxes due to expenses which are non-deductible for federal income tax purposes. The tax effects of temporary differences that give rise to the deferred tax assets at December 31, 2003 and 2002 are inventory reserves which are not deductible for tax purposes until realized.

NOTE 7. RELATED PARTY TRANSACTIONS

The Company paid approximately $43,000 and $7,650 to a shareholder for legal fees for the years ended December 31, 2003 and 2002, respectively.

Page 9

EX-99.3

Exhibit 99.3

PRO-FORMA FINANCIAL INFORMATION
UNAUDITED PRO-FORMA COMBINED CONDENSED
FINANCIAL INFORMATION

Halifax Corporation (“Halifax”) completed the acquisition of AlphaNational Technology Services, Inc. (“AlphaNational”) on September 30, 2004.

The following unaudited pro-forma combined condensed financial information combines the historical consolidated financial information of Halifax and the historical financial statements of AlphaNational. The financial statement for the year ended March 31, 2004 were combined with the year ended December 31, 2003 for comparative purposes. The unaudited pro-forma combined condensed statements of income for the six months ended September 30, 2004 have been prepared as if the Halifax acquisition had occurred on April 1, 2004, and combines Halifax and AlphaNational’s statements of operations.

Adjustments have been made to AlphaNational’s financial statements to conform to Halifax’s presentation. Halifax has a fiscal year end of March 31 and AlphaNational has a fiscal year end of December 31. The six-month periods from April 1, to September 30, 2004 for AlphaNational was combined with the six month period ended September 30, 2004 for Halifax. The balance sheet for AlphaNational as of September 30, 2004 was combined with the unaudited balance sheet for Halifax as of September 30, 2004.

In connection with the acquisition of AlphaNational, analysis was conducted to review the implied value of Halifax common stock. Due to the restrictions on the securities issued and lack of market ability of Halifax common stock a discount of 14% from the $5.10 market price as of the date of issuance to $4.386, or $168,000 was recorded as a reduction of goodwill and paid in capital.

The assets and liabilities of AlphaNational have been adjusted to estimated fair value, based upon estimates, which are subject to change as additional information is obtained. The allocations of the purchase costs are subject to final determination based upon estimates and other evaluations of fair market value, identification and valuation of identifiable intangible assets. Under the terms of the merger agreement, the purchase price was subject to adjustment to extent that net assets on date of acquisition was less than zero. As a result of its calculation of the net assets of AlphaNational the purchase consideration was adjusted down by $200,000 and reflected as a reduction of notes payable to the former AlphaNational shareholders’.

The method of combining historical financial statements for the preparation of the unaudited pro-forma combined condensed financial statements is for Informational purposes only. Actual statements of income of the companies will be consolidated commencing on the date of acquisition. The unaudited pro-forma combined condensed financial information does not purport to represent what Halifax’s operations or financial position actually would have been had the acquisition occurred on the dates specified, or to project Halifax’s results of operation or financial position for any future period or date. The unaudited pro-forma combined condensed financial information does not reflect any adjustments to conform to accounting practices, except for certain reclassifications, or any cost savings or other synergies which may result from the merger.

In the opinion of management, all material adjustments necessary to reflect the acquisition of AlphaNational by Halifax have been made. The accompanying unaudited pro-forma combined condensed financial statements should be read in conjunction with the historical financial statements and related notes thereto for both Halifax and AlphaNational.

Unaudited Pro-Forma Combined Condensed Statement of Operations for six months ended September 30, 2004

(Amounts in thousands	Historical			Historical			Pro-forma
except share data)	Halifax (a)			AlphaNational(a)			Adjustments					Pro-forma
Revenues	$	28,250		$	3,369		$	(270	)	(c	)	$	31,349
Cost		24,914			1,988			(270	)	(c	)		26,632
Gross margin		3,336			1,381								4,717
Selling marketing and								91		(b	)
general and administrative		2,836			1,529			(210	)	(d	)		4,246
Operating income		500			(148	)		219					471
								(9	)	(g	)
Interest expense		(297	)		(23	)		13		(f	)		(316	)
Income before income taxes		203			(171	)		23					155
Gain on sale of land (net of taxes)					177			(177	)	(e	)		—
Income taxes		68			—			18		(h	)		50
Net income	$	135		$	6		$	(36	)			$	105
Earnings per common share
Basic	$	.05										$	.03
Diluted	$	.05										$	.03
Weighted number of shares outstanding:
Basic		2,919,647			235,294					(k	)		3,154,941
Diluted		2,970,515			235,294					(k	)		3,120,809

See accompanying notes to the unaudited pro-forma combined condensed financial information

Unaudited Pro-Forma Combined Condensed Statement of Operations for the Year Ended March 31, 2004

(Amounts in thousands	Historical			Historical			Pro-forma
except share data)	Halifax (a)			AlphaNational(a)			Adjustments					Pro-forma
Revenues	$	49,537		$	6,638		$	(480	)	(c	)	$	55,695
Costs		43,609			5,310			(480	)	(c	)		48,439
Gross margin		5,928			1,328			—					7,256
Selling, marketing and general and administrative		4,874			1,002			182		(b	)		6,058
Operating income		1,054			326			(182	)				1,198
								13
Interest expense		(591	)		(85	)		(18	)	(f	)		(681	)
Other income		15			—			—		(g	)		15
Income before income taxes		478			241			(187	)				532
Income taxes expense (benefit)		(3,750	)		82			(65	)	(h	)		(3,733	)
Net income		4,228			159			(122	)				4,265
Earnings per common share
Basic	$	1.60										$	1.48
Diluted	$	1.54										$	1.41
Weighted number of shares outstanding:
Basic		2,638,345			235,294					(k	)		2,873,648
Diluted		2,787,656			235,294					(k	)		3,022,950

See accompanying notes to the unaudited pro-forma combined condensed financial information.

Unaudited Pro-Forma Combined Condensed Balance Sheet as of September 30, 2004.

(Amounts in thousands)	Historical			Historical			Pro-forma
	Halifax			AlphaNational			Adjustments					Pro-forma
Balance Sheet
Cash	$	100		$	(29	)	$	—				$	71
Accounts receivable		11,227			763			—					11,990
Inventory		5,763			194			—					5,957
Prepaid expense		740			16			—					756
Deferred tax asset		1,148			—			—					1,148
Total current assets		18,978			944			—					19,922
Fixed assets (Net)		1,726			80								1,806
Goodwill (Net)		4,540			304			2,473		(b	)		7,317
		—			—			(91	)				—
Other		140			—			—					140
Deferred tax asset		2,685			—			—					2,685
Total assets	$	28,069		$	1,328		$	2,382				$	31,779
Accounts payable	$	3,997		$	188		$	300		(b	)	$	4,685
								200		(i	)
Accrued expenses		3,542			254			(114	)				3,682
Deferred revenue		3,146			860			—					4,006
Other current liabilities		—			485			—					485
Acquisition Debt		494			—			—					494
Current portion of note payable		27			—			—					27
Income taxes payable		—			41			—					41
Total current liabilities		11,206			1,828			386					13,420
Long term debt		7,223			—			200		(b	)		7,423
Subordinated Debt		2,400			—								2,400
Acquisition debt		—			—			500		(b	)		300
								(200	)	(i	)
Other Long-term debt		7			—			—					7
Deferred gain		308			—			—					308
Total Liabilities		21,144			1,828			886					23,858
Preferred stock
Common stock		769			39			56		(b	)		825
								(39	)	(b	)
Additional paid in capital		8,028			—			1,144		(b	)		9,004
								(168	)	(b	)
Accumulated deficit		(1,660	)		(539	)		539		(b	)		(1,696	)
								(36	)	(i	)
Less treasury Stock		(212	)		—			—					(212	)
		6,925			(500	)		1,496					7,921
	$	28,069		$	1,328		$	2,382				$	31,779

See accompanying notes to the unaudited pro-forma combined condensed financial information.

HALIFAX CORPORATION

NOTES TO UNAUDITED PRO-FORMA COMBINED CONDENSED FINANCIAL STATEMENTS

The unaudited pro-forma combined condensed financial information as based upon the following:

(a)	AlphaNational’s historical column includes the results of operations for the year ended December 31, 2003. AlphaNational’s historical column for the six months ended September 30, 2004 includes AlphaNational results of operations from April 1, 2004.
(b)	In the acquisition transaction, Halifax acquired all of the outstanding shares of AlphaNational’s common stock in exchange for shares of Halifax’s common stock, cash and notes.
	Halifax issued 235,294 shares of its common stock for all outstanding classes of AlphaNational common stock as discussed above. The number of Halifax shares of common stock issued increased to approximately 3.17 million shares.
	Below is a table of the estimated acquisition cost:
	(Amounts in thousands)

Cash	$	200
Halifax Stock Issued (235,294 shares at $5.10)		1,200
Discount due to restricted shares		(168	)
Notes payable — shareholders notes		300
Liabilities assumed		500
Investment banking services		205
Estimated acquisition cost		246
Total estimated acquisition cost to be allocated		2,483
Less: Historical cost basis of the following at September 30, 2004 Net Assets of AlphaNational		10
Excess of purchase price over historical cost basis of net assets acquired	$	2,473

Components of the transaction were cash of $200,000, notes payable of $500,000 and 235,294 of common stock shares at $5.10, totaling $1.9 million in the aggregate. The notes payable have been reduced by approximately $200,000, to $300,000 due to the adjustment of the closing balance sheet.

In addition, costs to consummate the transaction were approximately $451,000, the excess purchase price over the net assets of AlphaNational is approximately $2.5 million.

Amortization expenses is estimated to consist of the following:

(Amounts in thousands)

				Annual
	Value		Life	Amortization
Customer contracts/relationships	$	660	5 years	$	132
Non compete agreements		100	2 years		50
	$	760		$	182
Trade name		700	Indefinite
Goodwill		1,013	Indefinite
		2,473

Halifax is in the process of identifying the fair values of tangible and intangible assets that will be acquired. It is expected that the intangible assets will include the following: customer contracts/relationships, a noncompete agreements, and goodwill. The intangible assets are expected to have a value of approximately $760 thousand estimated lives ranging from 2 to 5 years. The unaudited pro-forma combined condensed financial information has assumed a composite life of 4 years for purposes of computing amortization expense. Amortization expense for the six months ended September 30, 2004 was estimated to be $91 thousand.

(c)	Inter-company revenue and costs of approximately $480,000 and $270,000 for year end March 31, 2004 and the six months ended September 30, 2004, respectively.
(d)	To eliminate one time adjustments related to the acquisition by Halifax. Included in non-recurring one timer adjustments were transactions costs of approximately $60,000 vendor rebate of $100,000 officer life insurance of $15,000 and other non-recurring items of approximately $35,000.
(e)	To eliminate the gain of disposal of real estate (net of taxes). During the nine months ended September 30, 2004, the Company sold a parcel of land to a third party and distributed the remaining parcels to its former shareholders. The gain on the disposal of the land was approximately $177,000 (net of a provision for income taxes of $44,000).
(f)	To reduce interest expense for interest on real estate.
(g)	Record interest expenses on notes payable former AlphaNational Shareholders’.
(h)	To adjust income tax expense.
(i)	Reduction in notes to formers shareholders’ based upon the adjusted final balance sheet at September 30, 2004.
(j)	Balance sheet adjustments as a result of the pro-forma adjustments to the statement of operations.
(k)	Common stock outstanding after giving effect to the purchase of AlphaNational.