<PAGE>

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                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-K
              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                       SECURITIES AND EXCHANGE ACT OF 1934

 For the fiscal year ended: September 30, 1997 Commission File Number: 0-22737

                      ADVANCED COMMUNICATION SYSTEMS, INC.
             (Exact Name of Registrant as Specified in its Charter)

                               Delaware 54-1421222
                  (State or Other Jurisdiction (I.R.S. Employer
            of Incorporation or Organization) Identification Number)

                   10089 Lee Highway, Fairfax, Virginia 22030
               (Address of principal executive office) (Zip Code)

                                  703-934-8130
                    Registrant's telephone number, including
                                   area code:
                            -------------------------

                  Securities registered pursuant to Section 12
                                (b) of the Act:
                                      NONE

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

           Securities registered pursuant to Section 12(g) of the Act:
                     Common Stock, par value $.01 per share
                                (Title of class)
                            -------------------------

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No _

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

     The aggregate market value of the registrant's voting stock held by persons
considered  by the  registrant  for  the  purpose  to be  non-affiliates  of the
registrant on December 10, 1997, computed with reference to the closing price of
the Common  Stock on the Nasdaq  National  Market as reported  for  December 10,
1997, was $37,633,000.
                            -------------------------

     As of  the  close  of  business  December  10,  1997,  the  registrant  had
outstanding  6,514,000  shares  of  Common  Stock,  par  value  $.01 per  share.
                           -------------------------

                       Documents Incorporated By Reference

     Certain  information called for by Part III of the Form 10-K will either be
filed with the Commission under Regulation 14A under the Securities Exchange Act
of 1934 or by amendment to this Form 10-K,  in either case on or before  January
28, 1998.

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<PAGE>
                                    
                                     PART I

Item 1.  Business.

General

     Advanced  Communication  Systems,  Inc.  ("ACS" or the "Company")  provides
communications   and  information   technology   services  ("IT  Services")  and
solutions,  predominantly  to U.S.  government  agencies and to a lesser  extent
commercial and international  customers. The Company operates primarily in three
interrelated  areas:  communication  systems design and support, IT Services and
systems  integration.  The Company believes that, from its inception in 1987, it
has been a leader in U.S. Navy satellite  communications  ("SATCOM").  Recently,
using its  information  management  capabilities  in such areas as  network  and
database design and support, the Company has begun to expand its services to the
U.S.  military and to develop  business with other federal  agencies,  state and
local  governments and commercial and international  customers.  The Company has
been profitable  since its inception in 1987, and has achieved a compound annual
growth rate in revenues of 43.2% over the past five fiscal years.  With revenues
of $52.2 million, fiscal 1997 was the tenth consecutive year of revenue growth.

     In 1997, the Company  consummated the initial public offering of its Common
Stock,  selling  2,225,000 shares of Common Stock,  including the  underwriter's
overallotment  option of 375,000 shares, for $7.50 per share. The initial public
offering resulted in net proceeds to the Company of approximately  $14.4 million
after  deducting  underwriting  discounts and offering  expenses  payable by the
Company.

     The Company  acquired RF  Microsystems,  Inc. ("RFM") on September 12, 1997
and  Integrated  Systems  Control,  Inc.  ("ISC")  on  November  26,  1997 . See
"Business -- Recent Acquisitions."

Business Areas

    The three main areas of the Company's business are as follows:

    o   Communication  Systems.  The  Company  designs,   engineers,   develops,
        integrates,   installs  and  operates   satellite   and   computer-based
        communication  systems.  It provides  SATCOM  engineering  and technical
        services   and  program  and  system   support   primarily   to  program
        directorates  and  field  activities  of the U.S.  Navy.  Recently,  the
        Company has expanded its communication  systems business capabilities to
        provide a full range of systems  engineering  procurement  and technical
        support  for  the   Command,   Control,   Communication,   Computer  and
        Intelligence  ("C4I")  initiatives  of the  Department  of Defense  (the
        "DOD").  In  addition,  the  Company has  expanded  its staff to include
        experts in program and financial management, and now provides support in
        these areas to its communication systems customers. The Company believes
        this  combination of skills and  capabilities is one of the factors that
        distinguishes  it from  its  competitors  in the  communication  systems
        business. For fiscal 1997, the Company's  communication systems business
        represented 59.1% of revenues.

    o   IT Services.  The Company  provides a full range of services and support
        in  the  areas  of  information   management   technology,   information
        processing,   network  design  and   operations,   database  design  and
        management,  Internet and  intranet  services  and  multimedia  training
        services.  It  provides  these  services  to a wide range of  customers,
        including the DOD, other federal  agencies and  commercial  enterprises.
        The  advanced  technical   capabilities  gained  by  the  Company  while
        performing  services for government  customers has provided expertise in
        the  information  technology  area,  which the Company is  leveraging to
        develop its commercial  business.  The Company is currently  focusing on
        expanding its IT Services to commercial and international customers. For
        fiscal 1997,  the Company's IT Services  business  represented  14.5% of
        revenues.

    o   Systems  Integration.  The Company provides systems integration services
        for communication systems and, to a lesser extent, acts as a value-added
        reseller of  computer  hardware  and  software  to both  government  and
        commercial customers. The Company's strategy in this business area is to
        concentrate  on  providing  total   communication   systems  integration
        solutions.  Most of this communication  systems integration  business is
        performed  under its contract  (the "GSA  Schedule  Contract")  with the
        General Services  Administration  ("GSA"),  which permits the Company to
        sell  approved  products to U.S.  government  agencies  and  contractors
        without competitive  bidding. The Company's systems integration business
        represented 26.4% of revenues for fiscal 1997.

Industry Overview

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

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

Business Strategy

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

    Maintain  leadership in military SATCOM industry.  Since its inception,  the
Company has focused on being a leader in the military  SATCOM  industry.  It now
seeks  to  expand  its  services  in  this  market  by   continuing   its  early
identification  of program needs,  its support of government  program offices in
formulating requirements and its incremental investments in development of lower
cost military products with shorter delivery times. The Company also believes it
can leverage its expertise with the U.S. Navy SATCOM to expand its presence as a
military SATCOM provider both within the Navy and other branches of the DOD.

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

    Expand through strategic  acquisitions and the use of teaming relationships.
Strategic  acquisitions  are  an  integral  component  of the  Company's  growth
strategy.  The  Company  believes  that  acquisitions  will  allow it to develop
technical services and products it does not currently provide, to target markets
it does not currently serve and, with our increased  capabilities,  successfully
pursue larger  communication and IT Services  opportunities.  Additionally,  the
Company is pursuing teaming relationships with significant industry participants
in order to enhance its ability to participate  in additional  large and complex
procurement programs.

    Develop  additional  commercial  business.  While  servicing its  government
customers,  the Company has developed many advanced  technical  capabilities  in
areas such as  networking,  local area  network  ("LAN")  and wide area  network
("WAN") services and database design and support.  The Company's  strategy is to
apply these skills and capabilities in selected commercial  markets,  especially
small  and  medium-sized  businesses  that are  outsourcing  their  increasingly
complex information technology needs.

Recent Acquisitions

     Since its  initial  public  offering  in July 1997,  the  Company  made the
following acquisitions.  These businesses bring new strengths to ACS's technical
capabilities,  while also extending the Company's customer and geographic reach.
The Company believes that these  acquisitions are major steps in its strategy to
consolidate its superior communication and IT Services capabilities.

     RF Microsystems, Inc.

     The Company completed the acquisition of RFM, a wholly-owned  subsidiary of
REMEC,  Inc.,  on  September  12, 1997 for $5.0  million in cash.  RFM  provides
technical and  engineering  services to the DOD in the areas of  communications,
navigation,  electronic warfare and digital signal systems. Headquartered in San
Diego,  RFM has operations in San Diego, Los Angeles,  and the Washington,  D.C.
area. Its clients  include the Naval Research and  Development  Center,  the Air
Force Space and the  Missile  Center,  the Naval Air Weapons  Center - Aircrafts
Division, and the Naval Undersea Warfare Center.

     Integrated Systems Control, Inc.

     On November 26, 1997, the company acquired all of the outstanding shares of
Common  Stock of ISC in exchange  for  475,000  shares of the  Company's  Common
Stock. ISC provides technical and engineering services to the DOD, primarily the
U.S.  Navy,  in  the  areas  of  communications   and  information   technology.
Headquartered in Virginia Beach, Virginia, ISC has operations in Virginia Beach,
San Diego, Charleston, and the Washington,  D.C. area and lends support services
from a number of sites worldwide, including Japan, Bahrain, Honolulu, Italy, and
Guam. Among others,  its clients include Space and Naval Warfare Systems Command
and  Centers,   Defense  Information   Systems  Agency  Joint   Interoperability
Engineering Office, Naval Air Systems Command, U.S. Coast Guard, and NATO.

Company Operations

     The Company operates primarily in three interrelated  areas:  communication
systems, IT Services and systems integration.

Communication Systems

    The Company  believes it is recognized  as a leader in the SATCOM  industry,
providing  technical and program  management  services and support for satellite
communication  systems to the U.S. military.  It provides SATCOM engineering and
technical  services and program and system support  primarily to various program
directorates and field activities of the U.S. Navy. While the Company  initially
developed  a staff of highly  qualified  communications  engineers  and  systems
analysts to provide state-of-the-art engineering and technical support services,
it has expanded its staff to include experts in program and financial management
as well as  professional  support  personnel with  backgrounds in  communication
systems. The Company believes this combination of skills and capabilities is one
of  the  key  factors  that   distinguishes  it  from  its  competitors  in  the
communication  systems  market.  For fiscal 1997,  the  Company's  communication
systems business represented 59.1% of revenues.

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

    The Company's skills and experience permit it to apply innovative  solutions
to communications  engineering problems.  For example, the Company has developed
receiver,  modulator  and  coder  design  alternatives  for a  major  U.S.  Navy
communication system and has defined satellite payload modifications for a major
military  satellite  program.  The  Company's  expertise  in both  military  and
commercial satellite programs has enabled it to develop innovative military uses
of commercial satellite systems. For instance, the Company developed the concept
which   permitted   the  U.S.  Navy  to  conduct  its  first   worldwide   video
teleconference,  simultaneously  linking  all  European,  Atlantic  and  Pacific
commanders  by satellite  with the Pentagon and a major  command ship at sea. In
addition,  the Company's  engineers have  operational  experience to translate a
user's requirements into practical technical  specifications for a communication
system.  This  experience  has enabled the Company's  engineers to analyze major
Navy  communication  systems,  such  as  High  Speed  Fleet  Broadcast  and  the
Communication   Support   System,   and  project  future  needs  and  technology
requirements.  The  Company's  capability  to  conduct  high  level  theoretical
engineering  tasks,  coupled  with an  intimate  knowledge  of the system  under
investigation,  permits the Company to assist its  customers in avoiding  costly
troubleshooting  efforts on communication problems related to natural phenomena.
Many of these  concepts and  techniques  which were  developed for the U.S. Navy
have natural extensions to other military and commercial applications.

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

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

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

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

    The Company's network management and satellite communications expertise also
permit it to develop  systems for  business  users in  geographically  dispersed
locations. The Company believes that office locations of companies will continue
to become  more  geographically  dispersed  and that the  commercial  market for
systems  to link  these  offices  can be a  significant  opportunity  for future
growth.  The Company has created a product called Virtual Program Office ("VPO")
to capitalize on this emerging market of geographically dispersed companies. VPO
is a suite of user-friendly management tools designed to enable real-time voice,
video and data communications among geographically  dispersed  organizations and
users.  Implemented as a business process reengineering  strategy,  VPO includes
Lotus Notes groupware, desktop video teleconferencing and a series of customized
integrated data management solutions.

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

    o   The Company is the prime  contractor  under a five-year  cost plus fixed
        fee contract awarded by the U.S. Navy in March 1996 to provide technical
        engineering and other support services to a U.S. Navy command.  Although
        there can be no assurance  that the contract will develop as it expects,
        the Company believes the contract has a potential value of approximately
        $84 million over the five-year period of the contract,  which expires in
        fiscal 2001. The contract team  includes,  as  subcontractors,  Computer
        Sciences Corporation,  Booz-Allen and Hamilton, Inc.,  Tele-Consultants,
        Inc. and others.

    o   The Company is the prime  contractor  under a five-year  cost plus fixed
        fee contract  awarded by the U.S. Navy in August 1996 to provide program
        management  support,  financial  management  support,  cost and schedule
        analysis,   information  management  support,   foreign  military  sales
        support,   installation  and  inventory   management  and  configuration
        management  for the PD 70 Integrated  Command,  Control,  Communication,
        Computers and Intelligence ("IC4I") project and staff offices.  Although
        there can be no assurance  that the contract will develop as it expects,
        the Company  believes that the contract could have a potential  value of
        approximately  $36 million over the five-year  period,  which expires in
        fiscal 2001.

    o   The Company is the prime  contractor  under a five-year  cost plus fixed
        fee contract awarded by the U.S. Navy that commenced in October 1993, to
        provide program management support,  financial management support,  cost
        and  schedule  analysis,   configuration  management  for  communication
        systems,    equipment    integration    support,    specification    and
        standardization  support,  integrated  logistics  management support and
        information  management  support  to the  Information  Transfer  Systems
        Directorate  of a U.S. Navy command.  Although there can be no assurance
        that the contract will develop as it expects,  the Company believes that
        the contract could have a potential value in excess of  approximately $3
        million over the remaining  one year of the  contract,  which expires in
        fiscal 1998.

Information Technology Services

    Through  its IT  Services  business,  the  Company  offers a broad  array of
professional   information   technology  services  and  information  systems  to
commercial  and  government  markets.  The IT  Services  offered by the  Company
include information  management systems design and integration;  LAN/WAN design,
installation  and support;  database design and real-time  database  management;
Internet  and intranet  services;  and  multi-media  training  development.  The
advanced technical  capabilities gained by the Company while performing services
for government  customers has provided  expertise in the information  technology
area,  which the Company is leveraging to develop its commercial  business.  The
Company  is  currently  focusing  on  expanding  its  customer  base to  include
commercial  and  international  customers.  For fiscal  1997,  the  Company's IT
Services business represented 14.5% of revenues.

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

    The Company plans and creates conceptual designs,  system designs and system
updates,  including identifying  functional  requirements and creating database,
system and subsystem  specifications.  It performs  feasibility and cost-benefit
studies on system alternatives and presents  recommendations.  It recently won a
competitively awarded contract to conduct a system design and requirements study
for the City of Imperial Beach, California. The Company believes that there is a
substantial demand for these kinds of services and is actively seeking to market
them to small and midsize companies and to municipalities.

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

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

    The  Company  provides a full range of  database  support  using  innovative
solutions to manage  databases and present the information  back to a variety of
end users at the level and detail  specific  to their  needs.  The  Company  has
extensive  expertise in developing and  implementing  plans to migrate data from
legacy  systems  to  modern  technology  products,  as  well as the  design  and
implementation  of new  applications.  The  Company  recently  completed a major
database task for the U.S. Army to provide access to Army databases using a data
warehousing approach.  The Company believes that this successful  implementation
will  result in  additional  contracts  from the U.S.  Army to  extend  the data
warehousing to additional databases.

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

    To permit  its  customers  to  communicate  more  efficiently,  the  Company
develops  and  implements  both  external  (Internet)  and  internal  (intranet)
connectivity solutions. It conducts needs analyses to define specific objectives
for web sites;  designs  marketing  objectives and  strategies;  provides design
services  for the  appearance  of web  sites;  provides  technical  and  project
management  services and support;  hosts  customer web sites on its server;  and
provides web site  promotional  services to create the desired site traffic.  An
example  of a web page  developed  and hosted by the  Company is the  Children's
Hospice     International    home    page,    which    can    be    viewed    at
http://www.chionline.org.

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

Systems Integration

    The Company provides systems integration for communication  systems and to a
lesser extent acts as a value-added reseller of computer hardware,  software and
integrated  systems  to both  government  and  commercial  customers.  Sales  to
government  customers are through the Company's GSA Schedule Contract.  Sales to
commercial  customers also are through the GSA Schedule  Contract (to government
contractors) or through direct  contracts with other commercial  customers.  The
Company  supports the systems and products it sells by providing its customers a
wide range of services,  including  employee training,  maintenance,  repair and
user  assistance.  The Company offers  individual  components of its systems and
other  products  from  various  vendors  for  resale  through  the GSA  Schedule
Contract.  The resale  business  often provides the  opportunity  for additional
systems  integration  business.   The  Company's  systems  integration  business
represented 26.4% of revenues for fiscal 1997.

    The Company  believes that a market  opportunity has developed as government
and commercial customers have begun to migrate to systems composed of commercial
off-the-shelf  hardware  and  software  components.  Its  strategy  has  been to
anticipate  the systems needs of customers and to develop  systems using readily
available  commercial hardware and software.  This strategy differs from that of
many  of  the  Company's  reseller  competitors,   which  traditionally  provide
individual hardware and software items for resale without integration,  and many
of its  integration  competitors,  which  traditionally  have  developed  entire
systems. The Company concentrates on relatively low quantity  procurements which
are not  cost-competitive  for large  systems  integration  companies,  applying
system knowledge gained through  following  technology trends and providing ease
of  procurement  through a GSA Schedule  Contract for  government  customers and
direct  purchase for  commercial  customers.  A recent  example of this strategy
resulted in the sale to the U.S. Navy of over $4.0 million of  integration  work
for extra high frequency communications controllers.

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

Products

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

SALTS

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

    The  SALTS  technology  originally  was  developed  by the  U.S.  Navy as an
alternative data  transmission  system so that the transmission of logistics and
administrative  data would not interfere with the  transmission of tactical data
during the Persian Gulf war. Following the Persian Gulf war, the Navy contracted
with the  Company to operate and enhance  the SALTS  system.  Subsequently,  the
Company has customized versions of SALTS for other specialized applications. For
example,  the Army's 18th Airborne Corps and the troops  occupying Haiti used it
to exchange  accounting data. In addition,  SALTS successfully  conveyed mission
support data during other major military operations and disaster relief efforts.
The Company's  first  commercial  application  of the SALTS  technology  was the
Company's  USO-GRAM program,  introduced in 1994, under which sailors at sea and
persons on shore can exchange e-mail messages.

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

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

BGIXS

    BGIXS  ("Battle  Group  Information  Exchange  System") was developed by the
Company  as a way to  permit  reliable  and  efficient  data  communication  (as
compared  to text  communication  only)  between  land,  sea and  air  units  in
half-duplex mode using a hub/spoke  architecture.  First marketed in 1993, BGIXS
uses commercial off-the-shelf technology to permit PC-to-PC transfer of tactical
data between a headquarters  host and supporting  forces using satellite  links.
Additionally,  BGIXS permits rapid file  transfer with  guaranteed  delivery and
provides  multimedia  capability.  The  U.S.  Navy and the UK  Royal  Navy  have
purchased  BGIXS systems,  and the Company is actively  marketing the product to
other foreign military organizations in friendly countries.

Pelican

    Pelican couples the data transfer  capabilities of BGIXS with high frequency
radio  communications  to provide an  integrated,  self-contained  communication
system to those  organizations  using high frequency radio rather than satellite
communications. Pelican is based on a commercial open systems architecture using
readily   available   commercial   hardware  and  software  that  provides  data
compression  and   packetization   for  efficient   transmission.   The  Pelican
communication protocol provides maximum operational  flexibility through the use
of multiple  modes of  transmission,  on-demand  push/pull of files to a distant
host, store and forward file transfer and silent broadcast by the distant host.

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

Financial Management Software

    The  Company  develops  and offers a variety of  software  products  used to
support  customers'  financial  functions.  These include:  PRECEPT 5000, a cost
estimating  tool; FMIS, an Oracle-based  financial  management  system;  FTS, an
application for financial  tracking which can be coupled with FMIS for a broader
financial  management and tracking  system;  and EMT, an engineering  management
tool  that  has  functionality  similar  to FTS and can be tied to  FMIS.  These
software  products can be customized or adapted to meet a particular  customer's
needs.

Marketing

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

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

Government Contracts

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

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

    Under the Company's GSA Schedule Contract, government agencies may purchase,
at prices  approved  by the GSA,  hardware  and  software  integration,  systems
engineering,  automated data processing services,  hardware and software, repair
(service and parts) and training,  without further competitive bidding. Products
that the Company can provide under the GSA Schedule Contract must be approved by
the GSA prior to being offered to end-users.  Also, at the time the contract was
initially  awarded and at each contract  renewal,  prices to end-users under the
contract  are set for the  duration  of the  contract  at a  specified  level or
specified  levels  varying over time. The contract is a fixed price contract and
does not have any pre-set  delivery  schedules  or  obligation  to purchase  any
significant amount of goods or services.  The GSA Schedule Contract is renewable
annually  and the  current  contract  term  expires in March  1998.  The Company
believes that the GSA Schedule  Contract will be renewed,  although there can be
no assurance to this effect.

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

    A   significant   portion  of  the   Company's   revenues   in  fiscal  1997
(approximately  23%) was generated by U.S.  government  contracts awarded to the
Company  through small  business  set-aside  programs.  The Company no longer is
eligible to  participate in some of these programs and, as its revenues and size
expand,  it will lose its  eligibility to participate in more of these programs.
There can be no assurance that the Company will be able to replace revenues from
these contracts.

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

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

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

Backlog

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

    Many  of the  Company's  contracts  are  funded  from  year to  year,  based
primarily on the  procuring  company's  or agency's  fiscal  requirements.  This
results in two  different  categories of contract  backlog:  funded and unfunded
backlog. "Funded backlog" represents the sum of contract amounts for which funds
have been specifically obligated to contracts by customers, which in the case of
a U.S.  government  contract requires  appropriation by the U.S. Congress to the
applicable  agency and  allocation  to the  contract  by the  agency.  "Unfunded
backlog"  represents  future  contract  or  option  amounts  that  have not been
specifically  obligated  by  customers.  "Backlog"  is the total of  funded  and
unfunded backlog.

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

                                                      September 30,
                                           -----------------------------------
                                              1995        1996        1997
                                              ----        ----        ----
                                                      (in thousands)
        Backlog Component
        Funded............................. $ 3,255    $  6,437    $  5,323
        Unfunded...........................  29,920     132,803     141,314
                                             -------   --------    --------
        Total.............................. $33,175    $139,240    $146,637
                                             =======   ========    ========
                                       
    The Company believes that  approximately  37% of its backlog as of September
30,  1997 will  result in revenues in fiscal  1998.  However,  the Company  also
believes  that backlog is not  necessarily  indicative of future  revenues.  The
Company's  backlog  typically  is subject to large  variations  from  quarter to
quarter  as  existing  contracts  are  renewed  or new  contracts  are  awarded.
Additionally,  all U.S. government contracts included in backlog, whether funded
or unfunded, may be terminated at the convenience of the government.

Competition

    The Company experiences significant competition in all of the areas in which
it does business. In general, the markets in which it competes are not dominated
by a single company or a small number of companies;  instead,  a large number of
companies offer services that overlap and are competitive  with those offered by
the Company.  Many of its competitors are significantly  larger and have greater
financial  resources  than  the  Company,  and  some of  these  competitors  are
divisions or  subsidiaries of large,  diversified  companies that have access to
the  financial  resources of their parent  companies.  There can be no assurance
that the Company will be able to compete successfully.

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

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

Employees

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

    As of November 30, 1997, the Company  employed 529 people,  439 of whom were
directly involved in computer and information  systems  programming,  design and
engineering,  and 90 of whom were in executive and administrative functions. The
Company  believes  that its relations  with its employees are good.  None of the
Company's employees are covered by collective bargaining agreements.

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

Item 2.  Description of Property.

    The  Company's  headquarters  occupies  approximately  22,200 square feet at
10089 Lee Highway, Fairfax,  Virginia. This space is provided under the terms of
a lease from 10089  Management,  L.L.C.,  a Virginia limited  liability  company
("10089 Management") and a related party to the Company, that expires August 31,
2003. In the United States,  the Company  occupies  approximately  83,400 square
feet in offices in Fairfax, Virginia; Arlington, Virginia; Alexandria, Virginia;
Virginia Beach, Virginia;  Charleston, South Carolina; San Diego, California; El
Segundo,  California;  Colorado  Springs,  Colorado;  and Lusby,  Maryland.  The
Company also maintains an office near Plymouth,  England.  The Company  believes
that its  current  facilities  are  adequate  for its  existing  needs  and that
additional suitable space will be available as required.

Item 3.  Legal Proceedings.

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

Item 4.  Submission of Matters to a Vote of Security Holders.

     No matters were submitted  during the fourth quarter of fiscal year 1997 to
a vote of security holders.


<PAGE>


                                   PART II

Item 5.  Market  for the  Registrant's  Common  Equity and  Related  Stockholder
Matters.

     The Company's  Common Stock has been traded on the Nasdaq  National  Market
(Symbol:  ACSC) since June 27,  1997.  As of December  10,  1997,  there were 53
shareholders  of  record of Common  Stock.  The  Company  believes  that,  as of
December 10, 1997, there were  approximately  3,400 beneficial  owners of Common
Stock.

     The following  table sets forth the high and low sales prices of the Common
Stock of the Company as reported by the Nasdaq  National  Market for each of the
quarters  indicated.  Pricing information for previous quarters is not available
as the Company's Common Stock was not publicly traded prior to June 27, 1997.

                                          High               Low
                  1997
                  3rd Quarter            $8 1/4             $7 1/2
                  4th Quarter            $13                $7 1/2

   Dividend Policy

    The Company does not  anticipate  declaring or paying cash  dividends in the
foreseeable future. In addition, the Company's existing credit facility contains
provisions  which  could have the  effect of  limiting  its  ability to pay cash
dividends. See "Note 10 of the Consolidated Financial Statements."

   Recent Sales of Unregistered Securities

    In November  1997,  the Company issued 475,000 shares of Common Stock to the
shareholders  of ISC in connection  with its  acquisition of all the outstanding
shares of ISC Common  Stock.  The  offering was exempt from  registration  under
Section 4(2) of the  Securities  Act of 1933 as a transaction  not involving any
public offering. See "Business -- Recent Acquisitions."

   Uses of Proceeds from Registered Securities

    Information  regarding  use of proceeds  from the July 1997  initial  public
offering is given below:

   Effective Date of Registration
   Statement (Reg. No. 333-23959):               June 26, 1997
   Offering Date (1):                            June 27, 1997
   Names of managing underwriters:               A.G. Edwards & Sons, Inc.
                                                 Ferris, Baker Watts
   Title of each class of securities registered: Common Stock, par value $0.01
   Company and selling shareholders:
   Amount of shares registered and sold
       Company                                   2,225,000
       Selling shareholders                        650,000
   Aggregate offering price of shares
   registered and sold
       Company                                   $16,687,500
       Selling shareholders                      $ 4,875,000
    Actual offering expenses (2):
       Underwriting discounts and commissions    $ 1,168,125
       Other expenses                            $ 1,155,956
       Total expenses                            $ 2,324,081
    Net proceeds after expenses:                 $14,363,419
    Use of proceeds:
       S corporation distribution (3)            $ 6,624,409
       Acquisitions                              $ 5,160,000
       Working capital and general   
       corporate purposes                        $ 2,579,010

(1)  The  offering  terminated  after  the  sale  of all  securities  that  were
     registered  under the  Registration  Statement
(2)  All  expenses  were  direct payments  to  others. 
(3)  The  S  corporation   distribution  was  made  to  the   then-existing
     shareholders of the Company, including George A. Robinson, Charles G. 
     Martinache and Thomas A. Costello.


<PAGE>


Item 6.  Selected Financial Information.

                                            Year Ended September 30,
                                   1993      1994      1995     1996    1997(3)
                                   -----     -----    -----     -----   ------
                                      (in thousands, except per share data)
   Statement of Operations Data:
   Revenues..................... $12,223   $19,106  $23,724   $31,665   $52,194
   Direct costs.................   7,050    11,418   14,815    19,307    37,687
   Indirect, general and           
    administrative expenses.....   4,612     7,177    8,202    10,253    11,128
                                  ------    ------   ------    ------    ------
   Income from operations.......     561       511      707     2,105     3,379
   Other income (expense), net..     (78)      (73)    (133)     (200)       17
   Provision for income taxes...      -        -        -         -        (484)
                                  -------  ------- --------  --------  --------
   Net income................... $   483    $  438  $   574   $ 1,905   $ 2,912
                                  =======  ======= ========  ========  ========
       
   Pro Forma Statement of Operations Data (1):

   Net income before taxes......     483       438      574   $ 1,905  $  3,396
   Income taxes.................     193       175      229       743     1,305
                                  -------   -------  -------   -------  -------
   Net income................... $   290     $ 263      345     1,162     2,091
                                  =======  ========  =======   =======  =======
                                                                               
                                                                               
   Net income per share(2)......                               $ 0.27   $  0.44
                                                               =======  =======
   Weighted average shares                                      
    outstanding(2)..............                                4,361     4,767
        -----------------------------------------------------------------------
                                                September 30,
                                1993      1994      1995      1996      1997
                                ----      ----      ----      ----      ----
                                               (in thousands)
Balance Sheet Data:
    Working capital .......   $ 2,231   $ 2,616   $ 2,716   $ 5,387   $ 9,526
    Total assets...........     4,454     6,798     6,987    13,117    26,212
    Total debt ............     1,359     2,031     1,821     2,688      --
    Stockholders' equity...     1,626     2,006     2,497     4,375    13,828


(1) Prior  to  June  25,  1997,  the  Company  elected  to  be  treated  as an S
    corporation  and was not subject to federal and certain  state income taxes.
    The pro forma statement of operations data reflects federal and state income
    taxes  based  on  applicable  rates  as if the  Company  had not  elected  S
    corporation status for the periods indicated.

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

(3) Excludes a one-time,  non-cash  charge of acquired  in-process  research and
    development  costs incurred in connection  with  acquisition of RFM totaling
    $1.9  million  and the related tax benefit of $234,000 or $0.25 per share on
    an after tax basis.

Item 7. Management's  Discussion and Analysis of Financial Condition and Results
of Operations.

    The following  Management's  Discussion and Analysis of Financial  Condition
and  Results  of  Operations  contains   forward-looking   statements  based  on
management's current expectations, estimates and projections about the Company's
industry, management's beliefs and certain assumptions made by management. These
forward-looking  statements involve risks and uncertainties,  and actual results
may differ  materially from those  anticipated or expressed in such  statements.
Potential risks and uncertainties  include,  among others, those set forth under
the "Risk  Factors"  section of the Company's  final  prospectus  dated June 27,
1997,  as filed with the  Commission.  Except as  required  by law,  the Company
undertakes no obligation to update any forward-looking  statement,  whether as a
result of new information, future events or otherwise.

Overview

    The Company provides  communications and information technology services and
solutions,  predominantly  to U.S.  government  agencies and to a lesser  extent
commercial and international  customers. The Company operates primarily in three
interrelated  areas:  communication  systems design and support, IT Services and
systems  integration.  The Company has been  profitable  since its  inception in
1987,  and has achieved a compound  annual growth rate in revenues of 43.2% over
the past five fiscal years. With revenues of $52.2 million,  fiscal 1997 was the
tenth consecutive year of revenue growth.

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

    The  Company's  backlog,  including  both funded and unfunded  backlog,  was
$146.6 million at September 30, 1997. Two five-year U.S. Navy contracts  awarded
in fiscal 1996 involve services estimated at approximately $120 million and were
the main  contributors to the recent increase in backlog.  Many of the Company's
contracts  are  funded  from  year to year,  based  primarily  on the  procuring
company's  or  agency's  fiscal  requirements.  The  estimated  backlog  under a
government contract is not necessarily indicative of revenues that will actually
be realized  under that contract.  Congress  normally  appropriates  funds for a
given program on a fiscal year basis,  even though actual  contract  performance
may take many years. As a result, contracts ordinarily are only partially funded
at the time of award,  and  additional  monies  are  normally  committed  to the
contract  by the  procuring  agency as  appropriations  are made by  Congress in
subsequent  fiscal  years.   There  can  be  no  assurance  that  Congress  will
appropriate funds or that procuring  agencies will commit funds to the Company's
contracts  for their  anticipated  terms.  In  addition,  most of the  Company's
government  contracts have a base term of one year and a number of option years.
There can be no assurance that the government will extend a contract through its
option years.  Many of the Company's  large  contracts  require that the Company
supply services upon request,  and the Company  receives no payments under these
contracts  until such  services are  requested  and  performed.  There can be no
assurance that  cancellations or scope  adjustments of these contracts might not
occur or that the Company's  services under these contracts will be requested at
the anticipated levels in the future.

    Revenues,  by dollar and percentage,  from the Company's three  interrelated
areas and three major types of customer are given below:

                                      Year Ended September 30,
                                    1995           1996              1997
                                    ----           ----              ----
                                        (dollars in thousands)
Services Provided
Communication Systems ...   $17,785     75%   $20,422     65%   $30,854    59%
IT Services..............     4,634     19      8,008     25      7,563    15
Systems Integration......     1,305      6      3,235     10     13,777    26
                            -------    ----   -------    ----   -------   ----
Total                       $23,724    100%   $31,665    100%   $52,194   100%
                            =======    ====   =======    ====   =======   ====
Customer Type
U.S. Government..........   $23,483     99%   $28,607     90%   $48,284    92%
Commercial ..............       219      1        848      3      1,997     4
International ...........        22      0      2,210      7      1,913     4
                            -------    ----   -------    ----   -------   ----
                                                                              
Total....................   $23,724    100%   $31,665    100%   $52,194   100%
                            =======    ====   =======    ====   =======   ====

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

                                              Year Ended
                                             September 30,
                                           1995   1996   1997
                                           ----   ----   ----
                    Cost reimbursement..    77%    68%    59%
                    Fixed price.........    16     25     35
                    Time and materials..     7      7      6
                                           ---    ---    ---
                      Total.............   100%   100%   100%
                                           ===    ===    ===
                   

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

    The Company's three  significant U.S. Navy  communication  systems contracts
and  programs  accounted  for  approximately  51% of revenues  for fiscal  1997.
Although the Company intends to expand its commercial and international sales, a
relatively  small  number of  contracts  are likely to continue to account for a
significant  portion  of  the  Company's  future  revenues.   For  fiscal  1997,
approximately  26% of the  Company's  revenues were derived from sales under the
GSA  Schedule  Contract.  The GSA  Schedule  Contract  is a  one-year  contract,
renewable  annually by the government.  Termination of any of these contracts or
the  Company's  inability to renew or replace them when they expire could have a
material  adverse  effect on the  Company's  business,  financial  condition and
results of operations.

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

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

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

    Approximately 23% of the Company's  revenues in fiscal 1997 was generated by
U.S.  government  contracts  awarded  to  the  Company  through  small  business
set-aside programs.  The Company no longer is eligible to participate in some of
these  programs  and,  as its  revenues  and  size  expand,  it  will  lose  its
eligibility to participate in more of these programs.  There can be no assurance
that the Company will be able to replace revenues from these contracts

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

    During fiscal 1997, revenues from international business amounted to 3.7% of
revenues. The vast majority of the Company's international business revenues are
derived  from  sales  of the  Company's  products  to  foreign  navies  and  the
performance of services related to such sales. Because international business to
date has had higher profit margins than U.S. government  business,  an inability
to obtain future  international  business could  adversely  affect the Company's
financial  condition  and  results of  operations.  Because  both the  Company's
expenses  and  its  revenues  from  its  international  business  are  generally
denominated  in U.S.  dollars,  the Company does not believe that its operations
are subject to material risks associated with currency fluctuations.

     A part  of  the  Company's  business  strategy  calls  for  growth  through
acquisitions.  The Company has successfully  completed two acquisitions,  RFM in
September  1997 and ISC in  November  1997.  Since the  respective  dates of the
acquisitions,  the Company has integrated  these  acquired  entities in order to
draw on the Company's base of technical  expertise and capabilities in designing
solutions for government and commercial clients. Identifying and pursuing future
acquisition  opportunities  will require a significant amount of management time
and skill.  There can be no assurance  that the Company will be able to identify
suitable acquisition candidates,  consummate any acquisition on acceptable terms
or successfully integrate acquired business operations.  Future acquisitions may
entail the payment of  consideration  in excess of book value, may result in the
issuance of additional shares of the Company's Common Stock or the incurrence of
additional  indebtedness  and could have a dilutive  effect on the Company's net
income per share.

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

Results of Operations

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

                                              Year Ended September 30,
                                              1995      1996     1997
                                              ----      ----     ----
Revenues ...............................     100.0%    100.0%   100.0%
Direct costs ...........................      62.4      61.0     72.2
Indirect, general and administrative       
expenses ...............................      34.6      32.4     21.3
Acquired in-process R&D costs ..........        -         -       3.7
                                              -----     -----    -----
Income from operations..................       3.0       6.6      2.8
Other income (expense), net.............      (0.6)     (0.6)     --
                                              -----     -----    -----
Net income..............................       2.4       6.0      2.8
Pro forma income taxes..................       1.0       2.3      1.0
                                              -----     -----    -----
Pro forma net income....................       1.4%      3.7%     1.8%
                                              =====     =====    =====

Fiscal 1997 Compared to Fiscal 1996

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

    Direct costs  include  labor costs,  related  fringe  benefits,  subcontract
costs,  material  costs and  other  non-overhead  costs  directly  related  to a
contract.  Direct costs  increased  to $37.7  million for fiscal 1997 from $19.3
million for fiscal 1996.  Direct  costs,  expressed as a percentage of revenues,
increased to 72.2% for fiscal 1997 from 61.0% for fiscal 1996,  primarily due to
an increased  proportion of revenues coming from systems  integration  services.
These services have higher direct costs because the contracts  generally require
the Company to purchase hardware components as part of the services.

    Indirect,  general and  administrative  expenses  include  fringe  benefits,
overhead,  selling and administrative costs, depreciation and amortization,  bid
and proposal  costs and research and  development  expenses.  Indirect  expenses
increased to $11.1  million for fiscal 1997 from $10.3  million for fiscal 1996.
The increase was due primarily to the higher level of revenues  discussed above.
Indirect expenses, expressed as a percentage of revenues, decreased to 21.3% for
fiscal 1997 from 32.4% for fiscal 1996, due to the higher  proportion of systems
integration revenues, which typically have lower associated indirect expenses.

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

    Income from  operations  decreased  30.2%,  to $1.5 million for fiscal 1997,
from $2.1 million for fiscal 1996,  primarily  due to the  above-mentioned  $1.9
million  in-process  research and development  write-off  incurred in connection
with the RFM  acquisition.  Excluding  the $1.9 million  write-off,  income from
operations  increased  60.5%,  to $3.4 million for fiscal 1997. This increase is
primarily  due to  increased  revenues  from U.S.  Navy  contracts  and  systems
integration.  Excluding the in-process research and development write-off,  as a
percentage of revenues,  income from operations  decreased  slightly to 6.5% for
fiscal  1997,  from  6.6%  for  fiscal  1996,  primarily  attributable  to lower
high-margin international revenues.

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

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

Fiscal 1996 Compared to Fiscal 1995

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

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

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

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

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

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

Quarterly Results of Operations

    The  following  tables set forth certain  unaudited  statement of operations
data for the last eight  quarters,  and such data  expressed as a percentage  of
revenues  for  each  quarter.  This  data has been  derived  from the  Company's
unaudited  quarterly  financial  statements.   In  management's  opinion,  these
quarterly financial statements have been prepared on a basis consistent with the
audited  financial   statement  contained  elsewhere  herein,  and  include  all
adjustments,  consisting only of normal recurring adjustments, which the Company
considers necessary for a fair presentation of the information  presented,  when
read in conjunction with the Company's  audited  Financial  Statements and Notes
thereto appearing  elsewhere  herein.  The results of operations for any quarter
and any quarter-to-quarter  trends are not necessarily indicative of the results
to be expected for any future periods.
<TABLE>
<CAPTION>

                                                         Three Months Ended
                                          Fiscal 1996                          Fiscal 1997
                                   ---------------------------      ----------------------------------
                                   Dec.   Mar.   June.    Sept.     Dec.      Mar.     June    Sept.
                                    31,    31,    30,      30,       31,       31,      30,     30,
                                   1995   1996   1996     1996      1996      1997     1997    1997
                                   ----   ----   ----    -----      ----     -----    -----    -----
     <S>                          <C>    <C>    <C>     <C>        <C>      <C>      <C>      <C>
    
    Revenues......................$5,775 $7,261 $7,215  $11,415    $9,066   $12,064  $14,379  $16,685
    Direct costs.................. 3,331  3,864  4,475    7,638     6,038     8,708   10,432   12,509
    Indirect, general and
      administrative expenses..... 2,027  2,748  2,358    3,121     2,442     2,583    3,040    3,063
    Acquired in-process R&D costs.    -      -      -        -         -         -        -     1,910
                                   -----  -----  -----   ------     -----    ------   ------   ------
    Income from operations........   417    649    382      656       586       773      907    (797)
                                   =====  =====  =====   ======     =====    ======   ======   ======
</TABLE>
<TABLE>
    

<CAPTION>
                                                   (as a percentage of revenues)
    <S>                            <C>     <C>     <C>     <C>       <C>     <C>      <C>      <C>
    Revenues.......................100.0%  100.0%  100.0%  100.0%    100.0%  100.0%   100.0%   100.0%
    Direct costs................... 57.7    53.2    62.0    66.9      66.6    72.2     72.6     75.0
    Indirect, general and
      administrative expenses...... 35.1    37.9    32.7    27.4      26.9    21.4     21.1     18.4
    
    Acquired in-process R&D costs..   -       -       -       -         -       -        -      11.4
                                   ------  ------  ------  ------    ------  ------   ------   ------
                                                                    
    Income from operations......     7.2%    8.9%    5.3%    5.7%      6.5%    6.4%     6.3%    (4.8)%
                                   ======  ======  ======  ======    ======  ======   ======   ====== 
</TABLE>

    The Company's  revenues and earnings may  fluctuate  from quarter to quarter
based on such factors as the number,  size and scope of  projects,  expenditures
required  by the  Company,  delays,  employee  utilization  rates,  adequacy  of
provisions for losses,  accuracy of estimates of resources  required to complete
ongoing projects,  general economic  conditions and acquisition related charges.
Demand for the Company's  products and services in each of the markets it serves
can vary  significantly  from  quarter to quarter due to  revisions  in customer
budgets  or  schedules   and  other  factors   beyond  the  Company's   control.
Additionally,  a change in revenue  mix from  quarter  to quarter  may result in
fluctuating earnings, as experienced by the Company on the sale of higher margin
products to international customers in the quarters ending December 31, 1995 and
March 31, 1996.

Liquidity and Capital Resources

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

    The Company used cash from  operating  activities of $1.6 million for fiscal
1997,  resulting  primarily from net income,  increases in accounts  payable and
accrued expenses,  offset by increases in contract receivables.  The increase in
contract  receivables was due to increased revenues from the two large U.S. Navy
contracts awarded to the Company during fiscal 1996 and from systems integration
and resale business under the GSA Schedule Contract.

    The Company  generated cash flow from  operating  activities of $165,000 and
$545,000 for fiscal 1996 and 1995, respectively.  Net cash provided by operating
activities  for fiscal 1996 resulted  primarily from net income and increases in
accounts payable and accrued expenses, partially offset by increases in contract
receivables.  Net cash  provided  by  operating  activities  in fiscal  1995 was
primarily  the result of net income,  non-cash  charges and increases in accrued
expenses, partially offset by increases in contract receivables and decreases in
accounts payable.

    The principal use of cash for investing activities has been for the purchase
of computers and  equipment.  These  purchases  totaled  $678,000,  $370,000 and
$270,000  for fiscal 1997,  1996 and 1995,  respectively.  Further,  the Company
invested $626,000, $-0- and $240,000 in software development costs for its SALTS
products in fiscal 1997, 1996 and 1995, respectively.

    In March 1997, the Company  extended its line of credit under more favorable
terms.  The new line permits  borrowing  up to $5.0 million and bears  interest,
payable  monthly,  at the  bank's  prime rate plus a  percentage,  not more than
0.25%, that depends on the Company's historical financial performance.  The line
of credit  expires on February  28,  1998.  Borrowings  are limited by specified
percentages  of  specific  contract  receivables  and are  secured by all assets
including inventory,  contract receivables and intangibles. The credit agreement
contains various  covenants  requiring the Company to maintain certain financial
ratios,  including tangible net worth, liabilities to tangible net worth, funded
debt to operating  cash flow and debt service.  The agreement also restricts the
payment  of  dividends.  As of the  end  of  fiscal  1997,  the  Company  was in
compliance with all covenants  contained in such agreement.  As of September 30,
1997,  there  was no debt  outstanding  under  the  Company's  revolving  credit
facility.

    The Company  leases  office  space from 10089  Management,  which has as its
majority  members  Messrs.  Robinson,  Martinache  and  Costello,  the principal
stockholders  and  directors  and  officers  of the  Company.  The  Company  had
guaranteed 10089 Management's bank borrowings,  but this guaranty was terminated
upon the closing of the initial public offering.

    The Company  consummated  the initial public offering of its Common Stock in
July 1997, selling 2,225,000 shares of Common Stock, including the underwriter's
overallotment  option of 375,000 shares, for $7.50 per share. The initial public
offering resulted in net proceeds to the Company of approximately  $14.4 million
after  deducting  underwriting  discounts and offering  expenses  payable by the
Company.

    In connection with the termination of the Company's S corporation status and
its initial  public  offering,  the Board of  Directors  declared a $6.6 million
dividend of its previously  undistributed  S corporation  earnings in June 1997.
The  distribution  was made as follows:  $3.4  million,  in kind, in the form of
contract receivables in June 1997, and $3.2 million in cash in July 1997.

     The Company is regularly evaluating potential  acquisition  candidates.  In
September 1997, the Company acquired all of the outstanding capital stock of RFM
for $5.0 million in cash. The  acquisition has been accounted for as a purchase,
and the financial results of RFM have been included in the results of operations
from the date of acquisition. The total purchase price has been allocated to the
acquired  assets and  liabilities  assumed  at their  estimated  fair  values in
accordance  with the provisions of Accounting  Principles  Board Opinion No. 16.
The estimated excess of the purchase price over the net assets acquired is being
carried as goodwill,  in the amount of $1,671,000,  which will be amortized over
its  estimated  useful life of fifteen  years.  The  consolidated  statement  of
operations  includes a $1.9 million charge taken at the time of the  acquisition
for acquired research and development costs related to acquired  technology that
has not reached  technological  feasibility  and that has no alternative  future
use. In April 1997,  the  Company  acquired  Fairfax  Communications,  Ltd.  for
$46,500  in  cash.  See  "Note  4 of  the  Consolidated  Financial  Statements."
Subsequent to the year end, in November  1997,  the Company  acquired all of the
outstanding capital stock of ISC in exchange for 475,000 shares of the Company's
Common Stock. See "Note 4 of the Consolidated Financial Statements."

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

Recently Issued Financial Accounting Standards

    Effective for fiscal 1998, the Company adopted SFAS No. 123, "Accounting for
Stock-Based Compensation",  and, as permitted by this standard, will continue to
apply the recognition and measurement  principles of Accounting Principles Board
Opinion No. 25 to its stock options. This statement requires footnote disclosure
of the pro forma impact on net income and earnings per share of the compensation
cost that would have been recognized if the fair value of all stock-based awards
was recorded in the income statement. See "Note 12 of the Consolidated Financial
Statements."

    In March 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings Per Share" which simplifies the standards for computing EPS previously
found in Accounting Principles Board Opinion No. 15 and makes them comparable to
international EPS standards. The Statement is effective for financial statements
issued for periods  ending  after  December 15, 1997.  Had this  statement  been
effective for the years ended  September 30, 1997 and 1996,  earnings would have
been presented as follows:

          Year ended September 30              1997       1996
          -----------------------              ----       ----
          EPS-basic ......................... $0.20      $0.28
          EPS-diluted .......................  0.19       0.27

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

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

    SFAS  131  establishes  standards  for  the way  that  the  public  business
enterprises  report  information  about operating  segments in annual  financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports issued to shareholders.  It also
establishes  standards  for related  disclosures  about  products and  services,
geographic areas, and major customers.  This Statement supersedes FASB Statement
No. 14, "Financial Reporting for Segments of a Business Enterprise", but retains
the requirement to report information about major customers.  It amends FASB No.
94,  "Consolidation of All Majority-Owned  Subsidiaries",  to remove the special
disclosure requirements for previously unconsolidated subsidiaries.

    At this point,  the Company has not  determined  the impact of adopting SFAS
131.


<PAGE>



Item 8.  Index to Financial Statements

Advanced Communication Systems, Inc.
                                                                       Page

 Report of Independent Public Accountants............................   21
 
 Consolidated Balance Sheets as of September 30, 1997 and 1996.......   22
 
 Consolidated Statements of Operations for the Years Ended September
 30, 1997, 1996 and 1995.............................................   23

 Consolidated Statements of Changes in Stockholders' Equity for the 
 Years ended September 30, 1997, 1996 and 1995.......................   24

 Consolidated Statements of Cash Flows for the Years Ended September
 30, 1997, 1996 and 1995.............................................   25

 Notes to Consolidated Financial Statements..........................   26
 


<PAGE>



                    Report of Independent Public Accountants

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

We have  audited  the  accompanying  consolidated  balance  sheets  of  Advanced
Communication  Systems,  Inc. (a Delaware  corporation) and subsidiaries,  as of
September  30,  1997  and  1996,  and the  related  consolidated  statements  of
operations,  stockholders' equity, and cash flows for each of the three years in
the  period  ended  September  30,  1997.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

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

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

ARTHUR ANDERSEN LLP

Washington, D.C.
November 7, 1997

<PAGE>





                      ADVANCED COMMUNICATION SYSTEMS, INC.

                           CONSOLIDATED BALANCE SHEETS
                 (in thousands, except share and per share data)

                                                                September 30,
                                                         -----------------------
                                                              1997        1996
                                                         ------------ ----------
                                         ASSETS
Current assets:
Cash and cash equivalents ................................   $  2,744  $  1,177
Contract receivables .....................................     17,643     9,987
Other  receivables .......................................        154        69
Income taxes receivable ..................................        529      --   
Inventories ..............................................        544      --
Prepaid expenses .........................................        296       208
                                                             --------  --------
  Total current assets ...................................     21,910    11,441
                                                             --------  --------
Property and equipment, net ..............................      1,261       571
Other assets:
Notes receivable, stockholders ...........................       --         443
Other related party receivables ..........................         86       138
Software development costs, net ..........................        950       461
Goodwill, net ............................................      1,706      --
Long-term deferred tax asset .............................        147      --
Other assets .............................................        152        63
                                                             --------  --------
  Total other non-current assets .........................      3,041     1,105
                                                             --------  --------
      Total assets .......................................   $ 26,212  $ 13,117
                                                             ========  ========

                          LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable .........................................   $  3,321  $  2,125
Accrued expenses and other current liabilities ...........      8,838     3,476
Billings in excess of revenue ............................        225       362
Deferred income tax liability ............................       --          91
                                                             --------  --------
   Total current liabilities .............................     12,384     6,054
Line of credit ...........................................       --       2,688
                                                             --------  --------
   Total liabilities .....................................     12,384     8,742

Commitments (Note 13)

Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares
  authorized, no shares issued and outstanding ...........       --        --
Common stock, $.01 par value, 40,000,000 shares
  authorized, 8,975,000 shares issued at September 30,
  1997 and 6,750,000 shares issued at September 30, 1996 .         90        67
Paid-in-capital and accretion ............................     14,409    16,506
Retained (deficit) earnings ..............................       (382)    4,520
Adjustment for redemption value greater than amounts paid
 in by stockholders ......................................       --     (16,438)
Less - Treasury Stock, 2,945,000 shares at September 30,
1997 and 3,017,250 shares at September 30, 1996, at cost .       (289)     (280)
                                                             --------  --------
  Total stockholders' equity .............................     13,828     4,375
                                                             --------  --------
      Total liabilities and stockholders' equity .........   $ 26,212  $ 13,117
                                                             ========  ========


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


<PAGE>


<TABLE>

                      ADVANCED COMMUNICATION SYSTEMS, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                      (in thousands, except per share data)

<CAPTION>

                                                            Year Ended September 30,
                                                      ------------------------------------

                                                         1997          1996        1995
                                                      ----------    ----------  ----------

<S>                                                     <C>         <C>         <C>

Revenues ............................................   $ 52,194    $ 31,665    $ 23,724

Direct costs ........................................     37,687      19,307      14,815

Indirect, general and administrative expenses .......     11,128      10,253       8,202

Write-off of acquired in-process R & D costs (Note 4)      1,910        --          --
                                                        --------    --------    --------
Income from operations ..............................      1,469       2,105         707

Interest expense ....................................       (136)       (257)       (185)

Other income, net ...................................        153          57          52
                                                        --------    --------    --------
Income before taxes .................................      1,486       1,905         574

Benefit for income taxes ............................       (250)       --          --   
                                                        --------    --------    --------
Net income ..........................................   $  1,736    $  1,905    $    574
                                                        ========    ========    ========
</TABLE>
<TABLE>
<CAPTION>


Pro forma statements of operations data:
    (unaudited): (Note 2)

       <S>                                              <C>         <C>
       Income before taxes as reported ..............   $  1,486    $  1,905

       Pro forma tax provision ......................        571         743
                                                        --------    --------

       Pro forma net income .........................   $    915    $  1,162
                                                        ========    ========

       Pro forma net income per share ...............   $   0.19    $   0.27
                                                        ========    ========

       Pro forma weighted average shares outstanding       4,767       4,361
                                                        ========    ========
</TABLE>


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








<PAGE>
<TABLE>


                       ADVANCED COMMUNICATION SYSTEMS, INC

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                        (in thousands, except share data)

<CAPTION>
                                                                                                        
                                                                                                Adjustment for
                                                                                                 Redemption
                                                                                                Value Greater 
                                                   Common Stock                                  Than Amounts
                                             -----------------------     Paid-In     Retained     Paid In by   Treasury
                                                Shares       Amount      Capital     Earnings    Stockholders   Stock      Total
                                             ------------ ---------  -----------   -----------  -------------  ---------- -------
<S>                                            <C>            <C>      <C>           <C>          <C>           <C>      <C>
Balance at September 30, 1994 ..............   6,750,000      $67      $  4,864      $ 2,068      ($ 4,796)     ($197)   $  2,006
Net income .................................        --         --          --            574          --         --           574
Sale of treasury stock .....................        --         --          --           --            --            5           5
Purchase of treasury stock .................        --         --          --           --            --          (88)        (88)
Adjustment for redemption value greater            
 than amounts paid in by stockholders ......        --         --           593         --            (593)      --           --
                                               ----------     ----      --------     -------       --------      -----    --------
Balance at September 30, 1995 ..............   6,750,000       67         5,457        2,642        (5,389)      (280)      2,497
Net income .................................        --         --          --          1,905          --         --         1,905
Stockholder distributions ..................        --         --          --            (27)         --         --           (27)
Adjustment for redemption value greater
   than amounts paid in by stockholders ....        --         --        11,049        --          (11,049)      --           --   
                                               ----------     ----      --------     -------       --------      -----    --------
Balance at September 30, 1996 ..............   6,750,000       67        16,506        4,520       (16,438)      (280)      4,375
Net income .................................        --         --          --          1,736          --         --         1,736
Sale of common stock from initial public
  offering .................................   2,225,000       23        14,341        --             --         --        14,364
Sale of treasury stock .....................        --         --          --          --             --           57          57
Purchase of treasury stock .................        --         --          --          --             --          (66)        (66)
Stockholder distributions ..................        --         --          --        (6,625)          --         --        (6,625)
Translation adjustment .....................        --         --          --           (13)          --         --           (13)
Cancellation of stock repurchase agreements.        --         --       (16,438)       --           16,438       --           --   
                                               ----------     ----      --------     -------       --------      -----    --------
Balance at September 30, 1997 ..............   8,975,000      $90      $ 14,409     ($  382)          --        ($289)   $ 13,828
                                               ==========     ====      ========     =======       ========      =====    ========

</TABLE>

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





<PAGE>

<TABLE>


                                        ADVANCED COMMUNICATION SYSTEMS, INC.

                                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                   (in thousands)
<CAPTION>

                                                                             Year Ended September 30,
                                                                       ----------------------------------
                                                                          1997         1996       1995
                                                                       -----------  ---------  ----------
         <S>                                                             <C>          <C>          <C>
         Cash flow from operating activities:
         Net income....................................................  $1,736       $1,905       $574
         Adjustments to reconcile net income to net cash (used in)
             provided by operating activities-            
             Depreciation and amortization.............................     471          402        330
             Write-off of acquired in-process research and development.   1,910          -          -
             Loss on property and equipment............................     -              2          4
             Changes  in  assets and liabilities, net of effects 
              from acquisitions:                 
                 Contract receivables..................................  (9,414)      (5,328)      (282)
                 Other receivables.....................................     (85)         (18)        (3)
                 Prepaid expenses......................................     (84)        (125)       -
                 Income taxes receivable...............................    (636)         -          -
                 Inventories...........................................    (182)         -          -
                 Other related party receivables.......................    (218)         (37)       (53)
                 Long-term deferred tax asset..........................    (147)         -          -
                 Other assets..........................................     (80)         (21)        17
                 Accounts payable......................................     715        1,439       (476)
                 Accrued expenses......................................   4,885        1,874        306
                 Billings in excess of  revenue........................    (502)          79         78
                 Income taxes payable..................................     -             (7)         7
                 Deferred income taxes.................................     (91)         -           (7)
                 Other current liabilities.............................      98          -          -
                                                                       -----------  ---------  ----------
                   Net cash (used in) provided by operating activities.  (1,624)         165        545
                                                                       -----------  ---------  ----------
         Cash flows from investing activities:         
         Collection (advances) of notes receivable-stockholders........     443          (50)         7
         Purchases of property and equipment...........................    (678)        (370)      (270)
         Capitalized software development costs........................    (626)         -         (240)
         Acquisitions, net of cash acquired............................  (4,438)         -          -
         Insurance proceeds from loss of property and equipment........     -            -           23
                                                                       -----------  ---------  ----------
                   Net cash used in investing activities...............  (5,299)        (420)      (480)
                                                                       -----------  ---------  ----------
         Cash flows from financing activities:
         Net proceeds from sale of common stock........................  14,364          -          -
         Net (repayments) borrowings under line of credit..............  (2,701)         867       (209)
         Stockholders' distributions...................................  (3,164)         (27)       -
         Purchase of treasury stock....................................     (66)         -          (88)
         Sale of treasury stock........................................      57          -            5
                                                                       -----------  ---------  ----------
                   Net cash provided by (used in) financing activities.   8,490          840       (292)
                                                                       -----------  ---------  ----------
         
         Net increase (decrease) in cash...............................   1,567          585       (227)
         Cash and cash equivalents, beginning of year..................   1,177          592        819
                                                                       -----------  ---------  ----------

         Cash and cash equivalents, end of period......................  $2,744       $1,177       $592
                                                                       ===========  =========  ==========
</TABLE>

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


<PAGE>



                      ADVANCED COMMUNICATION SYSTEMS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  Organization:

Advanced Communication Systems, Inc. (the "Company") was incorporated in 1987 in
the state of  Delaware.  The Company  provides  communications  and  information
technology services and solutions, predominantly to U.S. government agencies and
to a lesser extent commercial and international  customers.  The Company focuses
its operations in three  interrelated  areas:  communication  systems design and
support,  information  technology  services and systems  integration.  Effective
August 26, 1997, the Company acquired RF Microsystems, Inc. ("RFM") which became
a wholly owned subsidiary of the Company. RFM provides technical and engineering
services  to  the  Department  of  Defense  in  the  areas  of   communications,
navigation,  electronic  warfare and digital signal systems.  RFM has offices in
San Diego, Los Angeles and the Washington, DC area.

2.  Summary of Significant Accounting Policies

Basis of Presentation

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

Pro Forma Net Income Per Share (Unaudited)

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

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

Pro forma fully diluted net income per share approximates primary net income per
share for all periods presented.

Management's Use of Estimates

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

Supplemental Statements of Cash Flows Data

The Company paid income taxes in the amount of $608,000,  $14,000 and $1,000 and
interest  expense of $136,000,  $251,000  and  $175,000  during the fiscal years
ended September 30, 1997, 1996 and 1995, respectively.

Revenue Recognition

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

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

Concentrations of Credit Risk

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

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

Cash and Cash Equivalents

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

Inventories

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

Property and Equipment

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

Software Development Costs

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

Research and Development Expenses

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

Impairment of Long-Lived Assets

The Company reviews its long-lived assets,  including software development costs
and  property  and  equipment,  for  impairment  whenever  events or  changes in
circumstances  indicate that the carrying  amount of the assets may not be fully
recoverable.  To determine  recoverability of its long-lived assets, the Company
evaluates  the  probability  that future  undiscounted  net cash flows,  without
interest  charges,  will be less than the  carrying  amount of the  assets.  The
Company has determined that as of September 30, 1997 and 1996, there has been no
impairment in the carrying value of long-lived assets.

Fair Value of Financial Instruments

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

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

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

3. Initial Public Offering and Distribution to Stockholders

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

4.   Acquisitions

Effective  August 26, 1997, the Company  acquired all of the outstanding  common
stock of RF Microsystems, Inc. ("RFM") for cash consideration of $5,000,000. The
acquisition has been accounted for as a purchase,  and the financial  results of
RFM  have  been  included  in  the  results  of  operations  from  the  date  of
acquisition.  The total purchase price has been allocated to the acquired assets
and  liabilities  assumed at their  estimated fair values in accordance with the
provisions of Accounting  Principles  Board Opinion No. 16. The estimated excess
of the purchase price over the net assets acquired is being carried as goodwill,
in the amount of $1,671,000,  which will be amortized over its estimated  useful
life of fifteen  years.  The  consolidated  statement of  operations  includes a
$1,910,000 charge taken at the time of the acquisition for acquired research and
development   costs  related  to  acquired   technology  that  has  not  reached
technological feasibility and that has no alternative future use.

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

                                                     (unaudited)
                                                    September 30,
                                                   1997       1996
                                                  -------   -------
          (in thousands, except per share data)

          Revenues .............................  $58,195   $37,607
          Net income............................    1,048     1,294
          Net income per share..................    $0.22     $0.30


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

On  November  26,  1997,  the Company  acquired  all the  outstanding  shares of
Integrated Systems Control, Inc. ("ISC") pursuant to a Stock Purchase Agreement,
dated as of October  31,  1997,  by and  between the  shareholders  of ISC.  The
consideration paid was 475,000 shares of the Company's common stock.

The most recent  annual  financial  statements  of ISC (at  December  31,  1996)
disclose  revenues of  $11,123,000,  net income of $301,000  and total assets of
$5,098,000.  The  Company  is in the  process  of  determining  the  appropriate
accounting  treatment  (purchase  or  pooling-of-interests)  for  this  business
combination.  However, management believes that the application of either method
would not produce materially different results in future periods.





5.  Contract Receivables:

Contract receivables consist of the following:

                                                           September 30,
                                                          1997       1996
                                                         -------    ------
                                                           (in thousands)
                                                                  
     U.S. government:
       Amounts billed .................................  $ 2,927    $4,103
       Recoverable costs and accrued profit on
         progress completed; not billed ...............   11,860     5,187
                                                         -------    ------
           Subtotal ...................................   14,787     9,290
     Commercial customers:
       Amounts billed .................................      904       123
       Recoverable costs and accrued profit on
         progress completed; not billed ...............    1,952       574
                                                         -------    ------
           Subtotal ...................................    2,856       697
                                                         -------    ------
           Total ......................................  $17,643    $9,987
                                                         =======    ======

6.  Property and Equipment:

Property and equipment consist of the following:

                                                           September 30,
                                                          1997       1996
                                                         ------     ------
                                                          (in thousands)
     Furniture and equipment .......................     $2,575     $1,561
     Leasehold improvements ........................         18         13
                                                         ------     ------
                                                          2,593      1,574
     Less -- Accumulated depreciation and
     amortization ..................................      1,332      1,003
                                                         ------     ------
     Total property and equipment, net .............     $1,261     $  571
                                                         ======     ======

7.  Software Development Costs:

Software development costs consist of the following:

                                                           September 30,
                                                          1997        1996
                                                         ------       ----   
                                                          (in thousands)
     Cost ............................................   $1,311       $685
     Accumulated amortization ........................      361        224
                                                         ------       ----
     Total software development costs, net ...........   $  950       $461
                                                         ======       ====

Software  development  costs capitalized were $626,000 and $0 in the years ended
September 30, 1997 and 1996,  respectively.  Amortization  expense for the years
ended  September  30,  1997,  1996  and  1995 was  $137,000,  $137,000,  $88,000
respectively.

8.  Accrued Expenses:

Accrued expenses consist of the following:

                                                           September 30,
                                                          1997       1996
                                                         ------     ------
                                                           (in thousands)
     Accrued salaries, benefits and related taxes....    $  984     $  833
     Accrued vacation................................       543        411   
     Accrued bonuses.................................       310        387
     Accrued subcontractor costs.....................     6,579      1,726
     Other...........................................       422        119
                                                         ------     ------
     Total accrued expenses..........................    $8,838     $3,476
                                                         ======     ======

9.  Related-Party Transactions (See Note 4)

In 1993, the Company entered into a ten-year lease with a real estate management
company ("10089 Management") to lease its headquarters  facility.  The owners of
10089 Management include the principal  stockholders of the Company.  The lease,
which  expires  on  August  31,  2003,   requires  current  rental  payments  of
approximately $26,000 per month,  increased annually based on the Consumer Price
Index.

10089 Management  purchased the headquarters  facility,  using in part a loan of
$1,125,000  from a third party lender,  which was guaranteed by the Company.  In
March 1997,  the loan  agreement  was amended to cancel the  guarantee  upon the
initial  public  offering  resulting  in net proceeds to the Company of at least
$10,000,000.  The remaining purchase price was financed through promissory notes
from various  stockholders due to the Company.  Accordingly,  this guarantee was
terminated  upon the closing of the initial  public  offering in July 1997.  The
mortgage  requires  monthly  principal  payments of $6,000 plus  interest  and a
balloon payment for the balance of $750,000 in 1998. The outstanding  balance as
of September 30, 1997 and 1996, was $818,750 and $894,000 respectively.

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

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

10.  Line of Credit:

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

At  September  30,  1997,  and  1996 , the  Company  had  $0  and  $2,688,000  ,
respectively,  outstanding under this arrangement. For the years ended September
30,  1997,  1996 and 1995,  interest  expense  under  this  line of  credit  was
$136,000,  $249,000 and $185,000,  respectively,  at weighted  average  interest
rates of 8.75%, 8.87% and 9.20% respectively.

11. Income Taxes

Following the completion of the Offering,  the Company became subject to federal
and state income taxes. The following  unaudited pro forma  information has been
determined based upon the provisions of SFAS No. 109. This information  reflects
income tax expense  (benefit)  that the Company  would have incurred had it been
subject to federal and state income taxes.


                                                        (unaudited)
                                                  Years ended September 30,
                                                  -------------------------
                                                      1997        1996
                                                    ---------   ---------

     Pro forma income tax provision (benefit)           (in thousands)
     Current
       Federal ..............................         $ 521       $ 708
       State ................................            75          87
     Deferred ...............................           (25)        (52)
                                                      -------     -------
                                                      $ 571       $ 743
                                                      =======     =======

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

                                                        September 30,
                                                             1997
                                                      ---------------

     Statutory federal income tax rate...............       34.0%     
     State income taxes, net of federal tax benefit..        4.9%    
     Other...........................................       (0.5%)
                                                      ---------------
                                                            38.4%
                                                      ===============

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

Under the  provisions of SFAS No. 109, the tax effect of the net operating  loss
carryforwards,  together  with  net  temporary  differences,  represents  a  net
deferred tax asset for which  management has reserved 100% of the operating loss
carryforward.  These  carryforwards  will be benefited for  financial  reporting
purposes when utilized to offset future  taxable  income.  The components of the
net deferred tax assets are as follows:

                                                       September 30,
                                                            1997
                                                      ----------------

                                                       (in thousands)
     Deferred tax assets
       Net operating loss carryforwards..............       $386     
       Acquired in-process R and D write-off.........        729   
       Cash to accrual adjustment....................        607     
       Accrued vacation..............................        116
       Other.........................................        191
                                                      ----------------
                                                           2,029
                                                      ----------------
     Deferred tax liabilities     
       Unbilled receivables..........................     (1,143)     
       Capitalized software development costs........       (307)
       Other.........................................        (46)
                                                      ----------------
                                                          (1,496)
                                                      ----------------
     Net deferred tax asset..........................        533
     Valuation allowance.............................       (386)
                                                      ----------------
     Long-term deferred tax asset....................       $147
                                                      ================




12.  Stockholders' Equity:

Recapitalization and Stock Split

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

Stock Redemption Agreements

All of the outstanding shares of common stock and options,  upon exercise,  were
subject to Stock Redemption Agreements. Under certain circumstances, the Company
was required to buy back the stock at a price equal to fair value, as determined
by the Board of Directors.  Adjustment for redemption value greater than amounts
paid in by stockholders  represents the change in the redemption value per share
of  outstanding  Common Stock in each period.  The  redemption  value per share,
based on the fair market value, was $4.44 and $1.48 as of September 30, 1996 and
1995,   respectively.   The  Stock  Redemption  Agreements  were  terminated  in
connection with the initial public offering and the corresponding  accretion was
removed.  All treasury stock  purchases were a result of the provisions of these
Stock Redemption Agreements.

Stock Plans and Agreements

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

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

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

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

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

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

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

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

                                                                      Weighted
                                                                       Average
                                                           Exercise     Price
                                               Number      Price per     per
                                             of Shares       Share      Share
                                             ---------     ---------  --------
  Shares under option, September 30, 1994 ..    87,750         0.70       0.70
    Options exercised.......................    (6,750)        0.70       0.70
                                             ---------     ---------  --------
  Shares under option, September 30, 1995 ..    81,000         0.70       0.70
    Options granted.........................   148,500         4.44       4.44
    Options exercised.......................       -           0.70       0.70
                                             ---------     ---------  --------
  Shares under option, September 30, 1996 ..   229,500      0.70-4.44     3.12
    Options granted.........................   115,000         6.50       6.50
    Options granted.........................   108,800      7.50-9.875    8.10
    Options exercised ......................   (81,000)        0.70       0.70
    Options forfeited.......................   (13,500)        4.44       4.44
                                              --------     ---------  --------
  Shares under option, September 30, 1997 ..   358,800    $0.70-$9.875   $6.21
                                              ========     =========  ========

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

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

                                                   Year Ended
                                                  September 30,
                                                      1997
                                                  -------------
     Pro forma net income (in thousands) --
       As reported .............................     $ 915
       SFAS No. 123 pro forma ..................     $ 826
     Pro forma net income per share --
       As reported .............................     $0.19
       SFAS No. 123 pro forma ..................     $0.17


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

13.  Commitments:

Lease Commitments

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

       
       Year Ended
      September 30,                        (in thousands)
     ---------------                       --------------
     1998................................     $ 1,146
     1999................................       1,070
     2000................................         737
     2001................................         465
     2002................................         326
     Thereafter .........................         299
                                           --------------
        Total                                  $4,043
                                           ==============

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

Profit-Sharing Plan

The  Company  provides  a   profit-sharing   plan  (401(k)  plan)  which  covers
substantially  all employees.  Under the terms of the plan, the Company may make
discretionary    profit-sharing   contributions   and   discretionary   matching
contributions, each determined annually by the Board of Directors. Contributions
charged to expense for the years ended  September 30, 1997,  1996 and 1995, were
$236,000, $368,000, $320,000, respectively.

14.  Subsequent Events:

Acquisition

    As discussed in Note 4, on November 26, 1997,  the Company  acquired all the
outstanding shares of ISC.

Item  9.  Changes  In and  Disagreements  With  Accountants  on  Accounting  and
Financial Disclosure.

     None.


<PAGE>



                                    PART III

Item 10.  Directors and Executive Officers of the Registrant.

     The information  required by this item is hereby  incorporated by reference
from the Company's  definitive  proxy  statement to be filed with the Commission
under Section 14A of the  Securities  Exchange Act of 1934 on or before  January
28,  1998,  or shall be filed by amendment to this Form 10-K on or prior to such
date.

Item 11.  Executive Compensation.

     The information  required by this item is hereby  incorporated by reference
from the Company's  definitive  proxy  statement to be filed with the Commission
under Section 14A of the  Securities  Exchange Act of 1934 on or before  January
28,  1998,  or shall be filed by amendment to this Form 10-K on or prior to that
date.

Item 12.  Security Ownership of Certain Beneficial Owners and Management.

     The information  required by this item is hereby  incorporated by reference
from the Company's  definitive  proxy  statement to be filed with the Commission
under Section 14A of the  Securities  Exchange Act of 1934 on or before  January
28,  1998,  or shall be filed by amendment to this Form 10-K on or prior to that
date.

Item 13.  Certain Relationships and Related Transactions.

     The information  required by this item is hereby  incorporated by reference
from the Company's  definitive  proxy  statement to be filed with the Commission
under Section 14A of the  Securities  Exchange Act of 1934 on or before  January
28,  1998,  or shall be filed by amendment to this Form 10-K on or prior to that
date.


<PAGE>



                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

     (a)  1.  Financial Statements:

           Report of Independent Accountants

           Consolidated Balance Sheets as of September 30, 1997 and 1996

           Consolidated  Statements of Operations for the Years Ended  September
           30, 1997, 1996 and 1995

           Consolidated  Statements of Stockholders'  Equity for the Years Ended
           September 30, 1997, 1996 and 1995

           Consolidated  Statements of Cash Flows for the Years Ended  September
           30, 1997, 1996 and 1995

           Notes to Consolidated Financial Statements

     (a)  2.  Financial Statement Schedules:

           All  schedules  are omitted  because they are not  applicable  or the
           required   information  is  shown  in  the   Consolidated   Financial
           Statements or the notes thereto under Item 8.

     (a)  3.  Exhibits:

                  Exhibit
                     No.                    Description
                  -------                   -----------  
                   3.1 --  Certificate of  Incorporation of the Company.** 
                   3.2 --  Bylaws of the Company.**
                   3.3 --  Amended  and  Restated Certificate  of  Incorporation
                           of  the  Company.***
                   3.4 --  Amended and Restated Bylaws of the Company.***
                   
                  10.1 --  Employment Agreement, dated June 18, 1993, between 
                           the Company and Warren C. Willis.**
                  10.2 --  Employment  Agreement, dated as of January  2,  1997,
                           between  the  Company  and Dev Ganesan.**
                  10.3 --  1996 Stock Incentive  Plan.*** 
                  10.4 --  1997 Stock Incentive  Plan.****
                  10.5 --  Form of Indemnity Agreement between the Company and 
                           each of its directors  and  executive officers.****
                  10.6 --  Revolving Credit and Security Agreement and Revolving
                           Promissory Note, dated as of March 1, 1997,  between 
                           First Union Commercial Corporation and the Company.**
                  10.7 --  Lease Agreement,  dated July 16, 1993, including 
                           Amendment 1, dated December 1, 1993,  Amendment 2, 
                           dated January 15, 1994,  and Amendment  3, dated 
                           March 15,  1994.**
                  10.8 --  Contract  No.N00039-96-C-0066, effective March 14, 
                           1996, by and between the Company and Space and Naval
                           Warfare Systems Command.** +
                  10.9 --  Contract No. N00039-96-C-0097, effective August 29, 
                           1996, by and between the Company and Space and Naval
                           Warfare Systems Command.** +
                 10.10 --  Form of Tax Indemnification Agreement to be entered 
                           into by the Company and each of its existing 
                           Stockholders.*****
                 10.11 --  Stockholders Agreement.***
                 10.12 --  Stock Purchase Agreement by and between Advanced 
                           Communication Systems, Inc. and REMEC Inc., dated as 
                           of August 26, 1997.******
                 10.13 --  Stock Purchase Agreement by and between Advanced 
                           Communication Systems, Inc. and the Shareholders of 
                           Integrated Control Systems, Inc., dated as of October
                           31, 1997.*******
                 11.1  --  Computation of Per Share  Earnings.*  
                 21.1  --  List of Subsidiaries  of the  Registrant.*
                 23.1  --  Consent of Arthur Andersen LLP.*                 
                 27.1  --  Financial Data Schedule for year ended September 30, 
                           1997. (For SEC purposes only).*
         ----------------------
                             *  Filed herewith.
                            **  Incorporated by reference to the Registration 
                                Statement on Form S-1 (File No. 333-23959) filed
                                by the Company with the SEC on March 26, 1997.
                           ***  Incorporated by reference to Amendment No. 1 to 
                                the Registration Statement on Form S-1 
                                (File No.333-23959) filed by the Company with 
                                the SEC on May 6, 1997.
                          ****  Incorporated by reference to Amendment No. 2 to 
                                the Registration Statement on Form S-1 
                                (File No.333-23959) filed by the Company with 
                                the SEC on May 30, 1997.
                         *****  Incorporated by reference to Amendment No. 4 to 
                                the Registration Statement on Form S-1 
                                (File No.333-23959) filed by the Company with 
                                the SEC on June 25, 1997.
                        ******  Incorporated  by reference to Current Report on
                                Form 8-K filed by the Company  with the SEC on  
                                September  26, 1997.
                       *******  Incorporated  by reference to Current  Report on
                                Form 8-K filed by the Company with the SEC on 
                                December 5, 1997.
                             +  Confidential treatment has been granted for
                                certain portions of this exhibit.

     (b)   Reports on Form 8-K

     On  September  3,  1997,  the  Company  filed a current  report on Form 8-K
pursuant  to Item 5  thereof,  reporting  that on  August  26,  1997 it signed a
definitive agreement to acquire RF Microsystems, Inc., a wholly owned subsidiary
of REMEC, Inc. for $5.0 million in cash.

     On  September  26,  1997,  the Company  filed a current  report on Form 8-K
pursuant to Item 2 thereof,  reporting  that on September  12, 1997, it acquired
all the outstanding shares of RF Microsystems,  Inc., from REMEC, Inc., pursuant
to a Stock Purchase Agreement, dated August 26, 1997.


<PAGE>



                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned,  thereunto duly authorized,  in Fairfax, Virginia
on December 29, 1997.


                                  ADVANCED COMMUNICATION SYSTEMS, INC.


                                      By: /s/ George A. Robinson
                                      ----------------------------
                                               George A. Robinson
                                Chairman, President and Chief Executive Officer

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.

           Signature               Title                           Date
          -----------           -----------                      --------

 /s/  George A. Robinson      Chairman, President             December 29, 1997
 -----------------------   and Chief Executive Officer
      George A. Robinson  (Principal Executive Officer)

 /s/  Dev Ganesan          Executive Vice President,          December 29, 1997
 ----------------           Chief Financial Officer
      Dev Ganesan               and Treasurer
                           (Principal Financial and
                             Accounting Officer)

 /s/  Charles R. Collins          Director                    December 29, 1997
 -----------------------
      Charles R. Collins

 /s/  Thomas A. Costello          Director                    December 29, 1997
 -----------------------
      Thomas A. Costello

 /s/  Charles G. Martinache       Director                    December 29, 1997
 --------------------------
      Charles G. Martinache

 /s/  Wayne Shelton               Director                    December 29, 1997
 --------------------------       
      Wayne Shelton


<PAGE>


                                INDEX TO EXHIBITS

                  Exhibit
                   No.            Description

                  11.1     -- Computation of Per Share Earnings.
                  21.1     -- List of Subsidiaries of the Registrant.
                  23.1     -- Consent of Arthur Andersen LLP.
                  27.1     -- Financial  Data Schedule for year ended  September
                              30, 1997. (For SEC purposes only).