INFODATA SYSTEMS INC.
12150 Monument Drive
Fairfax, VA 22033
April 8, 2002
Dear Infodata Systems Shareholder:
We are writing to update you on recent events at Infodata. As many of you
are aware, on January 10, 2002 Infodata and SAIC signed an "Agreement of Merger"
and our shareholders approved the merger at the Special Shareholder's Meeting on
March 1, 2002. However, on March 1, our major United States Intelligence
Community customer notified us that the scope of a large contract (the "Customer
Contract"), accounting for 40% of our revenue in 2001, was going to be
substantially reduced. We were obviously very disappointed at this event, not
only because of its timing, but because we had performed very well on this
engagement. However, the terms of our contract with the customer give it the
right to change the scope of its services engagement, as is typical of all
government contracts. Therefore, we felt it prudent to immediately scale back
expenses to adjust for the expected loss of revenue. We reduced headcount, cut
our rent and reduced expenditures in other areas.
Under the Agreement of Merger, this contract reduction may entitle SAIC, in
its sole discretion, to terminate the Agreement of Merger at any time. SAIC is
currently evaluating the economic impact of this change and has not yet told us
whether, or on what terms, it will be willing to proceed with the merger.
In the first weeks following the contract notification, we were uncertain
what percentage of the intelligence customer contract would be retained. Now,
after working with the customer over the past several weeks, we believe
approximately 75% of the staff will remain on the contract. Some of our staff
affected by the action are being transferred to other contracts with customers
in the same government community. While some of these assignments are
short-term, it gives us time to pursue other opportunities in different, but
related departments, where we have expertise. In addition, part of the reduction
of our revenue from this contract came from eliminating subcontractors, on which
Infodata earned only a small margin.
For the present, Infodata will continue to operate three business units:
(1) The Information Technology (IT) professional services unit that does
business with the United States Intelligence Community; (2) the IT professional
services group that designs and implements complex web content
management and document management systems for commercial and government clients
such as Pfizer and FDIC; and (3) the Software Products group, that designs and
builds proprietary products such as our recently announced AnnoDoc(TM) and
DocLuminate(TM).
Lastly, because we had expected the merger to be completed in March, we
delayed the commencement of an audit of our financial statements for the year
ended December 31, 2001. We have engaged PricewaterhouseCoopers LLP to conduct
the audit and expect that it will be completed in mid-April.
Although faced with uncertainties, we are working hard to keep costs in
line with revenues. We will keep you informed of our progress.
Sincerely,
/s/ Richard T. Bueschel /s/ Steven Samowich
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Richard T. Bueschel Steven Samowich
Chairman President & CEO
NOTE:
Forward-looking statements contained in this press release are based on current
expectations that involve uncertainties and risks associated with new service
offerings including, but not limited to, market conditions, successful service
offering introduction and acceptance, competition, economic conditions, and the
timing of contract initiation. The Company's actual results may differ
materially from current expectations. Readers are cautioned not to put undue
reliance on forward-looking statements, whether as a result of new information,
future events or otherwise.