SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(mark one)
X Quarterly report pursuant to Section 13 or 15 (d) of the Securities
- --- Exchange Act of 1934
For the quarterly period ended December 31, 1999 or
-----------------
Transition report pursuant to Section 13 or 15 (d) of the Securities
- --- Exchange Act of 1934
For the transition period from to
--------------- ---------------
Commission file number 0-18603
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INTEGRAL SYSTEMS, INC.
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(Exact name of registrant as specified in its chapter)
Maryland 52-1267968
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5000 Philadelphia Way, Suite A, Lanham, MD 20706
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (301) 731-4233
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- --------------------------------------------------------------------------------
(Former name, address and fiscal year, if changed since last report)
Indicate by checkmark 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
----- -----
As of December 31, 1999 the aggregate market value of the Common Stock of the
Registrant (based upon the closing price of the Common Stock on the NASDAQ Stock
Exchange at December 31, 1999) held by non-affiliates of the Registrant was
$275,054,202.
Registrant had 7,243,544 shares of common stock outstanding as of December 31,
1999
PART I. FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS
INTEGRAL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and September 30, 1999
ASSETS December 31, September 30,
1999 1999
(unaudited)
------------------- -------------------
CURRENT ASSETS
Cash $ 6,751,045 $ 7,027,446
Marketable Securities 18,136,000 18,136,000
Accounts Receivable 15,099,636 13,052,820
Prepaid Expenses 27,425 78,123
------------------- -------------------
TOTAL CURRENT ASSETS 40,014,106 38,294,389
FIXED ASSETS
Electronic Equipment 490,366 655,272
Furniture & Fixtures 382,118 380,904
Leasehold Improvements 152,857 132,110
Software Purchases 109,245 67,861
Equip. Under Capital Lease 1,911,463 1,911,463
------------------- -------------------
SUBTOTAL 3,046,049 3,147,610
Less: Accumulated Depreciation 1,276,660 1,322,169
------------------- -------------------
TOTAL FIXED ASSETS 1,769,389 1,825,441
OTHER ASSETS
Software Development Costs 2,176,279 2,006,194
Deposits 65,348 13,666
------------------- -------------------
TOTAL OTHER ASSETS 2,241,627 2,019,860
TOTAL ASSETS $44,025,122 $42,139,690
=================== ===================
See Notes to Financial Statements
-1-
INTEGRAL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and September 30, 1999
LIABILITIES & STOCKHOLDERS' EQUITY December 31, September 30,
1999 1999
(unaudited)
------------------ -------------------
CURRENT LIABILITIES
Accounts Payable $ 2,183,837 $ 2,838,639
Accrued Expenses 2,552,949 2,555,850
Capital Leases Payable 734,664 601,327
Billings in Excess of Cost 2,267,911 1,666,484
Income Taxes Payable 666,781 173,637
Deferred Income Taxes 146,890 146,890
------------------ -------------------
TOTAL CURRENT LIABILITIES 8,553,032 7,982,827
LONG TERM LIABILITIES
Capital Leases Payable 431,053 714,106
------------------ -------------------
TOTAL LONG TERM LIABILITIES 431,053 714,106
STOCKHOLDERS' EQUITY
Common Stock, $.01 par value,
40,000,000 shares authorized, and
7,243,544 and 7,163,908 shares issued
and outstanding at December 31, 1999
and September 30, 1999, respectively 72,435 71,639
Additional Paid-in Capital 22,330,993 21,993,620
Retained Earnings 12,637,609 11,377,498
------------------ -------------------
TOTAL STOCKHOLDERS' EQUITY 35,041,037 33,442,757
------------------ -------------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $44,025,122 $42,139,690
================== ===================
See Notes to Financial Statements
-2-
INTEGRAL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
December 31,
1999 1998
(unaudited) (unaudited)
------------- -------------
Revenue $10,021,861 $7,676,486
Cost of Revenue
Direct Labor 2,323,124 2,071,440
Overhead Costs 1,910,044 1,661,728
Travel and Other Direct Costs 394,743 259,946
Direct Equipment & Subcontracts 1,932,242 1,658,672
------------- -------------
Total Cost of Revenue 6,560,153 5,651,786
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Gross Margin 3,461,708 2,024,700
------------- -------------
Selling, General & Administrative 1,461,186 1,046,658
Product Amortization 237,500 165,000
------------- -------------
Income From Operations 1,763,022 813,042
Other Income (Expense)
Interest Income 254,117 38,148
Interest Expense (28,563) (30,409)
Miscellaneous, net (43,165) (76,340)
------------- -------------
Total Other Income (Expense) 182,389 (68,601)
Income Before Income Taxes 1,945,411 744,441
Provision for Income Taxes 685,300 287,500
------------- -------------
Net Income $ 1,260,111 $ 456,941
============= =============
Weighted Average Number of Common
Shares Outstanding During Period 7,203,997 5,857,499
============= =============
Earnings per Share $0.17 $0.08
============= =============
Diluted Shares Outstanding 7,749,530 6,647,766
============= =============
Diluted Earnings per Share $0.16 $0.07
============= =============
See Notes to Financial Statements
-3-
INTEGRAL SYSTEMS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED DECEMBER 31, 1999
(unaudited)
Common
Number Stock Additional
of at Par Paid-in Retained
Shares Value Capital Earnings Total
------------ ----------- ------------- ------------- --------------
Balance September 30, 1999 7,163,908 $71,639 $21,993,620 $11,377,498 $33,442,757
.
Exercise of Stock Options 79,636 796 337,373 - 338,169
Net income - - - 1,260,111 1,260,111
------------ ----------- ------------- ------------- --------------
Balance December 31, 1999 7,243,544 $72,435 $22,330,993 $12,637,609 $35,041,037
============ =========== ============= ============= ==============
-4-
INTEGRAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
December 31,
1999 1998
(unaudited) (unaudited)
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Cash flows from operating activities:
Net income $ 1,260,111 $ 456,941
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Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 461,382 308,189
(Increase) decrease in:
Accounts receivable (2,046,816) 855,595
Prepaid expenses 50,698 3,769
(Decrease) increase in:
Accounts payable (654,802) (650,169)
Accrued expneses (2,901) (302,517)
Billings in excess of cost 601,427 (258,855)
Income taxes payable 493,144 (460,529)
------------- -------------
Total adjustments (1,097,868) (504,517)
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Net cash provided (used) by operations 162,243 (47,576)
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Cash flow from investing activities:
Acquisition of fixed assets (167,830) (3,992)
Increase in software development costs (407,585) (270,152)
Increase in other assets (51,682) 0
------------- -------------
Net cash provided (used) in investing activities (627,097) (274,144)
------------- -------------
Cash flow from financing activities:
Proceeds from issuance of common stock 338,169 101,887
Payments on capital lease obligations (149,716) (98,974)
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Net cash provided by financing activities 188,453 2,913
------------- -------------
Net increase (decrease) in cash (276,401) (318,807)
Cash - beginning of year 7,027,446 3,055,144
------------- -------------
Cash - end of period $ 6,751,045 $2,736,337
============= =============
-5-
INTEGRAL SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation
---------------------
The interim financial statements include the accounts of Integral Systems,
Inc. (ISI or the Company) and its two wholly-owned subsidiaries, Integral
Marketing, Inc. (IMI) and InterSys, Inc. (INTSYS). In the opinion of
management, the financial statements reflect all adjustments consisting
only of normal recurring accruals necessary for a fair presentation of
results for such periods. The financial statements, which are condensed
and do not include all disclosures included in the annual financial
statements, should be read in conjunction with the consolidated financial
statements of the Company for the fiscal year ended September 30, 1999.
The results of operations for any interim period are not necessarily
indicative of results for the full year.
Certain accounts in the prior period financial statements have been
reclassified for comparative purposes to conform with the presentation in
the current year financial statements.
2. Accounts Receivable
-------------------
Accounts receivable at December 31, 1999 and September 30, 1999 consist of
the following:
December 31, September 30,
1999 1999
---------------- -----------------
Billed $ 9,233,676 $ 7,758,571
Unbilled 5,790,673 5,231,611
Other 75,287 62,638
---------------- -----------------
Total $15,099,636 $13,052,820
================ =================
The Company uses the direct write-off method for bad debts.
The Company's accounts receivable consist of amounts due on prime contracts
and subcontracts with the U.S. Government and contracts with various
private organizations. Unbilled accounts receivable consist principally of
amounts that are billed in the month following the incurrence of cost or
when milestones are delivered under fixed price contracts. All unbilled
receivables are expected to be billed and collected within one year.
3. Line of Credit
--------------
The Company has access to a general line of credit facility through which
it can borrow up to $9,000,000 for operating purposes and has an additional
line of credit amounting to $6,000,000, which can be used for corporate
acquisitions. The lines of credit are secured by the Company's billed and
unbilled accounts receivable. The lines also have certain financial
covenants, including minimum net worth and liquidity ratios. The lines
expire February 28, 2002. At December 31, 1999, the Company had no amounts
outstanding under the lines of credit.
4. Capital Lease
-------------
The Company has access to a $2.0 million equipment lease line of credit
that had a balance of $1,165,717 at December 31, 1999. The balance is
payable over 36 months and bears interest at a rate of 8.89% per annum.
-6-
5. Stock Splits
------------
On June 4, 1997, the Company's stockholders approved an increase to the
Company's authorized shares from 2.0 million to 10.0 million and also
authorized a three-for-one stock split which became effective in July 1997.
On May 29, 1998, the Company's board of directors declared a two-for-one
stock split in the form of a 100% stock dividend for stockholders of record
as of June 9, 1998.
On April 27, 1999, the Company's stockholders approved an amendment to the
Company's charter increasing the total number of shares of stock which the
Corporation is authorized to issue from 10.0 million to 40.0 million.
Stockholders' equity has been restated to give retroactive recognition to
the stock splits for all periods presented by reclassifying from additional
paid-in capital to common stock the par value of the additional shares
arising from the splits. In addition, all references to number of shares,
per share amounts, stock option data, and market prices of common stock
have been restated.
6. Business Segment Information
----------------------------
During the periods ended December 31, 1999 and December 31, 1998, the
Company's operations included two reportable segments: Satellite ground
systems and electronic test instrumentation and equipment marketing.
The Company builds satellite ground systems for command and control,
integration and test, data processing, and simulation. Customers for these
systems include U.S. Government organizations such as the National
Aeronautics and Space Administration (NASA), the National Oceanic and
Atmospheric Administration (NOAA), and the U.S. Air Force, as well as
commercial satellite operators, both domestic and foreign.
Through its wholly-owned subsidiary, IMI, the Company acts as a
manufacturer's representative, selling electronic test instrumentation and
equipment to customers primarily in Maryland, Virginia and the District of
Columbia. (The Company's other wholly-owned subsidiary, InterSys, provides
consulting services for satellite design and procurement, but is presently
inactive.) Summarized financial information is as follows:
Three Months Ended Three Months Ended
December 31, 1999 December 31, 1998
-------------------- --------------------
Net Sales
Satellite ground systems $9,663,106 $7,344,112
Equipment marketing $ 358,756 $ 332,374
Income before taxes
Satellite ground systems $1,810,117 $ 639,856
Equipment marketing $ 135,295 $ 104,585
-7-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998
---------------------------------------------------------------
Overview
Integral Systems, Inc. builds satellite ground systems for command and control,
integration and test, data processing, and simulation. Since its inception in
1982, the Company has provided ground systems for over 100 different satellite
missions for communications, science, meteorology, and earth resource
applications. The Company has an established domestic and international
customer base that includes government and commercial satellite operators,
spacecraft and payload manufacturers, and aerospace systems integrators.
The Company has developed innovative software products that reduce the cost and
minimize the development risk associated with traditional custom-built ground
systems. The Company believes that it was the first to offer a comprehensive
COTS (Commercial-Off-The-Shelf) software product line for command and control.
As a systems integrator, the Company leverages these products to provide turnkey
satellite control facilities that can operate multiple satellites from any
manufacturer. These systems offer significant cost savings for customers that
have traditionally purchased a separate custom control center for each of their
satellites.
Results of Operations
The components of the Company's income statement as a percentage of revenue are
depicted in the following table for the three months ended December 31, 1999 and
December 31, 1998:
Three Months Ended December 31,
% of % of
1999 Revenue 1998 Revenue
-------------- -------------- -------------- --------------
(in thousands) (in thousands)
Revenue $10,022 100.0 $7,676 100.0
Cost of Revenue 6,560 65.5 5,651 73.6
------- ----- ------ -----
Gross Margin 3,462 34.5 2,025 26.4
Operating Expenses
SG&A 1,461 14.6 1,047 13.6
Prod. Amortization 238 2.4 165 2.2
------- ----- ------ -----
Income from Operations 1,763 17.6 813 10.6
Other (net) 182 1.8 -69 -.9
------- ----- ------ -----
Income Before Income
Taxes 1,945 19.4 744 9.7
------- ----- ------ -----
Income Taxes 685 6.8 287 3.7
------- ----- ------ -----
Net Income $ 1,260 12.6 $ 457 6.0
======= ===== ====== =====
-8-
Revenue
The Company earns revenue from sales of its products and services through
contracts that are funded by the U.S. Government, both as a prime contractor or
a subcontractor, as well as commercial and international organizations. The
Company, through its wholly-owned subsidiary IMI, earns commission revenue by
representing a number of electronic product manufacturers in Maryland, Virginia
and the District of Columbia, principally in space related markets.
Internally, the Company classifies revenues in two separate categories on the
basis of the contracts' procurement and development requirements: (i) contracts
which require compliance with Government procurement and development standards
("Government Services") are classified as government revenue, and (ii) contracts
conducted according to commercial practices ("Commercial Products and Services")
are classified as commercial revenue, regardless of whether the end customer is
a commercial or government entity. Sales of the Company's COTS products are
classified as Commercial Products and Services revenue. IMI sales of third-
party hardware and software are also classified as Commercial Products and
Services revenue.
For the three months ended December 31, 1999 and 1998, the Company's revenues
were generated from the following sources:
Three Months Ended December 31,
Revenue Type 1999 1998
------------------------------ ---------- ----------
Commercial Products & Services
Commercial Users 41% 22%
U.S. Government Users 1 5
---- ----
Subtotal 42 27
Government Services
NOAA 46 54
NASA 8 9
Other U.S. Government Users 4 10
---- ----
Subtotal 58 73
Total 100% 100%
==== ====
Based on the Company's revenue categorization system, the Company classified 42%
and 27% of its revenue as Commercial Products and Services revenue with the
remaining 58% and 73% classified as Government Services revenue for the three
months ended December 31, 1999 and 1998 respectively. By way of comparison, if
the revenues were classified strictly according to end-user (independent of the
Company's internal revenue categorization system), the U.S. Government would
account for 59% and 78% of the total revenues for the three months ended
December 31, 1999 and 1998, respectively.
On a consolidated basis, revenue increased 31%, or $2.3 million, to $10.0
million for the three months ended December 31, 1999, from $7.7 million for the
three months ended December 31, 1998. The increase was primarily due to
increases in the Company's Commercial Products and Services revenues, which
accounted for approximately $2.1 million of the increase. Government Services
revenue increased approximately $200,000 during the three months ended
December 31, 1999 compared to the three months ended December 31, 1998. This
increase was achieved despite a decline of $400,000 in revenues related to
equipment and subcontract pass-throughs for government customers in the first
quarter of fiscal year 2000 as compared to the first quarter of fiscal year
1999.
-9-
Cost of Revenue/Gross Margin
The Company computes gross margin by subtracting cost of revenue from revenue.
Included in cost of revenue are direct labor expenses, overhead charges
associated with the Company's direct labor base and other costs that can be
directly related to specific contract cost objectives, such as travel,
consultants, equipment, subcontracts and other direct costs.
Gross margins on contract revenues vary depending on the type of product or
service provided. Generally, license revenues (related to the sale of the
Company's COTS products) have the greatest gross margins because of the minimal
associated marginal costs to produce. By contrast, gross margins rates for
equipment and subcontract pass-throughs seldom exceed 20%. Engineering service
gross margins typically range between 20% and 40%, while gross margins for IMI
vary considerably depending on sales volume achieved.
During the three months ended December 31, 1999, cost of revenue increased to
$6.6 million from $5.7 million during the three months ended December 31, 1998,
which increase was due primarily to increases in direct labor and related
overhead costs necessary to staff the Company's new contracts and revenue
growth. Cost of revenue expressed as a percentage of revenues, declined to
65.5% for the three months ended December 31, 1999 from 73.6% for the three
months ended December 31, 1998. The percentage improvement with respect to cost
of revenue was primarily due a lower percentage of equipment and subcontract
costs in the fiscal year 1999 cost of revenue mix.
The Company's gross margin increased 71%, or $1.4 million, to $3.5 million for
the three months ended December 31, 1999 from $2.0 million for the three months
ended December 31, 1998. The increase was due to margin percentage improvements
in all of the Company's revenue components (i.e. licenses, engineering services,
pass-throughs and IMI) coupled with revenue growth. As a result of the
foregoing factors, gross margin as a percentage of revenue was 34.5% during the
three months ended December 31, 1999 compared to 26.4% for the three months
ended December 31, 1998.
Operating Expenses/Income from Operations
Selling, General & Administrative expenses (SG&A) increased to approximately
$1.5 million during the three months ended December 31, 1999 from $1.0 million
in the quarter ended December 31, 1998. The change was primarily due to
increases in the Company's selling and marketing infrastructure costs combined
with increased bid and proposal activity. As a percentage of revenue, SG&A
accounted for 14.6% of revenue the three months ended December 31, 1999 compared
to 13.6% in the quarter ended December 31, 1998. Product amortization increased
from $165,000 for the three months ended December 31, 1998 to $238,000 for the
three months ended December 31, 1999.
Income from operations increased 117% to $1.8 million for the three months ended
December 31, 1999 from $800,000 for the three months ended December 31, 1998
primarily due to increases in gross margin dollars described above. As a
percentage of revenue, income from operations increased to 17.6% for the three
months ended December 31, 1999 from 10.6% for the prior year's first quarter.
This increase was principally the result of improved gross margin rates
partially offset by a higher percentage of SG&A expense against revenue.
The Company's effective tax rate declined from 38.6% for the three months ended
December 31, 1998 to 35.2% for the three months ended December 31, 1999. The
decrease was a result of approximately $170,000 of tax-free interest income
recorded in the current quarter.
-10-
Outlook
The Company's strong first quarter results represent a continued trend from
prior fiscal years of increased sales and profitability on those sales. At this
time the Company has a significant backlog of work to be performed, as well as
potential contract awards it believes are probable based on proposals in the
pipeline. Management believes that operating results for future periods will
continue to improve based on the following assumptions:
. Demand for satellite technology and related products and services will
continue to expand
. Sales of its software products and engineering services will continue to
increase
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Since the Company's inception in 1982, it has been profitable on an annual basis
and has generally financed its working capital needs through internally
generated funds, supplemented by borrowings under the Company's general line of
credit facility with a commercial bank and the proceeds from the Company's
initial public offering in 1988.
For the three months ended December 31, 1999, the Company generated
approximately $160,000 of cash from operating activities and used approximately
$600,000 for investing activities, including approximately $410,000 for newly
capitalized software development costs. The Company anticipates that it will
spend more money for software development in fiscal year 2000 than in fiscal
year 1999, as it completes NT versions of its software products.
The Company has access to a general line of credit facility through which it can
borrow up to $9.0 million for operating purposes and has an additional line of
credit amounting to $6.0 million, which can be used for corporate acquisitions.
The lines of credit are secured by the Company's billed and unbilled accounts
receivable. The lines also have certain financial covenants, including minimum
net worth and liquidity ratios. The lines expire February 28, 2002. At
December 31, 1999, the Company had no amounts outstanding under the lines of
credit.
The Company also has access to a $2.0 million equipment lease line of credit
under which it had $1.2 million outstanding as of December 31, 1999.
The Company currently anticipates that its current cash balances, amounts
available under its credit facilities 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. The Company
believes that inflation did not have a material impact on the Company's revenues
or income from operations during the quarter ended December 31, 1999 or in past
fiscal years.
Year 2000 Compliance
Many currently installed computer systems, software products, and
microprocessor-dependent equipment are coded to accept only two digit entries in
the date code field. To distinguish 21st century dates from 20th century dates,
these date code fields must be able to accept four digit entries.
The Company may realize exposure and risk if its suppliers or the systems it
relies upon to conduct day-to-day operations are not year 2000 compliant. The
potential areas of exposure include electronic data exchange systems operated by
third parties with whom the Company transacts business, products purchased from
third parties and computers, software, telephone systems and other equipment
used internally. To minimize the potential adverse effects of the year 2000
problem, the Company established an internal project team comprised of all
functional disciplines. This project team has implemented a three-phase process
of:
-11-
. identifying the Company's internal information and non-information technology
systems that are not year 2000 compliant;
. determining their significance in the effective operation of the Company; and
. developing plans to resolve the issues where necessary.
After review of the Company's internal computer systems, software products and
microprocessor dependent equipment, management has determined the Company to be
year 2000 compliant and, as such, does not anticipate any material adverse
operational issues to arise.
In addition to its internal review, the Company has communicated with its
suppliers and others with whom it does business to coordinate year 2000
readiness. The responses received by the Company to date indicate that steps
have been taken to address this concern. However, if those third parties have
not been able to make all systems year 2000 compliant, there could be a material
adverse impact on the Company.
Although the rollover from December 31, 1999 to January 1, 2000 has occurred,
the Company still faces risks to the extent that suppliers of products,
services, and systems purchased by the Company or the suppliers of others with
whom the Company transacts business cannot timely provide the Company with
products, components, services, or systems that meet year 2000 requirements. In
the event that any such third parties cannot timely provide the Company with
products, services, or systems that meet the year 2000 requirements, the
Company's business could be harmed. For example, if one of the Company's major
vendors experiences a material disruption in business due to a failure to
achieve year 2000 compliance, the Company could experience a material disruption
in business.
The Company has not yet developed a contingency plan with respect to any
potential failure of third parties to have become year 2000 compliant by
January 1, 2000, nor has it formulated a timetable to create a contingency plan.
If either the internal systems material to the Company's operations or the
internal systems, products, or services of one or more of the Company's major
vendors fail to achieve year 2000 compliance, the year 2000 issue could have a
material adverse effect on the Company's business, financial condition and
results of operations.
To date the Company has not experienced any problems associated with Year 2000
computer issues nor does it anticipate any material adverse operational issues
to arise.
Forward Looking Statements
Certain of the statements contained in this section, including those under the
headings "Outlook" and "Liquidity and Capital Resources," are forward looking.
In addition, from time to time, the Company may publish forward looking
statements relating to such matters as anticipated financial performance,
business prospects, technological developments, new products, research and
development activities and similar matters. These forward-looking statements
are predictions. No assurances can be given that the future results indicated,
whether expressed or implied, will be achieved. The Company's actual results
may differ significantly from the results discussed in the forward-looking
statements. While the Company believes that these statements are and will be
accurate, a variety of factors could cause the Company's actual results and
experience to differ materially from the anticipated results or other
expectations expressed in the Company's statements. The Company's business is
dependent upon general economic conditions and upon various conditions specific
to its industry, and future trends cannot be predicted with certainty.
Particular risks and uncertainties that may effect the Company's business
including the following:
. A significant portion of the Company's revenue is derived from contracts
or subcontracts funded by the U.S. government.
. The presence of competitors with greater financial resources and their
strategic response to the Company's new services.
-12-
. The potential obsolescence of the Company's services due to the
introduction of new technologies.
. The response of customers to the Company's marketing strategies and
services.
. Changes in activity levels in the Company's core markets.
While sometimes presented with numerical specificity, these forward-looking
statements are based upon a variety of assumptions relating to the business of
the Company, which although considered reasonable by the Company, may not be
realized. Because of the number and range of the assumptions underlying the
Company's forward-looking statements, many of which are subject to significant
uncertainties and contingencies beyond the reasonable control of the Company,
some of the assumptions inevitably will not materialize and unanticipated events
and circumstances may occur subsequent to the date of this document. These
forward-looking statements are based on current information and expectation, and
the Company assumes no obligation to update. Therefore, the actual experience
of the Company and the results achieved during the period covered by any
particular forward-looking statement should not be regarded as a representation
by the Company or any other person that these estimates will be realized, and
actual results may vary materially. There can be no assurance that any of these
expectations will be realized or that any of the forward-looking statements
contained herein will prove to be accurate.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
-13-
Part II. Other Information
- ----------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
--------
10.1 Loan Agreement and Security Agreement dated December 9, 1999
between Bank of America, N.A. and Integral Systems, Inc.
10.2 Second Amendment dated December 30, 1999 to Lease dated June 1,
1999, between Integral Systems, Inc. and ASP Washington, L.L.C.
(Incorporated by reference to the Company's June 30, 1999 10-QSB
filed by the Company on August 11, 1999).
11.1 Computation of Per Share Earnings.
27.1 Financial Data Schedule.
b. Reports on Form 8-K
-------------------
None.
-14-
SIGNATURES
----------
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTEGRAL SYSTEMS, INC.
---------------------
(Registrant)
Date: February 11, 2000 By: /s/
----------------- ------------------------------------------
Thomas L. Gough
President & Chief Operating Officer
Date: February 11, 2000 By: /s/
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Elaine M. Parfitt
Vice President & Chief Financial Officer
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