INTEGRATED SYSTEMS CONSULTING GROUP INC, S-1, 1997-02-03

INTEGRATED SYSTEMS CONSULTING GROUP INC
S-1, 1997-02-03
COMPUTER INTEGRATED SYSTEMS DESIGN

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<PAGE>
As filed with the Securities and Exchange Commission on February 3, 1997
Registration No. 333-_____
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------
FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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INTEGRATED SYSTEMS CONSULTING GROUP, INC.
(Exact name of registrant as specified in its charter)
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Pennsylvania 7373/7379 23-2528944
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code No.) Identification No.)
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575 East Swedesford Road
Suite 200
Wayne, Pennsylvania 19087
(610) 989-7000
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
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Mr. David S. Lipson
Chairman, Chief Executive Officer and President
Integrated Systems Consulting Group, Inc.
575 East Swedesford Road
Suite 200
Wayne, Pennsylvania 19087
(610) 989-7000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies of all communications to:

David S. Antzis, Esq. Gerald S. Tanenbaum, Esq.
Saul, Ewing, Remick & Saul Cahill Gordon & Reindel
1055 Westlakes Drive, Suite 150 80 Pine Street
Berwyn, Pennsylvania 19312-2409 New York, New York 10005
(610) 251-5050 (212) 701-3000

Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of earlier effective registration
statement for the same offering. [ ] __________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] __________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
================================================================================================================================
Proposed Proposed
Amount maximum maximum
Title of each class of securities to to be offering price aggregate Amount of
be registered registered (1) per share (2) offering price (2) registration fee
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Common Stock, $.005 par value 2,012,500 $12.94 $25,659,375 $7,891.44
================================================================================================================================
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(1) Includes 262,500 shares the Underwriters have the option to purchase from
certain selling shareholders to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933, as amended.
----------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

================================================================================

<PAGE>

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.

Subject to Completion
Dated February 3, 1997
Prospectus

1,750,000 Shares

[LOGO]

Common Stock
(par value $.005 per share)

All of the shares of Common Stock, par value $.005 per share (the "Common
Stock"), of Integrated Systems Consulting Group, Inc. (the "Company") are being
sold by the selling shareholders named herein (the "Selling Shareholders"),
including 169,931 shares to be acquired by the Selling Shareholders upon
exercise of certain warrants (the "Warrants"). See "Principal and Selling
Shareholders." The Company will not receive any of the proceeds from the sale of
the Common Stock by the Selling Shareholders other than the aggregate exercise
price of the Warrants.

The Common Stock is included for quotation on the Nasdaq National Market
("Nasdaq") under the symbol "ISCG." On January 31, 1997, the last reported sale
price of the Common Stock as quoted on Nasdaq was $13.875 per share.
See "Price Range of Common Stock and Dividend Policy."

See "Risk Factors" commencing on page 6 for certain information that should be
considered by prospective investors.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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Price to Underwriting Proceeds to Selling Proceeds to
Public Discount (1) Shareholders (2) Company (2) (3)
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Per Share $ $ $ $
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Total(4) $ $ $ $
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(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Expenses of the Offering, estimated at $275,000, will be paid by the
Selling Shareholders in proportion to the proceeds they receive from the
Offering.
(3) The Proceeds to Company represents the exercise price of the Warrants.
(4) Each of David S. Lipson and the Warrant and Stock Trust have granted to the
Underwriters an option, exercisable within 30 days after the date of this
Prospectus, to purchase up to an additional 131,250 shares of Common Stock
on the same terms as set forth above, solely to cover over-allotments, if
any. If such options are exercised in full, the total Price to Public,
Underwriting Discount, Proceeds to Selling Shareholders and Proceeds to
Company will be $ , $ , $ and $ , respectively.
See "Underwriting."

The shares of Common Stock being offered by this Prospectus are offered by the
Underwriters, subject to prior sale, when, as and if delivered to and accepted
by the Underwriters, and subject to approval of certain legal matters by Cahill
Gordon & Reindel, counsel for the Underwriters. It is expected that delivery of
the shares of Common Stock offered hereby will be made against payment therefor
on or about , 1997 at the offices of J.P. Morgan Securities Inc., 60 Wall
Street, New York, New York.

J.P. Morgan & Co. Robert W. Baird & Co.
, 1997 Incorporated

<PAGE>

No person is authorized to give any information or make any representations not
contained in this Prospectus, and, if given or made, such information or
representations must not be relied upon as having been authorized by the Company
or any Underwriter. This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, the Common Stock in any jurisdiction to any
person to whom it is unlawful to make such offer or solicitation. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company subsequent to the date hereof.

Table of Contents

Page Page
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Available Information........................ 2 Business........................................ 18
Prospectus Summary........................... 3 Management...................................... 32
Risk Factors................................. 6 Certain Relationships and Related Transactions.. 38
Use of Proceeds.............................. 9 Principal and Selling Shareholders.............. 39
Price Range of Common Stock and Description of Capital.Stock.................... 41
Dividend Policy............................ 10 Shares Eligible for Future Sale................. 43
Capitalization............................... 11 Underwriting.................................... 45
Selected Consolidated Financial Data ........ 12 Legal Matters................................... 47
Management's Discussion and Analysis Experts......................................... 47
of Financial Condition and Results Additional Information.......................... 47
of Operations.............................. 13 Index to Financial Statements................... F-1

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Available Information

The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company may be inspected without charge and
copied at the public reference facilities maintained by the Commission at Room
1014, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the following regional offices of the Commission: 7 World Trade Center, New
York, New York 10048; and 500 West Madison Street, 14th Floor, Chicago, Illinois
60661. Copies of such material may also be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
the prescribed rates. The Commission maintains a Web site (http://www.sec.gov)
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The Common
Stock is included for quotation on Nasdaq. Reports, proxy statements and other
information filed by the Company may also be inspected at the National
Association of Securities Dealers, Inc.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. IN
CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP MEMBERS OR
THEIR AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON
STOCK OF THE COMPANY ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE
10b-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."

<PAGE>

Prospectus Summary

The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements and notes thereto appearing
elsewhere in this Prospectus. Except as otherwise indicated, all information in
this Prospectus assumes no exercise of the Underwriters' over-allotment option.
Unless the context otherwise indicates, Integrated Systems Consulting Group,
Inc. and its subsidiaries are referred to collectively herein as "ISCG" or the
"Company."

The Company

ISCG provides consulting services that address its clients' information
processing needs through technologically advanced solutions, including
client-server architecture, graphical user interface ("GUI")-based applications,
local and distributed relational databases and cross-platform applications
integration. The Company delivers consulting services in two broad areas:
software applications development ("applications development") and systems and
network management ("network management"). In the applications development area,
the Company provides expertise to its clients in the full software development
life cycle or one or more discrete phases within such process. The Company's
applications development activities accounted for approximately 78.4% and 79.3%
of its revenues in 1995 and 1996, respectively. In the network management area,
the Company provides expertise to its clients in the design, implementation,
management and support of multi-vendor local and wide area networks, desktop
computer systems and servers. The Company's network management activities
accounted for approximately 21.6% and 20.7% of its revenues in 1995 and 1996,
respectively.

Historically, the Company has provided consulting services to businesses in a
variety of industries, particularly the pharmaceutical, biotechnology, chemical
and software industries. In recent years, however, the Company has principally
focused its marketing efforts on the pharmaceutical industry in order to exploit
more effectively its extensive experience in the development, implementation,
integration and management of information systems used in connection with the
drug development process. By virtue of this experience, the Company's technical
employees have developed a strong understanding of the drug development process
and broad expertise in the information systems and software applications
required to support this complicated and data intensive process. In addition,
the Company's technical employees have developed a broad range of technical
skills and capabilities with respect to commercially available packaged software
products that address drug development information processing requirements.
Pharmaceutical company engagements accounted for an aggregate of approximately
$8.3 million, $13.5 million and $18.0 million or 61.5%, 64.3% and 58.8% of the
Company's revenues in 1994, 1995 and 1996, respectively. See "Risk
Factors--Dependence on Pharmaceutical Industry," "Risk Factors--Concentration
and Mix of Revenues," "Business--General" and "Business--Competition."

The Company has experienced substantial growth in revenues, income from
operations and net income since it began operations in 1988. The Company
believes this growth has resulted from, and its future success will depend in
large part upon, its ability to attract, retain and motivate highly skilled
technical employees. In this regard, the Company seeks to create an attractive
and rewarding corporate culture by enfranchising employees through stock
ownership, by promoting from within and by providing intensive training,
challenging assignments and involvement in many facets of the Company's business
processes in an environment of mutual trust and support. The Company believes
that these policies have resulted in a turnover rate of its technical employees
which is considerably lower than the industry average.

The Company's clients include some of the largest pharmaceutical companies in
the world and other Fortune 500 corporations, including, among others, Air
Products and Chemicals, Inc., American Cyanamid Company, Bristol-Myers Squibb
Co., Eli Lilly & Company, G. D. Searle & Company, Merck & Company, Inc., Pfizer
Inc., Procter & Gamble, Rhone-Poulenc Rorer Pharmaceuticals, SmithKline Beecham
Pharmaceuticals, Inc., Warner-Lambert Company and Zeneca Group. In 1995 and
1996, the Company derived approximately 88.1% and 85.6% of its revenues,
respectively, from clients to which it had provided services in the previous
year. See "Risk Factors--Dependence on Pharmaceutical Industry," "Risk
Factors--Concentration and Mix of Revenues" and "Business--Concentration and Mix
of Revenues."

<PAGE>

The Company was incorporated in the Commonwealth of Pennsylvania in 1988. The
Company completed its initial public offering of common stock in May 1996
pursuant to a rights offering to the stockholders of Safeguard Scientifics, Inc.
("Safeguard"). The Company's principal executive offices are located at 575 East
Swedesford Road, Suite 200, Wayne, Pennsylvania 19087, and its telephone number
is (610) 989-7000. The Company's World Wide Web homepage address is
http://www.iscg.com and its e-mail address is [email protected].

Risk Factors

For a discussion of certain of the risks and considerations relevant to an
investment in the Common Stock and the Company's ability to achieve its
objectives, see "Risk Factors" beginning on page 8.

The Offering

Common Stock Offered by the Selling Shareholders.................. 1,750,000 shares

Common Stock to be outstanding after the Offering................. 8,026,604 shares (1)

Use of Proceeds................................................... The Company intends to use the proceeds of
approximately $625,000 from the exercise of the
Warrants and approximately $483,000 in proceeds,
which it will receive from the exercise of additional
warrants if the underwriters' over-allotment option is
exercised in full, for general corporate purposes.
See "Use of Proceeds."

Dividend Policy................................................... The Company anticipates it will not pay dividends
for the foreseeable future. See "Price Range of
Common Stock and Dividend Policy."

Nasdaq National Market Symbol .................................... "ISCG"
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(1) Excludes (i) 710,246 shares of Common Stock issuable upon the exercise of
options outstanding at December 31, 1996 (of which 152,914 were exercisable
at that date) at a weighted average exercise price of $2.33 per share and
(ii) 509,792 shares of Common Stock issuable upon the exercise of warrants
outstanding at December 31, 1996 at an exercise price of $3.68 per share.
See "Management -- 1989 Incentive Stock Option Plan" and "Principal and
Selling Shareholders."

<PAGE>

Summary Consolidated Financial Data

The following table sets forth summary consolidated financial data of the
Company. The data at December 31, 1996 and for each of the years in the
four-year period then ended have been derived from the Company's consolidated
financial statements. The data at December 31, 1992 and for the year then ended
have been derived from the Company's unaudited consolidated financial
statements, which include all adjustments, consisting only of normal recurring
adjustments, which management considers necessary for a fair presentation of the
data for such period. The data should be read in conjunction with the
Consolidated Financial Statements and the notes thereto and other financial
information appearing elsewhere in this Prospectus.
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Years Ended December 31,
In thousands, except per share data
Statement of Operations Data: 1992 1993 1994 1995 1996
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Revenues...................................................... $6,729 $9,461 $13,543 $21,024 $30,607
Income from operations........................................ 393 1,334 2,173 3,278 4,916
Income before income taxes and
cumulative effect of accounting change...................... 385 1,339 2,088 3,245 5,270
Net income.................................................... $222 $703 $1,208 $1,850 $3,004
Net income per common share:
Primary............................................. (1) $.07 $.17 $.31 $.38
Fully diluted....................................... (1) $.07 $.17 $.31 $.37
Shares used in computing net income per common share:
Primary............................................. (1) 10,053 7,145 6,002 7,958
Fully diluted....................................... (1) 10,053 7,145 6,002 8,051
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<PAGE>

---------------------------------
As of December 31, 1996

Actual As Adjusted(2)
-------- --------------

Dollars in thousands
Balance Sheet Data:
Cash, cash equivalents and short-term
investments.............................. $11,267 $11,892
Working capital........................... 14,728 15,353
Total assets.............................. 20,844 21,469
Long-term debt, .......................... -- --
Total stockholders' equity................ 17,760 18,385

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Years Ended December 31,

1992 1993 1994 1995 1996
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Other Data:

Operating margin.................................... 5.8% 14.1% 16.0% 15.6% 16.1%

Technical employees at year-end (unaudited)......... 83 118 173 254 330

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(1) This data has not been furnished for 1992 because such data would not be
meaningful.

(2) Adjusted to give effect to receipt by the Company of approximately
$625,000, which represents the aggregate exercise price of the Warrants.

<PAGE>

Risk Factors

In evaluating the Company and its business and an investment in the Common
Stock, prospective investors should consider carefully the following risk
factors in addition to the other information contained herein.

Dependence on Pharmaceutical Industry

The Company has in the past derived, and may in the future derive, a significant
portion of its revenues from companies in the pharmaceutical industry. Revenues
derived by the Company from the pharmaceutical industry during 1994, 1995 and
1996 accounted for approximately 61.5%, 64.3% and 58.8%, respectively, of total
revenues. In particular, the Company's revenues are highly dependent on research
and development expenditures by the pharmaceutical industry. The Company's
financial condition and results of operations could be materially adversely
affected by adverse changes in the general economic environment within the
pharmaceutical industry or the impact of the current trend toward consolidation
in or decreases in research and development expenditures in that industry.
Furthermore, the Company has benefited to date from the increasing tendency of
pharmaceutical companies to outsource large information technology dependent
projects. A reversal or slowing of this trend would have a material adverse
effect on the Company's financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business--General," "Business --Industry Overview" and Note 3 to
the Consolidated Financial Statements included elsewhere in this Prospectus.

Attraction and Retention of Technical Employees

The Company's business involves the delivery of professional services and is,
therefore, labor-intensive. The Company believes its future success will depend
in large part upon its ability to attract, retain and motivate highly skilled
employees, particularly technical employees. Information services professionals
are in great demand and are likely to remain a limited resource for the
foreseeable future. Although the Company expects to continue to attract and
retain sufficient numbers of highly skilled technical employees, there can be no
assurance that the Company will be able to do so. The loss of a significant
number of the Company's technical employees could have a material adverse impact
on the Company, including its ability to secure and complete engagements. See
"Business -- Human Resources."

Concentration and Mix of Revenues

Historically, a small number of clients have each accounted for 10.0% or more of
the Company's revenues. In 1995, Air Products and Chemicals, Inc. ("Air
Products") and Merck & Company, Inc. ("Merck") accounted for approximately 12.7%
and 10.9% of revenues, respectively. In 1996, Air Products and Merck each
accounted for approximately 10.0% of revenues. An unanticipated reduction of a
significant amount of business from either of these clients may have a material
adverse effect on the Company's financial condition and results of operations.

Since the implementation of a large software application is a complex, time
intensive and costly process, clients generally undertake these projects on an
irregular basis. As a result, the amount of revenues derived by the Company from
any given client may vary significantly from year-to-year. Accordingly, the
Company expects that the identity of clients accounting for large portions of
its revenues may change from year-to-year. The inability of the Company to
maintain its personnel utilization rates (i.e. the ratio of hours billed to
total available hours) following the completion of large engagements, either by
securing new engagements or by utilizing its technical employees for existing
engagements, could be expected to have a material adverse effect on the
Company's financial condition and results of operations during such period. See
"Business -- Concentration and Mix of Revenues."

Management of Growth and Utilization of Resources

From January 1, 1992 through December 31, 1996, the size of the Company's
professional staff increased from 61 to 330 technical personnel, including an
increase of 76 technical personnel during 1996. Further significant increases
are anticipated during 1997. As employee related costs are relatively fixed,
variations in the Company's revenues and operating results can occur as a result
of variations in billing margins and utilization rates of its technical
employees. If the Company's management is unable to manage growth effectively
and new technical employees are unable to achieve anticipated performance
levels, the Company's financial condition and results of operations could be
adversely affected. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

<PAGE>

Reliance on Vendor Relationships

The Company has established non-exclusive partnership arrangements with two
organizations, Documentum, Inc. ("Documentum") and DLB Systems, Inc. ("DLB"),
that it believes are important to its sales, marketing and support activities.
Both Documentum and DLB market software applications to the pharmaceutical
industry. The Company's history of integrating these vendors' software products
into clients' systems has led to strong relationships with these vendors,
enhancing the Company's marketing efforts. These partnership arrangements
position the Company as a potential systems integrator should clients or
prospective clients select one of these vendors' products. These relationships
have often resulted in sales leads and the generation of client engagements. The
failure by the Company to maintain these relationships or to establish new
relationships in the future could have a material adverse effect on the
Company's financial condition and results of operations. See "Business -- Sales
and Marketing."

Technological Advances

The information technology industry has experienced and is continuing to
experience rapid technological advances and developments. The Company's success
will depend in part on its ability to develop solutions that keep pace with
continuing changes in information processing technology, evolving industry
standards and changing client preferences. There can be no assurance that the
Company will be successful in addressing these developments on a timely basis or
that, if addressed, the Company will be successful in the marketplace. The
Company's delay or failure to address these developments would have a material
adverse effect on the Company's financial condition and results of operations.
In addition, there can be no assurance that technologies developed by others
will not render the Company's services noncompetitive or obsolete. See "Business
- -- Industry Overview."

Competition

The commercial professional services segment of the information technology
industry includes a large number of participants and is highly competitive. The
Company competes with and faces potential competition for client assignments and
experienced personnel from a number of companies that have significantly greater
financial, technical and marketing resources and have greater name recognition.
The Company also faces competition from organizations providing staff
augmentation services to, and individuals who contract directly with,
information systems departments of existing and potential clients. The Company's
client focus primarily consists of companies within the pharmaceutical industry
for which there are a number of professional services firms seeking consulting,
applications development and systems and networking engagements. The Company
believes that the principal competitive factors in the commercial professional
services segment of the information technology industry include responsiveness
to client needs, availability of technical personnel, speed of applications
development, quality of service, price, project management capability and
technical expertise. The Company also believes that the ability to conduct
marketing activities and to serve clients through international offices is a
competitive factor because of the trend toward global operations among
pharmaceutical companies. The Company believes that its ability to compete also
depends in part on a number of competitive factors outside its control,
including the ability of its competitors to hire, retain and motivate qualified
technical personnel, the ownership by competitors of software used by potential
clients, the development of software that would reduce or eliminate the need for
the Company's services, the price at which others offer comparable services and
the extent of its competitors' responsiveness to customer needs. See "Business
- -- Competition."

Dependence on Key Personnel

The Company believes that its continued success depends to a significant extent
upon the efforts and abilities of its senior management. In particular, the loss
of services of David S. Lipson, the Company's Chairman, Chief Executive Officer
and President, or any of the Company's other executive officers or senior
managers could have a material adverse effect on the Company's financial
condition and results of operations. The Company has entered into employment
agreements with each of its executive officers. See "Management -- Employment
Agreements."

Possible Volatility of Stock Price

The market price for the Common Stock may be highly volatile and there can be no
assurance that the market price of the Common Stock after the Offering will not
fall below the offering price. The public markets, in general, have from time to
time experienced extreme price and volume fluctuations, which have in some cases
been unrelated to the operating performance of particular companies.
Furthermore, the market for technology stocks, such as the Common Stock, can be
subject to greater price volatility than the stock market in general. In
addition, factors such as announcements of technological innovations,
announcements of new products by the Company's competitors or

7
<PAGE>

third parties and market conditions in the information technology industry may
have a significant impact on the market price of the Common Stock.

Shares Eligible for Future Sale

A substantial number of outstanding shares of Common Stock and shares of Common
Stock issuable upon exercise of outstanding stock options and warrants will
become eligible for future sale in the public market at various times. In
addition to the factors affecting the stock market in general and the market for
the Common Stock discussed above, sales of substantial amounts of Common Stock
in the public market, or the perception that such sales could occur, could
adversely affect the market price of the Common Stock. Upon completion of the
Offering, the Company will have 8,026,604 (8,157,854 if the Underwriters'
over-allotment option is exercised in full) shares of Common Stock outstanding,
excluding 1,220,038 shares of Common Stock subject to stock options and warrants
outstanding as of December 31, 1996 and any stock options or warrants granted by
the Company after December 31, 1996. Of these shares, the Common Stock sold in
the Offering will be freely tradeable without restriction or further
registration under the Securities Act of 1933, as amended (the "Act"). An
additional 2,875,000 shares, which were sold in the Company's initial public
offering in May 1996, are currently freely tradeable, except to the extent such
shares were purchased by affiliates of the Company, in which case they are
subject to Rule 144 under the Act ("Rule 144"). In addition, all shares that may
be issued upon exercise of options granted under the Company's 1989 Incentive
Stock Option Plan will be freely tradeable without restriction, except that any
such shares issued to affiliates of the Company will be subject to Rule 144. The
remaining 3,401,604 shares of outstanding Common Stock (the "Restricted Shares")
were sold by the Company in reliance on exemptions from the registration
requirements of the Act and are "restricted securities" as defined in Rule 144
and may not be sold in the absence of registration under the Act unless an
exemption is available, including an exemption afforded by Rule 144. The Company
and certain of its shareholders have agreed not to offer, sell, contract to sell
or otherwise dispose of any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for shares of Common Stock, for a period of
120 days after the date hereof, without the prior written consent of J.P. Morgan
Securities Inc., with certain limited exceptions. The Company has granted Mr.
Lipson and Safeguard certain registration rights whereby they may cause the
Company to register their shares of Common Stock, including any shares of Common
Stock obtained upon the exercise of certain warrants, under the Act for public
sale. See "Shares Eligible for Future Sale."

Possible Issuances of Preferred Stock

Shares of preferred stock may be issued by the Company in the future without
stockholder approval and upon such terms as the Board of Directors may
determine. The rights of the holders of the Common Stock will be subject to, and
may be adversely affected by, the rights of the holders of any preferred stock
that may be issued in the future. The issuance of preferred stock, while
providing flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from acquiring, a
majority of the outstanding stock of the Company and potentially prevent the
payment of a premium to stockholders in an acquisition transaction. The Company
has no present plans to issue any shares of preferred stock. See "Description of
Capital Stock -- Preferred Stock."

No Dividends

To date, the Company has not paid any cash dividends on its Common Stock, and
does not expect to declare or pay any cash or other dividends in the foreseeable
future. Further, the Company's bank loan agreement prohibits the Company from
declaring or paying dividends or other distributions on its Common Stock. See
"Price Range of Common Stock and Dividend Policy."

8
<PAGE>

Use of Proceeds

The Company will not receive directly any proceeds from the sale of the Common
Stock offered hereby. The Company will receive, however, approximately $625,000,
which represents the aggregate exercise price of the Warrants. If the
Underwriters exercise the over-allotment option in full, the Company will
receive approximately an additional $483,000, which represents the aggregate
exercise price of additional warrants. The Company intends to use the proceeds
for general corporate purposes. See "Management's Discussion and Analysis of
Financial Condition and Results of Operation--Liquidity and Capital Resources."

9
<PAGE>

Price Range of Common Stock and Dividend Policy

The Common Stock is quoted on Nasdaq under the symbol "ISCG." The following
table sets forth, for the calendar periods indicated, the range of high and low
sale prices for the Common Stock on Nasdaq. These prices do not include retail
mark-up, mark-down or commissions.
----------------------
1996 High Low
---- ---
Second Quarter (commencing April 18)............. $30.00 $16.25
Third Quarter.................................... 21.50 13.25
Fourth Quarter................................... 20.75 11.50

1997
First Quarter (through January 31)............... $14.13 $12.25

On January 31, 1997, the last reported sale price on Nasdaq for the Common Stock
was $13.875 per share.

To date, the Company has not paid any cash dividends on its Common Stock. The
Company currently intends to retain future earnings for use in its business and,
therefore, does not anticipate paying any cash dividends in the foreseeable
future. The payment of future dividends, if any, will depend, among other
things, on the Company's results of operations and financial condition, any
restriction in the Company's loan agreements and on such other factors as the
Company's Board of Directors may, in its discretion, consider relevant. The
Company's bank loan agreement currently prohibits the payment of dividends. See
Note 5 to the Consolidated Financial Statements appearing elsewhere in this
Prospectus.

10
<PAGE>

Capitalization

The following table sets forth the total capitalization of the Company as of
December 31, 1996, and as adjusted to reflect the exercise of the Warrants and
the receipt of approximately $625,000 by the Company representing the aggregate
exercise price of the Warrants. This table should be read in conjunction with
the Consolidated Financial Statements and related notes thereto and other
financial information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>

-------------------------------------
As of December 31, 1996
Actual As Adjusted

<S> <C> <C>
Dollars in thousands, except per share data
Long-term debt ..................................................................... $ -- $ --
------ ------

Shareholders' equity:
Preferred stock, $1.00 par value; 500,000 shares
authorized; none issued (actual and as adjusted)................................. -- --
Common stock, $.005 par value; 25,000,000 shares authorized, and
9,227,513 and 9,397,444 (as adjusted) shares issued (1) ......................... 46 47
Additional paid-in capital....................................................... 12,612 13,236
Retained earnings................................................................ 5,776 5,776
Treasury stock, at cost, 1,370,840 shares........................................ (674) (674)
------ ------
Total stockholders' equity....................................................... 17,760 18,385
------ ------

Total capitalization................................................................ $17,760 $18,385
====== ======
</TABLE>

- ---------
(1) As adjusted figures exclude (i) 710,246 shares of Common Stock issuable
upon the exercise of options outstanding at December 31, 1996 (of which
152,914 were exercisable at that date) at a weighted average exercise price
of $2.33 per share and (ii) 509,792 shares of Common Stock issuable upon
the exercise of warrants outstanding at December 31, 1996 at an exercise
price of $3.68 per share. See "Management -- 1989 Incentive Stock Option
Plan" and "Principal and Selling Shareholders."

11
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data presented below as of and for each of
the years in the four-year period ended December 31, 1996 have been derived from
the Company's consolidated financial statements, which have been audited by KPMG
Peat Marwick LLP, independent auditors. The selected consolidated financial data
at December 31, 1992 and for the year ended December 31, 1992 have been derived
from the Company's unaudited consolidated financial statements, which include
all adjustments, consisting only of normal recurring adjustments, which
management considers necessary for a fair presentation of the data for such
period. The consolidated balance sheets as of December 31, 1995 and December 31,
1996 and the related consolidated statements of operations, stockholders' equity
and cash flows for each of the years in the three-year period ended December 31,
1996 and the report of KPMG Peat Marwick LLP thereon are included elsewhere in
this Prospectus. The data presented below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the Consolidated Financial Statements and the notes thereto and
other financial information appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
----------------------------------------------------------------------
Years Ended December 31,
In thousands, except per share data
Statement of Operations Data: 1992 1993 1994 1995 1996
------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Revenues............................................... $6,729 $9,461 $13,543 $21,024 $30,607
Operating expenses:
Direct costs......................................... 4,035 5,632 8,111 12,559 17,497
Selling expenses..................................... 329 606 808 1,044 1,822
General and administrative expenses.................. 1,972 1,889 2,451 4,143 6,372
----- ----- ----- ----- -----
Total operating expenses............................... 6,336 8,127 11,370 17,746 25,691
----- ----- ------ ------ ------
Income from operations................................. 393 1,334 2,173 3,278 4,916
Interest income (expense), net......................... (8) 5 (85) (33) 354
------ ------- ------- ------- ------
Income before income taxes and
cumulative effect of accounting change............... 385 1,339 2,088 3,245 5,270
Provision for income taxes............................. 163 495 880 1,395 2,266
--- --- --- ----- -----
Income before cumulative effect of
accounting change.................................... 222 844 1,208 1,850 3,004
Cumulative effect of accounting change................. -- 141 -- -- --
------- ----- --------- --------- ---------
Net income............................................. $222 $703 $1,208 $1,850 $3,004
==== ==== ====== ====== =====
Net income per common share:
Income before cumulative effect of
accounting change.................................. $.08 $.17 $.31 $.38
Cumulative effect of accounting change............... (.01) -- -- --
------ -------- -------- --------
Net income per common share:
Primary...................................... (1) $ .07 $ .17 $ .31 $.38
Fully diluted................................ (1) $ .07 $ .17 $ .31 $.37
------ ------ ------ ------
Shares used in computing net income per common share:..
Primary...................................... (1) 10,053 7,145 6,002 7,958
====== ===== ===== =====
Fully diluted................................ (1) 10,053 7,145 6,002 8,051
====== ===== ===== =====
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
-----------------------------------------------------------------------
As of December 31,
Dollars in Thousands
Balance Sheet Data: 1992 1993 1994 1995 1996
------ ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Cash, cash equivalents and short-term investments. $ 138 $ 626 $ 757 $2,479 $11,267
Working capital................................... 523 991 1,393 3,327 14,728
Total assets...................................... 1,882 2,814 4,205 7,586 20,844
Long-term debt ................................... 135 5 2,088 -- --
Total stockholders' equity........................ 691 1,401 291 4,846 17,760
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
Years Ended December 31,
1992 1993 1994 1995 1996
------ ------- -------- ------ -----
Other Data:
<S> <C> <C> <C> <C> <C>
Operating margin.................................. 5.8% 14.1% 16.0% 15.6% 16.1%
Technical employees at year-end (unaudited)....... 83 118 173 254 330
</TABLE>
- -----------
(1) This data has not been furnished for 1992 because such data would not be
meaningful.

12
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following information should be read in connection with the information
contained in the Consolidated Financial Statements and notes thereto appearing
elsewhere in this Prospectus.

General

Since the Company began operations in late 1988, it has experienced substantial
growth in revenues, income from operations and net income. During 1994, 1995 and
1996, the Company's revenues increased by 43.1%, 55.2% and 45.6%, respectively,
to $13.5 million in 1994, $21.0 million in 1995 and $30.6 million in 1996. The
Company's income from operations increased by 62.9%, 50.9% and 50.0%,
respectively, to $2.2 million in 1994, $3.3 million in 1995 and $4.9 million in
1996. The Company's net income increased by 71.8%, 53.1% and 62.4%,
respectively, to $1.2 million in 1994, $1.9 million in 1995 and $3.0 million in
1996.

Substantially all of the Company's revenues are professional fees which
generally are billed at an hourly rate. The Company's costs consist primarily of
employee-related costs and non-reimbursed travel expenses of its technical and
technical management employees. As employee related costs are relatively fixed,
variations in the Company's revenues and operating results can occur as a result
of variations in billing margins and utilization rates (i.e. the ratio of hours
billed to total available hours) of its technical employees.

Since most of the Company's consulting engagements are on a time and materials
basis, the Company historically has been able to maintain its billing margins by
increasing its hourly rates to offset increases in costs related to its
professional staff. The Company manages its billing margins by establishing a
target billing rate for each of its technical employees which is used as a goal
for the Company's account executives in negotiating and establishing billing
rates for specific projects or assignments; however, actual billing rates may be
higher or lower than the target billing rates. Hourly rate increases are
generally implemented by the Company when a technical employee completes one
assignment and moves to the next assignment, although hourly rates are also
often adjusted during an assignment based on relevant contractual provisions.
The Company further manages its billing margins by basing a portion of all
account executives' incentive compensation on the annual aggregate billing
margin for their accounts.

To date, the Company believes that it has effectively managed its personnel
utilization rates. Differences in personnel utilization rates can result from
variations in the amount of non-billed time, which has historically consisted of
training time, vacation and holiday time, time lost to illness and inclement
weather and unassigned time. Non-billed time also includes time devoted to other
necessary and productive activities such as sales support and interviewing
prospective employees. Unassigned time results from differences in the timing of
the completion of an existing assignment and the beginning of a new assignment.
In order to reduce and limit unassigned time, the Company actively manages
personnel utilization by monitoring and projecting estimated engagement start
and completion dates and matching employee availability with current and
projected client requirements. In addition, the number of new technical employee
training programs and the amount of training incurred for existing technical
employees varies and can affect the Company's personnel utilization rates from
period to period.

During 1993, 1994 and 1995, the Company enjoyed a lower employee turnover rate
than that experienced by the industry in general. Although industry statistics
are not yet available for 1996, the Company believes this trend will continue
for 1996 as well. See "Business--Human Resources." The Company believes the
continuity associated with its lower employee turnover rate has helped it to
respond more effectively to its clients' needs as its business has grown. In
addition, although the Company's growth has resulted in increases in general and
administrative expenses, such increases would likely have been greater if the
Company's employee turnover rate were significantly higher.

13
<PAGE>

Results of Operations

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

-----------------------------------------------
Years Ended December 31,
1994 1995 1996
------ ------ -----

<S> <C> <C> <C>
Revenues......................................................... 100.0% 100.0% 100.0%
Operating expenses:
Direct costs................................................... 59.9 59.7 57.1
Selling expenses............................................... 6.0 5.0 6.0
General and administrative expenses............................ 18.1 19.7 20.8
----- ----- -----
Total operating expenses......................................... 84.0 84.4 83.9
----- ----- -----
Income from operations........................................... 16.0 15.6 16.1
Interest income (expense), net................................... (.6) (.2) 1.1
------ ------ -----
Income before income taxes....................................... 15.4 15.4 17.2
Provision for income taxes....................................... 6.5 6.6 7.4
----- ----- -----
Net income....................................................... 8.9% 8.8% 9.8%
===== ===== =====

</TABLE>

1996 Compared to 1995

Revenues. The Company's revenues for 1996 increased by $9.6 million, or 45.6%
from 1995. Approximately 64% of this increase resulted from an increase in the
volume of hours billed and approximately 36% from increases in the aggregate
average rates for hours billed during 1996. For 1996, revenue from clients in
the pharmaceutical industry increased to $18.0 million, or 58.8% of revenues,
from $13.5 million, or 64.3% of revenues, in 1995 and revenues from clients
engaged in software development increased to $3.5 million, or 11.4% of revenues,
in 1996 from $1.4 million, or 6.7% of revenues, in 1995.

Direct costs. Direct costs consist primarily of employee-related costs and
non-reimbursed travel expenses for the Company's technical employees.

Direct costs for 1996 increased by $4.9 million, or 39.3%, from 1995. This
increase is principally due to an increase in the number of technical employees
to 330 at December 31, 1996 from 254 at December 31, 1995.

As a percentage of revenues, direct costs declined to 57.1% in 1996 from 59.7%
in 1995. The decline resulted primarily from increases in aggregate average
billing rates during 1996 that exceeded increases in payroll and related
expenses for the Company's technical employees. In response to such billing rate
increases and to competition for information services professionals in general,
during the second quarter of 1996 the Company increased the compensation levels
for a number of its technical professionals. The Company expects that such
competitive pressures on technical employee compensation will continue at least
through 1997.

Selling expenses. Selling expenses principally consist of employee-related costs
as well as travel expenses of the Company's sales and marketing personnel.

14
<PAGE>

Selling expenses for 1996 increased by $778,000 to $1.8 million from $1.0
million in 1995. This increase is principally due to the increase in the number
of sales and marketing personnel to 13 at December 31, 1996 from 8 at December
31, 1995.

As a percentage of revenues, selling expenses increased to 6.0% for 1996
compared to 5.0% for 1995. This increase resulted from the addition of three
account executives (one in the Company's new Chicago sales office) and the
addition of two technical sales support personnel to assist in the increased
focus on project-oriented consulting.

General and administrative expenses. General and administrative expenses consist
of executive management costs, recruiting costs, accounting, human resources,
general expenses, office facilities costs, training and education expenses and
depreciation and amortization.

General and administrative expenses for 1996 increased by $2.3 million to $6.4
million from $4.1 million in 1995 and to 20.8% of revenues for 1996 compared to
19.7% for 1995. These increases are principally due to increases in facilities
costs (office rent and utilities) and facility-related costs (such as
depreciation of computer equipment, amortization of software and leasehold
improvements, expansion of computer networks, additional software costs and the
costs of related support personnel) to support an increase during 1996 in the
number of professional and supervisory personnel performing client engagements
in the Company's offices rather than at client locations. During 1996, the
Company also incurred certain new expenses and increased insurance, legal and
accounting expenses associated with public company filing and compliance
requirements and with investor and shareholder relations.

Interest Income. Net interest income was $354,000 in 1996 as compared with net
interest expense of $33,000 in 1995. This increase in net interest income
resulted from higher invested cash balance during 1996 principally as a result
of the $9.9 million in net proceeds received from the Company's initial public
offering of common stock in May 1996 (the "Initial Public Offering"). See
"-- Liquidity and Capital Resources."

Effective Income Tax Rate. The Company's effective income tax rate in 1995 and
1996 was 43.0%.

1995 Compared to 1994

Revenues. The Company's revenues increased 55.2% to $21.0 million in 1995 from
$13.5 million in 1994. The increase in the Company's revenues reflects an
increase in the volume of services delivered to new clients, as well as the
leveraging of the Company's existing client base by undertaking additional
projects for these clients, particularly from clients in the pharmaceutical
industry. The Company's revenues from clients in the pharmaceutical industry
increased by 62.7% to $13.5 million in 1995 from $8.3 million in 1994. In
addition, the Company's revenues from clients in the chemical industry increased
by approximately 74.4% to $3.0 million in 1995 from $1.7 million in 1994.

Direct costs. Direct costs declined as a percentage of revenues to 59.7% from
59.9% in 1994. In the aggregate, direct costs increased by 54.8% from 1994, due
to the increase in the number of technical employees required to support the
increased demand for the Company's services. In response to demand for the
Company's services, the Company increased the number of its technical employees
by 46.8% to 254 technical personnel at December 31, 1995 from 173 at December
31, 1994.

Selling expenses. Selling expenses declined as a percentage of revenues to 5.0%
in 1995 from 6.0% in 1994 due to the operating leverage resulting from a 55.2%
increase in revenues compared to an increase in selling expenses of only 29.2%.

15
<PAGE>

General and administrative expenses. General and administrative expenses
increased as a percentage of revenues to 19.7% in 1995 from 18.1% in 1994. This
increase is primarily attributable to increased recruiting and depreciation
expenses. In 1995, recruiting expenses increased by approximately $417,000 from
1994, due to the Company's increased hiring of technical employees and an
approximate 43.0% increase in the average cost of recruiting each new employee.
The increase in the average cost of recruiting new employees was a reflection of
the competition for employees within the information technology industry and the
increased level of hiring necessary to meet the increased demand for the
Company's services. In 1995, depreciation expense increased by approximately
$156,000 due to the Company's increased purchases of computer equipment and
furniture to support an increase in the number of technical employees performing
client engagements at the Company's offices.

Effective Income Tax Rate. The Company's effective income tax rate in 1994 and
1995 was 42.1% and 43.0%, respectively.

Quarterly Financial Results

Set forth below are selected unaudited statements of operations data for the
last eight fiscal quarters of the Company. In management's opinion, the results
below have been prepared on the same basis as the audited financial statements
contained herein and include all material adjustments, consisting only of normal
recurring adjustments necessary for a fair presentation of the information for
the periods presented when read in conjunction with the audited financial
statements and notes thereto contained elsewhere in this Prospectus.
<TABLE>
<CAPTION>

Unaudited Quarterly Statements of Operations
----------------------------------------------------------------------------------------------------
1995 Quarter Ended 1996 Quarter Ended

March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. 30 Dec. 31
-------- ------- -------- ------- -------- ------- -------- -------

In thousands, except per
<S> <C> <C> <C> <C> <C> <C> <C> <C>
share data $4,670 $4,959 $5,470 $5,925 $7,065 $7,444 $7,538 $8,560
Revenues....................

Income before income
taxes..................... 686 766 976 817 1,484 1,270 1,200 1,316

Net income.................. 391 437 556 466 846 724 683 751

Net income per common share:
Primary................. $.07 $.07 $.09 $.07 $.13 $.10 $.08 $.08
Fully diluted........... $.07 $.07 $.09 $.07 $.13 $.10 $.08 $.08

Shares used in computing net
income per common share:
Primary................. 5,734 5,844 6,156 6,273 6,274 7,584 9,000 8,974
Fully diluted........... 5,734 5,844 6,156 6,273 6,274 7,589 9,041 8,974

</TABLE>

The Company believes that its business is generally not seasonal; however,
fluctuations in personnel utilization rates and the timing of additional general
and administrative expenses may cause profitability to fluctuate from one
quarter to another. Quarterly results may also vary due to the timing of new
hires, the timing of training for new and existing technical employees and the
number of business days in a particular quarter. Results of operations for any
previous fiscal quarter are not necessarily indicative of results for any future
periods, and future quarterly results could be adversely impacted by these, and
other factors.

16
<PAGE>

Liquidity and Capital Resources

Cash and cash equivalents and short-term investments increased $8.8 million to
$11.3 million at December 31, 1996 from $2.5 million at December 31, 1995. The
increase resulted primarily from the Initial Public Offering proceeds described
below and working capital provided by operations offset by capital expenditures.

Capital spending during 1996 increased to $2.2 million from $1.2 million in 1995
principally from purchases of computer and office equipment, software and
leasehold improvements to support an increase in the number of technical
employees performing client engagements on the Company's premises rather than at
client locations.

At December 31, 1996, cash equivalents and short-term investments were invested
in short-term U. S. Governmental securities, commercial paper, and institutional
money-market funds. By policy, the Company invests in high credit-quality
instruments.

In May 1996, the Company completed its Initial Public Offering. The Company
issued 2,175,000 shares of the Company's common stock and received net proceeds
of approximately $9.9 million.

In 1995, the Company sold 953,355 shares of Common Stock and received net
proceeds of approximately $2.7 million from such sale. The net proceeds
primarily were used by the Company to repay the outstanding bank indebtedness
and the note to the selling stockholder and the balance for general corporate
purposes. See "Certain Transactions" and Note 8 to the Consolidated Financial
Statements appearing elsewhere in this Prospectus.

In May 1994, the Company repurchased, for approximately $2.1 million, all of the
shares of Common Stock held by a former stockholder. The Company paid $775,000
of this amount in cash with the balance financed by a seller note. To finance
its cash payment, the Company borrowed $750,000 from a commercial bank.

The Company currently anticipates that cash generated from operations and
existing cash balances will be sufficient to satisfy its operating requirements
and ordinary capital spending for the foreseeable future. The Company may expand
its capabilities through the acquisition of other businesses that are
complementary to the Company's business. Should the Company's business expand
more rapidly than expected, the Company's $1.0 million bank line of credit would
be available to fund such operating and capital requirements. In addition, the
Company could consider seeking additional public or private debt or equity
financing to fund growth opportunities, including acquisitions.

17
<PAGE>
Business

General

ISCG provides consulting services that address its clients' information
processing needs through technologically advanced solutions, including
client-server architecture, GUI-based applications, local and distributed
relational databases and cross-platform applications integration. The Company
delivers consulting services in two broad areas: applications development and
network management. In the applications development area, the Company provides
expertise to its clients in the full software development life cycle or one or
more discrete phases within such process. The Company's applications development
activities accounted for approximately 78.4% and 79.3% of its revenues in 1995
and 1996, respectively. In the network management area, the Company provides
expertise to its clients in the design, implementation, management and support
of multi-vendor local and wide area networks, desktop computer systems and
servers. The Company's network management activities accounted for approximately
21.6% and 20.7% of its revenues in 1995 and 1996, respectively.

Industry Overview

Rapid technological advances have accelerated the growth of the information
technology industry. These advances in recent years have included increases in
the power of personal computers at decreasing cost, the transition from
mainframe systems to open and distributed computing environments and the advent
of capabilities such as cooperative processing, relational databases, imaging
and software development productivity tools. These advances have expanded the
benefits that users can derive from computer-based information systems and
improved the price-to-performance ratios of such systems. As a result, an
increasing number of companies are employing information technology in new ways,
often to gain competitive advantages in the marketplace. Consequently,
information technology services have become an important component of the
long-term growth strategies for organizations, particularly those in information
intensive industries, such as the pharmaceutical and biotechnology industries.

The same advances that have enhanced the benefits of computer systems, however,
have rendered the development and implementation of such systems increasingly
complex. As a consequence, businesses increasingly are outsourcing information
technology requirements to skilled and experienced providers such as the Company
to help them accomplish their strategic information processing objectives. In
addition to the complexity of computer systems, the Company believes the factors
fueling this trend include: (i) the risk of selecting inappropriate technology;
(ii) competitive pressures requiring rapid implementation of new systems; (iii)
the growing application development backlog in many organizations; (iv) the lack
of requisite technical and management capabilities within many in-house
information systems ("IS") departments; (v) difficulty in attracting and
retaining qualified technical and management personnel within many in-house IS
departments; (vi) the existence of older information systems in many
organizations that are difficult and expensive to maintain; and (vii) strategic
decisions by many organizations to concentrate on core businesses, to keep IS
costs variable and to contain the growth of IS departments. The Company believes
this trend will continue as companies increase their investments

18
<PAGE>

in software upgrades, systems re-engineering, client-server migration and
enterprise-wide systems integration.

Target Market Drivers

The Company focuses principally on clients and prospective clients in the
pharmaceutical industry and, in particular, the information technology needs of
the professionals responsible for the regulatory approval of products. The
Company believes there are a variety of forces impacting the pharmaceutical and
biotechnology industries that will lead to increased dependence on information
technology solutions. These include:

Pressure to Reduce Time to Market. There is intense pressure on pharmaceutical
companies to minimize the time required to bring a drug to market. In response
to this pressure, companies are employing information technology systems as an
important strategy in their attempt to shorten the time required for development
of, and preparation of New Drug Applications ("NDAs") for, candidate drugs and
to shorten the duration of the FDA review process. Typically, a company files a
patent application for a new drug early in the developmental cycle,
approximately at the time the new compound is first synthesized. When issued,
the resulting patent is valid for 20 years. In the U.S., the average time
required for the development of a new drug, from the discovery or creation of
the new chemical entity to its approval by the FDA, is ten to 12 years. See
"--The Drug Development Process." To the extent the time to market for the
approved drug can be shortened, the pharmaceutical company maximizes the period
during which it may market the drug commercially as the sole provider.

Increasing Complexity of Clinical Data Management. The volume and complexity of
data associated with the clinical stages of the drug development process have
been increasing in recent years. This is evidenced by a growing number of
patients involved in clinical studies and an expanding number of pages contained
in NDA submissions. In the late 1970s, the average Phase III clinical trial
involved approximately 1,600 patients per study and the average number of pages
in an NDA submission was approximately 38,000. By the early 1990s, the average
number of patients per study had grown to approximately 3,600 and the average
NDA submission had expanded to approximately 91,000 pages. This growth has
imposed, and the Company believes will continue to impose, heavier burdens on
the clinical data management processes of pharmaceutical companies.

Global Development Strategies. Pharmaceutical companies are pursuing regulatory
approval of drug candidates, often concurrently, in multiple countries,
expanding not only the geographic scope of clinical trials but the diversity of
regulatory issues and complexity of managing the resulting data. Properly
administering and coordinating these trials, effectively sharing the data across
all corporate locations and consolidating and analyzing the data requires
increasingly sophisticated information systems.

Consolidation in the Pharmaceutical Industry. The pharmaceutical industry is
consolidating as companies seek to obtain access to new products, new or
complementary distribution channels and cost reductions through business
combinations. Mergers completed during 1994, 1995 and 1996 involved some of the
largest multinational pharmaceutical companies in the world, such as Roche
Holding AG/Syntex Corp.; American Home Products Corp./American Cyanamid Co.;
Glaxo Holdings PLC/Wellcome PLC; Hoechst AG/Marion Merrell Dow Inc.; Pharmacia
AB/Upjohn Co.; Rhone-Poulenc Rorer Pharmaceuticals/Fisons; and Ciba-Geigy,
Ltd./Sandoz, Ltd. These business combinations create a need to integrate quickly
and successfully the systems of, and to migrate data between, these newly
consolidated global organizations.

Product Pipelines and Biotechnology Industry Growth. Pharmaceutical companies
are under constant pressure to develop new product candidates to submit for
regulatory approval. In addition, the biotechnology industry, which has grown
rapidly over the last ten years, is introducing significant numbers of new drug
candidates that require regulatory approval. The Company believes these forces
will continue to expand its principal target market. In addition, many early
stage biotechnology companies do not have the systems in place to manage the
data and documentation associated with the drug development process.

19
<PAGE>

Increased Focus on Information Systems by the FDA. The FDA has become
increasingly sophisticated with respect to information systems and the integrity
of data incorporated into regulatory submissions. The FDA conducts information
systems audits to confirm the validity of pharmaceutical companies' information
systems. In response to this and other factors, the FDA is encouraging the use
of computer-assisted filings in an effort to expedite the approval process. The
Company believes this regulatory focus on information technology will cause
pharmaceutical companies continually to maintain and enhance the sophistication
and effectiveness of their information systems.

The Drug Development Process

The Company believes its knowledge of the drug development process and expertise
in the software systems required to support that process constitute an important
competitive advantage. The regulatory process is highly complex and is an
important element of the pharmaceutical, biotechnology, medical device and
contract research organization ("CRO") industries, which the Company has
targeted as principal areas for its future growth. The average time period for a
pharmaceutical company to bring a new drug to market in the United States is ten
to 12 years. The Company believes the drug development process is segmented into
four general stages (Discovery, Development, Submission and Post-Approval), each
having certain milestones and activities and possessing opportunities for the
supply of the Company's services. The Company's view of this process is
illustrated in the following diagram:

[Graphic depicting the drug development process in four stages
(Discovery, Development, Submission, and Post-Approval) and representative
activities conducted by pharmaceutical companies within these four stages.]

In the Discovery stage, the development process begins with the identification
or creation of a new chemical entity in the laboratory. The company developing
the new drug then begins laboratory analyses and pharmacologic tests

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on animals, typically extending over one to three and a half years, to determine
the basic biological activity and safety of the drug. Toxicological studies are
continued through both the Discovery and Development stages. In the U.S., a
developer of a new drug must file an Investigational New Drug application
("IND") with the FDA before the commencement of human testing (i.e. clinical
trials) of such drug. In the absence of any comments from the FDA, human
clinical trials may begin 30 days after the IND is filed. In 1994 (the most
recent full-year data available), there were 2,156 INDs filed with the FDA.

Clinical trials (consisting of Phases I, II and III) often represent the most
expensive and time-consuming part of the overall drug development process. After
the successful completion of Phase III clinical trials, the developer of a new
drug must submit an NDA to the FDA. The NDA is a comprehensive filing that
includes, among other things, the results of all pre-clinical and clinical
studies, information about the manufacture of the drug and the developer's plans
for producing, packaging and labelling the drug. NDA submissions can consist of
up to 250,000 pages and involve the collaborative efforts of numerous
departments and individuals. This critical process requires the regulatory
affairs group of a pharmaceutical firm to track and chronicle each step of the
research and development process of the new drug. This includes the collection,
analysis, validation and documentation of the results of clinical trials,
generally over many years, involving scientists, researchers and physicians,
often located throughout the world. To the extent a pharmaceutical company is
seeking approval of the drug in foreign countries, each submission must be
modified in accordance with each country's regulatory requirements. The ability
to streamline this process can mean a substantial shortening of the candidate
drug's time to market and a significant economic advantage to the pharmaceutical
company given the limited life of any patent obtained on the new drug. In 1994
(the most recent full-year data available), there were 133 NDAs filed with the
FDA.

ISCG's Strategy

The Company believes its most promising opportunity for growth lies in
leveraging the high degree of expertise its technical employees have developed
in the pharmaceutical industry. This expertise entails extensive knowledge of
the drug development process and the industry leading software products used to
support that process. From this foundation of knowledge and experience, as well
as successful client relationships, the Company's strategic objective is to be a
leading provider of applications development and network management consulting
services to pharmaceutical and other companies whose products are subject to, or
whose services relate to, the FDA approval process. The Company plans to pursue
this objective through the following strategic elements:

Broaden Scope of Expertise to Address Full Drug Development Spectrum. In the
Company's view, the full drug development spectrum commences with laboratory
efforts to identify or create a new chemical entity and runs through the
manufacturing and distribution of the approved drug for the entire commercial
life of the product. As depicted in the above diagram, the Company believes the
drug development process can be segmented into four general stages: Discovery,
Development, Submission and Post-Approval. The Company has extensive experience
in a wide array of tasks and processes conducted by pharmaceutical companies in
the Development and Submission stages and these two stages likely will remain
the principal focus of the Company's marketing activities. To date, the Company
has been engaged by pharmaceutical companies on a more limited basis to develop
systems for, or otherwise support various activities or processes in, the
Discovery and Post-Approval stages, and the Company has targeted these areas for
expansion. Managing the Discovery and Post-Approval stages of these new products
creates challenges for pharmaceutical companies for which the Company believes
information technology solutions are well suited. Recent scientific and
technology advances in bioinformatics and high throughput screening have created
a need to build warehouses of information to support the drug discovery process.
The Company believes that the information technology skills used to build
software systems for the Development and Submission stages are transferable to
the Discovery and Post-Approval stages. The Company also believes that it may
need to hire additional technical employees with requisite industry skills
applicable to these stages.

Increase Pharmaceutical Client Base. The Company is allocating marketing
resources toward securing relationships with pharmaceutical companies with which
it has not yet established client relationships. Although the Company provided
services to a large number of pharmaceutical companies in 1996, there are a
larger number of pharmaceutical firms with which it has not yet established
relationships. The Company believes it can leverage

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successful engagements from its current pharmaceutical client base to attract
new pharmaceutical clients. The Company plans to increase its exposure to these
prospective clients through attendance, presentations, and exhibits at
pharmaceutical trade shows with particular emphasis on the applications and
technologies in which the Company has developed expertise.

Expand Penetration into Other Regulated Markets. In addition to the traditional
pharmaceutical industry, substantial industries exist whose participants are
subject to similar FDA regulation, including the biotechnology and medical
device industries. Furthermore, CROs represent a multi-billion dollar industry
focused on the regulatory approval process for new drugs. To date, the Company
has performed various engagements for biotechnology companies and CROs, although
these have been limited in number and scope relative to the Company's work for
pharmaceutical firms. The Company's goal is to leverage on its current presence
in the pharmaceutical industry to expand its penetration of these associated
industries.

In addition to FDA-regulated industries, the Company markets its consulting
services to organizations in other industries, including the chemical and
software industries. Although the Company believes regulated health care product
industries present its most significant opportunities for growth, the Company
intends to pursue opportunities in other markets as well.

The Company plans to pursue various tactics in order to implement its strategic
plan. One of these will be to pursue acquisitions of other information services
providers to add technical capabilities, skilled personnel, geographic coverage
and clients. At present, the Company has no commitments or understandings with
respect to future acquisitions. Another tactic the Company intends to pursue
will be to leverage its current software vendor relationships and to establish
similar relationships with other vendors. The Company views its relationships
with Documentum and DLB as the prototypes for these relationships and will seek
to model other relationships on them. See "--Sales and Marketing" for a
description of these relationships. On August 1, 1996, the Company opened a new
office in Chicago, Illinois, out of which the Company conducts sales and
technical sales support activities. The Company may pursue further geographic
expansion into domestic and international locations possessing high
concentrations of pharmaceutical, biotechnology and medical device companies for
establishment of additional sales offices.

ISCG's Consulting Services

Historically, the Company has delivered applications development consulting
services primarily by providing staff augmentation to its clients on a time and
materials basis. Clients typically have utilized the Company's services in this
format for assignments that encompass all aspects of the software development
life cycle. The Company also delivers applications development consulting
services on a project basis by providing full software development life cycle
services at its and its clients' facilities. The Company also delivers network
management consulting services primarily by providing supplemental staff to its
clients. The foundation of the Company's consulting skills is its overall focus
on maintaining its expertise in advanced information processing technologies. In
deploying these technologies, the Company provides expertise in client-server
architecture, GUI-based applications, local and distributed relational
databases, cross-platform applications integration and network management
services.

Applications Development Services

The Company's applications development consulting group is organized in three
practices, which represent the Company's primary areas of technical expertise:
pharmaceutical research systems, document management systems and client-server
systems integration. The Company's applications development engagements
typically involve disciplines from, and the Company's technical employees
generally are involved in, more than one, if not all, of these practices.
Currently, approximately 100 of the Company's technical employees perform client
applications

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<PAGE>

development services in ISCG's in-house applications development center. The
remaining technical employees perform client work at the respective clients'
sites. The Company is expanding its applications development center to
accommodate approximately an additional 35 technical employees in early 1997 and
an additional 30 technical employees by June 1997.

Pharmaceutical Research Systems Practice. The Company's technical employees in
this practice specialize in the analysis, development and integration of
software solutions that support the research groups of pharmaceutical
organizations. These technical employees are knowledgeable with respect to the
research groups' focus on the collection, analysis and management of clinical
and pre-clinical data required for INDs and NDAs. The Company's technical
employees have extensive experience in the development and deployment of
customized systems for these divisions. In addition to custom development, the
Company's technical employees have integrated and customized commercially
available applications software from a number of vendors including DLB, Domain
Solutions Corporation, Clinarium and the SAS Institute. The vast majority of
these integration efforts include an extensive migration or conversion process
for crucial existing data.

Document Management Systems Practice. The Company's technical employees in this
practice help clients design and build document management systems. These
technical employees are particularly knowledgeable in the documentation
requirements of the pharmaceutical regulatory approval process, as well as in
the software technologies applicable to that process. The Company customizes
packaged software products such as Documentum to support the preparation and
submission of NDAs. This includes the creation of systems that track and manage
clinical documents and support the automated assembly of regulatory submissions.
This customization includes the development of user interfaces implementing
GUI-based products such as Microsoft's Visual Basic and Visual C++ and
Powersoft's PowerBuilder and the creation of document databases using packaged
software products provided by Documentum. Pharmaceutical companies are deploying
document management products, such as those provided by Documentum, as an
important part of their efforts to shorten the time to market for new drugs.
Such products replace manual processes and paper distribution lists, while
providing accurate, easily accessible repositories of drug information that can
be used and reused for simultaneous submissions in multiple markets, as well as
consistent, rapid responses to governmental agency inquiries. See "--Clients and
Representative Engagements." Other document management technology products
integrated by the Company include Adobe's Acrobat and Framebuilder products and
Interleaf.

Client-Server Systems Integration Practice. The Company's technical employees in
this practice specialize in the architecture, development and integration of
client-server systems using integrated development environments that include
computer-aided design tools, GUIs and state-of-the-art database technologies.
GUI development platforms include Borland's Delphi, Powersoft's PowerBuilder,
Microsoft's Visual Basic, Access and Visual C++ and Oracle's Designer/2000 and
Developer/2000. Database technologies used by this group include products from
Oracle, Sybase, Informix and Microsoft, and operating systems such as Hewlett
Packard's HP/UX, Digital Equipment Corporation's OpenVMS, Sun Microsystems'
Sun/OS and Solaris, Microsoft's Windows NT, International Business Machines'
OS/2 and SCO UNIX. In addition to application development and integration
services, this group also provides database administration, capacity planning
and migration services.

Typically, when the Company delivers its services on a project basis, it employs
a flexible, interactive application development methodology based on the concept
of delivering incremental modules of the system to clients. These incremental
modules represent functional subsets of the complete system and allow clients to
examine and determine whether they meet the users' requirements. In this manner,
the client's user community provides continuous testing and feedback to the
development team throughout the development life cycle until the entire system
is completed.

The Company's application development methodology distinguishes the Company from
many of its competitors, which employ more rigid methodologies and require
clients to work within the competitors' or software vendors' standardized
approaches. This methodology allows the user community to take a much more
active role in the definition and design of the system. The users' hands-on
involvement is critical to building a solution that more fully

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<PAGE>

satisfies the client's needs. As a result, the Company believes it is able to
deliver applications development services that more closely meet the needs and
culture of the particular client in a more timely and cost-effective manner.

Network Management Services

The Company's network management services provide clients with expertise in the
evaluation, selection, design, implementation and support of local and wide area
networks. Examples of the varied functions performed by the Company's technical
employees include multi-network integration, desktop system installation and
management, server management, capacity planning, performance analysis and Lotus
Notes administration and development. The Company's technical employees
specialize in UNIX, Open/VMS and Lotus Notes technologies, but their technical
skill set spans a wide range of network software technologies, including Hewlett
Packard's HP/UX; Sun Microsytems' Solaris; International Business Machines' AIX
and OS/2; Digital Equipment Corporation's Open VMS, PATHWORKS, Alpha and
Clusters; Microsoft's Windows NT and LAN Manager; Novell's Netware; and TCP/IP.
Consequently, the Company is able to provide network management services in
diverse client environments. See "--Clients and Representative Engagements."

Since the Company's inception, the market demand for the services of its network
management practice group has steadily increased, and management believes it
will continue to increase. In addition, the Company believes that the
globalization of business and resulting complexity of managing networks will
increase current and prospective clients' needs for network management
consulting services.

Clients and Representative Engagements

The Company's clients include some of the largest pharmaceutical companies in
the world and other Fortune 500 corporations, including, among others, Air
Products, American Cyanamid Company, Bristol-Myers Squibb Co., Eli Lilly &
Company, G.D. Searle & Company, Merck, Pfizer, Inc., Procter & Gamble,
Rhone-Poulenc Rorer Pharmaceuticals, SmithKline Beecham Pharmaceuticals, Inc.,
Warner-Lambert Company and Zeneca Group. During the five-year period ended
December 31, 1996, the Company served 41 clients in the pharmaceutical industry
and completed engagements in all stages of the drug development process.
Pharmaceutical company engagements accounted for approximately $8.3 million,
$13.5 million and $18.0 million or 61.5%, 64.3% and 58.8% of the Company's
revenues in 1994, 1995 and 1996, respectively. See "Risk Factors--Dependence on
Pharmaceutical Industry."

The following paragraphs describe representative engagements in which the
Company is currently involved or that the Company completed recently:

In a recent engagement within the Discovery stage of the drug development
process, the Company helped a client streamline its international processes and
implement applications designed to enhance the client's ability to identify new
drug leads. Among other things, the Company redesigned the client's
international database to support an integrated, flexible architecture, enabling
the system to accomodate with future changes in chemical synthesis and screening
techniques. Development was performed in a client-server environment using
Windows 3.1, Windows NT 4.0 and Windows NT Server 4.0. The database design and
development were performed using Oracle 7.3, SQL*Net and Oracle Web Server 2.0.
The application design employed Delphi Client-Server 2.0 with numerous
third-party components,

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<PAGE>

Microsoft Explorer Shell Namespace extensions, Visual Basic 4.0, ISIS Client
2.0.2, and Microsoft Excel. The system also employed OLE Automation in the
development process.

In a project that involved the Discovery and Development stages of the drug
development process, the Company designed and implemented a toxicology report
document management system for a pharmaceutical company. This document
management application allows toxicology/preclinical users to log, edit, import,
search, route, and prepare documents for publishing. These documents support
toxicology testing and comprise toxicology reports, which are included in INDs
and NDAs. The system tracks the location of specific documents, manages how
these documents are updated, controls access to them, and efficiently routes the
documents to the appropriate users. The Company employed Documentum Workspace,
Visual Basic, Oracle7, TCP/IP, Microsoft SourceSafe, Adobe Acrobat Exchange, and
Soffrant Track and Data Logic's Composer on a SUN UNIX platform.

In a project within the Development stage of the drug development process, the
Company is integrating Domain Solutions Corporation's ClinTRACE software into
the client's global computing environment, converted the existing data from the
client's legacy systems to the Oracle7 database, and validated the system. This
system is designed to improve the pharmaceutical company's global mananagement
of adverse event and reaction data.

In a project in the Post-Approval stage of the drug development process, the
Company is implementing an electronic batch record system for a pharmaceutical
company that will change the client's current paper-intensive batch record
system to a paperless environment. The system is designed to ensure compliance
to current good manufacturing practices and will provide the electronic
equivalent of batch records, use and cleaning logs, standard operating
procedures, non-conformance reports, and equipment and cleaning checklists. The
Company's technical employees are providing project leadership, application
development, data design, and logical and physical database design services.

In a continuing non-pharmaceutical engagement, the Company provides Intel/NT and
UNIX server administration, network management, and end-user support services to
approximately 3,000 users at the client's headquarters. The Company's technical
employees are integrated into this client's delivery teams that are planning,
implementing, and supporting the technology migrations from PATHWORKS for
OpenVMS and PATHWORKS for OS/2 to Windows NT Server, from DECnet to TCP/IP, and
from Windows for Workgroups to Windows 95.

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<PAGE>

Sales and Marketing

The Company has a direct sales force, consisting of a Vice President of Sales,
two sales managers and eight account executives, that is responsible for all
phases of the selling process in the continental United States. One account
executive is located in the Princeton office and one account executive and two
senior technical employees who provide sales support are based in the Chicago
office, which the Company established in August 1996. The remainder of the
direct sales force is based in the Company's Wayne, Pennsylvania headquarters.
The efforts by the Company's sales force are supplemented by its technical
employees, who, in the past, have been able to expand existing engagements and
generate new business while on assignment at clients' sites. Although the
Company does not have an international marketing organization, it has secured
limited overseas engagements from multi-national organizations for which it has
performed services domestically.

The Company's marketing efforts are primarily focused on expanding its name
recognition and its technical reputation in the pharmaceutical industry, its
largest marketplace, and the document management market. The Company's sales
team has exhibited at pharmaceutical trade association, technical and vendor
user group conferences that focus on document management, adverse events
reporting and clinical data management, and plans to increase the number of
conferences it attends in the pharmaceutical, biotechnology and medical device
industries.

The Company also periodically writes and distributes "white papers" or case
studies about its experiences in utilizing a variety of leading edge
technologies. These white papers are often delivered at trade association
conferences and are routinely distributed to current and prospective clients.
The purpose of these publications is to create and enhance the Company's image
as a technology leader.

The Company views existing clients as a valuable source of additional work in
the form of both extensions to, and expansion of, ongoing engagements, and the
initiation of new engagements. The Company seeks to establish long-term
relationships with clients in which clients rely on the Company for ongoing
information technology solutions. These types of relationships have helped
create stable revenues for the Company. In 1994, 1995 and 1996, approximately
$12.0 million, $18.5 million and $26.2 million, respectively, of the Company's
revenues were derived from clients to which it had provided services in the
previous year.

Vendor Relationships

The Company has established non-exclusive partnership arrangements with two
software vendors, Documentum and DLB, each of which markets products to the
pharmaceutical industry. The Company's history of integrating their software
products into clients' systems has led to strong relationships with these
vendors which enhances the Company's marketing efforts. These partnership
arrangements position the Company as a potential systems integrator should
clients or prospective clients select one of these vendors' products. These
relationships have often resulted in sales leads and the generation of client
engagements. However, in order to retain its objectivity in evaluating clients'
needs and designing solutions, the Company has avoided creating relationships
with these software vendors pursuant to which it earns fees or commissions on
the sale of particular software products. See "Risk Factors -- Reliance on
Vendor Relationships."

Documentum, Inc. Since it first implemented Documentum's products in 1992, the
Company has been engaged by more than 40 clients for projects involving the
integration of these products. Documentum has supported the Company's growth by
recommending the Company to its clients as a provider of information technology
consulting services. The Company has supported Documentum's growth by
successfully implementing Documentum's products at important pharmaceutical
accounts and co-developing several training courses with Documentum. The Company
has served as the East Coast training center for Documentum since 1992, although
Documentum plans to establish its own East Coast training center in 1997. The
Company has also organized and

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<PAGE>

sponsored the East Coast Documentum Users' Group, and has served as a Beta test
site for several new Documentum products. Several aspects of the relationship
between the companies have been formalized, such as the arrangements for
training and Beta testing. However, the strength of the relationship lies in the
rapport that has developed between counterparts in parallel groups within the
two companies, including executive management, marketing, sales, technical
support and training.

DLB Systems, Inc. After completing approximately eight engagements from 1991
through 1995 that involved the implementation of packaged software products
produced by DLB, the Company entered into a partnership arrangement with DLB in
late 1995. This agreement provides a methodology for the Company and DLB jointly
to propose to prospective clients the sale of software by DLB and its
implementation by ISCG, with the Company acting as a subcontractor to DLB for
the implementation at the client's facility of DLB's products. The Company is
currently providing consulting services to DLB in support of its new product
development.

In partnership with other software vendors, such as Oracle Corporation and
Borland International, Inc., the Company provides training courses in the
vendors' respective technologies to clients. These joint training activities
generally strengthen the relationship between the Company and these vendors,
enhance the Company's market position with the vendors' products, create
consulting opportunities, train the Company's technical employees in strategic
technologies at lower costs and introduce potential clients and allow current
clients a closer view of the Company. The Company intends to pursue additional
partnership arrangements with other vendors in the future as circumstances
warrant.

Pricing Strategy

The Company believes that it generally has been able to distinguish itself from
larger, nationally known consulting firms by offering similar or better
expertise at price levels that provide clients relatively higher value. The
Company generally seeks engagements in a price range of $100,000 to $1.5
million. Engagements in this range typically are beyond the capabilities of
smaller, local competitors primarily due to the volume and complexity of the
work involved yet may be too small for the Company's larger, national
competitors to cost-effectively pursue. In the Company's experience, it is not
unusual for these smaller engagements to expand or to lead to new engagements.

Based on client requirements, the Company structures pricing for applications
development projects on either a time and materials or a fixed price basis. In
1996, over 94.0% of the Company's business was done on a time and materials
basis. Additionally, the Company continually refines its pricing, proposal and
project management methodologies to maximize the profitability of its fixed
price projects.

Concentration and Mix of Revenues

Historically, a small number of clients have each accounted for 10.0% or more of
the Company's revenues. In 1994, Merck accounted for approximately 17.2% of the
Company's revenues. In 1995, Air Products and Merck accounted for approximately
12.7% and 10.9% of revenues, respectively. In 1996, Air Products and Merck each
accounted for approximately 10.0% of revenues. An unanticipated reduction of a
significant amount of business from either of these clients may have a material
adverse effect on the Company's financial condition and results of operations.

Since the implementation of a large software application is a complex, time
intensive and costly process, clients generally undertake these projects on an
irregular basis. As a result, the amount of revenues derived by the Company from
any given client likely may vary significantly from year-to-year. Accordingly,
the Company expects that the identity of clients accounting for large portions
of its revenues may change from year-to-year. The inability of the Company to
maintain its personnel utilization rates (i.e. the ratio of hours billed to
total available hours) following the completion of large engagements, either by
securing new engagements or by utilizing its technical employees for existing
engagements, could be expected to have a material adverse effect on the
Company's financial condition and results of operations during such period. See
"Risk Factors -- Concentration and Mix of Revenues."

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The Company has in the past derived, and expects in the future to derive, a
significant portion of its revenues from companies in the pharmaceutical
industry. Engagements by pharmaceutical companies accounted for approximately
61.5%, 64.3% and 58.8% of the Company's revenues in 1994, 1995 and 1996,
respectively. The Company's revenues are highly dependent on research and
development expenditures by the pharmaceutical industry. At December 31, 1996,
$3.1 million or 52.1% of the Company's trade and unbilled accounts receivable
were due from companies in the pharmaceutical industry. See "Risk Factors --
Dependence on Pharmaceutical Industry" and Note 3 to the Consolidated Financial
Statements included elsewhere in this Prospectus.

Human Resources

General

The Company believes that its future success will depend in large part upon its
ability to attract, retain and motivate highly skilled employees, particularly
technical employees. The Company has therefore sought to create an attractive
and rewarding corporate culture by enfranchising employees through stock
ownership, by promoting from within and by providing intensive training,
challenging assignments and involvement in many facets of the Company's business
processes in an environment of mutual trust and support. The Company believes
that these policies have resulted in a turnover rate of its technical employees
which is considerably lower than the industry average. According to a survey
performed by The Updata Group, Inc. of 200 companies in the Company's industry,
the weighted average industry turnover in 1995 was 38.6%. During 1995 and 1996,
the Company's turnover rate was 20.5% and 24.8%, respectively.

Information services professionals are in great demand and are likely to remain
a limited resource for the foreseeable future. Although the Company expects to
continue to attract sufficient numbers of highly skilled employees and to retain
its key technical employees, project managers and other senior personnel for the
foreseeable future, there can be no assurance that the Company will be able to
do so. The Company has employment agreements with approximately 24 of its senior
executives and sales and technical personnel. These agreements generally provide
that, in addition to base compensation, such employees are entitled to annual
bonuses based upon achievement of revenue and gross profit goals. In addition,
the employment agreements generally restrict such employees, during the term of
their employment and for six to 24 months thereafter, from competing with the
Company or soliciting Company clients or employees.

As of December 31, 1996, the Company had a total professional staff of 385
employees, comprised of five members of senior management, 32 administrative
personnel, 17 technical service managers (including one member of senior
management), 313 other technical employees, eight recruiting personnel and 13
sales and marketing personnel (including one member of senior management and one
administrative person). In general, the Company's account executives qualify the
Company's sales leads and determine the required skills for a particular
engagement as well as the probability of closure, price of services, payment
terms, length of engagement and location. The Company's technical service
managers oversee groups of 20 to 25 technical employees and are responsible for
the client assignment, quality control, performance reviews, administration and
career development of the technical employees within their respective groups.

None of the Company's employees is subject to a collective bargaining agreement.
The Company believes its relations with its employees are excellent. See "Risk
Factors -- Attraction and Retention of Technical Employees."

Recruiting

The Company recognizes the critical importance of recruiting to its future
growth. The Company recently hired two additional recruiters, increasing the
number of employees dedicated to recruiting to eight persons. Two recruiters are
dedicated to new college graduates. In order to enhance further its recruiting
efforts, the Company also provides customized training for its recruiters,
provides incentives for its technical personnel to recruit technical and other
personnel, advertises for candidates on the Internet and conducts special hiring
events and seminars. The Company

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<PAGE>

believes the quality and reputation of its intensive technical training programs
have been instrumental in its success in recruiting technical employees.

The Company uses a variety of techniques to identify qualified candidates for
recruiting. The Company's most successful source of new employees is its
employee referral program. This program encourages employees to recommend or
refer qualified candidates for employment with the Company. In 1996,
approximately 45.0% of new hires were the result of employee referrals. The
Company believes its corporate culture and employee enfranchisement are
significant factors in the success of this program. The Company also places
advertisements in various newspapers and trade magazines and has utilized
professional search firms to identify candidates for hire. The Company has
implemented an automated system pursuant to which candidate resumes are scanned
into electronic format and stored in a database. The Company's recruiters are
able to search the database for candidate characteristics such as skills,
experience and geographic area.

Training

The Company has established an extensive educational facility at its
headquarters comprised of three training rooms that accommodate a total of 50
students. In July 1996, the Company created and internally staffed a manager of
education services position to ensure the effective utilization of its training
facilities. Both vendor training and Company designed and conducted evening
school classes are provided to the Company's technical employees. Each technical
employee attends approximately two weeks of training in new technology and
professional skills annually. At the end of each year, the Company's technical
services managers work with the manager of education services to develop
training plans for each technical employee. The development of the training
plans includes input from the Company's sales personnel, as well as its clients,
to ensure the training has a high degree of relevance in the marketplace. Vendor
training consists of classes developed and presented by software vendors. In
1995 and 1996, the Company offered at its in-house facility formal vendor
training courses in topics such as Oracle7, database administration, Oracle
Forms 4.5 programming, PowerBuilder application development, Delphi application
development, object-oriented analysis and design, and client-server application
development. The Company has also internally developed an evening school
curriculum currently consisting of 29 courses. Representative courses include
GUI design concept, Visual Basic programming, C++ programming, UNIX system
administration, decision-making skills, and project management methods.

The Company has developed other educational programs designed to provide
training to new employees at different career levels. For each of the four years
through 1995, the Company has hired approximately 12 recent college graduates to
attend an intensive ten-week associate technical employee training program. In
1996, the Company hired approximately 50 recent college graduates into four
eight-week programs. The purpose of the program is to provide entry-level
technical employees with technical and professional skills, and knowledge of the
Company's business practices, methods, and philosophies. Experienced lateral
recruits attend the Company's six-week "Boot Camp" training program. The Boot
Camp curriculum contains the same technical content as the college graduate
program, but omits the non-technical elements. The Company expects to complete
at least five eight-week college graduate (approximately 75 hires) and two Boot
Camp training programs in 1997. In addition, the Company also selects certain
senior technical employees for its Advanced Business Experience Program. This
program is designed to challenge these individuals through specialized training
and participation in the Company's business processes. Finally, the Company
provides tuition reimbursement for relevant educational pursuits at accredited
colleges and universities.

Competition

The commercial professional services segment of the information technology
industry includes a large number of participants and is highly competitive. The
industry includes participants from a variety of market segments, including
systems consulting and integration firms, contract programming companies,
application software firms, the professional service groups of computer
equipment manufacturers, such as IBM and Digital Equipment, "Big Six" consulting
firms and general management consulting firms. The Company's competitors include
international

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companies such as Andersen Consulting, Technology Solutions Corporation, Cap
Gemini America, Computer Sciences Corporation's consulting division, Electronic
Data Systems Corporation and Cambridge Technology Partners, Inc.

Many participants in the commercial professional services segment of the
information technology industry have significantly greater financial, technical
and marketing resources and have greater name recognition than the Company. In
addition, this industry is highly fragmented and served by numerous firms, many
of which serve only their respective local markets. The Company also faces
competition from organizations providing staff augmentation services to, and
individuals who contract directly with, information systems departments of
existing and potential clients. The Company believes that the principal
competitive factors in the commercial professional services segment of the
information technology industry include responsiveness to client needs,
availability of technical personnel, speed of application software development,
quality of service, price, project management capability and technical
expertise.

The Company's current clients can generally be described as being located in the
eastern United States. It has a growing client base in the midwestern United
States, however, which it serves through the Chicago office. In addition,
certain of the Company's clients are located in Europe. The Company believes
that geographic location with respect to the performance of technical services
has become a lesser competitive factor in the United States, although the
existence of a sales office in a particular region can facilitate the sales and
marketing process. The Company believes that having an international sales and
operating presence is an important competitive factor in competing on an
international basis. See "Business -- ISCG's Strategy."

The Company also believes that its ability to compete depends in part on a
number of competitive factors outside its control, including the ability of its
competitors to hire, retain and motivate qualified technical personnel, the
ownership by competitors of software used by potential clients, the development
of software that would reduce or eliminate the need for the Company's services,
the price at which others offer comparable services and the extent of its
competitors' responsiveness to customer needs.

Intellectual Property

The Company's business is not dependent on the ownership or exclusive use of any
specific information technology. The Company holds no patents or registered
copyrights. The Company's business does, however, include the development of
custom software applications in connection with specific client engagements.
Ownership of such software is generally assigned to the client. Although the
Company believes that its services do not infringe on the intellectual property
rights of others, there can be no assurance that such a claim will not be
asserted against the Company in the future or, if asserted, that the Company
will be able to successfully defend against any such claim.

The Company relies upon a combination of trade secret, nondisclosure and other
contractual arrangements to protect its and its clients' proprietary rights. The
Company generally enters into confidentiality agreements with its clients and
potential clients and limits access to, and distribution of, its clients' or
software vendor partners' proprietary information. There can be no assurance
that the steps taken by the Company in this regard will be adequate to deter
misappropriation of the Company's, its clients' or vendor partners' proprietary
information or that the Company will be able to detect unauthorized use or take
appropriate steps to enforce its clients' and vendor partners' intellectual
property rights. In addition, all of the Company's employees execute restrictive
covenants upon joining the Company that require the employee to keep
confidential all proprietary information pertaining to the assets or business of
the Company and its clients and provide that during the term of employment, and
for a certain time period thereafter, the employee may not be employed by,
solicit, or provide consulting services for any past, current or potential
clients of the Company.

30
<PAGE>

Facilities

The Company's headquarters and principal administrative, sales and marketing,
and application development operations are located in approximately 36,000
square feet of leased space in Wayne, Pennsylvania. This lease expires in 2000.
The Company leases an additional 12,500 square feet of space in an office
complex near its headquarters, in which is located part of ISCG's software
development center. By July 1997, this space is expected to accommodate up to 65
technical employees.

The Company also leases 2,550 square feet of space in Princeton, New Jersey,
where the Company conducts sales and marketing and recruiting activities and
performs small client projects. This lease expires in 1998, but is subject to
the Company's option to extend the term for three additional years.

Currently, the Company leases shared facilities in Chicago, Illinois pursuant to
a short-term agreement.

The Company anticipates that additional space will be required as business
expands and believes that it will be able to obtain suitable space as needed.

Litigation

In the opinion of management, there are no claims or actions against the Company
the ultimate disposition of which will have a material adverse effect on the
Company's financial condition or results of operations.

31
<PAGE>

Management

Executive Officers and Directors

The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>

Name Age Position
- ---- --- --------
<S> <C> <C>
David S. Lipson .......................................... 53 Chairman of the Board of Directors, Chief
Executive Officer, President and Treasurer
David D. Gathman.......................................... 49 Executive Vice President, Finance and
Administration, Chief Financial Officer,
Secretary, Assistant Treasurer and Director
David F. Elderkin......................................... 43 Vice President of Technology and Assistant
Secretary
Edward P. Kaiserian....................................... 44 Vice President and General Manager,
Systems and Networks
Jay M. Rose............................................... 45 Vice President of Sales
Frank Baldino, Jr., Ph.D ................................. 43 Director
Melvyn E. Bergstein ...................................... 55 Director
Donald R. Caldwell........................................ 50 Director
Mark J. DeNino............................................ 43 Director
David Fehr................................................ 61 Director
James L. Mann............................................. 62 Director
Donna J. Pedrick ......................................... 47 Director
Michael D. Stern ......................................... 48 Director
Edward S. J. Tomezsko, Ph.D .............................. 62 Director
</TABLE>

The principal occupation and employment background of each of the executive
officers and directors of the Company are set forth below.

David S. Lipson co-founded the Company and has been its Chairman, Chief
Executive Officer, President and Treasurer since the Company's inception. Mr.
Lipson has more than 29 years of industry experience in executive management,
sales and marketing, and systems development. His previous employers include
IBM, Control Data Corporation, Dun & Bradstreet Computer Services, SunGard Data
Systems Inc ("SunGard") and Digital Equipment Corporation.

David D. Gathman has served as the Executive Vice President, Finance and
Administration and Chief Financial Officer since January 1997. He served as the
Chief Operating Officer, Vice President, Secretary and Assistant Treasurer of
the Company since joining the Company in April 1994 and has served as a director
of the Company since October 1990. From February 1987 to April 1994, Mr. Gathman
was Vice President-Finance and Chief Financial Officer of SunGard and from
December 1982 to February 1987, Mr. Gathman was controller of SunGard.

David F. Elderkin has served as a Vice President of the Company since June 1989.
Mr. Elderkin has more than 20 years of experience in technology assessment,
management of applications development and systems and network management. He
has managed projects for aerospace, banking, healthcare, manufacturing, and
pharmaceutical companies. Mr. Elderkin is responsible for maintaining the
Company's focus on leading edge technologies.

32
<PAGE>

Edward P. Kaiserian joined the Company in March 1991 and has served as an
account executive from March 1991 through December 1992, a regional manager from
January 1993 through December 1994 and as Vice President since January 1995.
From February 1984 until March 1991, Mr. Kaiserian served in various capacities
at Source Services Corporation, a personnel services firm specializing in the
recruitment of software and engineering professionals for the computer industry
and other high technology companies.

Jay M. Rose has served as Vice President of Sales since joining the Company in
November 1995. Prior to such time, Mr. Rose held various positions with Shared
Medical Systems, Incorporated, including Vice President of Product Development
from 1992 to 1995, Vice President of Marketing from 1991 to 1992 and Vice
President and General Manager of a wholly-owned subsidiary from 1987 to 1991.

Frank Baldino, Jr., Ph.D., a director since November 1995, founded and has
served since 1987 as President, Chief Executive Officer and a director of
Cephalon, Inc., an integrated specialty biopharmaceutical company that
discovers, develops, and markets products to treat neurological disorders. Dr.
Baldino also currently serves as an adjunct associate professor at Hahnemann
University and Temple University School of Medicine. Dr. Baldino's previous
positions include Senior Research Biologist in Neuroscience at E.I. DuPont de
Nemours & Company, as well as several research and instructional positions at
UMDNJ-Rutgers Medical School, A.I. DuPont Institute, and Temple University
School of Medicine.

Melvyn E. Bergstein, a director since November 1995, co-founded and has been the
Chief Executive Officer and Chairman of the Board of Directors of Diamond
Technology Partners, Incorporated, a business and information technology
consulting firm, since February 1994. Prior to such time, Mr. Bergstein served
as President and Vice Chairman of Technology Solutions Company, a provider of
consulting services to the information technology and software development
industry, from September 1991 to September 1993 and as Senior Vice President of
Computer Sciences Corporation from July 1989 to September 1991. Mr. Bergstein's
prior positions included serving as a partner and managing director--technology
at Andersen Consulting and on the Board of Directors of Arthur Andersen & Co.
and Chairman of its consulting oversight committee.

Donald R. Caldwell, a director since July 1995, has been the President and Chief
Operating Officer of Safeguard since February 1996. Mr. Caldwell was an
Executive Vice President of Safeguard from December 1993 to February 1996. Prior
to such time, Mr. Caldwell was the President of Valley Forge Capital Group,
Ltd., a business mergers and acquisition advisory firm that he founded, from
April 1991 to December 1993 and an executive officer of a predecessor company of
Cambridge Technology Partners (Massachusetts), Inc., a provider of information
technology consulting and software development, from December 1989 to March
1991. Mr. Caldwell's prior positions included serving as a partner in the
national office of Arthur Young & Co. (a predecessor to Ernst & Young, LLP).

Mark J. DeNino, a director since July 1995, has been a General Partner and
Managing Director of Technology Leaders II Management L.P. since November 1994.
Prior to such time, Mr. DeNino was the President of Crossroads Capital, Inc., an
investment banking firm, from September 1991 to October 1994. Mr. DeNino is a
director of Aloette Cosmetics, Inc., CRW Financial, Inc. and Daleco Resources,
Inc., as well as four privately-held companies.

David Fehr, a director since August 1996, was Corporate Senior Vice President of
Dun & Bradstreet Corporation where he served as a Group Head from 1985 until
retirement in March 1995. Prior to that, he was President of D&B Computing
Services (previously National CSS) from 1981 to 1986.

James L. Mann, a director since November 1995, has been the Chairman, Chief
Executive Officer and President of SunGard since 1987. Mr. Mann has previously
served on the Boards of Directors of Goal Systems International, Inc., Digital
Communications Associates, Inc., and Reality Technologies, Inc. Mr. Mann is a
past

33
<PAGE>

Chairman of the Information Technology Association of America. Mr. Mann is a
director of SunGard and T-Netix, Inc.

Donna J. Pedrick, a director since April 1994, has been the Vice President of
Human Resources of SunGard since February 1988. Ms. Pedrick is the past
President of the Information Services Human Resource Association, a past member
of the Penjerdel Employee Benefits Association membership committee and a member
of the Penn State University Delaware County Campus Board of Advisors.

Michael D. Stern, a director since January 1995, is an attorney who maintains a
private law practice. Mr. Stern is President of Innovative Software Solutions,
Inc. From 1984 to January 1994, Mr. Stern served as the President of National
Software Testing Laboratories, Inc., a company which he co-founded. Prior
thereto, Mr. Stern co-founded PermaColor, a manufacturer of photographic
preservation systems, and served as House Counsel for Presidential Airways
Corporation.

Edward S. J. Tomezsko, Ph.D., a director since 1988, is a tenured associate
professor of chemistry and has been the Campus Executive Officer of Penn State
University's Delaware County Campus since 1986. Dr. Tomezsko serves on the board
of Triple P Development Company.

Director Compensation

All nonemployee directors of the Company receive an annual base payment of
$1,000, plus an additional $500 for each regular or special meeting of the board
they attend. Directors are not additionally compensated for service on board
committees. Directors who are also employees of the Company are not compensated
for their services as directors. Each nonemployee director automatically is
granted an option covering 10,000 shares of Common Stock upon his or her initial
election to the Board of Directors, and thereafter automatically is granted an
option covering an additional 2,000 shares of Common Stock every second year
thereafter following his or her reelection to the Board of Directors.

Committees

The Audit Committee of the Board of Directors consists of Messrs. Baldino, Stern
and Tomezsko. The Executive Committee consists of Messrs. Caldwell, Lipson and
Mann. The Nominating Committee consists of Messrs. DeNino, Gathman and Lipson.

Compensation Committee Interlocks and Insider Participation

The Compensation Committee of the Board of Directors consists of Messrs.
Bergstein and Lipson (who serves on an ex-officio basis) and Ms. Pedrick.

Mr. Bergstein is the Chairman and Chief Executive Officer of Diamond Technology
Partners Incorporated ("DTP"). During 1996, DTP purchased approximately $80,000
in services from the Company. The Company expects DTP will purchase at least
$60,000 in services in 1997.

34
<PAGE>

Summary Compensation Table

The following table sets forth certain information concerning compensation paid
or accrued for each of the last three years with respect to the Company's chief
executive officer and its other four most highly compensated executive officers
at December 31, 1996 (collectively, the "Named Officers"):
<TABLE>
<CAPTION>

--------------------------------------------------------------------------------
Long Term
Compensation
------------
Annual Compensation (1) Securities
----------------------- Underlying All Other
Name and Principal Position Year Salary Bonus Options Compensation
---- ------ ----- ------- ------------
<S> <C> <C> <C> <C> <C>
David S. Lipson.......... 1996 $200,000 $79,650 -- $147,927(2)
Chairman, Chief Executive 1995 200,000 75,000 -- 120,541(2)
Officer, President and 1994 100,000 150,000 -- 68,337(2)
Treasurer
David D. Gathman 1996 100,000 76,860 -- 1,974(3)
Executive Vice President, 1995 100,000 46,471 137,400 1,411(3)
Finance and Administration 1994 75,000(5) 27,544 -- 930(3)
and Chief Financial Officer,
Secretary and Assistant
Treasurer
David F. Elderkin........ 1996 60,000 66,240 -- 2,130(4)
Vice President and 1995 60,000 47,704 18,750 1,597(4)
Assistant Secretary 1994 60,000 41,585 6,000 1,468(4)

Edward P. Kaiserian 1996 100,000 114,205 -- 1,500(3)
Vice President 1995 75,000 108,734 9,000 1,500(3)
1994 75,000 78,689 1,500 1,282(3)

Jay M. Rose.............. 1996 100,000 183,904 -- 1,597(3)
Vice President 1995 4,964(6) 14,167 41,250 --
1994 -- -- -- --

</TABLE>
- -----------

(1) The compensation described in this table does not include medical, group
life insurance or other benefits received by the Named Officers, which are
available generally to all salaried employees of the Company, and certain
perquisites and other personal benefits, securities or property received by
the Named Officers which do not exceed the lesser of $50,000 or 10% of the
aggregate of any such Named Officer's salary and bonus in the year in which
the same were received.
(2) Includes $143,314, $115,783, and $63,079 respectively, for 1996, 1995 and
1994 for life insurance premiums paid on behalf of David S. Lipson. In the
event of David S. Lipson's death the Company will receive proceeds to the
extent of premiums paid. The amounts also include Company contributions
under the Company's 401(k) plan of $1,833, $1,500 and $2,000 in 1996, 1995
and 1994, respectively and $2,780, $3,258 and $3,258 in disability
insurance premiums for 1996, 1995, and 1994 respectively.
(3) Represents a contribution under the Company's 401(k) plan.
(4) Includes Company contribution under the Company's 401(k) plan of $1,440,
$964 and $835 in 1996, 1995, and 1994, respectively and $690, $633 and $633
in disability insurance premiums in 1996, 1995, and 1994 respectively.
(5) Mr. Gathman joined the Company on April 1, 1994.
(6) Mr. Rose joined the Company on November 25, 1995.

35
<PAGE>

Employment Agreements

Each of the Named Officers has an employment agreement with the Company. Mr.
Lipson's employment agreement provides for his employment through December 31,
2000 at a specified annual salary and an annual bonus based upon the achievement
of certain revenues and income goals, as set annually by the Board of Directors.
Each of Messrs. Gathman's, Kaiserian's, Elderkins' and Rose's employment
agreement provides for his employment for an indefinite period at a specified
salary, subject to the right of either party to terminate upon thirty day's
prior written notice. In addition, each such employment agreement provides for
an annual bonus based upon the achievement of goals (such as revenues and
income) as set annually by the Board of Directors and also contains other terms
customarily found in executive officer employment agreements, including
provisions relating to reimbursement of certain business expenses, participation
in employee benefit plans generally available to the other executive officers of
the Company, severance, confidentiality and noncompetition. See "Business --
Human Resources."

1989 Incentive Stock Option Plan

The Company's Amended and Restated 1989 Incentive Stock Option Plan (the "Stock
Option Plan") was adopted in 1989 and provides for the grant to any employee or
director of the Company of incentive stock options within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended. Options to purchase an
aggregate of 1,250,000 shares of Common Stock were eligible to be granted under
the Stock Option Plan. As of December 31, 1996, the Company had granted options
to purchase 710,246 shares of Common Stock (net of expired options) at a
weighted average exercise price of $2.33 per share. The Company's Board of
Directors has approved an amendment to the Stock Option Plan to increase by
400,000 the number of shares reserved for grant under the plan, subject to
approval by the Company's shareholders at its 1997 annual meeting of
shareholders.

The Compensation Committee of the Board of Directors has the power to select the
individuals to whom options shall be granted under the Stock Option Plan and to
determine the terms of each grant, including the number of shares of Common
Stock subject to the option, the exercise price (which shall not be less than
the fair market value of a share of Common Stock on the date of grant) and the
term of the option. Options granted prior to July 25, 1996 generally vest in 20%
annual increments beginning on the second anniversary date of the date of grant.
Those granted after July 25, 1996 generally vest in 20% annual increments
beginning on the first anniversary of the date of grant. No option may be
exercisable after the expiration of 10 years from the date of grant. Options
granted under the Stock Option Plan are not transferrable other than by will or
the laws of descent and distribution, or by operation of law in the event of
legal disability.

The Board of Directors may amend or revise the terms of the Stock Option Plan in
any respect whatsoever, provided, however, that certain amendments of the Plan
are subject to stockholder approval. Unless terminated sooner, the Stock Option
Plan will terminate in July 1999.

36
<PAGE>

Stock Option Grants

None of the Named Officers were granted stock options in 1996.

Aggregated Option Exercises and Last Fiscal Year-End Option Values

The following table sets forth information concerning options exercised during
1996 and the number and the hypothetical value of certain unexercised options of
the Company held by the Named Officers as of December 31, 1996. This table is
presented solely for purposes of complying with the Commission rules and does
not necessarily reflect the amounts the optionees will actually receive upon any
sale of the shares acquired upon exercise of the options.

------------------------------------------------------------------------------------------------------------
Number of Securities
Underlying Unexercised Value of Unexercised In-The-
Options at Money Options at
December 31, 1996 December 31, 1996
---------------------------------- ----------------------------------
Shares Acquired
Name on Exercise Value Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David D. Gathman 21,900 $111,294 47,568 73,932 $581,757 $878,948
David F. Elderkin 15,600 267,642 37,800 45,150 503,255 554,111
Edward P. Kaiserian 3,600 51,757 -- 16,200 -- 198,494
Jay M. Rose 3,000 31,260 23,250 15,000 242,265 156,300
----- --------- ------ ------ ---------- ----------
Total 44,100 $461,953 108,618 150,282 $1,327,277 $1,787,853
</TABLE>
37
<PAGE>

Certain Relationships and Related Transactions

DLB Systems, Inc. ("DLB") purchased approximately $2.9 million in services from
the Company in 1996 and the Company expects that DLB will purchase in excess of
$60,000 in 1997. At December 31, 1996, the Company had outstanding accounts
receivable from DLB of approximately $572,000 in the aggregate and a note
receivable (representing converted accounts receivable) from DLB under which the
outstanding principal amount was $50,000. The note is unsecured, matures on
September 30, 1997 and bears interest at the rate of 7% per annum. As of the
date of this Prospectus, Safeguard held approximately 81.0% of the voting rights
of DLB. Donald R. Caldwell, a director of the Company, is also a director of
DLB.

Premier Solutions, Ltd. ("Premier") purchased approximately $114,000 in services
from the Company in 1996. As of the date of this Prospectus, Safeguard held
approximately 85.0% of the outstanding voting stock of Premier.

<PAGE>

Principal and Selling Shareholders

The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of the date of this Prospectus and as adjusted
to reflect the sale of the shares offered hereby (i) by each person who is known
by the Company to own beneficially more than 5% of the outstanding shares of
Common Stock, (ii) by each director of the Company, (iii) by each Named Officer,
and (iv) by all directors and executive officers of the Company as a group.
Unless otherwise indicated below, to the knowledge of the Company, all persons
listed below have sole voting and investment power with respect to their shares
of Common Stock, except to the extent authority is shared by spouses under
applicable law.
<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------
Number of Shares
Beneficial Ownership to be Sold in the Beneficial Ownership
Prior to the Offering(1) Offering After the Offering(1)
------------------------ ----------------- ---------------------
Name and Address Number of Shares Percentage Number of Shares Percentage
- ---------------- ---------------- ---------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
David S. Lipson(2) 2,993,932 38.1% 501,045 2,492,887 31.1%
575 East Swedesford Road
Suite 200
Wayne, PA 19087
Technology Leaders II(3) 1,209,955 15.1 1,209,955 -- --
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
Safeguard Scientifics, Inc.(4) 756,025 9.4 -- 756,025 9.2
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
Warrant and Stock Trust(5) 370,137 4.5 -- 370,137 4.4
1133 Rose Glen
Gladwyne, PA 19035
David F. Elderkin(6) 115,100 1.5 39,000 76,100 *
David D. Gathman(7) 89,876 1.1 -- 89,876 *
Jay M. Rose(8) 31,250 * -- 31,250 *
Edward P. Kaiserian(9) 20,600 * -- 20,600 *
Frank Baldino, Jr., Ph.D. 5,000 * -- 5,000 *
Melvyn E. Bergstein 10,434 * -- 10,434 *
Donald R. Caldwell(10) 20,040 * -- 20,040 *
Mark J. DeNino(11) 1,080 * -- 1,080 *
David Fehr -- * -- -- *
James L. Mann 8,000 * -- 8,000 *
Donna J. Pedrick(12) 1,650 * -- 1,650 *
Michael D. Stern(13) 379,906 4.6 -- 379,906 4.5
Edward S.J. Tomezsko, Ph.D.(14) 15,050 * -- 15,050 *
All executive officers and directors 3,691,918 44.2 540,045(16) 3,151,873 37.0
as a group (14 persons)(15)
</TABLE>

- --------
* Less than 1% of the outstanding Common Stock

(1) Solely for the purpose of the percentage ownership calculation for each
beneficial owner depicted herein, the number of shares of Common Stock
deemed outstanding prior to the Offering (i) assumes there are

39
<PAGE>

7,856,673 shares of Common Stock outstanding as of the date of this
Prospectus and (ii) includes additional shares issuable pursuant to options
or warrants held by such owner that may be exercised within 60 days after
the date of this Prospectus ("presently exercisable options"), as set forth
below. Solely for the purpose of the percentage ownership calculation for
each beneficial owner depicted herein, the number of shares of Common Stock
deemed outstanding after the Offering (i) assumes 8,026,604 shares of
Common Stock will be outstanding upon the successful completion of the
Offering, and (ii) includes additional shares issuable pursuant to
presently exercisable options held by such owner. Solely for the purpose of
the percentage beneficial ownership calculation for all executive officers
and directors as a group, the aggregate number of shares underlying all
presently exercisable options held by such persons is added to the total
number of shares issued and outstanding.

(2) Excludes 30,276 shares of Common Stock outstanding and 339,861 shares of
Common Stock issuable pursuant to a warrant, which outstanding shares and
warrant were transferred by Mr. Lipson to the Warrant and Stock Trust. See
footnotes (5) and (13). Mr. Lipson disclaims beneficial ownership of such
securities.

(3) Includes 169,931 shares of Common Stock issuable pursuant to a warrant.
Technology Leaders II L.P. and Technology Leaders II Offshore C.V. are
venture capital funds that are required by their governing documents to
make all investment, voting and disposition actions in tandem. Technology
Leaders II L.P. and Technology Leaders II Offshore C.V. are referred to in
this Prospectus as "Technology Leaders II." Of the 1,040,024 shares
outstanding and 169,931 shares (the "Derivative Shares") obtainable upon
the exercise of the warrant owned by Technology Leaders II, 579,605 shares
and 94,703 Derivative Shares are owned by Technology Leaders II L.P. and
460,419 shares and 75,228 Derivative Shares are owned by Technology Leaders
II Offshore C.V. Technology Leaders II Management L.P. ("TLM"), the sole
general partner of Technology Leaders II L.P. and the co-general partner of
Technology Leaders II Offshore C.V., exercises through its executive
committee sole investment and voting power with respect to the shares owned
by those entities.

(4) Includes 169,931 shares of Common Stock issuable pursuant to a warrant.
Shares are held of record by Safeguard Scientifics (Delaware), Inc., a
wholly-owned subsidiary of Safeguard. Does not include shares beneficially
owned by Technology Leaders II, in which Safeguard has a beneficial
interest.

(5) Consists of 30,276 shares of Common Stock outstanding and 339,861 shares of
Common Stock issuable pursuant to a warrant. See footnotes (2) and (13).

(6) Includes 55,500 shares of Common Stock issuable pursuant to presently
exercisable options.

(7) Includes 62,976 shares of Common Stock issuable pursuant to presently
exercisable options.

(8) Includes 23,250 shares of Common Stock issuable pursuant to presently
exercisable options.

(9) Includes 4,800 shares of Common Stock issuable pursuant to presently
exercisable options.

(10) Does not include 756,025 shares beneficially owned by Safeguard. Mr.
Caldwell serves as President and Chief Operating Officer of Safeguard. See
"Management -- Executive Officers and Directors." Mr. Caldwell disclaims
beneficial ownership of such shares.

(11) Does not include 1,209,955 beneficially owned by Technology Leaders II. Mr.
DeNino disclaims beneficial ownership of such shares. Mr. DeNino is a
General Partner and Managing Director of TLM and is a member of TLM's
eleven-person executive committee. See "Management -- Executive Officers
and Directors."

(12) Includes 150 shares of Common Stock issuable pursuant to presently
exercisable options.

(13) Includes 30,276 shares of Common Stock and 339,861 shares of Common Stock
issuable pursuant to a warrant held by the Warrant and Stock Trust, of
which Mr. Stern is the sole trustee. Also includes 150 shares of Common
Stock issuable pursuant to presently exercisable options.

(14) Includes 7,050 shares of Common Stock issuable pursuant to presently
exercisable options.

(15) Includes, in the aggregate, 153,876 shares of Common Stock issuable
pursuant to presently exercisable options and 339,861 shares of Common
Stock issuable pursuant to a warrant.

(16) Consists of 501,045 shares of Common Stock being sold by Mr. Lipson and
39,000 shares of Common Stock being sold by Mr. Elderkin.

<PAGE>
DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 25,000,000 shares of
Common Stock, par value $.005 per share, and 500,000 shares of Preferred Stock,
par value $1.00 per share.

Common Stock

As of December 31, 1996, there were 7,856,673 shares of Common Stock
outstanding and held of record by approximately 547 stockholders. After giving
effect to the issuance of the 169,931 shares of Common Stock issued by the
Company upon exercise of the Warrants, there will be 8,026,604 shares of Common
Stock outstanding.

Holders of Common Stock are entitled to one vote for each share held of record
on all matters submitted to a vote of stockholders and do not have cumulative
voting rights. The election of directors is determined by a plurality of the
votes cast and, except as otherwise required by law, all other matters are
determined by a majority of the votes cast. Holders of Common Stock are entitled
to receive ratably such dividends, if any, as may be declared by the Board of
Directors out of funds legally available therefor, subject to any preferential
dividend rights of outstanding Preferred Stock. Upon the liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to receive ratably the net assets of the Company available after the
payment of all debts and other liabilities. Holders of the Common Stock have no
preemptive, subscription, redemption or conversion rights. The outstanding
shares of Common Stock are, and the shares (i) to be issued to the Selling
Shareholders upon exercise of their warrants and offered by them in the Offering
and (ii) offered by the Company in the Offering will be, when issued and paid
for, fully paid and nonassessable. The rights, preferences and privileges of
holders of Common Stock are subject to, and may be adversely affected by, the
rights of the holders of shares of any series of Preferred Stock which the
Company may designate and issue in the future. See "--Preferred Stock."

Preferred Stock

The Company, by resolution of the Board of Directors and without any further
vote or action by the stockholders, has the authority, subject to certain
limitations prescribed by law, to issue from time to time up to an aggregate of
500,000 shares of Preferred Stock in one or more classes or series and to
determine the designation and the number of shares of any class or series as
well as the voting rights, preferences, limitations and special rights, if any,
of the shares of any such class or series, including the dividend rights,
dividend rates, conversion rights and terms, voting rights, redemption rights
and terms, and liquidation preferences. The issuance of Preferred Stock may have
the effect of delaying, deferring or preventing a change of control of the
Company. As of the date of this Prospectus, there are no shares of Preferred
Stock outstanding, and the Company has no plans to issue any shares of Preferred
Stock.

Pennsylvania Business Corporation Law

The Pennsylvania Business Corporation Law of 1988 (the "BCL") expressly permits
directors of a corporation to consider the interests of constituencies other
than stockholders, such as employees, suppliers, customers and the community, in
discharging their duties. Further, the BCL, as amended in 1990, expressly
provides that directors do not violate their fiduciary duty solely by relying on
stockholders' rights plans or other antitakeover provisions of the BCL.

41
<PAGE>

The effect of these provisions may be to deter hostile takeovers at a price
higher than the prevailing market price for the Common Stock. In some
circumstances, certain stockholders may consider these antitakeover provisions
to have a disadvantageous effect. Tender offers or other non-open market
acquisitions of shares are frequently made at prices above the prevailing market
price of a company's shares. In addition, acquisitions of shares by persons
attempting to acquire control through market purchases may cause the market
price of the Common Stock to reach levels that are higher than would otherwise
be the case. These antitakeover provisions may discourage any or all of such
acquisitions, particularly those of less than all of the Common Stock, and may
thereby prevent certain holders of Common Stock from having an opportunity to
sell their shares at a temporarily higher market price.

Transfer Agent and Registrar

The transfer agent and registrar for the Common Stock is Chase Mellon
Shareholder Services, L.L.C., 85 Challenger Road, Overpeck Centre, Ridgefield
Park, NJ 07660.

42
<PAGE>

Shares Eligible for Future Sale

Upon completion of the Offering, the Company will have 8,026,604 (8,157,854 if
the Underwriter's over-allotment option is exercised in full) shares of Common
Stock outstanding, excluding 1,220,038 shares of Common Stock subject to stock
options and warrants outstanding as of December 31, 1996 and any stock options
or warrants granted by the Company after December 31, 1996. Of these shares, the
Common Stock sold in the Offering will be freely tradeable without restriction
or further registration under the Act. An additional 2,875,000 shares, which
were sold in the Company's initial public offering in May 1996, are currently
freely tradeable, except to the extent such shares were purchased by affiliates
of the Company, in which case they are subject to Rule 144. In addition, all
shares that may be issued upon exercise of options granted under the Company's
1989 Incentive Stock Option Plan will be freely tradeable without restriction,
except that any such shares issued to affiliates of the Company will be subject
to Rule 144. The remaining 3,401,604 shares of Common Stock (the "Restricted
Shares") were sold by the Company in reliance on exemptions from the
registration requirements of the Act and are"restricted securities" as defined
in Rule 144 under the Act ("Rule 144") and may not be sold in the absence of
registration under the Act unless an exemption is available, including an
exemption afforded by Rule 144. See "Risk Factors -- Shares Eligible for Future
Sale."

In general, under Rule 144 as currently in effect, if three years have elapsed
since the date of acquisition of restricted securities from the Company or an
affiliate and the acquiror or subsequent holder is not deemed to have been an
affiliate of the Company for at least 90 days prior to a proposed transaction,
such person would be entitled to sell such shares under Rule 144(k) without
regard to the limitations described below. If two years have elapsed since the
date of acquisition of restricted securities from the Company or any affiliate,
the acquiror or subsequent holder thereof (including persons who may be deemed
affiliates of the Company) is entitled to sell within any three-month period a
number of shares that does not exceed the greater of 1.0% of the
then-outstanding shares of Common Stock or the average weekly trading volume in
the Common Stock on the Nasdaq National Market during the four calendar weeks
preceding such sale. Sales under Rule 144 are also subject to certain provisions
regarding the manner of sale, notice requirements and the availability of
current public information about the Company. Without considering the
contractual restrictions described below, the Restricted Shares will be eligible
for future sale subject to the holding period and other conditions imposed by
Rule 144. Certain restrictions apply to any shares of Common Stock purchased in
the Offering by affiliates of the Company, which may generally only be sold in
compliance with the limitations of Rule 144, except for the holding period
requirements thereunder. See "Risk Factors -- Shares Eligible for Future Sale."

Rule 144A under the Act provides a nonexclusive safe harbor exemption from the
registration requirements of the Act of specified resales of restricted
securities to certain institutional investors. In general, Rule 144A allows
unregistered resales of restricted securities to a "qualified institutional
buyer," which generally includes an entity, acting for its own account or for
the account of other qualified institutional buyers, that in the aggregate owns
or invests at least $100 million in securities of issuers that are not
affiliated with the entity.

Options and Warrants

As of December 31, 1996, there were outstanding (i) options to purchase an
aggregate of 710,246 shares of Common Stock (of which 152,914 were exercisable
at December 31, 1996) and (ii) exercisable warrants to purchase an aggregate of
679,723 shares of Common Stock (which include the 169,931 Warrant Shares offered
for sale by the Selling Shareholders pursuant to this Prospectus). An aggregate
of 362,287 additional shares are available for issuance pursuant to future
grants under the Stock Option Plan. See "Management -- Stock Option Plan."

43
<PAGE>

Lock-Up Agreements

The Company and certain shareholders or beneficial owners (including Mr. Lipson,
all the Company's other directors and officers, Safeguard and Warren V. Musser,
Chairman and Chief Executive Officer of Safeguard) have agreed with the
Underwriters not to offer, sell, contract to sell or otherwise dispose of any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for shares of Common Stock until 120 days after the date of this
Prospectus without the prior written consent of J.P. Morgan Securities Inc.

Registration Rights

In connection with the 1995 Purchase, the Company granted certain registration
rights to Mr. Lipson, Safeguard and Technology Leaders II. In particular, under
certain circumstances and subject to certain limitations, Safeguard and
Technology Leaders II can require the Company to register under the Act (i) a
minimum of 30.0% of the aggregate number of shares of Common Stock acquired by
them in the 1995 Purchase and any shares of Common Stock obtainable upon
exercise of their warrants, provided that the Company is not obligated to effect
more than one such registration during any twelve month period and two such
registrations in the aggregate, and (ii) on Form S-3 such number of shares of
Common Stock having a market value of at least $500,000, provided that the
Company is not required to effect more than two such registrations during any
twelve-month period or three such registrations in the aggregate. Mr. Lipson,
Safeguard, Technology Leaders II and the Warrant and Stock Trust (as transferee
of a warrant exercisable for 339,861 shares of Common Stock) were also granted
certain "piggy-back" registration rights whereby on three occasions ending on
the tenth anniversary of the date of this Prospectus, under certain
circumstances and subject to certain conditions, they may include shares of
Common Stock in any registration of shares of Common Stock under the Act on a
form which permits registration of secondary shares.

44
<PAGE>

Underwriting

Under the terms and subject to the conditions set forth in an Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), the Underwriters
named below, for which J.P. Morgan Securities Inc. and Robert W. Baird & Co.
Incorporated are acting as representatives (the "Representatives"), have
severally agreed to purchase, and the Selling Stockholders have agreed to sell
to them, the respective number of shares of Common Stock set forth opposite
their names below:

Number of
Underwriters Shares
- ------------ ------

J.P. Morgan Securities Inc.........................................
Robert W. Baird & Co. Incorporated.................................
---------
Total.................................................... 1,750,000
=========

The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase shares of Common Stock are subject to the approval of
certain legal matters by counsel and certain other conditions. The Underwriters
are obligated to take and pay for all such shares of Common Stock, if any are
taken.

The Underwriters propose initially to offer such shares of Common Stock directly
to the public at the public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in excess
of $ per share. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share to certain other dealers. After the
shares of Common Stock are released for sale to the public, the offering price
and such concession may be changed.

David S. Lipson and the Warrant and Stock Trust have each granted to the
Underwriters an option, expiring at the close on the 30th day after the date of
this Prospectus, to purchase up to 131,250 additional shares of Common Stock at
the public offering price, less the underwriting discount. The Underwriters may
exercise such options solely for the purpose of covering over-allotments, if
any. To the extent that the Underwriters exercise such options, each Underwriter
will have a firm commitment, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the number set
forth next to such Underwriter's name in the preceding table bears to the total
number of shares of Common Stock offered hereby.

The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act.

Pursuant to regulations promulgated by the Commission, market makers in the
Common Stock who are Underwriters or prospective underwriters ("passive market
makers") may, subject to certain limitations, make bids for or purchases of
shares of Common Stock until the earlier of the time of commencement (the
"Commencement Date") of offers or sales of the Common Stock contemplated by t
his Prospectus or the time at which a stabilizing bid for such shares is made.
In general, on and after the date two days prior to the Commencement Date (i)
such market makers' net daily purchases of the Common Stock may not exceed 30.0%
of their average daily trading volume in such stock for the two full consecutive
calendar months immediately preceding the filing date of the Registration
Statement of which this Prospectus forms a part, (ii) such market makers may not
effect transactions in, or display bids for, the Common Stock at a price that
exceeds the highest bid for the Common Stock by persons who are not passive
market makers and (iii) bids by passive market makers must be identified as
such.

45
<PAGE>

The company and certain of its shareholders (including Mr. Lipson, all the
Company's other directors and officers, Safeguard and Warren V. Musser, Chairman
and Chief Executive Officer of Safeguard) have agreed not to offer, sell,
contract to sell or otherwise dispose of any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for shares of Common
Stock for a period of 120 days after the date hereof, without the prior written
consent of J.P. Morgan Securities Inc.

46
<PAGE>

Legal Matters

The validity of the shares of Common Stock offered hereby will be passed upon
for the Company by Saul, Ewing, Remick & Saul, Philadelphia, Pennsylvania.
Certain legal matters in connection with the Offering are being passed upon for
the Underwriters by Cahill Gordon & Reindel (a partnership including a
professional corporation), New York, New York.

Forward Looking Statements

A number of the matters and subject areas discussed in this Prospectus are not
matters of historical or current fact, but deal with potential future
circumstances and developments and, therefore, are forward looking statements.
The discussion of such matters and subject areas is qualified by the inherent
risks and uncertainties surrounding future expectations generally, and the
Company's actual future experience involving any one or more of such matters and
subject areas may differ materially from such discussions. All discussions
contained herein that deal with potential future circumstances and developments
are subject generally to the risks and uncertainties described under "Risk
Factors."

Experts

The consolidated financial statements and schedule of Integrated Systems
Consulting Group, Inc. as of December 31, 1995 and December 31, 1996 and for
each of the years in the three-year period ended December 31, 1996 have been
included herein and in the registration statement in reliance upon the report of
KPMG Peat Marwick LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.

Additional Information

The Company has filed with the Commission a Registration Statement on Form S-1
(including all amendments thereto, the "Registration Statement") under the Act
with respect to the Common Stock offered hereby. As permitted by the rules and
regulations of the Commission, this Prospectus omits certain information
contained in the Registration Statement. For further information with respect to
the Company and the Common Stock offered hereby, reference is hereby made to the
Registration Statement and to the exhibits and schedules filed therewith.
Statements contained in this Prospectus regarding the contents of any agreement
or other document filed as an exhibit to the Registration Statement are not
necessarily complete, and in each instance reference is made to the copy of such
agreement filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference. The Registration Statement,
including the exhibits and schedules thereto, may be inspected at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, DC 20549, and copies of all or any part thereof may be obtained from
such office upon payment of the prescribed fees.

<PAGE>

INTEGRATED SYSTEMS CONSULTING GROUP, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>

Page
----
<S> <C>
Independent Auditors' Report ...................................................... F-2

Consolidated Balance Sheets as of December 31, 1995 and 1996....................... F-3

Consolidated Statements for the years ended December 31, 1994, 1995, and
1996:

Statements of Operations......................................................... F-4

Statements of Stockholders' Equity............................................... F-5

Statements of Cash Flows......................................................... F-6

Notes to Consolidated Financial Statements ........................................ F-7

</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Integrated Systems Consulting Group, Inc.:

We have audited the accompanying consolidated balance sheets of Integrated
Systems Consulting Group, Inc. and subsidiaries as of December 31, 1995 and
1996, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Integrated Systems Consulting Group, Inc. and subsidiaries as of December 31,
1995 and 1996, and the consolidated results of their operations and their
cash flows for each of the years in the three-year period ended December 31,
1996, in conformity with generally accepted accounting principles.

KPMG Peat
Marwick LLP

Philadelphia, Pennsylvania
January 23, 1997

F-2
<PAGE>

INTEGRATED SYSTEMS CONSULTING GROUP, INC.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
----------------------
December 31
1995 1996
--------- ---------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents .......................................... $2,479 $ 8,730
Short-term investments, at cost, which approximates market ......... -- 2,537
Accounts receivable:
Trade, net of reserves of $200 and $196 ....................... 3,139 5,643
Unbilled ...................................................... 133 144
Prepaid expenses ................................................... 204 562
Other current assets ............................................... 112 196
--------- ---------
Total current assets .................................................... 6,067 17,812
Property and equipment, net ............................................. 1,412 2,935
Other assets ............................................................ 107 97
--------- ---------
$7,586 $20,844
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses .............................. $ 994 $ 1,590
Accrued compensation payable ....................................... 746 1,104
Income taxes payable ............................................... 400 27
Deferred income taxes .............................................. 600 363
--------- ---------
Total current liabilities ............................................... 2,740 3,084
--------- ---------
Commitments (note 10)
Stockholders' equity:
Preferred stock, $1.00 par value; 500,000 shares authorized; none
issued ........................................................... -- --
Common stock, $.005 par value, 25,000,000 shares authorized,
7,017,541 and 9,227,513 shares issued in 1995 and 1996,
respectively ..................................................... 35 46
Additional paid-in capital ......................................... 2,711 12,612
Retained earnings .................................................. 2,772 5,776
--------- ---------
5,518 18,434
Treasury stock, at cost, 1,411,860 and 1,370,840 common shares in
1995 and 1996, respectively ...................................... (672) (674)
--------- ---------
4,846 17,760
--------- ---------
$7,586 $20,844
========= =========

</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE>

INTEGRATED SYSTEMS CONSULTING GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
-----------------------------------
Years ended December 31,
1994 1995 1996
---------- --------- ---------
<S> <C> <C> <C>
Revenues ........................................... $13,543 $21,024 $30,607
Operating expenses:
Direct costs .................................. 8,111 12,559 17,497
Selling expenses .............................. 808 1,044 1,822
General and administrative expenses ........... 2,451 4,143 6,372
---------- --------- ---------
Total operating expenses ........................... 11,370 17,746 25,691
---------- --------- ---------
Income from operations ............................. 2,173 3,278 4,916
---------- --------- ---------
Interest income .................................... 24 80 359
Interest expense ................................... (109) (113) (5)
---------- --------- ---------
Income before income taxes ......................... 2,088 3,245 5,270
Provision for income taxes ......................... 880 1,395 2,266
---------- --------- ---------
Net income ......................................... $ 1,208 $ 1,850 $ 3,004
========== ========= =========
Net income per common share:
Primary ....................................... $ .17 $ .31 $ .38
========== ========= =========
Fully diluted ................................. $ .17 $ .31 $ .37
========== ========= =========
Shares used in computing net income per common
share:
Primary ....................................... 7,145 6,002 7,958
========== ========= =========
Fully diluted ................................. 7,145 6,002 8,051
========== ========= =========

</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE>

INTEGRATED SYSTEMS CONSULTING GROUP, INC.
Consolidated Statements of Stockholders Equity
(in thousands, except number of shares)
Years ended December 31, 1994, 1995, and 1996

Common Stock Additional Treasury Stock
------------------------- Paid-in Retained --------------------------
Shares Amount Capital Earnings Shares Amount Total
------------- -------- ------------ ---------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1994 .......... 9,104,161 $ 45 $ 8 $ 1,348 -- $ -- $ 1,401
Distribution to stockholders ....... -- -- -- (192) -- -- (192)
Stock redemption transaction ....... (3,103,020) (15) (8) (1,442) (1,396,980) (660) (2,125)
Purchase of treasury stock, at cost -- -- -- -- (9,900) (4) (4)
Exercise of stock options .......... 14,610 -- 3 -- -- -- 3
Net income ......................... -- -- -- 1,208 -- -- 1,208
------------- -------- ------------ ---------- ------------- --------- --------

Balances, December 31, 1994 ........ 6,015,751 30 3 922 (1,406,880) (664) 291
Purchase of treasury stock, at cost -- -- -- -- (4,980) (8) (8)
Exercise of stock options .......... 48,435 -- 15 -- -- -- 15
Issuance of common stock and
warrants .......................... 953,355 5 2,693 -- -- -- 2,698
Net income ......................... -- -- -- 1,850 -- -- 1,850
------------- -------- ------------ ---------- ------------- --------- --------

Balances, December 31, 1995 ........ 7,017,541 35 2,711 2,772 (1,411,860) (672) 4,846
Purchase of treasury stock, at cost -- -- -- -- (7,800) (26) (26)
Exercise of stock options .......... 34,972 -- 43 -- 48,820 24 67
Issuance of common stock ........... 2,175,000 11 9,858 -- -- -- 9,869
Net income ......................... -- -- -- 3,004 -- -- 3,004
------------- -------- ------------ ---------- ------------- --------- --------
Balances, December 31, 1996 ........ 9,227,513 $ 46 $12,612 $ 5,776 (1,370,840) $(674) $17,760
============= ======== ============ ========== ============= ========= ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE>

INTEGRATED SYSTEMS CONSULTING GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)
<TABLE>
<CAPTION>
-----------------------------------
Years Ended December 31,
1994 1995 1996
--------- --------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ..................................... $ 1,208 $ 1,850 $ 3,004
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ............. 156 312 725
Deferred income tax benefit ............... 301 (297) (237)
Changes in assets and liabilities:
Accounts receivable .................. (1,094) (708) (2,609)
Prepaid expenses ..................... (23) (23) (358)
Other assets ......................... (31) 3 20
Accounts payable and accrued expenses 193 507 596
Accrued compensation payable ......... 231 500 358
Deferred revenue ..................... (159) -- --
Income taxes payable ................. (126) 179 (373)
--------- --------- ----------
Net cash provided by operating activities ........... 656 2,323 1,126
--------- --------- ----------
Cash flows from investing activities:
Purchases of property and equipment ............ (228) (1,243) (2,248)
Purchase of short-term investments ............. -- -- (15,942)
Maturity and sale of short-term investments .... -- -- 13,405
--------- --------- ----------
Net cash used in investing activities ............... (228) (1,243) (4,785)
--------- --------- ----------
Cash flows from financing activities:
Repayment of note payable to stockholder ....... (25) (1,350) --
Proceeds from bank debt ........................ 1,500 -- --
Repayments on bank debt ........................ (797) (703) --
Purchase of treasury stock, net ................ (780) (8) (2)
Proceeds from issuance of common stock ......... 3 2,714 9,912
Distribution to shareholders ................... (192) -- --
--------- --------- ----------
Net cash (used in) provided by financing activities . (291) 653 9,910
--------- --------- ----------
Net increase in cash and cash equivalents ........... 131 1,722 6,251
Cash and cash equivalents, beginning of year ........ 626 757 2,479
--------- --------- ----------
Cash and cash equivalents, end of year .............. $ 757 $ 2,479 $ 8,730
========= ========= ==========
Supplemental disclosure of cash flow information:
Interest paid .................................. $ 109 $ 118 $ 5
Income taxes paid .............................. $ 704 $ 1,514 $ 2,879
Noncash investing and financing transactions:
Equipment acquired under capital lease ......... $ 36 $ -- $ --
Issuance of debt to acquire treasury stock ..... $ 1,350 $ -- $ --
Conversion of accounts receivable to note
receivable ................................... $ -- $ 100 $ 94

</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE>

INTEGRATED SYSTEMS CONSULTING GROUP, INC.

Notes to consolidated financial statements

DECEMBER 31, 1996

(1) NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Integrated Systems Consulting Group, Inc. (ISCG or the Company) through its
wholly-owned operating subsidiary provides consulting services that address its
clients' information processing needs, including client-server architecture,
graphical user interface applications, local and distributed relational
databases, and cross platform applications integration. The Company operates in
one business segment delivering its services in two broad areas, software
applications development and systems and network management. The Company's
applications development activities accounted for approximately 78% and 79% of
its revenues in 1995 and 1996, respectively.

The accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include U.S. Government securities, commercial
paper, and money market accounts with an original maturity of three months or
less.

INVESTMENTS

The Company has classified it's marketable debt securities as
held-to-maturity. Securities classified as held-to-maturity are reported at
amortized cost. Realized gains and losses and declines in value of securities
judged to be other-than-temporary are included in income. Interest and
dividends on all securities are included in interest income.

Since held-to-maturity securities are short-term in nature, changes in market
interest rates would not have a significant impact on fair value of these
securities. These securities are carried at amortized cost which approximate
fair value.

Investments with maturities between three and twelve months are considered
short-term investments. Short-term investments consists of commercial paper
and United States Government debt securities.

The carrying amounts reflected in the consolidated balance sheets for cash
and cash equivalents, accounts receivable, and accounts payable approximate
fair value due to the short maturities of these instruments.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost net of depreciation. Expenditures
for improvements which significantly extend the useful life of an asset are
capitalized. Expenditures for repairs and maintenance are expensed as
incurred. Property and equipment acquired under capital leases are stated at
the lower of fair market value or the present value of the minimum lease
payments at the inception of the lease. Depreciation and amortization is
provided using the straight-line method over the estimated useful lives of
the assets as follows:

Computers and software (commercially available packages) 3 years
Furniture, fixtures and equipment 3 to 8 years

Leasehold improvements are amortized over the shorter of their estimated
useful lives or the related lease term.

REVENUE RECOGNITION

Revenues under time and material contracts are recognized in the period in
which services are provided.

Revenues under fixed price contracts are recognized under the
percentage-of-completion method. Under this method, revenues are recognized
based upon costs incurred as a percentage of estimated total costs of
individual contracts. Anticipated losses are recognized when they become
known. Revisions in estimated profits are made in the month in which the
circumstances requiring the revision become known.

F-7
<PAGE>
INTEGRATED SYSTEMS CONSULTING GROUP, INC.

Notes to consolidated financial statements - (Continued)

(2) Summary of Significant Accounting Policies - (Continued)

INCOME TAXES

Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes (SFAS No. 109)
which requires the use of the asset and liability approach for financial
accounting and reporting of deferred income taxes.

RECLASSIFICATIONS

Certain reclassifications have been made to the 1994 and 1995 consolidated
financial statements to conform to the 1996 presentation.

NET INCOME PER SHARE

Net income per share is computed using the weighted average number of shares
of common and common equivalent shares (stock options and warrants)
outstanding less the number of treasury shares assumed to be purchased from
the proceeds using the average market price of the Company's common stock
during the quarters and year for primary and fully diluted net income per
common share, respectively. As required by a Staff Accounting Bulletin issued
by the Securities and Exchange Commission, common and common equivalent
shares issued by the Company during the twelve-month period preceding the
initial public offering ("IPO"), discussed in Note 8, have been included in
the calculation as if they were outstanding for all periods prior to the IPO
(using the treasury stock method and assuming an IPO price of $5.00 per
share).

ACCOUNTING 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 disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates. Estimates made in the
preparation of the accompanying financial statements include the percentage
of completion of fixed price contracts and the amount of reserves established
for uncollectible amounts included in accounts receivable.

RECENTLY ADOPTED ACCOUNTING STANDARDS

Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of,
(SFAS 121) was adopted by the Company in January 1996. SFAS 121 requires that
long-lived assets and certain identifiable intangibles to be held and used by
an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company's adoption of SFAS 121 did not have a material
impact on its results of operations or financial position.

Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation, (SFAS 123) was adopted by the Company in January
1996 and the Company elected to continue to use the intrinsic value method
under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued
to Employees, (APB 25) with pro forma disclosures of net income and net
income per share as if the fair value method had been applied, discussed in
Note 9.

(3) CONCENTRATION OF CREDIT RISK AND MAJOR CLIENTS

The Company derives a significant portion of its revenues from companies in the
pharmaceutical industry. In particular, the Company's revenues are highly
dependent on research and development expenditures by the pharmaceutical
industry. Further, the Company's business could be impacted by changes in
government regulations applicable to the drug development process. Revenues
derived from clients in the pharmaceutical industry were approximately 61%, 64%
and 59% of total revenues in the years ending December 31, 1994, 1995, and 1996,
respectively. At December 31, 1996, $3,120,000 or 52% of trade and unbilled
receivables are due from companies in the pharmaceutical industry.

The following table summarizes the percentage of revenues from the Company's
significant clients (listing those clients that exceed 10% in the applicable
year):
<TABLE>
<CAPTION>
-----------------------------------------------------
Year Ended December 31,
Client 1994 1995 1996
---------- -------- -------- --------
<S> <C> <C> <C>
A .................. * 13% 10%
B .................. 17% 11% *
</TABLE>
* Less than 10%
F-8
<PAGE>

INTEGRATED SYSTEMS CONSULTING GROUP, INC.

Notes to consolidated financial statements - (Continued)

(3) Concentration of Credit Risk and Major Clients - (Continued)

The Company generally extends 30-day credit terms to, and requires no
collateral from, its clients. The Company performs an initial credit
evaluation and, on an ongoing basis, monitors the payment patterns and
balances of its clients' accounts. The Company maintains an allowance for
uncollectible amounts based on past experience.

There were no significant revenues derived from foreign operations during the
periods covered by the accompanying financial statements.

(4) PROPERTY AND EQUIPMENT

Property and equipment consists of the following:
<TABLE>
<CAPTION>
------------------------
December 31,
1995 1996
--------- ---------
(in thousands)
<S> <C> <C>
Software (commercially available packages) ..... $ 191 $ 450
Computers and office equipment ................. 1,425 2,542
Leasehold improvements ......................... 38 378
Furniture and fixtures ......................... 479 995
--------- ---------
2,133 4,365
Less: Accumulated depreciation and amortization (721) (1,430)
--------- ---------
$1,412 $ 2,935
========= =========
</TABLE>

(5) LINE OF CREDIT

The Company maintains a bank line of credit which provides for maximum
borrowings of $1,000,000, with interest on outstanding borrowings at the bank's
national commercial rate, which was 8.25% at December 31, 1996. The agreement
requires the Company to maintain a compensating balance of $50,000, meet certain
financial covenants, prohibits the payment of dividends, and matures in June
1997 if not extended. The highest borrowings outstanding under this line were
$0, $375,000, and $200,000 during 1994, 1995, and 1996, respectively. There were
no amounts outstanding at December 31, 1996.

<PAGE>

(6) INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Components of the
Company's net deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
----------------------
December 31,
1995 1996
------- -------
(in thousands)
<S> <C> <C>
Modified cash vs. accrual method of accounting $659 $491
Allowance for doubtful accounts ............... (81) (79)
Other ......................................... 22 (49)
------- -------
Net deferred tax liabilities .................. $600 $363
======= =======
</TABLE>

Significant components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>
----------------------------------------------------
Year Ended December 31,
1994 1995 1996
------- --------- ---------
(in thousands)
<S> <C> <C> <C>
Current:
Federal ............ $422 $1,298 $1,954
State .............. 157 394 549
------- --------- ---------
579 1,692 2,503
------- --------- ---------
Deferred:
Federal . .......... 210 (192) (169)
State .............. 91 (105) (68)
------- --------- ---------
301 (297) (237)
------- --------- ---------
$880 $1,395 $2,266
======= ========= =========
</TABLE>

F-9
<PAGE>

INTEGRATED SYSTEMS CONSULTING GROUP, INC.

Notes to consolidated financial statements - (Continued)

(6) Income Taxes - (Continued)

The following is a reconciliation of the federal income tax computed at the
statutory rates to the actual income tax. The Federal statutory rate for the
year 1994 was 35% as compared to 34% for 1995 and 1996. The difference in
rates is due to the Company being classified as a Personal Service
Corporation for 1994.
<TABLE>
<CAPTION>
--------------------------------
Year Ended December 31,
1994 1995 1996
------- --------- ---------
(in thousands)
<S> <C> <C> <C>
Federal income taxes at statutory rate ........ $731 $1,103 $1,792
State income taxes, net of federal tax benefit 102 260 317
Income of affiliate not subject to income tax . (21) -- --
Other ......................................... 68 32 157
------- --------- ---------
$880 $1,395 $2,266
======= ========= =========

</TABLE>

(7) EMPLOYEE SAVINGS PLAN

The Company sponsors an employee savings plan under Section 401(k) of the
Internal Revenue Code which covers substantially all employees. The Company's
contribution was $59,000, $86,000 and $203,000 for 1994, 1995, and 1996,
respectively.

(8) STOCKHOLDERS' EQUITY

CAPITAL STRUCTURE

Prior to June 1995, the Company had two classes of common stock (A and B)
which were similar in all respects except that class A common shares had
voting rights and class B common shares did not. Effective June 30, 1995, the
Company's articles of incorporation were amended to combine the class A and
class B shares into a single class of voting common stock. This combination
of the separate classes of common stock has been given retroactive effect in
the accompanying financial statements and related note disclosures for all
periods presented.

STOCK REDEMPTION TRANSACTION

In May 1994, the Company purchased, for $2,125,000, all of the shares of its
common stock held by a principal stockholder. The Company paid $775,000 in
cash, and financed the balance with a note to the seller for $1,350,000 which
was repaid in 1995. Concurrent with the purchase, the Company borrowed
$750,000 from a bank which was repaid in 1995. The transaction was accounted
for as a redemption and cancellation of the majority of the reacquired
shares, excluding 1,396,980 shares which were accounted for as treasury
shares, and resulted in the elimination of available additional paid-in
capital as of the transaction date of $8,000 and a charge to retained
earnings of $1,442,000.

STOCK SPLITS

On October 13, 1994, the Board of Directors declared a one-for-one stock
dividend which has been accounted for as a stock split. On November 16, 1995,
the Board of Directors authorized a three-for-two stock split. All share and
per share information included in the accompanying financial statements and
notes has been adjusted to give retroactive effect to these stock splits.

OTHER TRANSACTIONS

On May 31, 1996, the Company completed its IPO. The Company issued 2,175,000
shares of the Company's common stock and received proceeds of approximately
$9,900,000, net of issuance costs of approximately $975,000.

In June and August 1995, Safeguard Scientifics, Inc. (Safeguard) and two
venture capital funds (collectively, the Investors) acquired 2,080,048 shares
of the Company's common stock from the Company and its principal shareholder
and also acquired warrants to purchase 339,862 shares of common stock at an
exercise price of $3.68 per share. The Company sold 953,355 common shares and
the warrants directly to the investors for cash of $2,750,000. The balance of
the Investors shares were acquired from the Company's principal stockholder.
In connection with these transactions, the Company also

F-10
<PAGE>

INTEGRATED SYSTEMS CONSULTING GROUP, INC.

Notes to consolidated financial statements - (Continued)

(8) Stockholders' Equity - (Continued)

issued warrants to acquire 339,861 shares of its common stock at an exercise
price of $3.68 per share to the principal stockholder, who is also the
Company's chief executive officer. No value was assigned to these warrants
since their exercise price exceeded the estimated fair value of the Company's
common stock as of the issuance date.

The warrants discussed in the preceding paragraph became exercisable on the
effective date of the registration statement on Form S-1 with respect to the
IPO . The warrants issued to the Investors expire three years after they
become exercisable and the warrants issued to the principal stockholder
expire June 30, 1999. The warrants contain customary provisions requiring
proportionate adjustment of the exercise price in the event of a stock split,
stock dividend, or dilutive financing. The Investors also obtained certain
other rights which include piggyback and demand registration rights in
certain circumstances following an IPO of the Company's common stock.

(9) STOCK OPTION PLAN

The Company has a stock option plan (the Plan) under which all employees and
members of the Board of Directors are eligible to participate. A total of
1,250,000 shares of common stock have been reserved for this purpose.

Under the terms of the Plan, authorized options are granted at estimated fair
value. Options granted before July 25, 1996 generally become exerciseable and
vest at the rate of 20% per annum beginning on the second anniversary of the
grant date. Options granted on or after July 25, 1996 become exerciseable and
vest at the rate of 20% per annum beginning on the first anniversary of the
grant date. All options expire 10 years from the grant date.

The Company applies APB Opinion No. 25 and related Interpretations in
accounting for the Plan. Accordingly, no compensation cost has been
recognized. Had compensation cost for the Company's Plan been determined
consistent with FASB Statement No. 123, the Company's net income and earnings
per share would have been reduced to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C> <C>
Net Income ..................... As Reported $1,850 $3,004
Pro forma $1,811 $2,918
Primary earnings per share ..... As Reported $ .31 $ .38
Pro forma $ .30 $ .37
Fully diluted earnings per share As Reported $ .31 $ .37
Pro forma $ .30 $ .36

</TABLE>

The per share weighted-average fair value of stock options granted during
1995 and 1996 was $.55 and $3.22 on the date of grant using the Black Scholes
option-pricing model with the following weighted-average assumptions: 1995 -
expected dividend yield 0%, risk-free interest rate of 5.55% to 7.18%, and an
expected life of seven years; 1996 - expected dividend yield 0%, risk-free
interest rate of 6.67%, and an expected life of six years.

Pro forma net income reflects only options granted in 1995 and 1996.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS No. 123 is not reflected in the pro forma net income amounts
presented above because compensation cost is reflected over the options'
vesting period and compensation cost for options granted prior to January 1,
1995 is not considered.

F-11
<PAGE>

INTEGRATED SYSTEMS CONSULTING GROUP, INC.

Notes to consolidated financial statements - (Continued)

(9) Stock Option Plan - (Continued)

Option activity under the Plan is summarized below:

<TABLE>
<CAPTION>
Average Range/
Shares Weighted -
Shares Under Average of
Available Option Exercise Prices
----------- ---------- ---------------
<S> <C> <C> <C>
Balances, January 1, 1994 .. 576,675 307,725 $ .05 to .72
Granted .................... (58,598) 58,598 1.22
Exercised .................. -- (14,610) .05 to .63
Canceled ................... 25,633 (25,633) .05 to 1.22
----------- ---------- ---------------
Balances, December 31, 1994 543,710 326,080 .59
Additional authorization ... 320,000 -- --
Granted .................... (556,551) 556,551 2.49
Exercised .................. -- (48,435) .32
Canceled ................... 23,140 (23,140) 1.07
----------- ---------- ---------------
Balances, December 31, 1995 330,229 811,056 1.89
Granted .................... (13,760) 13,760 14.35
Exercised .................. -- (75,352) .81
Canceled ................... 39,218 (39,218) 2.51
Repurchases ................ 6,600 -- --
----------- ---------- ---------------
Balances, December 31, 1996 362,287 710,246 $2.33
=========== ========== ===============

</TABLE>

At December 31, 1996, the range of exercise prices and weighted-average
remaining contractual life of outstanding options was $.05 - $15.25 and 7.67
years, respectively.

At December 31, 1995 and 1996, the number of options exercisable was 140,492
and 152,914 respectively, and the weighted-average exercise price of those
options was $1.11 and $1.27, respectively.

(10) COMMITMENTS

LEASES

The Company is obligated under a capital lease for certain equipment with
$13,000 of future payments through December 1997. Equipment acquired through
capital leases in December 1994 are included in fixed assets at a cost of
$36,000 and accumulated amortization of $10,000 at December 31, 1996. The
Company is obligated to pay rent for office space under operating leases which
expire at various dates through September 2000.

Rent expense for 1994, 1995, and 1996 was $200,000, $293,000, and $614,000
respectively.

Future minimum lease payments under noncancelable operating leases at December
31, 1996 are as follows (in thousands):

<TABLE>
<CAPTION>
<S> <C>
1997 ......................................... $ 817
1998 ......................................... 824
1999 ......................................... 815
2000 ......................................... 673
----------------
Total minimum lease payments ...................... $3,129
================

</TABLE>

F-12
<PAGE>

INTEGRATED SYSTEMS CONSULTING GROUP, INC.

Notes to consolidated financial statements - (Continued)

(10) Commitments - (Continued)

SALARY CONTINUATION AGREEMENTS

The Company has employment agreements with certain members of management.
These agreements contain provisions for salary continuation payments
(aggregating approximately $600,000 at December 31, 1996) if all such
employees are terminated without cause.

(11) RELATED PARTY TRANSACTIONS

A former member of the Company's Board of Directors is the chief executive
officer of a client. Revenues from this client were $52,000, $587,000, and
$2,858,000 in 1994, 1995, and 1996 respectively. Outstanding trade accounts
receivable from this client were $150,000 and $572,000 at December 31, 1995 and
1996, respectively. Additionally, on September 30, 1995, the Company converted
$100,000 of accounts receivable from this client into a note receivable. The
$50,000 balance of the unsecured note is payable on September 30, 1997, and
bears interest at 7% per annum, which is payable quarterly.

The same former member of the Company's Board of Directors is also a member of a
client's Board of Directors. This client is also a consolidated subsidiary of
Safeguard. Revenues from this client were $1,241,000, $395,000, and $114,000 in
1994, 1995, and 1996. Outstanding accounts receivable from this client were
$49,000 and $0 at December 31, 1995 and 1996, respectively.

During the years ended December 31, 1994, 1995, and 1996, the Company made
insurance premium payments of $63,000, $116,000, and $143,000 respectively,
under certain insurance policies on the life of the Chief Executive Officer of
the Company for which the Company is not the beneficiary.

(12) SUBSEQUENT EVENTS

On January 23, 1997, the Company's Board of Directors authorized the filing of a
registration statement on Form S-1. The Board also authorized the reservation of
400,000 additional shares for the Stock Option Plan subject to shareholder
approval and authorized the granting of approximately 143,000 options to
employees.

F-13

<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

The expenses (other than underwriting discount) payable in connection with the
offering and sale of the Common Stock offered hereby are as follows:

Securities and Exchange Commission registration fee.............. $ 7,891
NASD filing fee................................................... 2,732
Nasdaq filing fee................................................. 17,500
Printing and engraving expenses................................... 50,000
Legal fees and expenses........................................... 75,000
Accounting fees and expenses...................................... 25,000
Blue Sky fees and expenses (including legal fees)................. 10,000
Transfer agent and rights agent and registrar fees and expenses... 20,000
Miscellaneous..................................................... 66,877
------
Total............................................................$275,000
========

The foregoing, except for the Securities and Exchange Commission registration
fee, the NASD filing fee, and the Nasdaq filing fee, are estimates. All of the
foregoing expenses will be borne by the Registrant and the Selling Shareholders
in proportion to the net proceeds received thereby.

Item 14. Indemnification of Directors and Officers

The Registrant's By-laws require the Registrant to indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed proceeding by reason of the fact that he is or was a director or
officer of the Registrant or is or was serving at the request of the Registrant
as a director, officer, employee, fiduciary or agent of another corporation,
trust or other enterprise against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such proceeding if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the Registrant, and, with respect to any such criminal proceeding, had no
reasonable cause to believe his conduct was unlawful. Such indemnification as to
expenses is mandatory to the extent the individual is successful on the merits
of the matter. Pennsylvania law permits the Registrant to provide similar
indemnification to employees and agents who are not directors or officers. The
determination of whether an individual meets the applicable standard of conduct
may be made by the disinterested directors, independent legal counsel or the
stockholders. Pennsylvania law also permits indemnification in connection with a
proceeding brought by or in the right of the Registrant to procure a judgment in
its favor. Reference is also made to the form of Indemnification Agreement
included as Exhibit 10.10 hereto which the Registrant has entered into with each
of its directors. Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Act") may be permitted to directors,
officers, or persons controlling the Registrant pursuant to the foregoing
provisions, the Registrant has been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in that Act and is therefore unenforceable. The Registrant
maintains a directors and officers liability insurance policy pursuant to which
the directors and officers are insured against certain liabilities they may
incur in their capacities as such.

II-1
<PAGE>

The Underwriting Agreement provides that the Underwriters are obligated, under
certain circumstances, to indemnify directors, officers and controlling persons
of the Registrant against certain liabilities, including liabilities under the
Act. Reference is made to the form of Underwriting Agreement which will be filed
by amendment as Exhibit 1.1 hereto.

Reference is made to Sections 4.01 and 5.05 of the Common Stock and Warrant
Purchase Agreement filed as Exhibit 10.7 hereto which provides for the
Registrant to indemnify certain of its shareholders, officers and directors in
certain events.

Item 15. Recent Sales of Unregistered Securities

In the three years preceding the filing of this registration statement, the
Registrant has issued the following securities that were not registered under
the Act:

Pursuant to the terms of a Common Stock and Warrant Purchase Agreement made as
of June 30, 1995, the Registrant sold an aggregate of 953,355 shares of
Registrant's Common Stock and granted warrants to purchase an aggregate of
339,862 shares of Registrant's Common Stock to Safeguard Scientifics (Delaware),
Inc., Technology Leaders II L.P. and Technology Leaders II Offshore C.V. and
also granted David S. Lipson a warrant to purchase 339,861 shares of
Registrant's Common Stock. In issuing and selling such shares and warrants, the
Registrant relied upon an exemption from registration under Section 4(2) of the
Act, and the fact that such securities were issued to a limited number of
offerees, each of whom was an "accredited investor" as defined under Regulation
D of the 1933 Act and had sufficient knowledge of and access to material
information regarding Registrant relevant to making an informed investment
decision.

Pursuant to Registrant's Amended and Restated 1989 Stock Option Plan, Registrant
has granted options to purchase a total of 628,909 shares of Common Stock to its
employees and directors during the past three fiscal years at exercise prices
ranging from $1.22 to $15.25 per share. For a more detailed description of the
Plan, see "Management--Stock Option Plan" in this Registration Statement. In
granting the options and selling the underlying securities upon option exercise,
Registrant is relying on exemptions to registration set forth in Rule 701 under,
and Section 4(2) of, the Act.

II-2

<PAGE>

Item 16. Exhibits and Financial Statement Schedules

(a) Exhibits:
<TABLE>
<CAPTION>

Exhibit
Number Description
------ -----------
<S> <C>

1.1 Form of Underwriting Agreement.+
3.1 Articles of Incorporation of the Company.*
3.2 By-laws of the Company.*
4.1 Specimen stock certificate representing the Common Stock.*
5.1 Opinion of Saul, Ewing, Remick & Saul.+
10.1 Stock Option Plan, as amended.+
10.2 Amended and Restated Employment Agreement dated January 1, 1995 between the
Registrant and David S. Lipson.*
10.3 Employment Agreement dated April 1, 1994 between the Registrant and David D.
Gathman.*
10.4 Employment Agreement dated January 1, 1993 between the Registrant and Edward P.
Kaiserian, as modified on January 1, 1995.*
10.5 Employment Agreement dated January 9, 1992 between the Registrant and David F.
Elderkin.*
10.6 Employment Agreement dated November 25, 1995 between the Registrant and Jay M.
Rose.*
10.7 Common Stock and Warrant Purchase Agreement dated June 30, 1995 among the
Registrant, David S. Lipson, Safeguard Scientifics (Delaware), Inc., Technology Leaders II
L.P. and Technology Leaders II Offshore C.V.*
11 Statement Regarding Computation of Earnings Per Share.
21 Subsidiaries of the Registrant.*
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Saul, Ewing, Remick & Saul (included in Exhibit 5.1).+
24 Power of Attorney (included on the signature page hereof).
27 Financial Data Schedule.
</TABLE>

- --------
+ To be filed by amendment.
* Filed as an exhibit to the Company's registration statement on Form S-1
(File No. 333-00790) and incorporated herein by reference.

II-3

<PAGE>

(b) Financial Statement Schedules

SCHEDULE II - Valuation and Qualifying Accounts

All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.

Item 17. Undertakings.

The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) To include any prospectus required by section 10(a)(3) of the Securities
Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; and

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.

(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.

Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to provisions described in Item 14 above, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

The undersigned registrant hereby undertakes (1) to provide to the underwriters
at the closing specified in the standby underwriting agreement certificates in
such denominations and registered in such names as required by the underwriters
to permit prompt delivery to each purchaser; (2) that for purposes of
determining any liability under the Act, the information omitted from the form
of prospectus filed as part of a registration statement in reliance upon Rule
430A and contained in the form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Act shall be deemed to be part of this
registration statement as of the time it was declared effective; and (3) that
for the purpose of determining any liability under the Act, each post-effective
amendment that contains a

II-4

<PAGE>

form of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-5

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Wayne, Pennsylvania, on January 31,
1997.

INTEGRATED SYSTEMS CONSULTING
GROUP, INC.

By: /s/ DAVID S. LIPSON
-----------------------
David S. Lipson
Chairman, Chief Executive Officer,
President & Treasurer

Power of Attorney

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
hereby makes, constitutes and appoints David S. Lipson and David D. Gathman, and
each of them, with full power to act without the other, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities to sign any
and all amendments to this Registration Statement, including post-effective
amendments, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in connection therewith, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or any substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.

Signatures Title(s) Date
- ---------- -------- ----
<S> <C> <C>

/s/ DAVID S. LIPSON Chief Executive Officer, President and January 31, 1997
- -------------------------------------- Treasurer (Principal Executive Officer) and
David S. Lipson Chairman

/s/ DAVID D. GATHMAN Executive Vice President, Finance and January 31, 1997
- -------------------------------------- Administration and Chief Financial Officer,
David D. Gathman Secretary and Assistant Treasurer (Principal
Financial and Accounting Officer) and
Director

</TABLE>

Signatures Title(s) Date
- ---------- -------- ----
<S> <C> <C>

/s/ FRANK BALDINO, JR. Director January 31, 1997
- --------------------------------------
Frank Baldino, Jr.

/s/ MELVYN E. BERGSTEIN Director January 31, 1997
- --------------------------------------
Melvyn E. Bergstein

/s/ DONALD R. CALDWELL Director January 31, 1997
- --------------------------------------
Donald R. Caldwell

/s/ MARK J. DENINO Director January 31, 1997
- --------------------------------------
Mark J. DeNino

/s/ DAVID FEHR Director January 31, 1997
- --------------------------------------
David Fehr

/s/ JAMES L. MANN Director January 31, 1997
- --------------------------------------
James L. Mann

/s/ DONNA J. PEDRICK Director January 31, 1997
- --------------------------------------
Donna J. Pedrick

/s/ MICHAEL D. STERN Director January 31, 1997
- --------------------------------------
Michael D. Stern

/s/ EDWARD S.J. TOMEZSKO Director January 31, 1997
- --------------------------------------
Edward S.J. Tomezsko

</TABLE>

<PAGE>

INTEGRATED SYSTEMS CONSULTING GROUP, INC.

INDEX TO FINANCIAL STATEMENT SCHEDULES
DECEMBER 31, 1996

Page

Index to Financial Statement Schedules................................. S-1

Schedule II - Valuation and Qualifying Accounts........................ S-2

S-1
<PAGE>

SCHEDULE II

INTEGRATED SYSTEMS CONSULTING GROUP, INC.

VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
------------------- ------------ ---------------------------- ------------ -----------
Additions
----------------------------
For the year Balance at Charged to Charged to Balance
ended beginning cost and other at end of
December 31 Description of period expenses accounts Deductions period
-------------- ------------------- ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
1994 Billing adjustments $100,000 $ -- $ -- $ -- $100,000
and uncollectible
amounts
1995 Billing adjustments 100,000 41,000 59,000 -- 200,000
and uncollectible
amounts
1996 Billing adjustments 200,000 -- 23,100(1) (27,179) 195,921
and uncollectible
amounts

</TABLE>

- ------
(1) Charged against revenue.

S-2

<PAGE>

EXHIBIT INDEX

Exhibit
Number Description
------ -----------
<S> <C>
1.1 Form of Underwriting Agreement.+
3.1 Articles of Incorporation of the Company.*
3.2 By-laws of the Company.*
4.1 Specimen stock certificate representing the Common Stock.*
5.1 Opinion of Saul, Ewing, Remick & Saul.+
10.1 Stock Option Plan, as amended.+
10.2 Amended and Restated Employment Agreement dated January 1, 1995 between the
Registrant and David S. Lipson.*
10.3 Employment Agreement dated April 1, 1994 between the Registrant and David D.
Gathman.*
10.4 Employment Agreement dated January 1, 1993 between the Registrant and Edward P.
Kaiserian, as modified on January 1, 1995.*
10.5 Employment Agreement dated January 9, 1992 between the Registrant and David F.
Elderkin.*
10.6 Employment Agreement dated November 25, 1995 between the Registrant and Jay M.
Rose.*
10.7 Common Stock and Warrant Purchase Agreement dated June 30, 1995 among the
Registrant, David S. Lipson, Safeguard Scientifics (Delaware), Inc., Technology Leaders II
L.P. and Technology Leaders II Offshore C.V.*
11 Statement Regarding Computation of Earnings Per Share.
21 Subsidiaries of the Registrant.*
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Saul, Ewing, Remick & Saul (included in Exhibit 5.1).+
24 Power of Attorney (included on the signature page hereof).
27 Financial Data Schedule.
</TABLE>
- -------------
+ To be filed by amendment.
* Filed as an exhibit to the Company's registration statement on Form S-1
(File No. 333-00790) and incorporated herein by reference.

<PAGE>

EXHIBIT 11
INTEGRATED SYSTEMS CONSULTING GROUP, INC.

STATEMENT RE: CALCULATION OF INCOME PER SHARE

Year Ended December 31,
--------------------------------
1994 1995 1996
--------- -------- --------
<S> <C> <C> <C>
Shares used in computing net income per common share:
Shares outstanding at beginning of period ......................... 9,105 4,609 5,606
Common shares issued during the year ended December 31, 1995
presented as if outstanding for all periods, net of treasury
stock effect thereof(1) ......................................... 404 224 --
Stock options issued during the year ended December 31, 1995
presented as if outstanding for all periods net of treasury stock
effect thereof(1) ............................................... 279 279 --
Warrants issued during the year ended December 31, 1995 presented
as if outstanding for all periods net of treasury stock effect
thereof(1) ...................................................... 179 179 --
Net incremental shares resulting from assumed exercise of stock
options and warrants using the treasury stock method ............ 171 235 1,045
Weighted impact of common shares issued during the period ......... 11 481 1,315
Weighted impact of common shares repurchased during the period .... (3,004) (5) (8)
--------- -------- --------
Total shares used in computing primary net income per common share 7,145 6,002 7,958
========= ======== ========
Net income ............................................................. $ 1,208 $1,850 $3,004
========= ======== ========
Primary net income per common share .................................... $ 0.17 $ 0.31 $ 0.38
========= ======== ========
Shares used in computing fully diluted net income per common share:
Shares outstanding, beginning of period ........................... 9,105 4,609 5,606
Common shares issued during the year ended December 31, 1995
presented as if outstanding for all periods, net of treasury
stock effect thereof(1) ......................................... 404 224 --
Stock options issued during the year ended December 31, 1995
presented as if outstanding for all periods net of treasury stock
effect thereof(1) ............................................... 279 279 --
Warrants issued during the year ended December 31, 1995 presented
as if outstanding for all periods net of treasury stock effect
thereof(1) ...................................................... 179 179 --
Net incremental shares resulting from assumed exercise of stock
options and warrants using the treasury stock method ............ 171 235 1,138
Weighted impact of common shares issued during the period ......... 11 481 1,315
Weighted impact of common shares repurchased during the period .... (3,004) (5) (8)
--------- -------- --------
Total shares used in computing fully diluted net income per common
share ........................................................... 7,145 6,002 8,051
========= ======== ========
Net income ............................................................. $ 1,208 $1,850 $3,004
========= ======== ========
Fully diluted net income per common share .............................. $ 0.17 $ 0.31 $ 0.37
========= ======== ========

</TABLE>

(1) Treasury effect calculated using an assumed market price of $5.00 per
share.

<PAGE>

Consent of Independent Certified Public Accountants

The Board of Directors
Integrated Systems Consulting Group, Inc.

The audits referred to in our report dated January 23, 1997, included the
related financial statement schedule as of December 31, 1996, and for each of
the years in the three-year period ended December 31, 1996, included in the
registration statement. This financial statement schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the consolidated financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

We consent to the use of our report included herein and to the reference to our
firm under the heading "Selected Consolidated Financial Data" and "Experts" in
the prospectus.

/s/ KPMG Peat Marwick LLP

Philadelphia, Pennsylvania
January 30, 1997

<ARTICLE> 5
<MULTIPLIER> 1000
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 8,730
<SECURITIES> 2,537
<RECEIVABLES> 5,787
<ALLOWANCES> 196
<INVENTORY> 0
<CURRENT-ASSETS> 17,812
<PP&E> 4,365
<DEPRECIATION> 1,430
<TOTAL-ASSETS> 20,844
<CURRENT-LIABILITIES> 3,084
<BONDS> 0
0
0
<COMMON> 46
<OTHER-SE> 17,714
<TOTAL-LIABILITY-AND-EQUITY> 20,844
<SALES> 30,607
<TOTAL-REVENUES> 30,607
<CGS> 17,497
<TOTAL-COSTS> 25,691
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5
<INCOME-PRETAX> 5,270
<INCOME-TAX> 2,266
<INCOME-CONTINUING> 3,004
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,004
<EPS-PRIMARY> .38
<EPS-DILUTED> .37

</TABLE>