INTEGRAL SYSTEMS, INC.
10-QSB
FOR QUARTER ENDING
JUNE 30, 199
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(mark one)
X Quarterly report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1997 or
_____ Transition report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission file number 0-18603
INTEGRAL SYSTEMS, INC.
(Exact name of registrant as specified in its chapter)
Maryland 52-1267968
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5000 Philadelphia Way, Suite A, Lanham, MD 20706
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (301)731- 4233
(Former name, address and fiscal year, if changed since last report)
Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
As of June 30, 1997 the aggregate market value of the Common Stock of
the Registrant (based upon the average bid and ask prices of the Common
Stock as reported by the market makers) held by non-affiliates of the
Registrant was $24,990,935.
Registrant had 953,046 shares of common stock outstanding as of June 30,
1997.
INTEGRAL SYSTEMS, INC.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Page No.
Part I Financial Information:
Item 1. Financial Statements
Balance Sheets - June 30, 1997, September 30, 1996 1
Statements of Operations Nine Months and Three Months
Ended June 30, 1997 and June 30, 1996.... 3
Statement of Cash Flow Nine Months Ended June 30, 1997
and June 30, 1996 4
Statement of Stockholders' Equity Nine Months
Ended June 30, 1997 5
Notes to Financial Statements 6
Item 2. Management's Discussion
and Analysis of Financial Condition
and Results of Operations 8
Part II Other Information:
Item 6. Exhibits and Reports on Form 8-K 14
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
</TABLE>
<PAGE>
INTEGRAL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1997 and September 30, 1996
<TABLE>
<S> <C> <C>
ASSETS June 30, September 30,
1997 1996
CURRENT ASSETS
Cash $517,870 $1,369,915
Accounts Receivable 7,976,262 4,874,086
Prepaid Expenses 407,079 59,956
Deferred Income Taxes 73,913 73,913
TOTAL CURRENT ASSETS 8,975,124 6,377,870
FIXED ASSETS
Electronic Equipment 1,019,754 728,956
Furniture & Fixtures 56,545 54,898
Leasehold Improvements 11,364 11,364
Software Purchases 149,640 50,659
SUBTOTAL 1,237,303 845,877
Less: Accum. Deprec. 510,195 446,769
TOTAL FIXED ASSETS 727,108 399,108
OTHER ASSETS
Software Development Costs 1,405,120 1,295,514
Deposits 10,142 7,182
TOTAL OTHER ASSETS 1,415,262 1,302,696
TOTAL ASSETS $11,117,494 $8,079,674
See Notes to Finanacial Statements
</TABLE>
<PAGE>
INTEGRAL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1997 and September 30, 1996
<TABLE>
<S> <C> <C>
LIABILITIES & STOCKHOLDERS' EQUITY
June 30, September 30,
1997 1996
CURRENT LIABILITIES
Accounts Payable $2,122,534 $786,701
Accrued Expenses 1,427,752 1,157,356
Billings in Excess of Cost 1,048,720 128,925
Income Taxes Payable 120,100 48,060
TOTAL CURRENT LIABILITIES 4,719,106 2,121,042
LONG TERM LIABILITIES
STOCKHOLDERS' EQUITY
Common Stock, $.01 par value,
2,000,000 shares authorized, and
953,046 and 952,533 shares issued
and outstanding at June 30, 1997
and September 30, 1996, respectively 9,530 9,525
Additional Paid-in Capital 835,462 825,311
Retained Earnings 5,553,396 5,123,796
TOTAL STOCKHOLDERS' EQUITY 6,398,388 5,958,632
TOTAL LIABILITIES & $11,117,494 $8,079,674
STOCKHOLDERS' EQUITY
See Notes to Financial Statements
</TABLE>
<PAGE>
INTEGRAL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<S> <C> <C> <C> <C>
Nine Months Ended Three Months Ended
June 30, June 30,
1997 1996 1997 1996
Revenue $14,175,577 $7,268,974 $4,907,617 $2,336,178
Cost of Revenue
Direct Labor 3,293,562 2,573,825 1,187,122 904,632
Overhead Costs 2,354,863 1,874,685 845,371 618,074
Travel and Other Direct Costs 561,740 244,051 315,447 64,850
Direct Equipment& Subcontracts 5,093,314 663,071 1,441,197 321,558
Total Cost of Revenue 11,303,478 5,355,632 3,789,136 1,909,114
Gross Margin 2,872,099 1,913,342 1,118,481 427,064
Selling, General &
Administrative 1,657,284 1,365,606 716,519 468,715
Product Amortization 495,000 374,012 165,000 119,734
Bad Debt Expense 0 120,000 0 120,000
Income (Loss) From Operations 719,815 53,724 236,962 (281,385)
Other Income (Expense)
Interest Income 36,699 51,535 12,121 19,786
Interest Expense (7,594) (47) (1,498) (16)
Miscellaneous, net (74,245) (51,262) (21,507) (4,558)
Total Other Income (Expense) (45,140) 226 (10,884) 15,212
Income (Loss) Before Income Taxes 674,675 53,950 226,078 (266,173)
Provision for Income Taxes 245,075 20,800 79,575 (102,800)
Net Income (Loss) $429,600 $33,150 $146,503 ($163,373)
Weighted Average Number of Common
Shares Outstanding During Period 952,764 947,072 952,913 949,033
Earnings (loss) per share $0.45 $0.04 $0.15 ($0.17)
See Notes to Financial Statements
</TABLE>
<PAGE>
INTEGRAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
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For the Nine Months Ended
June 30,
1997 1996
Cash flows from operating activities:
Net income $429,600 $33,150
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 712,525 515,283
(Increase) decrease in:
Accounts receivable (3,102,176) (188,852)
Prepaid expenses (347,123) 26,869
Income tax receivable 0 (123,685)
(Decrease) increase in:
Accounts payable 1,335,833 10,680
Accrued expenses 270,396 (5,761)
Billings in excess of cost 919,795 (401,159)
Income taxes payable 72,040 (108,481)
Total adjustments (138,710) (275,106)
Net cash provided (used) by operations 290,890 (241,956)
Cash flow from investing activities:
Acquisition of fixed assets (545,525) (262,949)
Increase in software development costs (604,606) (341,160)
Increase in other assets (2,960) (7,182)
Net cash provided (used) in
investing activities (1,153,091) (611,291)
Cash flow from financing activities:
Proceeds from issuance of common stock 10,156 122,760
Net cash provided by financing activities 10,156 122,760
Net increase (decrease) in cash (852,045) (730,487)
Cash - beginning of year 1,369,915 2,125,553
Cash - end of period $517,870 $1,395,066
See Notes to Financial Statements
</TABLE>
<PAGE>
INTEGRAL SYSTEMS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED
JUNE 30, 1997
<TABLE>
<S> <C> <C> <C> <C> <C>
Number Additional
of Common Paid-in Retained
Shares Stock Capital Earnings Total
Balance September 30, 1996 952,533 $9,525 $825,311 $5,123,796 $5,958,632
Exercise of Stock Options 513 5 10,151 - 10,156
Net income - - - 429,600 429,600
Balance June 30, 1997 953,046 $9,530 $835,462 $5,553,396 $6,398,388
</TABLE>
<PAGE>
INTEGRAL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation
The interim financial statements include the accounts of Integral
Systems, Inc. (ISI or the Company) and its two wholly-owned subsidiaries,
Integral Marketing, Inc. (IMI) and InterSys, Inc. (INTSYS). In
the opinion of management, the financial statements reflect all
adjustments consisting only of normal recurring accruals necessary
for a fair presentation of results for such periods. The
financial statements, which are condensed and do not include all
disclosures included in the annual financial statements, should be
read in conjunction with the consolidated financial statements of
the Company for the fiscal year ended September 30, 1996. The
results of operations for any interim period are not necessarily
indicative of results for the full year.
Certain accounts in the prior period financial statements have
been reclassified for comparative purposes to conform with the
presentation in the current year financial statements.
During the quarter ended March 31, 1997, the Company changed an
accounting policy in order to be more conservation in the recognition of
commission revenues earned by IMI. Specifically, effective January 1, 1997,
the Company recorded commission revenues at the time orders are shipped;
prior to January 1, 1997, the Company recognized commission revenues at the
time the orders were received.
The effect of this change was to reduce revenue by approximately
$440,000 and gross profit by approximately $220,000 for the nine
months ended June 30, 1997, and to reduce revenue by approximately
$340,000 and gross profit by approximately $170,000 for the three
months ended June 30, 1997, as compared to the levels of revenue and
gross profit that would have been recorded if the Company had continued
to record commission revenues at the time of order receipt.
2. Accounts Receivable
Accounts receivable at June 30, 1997 and September 30, 1996
consist of the following:
<TABLE>
<S> <C> <c.
June 30, 1997 Sept. 30, 1996
Billed $4,465,142 $2,766,042
Unbilled 3,499,390 2,083,844
Other 21,730 24,200
Subtotal 7,986,262 4,874,086
Less: Reserve -10,000 0
Total $7,976,262 $4,874,086
</TABLE>
The Company uses the direct write-off method for bad debts.
The Company's accounts receivable consist of amounts due on prime
contracts and subcontracts with the U.S. Government and contracts
with various private organizations. Unbilled accounts receivable
consist principally of amounts that are billed in the month
following the incurrence of cost or when milestones are delivered
under fixed price contracts. All unbilled receivables are
expected to be billed and collected within one year.
3. Line-of-Credit
The Company has a line of credit agreement with a local bank for
$2,000,000. Borrowing under the line of credit bears interest at
the bank's lending rate plus one-quarter of one percentage point
per annum. Any accrued interest is payable monthly. There were no
amounts outstanding under the line at either June 30, 1997 or
September 30, 1996.
4. Subsequent Event
On June 4, 1997, the Company's shareholders approved an increase in the
Company's authorized shares from 2,000,000 to 10,000,000. In addition,
the Company's shareholders approved a 3 for 1 stock split for shareholders
of record as of July 1, 1997. As a result of the split, the Company
had 2,859,138 shares issued and outstanding as of July 15, 1997.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operation
COMPARISON OF THE NINE MONTHS ENDED JUNE 30, 1997
TO THE NINE MONTHS ENDED JUNE 30, 1996
The components of the Company's income statement as a percentage of
revenue are depicted in the following table for the nine months ended
June 30, 1997 and June 30, 1996:
<TABLE>
<S> <C> <C> <C> <C>
% of % of
1997 Revenue 1996 Revenue
(000's (000's
omitted) omitted)
Revenue $14,176 100.0 $7,269 100.0
Expenses
Cost of Revenue 11,304 79.7 5,355 73.7
SG&A 1,657 11.7 1,366 18.8
Prod. Amortization 495 3.5 374 5.1
Bad Debt Expense - - 120 1.7
Other 45 .3 - -
Income Taxes 245 1.7 21 .3
Total Expenses 13,746 97.0 7,236 99.5
Net Income $ 430 3.0 $ 33 .5
Revenue
</TABLE>
The Company sells its products and services to both the Federal
Government and to commercial and international organizations. The
Company defines commercial contracts as any business opportunity that
includes, as all or part of the sale, any of its commercial off the
shelf (COTS) software products. The Company presently sells three
proprietary COTS products, namely EPOCH, OASYS, and DRS.
The Company through its wholly owned subsidiary, Integral Marketing,
Inc. (IMI), earns commissions by representing a number electronic
product manufacturers in Maryland, Virginia and the District of
Columbia. The Company classifies IMI revenues as commercial revenues.
During the nine months ended June 30, 1997, consolidated revenue
increased by over 95% compared to the nine months ended June 30, 1996,
climbing from $7.3 million to $14.2 million. Although the results of
operations for an interim period are not necessairly indicative of the
results for the entire year, management notes that. The Company's
revenue total for the 1st nine months of fiscal year 1997,
exceeds the $11.2 million revenue total posted for fiscal year 1996 in
its entirety.
During the nine months ended June 30, 1997, the Company derived
approximately 38% of its consolidated revenue from commercial
opportunities compared to 47% of such revenue during the comparable
period last fiscal year. Despite the decrease in the
percentage of overall revenue accounted for by commercial revenues, commercial
revenues actually increased in absolute dollar terms, rising from $3.4
million during the 1st nine months of fiscal year 1996 to $5.4 million
during the 1st nine months of fiscal year 1997; an increase in excess of
57%.
Gross Margin
Although management believes that the distinctions between Government
revenue and commercial revenue are important in understanding the
financial dynamics of its business, management believes that it is also
important to analyze the types of revenue the Company has earned.
Specifically, the Company essentially derives revenues from the following
sources:
Software licenses
Engineering services
Equipment and subcontract pass throughs
IMI Commission revenues
Each of the above revenue types has different gross margin
characteristics. Generally license revenues have the greatest gross
margins, as the Company believes that this revenue type has virtually no
marginal cost associated with it. By contrast, equipment and subcontract
pass throughs have the least gross margin rates associated with them, as
the Company generally does not mark these items up by more than 15%.
Service margins for the Company typically range between 20% and 30% of
revenue, but can be less depending on specific contract pricing and/or
contract overruns. Margins for IMI vary considerably depending on sales
volume achieved.
Although in many instances margins on given contracts are bundled
together as part of an overall price and are therefore subject to
estimated allocation, the Company believes that the table below fairly
and accurately portrays the Company's revenue and gross margin results
for the nine months ended June 30, 1997 and June 30, 1996.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1997 1996
Revenue Margin % Margin Revenue Margin % Margin
(000's (000's (000's (000's
omitted) omitted) omitted) omitted)
Licenses $ 997 $ 997 100.0 $ 523 $ 523 100.0
Services 7,233 1,327 18.3 5,605 1,253 22.4
Equip. &
Subcontracts 5,538 416 7.5 789 59 7.5
IMI 408 132 32.4 352 78 22.2
Totals $14,176 $2,872 20.3 $7,269 $1,913 26.3
</TABLE>
Overall, the Company experienced a decrease in gross margin percentage
between the periods being compared, falling from 26.3% to 20.3%. The
reasons for the decrease are essentially twofold. First, over 39%
of the Company's fiscal year 1997 revenues were derived from low margin
equipment and subcontract pass throughs, compared to less than 11% of
such revenues last fiscal year. Most of the increase is attributable to
a material Government contract the Company received during the 2nd half
of fiscal year 1996 (i.e., the IPACS Contract with the National Oceanic and
Atmospheric Administration [NOAA], a copy of which was filed as an
exhibit to the Company's 1996 Annual Report on Form 10-KSB). In fact
over 2/3 of the Company's equipment and subcontract pass through revenue
for fiscal year 1997 was derived from this one contract alone.
Furthermore, on the Company's commercial side of the business, service
margins were lower than the prior fiscal year due to operating losses on
two relatively new contracts. The Company considers such losses to be
in effect "loss leaders", as both contracts were priced to gain entrance
to certain markets, which the Company believes it has since effectively
achieved. In particular, the Company believes that were it not for work
performed under the loss contracts referred to above, its current
material contract with Skynet (formerly issued by AT&T Corporation) as
well as its recent multiple sales of its Low Earth Orbiter Terminal
(LEO-T) may not have been awarded.
In addition to the above, margins in the Company's IMI operation were
negatively impacted due to an accounting policy change implemented
during the second quarter of fiscal year 1997, (see Note 1 of the Notes
to Financial Statements herein). Specifically, the Company now
recognizes IMI revenue at the time that orders are shipped rather
than at the time orders are received. This change adversely affected
IMI commission revenue by approximately $440,000 and gross margin by
approximately $220,000 for the nine months ended June 30, 1997 when
compared with the amounts that IMI would have recognized if it had
continued to record commission revenues at the time of order receipt.
Operating Expenses
SG&A increased by approximately $290,000 between the periods compared as
the Company continues to build an operating infrastructure to support
its commercial business. Bid and proposal expenses for the Company's
Government operation were also significantly higher in the current
period compared to last fiscal year As a percentage of revenue,
however, SG&A accounted for only 11.7% of revenue in the current period
compared to 18.8% last fiscal year.
Product amortization increased by approximately $120,000 between the
current period and the comparable period in fiscal year 1996, reflecting
the Company's expanding software development amortization base. Product
amortization now only pertains to the Company's EPOCH and OASYS products
as amortization for all other products was fully recognized in fiscal
year 1996.
Fiscal year 1996 expenses included a $120,000 provision for bad debt
expense which did not recur in fiscal year 1997.
General
During the nine months ended June 30, 1997, the Company recorded its
highest revenue total in its history for any nine month period.
Although the results of operations for an interim period are not necessairly
indicative of the results for the entire year, management notes that.
Net income for the first nine months of fiscal year 1997
was greater than the net income posted for fiscal year 1996 in its
entirety, ($430,000 vs. $323,000)
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 1997
TO THE THREE MONTHS ENDED JUNE 30, 1996
The components of the Company's income statement as a percentage of
revenue are depicted in the following table for the three months ended
June 30, 1997 and June 30, 1996:
<TABLE>
<S> <C> <C> <C> <C>
% of % of
1997 Revenue 1996 Revenue
(000's omitted) (000's omitted)
Revenue $4,908 100.0 $2,336 100.0
Expenses
Cost of Revenue 3,789 77.2 1,909 81.7
SG&A 716 14.6 468 20.0
Prod. Amortization 165 3.4 120 5.1
Bad Debt Expense - - 120 5.1
Other 11 .2 -15 -.6
Income Taxes 80 1.6 -103 -4.4
Total Expenses 4,761 97.0 2,499 107.0
Net Income $ 147 3.0 $ -163 -7.0
Revenue
</TABLE>
The Company sells its products and services to both the Federal
Government and to commercial and international organizations. The
Company defines commercial contracts as any business opportunity that
includes, as all or part of the sale, any of its commercial off the
shelf (COTS) software products. The Company presently sells three
proprietary COTS products, namely EPOCH, OASYS, and DRS.
The Company through its wholly owned subsidiary, Integral Marketing,
Inc. (IMI), earns commissions by representing a number electronic
product manufacturers in Maryland, Virginia and the District of
Columbia. The Company classifies IMI revenues as commercial revenues.
During the three months ended June 30, 1997, consolidated revenue
increased by over 110% compared to the three months ended June 30, 1996,
climbing from $2.3 million to $4.9 million. In fact the 3rd quarter
revenue total posted for fiscal year 1997 is the highest such figure in
the Company's history.
During the three months ended June 30, 1997, the Company derived
approximately 40% of its consolidated revenue from commercial
opportunities compared to 49% of such revenue during the comparable
period last fiscal year. Despite the decrease, in the percentage of
overall revenue accounted for by commerical revenues, commercial
revenues actually increased in absolute dollar terms, rising from $1.1
million during the 3rd quarter of fiscal year 1996 to $2.0 million
during the 3rd quarter of fiscal year 1997, an increase in excess of
70%.
Gross Margin
Although management believes that the distinctions between Government
revenue and commercial revenue are important in understanding the
financial dynamics of its business, management beleives that it is also
important to analyze the types of revenue the Company has earned.
Specifically, the Company essentially derives revenues from the following
sources:
Software licenses
Engineering services
Equipment and subcontract pass throughs
IMI Commission revenues
Each of the above revenue types has different gross margin
characteristics. Generally license revenues have the greatest gross
margins, as the Company believes that this revenue type has virtually no
marginal cost associated with it. By contrast, equipment and subcontract
pass throughs have the least gross margin rates associated with them, as
the Company generally does not mark these items up by more than 15%.
Service margins for the Company typically range between 20% and 30% of
revenue, but can be less depending on specific contract pricing and/or
contract overruns. Margins for IMI vary considerably depending on sales
volume achieved.
Although in many instances, margins on given contracts are bundled
together as part of an overall price and are therefore subject to
estimated allocation, the Company believes that the table below fairly
and accurately portrays the Company's revenue and gross margin results
for the three months ended June 30, 1997 and June 30, 1996.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1997 1996
Revenue Margin % Margin Revenue Margin % Margin
(000's (000's (000's (000's
omitted) omitted) omitted) omitted
Licenses $ 457 $ 457 100.0 $ 18 $ 18 100.0
Services 2,677 464 17.3 1,830 352 19.2
Equip. &
Subcontracts 1,585 125 7.9 372 28 7.5
IMI 189 72 38.1 116 29 25.0
Totals $4,908 $1,118 22.8 $2,336 $ 427 18.3
</TABLE>
The Company's gross margin percentage increased from 18.3% in the 3rd
quarter of fiscal year 1996 to 22.8% in the 3rd quarter of fiscal year
1997. As shown in the table, margins for the 3rd quarter of fiscal year
1996 were impacted due to the relatively low amount of high margin
license revenue.
On the other hand, gross margins for the 3rd quarter of fiscal year 1997
were adversely affected by the large percentage of low margin equipment
and subcontract revenue in the revenue mix. Specifically in excess of
32% of the Company's current period revenues were derived from equipment
and subcontractor pass throughs compared to less than 16% of such
revenue during the 3rd quarter of fiscal year 1996. Most of the
increase is attributable to a material Government contract the Company
received during the secon half of fiscal year 1996 (i.e., the IPACS Contract
with the National Oceanic and Atmospheric Administration [NOAA], a copy
of which was filed as an exhibit to the Company's 1996 Annual Report on
Form 10-KSB). In fact over 2/3 of the Company's equipment and
subcontract pass through revenue for the 3rd quarter of fiscal year 1997
was derived from this one contract alone.
On the Company's commercial side of the business, service margins during the
third quarter were lower than in the same period during the prior fiscal
year due to downward profit estimates on certain long term contracts.
In addition to the above, margins in the Company's IMI operation were
negatively impacted due to an accounting policy change implemented
during the second quarter of fiscal year 1997, (see Note 1 of the Notes
to Financial Statements herein). Specifically, the Company now
recognizes IMI revenue at the time that orders are shipped rather
than at the time orders are received. This change adversely affected
IMI commission revenue by approximately $340,000 and gross margin by
approximately $170,000 for the three months ended June 30, 1997 when
compared with the amounts that IMI would have recognized if it had
continued to record commission revenues at the time of order receipt.
Operating Expenses
SG&A increased by approximately $250,000 between the periods compared as
the Company continues to build an operating infrastructure to support
its commercial business. Bid and proposal expenses for the Company's
Government operation were also significantly higher in the current
period compared to last fiscal year. As a percentage of revenue,
however, SG&A accounted for only 14.6% of revenue in the current period
compared to 20.0% in the comparable period of last fiscal year.
Product amortization increased by approximately $45,000 between the
current quarter and the 3rd quarter in fiscal year 1996, reflecting the
Company's expanding software development amortization base. Product
amortization now only pertains to the Company's EPOCH and OASYS products
as amortization for all other products was fully recognized in fiscal
year 1996.
Fiscal year 1996 expenses included a $120,000 provision for bad debt
expense which did not recur in fiscal year 1997.
General
During the three months ended June 30, 1997, the Company recorded its
highest revenue total for any fiscal quarter in its history. From a
profitability standpoint, the Company was able to avoid certain non-
recurring expenses from the third quarter last fiscal year and to remain
profitable in the current period, despite the Company's relatively
high expenditures for SG&A.
Liquidity and Capital Resources
The Company has been profitable on an annual basis since inception and
has been able to generate adequate cash flow from operations to fund its
operating and capital expenses. To supplement operating cash flows, the
Company has access to a line of credit facility in the amount of $2.0
million which was unused at June 30, 1997. (See Note 3 of the Notes to
Financial Statements).
During the 1st nine months of fiscal year 1997, the Company generated
approximately $290,000 of cash from operating activities and used
approximately $1,150,000 for investing activities, including
approximately $605,000 for newly capitalized software development costs.
As a result of its current cash reserves, its unused line of credit, its
current profitability and management's internal budgeting and planning,
the Company believes it will have adequate cash resources to meet its
obligations for the foreseeable future. The Company may from time to
time avail itself of its line of credit facility to finance its current
rate of growth and the related build up of accounts receivable.
In terms of capital purchases, historically the Company has funded such
items through operating cash flow or capital lease. The Company
currently has no plans for major capital purchases in the ensuing twelve
month period, although the Company plans to continue to invest in the
continued development and improvement of its principal software
products, EPOCH and OASYS.
PART II. OTHER INFORMATION
6. Exhibits and Reports on Form 8-K
a. Exhibits
None
b. Reports on Form 8-K
A Form 8-K was filed on July 1, 1997 announcing the
consummation of a 3-for-1 stock split to all shareholders of
record as of that date.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
INTEGRAL SYSTEMS, INC.
(Registrant)
Date: August 14, 1997 By: /s/
Thomas L. Gough
President & Chief Operating
Officer
Date: August 14, 1997 By: /s/
Elaine M. Parfitt
Vice President & Chief
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 517,870
<SECURITIES> 480,992
<RECEIVABLES> 7,976,262
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,975,124
<PP&E> 2,652,565
<DEPRECIATION> 510,195
<TOTAL-ASSETS> 11,117,494
<CURRENT-LIABILITIES> 4,719,106
<BONDS> 0
9,530
0
<COMMON> 9,530
<OTHER-SE> 6,388,858
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 14,175,577
<TOTAL-REVENUES> 14,175,577
<CGS> 11,303,478
<TOTAL-COSTS> 2,872,099
<OTHER-EXPENSES> 2,152,284
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,594
<INCOME-PRETAX> 674,675
<INCOME-TAX> 245,075
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 429,600
<EPS-PRIMARY> .45
<EPS-DILUTED> .45<F1><F2>
<FN>
<F1>Does not represent securities. Includes Prepaid expenses @ $407,079
+ Deferred income tax @ $73,913
<F2>includes PP&E @ $1,237,303 +S/W dev. costs @ $1,405,120 + Misc. deposits @
$10,142
</FN>
</TABLE>
