SECURITIES AND EXCHANGE COMMISSION 

                    WASHINGTON, D.C.  20549
 
                          FORM 10-KSB/A


    (Mark One)
         X    	ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 {Fee Required}

For the fiscal year ended September 30, 1996

              	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
				SECURITIES EXCHANGE ACT OF 1934 {No Fee Required}

For the transition period from    		to  

Commission file number    0-18603


Integral Systems, Inc.					
(Name of small business issuer in its charter)


Maryland                                52-1267968
(State or other jurisdiction of	  (I.R.S. Employer Identification No.)
incorporation of organization)


5000 Philadelphia Way, Suite A, Lanham, MD      20706
(Address of principal executive offices)       (Zip Code)

Issuer's telephone number  (301) 731-4233			

Securities registered under Section 12(b) of the Exchange Act:

Title of each class	Name of each exchange on which registered

Securities registered under Section 12(g) of the Exchange Act:

           Common			
        (Title of class)

	

        (Title of class)


Indicate by check mark whether the registrant (1) has filed all 
reports required to be filed by Section 13 or 15(d) of the 
Securities Exchange Act of 1934 during the preceding 12 months (or 
for such shorter period that the registrant to file such reports), 
and (2) has been subject to such filing requirements for the past 
90 days.

          Yes      X                     No      		

As of November 30, 1996, 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 $19,588,322.

As of November 30, 1996, 952,533 shares of the Common Stock of the 
Registrant were outstanding.

For the year ended September 30, 1996, the Registrant's revenues 
were $11,217,148.

<PAGE>
                           PART 1


Item 1.  Business

General

Integral Systems, Inc. (the "Company") is a leading provider of 
satellite ground systems: computer systems for satellite command 
and control, data processing, simulation, and flight software 
validation.  The Company believes it is the only provider that 
offers "commercial-off-the-shelf" ("COTS") software for satellites 
that is actually used in satellite operations.  The Company's 
proprietary COTS products, the EPOCH 2000 system and the OASYS 
system, offer satellite operators a low-cost, highly-adaptable 
system that can be used for any currently operating satellite
with minimal modification.  

Customers for these systems include US Government organizations 
such as National Aeronautics and Space Administration (NASA), the 
National Oceanic and Atmospheric Administration (NOAA), and the US 
Air Force, as well as commercial satellite operators, both domestic 
and foreign.  Integral Systems supports satellite missions for 
scientific research, remote sensing, meteorology, and 
communications applications.  In addition, the Company offers 
ground system products explicitly for real-time environmental 
monitoring via satellite.

The Company has one active wholly owned subsidiary, Integral 
Marketing, Inc. (IMI).  IMI specializes in the sale and marketing 
of electronic equipment primarily for the telemetry, data 
acquisition and test communities.  


Satellite Ground Systems

The Company offers off-the-shelf products as well as custom 
development services for satellite ground systems.  The customers 
for the Company's products include government and commercial 
satellite operators, spacecraft manufacturers, and systems 
integrators.  Typical sales involve a combination of off-the-shelf 
software and hardware products together with development services 
for mission specific requirements and system integration.

The Company's flagship commercial product is the EPOCH 2000 
software which includes real-time command and control functions as 
well as off-line orbit analysis and mission planning functions.  
This product has gained international recognition and is currently 
used as a solution on a number of Government and commercial 
satellite programs. EPOCH 2000 components and turnkey systems 
(software and hardware) have been sold to a number of customers, 
including ChinaSat in the Peoples Republic of China, the National 
Space Program Office in Taiwan (ROCSAT),  EOSAT, Earthwatch, Johns 
Hopkins University Applied Physics Laboratory, AT&T, GE Americom, 
APT Satellite Company, Loral, TRW, Orbital Sciences Corporation, 
the US Air Force, and the US Navy.

Integral Systems has ongoing systems engineering work under 
contract to NASA at the Goddard Space Flight Center.  This work is 
in support of NASA's science satellites and includes development 
projects for telemetry and command systems and simulation as well 
as software verification and validation.  The Company developed the 
first workstation-based satellite command and control system for 
NASA Goddard and has supported over a dozen different NASA space 
missions.

For NOAA, Integral Systems builds command and control systems as 
well as payload and image data processing systems for 
meteorological satellites.  The Company has had extensive 
involvement in the both the TIROS and GOES satellite programs.

Recently, the company was awarded a large contract by NOAA to 
provide the command and control system for the Air Force's DMSP 
(Defense Meteorological) satellite fleet.  Integral Systems has 
also built several generations of the DMSP hardware-in-the-loop 
simulator and provided the satellite manufacturer with a 
workstation-based flight software test facility.  The Company 
provides the Air Force with ongoing services for independent 
verification and validation of the DMSP flight software using this 
simulator. 

Integral Systems also provides a product, called the DOMSAT Receive 
Station (DRS), which facilitates the collection, storage, and 
analysis of environmental data.  The DRS is a PC-based system which 
includes an antenna, receiver, and processing software which allows 
customers to take advantage of the complete NOAA GOES Data 
Collection System.  The Company has sold over 60 DRS systems to 
customers including the Army Corps of Engineers, the US Geological 
Survey, and a variety of state and local governments.  The 
applications include meteorology, water control, and pollution 
monitoring, as well as research in geomagnetism and hydrology.


Integral Marketing, Inc.

Through it's wholly-owned subsidiary, Integral Marketing, Inc. 
(IMI), the Company acts as a manufacturer's representative, selling 
electronic test instrumentation and equipment to customers in 
Maryland, D.C., and Virginia.  IMI currently represents 14 
manufacturers. 


Contract Revenue

Integral Systems'commercial revenue as a percentage of total 
revenue increased from 42% to 49% between fiscal year 1995 and 
fiscal year 1996.  The Company is continuing to focus its marketing 
efforts on commercial opportunities.  The Company's revenue for 
fiscal years 1996 and 1995 was generated from the following 
sources:

                    Fiscal Year

Customer          1996      1995

Commercial          49%      42%
NOAA                22%      30%
Air Force           17%      12%
NASA                12%      16%


ISI's services are principally performed under cost-plus-
fixed-fee contracts, fixed price, and time-and-material contracts 
and subcontracts.  Under cost-plus-fixed-fee contracts, the Company 
is reimbursed for allowable costs within the contractual terms and 
conditions and is paid a negotiated fee.  Under fixed-price 
contracts, ISI is paid a stipulated price for services or products 
and bears the risk of increased or unexpected costs.  Under time-
and-materials contracts, the Company receives fixed hourly rates 
intended to cover salary costs attributable to work performed on 
the contract and related overhead expenses, reimbursement for other 
direct costs, and a stipulated profit.  All contracts include 
specified objectives and performance periods ranging from a few 
weeks to several years, with most of the contracts providing for 
terms of 4 years or less.

The percentage of revenues derived by the Company under these 
different types of contracts for the fiscal years ended September 
30, 1996 and 1995 is as follows:

                          Fiscal Year

Contract Type           1996        1995

Cost Plus                 39%         43%
Fixed Price               56%         53%
Time and Materials         5%          4%


Government Contracts

Company revenues from US Government contracts are derived from 
a combination of contracts with the US Government and subcontracts 
with other companies that have prime contracts with the US 
Government.  The percentage of revenues received by the Company 
from prime contracts and subcontracts with the Government for 
fiscal years 1996 and 1995 are as follows:

                         Fiscal Year

Contract Source        1996      1995

Prime Contract           59%       46%
Subcontract              41%       54%


US Government contracting procedures may be categorized by 
formal advertising or procurement by negotiation.  Negotiated 
procurements may, but do not necessarily, involve the solicitation 
of competitive proposals.  If competitive proposals are solicited, 
the US Government selects the proposal most advantageous to it and 
then conducts negotiations with the selected bidder. Most contracts 
awarded to the Company or to other prime contractors for whom the 
Company served as a subcontractor were awarded on the basis of 
competitive procurements.

Many of the programs in which ISI participates as a contractor 
or subcontractor extend for several years, but are funded only on 
an annual basis.  Accordingly, the Company's contracts and 
subcontracts are subject to termination, reduction or modification 
in the event of changes in the Government's requirements or 
budgetary constraints.  Additionally, when ISI participates in a 
project as a subcontractor, it is subject to the risk that the 
prime contractor may fail or be unable to perform the prime 
contract.

All of the Company's US Government contracts and subcontracts 
are also subject to termination for "convenience".  Should a 
contract be so terminated, the Company would be reimbursed for 
allowable costs to the date of termination and would be paid a 
proportionate amount of the stipulated profits or fees attributable 
to the work actually performed.  To date, no ISI contract has been 
terminated for convenience.


The Company expects that 53% of revenue for the current fiscal 
year (fiscal year 1997) will be derived from five major US 
Government contracts and subcontracts.  It is estimated that the 
largest single contract will represent approximately 27% of the 
Company's revenue and the smallest approximately 3%.  The loss or 
termination of any one of these contracts due to funding cuts or 
contract termination could significantly affect the Company's 
performance.  Similarly, the expiration of any major contract could 
significantly affect the Company's performance if not renewed or 
replaced by contracts of similar value.  In addition, since a 
significant portion of revenue for the current fiscal year is 
derived from subcontracts, loss of those subcontracts due to 
termination of the subcontract or of the direct prime contract 
could also affect the Company's performance.  During fiscal year 
1996, approximately 56% of ISI's revenue was performed under fixed-
price contracts and subcontracts.  Under those contracts, an 
unanticipated increase in the Company's cost or expenses may reduce 
or eliminate the profitability of those contracts, thereby 
adversely affecting the Company's financial performance.

ISI's books and records are subject to audit by the Defense 
Contract Audit Agency.  Such audits can result in adjustments to 
contract costs and fees.  No audits are currently in process.  
Although the Company thus far has not been required to make any 
material audit adjustments, the possibility that such adjustments 
will be required always exists.  Management is of the opinion that 
any such audit adjustments would not have a material effect on the 
financial position or results of operations of the Company.


Employees

As of December 19, 1996, the Company employed 92 full time 
employees, 79 of whom are considered professionals in engineering 
related disciplines.  Of the engineering professionals, 97% have 
undergraduate degrees in a scientific discipline, and 34% of those 
have advanced degrees in a scientific discipline.  Approximately 
84% of the engineering staff have at least seven years experience, 
and 13% have three to eight years experience.  Approximately 18% of 
the engineering staff specialize in digital hardware development, 
although many of these individuals have analytic and software 
development expertise as well.  The remaining 82% of the 
engineering staff are analysts and software developers.

Employees are not represented by any union or collective 
bargaining group, and employee relations are considered good.  
Since inception, ISI has experienced minimal turnover in 
engineering staff.


Marketing

The Company relies upon senior corporate management, project 
managers and senior technical staff to carry out its marketing 
program.  These individuals collect information concerning 
requirements of current and potential customers in the course of 
contract performance, formal and informal briefings, from published 
literature, and through participation in professional and industry 
organizations.  Senior management evaluates this information, 
identifies potential business opportunities and coordinates 
proposal efforts.  As sources of business within existing markets 
are exhausted, new markets are explored.  The Company seeks 
business believed to be of long term benefit based on 
considerations such as technical sophistication required, favorable 
market positioning and potential product spin-offs.  


Backlog

The Company's estimated backlog as of September 30, 1996 and 
September 30, 1995 is as follows:


<TABLE>
                       September 30, 1996  September 30,1995
<S>                           <C>                <C>

Outstanding Commitments       $18,162,147        $9,596,273
General Commitments            $9,489,563       $14,784,770
Total                         $27,651,710       $24,381,043
</TABLE>

Under outstanding commitments, the Company agrees to provide 
specific services, frequently over an extended period of time, with 
continued performance of those services contingent upon the 
customer's year-to-year decision to fund the contract.  General 
commitments consist of contract options and sole source business 
that management believes likely to be exercised or awarded in 
connection with existing contracts.  Contract options are the 
Company's contractual agreement to perform specifically defined 
services only in the event the customer thereafter requests the 
Company to do so.  Sole source business refers to contract work 
which the Company reasonable expects to be awarded based on its 
unique expertise in a specific area or because it has previously 
done all such work in that area for the customer or prime 
contractor who will award the contract.  The Company estimates that 
54% of backlog as of September 30, 1996 will be completed during 
fiscal year 1997.  Estimated backlog includes contract options 
through September 30, 2002, including general commitments.


Competition

The Company principally obtains contracts and subcontracts 
through competitive procurements offered by the US Government or 
commercial enterprises.  ISI competes with numerous companies 
having similar capabilities, some of which are larger and have 
considerably greater financial resources.  In addition, many 
smaller companies have specialized capabilities in similar areas.

Because of its size, ISI often joins with a larger company in 
pursuing major procurements.  It is not unusual for ISI to compete 
with a company for a contract while simultaneously joining with the 
same company in pursuit of another contract.  The Company has 
entered into such joint bidding relations with Martin Marietta, 
Space Systems/Loral Corporation; Computer Sciences Corporation, and 
AlliedSignal Aerospace/Bendix Field Engineering Corporation.

It is not possible to predict how ISI's competitive position 
may be affected by changing economic or competitive conditions, 
customer requirements or technological developments.  The principal 
competitive factors for the Company's business are reputation and 
relationship with customers and competitors, quality of services 
and products, pricing, responsiveness, and a demonstrable record of 
delivering work on time and within budget.


Software Products

In the second quarter of 1991, ISI undertook several internal 
software development efforts, which have resulted in products which 
the Company is offering commercially.  The DOMSAT Receive Station 
(DRS) product is a hardware/software system that allows users to 
gather environmental telemetry data via a commercial communications 
satellite.  In fiscal year 1996, Integral Systems recognized 
approximately $229,000 in revenue on the DRS product.

The EPOCH 2000 product is a hardware/software system that 
allows users to command and control satellites.  The product was 
formally announced in the second quarter of 1992.  EPOCH related 
revenue (license fees and associated services) amounted to $4.2 
million in fiscal year 1996.

The Company has also developed other software intensive 
products.  OASYS, a spacecraft orbit determination product, can be 
sold as a stand-alone package or as a subsystem under the EPOCH 
2000 product.  OASYS related revenue for fiscal year 1996 was 
$384,000.


Research and Development

The Company is continually engaged in research and development 
activities both to improve its existing EPOCH and OASYS  software 
products as well as probe additional product areas for the future 
growth and development of the Company.  Currently, the Company is 
focusing its research and development efforts primarily on 
developing a new version of its EPOCH 2000 command and control 
software for satellites and on improving the user interface systems 
for its COTS software products.  In fiscal 1996, total capitalized 
software development costs were $431,773.


Environment

No material effects on the Company's expenditures, earnings, 
or competitive position are anticipated as a result of compliance 
with federal, state, and local provisions which have been enacted 
or adopted regulating the discharge of material into the 
environment, or otherwise related to the protection of the 
environment.


Financing

On July 28, 1988, ISI sold 110,000 of its common shares (par 
value $.01) in its initial public offering for $5.00 per share.

ISI also has a line of credit agreement with NationsBank for 
$1,200,000.  Borrowings under the line of credit bear interest at 
the bank's prime rate plus one-quarter (1/4) percentage point per 
annum.  Any accrued interest is payable monthly.   At September 30, 
1996 the Company had no amounts outstanding under the line of 
credit.


Financial Information in Industry Segments

During the year ended September 30, 1996, the Company's 
operations included two reportable segments:  Satellite ground 
systems and electronic test instrumentation and equipment 
marketing.

The Company provides satellite ground systems - computer 
systems for satellite command and control, data processing, 
simulation, and flight software validation.  Customers for these 
systems include US Government organizations such as National 
Aeronautics and Space Administration (NASA), the National Oceanic 
and Atmospheric Administration (NOAA), and the US Air Force, as 
well as commercial satellite operators, both domestic and foreign.

Through its wholly-owned subsidiary, Integral Marketing, Inc. 
(IMI), the Company acts as a manufacturer's representative, selling 
electronic test instrumentation and equipment to customers 
primarily in Maryland, Virginia and the District of Columbia.  (The 
Company's other wholly-owned subsidiary, InterSys, Inc. provides 
consulting services for satellite design and procurement, but is 
presently inactive.)

See Footnote Number 12 of the notes to the Financial 
Statements for financial information regarding these segments.


Item 2.	 Properties

As of March, 1994, ISI renegotiated its lease which obligated 
the Company for an additional five years, for an aggregate of 
25,600 square feet of office space at its principal location at 
5000 Philadelphia Way, Suite A, Lanham, Maryland 20706-4417.  The 
annual lease cost, including operating expenses, for the facility, 
is approximately $242,374.


Item 3.	Legal Proceeding

In August 1996 the Company sued International Systems 
Integrators, Inc. ("Integrators"), a New Mexico company which had 
failed to pay a $232,708 invoice from the Company in respect of 
certain software and hardware products sold by the Company to 
Integrators and subsequently resold by Integrators to the United 
States Air Force.  Integrators acted as the prime contractor for 
the Air Force and the Company acted as a subcontractor to 
Integrators.

The Company believes that it fully complied with the terms of 
its subcontract with Integrators.  However, Integrators failed to 
pay the Company's invoice for the products  supplied to Integrators 
by the Company under the subcontract.  Integrators was paid by the 
Air Force for the products supplied by the Company. 

The Company sued Integrators, and its principal owner, 
Bernadette L. Mares  (together with Integrators, the "Defendants"), 
for breach of contract, and is seeking to recover the $232,708, the 
amount owed under the Company's subcontract with Integrators.  

In September 1996, the Defendants filed a counterclaim against 
the Company alleging defamation, interference with contractual 
relations and extortion, seeking damages from the Company in an 
unspecified amount.  The Company believes that the Defendants' 
counterclaim is entirely without merit and intends to contest it 
vigorously.  The Company does not believe that the Defendants' 
counterclaim will have a material adverse effect on its financial 
condition or operations.

In October 1996, the Company filed an answer to the 
Defendants' counterclaims.  In December 1996 the Company filed a 
motion for summary judgment with respect to its claims.  In March 
1997, the Company's motion for summary judgment was denied by the 
court.  Discovery is continuing in the case and a trial date has 
not yet been set.

Although the Company has fully reserved the receivable it 
believes is due under its contract with Integrators, it continues 
to pursue vigorously all legal remedies available to it with 
respect to this matter


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

On March 28, 1996, Integral Systems held their annual 
shareholders meeting.  A Board of Directors was elected, and is 
made up of the following individuals:  Steven R. Chamberlain, 
Robert P. Sadler, Bonnie K. Wachtel, Louis Brown, Thomas L. Gough, 
Dominic A. Laiti, and R. Doss McComas.  In September, 1996, Mr. 
Louis Brown announced his resignation as a member of the board.  


                         PART II


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

Effective May, 1990, Integral Systems' over-the-counter stock 
began trading on NASDAQ.  The Company's NASDAQ trading symbol is 
ISYS.  The range of high and low transaction prices as reported by 
NASDAQ and the market makers for each quarterly period during the 
fiscal years ended September 30, 1996 and 1995, are shown below:
<TABLE>
      <S>                   <C>         <C>

      1996 Fiscal Year      High        Low

      First Quarter         28 1/4      22
      Second Quarter        27          19
      Third Quarter         29 1/2      21 1/2
      Fourth Quarter        28 1/2      20 1/2



      1995 Fiscal Year      High        Low

      First Quarter         17 3/4      16 3/4
      Second Quarter        23 1/2      17 1/2
      Third Quarter         28          25 3/4
      Fourth Quarter        31          26 1/2
</TABLE>

As of September 30, 1996, there were approximately 436 holders 
of record of the Company's Common Stock.

No cash dividends have been paid during the Company's 
existence, and none are expected to be declared during the 
forthcoming 1997 fiscal year.

Item 6. Management's Discussion And Analysis Of Financial 
Condition And Results Of Operations



              COMPARISON OF FISCAL YEAR 1996 
                     TO FISCAL YEAR 1995

The components of the Company's income statement as a 
percentage of revenue are depicted in the following table for 
fiscal years 1996 and 1995.  Certain classifications and 
presentations from fiscal year 1995 have been changed to be 
consistent with fiscal year 1996 formats.
<TABLE>
<S>                             <C>       <C>    <C>           <C>
                                        % of                  % of
                          1996          Revenue   1995        Revenue
                         (000's omitted)       (000's omitted)

Revenue                        $11,217    100.0 $10,771        100.0

Expenses

Cost of Revenue                  8,217     73.2   8,290         77.0
Selling, General & Admin.        1,758     15.7   1,434         13.3
Bad Debt Expense                   233      2.1       -            -
Prod. Amortization                 509      4.5     509          4.7
Other                               -2        -     -38          -.3
Income Taxes                       179      1.6     195          1.8

Total Expenses                  10,894     97.1  10,390         96.5

Net income                        $323      2.9    $381          3.5
</TABLE>


Revenue

The Company's principal components of revenue for fiscal years 
1996 and 1995 are as follows:

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

                                           % of                 % of
                              1996        Revenue  1995         Revenue
                           (000's omitted)       (000's omitted)

Government Revenue          $5,686         50.7    $6,239       57.9

Commercial Revenue
EPOCH                        4,240         37.8     3,512       32.6
OASYS/DRS/Other                629          5.6       753        7.0
IMI                            662          5.9       267        2.5
Total                        5,531         49.3     4,532       42.1

Total Consolidated Revenue $11,217        100.0   $10,771      100.0
</TABLE>

Consolidated revenue increased by approximately $450,000 
between the fiscal year ended September 30, 1996 and the fiscal 
year ended September 30, 1995, principally because of new contract 
awards related to the sale of the Company's EPOCH product along 
with associated integration services.  Revenue increases from EPOCH 
related business more than offset a $550,000 decline in the 
Company's Government business.  The Government decline is believed 
to be temporary as new contracts in this segment received at the 
end of fiscal year 1996 should provide for higher revenue levels 
(compared to both 1996 and 1995) during fiscal year 1997.  Although 
less than 6% of consolidated Company revenues, Integral Marketing, 
Inc. (IMI) achieved approximately 150% of revenue growth in 1996 
over 1995.

During fiscal year 1996, the Company derived approximately 49% 
of its revenues from the sale of its commercial products and 
related services as opposed to 42% of such revenue during the prior 
fiscal year.  The increase correlates to the Company's conscious 
effort to reduce its reliance on the Federal Government, and to 
utilize its recently developed software products to gain access to 
organizations in order to sell both its products and associated 
integration and support services.

Although the Company believes that its full cadre of software 
products is important for its future growth and prosperity, to date 
the Company's largest product investment relates to the development 
of its EPOCH software, a COTS (commercial off-the-shelf) product 
for satellite command and control.  The Company believes that it is 
unique in its status as the only entity with COTS software capable 
of "flying" satellites built by any satellite manufacturer in the 
world.  In fact during April, 1996 the Company was awarded  a 
strategically important contract, a copy of which has been filed 
herewith as an exhibit, from AT&T Corporation to provide its COTS 
products (and related integration services) to command and control 
a fleet of satellites composed of spacecraft from multiple 
manufacturers.  The preponderance of revenue to be derived from 
this contract is expected to be realized in fiscal year 1997.

During fiscal year 1996, the Company recorded approximately 
$4.2 million of revenue for its EPOCH product and associated 
services compared to $3.5 million of revenue during fiscal year 
1995.  The 1996 EPOCH revenue total included approximately $465,000 
of license revenue compared to approximately $345,000 of this 
revenue type recorded in 1995. The Company'a material agreements 
with AT&T Corporation and the Republic of China National Space 
Program Office, which are filed herewith as Exhibits, contain 
licensing provisions.
 
Because license revenues have nominal marginal costs 
associated with them, this form of revenue is highly important to 
the Company's overall profitability.  Looking forward to fiscal 
year 1997, the Company is encouraged that its current contract 
backlog includes in excess of $500,000 of unearned license revenues 
for its EPOCH product. 

The principal balance of the Company's commercial revenues 
pertain to other proprietary products as follows: OASYS (Orbital 
Analysis System); DRS (DOMSAT Receive Station); and a collection of 
software pertaining to database and information system 
applications.  During 1996, the Company recorded approximately 
$630,000 of revenue related to the sale of products and services 
under these programs compared to approximately $750,000 of revenue 
recorded last fiscal year.  The decrease principally relates to the 
Company's decision to cease operations of its information and 
database software operation as a discreet profit center.  All 
software development costs associated with this line of business 
have been fully amortized as of September 30, 1996.


Expenses

Cost of revenue as a percentage of revenue for fiscal year 
1996 was 73.2% compared to 77.0% for fiscal year 1995.  The 
improvement in these ratios is principally attributable to gross 
margin gains in the Company's EPOCH operation as well as increased 
margins at IMI.

SG&A increased in both absolute terms (by approximately 
$325,000) and as a percentage of revenue (15.7% vs. 13.3%) in 1996 
over 1995.  The increases reflect the Company's continued program 
to enhance and augment its selling efforts, including a very 
concerted effort (and expense) to sell its commercial products 
internationally.

During 1996 the Company recorded a non-recurring $233,000 bad 
debt expense attributable to a customer's inability to pay.  
Despite this reserve, the Company is vigorously pursuing collection 
of this receivable.  (See Item 3 - Legal Proceedings). 


General

Overall, net income as a percentage of revenue was 2.9% in 
fiscal year 1996 compared to 3.5% in fiscal year 1995, while pretax 
income was approximately $75,000 lower in 1996 compared to 1995. 
Were it not for the bad debt expense described above, pretax income 
would have been 28% greater in 1996 over 1995.  Further the 
Company's fourth quarter of fiscal year 1996 included its highest 
ever quarterly revenue total ($3.9 million) and its second highest 
ever pretax profit level ($448,000).  Because of its fourth quarter 
performance, its current and significant backlog, and contracts to 
be imminently received,  the Company believes that results for 
fiscal year 1997 will exceed those recorded in fiscal year 1996 for 
both revenue and profitability.



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 $1.2 million which is currently 
unused. (See Note 5 of the Notes to Financial Statements).  During 
fiscal year 1996, the Company used approximately $146,000 for 
operating activities and used an additional $739,000 for investing 
activities, including approximately $432,000 for newly capitalized 
software development costs.

As a result of its current cash reserves, its unused line of 
credit, its current profitability and its projected profitability 
for fiscal year 1997, the Company believes it will have adequate 
cash resources to meet its obligations for the foreseeable future. 
Although operating and investing activities consumed significant 
sums of cash during 1996, the Company does not believe it will have 
to rely on external sources of cash (i.e. its line of credit) to 
fund its growth and future software development in fiscal year 
1997.

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.

Item 7.	Financial Statements and Supplementary Data

The information required by this item is set forth under item 
13(a), which information is incorporated herein by reference.


Item 8.	Disagreements on Accounting and Financial Disclosure

Not Applicable.

PART III

Item 9.	Directors and Executive Officers, Promoters and Control 
Persons, Compliance With Section 16(a) of the Exchange Act.

Name                             Position with the Company

Steven R. Chamberlain            Chairman of the Board
                                 and Chief Executive Officer
Thomas L. Gough                  President, Chief Operating Officer 
                                 and Director
Robert P. Sadler                 Vice President, Quality Control, 
                                 Secretary; Treasurer; and Director
Steven K. Kowal                  Vice President, Engineering 
                                 Manufacturing
Steven A. Carchedi               Vice President of Commercial 
                                 Systems
Donald F. Mack, Jr.              Vice President of Engineering
Kimberly A. Chamberlain          Vice President, Chief Financial 
                                 Officer
William I. Tittley               Vice President, Asia Pacific 
                                 Operations
Bonnie K. Wachtel                Outside Director
Dominic A. Laiti                 Outside Director
R. Doss McComas                  Outside Director


Directors serve until the next annual meeting of stockholders 
or until successors have been elected and qualified.  Officers 
serve at the discretion of the Board of Directors.

Steven R. Chamberlain, 41, a Company founder, has been 
Chairman of the Board since June, 1992, President since May 1988 
and a Director since 1982.  He served as Vice President from 1982 
until he became President.  From 1978 to 1982, Mr. Chamberlain was 
employed by OAO Corporation where he progressed from Systems 
Analyst to Manager of the Offutt Air Force Base field support 
office.   Mr. Chamberlain holds a B.S. degree in Physics from 
Memphis State University and has done graduate work in Physics and 
Mathematics at Memphis State and the University of Maryland.  Mr. 
Chamberlain is married to Kimberly A. Chamberlain, who was, at 
September 30, 1996, the Vice President and Chief Financial Officer 
of the Company.  On February  28, 1997, Ms. Chamberlain resigned as 
Vice President and Chief Financial Officer of the Company.

Thomas L. Gough, 48, became a member of ISI's staff in 
January, 1984.  In March of 1996 he was elected to the Board of 
Directors of Integral Systems having served as President and Chief 
Operating Officer since June, 1992. For three years before being 
named President he served as Vice President and Chief Financial 
Officer.  Prior to joining ISI he was employed by Business and 
Technological Systems, Inc., serving initially as a Project Leader 
and later as the Software Systems Division Manager.  From 1972 to 
1977 he was employed by Computer Sciences Corporation where he 
progressed from programmer/analyst to section manager.  Mr. Gough 
earned a BS degree from the University of Maryland where he majored 
in Information Systems Management in the School of Business and 
Public Administration.

Robert P. Sadler, 46, a Company founder, has been a Director, 
Secretary, and Treasurer since 1982.  In May 1988, he was appointed 
Vice President of Administration, in June, 1992, he was appointed 
Vice President, Quality Control.  From 1976 to 1982, Mr. Sadler was 
employed at OAO Corporation where he progressed from Computer 
Analyst to Project Manager.  Mr. Sadler obtained a B.S. in 
Mathematics and a B.S. in Computer Sciences from Pennsylvania State 
University and a M.S. in Management of Information Systems 
Technology from George Washington University.


Steve K. Kowal, 43, a Company founder, has been with ISI since 
1982.  In May 1988 he was appointed Vice President of Engineering 
Manufacturing.  From 1979 to 1982, Mr. Kowal was employed by OAO 
Corporation where he was a manager of hardware development on 
several of OAO's major systems.  Mr. Kowal holds a B.S. degree in 
Electrical Engineering from the University of Delaware.

Steven A. Carchedi, 45, joined the Company in 1991 and is Vice 
President of Commercial Systems.  Before joining Integral Systems 
as a full-time employee in 1991, Mr. Carchedi worked with the 
company for two years as an independent business development 
consultant.  Previously, he worked for Computational Engineering, 
Inc., where he held positions as a Mathematician, Program Manager, 
Corporate Director, and Vice President of Business Development.  
Mr. Carchedi holds a B.S. Degree in Mathematics from Wake Forest 
University and a M.A. Degree in Mathematics from the University of 
Maryland.

Donald F. Mack, Jr., 43, joined the company in 1986.  In July 
of 1989, he was appointed Vice President of Engineering.  From 1979 
to 1986, Mr. Mack was employed by General Electric Corporation's 
Space Systems Division where he progressed from design engineer to 
a Senior Project Supervisor for systems development.  Mr. Mack 
holds a B.S. degree in Electrical Engineering from Northeastern 
University and a M.S. degree in Electrical Engineering from Johns 
Hopkins University.

Kimberly A. Chamberlain, 40, was appointed Vice President and 
Chief Financial Officer in April, 1995 and has been with the 
company since 1983.  Ms. Chamberlain graduated from the University 
of Maryland, with a B.S. degree in Business Management in 1985.  
Before coming to Integral Systems, Ms. Chamberlain worked at OAO 
Corporation.  Ms. Chamberlain is married to Steven R. Chamberlain, 
the Chairman of the Board and Chief Executive Officer of the 
Company.  On February 28, 1997, Ms. Chamberlain resigned as Vice 
President and Chief Financial Officer of the Company.

William I. Tittley, 53, joined the company in 1992, performing 
as Project Manager on the first EPOCH 2000 sale to the Chinese 
Government.  In March, 1995, Mr. Tittley was made Vice President, 
Asia Pacific, to oversee the Company's operations in the Asian 
region.  Formerly, Mr. Tittley was with the OAO Corporation (from 
1977 through 1992), where he performed duties as Director, Space 
System Programs, in charge of the technical and financial direction 
of aerospace systems programs.  Mr. Tittley holds a B.S. in 
Aerospace Vehicle Design from the State University of New York, and 
a M.S. in Engineering from the California Coast University.

Bonnie K. Wachtel, 42, has served as a Director since May 
1988.  Since 1984 she has been Vice President, General Counsel and 
a Director of Wachtel & Co., Inc., an investment banking firm in 
Washington, D.C.  Ms. Wachtel serves as a Director of several 
corporations including VSE Corporation and Information Analysis, 
Inc.  She holds a B.A. and M.B.A. from the University of Chicago 
and a J.D. from the University of Virginia, and is a Certified 
Financial Analyst.

Dominic A. Laiti, 65, was elected director of the Company in 
July, 1995.  Mr. Laiti is presently employed as an independent 
consultant and was President and Director of Globalink, Inc. from 
January 1990 to December 1994.  He has over twenty-five (25) years 
of experience in starting, building, and managing high-technology 
private and public companies with annual revenues from two million 
to over 120 million dollars.  Mr. Laiti was President of Hadron, 
Inc. from 1979 to 1989, Vice President of Xonics Inc. from 1972 to 
1979 and Vice President of KMS Industries from 1968 to 1972.  He is 
a former Director of United Press International, Saturn Chemicals 
Company, Hadron, Inc., Telecommunications Industries, Inc., MAXXAM 
Technology, Inc., and Jupiter Technology, Inc.


R. Doss McComas, 42, joined the Board in July, 1995.  Since 
1982 he has had various positions with COMSAT RSI, a business unit 
of COMSAT supplying products and services to the wireless, 
satellite, air traffic control and other specialized markets 
worldwide.  These positions included General Counsel, Vice 
President of Acquisitions, Strategic Planning and International 
Marketing, as well as Group Vice President, responsible for the 
company's international operations. Currently, he is Chairman and 
Chief Executive Officer of Plexsys International, a COMSAT RSI 
equity investment.  He holds a B.A. degree from Virginia 
Polytechnic Institute, a M.B.A. from Mt. Saint Mary's, and a J.D. 
from Gonzaga University.


Item 10.	Executive Compensation

a. Summary Compensation Table

The following table sets forth compensation received by the 
Company's CEO and four highest paid executive officers who earned 
over $100,000 during the fiscal year ended September 30, 1996:
<TABLE>
<S> <C>            <C>   <C>      <C>                  <C>             <C>

                     SUMMARY COMPENSATION TABLE
                                                Long-Term Compensation
              Annual Compensation               Awards        Payouts
                                       Other                          All other
                                       Annual  Restricted 
Name and                               Compen-  Stock            LTIP   Compen-
Principal                              sation   Award(s) Options/Payouts sation
Position           Year Salary($) Bonus($)($)($)($)       SAR(#)    ($)  ($)(1)

CEO
S. R. Chamberlain  1996  $114,179 $14,000              15,000          $11,486
                   1995  $108,577 $14,000               7,500          $10,502
                   1994  $105,998 $13,975                   0          $11,208 

PRESIDENT
Thomas L. Gough    1996  $101,581 $ 8,000              10,000          $10,061
                   1995  $ 98,048 $11,000                   0          $ 9,318
                   1994  $ 93,645 $10,980                   0          $ 9,677

VP, 
Commercial Systems
Steve Carchedi     1996  $ 97,771 $12,000              10,000          $ 9,572
                   1995  $ 94,926 $12,000               2,000          $ 8,944
                   1994  $ 91,896 $ 9,479                   0          $ 9,479
VP, Engineering 
Manufacturing
Steven K. Kowal    1996  $ 97,771 $ 9,000               4,000          $ 9,572
                   1995  $ 94,926 $ 9,500                   0          $ 8,944
                   1994  $ 91,896 $ 9,479                   0          $ 9,452 

VP, Asia 
Pacific 
Operations
William I. Tittley 1996  $ 98,891 $26,456               1,000          $10,684
                   1995  $ 96,050 $ 7,000               5,000          $ 9,046
                   1994  $ 93,006 $ 6,018                   0          $ 9,779

(1) Employer Pension Contributions
</TABLE>

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

                 OPTION/SAR GRANTS IN LAST FISCAL YEAR

                                   Percent of Total
                        Number of  Options/SARs
                        Options/   Granted to
                        SARS       Employees in   Exercise Base Expiration
Name                    Granted    Fiscal Year    Price($)     Date

CEO
S.R. Chamberlain           15,000     18%        *$22.50        2001

PRESIDENT
Thomas L. Gough            10,000     12%         $23.50        2001

VP, COMMERCIAL SYSTEMS
Steven A.Carchedi          10,000     12%        *$22.50        2001

VP, ENGINEERING
MANUFACTURING
Steven K. Kowal             4,000      5%         $21.50        2001

VP, ASIA PACIFIC
OPERATIONS
William I. Tittley          1,000      1%         $21.50        2001

*Average Price
</TABLE>


b.  Compensation Pursuant to Plans

ISI's Board of Directors awards annual bonuses to officers and 
employees on a discretionary basis.  Currently no formal plan 
exists for determining bonus amounts.

Effective October 1, 1987, the Company established a 401K 
pension and profit sharing plan under Section 401 of the Internal 
Revenue Code.  Under the plan the Company contributes annually an 
amount equal to 5% of an eligible employee's salary, and may make 
additional contributions of up to 7.5% of an eligible employee's 
salary.  The employee may contribute up to an additional 10% as 
salary deferral.  In fiscal years 1996 and 1995, the Company 
contributed a total of 11% of eligible employees salaries to both 
plans.


c.  Stock Option Plan


Effective May 25, 1988, ISI established a stock option plan to 
create additional incentives for the Company's employees, 
consultants and directors to promote the financial success of the 
Company.  ISI's Board of Directors has sole authority to select 
full-time employees, directors, or consultants to receive awards of 
options for the purchase of stock under this plan.  The maximum 
number of shares of ISI Common Stock which may be issued pursuant 
to the stock plan was increased from 50,000 to 200,000 during 
fiscal year 1994.


A total of 85,600 options were issued and 8,787 options were 
exercised during fiscal year 1996; 5,000 options were canceled.  
Total options issued and outstanding as of September, 1996 are 
117,987.  On December 1, 1995, William I. Tittley, the Company's 
Vice President for Asia Pacific Operations, exercised options for 
2,700 shares.  On June 27, 1996, Donald F. Mack, Jr., the Company's 
Vice President of Engineering, exercised options for 1,000 shares.

d. Compensation of Directors

Presently outside directors who are not employees of the 
Company receive $5,000 per year for their services.

e.  Termination of Employment and Change of Control 
Termination

The Company has no compensatory plan nor arrangement with 
respect to any individual named in the Cash Compensation Table 
(Item 11(a)) which results or will result from the resignation, 
retirement or any other termination of such individual's employment 
with the Company or its subsidiaries or from a change in control of 
the Company or a change in the individual's responsibilities 
following a change in control.


Item 11.	Security Ownership of Certain Beneficial Owners and 
Management

a. 	Security Ownership of Certain Beneficial Owners (as of 
9/30/96)

None


b. 	Security Ownership of Management (as of 9/30/96)

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

Name of Owner	             (1)(2)Shares   Percentage of Total Shares 
                                                Owned


Steven R. Chamberlain                79,040      7.7%
Thomas L. Gough                      37,850      3.7%
Robert P. Sadler                     52,340      5.1%
Kimberly A. Chamberlain              10,460      1.0%
Donald F. Mack, Jr.                  11,350      1.1%
Steven K. Kowal                      43,346      4.2%
Steven A. Carchedi                   26,500      2.6%
William Tittley                       3,800       .4%
Bonnie K. Wachtel                     5,000       .5%
Dominic A. Laiti                      5,000       .5%
R. Doss McComas                       4,500       .4%
</TABLE>

Officers and Directors as a group   279,186     27.0%

(1)  Includes Options
(2) There are no shares issuable to the individuals named in this 
table within 60 days.


Item 12.	Certain Relationships and Related Transactions

Bonnie K. Wachtel is Vice President, General Counsel and 
Director of Wachtel & Co., Inc., one of the Underwriters of ISI's 
initial public offering.  


Item 13.	 Exhibits, Financial Statement Schedules, and Reports 
on Form 8K

(a) (1) Financial Statements

Independent Auditors' Report - page 1
Balance Sheets as of September 30, 1996 - page 2
Statements of Operations for the Years Ended September 30, 1996, 
and 1995 - page 3
Statement of Stockholders' Equity for Years Ended September 30, 
1996 and 1995 - page 4
Statements of Cash Flows for the Years Ended September 30, 1996 and 
1995 - page 5
Notes to Financial Statements - pages 6 - 15

(2) Material Contracts

Contract, dated 9/27/90 between Integral Systems, Inc. and the U.S. 
National Oceanic and Atmospheric Administration, page 36.  
(Portions of this exhibit have been omitted pursuant to a request 
for confidential treatment filed with the Securities and Exchange 
Commission.)

Contract, dated 12/22/94, between Integral Systems, Inc. and the 
Republic of China National Space Program Office, page 104.  
(Portions of this exhibit have been omitted pursuant to a request 
for confidential treatment filed with the Securities and Exchange 
Commission.)

Contract, dated 5/17/96, between Integral Systems, Inc. and the U.S. 
National Oceanic and Atmospheric Administration, page 164.  
(Portions of this exhibit have been omitted pursuant to a request 
for confidential treatment filed with the Securities and Exchange 
Commission.)

Contract, dated 4/8/96, between Integral Systems, Inc. and AT&T 
Corporation, page 421.  (Portions of this exhibit have been 
omitted pursuant to a request for confidential treatment filed with 
the Securities and Exchange Commission.)


All other schedules are omitted since the required information is 
not present or is not present in amounts sufficient to require 
submission of the schedule, or because the information required is 
included in the financial statements and notes thereto.



(b) Reports on Form 8-K

There were no Form 8-Ks filed during fiscal year 1996.

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


                        INTEGRAL SYSTEMS, INC.


                        BY:		/s/			
                        Steven R. Chamberlain
                        Chairman of the Board and
                        Chief Executive Officer

                        DATE:  4/2/97


                        BY:		/s/			
                        Thomas L. Gough
                        President, Chief Operating 
                        Officer
                        Director

                        DATE:  4/2/97


                        BY:		/s/			
                        Elaine M. Parfitt
                        Chief Financial Officer, 
                        Principal Accounting Officer

                        DATE:  4/2/97			

<PAGE>

In accordance with the Exchange Act, this report has been signed below 
by the following persons on behalf of the registrant and in the 
capacities and on the dates indicated.



          Signature	Titles                                Date


Chairman of the Board, Director, Chief Executive Officer
Steven R. Chamberlain                                     4/1/97

President, Chief Operating Officer, Director 
Thomas L. Gough                                           4/1/97

Vice President of Quality Control,
Secretary & Treasurer; Director
Robert P. Sadler                                          4/1/97


Director
Bonnie K. Wachtel                                        3/31/97


Director
Dominic A. Laiti                                         4/1/97


Director
R. Doss McComas                                          4/1/97
<PAGE>


              INTEGRAL SYSTEMS, INC.
                 AND SUBSIDIARIES
	               

            CONSOLIDATED FINANCIAL STATEMENTS
     For the Years Ended September 30, 1996 and 1995
                             AND

              INDEPENDENT AUDITORS' REPORT

                    TABLE OF CONTENTS


DESCRIPTION	PAGES

Independent Auditors' Report                            1

Consolidated Balance Sheet as of September 30, 1996     2

Consolidated Statements of Operations for the Years 
  Ended September 30, 1996 and 1995                     3
Consolidated Statements of Stockholders' Equity for 
  the Years Ended September 30, 1996 and 1995           4
Consolidated Statements of Cash Flows for the Years
  Ended September 30, 1996 and 1995                     5

Notes to Consolidated Financial Statements            6-15

RUBINO & McGEEHIN CHARTERED
CERTIFIED PUBLIC ACCOUNTANTS
6905 ROCKLEDGE DRIVE, SUITE 700
BETHESDA, MARYLAND  20817-1818
301-564-3636
FAX 301-564-2994
<PAGE>
                    INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders
Integral Systems, Inc.

We have audited the accompanying consolidated balance sheet of 
Integral Systems, Inc. and its subsidiaries as of September 30, 1996, 
and the related consolidated statements of operations, stockholders' 
equity, and cash flows for the years ended September 30, 1996 and 
1995.  These financial statements are the responsibility of the 
Company's management.  Our responsibility is to express an opinion on 
these financial statements based on our audits.

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

In our opinion, the financial statements referred to above 
present fairly, in all material respects, the consolidated financial 
position of Integral Systems, Inc. and its subsidiaries as of 
September 30, 1996, and the consolidated results of their operations 
and their consolidated cash flows for the years ended September 30, 
1996 and 1995, in conformity with generally accepted accounting 
principles.

RUBINO & McGEEHIN
November 20, 1996
Bethesda, Maryland
<PAGE>

              INTEGRAL SYSTEMS, INC. AND SUBSIDIARIES
                    CONSOLIDATED BALANCE SHEETS
                        SEPTEMBER 30, 1996

                               ASSETS

Current assets
Cash and cash equivalents                              $1,369,915
Accounts receivable                                     4,849,886
Employee receivables                                       24,200
Prepaid expenses                                           59,956
Deferred income taxes                                      73,913

Total current assets                                    6,377,870

Property and equipment, at cost, net of accumulated 
 depreciation and amortization of $446,769                399,108

Other assets 
Deposits                                                    7,182
Software development costs, net of accumulated
 amortization of $1,463,779                             1,295,514

Total assets                                           $8,079,674

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable - trade                                 $786,701
Accrued expenses                                        1,157,356
Billings in excess of revenue for contracts
in progress                                               128,925
Income tax payable                                         48,060

Total current liabilities                               2,121,042

Commitments and contingencies
Common stock, $.01 par value, 2,000,000 shares
  authorized, 952,533 shares issued
  and outstanding                                           9,525
Additional paid-in capital                                825,311
Retained earnings                                       5,123,796

Total stockholders' equity                              5,958,632

Total liabilities and stockholders' equity             $8,079,674

The accompanying notes are an integral part of the these
consolidated financial statements.
<PAGE>

              INTEGRAL SYSTEMS, INC. AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF OPERATIONS
         For the Years Ended September 30, 1996 and 1995

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

Revenue                                            $11,217,148   $10,770,661

Cost of revenue
Direct labor                                         3,617,255     3,526,899
Direct equipment and subcontracts                    1,567,215     2,218,243
Travel and other direct costs                          302,373       159,992
Overhead costs                                       2,729,793     2,385,043

Total cost of revenue                                8,216,636     8,290,177

Gross margin                                         3,000,512     2,480,484

Selling, general and administrative                  1,758,248     1,434,296
Product amortization                                   509,477       508,556
Bad debt expense                                       232,708             -

Income from operations                                 500,079       537,632

Other income (expense)
Interest income                                         65,396        76,222
Interest expense                                        (2,320)       (2,529)
Miscellaneous, net                                     (60,787)      (35,139)

Income before income taxes                             502,368       576,186

Provision for income taxes                             179,351       195,483

Net income                                            $323,017      $380,703

Weighted average number of common shares               948,021       942,155

Earnings per share:
Net income                                                $ .34        $ .40
</TABLE>
The accompanying notes are an integral part of these consolidated financial 
statements.
<PAGE>
                  INTEGRAL SYSTEMS, INC. AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
               For the Years Ended September 30, 1996 and 1995
<TABLE>
<S>                        <C>      <C>       <C>      <C>         <C>
                                     Common
                                     Stock at   Additional
                          Number of  Par        Paid-in    Retained
                            Shares   Value      Capital    Earnings      Total

Balance, September 30, 1994 938,020  $ 9,380  $ 635,541  $4,420,076  $5,064,997

Stock options exercised       5,726       57     60,896           -      60,953

Net income                        -        -          -     380,703     380,703

Balance, September 30, 1995 943,746    9,437     696,437  4,800,779   5,506,653

Stock options exercised       8,787       88     128,874          -     128,962

Net income                        -        -           -    323,017     323,017

Balance, September 30, 1996 952,533  $ 9,525   $ 825,311  $5,123,796 $5,958,632
</TABLE>

The accompanying notes are an integral part of these consolidated financial 
statements. 
<PAGE>
                INTEGRAL SYSTEMS, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF CASH FLOWS
           For the Years Ended September 30, 1996 and 1995
<TABLE>
<S>                                                        <C>          <C>
                                                             1996        1995
Cash flows from operating activities:
Net income                                                $323,017    $380,703
Adjustments to reconcile net income to
  net cash provided by operating activities:
Depreciation and amortization                              705,793     677,207
Change in deferred taxes                                   (13,194)     20,805
(Increase) decrease in:
  Accounts receivable                                   (1,366,109) (1,090,207)
  Interest receivable                                            -      10,333
  Prepaid expenses and deposits                              4,549     (46,815)
  Employee receivable                                      (24,200)          -
  Income tax receivable                                          -       6,361
(Decrease) increase in:
  Accounts payable - trade                                 434,706     145,031
  Accrued expenses                                         282,108    (157,414)
  Billings in excess of revenue  
    for contracts in progress                             (432,277)    337,288
  Income tax payable                                       (60,421)    108,481

Total adjustments                                         (469,045)     11,070

Net cash (used) provided by operating activities          (146,028)    391,773
			
Cash flows from investing activities:
Acquisition of property and equipment                     (306,799)   (217,642)
Software development costs                                (431,773)   (315,470)
Sale of marketable securities                                    -     403,100
Net cash used in investing activities                     (738,572)   (130,012)

Cash flows from financing activities:
Proceeds from issuance of common stock                     128,962      60,953

Net (decrease) increase in cash                           (755,638)    322,714
Cash and cash equivalents, beginning of year             2,125,553   1,802,839

Cash and cash equivalents, end of year                  $1,369,915  $2,125,553
The accompanying notes are an integral part of these consolidated financial 
statements.
</TABLE>
<PAGE>

1.	Summary of Significant Accounting Policies

	Principles of Consolidation
	The accompanying consolidated financial statements include 
the accounts of Integral Systems, Inc. (the Company) and its 
wholly owned subsidiaries, Integral Marketing, Inc. (IMI) and 
InterSys, Inc. (InterSys).  All significant intercompany 
transactions have been eliminated in consolidation.
	Use of Estimates 
	The preparation of financial statements in conformity with 
generally accepted accounting principles requires management 
to make estimates and assumptions that affect certain 
reported amounts and disclosures.  Accordingly, actual 
results could differ from those estimates.
	Revenue Recognition
	Revenue under cost-plus-fixed-fee contracts is recorded on 
the basis of direct costs plus indirect costs incurred and an 
allocable portion of the fixed fee.  Revenue from fixed-price 
contracts is recognized on the percentage-of-completion 
method, measured by the cost-to-cost method for each 
contract.  Revenue from time and materials contracts is 
recognized based on fixed hourly rates for direct labor 
expended.  The fixed rate includes direct labor, indirect 
expenses and profits.  Material or other specified direct 
costs are recorded at actual cost.
	Contract costs include all direct material and labor costs 
and those indirect costs related to contract performance.  
General and administrative costs are charged to expense as 
incurred.  Provisions for estimated losses on contracts in 
progress are made in the period in which such losses are 
determined.  Changes in job performance, job conditions, and 
estimated profitability, including final contract 
settlements, may result in revisions to costs and income and 
are recognized in the period in which the revisions are 
determined.  The Company's contracts vary in length from one 
to four years.
	The fees under certain government contracts may be increased 
or decreased in accordance with cost or performance incentive 
provisions which measure actual performance against 
established targets or other criteria.  Such incentive fee 
awards or penalties are included in revenue at the time the 
amounts can be reasonably determined.

1.	Summary of Significant Accounting Policies (continued)

	Unbilled accounts receivable represents revenue recognized in 
excess of amounts billed.  The liability, billings in excess 
of revenue for contracts in progress, represents billings in 
excess of revenue recognized.  

	Revenue from commissions for the sale of equipment is 
recognized when customer orders are submitted.  A reserve is 
made for possible reductions in or cancellations of customer 
orders.

	Depreciation and Amortization

	Property and equipment are stated at cost.  The Company 
follows the policy of providing depreciation and amortization 
by charges, on the straight-line method, to operating 
expenses at rates based on estimated useful lives as follows:

	Classification    Estimated Useful Lives

Electronic equipment          3 Years
Furniture and fixtures        5 Years
Leasehold improvements        Life of lease
Software                      3 Years

	Maintenance and repair costs are charged to expense as 
incurred.  Replacements and betterments are capitalized.  At 
the time properties are retired or otherwise disposed of, the 
property and related accumulated depreciation or amortization 
accounts are relieved of the applicable amounts and any gain 
or loss is credited or charged to income.

	Software Development Costs
	The Company has capitalized costs related to the development 
of certain software products.  In accordance with Statement 
of Financial Accounting Standards No. 86, capitalization of 
costs begins when technological feasibility has been 
established and ends when the product is available for 
general release to customers.  Amortization is computed on an 
individual product basis and has been recognized for those 
products available for market based on the products' 
estimated economic lives which average five years.  Due to 
inherent technological changes in software development, 
however, the period over which such capitalized costs is 
being amortized may have to be modified.


1.	Summary of Significant Accounting Policies (continued)

	Earnings Per Share
	Earnings per share computations are based on the weighted 
average number of common shares outstanding during each year 
and have been adjusted where appropriate for stock splits.  
The exercise of outstanding stock options would not result in 
a material dilution of earnings per share.

	Cash Concentrations and Cash Equivalents
	The Company considers all highly-liquid debt instruments 
purchased with a maturity of three months or less to be cash 
equivalents.  Cash accounts are maintained primarily with one 
federally insured financial institution.  Balances usually 
exceed insured limits, but management does not consider this 
to be a significant concentration of credit risk.  Included 
in the cash balance is $89,057 held in a foreign bank 
account.

	Reclassification
	Certain accounts in the prior year financial statements have 
been reclassified for comparative purposes to conform with 
the presentation in the current year financial statements.


2.	Accounts Receivable and Revenue

	Accounts receivable at September 30, 1996 consists of the 
following:
  Billed
Government - prime contracts       $  669,556
Government - subcontractors           440,871
Commercial customers                1,655,615
  Subtotal                          2,766,042

  Unbilled
Government - prime contracts          827,637
Government - subcontractors            91,269
Commercial customers                1,164,938
  Subtotal                          2,083,844

  Total                            $4,849,886


2.	Accounts Receivable and Revenue (continued)

	Unbilled accounts receivable include amounts arising from 
the use of the percentage-of-completion or other methods of 
recognizing revenue that differ from contractual billing 
terms.  Substantially all unbilled receivables are expected 
to be collected in one year.

	During the years ended September 30, 1996 and 1995, 
approximately 51% and 58%, respectively, of the Company's 
revenue was from prime contracts and subcontracts with 
departments and agencies of the U.S. Government.  The 
remaining revenue consists of commercial contracts and sales 
of commercial products.  For each of the years ended 
September 30, 1996 and 1995, commercial revenue included one 
customer which provided revenue in excess of 10% of total 
revenue.


3.	Property and Equipment

	Property and equipment as of September 30, 1996, are as 
follows:
Electronic equipment                        $728,956
Furniture and fixtures                        54,898
Leasehold improvements                        11,365
Software                                      50,658

   Total property and equipment              845,877

Less: accumulated depreciation
             and amortization               (446,769)

                                            $399,108


4.	Software Development

	Software development costs at September 30, 1996, consist of 
the following: 

Costs incurred                      $2,759,293
  Less:  accumulated amortization   (1,463,779)
                                    $1,295,514

	The total amortization expense for the year ended September 
30, 1996 is $509,477. 

5.	Line of Credit

	The Company has a line of credit agreement with a bank at 
September 30, 1996 for $1,200,000.  Borrowings under the 
line of credit bear interest at the bank's prime lending 
rate plus one-quarter of one percentage point per annum.  
Any accrued interest is payable monthly.  The line of credit 
is secured by the Company's billed accounts receivable.  The 
line also has certain financial covenants, including minimum 
net worth and liquidity ratios.  The line expires February 
28, 1998.  At September 30, 1996, the Company had no 
outstanding balance under the line of credit.
6.	Accrued expenses

	Accrued expenses at September 30, 1996, consist of the 
following:

Accrued payroll                $544,974
Accrued vacation                253,950
Payroll taxes                   171,054
Retirement plan payable         158,897
Other                            28,481

                            $ 1,157,356

7.	Commitments and Contingencies

	Leases
	The Company is leasing office space for a five-year period 
that commenced March 15, 1994.  Future minimum lease payments 
through March 14, 1999 are as follows:

          Years ending September 30, 1997     $219,520
                                     1998      226,048
                                     1999      105,131

                                              $550,699

	Lease payments do not include operating expenses, which are 
adjusted annually, or utilities.  Rent expense was $254,327 
and $248,944, for the years ended September 30, 1996 and 
1995, respectively.


7.	Commitments and Contingencies (continued)

	Government Contracts
	A significant portion of the revenues of the Company 
represent payments made by the U.S. Government and by 
contractors that have prime contracts with the U.S. 
Government.  These revenues are subject to adjustment upon 
audit by the Defense Contract Audit Agency (DCAA).  Audits by 
the DCAA have been completed on the Company's contracts and 
subcontracts through the year ended September 30, 1994.  
Management is of the opinion that any disallowances by the 
Government auditors, other than amounts already provided, 
will not materially affect the Company's financial 
statements.  

	Litigation
	During the fiscal year ended September 30, 1996, the Company 
sold certain of its software products along with specified 
hardware to a U.S. Government agency.  The procurement 
required the Company to sell these items through an 
intermediary prime contractor.  The value of the contract to 
the Company was $232,708.
	The Company fully complied with the terms of its contract, 
and although the third party prime contractor has been paid 
in full by the U.S. Government, the Company has received no 
payments to date.  In August 1996, the Company filed a 
complaint in the Second Judicial District Court of the State 
of New Mexico against the prime contractor and its principal 
owner individually for breach of contract in an attempt to 
recover the value of its contract.  Based on discovery 
received, the Company subsequently filed a motion for summary 
judgment against the defendants.
	In September 1996, the defendants filed a counterclaim 
against the Company alleging defamation, intentional 
interference with contractual relations and the prima facie 
tort of extortion.  The Company believes the counterclaim is 
without merit and will not have a materially adverse effect 
on its financial statements.
	Although the Company has fully reserved the receivable due 
under this contract ($232,708), it continues to vigorously 
pursue all legal remedies available to it.

8.	Income Taxes

	For the years ended September 30, 1996 and 1995, the 
provision for income taxes consisted of the following:

                                  1996          1995

Current tax expense
Federal                           $154,910      $142,972
State                               37,635        31,706
                                   192,545       174,678
Deferred tax (benefit) expense     (13,194)       20,805

Total provision                   $179,351      $195,483

	At September 30, 1996, the tax effect of significant 
temporary differences representing deferred tax assets and 
liabilities are as follows:
                                                  Asset
                                                (Liability)
Depreciation and amortization                   $(36,827)
Vacation accrual                                  99,040
Revenue reserve                                   11,700

Net deferred income tax asset                   $ 73,913

	The effective income tax rates differ from the statutory 
United States income tax rate due principally to the 
following:
                                            1996     1995

Federal statutory rate                      34.0%    34.0%
State tax, net of federal
  income tax benefit                         4.6      4.6
Tax-exempt interest                            -     (0.8)
Tax deductible stock option compensation    (2.8)    (4.1)
Other, primarily change in estimate          0.1)     0.2

Effective rate                              35.7%    33.9%


9.	Profit Sharing and Employee Benefits Plans

	The Company has a profit sharing and 401(k) plan for the 
benefit of substantially all employees.  Profit sharing 
contributions consist of discretionary amounts determined 
each year by the Board of Directors of the Company based upon 
net profits for the year and total compensation paid.  The 
401(k) feature allows employees to make elective deferrals 
not to exceed 10% of compensation.  Effective January 1, 
1995, the separate profit sharing and 401(k) plans were 
combined into one plan.

	The Company also has a money purchase plan.  For the years 
ended September 30, 1996 and 1995, the money purchase plan 
obligated the Company to contribute 5% of eligible salaries 
under the plan.

	For the years ended September 30, 1996 and 1995, 
contributions to the plans totalled $473,552 and $455,269, 
respectively.

10.	Stock Option Plan

	Effective May 25, 1989, as amended on January 1, 1994, the 
Company established a stock option plan to create additional 
incentives for the Company's employees, consultants and 
directors to promote the financial success of the Company.  
The Board of Directors has sole authority to select full-time 
employees, directors or consultants to receive awards of 
options for the purchase of stock under this plan.  The 
maximum number of shares of common stock which may be issued 
pursuant to the stock option plan is 200,000.  The price of 
the options is set at the stock's bid price on the date of 
the Board of Directors meeting at which the option is 
granted.  Options expire no later than ten years from the 
date of grant (five years for greater than ten percent 
owners) or when employment ceases, whichever comes first, and 
vest over three years.


Stock option transactions under the plan for the years ended 
September 30, 1996 and 1995, are summarized as follows:
<TABLE>
<S>                                       <C>       <C>

                                           1996       1995

Options outstanding, beginning of year      46,174    30,800
Granted                                     85,600    21,100
Exercised                                   (8,787)   (5,726)
Cancelled                                   (5,000)        -
Options outstanding, end of year           117,987    46,174

Option price range                         $21.50 to    $17.75 to
                                           $29.00       $26.00
Options exercisable, end of year            19,012      15,714
Options available, end of year              51,850     132,450
</TABLE>

10.		Stock Option Plan (continued)

	The Company applies APB Opinion No. 25 in accounting for its 
stock option plan, and, accordingly, no compensation cost has 
been recognized for the plan.  FASB Statement No. 123, 
"Accounting for Stock-Based Compensation" (SFAS 123), is 
effective for fiscal years beginning after December 15, 1995. 
 Adoption of SFAS 123 is optional; however, proforma 
disclosures as if the Company adopted the cost recognition 
requirements under SFAS 123 will be required in the Company's 
financial statements for its fiscal year ending September 30, 
1997.

11.	Supplemental Cash Flow Information

	For the years ended September 30, 1996 and 1995, income taxes 
paid, net of refunds, were $410,076 and $81,012, 
respectively.  For the years ended September 30, 1996 and 
1995, interest expense incurred and paid was $2,320 and 
$2,529, respectively.

12.	Business Segment Information

	During the year ended September 30, 1996, the Company's 
operations included two reportable segments:  Satellite 
ground systems and electronic test instrumentation and 
equipment marketing.  

	The Company provides satellite ground systems - computer 
systems for satellite command and control, data processing, 
simulation, and flight software validation.  Customers for 
these systems include U.S. Government organizations such as 
National Aeronautics and Space Administration (NASA), the 
National Oceanic and Atmospheric Administration (NOAA), and 
the U.S. Air Force, as well as commercial satellite 
operators, both domestic and foreign.

	Through its wholly-owned subsidiary, IMI, the Company acts as 
a manufacturer's representative, selling electronic test 
instrumentation and equipment to customers primarily in 
Maryland, Virginia and the District of Columbia.  (The 
Company's other wholly-owned subsidiary, InterSys, provides 
consulting services for satellite design and procurement, but 
is presently inactive.)

12.	Business Segment Information (continued)

Summarized financial information is as follows:
<TABLE>
<S>                                  <C>            <C>

                                      1996           1995
Net sales
     Satellite ground systems         $10,555,371    $10,503,423
     Marketing                            661,777        267,238

Income before taxes
     Satellite ground systems            343,797         615,413
     Marketing                           158,571         (39,227)

Identifiable assets
     Satellite ground systems          6,139,157       4,981,702
     Marketing                           405,351         163,918

Capital expenditures
     Satellite ground systems            305,220         216,896
     Marketing                             1,579             746

Depreciation and amortization
     Satellite ground systems            192,838         165,551
     Marketing                             3,478           3,100
</TABLE>

	Identifiable assets of the respective segments include 
accounts receivable, property and equipment, and software 
development costs.  Cash and cash equivalents and the 
remaining assets are considered corporate assets.  There were 
no significant intercompany sales.