SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C.  20549

                                  FORM 10-KSB


    (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, 1995

              	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			
	(State or other jurisdiction of incorporation of organization)

                        	52-1267968	
         (I.R.S. Employer Identification No.)
	


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)

<PAGE>


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 October 31, 1995, 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 $22,420,245.

As of October 31, 1995, 946,646 shares of the Common Stock of the 
Registrant were outstanding.
<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.  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 products explicitly for real-time 
environmental monitoring via satellite.  These systems are used by 
federal, state, and local governments, as well as private 
industry, for applications such as erosion control and 
restoration, pollution monitoring, water control, seismic 
analysis, forest management, and geomagnetic field modeling.

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 are primarily commercial satellite 
operators, spacecraft manufacturers, and systems integrators.   
Government organizations generally purchase a combination of off-
the-shelf products together with custom development services for 
mission specific requirements.

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.
<PAGE>



Integral Systems has ongoing systems engineering work under 
contracts to NASA at 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 both the TIROS and GOES satellite programs.

The current Air Force contracts are under the Defense 
Meteorological Satellite Program (DMSP).  Integral Systems has 
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 also 
provides the Air Force with ongoing services for independent 
verification and validation of the DMSP flight software.
<PAGE>


Environmental Monitoring Systems

Integral Systems provides a family of products and services 
to facilitate the collection, storage, and analysis of 
environmental data.  The Company's primary commercial product is 
called the DOMSAT Receive Station (DRS).  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 central processing facility 
for this system was also built by Integral Systems and is located 
in Wallops Island, Virginia.

DRS customers include 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.

There are now over 50 DRS installations in the United States 
and Canada enabling government and private organizations to 
receive environmental data from thousands of remote stations 
located throughout the western hemisphere.  The Company had 
expanded its product line to include decoding/translation 
software, real-time database interfaces, and the integration of 
complete data analysis and response systems using off-the-shelf 
networking and application products.


Integral Marketing, Inc.

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 
in Maryland, D.C., and Virginia.  IMI currently represents 12 
manufacturers. 

Contract Revenue

	Commercial revenue as a percentage of total revenue increased 
from 24% to 42% between fiscal year 1994 and fiscal year 1995.  
The Company is continuing to focus its marketing efforts on 
commercial enterprises.  The Company's revenue for fiscal years 
1995 and 1994 was generated from the following sources:
<TABLE>
                                          	Fiscal Year
<S>	                                    <C>        	<C>
Customer                               	1995       	1994
Commercial                             	42%	        24%
NOAA                                   	30%        	36%
Air Force                              	12%        	19%
NASA                                   	16%        	21%

</TABLE>
<PAGE>

	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, 1995 and 1994 is as follows:
<TABLE>

                                      Fiscal Year
<S>                                  <C>     <C>
Contract Type                        1995    1994
Cost Plus                            43%     64%
Fixed Price                          53%     33%
Time and Materials                    4%      3%
</TABLE>

Government Contracts

	Company revenues from the US Government 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 1995 and 1994 are as follows:
<TABLE>

                                      Fiscal Year
<S>                                  <C>     <C>
Contract Source                      1995    1994
Prime Contract                        46%     30%
Subcontract                           54%     70%
</TABLE>

<PAGE>

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.  Virtually 
all contracts awarded during fiscal years 1987 through 1995 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 33% of revenue for the current 
fiscal year (fiscal year 1996) will be derived from three major US 
Government contracts and subcontracts.  It is estimated that the 
largest single contract will represent approximately 14% of the 
Company's revenue and the smallest approximately 1%.  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 
1995, approximately 53% 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.
<PAGE>

	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 October 31, 1995, the Company employed 79 individuals, 
69 of whom are considered professionals in engineering related 
disciplines.  Of the engineering professionals, 96% have 
undergraduate degrees in a scientific discipline, and 32% of those 
have advanced degrees in scientific discipline.  Approximately 89% 
of the engineering staff have at least seven years experience, and 
11% have three to eight years experience.  Approximately 16% of 
the engineering staff specialize in digital hardware development, 
although many of these individuals have analytic and software 
development expertise as well.  The remaining 84% 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.

<PAGE>

Backlog

	The Company's estimated backlog as of September 30, 1995 and  
September 30, 1994 is as follows:
<TABLE>


                             Sept. 30,1995      Sept. 30,1994
<S>                         <C>                <C>
Outstanding Contract.......$ 9,596,273         $15,250,373
General Commitments....... $14,784,770         $ 3,731,820

	Total                     $24,381,043         $18,982,193

</TABLE>
	Under outstanding contracts, the Company commits 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 33% of backlog as of September 30, 1995 will be completed 
during fiscal year 1996.  Estimated backlog includes contract 
options through September 30, 2000, including general commitments.

Competition

	The Company principally obtains contracts and subcontracts 
through competitive procurements offered by the US Government or 
commercial enterprises awarded on a competitive basis.  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.
<PAGE>

	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 and Development

	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 1995, Integral Systems 
recognized approximately $230,000 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.  As of October 
31, 1992, Integral Systems sold its first EPOCH 2000 to the 
Chinese Government, under a subcontract with a US corporation, 
resulting in a $2.4 million dollar award.  The Company delivered 
it's first EPOCH 2000 software license to the Chinese Government 
in July, 1994.  At that time the Company first recorded EPOCH 
license revenue and began to amortize associated software 
development costs.  In fiscal year 1995, Integral Systems was 
awarded another major subcontract for an EPOCH 2000 system in the 
amount of $3.7 million dollars.  This new subcontract is for 
delivery of the company's products to the National Space Program 
Office in Taiwan.

EPOCH related revenue (license fees and associated services) 
amounted to $3.5  million in fiscal year 1995.

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 1995 was 
$400,000.
<PAGE>

The Company continues to develop new versions of EPOCH and 
OASYS and plans to capitalize development costs as appropriate in 
fiscal year 1996.

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, 1995 the Company had no amounts outstanding under the line of 
credit.

Financial Information in Industry Segments

	ISI operates as one operating segment and, therefore, does 
not report financial information in industry 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 $249,076.


Item 3.	Legal Proceeding

	The Company is not engaged in any material legal proceedings 
that could have an adverse effect on its business, nor is it aware 
of any pending or threatened material litigation against it.

<PAGE>

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

	On July 20, 1995, Integral Systems held their annual 
shareholders meeting.  A Board of Directors was elected, including 
the re-election of Steven R. Chamberlain, Robert P. Sadler, and 
Bonnie K. Wachtel.  New board members elected include Louis Brown, 
Thomas L. Gough, Dominic A. Laiti, and R. Doss McComas.
<PAGE>


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, 1995 and 1994, are shown below:
<TABLE>
<S>                     <C>      <C>
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

1994 Fiscal Year         High     Low
First Quarter            16       15 3/4
Second Quarter           15 3/4   15 3/4
Third Quarter            16 1/4   15 3/4
Fourth Quarter           17 3/4   16 3/4
</TABLE>

	As of September 30, 1995, there were approximately 423 
holders of record of the Company's Common Stock.

	No cash dividends were paid during the past four fiscal 
years, and none are expected to be declared during the forthcoming 
1996 fiscal year.
<PAGE>


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


COMPARISON OF FISCAL YEAR 1995 
TO FISCAL YEAR 1994

	The components of the Company's income statement as a 
percentage of revenue are depicted in the following table for 
fiscal years 1995 and 1994:
<TABLE>
                                 % of                      % of
                1994            Revenue   1995             Revenue
                (000's ommitted)           (000's ommitted)
<S>             <C>             <C>        <C>              <C>
Revenue         $10,771          100.0     $8,905           100.0

Expenses
Cost of Revenue   9,171           85.1      7,583            85.1
General & Admin.  1,062            9.9      1,166            13.1
Other               (38)         (-0.3)       (31)            (.3)
Income Taxes        195            1.8         56              .6

Total Expenses  $10,390           96.5      8,774            98.5

Net Income         $381            3.5       $131             1.5
</TABLE>


Revenue

	Revenue increased by approximately $1.9 million between the 
fiscal year ended September 30, 1995, and the fiscal year ended 
September 30, 1994, principally because of new contract awards 
related to the sale of the Company's EPOCH product along with 
associated integration services.  Such new contracts also included 
approximately $1,100,000 of incremental equipment that was 
delivered in the current period.

	During the current period, the Company derived approximately 
42% of its revenues from the sale of its commercial products and 
related services as opposed to 24% 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.
<PAGE>

	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, an off-the-shelf product for 
satellite command and control.  Specifically, the Company has 
incurred and capitalized approximately $1,360,000 of costs 
(inception to date) relating to this product.  During July, 1994, 
the Company delivered its first EPOCH licenses to customers 
previously booked. Consequently the Company commenced amortization 
of the capitalized costs under this program during the fourth 
quarter of fiscal 1994.  

	During fiscal year 1995, the Company recorded approximately 
$3.5 million of revenue (inclusive of approximately $1,140,000 of 
delivered equipment) for services associated with its EPOCH 
product compared to $1,100,000 of revenue during fiscal year 1994.  
Fiscal year 1995 EPOCH revenues included approximately $345,000 of 
license fees, while $150,000 of license fee revenues were recorded 
during fiscal year 1994.	

	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 fiscal year 1995, the Company recorded 
approximately $750,000 of revenue related to the sale of products 
and services under these programs compared to approximately 
$900,000 last fiscal year.  

	The Company's subsidiary, Integral Marketing, Inc., (IMI) 
accounted for an additional $270,000 of commercial revenue during 
the current period.  IMI contributed approximately $150,000 of 
revenue to the Company's consolidated revenue total last fiscal 
year.

Expenses

	Cost of revenue as a percentage of revenue for both fiscal 
year 1995 and fiscal year 1994 was 85.1%.  The Company believes 
that these figures are typical and representative of the Company's 
current operating cost structure.

	G&A expense decreased approximately $100,000 between fiscal 
year 1995 and fiscal year 1994.  The decreased expenses during the 
current period principally relate to the absence of start-up costs 
associated with InterSys, Inc. (InterSys), a wholly-owned 
subsidiary of the Company which is presently inactive.

	Income taxes as a percentage of revenue were higher in the 
current year due to the loss of surtax exemptions that benefited 
fiscal year 1994 results.

<PAGE>

General

	Overall, net income as a percentage of revenue was 3.5% in 
fiscal year 1995 compared to 1.5% in fiscal year 1994.  
Essentially, fiscal year 1995 income to date resulted from 
increased revenues from new contracts, while early fiscal year 
1994 losses have been eliminated because start-up costs associated 
with IMI and InterSys are no longer an issue.  It should be noted 
that fiscal year 1995 results would have been approximately 
$110,000 greater on a pretax basis except for reserves taken by 
the Company to account for certain contract cost disallowances for 
the Company's fiscal years 1992 to 1994 inclusive proposed by the 
Defense Contract Audit Agency (DCAA) and reserves taken on revenue 
recorded by IMI.


	
Liquidity and Capital Resources

	With the exception of the Company's second quarter of fiscal 
year 1994, the Company has been profitable 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 1995, the Company used approximately 
$315,000 for new software development and invested another 
$220,000 to acquire new equipment.  These capital additions were 
offset by the sale of approximately $400,000 of marketable 
securities, providing for a net $130,000 of cash used for 
investing activities in fiscal year 1995.

	Although operating activities consumed significant sums of 
cash during the first half of fiscal year 1995 due to the 
financing required to fund the Company's new contracts described 
above, third and fourth quarter collections under these same 
contracts put the Company in a position of generating cash flow 
from operations on a year to date basis.  Specifically, $390,000 
was generated from operations in fiscal year 1995.

	In July, 1988 the Company raised approximately $400,000 (net) 
through the sale of 110,000 common shares in its initial public 
offering.

	As a result of its current cash reserves, its unused line of 
credit, its current profitability and its projected profitability 
for fiscal year 1996, the Company believes it will have adequate 
cash resources to meet its obligations for the foreseeable future.
<PAGE>

	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 (albeit at lower levels) in the continued 
development of its software products, especially 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.
<PAGE>


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
	Louis M. Brown, Jr.       	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, 40, 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.

	Thomas L. Gough, 47, became a member of ISI's staff in 
January, 1984.  In June, 1992, he was appointed President of 
Integral Systems, Inc., in July of 1989 he was named Vice 
President of Finance.  Prior to joining ISI he was employed by 
Business and Technology 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 B.S. degree from the University of Maryland 
where he majored in Information Systems Management in the School 
of Business and Public Administration.
<PAGE>

	Robert P. Sadler, 45, 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, 42, 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, 44, 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., 42, 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, 39, 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.

	William I. Tittley, 52, 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, 40, 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 SSE Telecom, Inc. and VSE Corporation. 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.

	Louis M. Brown, Jr., 51, was elected in July, 1995 as one of 
four Integral Systems outside directors.  Mr. Brown was the 
founding Chairman of Autometric, Inc. and has served on the Board 
of Directors since the entity was acquired from Raytheon 
Corporation (Autometric Division of Raytheon) and incorporated in 
1977.  Mr. Brown assumed the position of President/CEO of 
Autometric, in April, 1990.  From 1970 to 1990, Mr. Brown was the 
founding president/CEO of IDEAS, Inc., Columbia, MD, and currently 
serves as a Director and Chairman of the Board of IDEAS.  He 
obtained a B.S.E.E. from the Johns Hopkins University and has done 
course work in Operations Research at West Virginia University and 
in Business Administration at George Washington University.

	Dominic A. Laiti, 63, 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, 41, 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, and Vice President, Business Development, for 
COMSAT RSI.  He holds a B.A. degree from Virginia Polytechnic 
Institute, an M.B.A. from Mt. Saint Mary's, and a J.D. from 
Gonzaga University.

<PAGE>

Item 10.	Executive Compensation

a.  Summary Compensation Table

	The following table sets forth compensation received by the 
Company's highest paid executive officers who earned over $100,000 
during the fiscal year ended September 30, 1995:
<TABLE>
<CAPTION>
                     SUMMARY COMPENSATION TABLE
                                               Long-Term Compensation
                 Annual Compensation           Awards            Payouts
                                             
                                      Other
Name                                  Annual Restricted             All other 
and                                   Compen- Stock           LTIP   Compen-
Principal                             sation Award(s) Options Payouts sation    
Position       Year   Salary($) Bonus($) ($)   ($)    SARs(#)   ($)  ($) (1)
<S>            <C>    <C>      <C>    <C>    <C>      <C>     <C>    <C>
CEO
S. R. 
Chamberlain    1995   $112,278 $14,000                  7,500        $12,351
               1994   $107,266 $13,975                               $11,208 
               1993   $103,147 $15,026                               $10,060 

PRESIDENT
Thomas L. 
Gough          1995   $99,507  $11,000                               $10,946
               1994   $94,765  $10,980                                $9,650 
               1993   $91,125  $12,000                                $8,874 

VP,Commercial 
Systems
Steven A. 
Carchedi      1995   $95,784   $12,000                  2,000        $10,536
              1994   $92,997   $9,479                                 $9,490 
              1993   $88,090   $10,016                  6,500         $8,787

VP, 
Engineering
Donald F. 
Mack, Jr.     1995   $95,784   $9,500                   2,000        $10,536  
              1994   $92,977   $9,479                                 $9,900 
              1993   $89,419   $8,500                                 $8,761 

VP, Asia Pacific 
Operations
William I. 
Tittley       1995   $96,907   $7,000                   5,000        $10,660  
              1994   $94,120   $6,018                                $10,353 
              1993   $90,501   $5,526                     200         $9,955 
</TABLE>
<PAGE>
Note (1) Profit Sharing/Money Purchase Plan


                      OPTION/SAR GRANTS IN LAST FISCAL YEAR

                             	Individual Grants	
                              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    7,500	      36%	              $17.75          10/1999

PRESIDENT
Thomas L. Gough        	0

VP,
COMMERCIAL SYSTEMS
Steven A. Carchedi	  2,000      9%	       	       $17.75          	10/1999

VP, ENGINEERING
Donald F. Mack		     2,000      9%       		       $17.75	          10/1999

VP, ENGINEERING
MANUFACTURING
Steven K. Kowal	       0	

VP, ASIA PACIFIC
OPERATIONS
William I. Tittley   5,000     24%		              $17.75	          10/1999



	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 1994 and 1995, the Company 
contributed a total of 11% of eligible employees salaries to both 
plans.


	c.  Stock Option Plan
<PAGE>

	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 21,100 options were issued and 5,726 options were 
exercised during fiscal year 1995, making it a total of 46,174 
options issued and outstanding as of September, 1995.

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 
9/30/95)

	None

							

Name of Owner	Shares	Percentage of Total Shares 
Owned
							




<PAGE>

	b.  Security Ownership of Management (as of 9/30/95)
							

Name of Owner	                  Shares	     Percentage of Total Shares Owned
							

Steven R. Chamberlain	          73,040	                   7.6%
Thomas L. Gough	                27,850	                   2.9%
Robert P. Sadler	               51,840	                   5.3%
Kimberly A. Chamberlain	         8,480                    	.9%
Donald F. Mack, Jr.	             8,600                    	.9%
William I. Tittley	              5,200                    	.5%
Steven K. Kowal	                39,346                   	4.1%
Steven A. Carchedi             	16,500                   	1.7%
Bonnie K. Wachtel               	4,500	                    .5%


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 8-K

(a) (1) Financial Statements

Independent Auditors' Report - page 1
Balance Sheets as of September 30, 1995 - page 2
Statements of Operations for the Years Ended September 30, 1995, 
and 1994 - page 3
Statement of Stockholders' Equity for Years Ended September 30, 
1995 and 1994 - page 4
Statements of Cash Flows for the Years Ended September 30, 1995 
and 1994 - page 5
Notes to Financial Statements - pages 6 - 13

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 1995.
<PAGE>
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:
                             Steven R. Chamberlain
                             Chairman of the Board and
                             Chief Executive Officer

                             DATE:
       

                             BY:
                             Kimberly A. Chamberlain
                             Vice President,
                             Chief Financial Officer

                             DATE:

<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    12/27/95
Steven R. Chamberlain   Chief Executive Officer

                        President, Chief Operating         12/27/95
Thomas L. Gough         Director                           

                        Vice President of Quality Control, 12/27/95
Robert P. Sadler        Secretary & Treasurer, Director   

                        Director                           12/27/95
Bonnie K. Wachtel

                        Director                           12/27/95
Dominic A. Laiti

                        Director                           12/27/95
R. Doss McComas

                        Director                           12/27/95
Louis M. Brown, Jr.

<PAGE>

                 

                   INTEGRAL SYSTEMS, INC., AND SUBSIDIARIES
	

                      CONSOLIDATED FINANCIAL STATEMENTS
               For the Years Ended September 30, 1995 and 1994

                                    AND

                        INDEPENDENT AUDITORS' REPORT
<PAGE>


TABLE OF CONTENTS



DESCRIPTION	PAGES

Independent Auditors' Report--1

Consolidated Balance Sheets as of September 30, 1995--2

Consolidated Statements of Operations for the Years
	Ended September 30, 1995 and 1994--3

Consolidated Statements of Stockholders' Equity for
	the Years Ended September 30, 1995 and 1994--4

Consolidated Statements of Cash Flows for the Years
	Ended September 30, 1995 and 1994--5

Notes to Financial Statements--6-13
<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, 1995 
and the related consolidated statements of operations, stockholders' 
equity, and cash flows for the years ended September 30, 1995 and 1994.  
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, 1995, 
and the consolidated results of their operations and their consolidated 
cash flows for the years ended September 30, 1995 and 1994 in conformity 
with generally accepted accounting principles.



November 27, 1995
Bethesda, Maryland

<PAGE>

<TABLE>
<CAPTION>
                      INTEGRAL SYSTEMS, INC. AND SUBSIDIARIES
                            CONSOLIDATED BALANCE SHEET
                              September 30, 1995
                                 _____________

                                    ASSETS

<S>				                                         	<C>
Current Assets
	Cash and cash equivalents	                      	$2,125,553
	Accounts receivable 	                            	3,483,777
	Prepaid expenses		                                   71,537
	Deferred income taxes	                              	60,719

		Total current assets                           		5,741,586

Property and equipment, at cost,
 net of accumulated
	depreciation and amortization of $426,248         		288,624

Other assets 
	Deposits			                                             150
	Software development costs,
 net of accumulated	amortization of $954,302	      1,373,219

		Total assets	                                  	$7,403,579
</TABLE>


<TABLE>
                    	LIABILITIES AND STOCKHOLDERS' EQUITY
<S>					                                          <C>
Current liabilities
	Accounts payable - trade	                       	$ 351,995
	Accrued expenses		                                 875,248
	Billings in excess of 
	revenue for contracts in progress                		561,202
	Income tax payable	                               	108,481

		Total current liabilities	                     	1,896,926

Commitments and contingencies	

Common stock, $.01 par value, 2,000,000
 shares authorized, 943,746 stock
 issued and outstanding             	                	9,437
Additional paid-in capital		                        696,437
Retained earnings		                              	4,800,779

		Total stockholders' equity		                    5,506,653

		Total liabilities and
		stockholders' equity	                         	$7,403,579
<PAGE>
</TABLE>


<TABLE>
<CAPTION>
                 INTEGRAL SYSTEMS, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF OPERATIONS
            For the Years Ended September 30, 1995 and 1994

                                 					1995               1994
<S>		                                 <C>                <C>
Contract revenues		                   $10,770,661        $8,905,233
			
Contract costs 
	Direct labor	                          3,689,396        	3,545,593
	Direct equipment and subcontracts	     2,230,002	        1,100,877
	Travel and other direct costs	          	752,444	          573,102
	Overhead costs		                       2,499,408        	2,363,580
			
		Total contract costs		                9,171,250        	7,583,152
			
Gross margin	                           1,599,411	        1,322,081
			
General and administrative expenses     1,061,779	        1,165,747
			
Income from operations		                  537,632	          156,334
			
Other income (expense)
	Interest income		                         76,222	           54,420
	Interest expense	                        	(2,529)	             (68)
	Other expense                          		(35,139)         	(23,550)
			
		Total other income	                      38,554	           30,802
			
Income before income taxes		              576,186	          187,136
			
Provision for taxes on income 	          	195,483	           56,148
			
Net income                           	$   380,703          $130,988
			
			
Weighted average number
 of common shares	              	         942,155	          932,357
			
Earnings per share

	Net Income 		                       $        .40	      $       .14
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
                 INTEGRAL SYSTEMS, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
           For the Years Ended September 30, 1995 and 1994

	                              	Common
		                          Stock atAdditional
	                  Number of  Par	  Paid-in	   Retained
	                   Shares    Value  Capital 	  Earnings	    Total
<S>                 <C>      <C>    <C>       <C>           <C>
Balance,
 September 30, 1993 927,970 	$9,280	$552,005	$4,289,088	 $4,850,373

Stock options
 exercised	           10,050	      100	   83,536	          -	      83,636

Warrants exercised         -         -         -           -           -

Net Income 	               -	        -         -     130,988      130,988

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

Warrants exercised         -         -         -           -           -

Net income 	               -	        -	        -	    380,703     	380,703

Balance,
 September 30, 1995	 943,746	    $9,437	$ 696,437	$ 4,800,779	 $5,506,653
<PAGE>
</TABLE>

<TABLE>
<CAPTION>
                         INTEGRAL SYSTEMS, INC.
               CONSOLIDATED STATESMENTS OF CASH FLOWS
          For the Years Ended September 30, 1995 and 1994



                                          				       	1995       1994
<S>                                              <C>         <C>
Cash flows from operating activities:

	Net income		                                    $  380,703  $  130,988
			
	Adjustments to reconcile net income to
	  net cash provided by operating activities:
		Depreciation and amortization		                  677,207	     438,641
		Change in deferred taxes	                        	20,805	      (8,600)
		(Increase) decrease in:
			Accounts receivable	                        	(1,090,207)	   (212,935)
			Interest receivable	                            	10,333	       3,575
			Prepaid expenses and deposits	                 	(46,815)        	163
			Income tax receivable	                           	6,361     	(60,361)
		(Decrease) increase in:
			Accounts payable - trade		                      145,031	      58,593
			Accrued expenses	                             	(157,414)	    213,405
			Billings in excess of revenue for
			  contracts in progress		                       337,288	    (339,163)
			Income tax payable	                            	108,481		          -
			
			Total adjustments		                              11,070	      93,318
 			
	Net cash provided by operating activities		       391,773	     224,306
			
Cash flows from investing activities:
			
	Acquisition of property and equipment		         (217,642)	    (153,165)
	Software development costs		                    (315,470)	    (695,817)
	Sale of marketable securities		                  403,100	      380,678
			
	Net cash used in investing activities		         (130,012)	    (468,304)
			
Cash flows from financing activities:
	Proceeds from issuance of common stock		          60,953	       83,636

Net increase (decrease) in cash		                 322,714	     (160,362)

Cash and cash equivalents, beginning of year		  1,802,839	    1,963,201

Cash and cash equivalents, end of year		      $ 2,125,553	  $ 1,802,839	
</TABLE
<PAGE>
                INTEGRAL SYSTEMS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           For the Years Ended September 30, 1995 and 1994

1.	Summary of Significant Accounting Policies

	Integral Systems, Inc. (the Company) provides commercial 
software products as well as custom system development and 
systems integration services for a variety of  domestic and 
international clients in the public and private sectors.  
During the fiscal year ended September 30, 1994, the Company 
formed two wholly owned subsidiaries.  Integral Marketing, 
Inc. (IMI), specializes in the sales and marketing of 
electronic test instrumentation for the telemetry, data 
acquisition and test communities.  InterSys, Inc. (InterSys) 
provides consulting services in the area of satellite design 
and procurement, but is presently inactive.

	Accounting policies which affect significant aspects of the 
Company's consolidated financial position and results of 
operations are summarized below.  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.

	Principles of Consolidation

	The accompanying financial statements include the accounts of 
the Company and its wholly owned subsidiaries, IMI and 
InterSys.  All significant intercompany transactions have 
been eliminated in consolidation.

	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.
<PAGE>

             INTEGRAL SYSTEMS, INC. AND SUBSIDIAIRES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       For the Years Ended September 30, 1995 and 1994

1.	Summary of Significant Accounting Policies (continued)

	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.

	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.

	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.
<PAGE>

           INTEGRAL SYSTEMS, INC. AND SUBSIDIAIRES
          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      For the Years Ended September 30, 1995 and 1994

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.  Included in the cash balance is 
$96,329 held in a foreign bank account.

2.	Accounts Receivable and Revenue

	Accounts receivable at September 30, 1995 consists of the 
following:

		Billed		
		Government - prime contracts		$  177,807
		Government - subcontractors		    601,077
		Commercial customers		           874,893
			Subtotal		                    1,653,777

		Unbilled		
		Government - prime contracts		   826,129
		Government - subcontractors	     	57,008
		Commercial customers		           946,863
			Subtotal		                    1,830,000

			Total	                    	 $ 3,483,777

	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.
<PAGE>

             INTEGRAL SYSTEMS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         For the Years Ended September 30, 1995 and 1994


2.  Accounts Receivable and Revenue (continued)

	During the years ended September 30, 1995 and 1994, 
approximately 58% and 76%, 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, 1995 and 1994, 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, 1995 are as 
follows:
	
				
		
	Electronic equipment	            	$ 624,706
	Furniture and fixtures	             	41,716
	Leasehold improvements	             	11,364
	Software	                           	37,086

		Total property and equipment	     	714,872

	Less: accumulated depreciation 
		and amortization	              	(  426,248)
	
	                               			$ 288,624

4.	Software Development

	Software development costs consist of the following at 
September 30, 1995 are as follows:


		Costs incurred		               $2,327,519
		Accumulated amortization	 	      (954,302)

                             				$1,373,217

	The total amortization expense for the year ended September 
30, 1995 is $508,556.
<PAGE>

           INTEGRAL SYSTEMS, INC. AND SUBSIDIARIES
         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       For the Years Ended September 30, 1995 and 1994

5.	Line of Credit

	The Company has a line of credit agreement with a bank at 
September 30, 1995 for $1,200,000.  Borrowings under the line 
of credit bear interest at the bank's base 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 of 
credit also has certain financial covenants including minimum 
net worth and liquidity ratios.  At September 30, 1995, the 
Company had no outstanding balance under the line of credit

6.	Accrued expenses

	Accrued expenses at September 30, 1995 consist of the 
following:


		Accrued payroll		            $  346,037
		Accrued vacation	              	216,291
		Payroll taxes	                 	152,196
		Retirement plan payable	       	149,254
		Other	                          	11,470

                           				$  875,248

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 as 
of March 14, 1999 are as follows:

		Years ending September 30, 1996		$ 213,120
                         				1997  		219,520
                         				1998		  226,048
		                         		1999  		105,131

                             						$ 763,819

	Lease payments do not include operating expenses which are 
adjusted annually or utilities.  Rental expense was $248,944 
and $237,515 for the years ended September 30, 1995, and 1994, 
respectively.
<PAGE>
             INTEGRAL SYSTEMS, INC. AND SUBSIDIAIRES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       For the Years Ended September 30, 1995 and 1994

	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.

8.	Income Taxes

	For the years ended September 30, 1995 and 1994, the provision 
for income taxes consisted of the following:

</TABLE>
<TABLE>
                                     				      	1995         	1994
<S>                                            <C>            <C>
Current tax expense
 Federal           		                          $ 142,972	     $ 53,012
	State  	                                         31,706        11,736
                                               $ 174,678	     $ 64,748

	Deferred tax expense (benefit)		                 20,805	       (8,600)

	Total provision		                             $ 195,483	     $ 56,148
</TABLE>
	
	At September 30, 1995, the deferred income tax asset results 
from accrued vacation and depreciation and amortization from 
product development.  The sources and tax effect of temporary 
differences between financial statement and tax income, for 
the years ended September 30, 1995 and 1994, are summarized 
below:
					
                                      					1995	         1994
			Depreciation and amortization		         $23,634	  $      -
			Vacation accrual	                        (2,829)    (8,600)

		Deferred tax expense (benefit)		          $20,805	 $ (8,600)
<PAGE>

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

                  					                        1995	      1994

			Federal statutory rate		                    34.0%	     34.0%
			State tax, net of federal
			  income tax benefit		                       4.6      		4.6
			Tax exempt interest	                       	(0.8)		    (5.5)
			Tax deductible stock option compensation		  (4.1)       		-
			Benefit of lower tax brackets	                	-	     	(5.0)
			Other, primarily change in estimate	        	0.2		      1.9

			Effective rate		                            33.9%	     30.0%


9.		Profit Sharing and Employee Benefits Plans

		The Company has a profit sharing plan 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 40l(k) plans 
were combined into one plan.

		The Company also has a money purchase plan.  For the years 
ended September 30, 1995 and 1994, the money purchase plan 
obligated the Company to contribute 5% of eligible salaries 
under the plan

		For the years ended September 30, 1995 and 1994,  
contributions to the plans were $455,269, and $511,609, 
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.

		Stock option transactions under the plan for the years ended 
September 30, 1995 and 1994 are summarized as follows:
                                         		   		1995	        1994

		Options outstanding at beginning of year	     30,800	      39,700
		Granted	                                      21,100	       3,100
		Exercised                                    	(5,726)    	(10,050)
		Canceled	                                          -	      (1,950)

		Options outstanding at end of year	           46,174	      30,800

		Option price range	                           $17.75 to	  $15.00 to
				                                             $26.00	     $15.50

		Options exercisable at September 30	          15,714	      27,700

		Options available for grant at September 30	 135,200     	156,300


11.		Supplemental Cash Flow Information

		For the years ended September 30, 1995 and 1994, income taxes 
paid, net of refunds, were $81,012, and $125,080, 
respectively. For the years ended September 30, 1995 and 
1994, interest expense incurred and paid was $2,529 and $68, 
respectively.
<PAGE>