---

---

UNITED
STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

---

FORM 10-Q


QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THESECURITIES EXCHANGE ACT OF 1934

|For the Quarter
    Ended: |  | Commission File
    Number:
|-------------------------- |  | ---------------------------
|June 30, 2000              |  | 333-36447                  

---

FEDERAL DATA CORPORATION(Exact
name of Registrant as specified in its charter)


|DELAWARE                            |  | 52-0940566                         
|----------------------------------- |  | -----------------------------------
|(State or other jurisdiction
    of |  | (I.R.S. Employer
    Identification
|incorporation)                      |  | Number)                            

4800 Hampden Lane Bethesda, MD
20814(Address of principal executive offices) (Zip
Code)

(301) 986-0800(Registrant's telephone number, including area code)

Not Applicable
  (Former name, former address, and former fiscal year, if
  changed since last report)

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 was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes
[X] No [ ]

As of the close of business July 31, 2000, the Registrant had
  outstanding 2,917,996 shares of Common Stock, par value $.01 per share.

---

---







INDEX

Part I. Financial
Information

Item 1. Consolidated
Financial Statements

Consolidated
Balance Sheets as of December 31, 1999 and June 30, 2000
(Unaudited)

Consolidated
  Statements of Operations for the Three Months Ended June 30, 1999 and 2000 (Unaudited)
  and the Six Months Ended June 30, 1999 and 2000 (Unaudited)

Consolidated
  Statements of Cash Flows for the Six Months Ended June 30, 1999 and 2000
 (Unaudited)

Notes to
Consolidated Financial Statements (Unaudited)

Item 2. Management's
Discussion and Analysis of Financial Condition and Results of
Operations

Item 3. Quantitative
and Qualitative Disclosure about Market Risk

Part II. Other
Information

Item 6. Exhibits and
Reports on Form 8-K



PART I. Financial
Information

Item 1. Consolidated Financial
Statements





Federal Data CorporationConsolidated Balance
Sheets(In thousands, except share data)

|                                                                         | December 31, |   | June 30,    |  
|------------------------------------------------------------------------ | ------------ | - | ----------- | -
|                                                                         | 1999         |   | 2000        |  
|Assets                                                                   |              |   | (Unaudited) |  
|                                                                         |              |   |             |  
|Cash and cash equivalents                                                | $4,095       |   | $1,298      |  
|Accounts receivable                                                      | 129,774      |   | 130,564     |  
|Net investment in
        sales-type leases                              | 5,672        |   | 4,281       |  
|Inventory                                                                | 6,020        |   | 9,590       |  
|Other assets                                                             | 3,317        |   | 4,740       |  
|Total  current assets                                                    | 148,878      |   | 150,473     |  
|                                                                         |              |   |             |  
|Net
        investment in sales-type leases                              | 2,714        |   | 2,433       |  
|Leased and other property
        and equipment                          | 6,071        |   | 6,837       |  
|Goodwill and intangibles                                                 | 57,718       |   | 54,378      |  
|Other assets                                                             | 10,783       |   | 10,339      |  
|Total assets                                                             | $226,164     |   | $224,460    |  
|                                                                         |              |   |             |  
|Liabilities and stockholders' deficit                                    |              |   |             |  
|                                                                         |              |   |             |  
|Accounts payable and other liabilities                                   | $95,667      |   | $89,250     |  
|Recourse notes payable                                                   | 2,000        |   | -           |  
|Nonrecourse
        obligations under capital leases                     | 1,691        |   | 730         |  
|Total current liabilities                                                | 99,358       |   | 89,980      |  
|                                                                         |              |   |             |  
|Recourse notes payable                                                   | 131,000      |   | 142,940     |  
|Other liabilities                                                        | 2,058        |   | 1,789       |  
|Total liabilities                                                        | 232,416      |   | 234,709     |  
|Stockholders' deficit                                                    |              |   |             |  
|                                                                         |              |   |             |  
|Common
      stock, $.01 par value: 8,000,000 shares authorized;         |              |   |             |  
|2,932,196
      shares issued and 2,917,996 outstanding in 1999 and 2000 | 29           |   | 29          |  
|Capital in
        excess of par value                                   | 43,968       |   | 44,070      |  
|Accumulated
        deficit                                              | (50,249      | ) | (54,348     | )
|Total stockholders' deficit                                              | (6,252       | ) | (10,249     | )
|Commitments and contingencies                                            |              |   |             |  
|Total
        liabilities and stockholders' deficit                      | $226,164     |   | $224,460    |  

See notes to consolidated financial
statements





Federal Data CorporationConsolidated
Statements of Operations(In thousands)(Unaudited)



|                                            | Three Months Ended
        June 30, |   | Six Months Ended
        June 30, |  
|------------------------------------------- | ----------------------------------- | - | --------------------------------- | -
|                                            | 1999                                |   | 2000                              |  
|Revenue                                     |                                     |   |                                   |  
|Product sales                               | $109,017                            |   | $101,148                          |  
|Professional and support services           | 42,901                              |   | 44,270                            |  
|Interest and other                          | 287                                 |   | 412                               |  
|Total
        revenue                       | 152,205                             |   | 145,830                           |  
|                                            |                                     |   |                                   |  
|Expenses                                    |                                     |   |                                   |  
|Cost of sales and services                  | 136,337                             |   | 130,644                           |  
|Selling,
        general and administrative | 10,837                              |   | 11,210                            |  
|Goodwill and intangibles                    | 2,329                               |   | 1,614                             |  
|Interest                                    | 4,018                               |   | 4,094                             |  
|Total
        expenses                      | 153,521                             |   | 147,562                           |  
|                                            |                                     |   |                                   |  
|Loss before income tax benefit              | (1,316                              | ) | (1,732                            | )
|Income tax benefit                          | (45                                 | ) | (316                              | )
|Net loss                                    | ($1,271                             | ) | ($1,416                           | )

See notes to consolidated financial
statements



Federal Data CorporationConsolidated
Statements of Cash Flows(In thousands)(Unaudited)



|                                                          | Six Months Ended 
        June 30, |  
|--------------------------------------------------------- | ---------------------------------- | -
|                                                          | 1999                               |  
|Cash flows from operating activities:                     |                                    |  
|Net
        loss                                          | ($4,869                            | )
|Adjustments to reconcile  net loss to                     |                                    |  
|net
        cash flows from operating activities:         |                                    |  
|Depreciation and amortization                             | 6,404                              |  
|Amortization of deferred
        financing cost           | 474                                |  
|Non-cash compensation related
        to stock options    | 1,274                              |  
|Gain on
      sale of assets                              | (125                               | )
|Income recorded on sales-type
        leases              | (617                               | )
|Collections from sales-type
        leases                | 4,298                              |  
|Increase in inventory                                     | (1,819                             | )
|Increase in accounts receivable                           | (12,419                            | )
|Decrease in accounts payable
        and accrued expenses | (568                               | )
|Net
        change in other assets and liabilities        | 3,376                              |  
|Net cash flows from
        operating activities          | (4,591                             | )
|Cash flows from investing activities:                     |                                    |  
|Net
      proceeds from sale of property and equipment    | 488                                |  
|Purchase of equipment for
        sales-type leases       | (3,176                             | )
|Purchase of property and
        equipment                | (1,317                             | )
|Net cash flows from
        investing activities          | (4,005                             | )
|Cash flows from financing activities:                     |                                    |  
|Net
        borrowings under line of credit               | 9,000                              |  
|Proceeds
      from sale of common stock                  | 9                                  |  
|Repayments
      of borrowings                            | -                                  |  
|Repayments of capital lease
        obligations           | (1,013                             | )
|Net
        cash flows from financing activities          | 7,996                              |  
|Net change in cash and cash equivalents                   | (600                               | )
|Cash and cash equivalents, beginning of period            | 3,942                              |  
|Cash and cash equivalents, end of period                  | $3,342                             |  



See notes to consolidated financial
statements






Federal Data CorporationNotes to
Consolidated Financial Statements(In thousands, except share
data)(Unaudited)



Note 1 - Basis of Presentation

The accompanying unaudited consolidated financial statements
include the accounts of Federal Data Corporation and its wholly-owned
subsidiaries (collectively, the Company) and have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in the annual financial
statements, prepared in accordance with generally accepted accounting
principles, have been condensed or omitted pursuant to those rules and
regulations, although the Company believes that the disclosures made are
adequate to make the information presented not misleading.

In the opinion of management, the accompanying unaudited
consolidated financial statements reflect all necessary adjustments and
reclassifications (all of which are of a normal, recurring nature) that are
necessary for fair presentation for the periods presented. It is suggested that
these unaudited consolidated financial statements be read in conjunction with
the consolidated financial statements and the notes thereto included in the
Company's latest annual report to the Securities and Exchange Commission on Form
10-K 405 for the year ended December 31, 1999.

The results of operations for the three months and six months
ended June 30, 2000, are not necessarily indicative of the results to be
expected for the full fiscal year ending December 31, 2000.

All of the Company's direct and indirect wholly-owned
subsidiaries have fully and unconditionally guaranteed, on a joint and several
basis, the Company's obligations under its Senior Subordinated Notes. The
Company is a holding company with no assets or operations other than its
investments in its subsidiaries. The separate financial statements of the
subsidiary guarantors are not presented because the Company's management
believes that such financial statements are not material to investors.

---



Note 2 - Recent Accounting Pronouncements

In December 1999, the Securities and Exchange Commission issued
Staff Accounting Bulletin 101 (SAB 101), "Revenue Recognition in Financial
Statements" which summarizes certain of the staff's views on revenue
recognition. The Company's revenue recognition policies have been and continue
to be in accordance with SAB 101.



---





Note 3 - Reclassification

Certain amounts have been reclassified in the prior period to
conform to the current period presentations. These reclassifications had no
effect on net loss or retained earnings as previously reported.



---



Note 4 - Stockholders' Equity

In December 1995, FDC Holdings, Inc. merged with and into the
  Company with the Company continuing as the surviving corporation. In accordance
  with the merger agreement, the Company was to replace options previously outstanding
  at the merger date with options in the surviving corporation that provide substantially
  the same economic benefit to the option holder as the benefits provided prior
  to the merger. To fulfill this obligation, in March 1999, the Company issued
  fully vested options to purchase 40,425 shares of the Company's common stock
  at an exercise price of $2.00 per share. These options expire ten years from
  the date of grant. Accordingly, the Company recorded non-cash compensation of
  $1,011 and a related increase in capital in excess of par value based on the
  difference between the exercise price of the stock options and the then current
  fair market value.

During the six months ended June 30, 2000, the Company issued
  options to purchase 43,000 shares of the Company's common stock at an exercise
  price of $27.00 per share.

---

Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2000 COMPARED WITH THREE MONTHS
ENDED JUNE 30, 1999

The following table sets forth, for the periods indicated,
selected consolidated statements of operations data as a percentage of total
revenue:

|                                            | Three Months Ended
        June 30,
|------------------------------------------- | -----------------------------------
|                                            | 1999                               
|Revenue                                     |                                    
|Product sales                               | 71.6                               
|Professional and support
        services   | 28.2                               
|Interest and other                          | 0.2                                
|                                            |                                    
|Total
        revenue                       | 100.0                              
|                                            |                                    
|Expenses                                    |                                    
|Cost of
        sales and services          | 89.6                               
|Selling,
        general and administrative | 7.1                                
|Goodwill
        and intangibles            | 1.5                                
|Interest                                    | 2.7                                
|                                            |                                    
|Total
        expenses                      | 100.9                              
|                                            |                                    
|Loss before income tax benefit              | -0.9                               
|                                            |                                    

REVENUE

Revenue for the three months ended June 30, 2000 was $145.8 million,
  down $6.4 million or 4% from the comparable period of 1999. During the three
  months ended June 30, 1999, the Company recorded a significant sale of networking
  products to the U.S. Navy aggregating $25.5 million. Excluding the effect of
  this transaction, revenue increased $19.1 million or 15% over the comparable
  period of 1999. Revenue from product sales was $101.1 million, down $7.9 million
  or 7% from the comparable period of 1999. Excluding the effect of the U.S. Navy
  transaction, revenue from product sales increased $17.6 million or 21% over
  the comparable period of 1999.  This increase in revenue from product sales
  is primarily due to increased volume as a result of repeat customer business,
  partner referrals, outbound solicitation and electronic commerce. Revenue from
  professional and support services was $44.3 million, up $1.4 million or 3% over
  the comparable period of 1999.

GROSS MARGIN

Gross margin is revenue from product sales and professional and
  support services less cost of sales and services, which includes product purchase
  costs, personnel and other professional and support services costs. The Company's
  gross margin for the three months ended June 30, 2000 was $14.8 million, down
  $0.8 million or 5% from the comparable period of 1999. The Company's gross margin
  percentages vary over time and change depending on the product sold, the contract
  vehicle used and the portion of the work performed by Company personnel versus
  subcontractors. Gross margin as a percentage of product sales and professional
  and support services revenue for the three months ended June 30, 2000 was 10.2%
  compared with 10.3% for the comparable period of 1999.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE

Selling, general and administrative expense for the three months
  ended June 30, 2000 was $11.2 million, up $0.4 million or 3% over the comparable
  period of 1999. Selling, general and administrative expense for the three months
  ended June 30, 2000 was 7.7% of revenue compared with 7.1% of revenue for the
  comparable period of 1999.

AMORTIZATION OF GOODWILL AND INTANGIBLES

The excess of the cost of acquisitions over the fair value of
  identifiable net tangible and intangible assets acquired was $65.0 million and
  is being amortized on a straight-line basis over fifteen years. The present
  value of the contract profits of $16.5 million acquired in acquisitions is being
  amortized over the remaining terms of the acquired contracts in relation to
  the recognition of related contract revenue. Other identified intangibles including
  covenants not to compete, work force and trade names and trademarks of $5.1
  million acquired in acquisitions are being amortized over periods up to three
  years. Amortization of goodwill and intangibles for the three months ended June
  30, 2000 was $1.6 million, down $0.7 million or 31% from the comparable period
  of 1999, primarily due to the reduction in the amortization of the present value
  of contract profits acquired through the acquisitions.

INTEREST EXPENSE

Interest expense for the three months ended June 30, 2000 was
  $4.1 million, up $0.1 million or 2% over the comparable period of 1999.

INCOME TAX BENEFIT

The income tax benefit for the three months ended June 30, 2000
is based on an estimated annual effective rate, excluding expenses not
deductible for income tax purposes. Before giving effect to the
non-deductibility of the amortization of goodwill and the value assigned to
other identified intangibles associated with certain acquisitions and the
non-cash compensation related to stock options, the effective tax provision rate
for the year ending December 31, 2000 is estimated to be 40%, approximately the
same rate recorded during the three months ended June 30, 1999.

NET LOSS

Net loss for the three months ended June 30, 2000 was $1.4 million,
  a $0.1 million increase or 11% from the net loss of $1.3 million recorded in
  the comparable period of 1999 based on the reasons discussed above.

RESULTS OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 2000 COMPARED WITH SIX MONTHS ENDED
JUNE 30, 1999

The following table sets forth, for the periods indicated,
selected consolidated statements of operations data as a percentage of total
revenue:

|                                            | Six Months Ended
        June 30,
|------------------------------------------- | ---------------------------------
|                                            | 1999                             
|Revenue                                     |                                  
|Product sales                               | 67.2                             
|Professional and support
        services   | 32.5                             
|Interest and other                          | 0.3                              
|                                            |                                  
|Total
        revenue                       | 100.0                            
|                                            |                                  
|Expenses                                    |                                  
|Cost of
        sales and services          | 88.6                             
|Selling,
        general and administrative | 8.7                              
|Goodwill
        and intangibles            | 2.0                              
|Interest                                    | 3.1                              
|                                            |                                  
|Total
        expenses                      | 102.4                            
|                                            |                                  
|Loss before income tax benefit              | -2.4                             
|                                            |                                  

REVENUE

Revenue for the six months ended June 30, 2000 was $264.2 million,
  up $8.8 million or 3% over the comparable period of 1999. During the six months
  ended June 30, 1999, the Company recorded a significant sale of networking products
  to the U.S. Navy aggregating $25.5 million. Excluding the effect of this transaction,
  revenue increased $34.3 million or 15% over the comparable period of 1999.
  Revenue from product sales was $181.9 million, up $10.2 million or 6% over the
  comparable period of 1999. Excluding the effect of the U.S. Navy transaction,
  revenue from product sales increased $35.7 million or 24% over the comparable
  period of 1999.  This increase in revenue from product sales is primarily
  due to increased volume as a result of repeat customer business, partner referrals,
  outbound solicitation and electronic commerce. Revenue from professional and
  support services was $81.3 million, down $1.8 million or 2% from the comparable
  period of 1999. The decrease in professional and support services revenue is
  primarily due to the expiration of existing contracts which were originally
  awarded to acquired companies under small business set-aside programs or contracts
  which became set-aside programs after their expiration.

GROSS MARGIN

Gross margin is revenue from product sales and professional and
  support services less cost of sales and services, which includes product purchase
  costs, personnel and other professional and support services costs. The Company's
  gross margin for the six months ended June 30, 2000 was $27.2 million, down
  $1.3 million or 4% from the comparable period of 1999. The Company's gross margin
  percentages vary over time and change depending on the product sold, the contract
  vehicle used and the portion of the work performed by Company personnel versus
  subcontractors. Gross margin as a percentage of product sales and professional
  and support services revenue was 10.3% for the six months ended June 30, 2000,
  down from 11.2% for the comparable period of 1999. This decrease in gross margin
  was primarily the result of specific sales and marketing initiatives in the
  value-added product marketplace during the three months ended March 31, 2000.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE

Selling, general and administrative expense for the six months
  ended June 30, 2000 was $22.4 million, up $0.1 million over the comparable period
  of 1999. During the six months ended June 30, 1999, the Company issued stock
  options in accordance with the Company's merger with FDC Holdings, Inc. in 1995.
  Accordingly, the Company recorded non-cash compensation of $1.0 million during
  the six months ended June 30, 1999 and a related increase in capital in excess
  of par value based on the difference between the exercise price of the stock
  options and the then current fair market value. Excluding the effect of the
  non-cash compensation, selling, general and administrative expense for the six
  months ended June 30, 2000 was 8.5% of revenue compared with 8.3% of revenue
  for the comparable period of 1999.

AMORTIZATION OF GOODWILL AND INTANGIBLES

The excess of the cost of acquisitions over the fair value of
  identifiable net tangible and intangible assets acquired was $65.0 million and
  is being amortized on a straight-line basis over fifteen years. The present
  value of the contract profits of $16.5 million acquired in acquisitions is being
  amortized over the remaining terms of the acquired contracts in relation to
  the recognition of related contract revenue. Other identified intangibles including
  covenants not to compete, work force and trade names and trademarks of $5.1
  million acquired in acquisitions are being amortized over periods up to three
  years. Amortization of goodwill and intangibles for the six months ended June
  30, 2000 was $3.3 million, down $1.8 million or 35% from the comparable period
  of 1999, primarily due to the reduction in the amortization of the present value
  of contract profits acquired through the acquisitions.

INTEREST EXPENSE

Interest expense for the six months ended June 30, 2000 was $8.0
  million, up $0.1 million or 2% over the comparable period of 1999.

INCOME TAX BENEFIT

The income tax benefit for the six months ended June 30, 2000
  is based on an estimated annual effective rate, excluding expenses not deductible
  for income tax purposes. Before giving effect to the non-deductibility of the
  amortization of goodwill and the value assigned to other identified intangibles
  associated with certain acquisitions and the non-cash compensation related to
  stock options, the effective tax provision rate for the year ending December
  31, 2000 is estimated to be 40%, approximately the same rate recorded during
  the six months ended June 30, 1999.

NET LOSS

Net loss for the six months ended June 30, 2000 was $4.1 million,
  a $0.8 million reduction or 16% from the net loss of $4.9 million recorded
  in the comparable period of 1999 based on the reasons discussed above.

LIQUIDITY AND CAPITAL RESOURCES

Historically, the Company's primary source of liquidity is cash
  provided by operations and financing activities. In general, the Company's liquidity
  requirements vary seasonally with revenue, which are historically higher in
  the third and fourth quarters of each fiscal year. Cash flow from the collection
  of accounts receivable from the U.S. Government (the Government) has generally
  been predictable and dependable. Cash and cash equivalents were $1.3 million
  at June 30, 2000, down $2.8 million from December 31, 1999 primarily as a result
  of net cash used in operating activities of $8.6 million and net cash used in
  investing activities of $3.2 million being partially offset by cash generated
  from financing activities of $9.0 million. Net cash used from operating activities
  was primarily a result of the decrease in accounts payable and accrued expenses
  of $5.0 million and an increase in inventory of $3.6 million. Net cash used
  in investing activities was the result of purchases of property and equipment
  of $2.0 million and equipment purchased for sales-type leases of $1.2 million.
  Net cash flow from financing activities was primarily the result of net borrowings
  under the Company's working capital line of credit of $12.0 million, being
  partially offset by repayments of other borrowings of $2.0 million.
  In March 2000, certain financial covenants within the Company's Senior Credit
  Facility were amended.

EBITDA, as calculated below, represents the sum of loss before
income tax benefit, net recourse interest expense, depreciation and amortization
and one-time non-cash charges. EBITDA is not a measure of performance or
financial condition under generally accepted accounting principles, but is
presented to provide additional information related to debt service capability.
EBITDA should not be considered in isolation or as a substitute for other
measures of financial performance or liquidity under generally accepted
accounting principles. While EBITDA is frequently used as a measure of
operations and the ability to meet debt service requirements, it is not
necessarily comparable to other similarly titled captions of other companies due
to the potential inconsistencies in the method of calculation.

The following presentation represents the Company's computation
of EBITDA (in thousands):

|                                                       | Six Months Ended
        June 30, |   |        
|------------------------------------------------------ | --------------------------------- | - | -------
|                                                       | 1999                              |   | 2000   
|Loss
        before income tax benefit                 | ($6,184                           | ) | ($5,542
|Net
        recourse interest expense                  | 7,644                             |   | 7,904  
|Non-cash
        compensation related to stock options | 1,274                             |   | 102    
|Depreciation
        and amortization                  | 6,404                             |   | 4,617  
|EBITDA                                                 | $9,138                            |   | $7,081 





YEAR 2000 COMPLIANCE

To date, the Company has not experienced any significant
failures or disruptions in its internal operating systems or in its dealings
with third party suppliers and customers. The Company continues to monitor its
infrastructure and its critical business partners to ensure continued Year 2000
compliance. There can be no assurance that the Company will not experience
unanticipated negative consequences and/or material costs caused by undetected
errors or defects in the technology used in its internal systems, which are
comprised of third party products, or by unidentified problems experienced by
its suppliers or customers. However, the Company does not believe that a
material adverse effect from Year 2000 issues is likely. The Company incurred
$0.9 million in connection with Year 2000 compliance, and does not anticipate
any significant future costs.

###

This quarterly report on Form 10-Q contains statements which, to
the extent that they are not recitations of historical fact, constitute
"forward-looking statements" that are based on management's expectations,
estimates, projections and assumptions. Words such as "expects," "anticipates,"
"plans," "believes," "estimates," variations of such words and similar
expressions are intended to identify such forward-looking statements that
include, but are not limited to, projections of future performance, assessment
of contingent liabilities and expectations concerning liquidity, cash flow and
contract awards. Such forward-looking statements are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. These
statements are not guarantees of future performance and involve certain risks
and uncertainties that are difficult to predict. Therefore, actual future
results and trends may differ materially from what is forecast in
forward-looking statements due to a variety of factors, including the Company's
successful execution of internal performance plans; performance issues with key
suppliers and subcontractors; developments with respect to contingencies such as
legal proceedings or administrative proceedings challenging any contract award;
labor negotiations; changing priorities or reductions in the budgets of
Government agencies who purchase products or services from the Company;
termination of Government contracts due to unilateral Government action; and the
impact of the "Year 2000" issue on the Company and its customers and suppliers.
For additional information, see "Risk Factors" in the Company's Registration
Statement on Form S-4, SEC File Number 333-36447.

The previous discussion and analysis should be read in
conjunction with the consolidated financial statements and related notes
included elsewhere in this report.

###

Item 3. Quantitative and Qualitative
Disclosure about Market Risk

The Company is exposed to market risk from changes in interest
rates due to investments in instruments made for non-trading purposes. The
interest rate risk relates primarily to the Company's portfolio of short-term
investment grade securities. The Company is also subject to risk relating to
fluctuating interest rates under its Senior Credit Facility. The Company
believes that interest rate risk is immaterial to the Company.

Part II. Other Information

Item 6 (a). Exhibits

27        Financial Data
Schedule.

Item 6 (b). Reports on Form 8-K

None.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.

|    | FEDERAL DATA CORPORATION                                                                                    
|--- | ------------------------------------------------------------------------------------------------------------
|    |                                                                                                             
|By: | / s/ James M.
      Dean                                                                                    
|    | James M.
      Dean        Vice President,
      Chief Financial
      Officer           and
      Treasurer
|    | Date: August 11,
      2000                                                                                 





QUICKLINKS





Part I
Item 1.Consolidated
  Financial StatementsConsolidated Balance Sheets as of December 31, 1999 and June 30, 2000 (Unaudited)Consolidated Statements of Operations for the Three Months Ended June 30,
  1999 and 2000 (Unaudited) and the Six Months Ended June 30, 1999 and 2000
 (Unaudited)Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1999 and 2000
(Unaudited)Notes
  to Consolidated Financial Statements (Unaudited)Note 1 - Basis of PresentationNote 2 - Recent Accounting
  PronouncementsNote 3 - ReclassificationNote 4 - Stockholders'
  EquityItem 2. Management's
  Discussion and Analysis of Financial Condition and Results of OperationsItem 3. Quantitative
  and Qualitative Disclosure about Market RiskPart IIItem 6. Exhibits and
  Reports on Form 8-KSignature