As filed with the Securities and Exchange Commission on November 8, 2002

Registration No. 333-87964

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

AMENDMENT NO. 5 TO FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933

SI INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in its Charter)

8484 Westpark Drive, Suite 630
McLean, Virginia 22102
(703) 762-0000
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)

Ray Oleson
Chief Executive Officer
SI International, Inc.
8484 Westpark Drive, Suite 630
McLean, Virginia 22102
(703) 762-0000
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)

Copies to:

        Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

        If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o                

        If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o                

        If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o                

        If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

        If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. / /

CALCULATION OF REGISTRATION FEE

(1)

Includes 652,500 shares issuable upon exercise of an over-allotment option granted to the underwriters.

(2)

Estimated pursuant to Rule 457(o) under the Securities Act of 1933, as amended, solely for the purpose of computing the amount of the registration fee.

(3)

Previously paid.

        The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine.

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.

4,350,000 Shares

SI International, Inc.
Common Stock

        This is SI International, Inc.'s initial public offering. Of the 4,350,000 shares of common stock being offered, 3,850,000 shares are being sold by SI International, Inc. and 500,000 shares are being sold by the selling stockholders. SI International, Inc. will receive no proceeds from the sale of shares by the selling stockholders. We expect the initial public offering price of our common stock to be between $14.00 and $16.00 per share.

        Prior to this offering, there has been no public market for our common stock. Our common stock has been approved for quotation on the Nasdaq National Market under the symbol "SIIT."

        Investing in our common stock involves risks. See "Risk Factors" beginning on page 9.

        Delivery of the shares of common stock will be made on or about                        , 2002.

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

        We and the selling stockholders have granted the underwriters an option to purchase a maximum of 652,500 additional shares of common stock to cover over-allotments of shares, exercisable at any time until 30 days after the date of this prospectus.

The date of this prospectus is                        , 2002.

TABLE OF CONTENTS

        You may rely on the information contained in this prospectus. Neither we nor any of the underwriters has authorized anyone to provide information different from that contained in this prospectus. When you make a decision about whether to invest in our common stock, you should not rely upon any information other than the information in this prospectus. Neither the delivery of this prospectus nor any sale of our common stock means that information contained in this prospectus is correct as of any date after the date of this prospectus. This prospectus is not an offer to sell or solicitation of an offer to buy these shares of common stock in any circumstances under which the offer or solicitation is unlawful.

Dealer Prospectus Delivery Obligations

        Until                        , 2002 (25 days after the commencement of this offering), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This delivery is in addition to the dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to its unsold allotments or subscriptions.

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PROSPECTUS SUMMARY

        You should read the following summary together with the more detailed information, including the financial statements and notes thereto, appearing elsewhere in this prospectus. In this prospectus, "SI," "we," "us" and "our" refer to SI International, Inc. and its subsidiaries, after giving effect to the SI Telecom merger described in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Company History," unless otherwise expressly stated or the context otherwise requires.

SI INTERNATIONAL, INC.

        We are a provider of information technology and network solutions primarily to the federal government. Our clients include the U.S. Air Force Space Command, U.S. Army, the Department of State, the Immigration and Naturalization Service and the intelligence community. In addition, we provide our services to a small number of commercial entities. We combine our technological and industry expertise to provide a full spectrum of state-of-the-practice solutions and services, from design and development to implementation and operations, to assist our clients in achieving their missions. We integrate our technical areas of expertise into comprehensive solutions covering information technology applications, systems engineering, network and telecommunications engineering and outsourcing. We address these areas of need through our specialized practice areas focused on:

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software development

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systems consulting

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eSolutions

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information security

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learning solutions

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systems engineering

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network engineering, furnishing, installation, and testing/turn-up

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mission-critical outsourcing

        Our business is guided by our experienced team of five executive officers, who have an average of 20 years of executive level experience in our industry. Our next level of senior management is comprised of seven individuals who have an average of 27 years of experience in managing government information technology businesses. We provide our full suite of services through our workforce of over 1,200 employees. Approximately 61% of these employees hold federal government security clearances or have passed National Agency Checks. Approximately 23% of our employees hold Top Secret security clearances. A significant portion of our employees who hold Top Secret security clearances also hold Sensitive Compartmental Information clearances, which permit us to bid on highly classified projects.

        The strength of our service offerings and information technology expertise has resulted in our extensive client relationships. As of September 28, 2002, we had over 500 active engagements. In fiscal 2001 and in the nine months ended September 28, 2002, we derived approximately 82% of our revenue by acting as prime contractor under contracts with the federal government. Our broad set of contract vehicles gives us extensive reach and enables us to deliver a full range of our services and solutions to the federal government.

        Our total backlog at September 28, 2002 was approximately $212.3 million, of which approximately $53.5 million was funded. Backlog is our estimate of the amount of future revenue we expect to realize over the remaining life of our signed contracts and task orders as of the measurement date. Our total backlog consists of funded and unfunded backlog. Our funded backlog is the estimated future revenues under government contracts and task orders for which Congress has appropriated funding and the applicable agency has authorized the expenditure, plus revenues we expect to receive under signed purchase orders with commercial clients. Unfunded backlog reflects our estimate of future revenues under signed government contracts and task orders for which either funding has not been appropriated or expenditures have not been authorized.

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Our Market Opportunity

        The ongoing modernization of the federal government's information systems and communication networks is creating an increase in its demand for information technology services. According to INPUT, an independent market research firm, federal government information technology spending is projected to increase from $37.1 billion in government fiscal 2002 to $63.3 billion in government fiscal 2007, representing a compound annual growth rate of approximately 11.3%. However, we believe that many information technology requirements are not specifically included in the information technology portion of the federal government's budget.

        We believe the following industry trends will also continue to drive the federal government technology services market:

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Increased federal government reliance on outsourcing. We believe that the federal government is increasingly turning to the information technology industry to execute support processes and functions that were traditionally performed in-house. In October 2001, the General Accounting Office published a report stating that, of the total federal government fiscal 2000 information technology expenditures of $42.3 billion, the federal government purchased $13.4 billion of information technology services from outside contractors, compared to $3.7 billion in 1990, representing a compound annual growth rate of 13.7%. We expect that several trends will contribute to the federal government's increasing use of service providers, including the aging of the federal government's workforce and increased governmental emphasis on competitive sourcing. We believe that we will continue to gain new engagements to the extent that the federal government increases its reliance on outsourcing for its information technology needs.



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Increased spending on homeland security and intelligence. In the wake of the terrorist attacks on September 11, 2001, there has been an increased emphasis on homeland security, intelligence and national defense, including protecting critical infrastructure. On September 18, 2001, Congress enacted a $40.0 billion emergency supplemental appropriation bill for these purposes. In addition, as of April 30, 2002, the administration has proposed increasing the funding for homeland security from $16.0 billion in government fiscal 2001 to $19.5 billion and $37.7 billion for government fiscal 2002 and government fiscal 2003, respectively. We expect that a portion of each of these amounts will be allocated to information technology spending. Although the total amount to be spent for intelligence applications is classified, the most recently declassified information, which was for government fiscal 1998, indicated that the aggregate budget for federal intelligence agencies and intelligence activities was $26.7 billion. We believe that there will be further increases in spending on federal intelligence activities, which are expected to represent significant additional opportunities for us.



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Increased simplicity of procurement. Federal governmental agencies have increasingly been able to rely on multiple contracting vehicles to procure needed services in an expedient manner. According to INPUT, the average time to procure products and services was approximately 55% less in government fiscal 2001 than it was in government fiscal 1995.

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Our Core Strengths

        We strategically built our business to respond specifically to the federal information technology marketplace. We believe that our core strengths position us to respond to the long term trends and changing demands of our principal market.

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Our Experienced Management Team. Our business is guided by our experienced team of five executive officers, who have an average of 20 years of executive level experience in our industry and a history of successfully growing information technology service providers. Our executive officers have served as presidents, chief operating officers and chief financial officers at Fortune 500 and industry-leading public companies. We believe that the strength of our executive team is further enhanced by our next level of senior management, which includes seven individuals with an average of 27 years of experience in managing government information technology businesses.



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Our Corporate Culture. We believe our commitment to a culture of respect for clients, personnel, business partners and management is a cornerstone of our company. Our culture helps us build the relationships necessary to gain an in-depth understanding of our clients' needs, business practices and information technology and network systems. Further, we believe that our culture is a factor in helping our employee turnover rate remain low compared to other companies in our industry, helping us to maintain client domain knowledge and provide consistent service to our clients, and is an important factor in retaining clients and winning new referrals.



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Focus on Information Technology Services. We deliver a full spectrum of information technology services and solutions that address challenges common to many governmental agencies and commercial companies. Our focus on end-to-end information technology solutions allows us to leverage our knowledge and experience to provide best practices across many federal government agencies and industries. We deliver these solutions through our over 1,200 employees, many of whom possess federal government security clearances and National Agency Checks that allow us to bid on and perform classified work for the federal government.



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Knowledge of Federal Government Contracting and Federal Agencies. We believe that we have an in-depth knowledge of federal government contracting and the governmental agencies we serve and their procurement processes that allows us to better provide solutions for our clients' needs. We believe that the insight provided by our officers and managers allows us to design solutions that are responsive to our clients' mission critical needs.



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Successful Integration of Acquired Businesses. We believe that a critical component of our success is our ability to identify, acquire and integrate companies that build or expand our suite of services to serve our clients' needs more effectively. Prior to the formation of our company in 1998, members of our management team participated in a total of 16 acquisitions. We believe that this experience provided a basis for our disciplined approach and resulting success in acquiring and integrating four companies.

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Our Growth Strategy

        We have implemented the following strategies in order to reach our goal of becoming a leading provider of information technology and network solutions to our clients:

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Maintain and expand our existing client relationships. We maintain relationships with our existing clients by adhering to our culture of respect and providing quality performance.



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Leverage our existing client base to win new clients. We believe satisfied clients are one of our most effective marketing tools. Since we focus on technology infrastructure improvement, we are able to transfer our skills readily from client to client. We plan to continue building a network of clients and leveraging these relationships to gain access to new clients.



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Pursue strategic acquisitions. We plan to continue utilizing our disciplined methodology to identify, evaluate and integrate strategic acquisitions. We have acquired and successfully integrated four businesses since 1999, which positioned us with strategically important technical skills in important client areas.

        Our principal executive offices are located at 8484 Westpark Drive, Suite 630, McLean, Virginia 22102 and our telephone number is (703) 762-0000. Our website is located at www.si-intl.com. The information on our website does not constitute part of this prospectus.

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THE OFFERING

        The foregoing information as to the number of shares of our common stock to be outstanding after this offering is based on shares outstanding as of September 28, 2002 and has been prepared on a pro forma basis assuming the conversion of all of our outstanding shares of preferred stock into common stock (based on an assumed public offering price of $15.00 per share), the issuance of shares of our common stock and options and warrants to purchase shares of our common stock in connection with the SI Telecom merger described in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Company History", the issuance of shares of our common stock upon the exercise of certain warrants and the completion of a reverse stock split pursuant to which approximately every 18.54 shares of our common stock outstanding at the time of the reverse split was converted into one share of our common stock as if those transactions had occurred as of that date.

        This information excludes:

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326,250 shares of our common stock issuable by us upon the exercise of the underwriters' over allotment option (although the information does include 326,250 shares of common stock that may be sold by the selling stockholders upon exercise of the underwriters' over-allotment option);



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240,881 shares of common stock issuable upon the exercise of stock options outstanding under our stock option plans as of September 30, 2002 at a weighted average exercise price of $11.13 per share, calculated on a pro forma basis assuming the issuance of options to purchase shares of our common stock in connection with the SI Telecom merger as if it had occurred as of September 28, 2002, and 376,000 shares of common stock issuable upon exercise of options to be granted to some of our officers and directors and an additional 386,831 shares of common stock issuable upon exercise of options to be granted to some of our employees under our 2002 stock incentive plan prior to or contemporaneously with the closing of this offering at an exercise price equal to the public offering price per share in this offering;



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837,169 additional shares of common stock reserved and available for issuance under our 2002 stock incentive plan as of September 30, 2002, plus annual increases in the number of shares that will be reserved for issuance under our 2002 stock incentive plan; and



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warrants to purchase common stock that we will purchase with a portion of the net proceeds from this offering.

        Unless otherwise expressly stated or the context otherwise requires, all information contained in this prospectus assumes that the underwriters' over-allotment option will not be exercised and also assumes the amendment of our certificate of incorporation and bylaws, which amendment is expected to occur prior to or contemporaneously with the closing of this offering.

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        Unless otherwise expressly stated or the context otherwise requires, information presented in this prospectus (other than our historical financial statements and notes thereto and other historical financial information with respect to us) as to the number of shares, options or warrants outstanding as of any date has been prepared on a pro forma basis assuming the conversion of all of the outstanding shares of our preferred stock into common stock (based on an assumed public offering price of $15.00 per share), the issuance of shares of our common stock and options and warrants to purchase shares of our common stock in connection with the SI Telecom merger, the issuance of shares of our common stock upon the exercise of certain warrants and the completion of a reverse stock split pursuant to which approximately every 18.54 shares of our common stock outstanding at the time of the reverse split was converted into one share of our common stock as if those transactions had occurred as of that date. The SI Telecom merger was completed in October 2002, the approximately 18.54 reverse stock split was completed in November 2002 and the remaining transactions are expected to be completed prior to or contemporaneously with the closing of this offering.

        The number of shares of our common stock that will be issued upon conversion of our outstanding preferred stock as described above will be determined by dividing the aggregate liquidation value of that preferred stock, plus accrued and unpaid dividends through the conversion date, by a number which is equal to the public offering price per share of our common stock in this offering, and has been calculated based upon an assumed public offering price of $15.00 per share of common stock and an assumed conversion date of November 13, 2002 (or, for purposes of the pro forma information set forth under "Summary Consolidated Financial Data," "Capitalization," "Selected Consolidated Financial Data" and in our consolidated financial statements included elsewhere herein, September 28, 2002). Accordingly, information regarding the number of shares of common stock to be outstanding after this offering and other information that is calculated on a pro forma basis assuming the conversion of our preferred stock for common stock will change unless the actual initial public offering price in this offering is $15.00 per share and, in the case of any such information that is calculated on the basis of an assumed conversion date of November 13, 2002, will also change if the conversion date is not November 13, 2002.

        Unless otherwise expressly stated or the context otherwise requires, all historical financial information presented in this prospectus with respect to us, including financial statements and notes thereto, has been prepared as if SI Telecom had been our wholly owned subsidiary for fiscal 2001 and thereafter and also assumes completion of the approximately 18.54 for one reverse stock split referred to above, but does not give effect to the conversion of our outstanding shares of preferred stock into common stock, the issuance of shares of our common stock upon the exercise of certain warrants or the issuance of shares of our common stock and options and warrants to purchase shares of our common stock in connection with the SI Telecom merger. See notes 1 and 15 to our consolidated financial statements included elsewhere in this prospectus.

        We generally perform our services for federal governmental agencies pursuant to both contracts and task orders. A contract may include specific work requirements for a particular job that is to be performed or may instead provide a framework that defines the scope and terms under which work may be performed in the future, in which case any task orders that may be issued from time to time under the contract set forth the specific work assignments that are to be performed under the contract. In this prospectus, references to any contract includes the task orders, if any, issued under that contract. Accordingly, information in this prospectus regarding our revenues under governmental contracts includes revenues we receive under both contracts and task orders, and references in this prospectus regarding the number of our "engagements" means specific work that we have contracted to perform pursuant to both contracts and task orders.

        Throughout this prospectus we use "government fiscal year" and "fiscal year" to describe the federal government's and our fiscal year, respectively, and statements with respect to our revenue or other financial statement items for a particular year, such as 2001, refer to our revenue or that item, as the case may be, for that fiscal year. The government's fiscal year runs from October 1 to September 30. Our fiscal year is based on the calendar year and ends each year on the Saturday closest to December 31 of that year and the first nine months of our fiscal year end on the Saturday closest to September 30 of that year.

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SUMMARY CONSOLIDATED FINANCIAL DATA

        The summary financial data presented below for our 1999, 2000 and 2001 fiscal years, and as of the end of our 2000 and 2001 fiscal years, are derived from our audited consolidated financial statements included elsewhere in this prospectus. The summary financial data presented below as of the end of our 1999 fiscal year is derived from our audited consolidated financial statements not included in this prospectus. The summary financial data for, and as of the end of, fiscal years 1997 and 1998 under the heading "Predecessor" are derived from the audited financial statements of SI International Application Development, Inc., formerly known as Statistica, Inc. We were founded in 1998 and acquired SI International Application Development, Inc., or SI Development, on January 15, 1999. SI Development is considered our predecessor for financial reporting purposes. The summary financial data presented below for, and as of the end of, the nine months ended September 29, 2001 and September 28, 2002 are derived from our unaudited financial statements included elsewhere in this prospectus and include all adjustments, consisting of normal and recurring adjustments, that we considered necessary for a fair presentation of the financial position and results of operations as of and for such periods. Financial results for any interim period are not necessarily indicative of the results that may be expected for the full fiscal year. You should read the summary financial data presented below in conjunction with the consolidated financial statements, the notes to the consolidated financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus.

        All fiscal years shown below include 52 weeks and both nine month periods shown below include 39 weeks.

(1)

On January 1, 2001, we transferred our telecommunications business to SI International Telecom Corporation, or SI Telecom, a corporation owned primarily by our stockholders. We acquired the telecommunications business as part of our acquisition of SI International Engineering, Inc., formerly known as System Technology Associates, Inc., on March 9, 2000. In October 2002, we merged SI Telecom with a wholly owned subsidiary of SI International Engineering, Inc. We sometimes

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refer to this merger as the "merger" or the "SI Telecom merger." Because of this merger, our financial statements and the other financial data with respect to us appearing in this prospectus have been prepared as if SI Telecom had been our wholly owned indirect subsidiary for all of fiscal 2001 and thereafter. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Company History" and Note 1 to our consolidated financial statements, included elsewhere in this prospectus, for a further discussion of the merger.

(2)

For fiscal 2002, we adopted SFAS No. 142 "Goodwill and Other Intangible Assets" which requires that goodwill no longer be amortized. If SFAS No. 142 had been effective for the nine months ended September 29, 2001, net loss attributable to common stockholders would have decreased by $1.9 million to net income of $0.2 million and basic and diluted loss per common share would have decreased by $0.74 to basic and diluted earnings of $0.09 per common share.

(3)

This per share data gives effect to the approximately 18.54 for one reverse stock split which occurred in November 2002 as if that transaction had occurred as of the first day of the respective periods presented.

(4)

Pro forma per share data gives effect to the conversion of all of our preferred stock into common stock (based on preferred stock dividends accrued through September 28, 2002) which is expected to occur prior to or contemporaneously with the closing of this offering, the approximately 18.54 for one reverse stock split which occurred in November 2002, and the issuance of additional shares of our common stock in connection with the SI Telecom merger and upon the exercise of certain warrants, both of which occurred in October 2002, as if those transactions had occurred as of the first day of the respective periods presented. See note 15 to our consolidated financial statements included elsewhere in this prospectus. Pro forma per share data does not reflect approximately 18,083 additional shares of our common stock to be issued upon conversion of our preferred stock as the result of dividends accruing from September 28, 2002 to November 13, 2002 (assuming conversion occurs on November 13, 2002).

(5)

EBITDA is defined as net income (loss) plus interest expense, income taxes, depreciation and amortization, certain non-cash compensation and charges resulting from changes in the fair value of our put warrants and minority interests. See Notes 11 and 13 to our consolidated financial statements, which are included elsewhere in this prospectus. EBITDA as calculated by us may be calculated differently than EBITDA for other companies. We have provided EBITDA because it is a commonly used measure of financial performance as well as to enhance an understanding of our operating results. EBITDA should not be construed as either:

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an alternative to net income (loss), as determined in accordance with generally accepted accounting principles in the United States, as an indicator of our operating performance; or

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an alternative to cash flows as a measure of liquidity.

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RISK FACTORS

        This offering involves a high degree of risk. You should carefully consider the risks described below, as well as the other information set forth in this prospectus, before you decide to buy our common stock. The risks and uncertainties described below are not the only ones we face. Any of the risks described below could significantly and adversely affect our business, prospects, financial condition or results of operations. In that case, the trading price of our common stock could fall and you may lose all or part of the money you paid to buy our common stock.

Risks Related to Our Industry

We depend on contracts with the federal government for most of our revenue, and our business would be seriously harmed if the government ceased doing business with us or significantly decreased the amount of business it does with us.

        We derived approximately 88% and 93% of our total revenue in fiscal 2001 and for the nine months ended September 28, 2002, respectively, from federal government contracts, either as a prime contractor or a subcontractor. This includes approximately 45% and 49% of our total revenue in fiscal 2001 and in the nine months ended September 28, 2002, respectively, that we derived, either as a prime contractor or a subcontractor, from contracts with agencies of the Department of Defense and intelligence community. We expect that we will continue to derive most of our revenue for the foreseeable future from work performed under federal government contracts. If we were suspended or prohibited from contracting with the federal government generally, or with any significant agency of the Department of Defense or the intelligence community, or if our reputation or relationship with the federal government or any significant agency of the Department of Defense or the intelligence community were impaired, or if any of the foregoing otherwise ceased doing business with us or significantly decreased the amount of business it does with us, our business, prospects, financial condition and operating results would be seriously harmed.

        Our two largest contracts, in terms of revenues, are the contract with the U.S. Air Force Space Command for communications and computer infrastructure for command and control, information management and intelligence and for surveillance and reconnaissance, or C4I2SR, and the National Visa Center, or NVC, contract with the Department of State. The C4I2SR contract generated approximately 19% of our total revenues in fiscal 2001 and approximately 23% of our total revenues in the nine months ended September 28, 2002, and the NVC contract generated approximately 8% of our total revenues in fiscal 2001 and approximately 11% of our total revenues in the nine months ended September 28, 2002. The C4I2SR contract expires in September 2003 and the NVC contract expires in September 2004. Although the NVC contract expires in 2004, aggregate expenditures under this contract are capped at $45 million and although we believe that this $45 million ceiling will be reached before the end of government fiscal year 2003, the government has exercised its annual option to continue contracting with us for the work through the end of government fiscal year 2003. Accordingly, we believe that the government will increase the ceiling to cover at least the newly exercised option year, although there can be no assurance in that regard. Our third largest contract, in terms of revenues, is our contract with the Department of State for application development services, or ADP. The ADP contract generated 7% of our total revenues in fiscal 2001 and 8% of our total revenues in the nine months ended September 28, 2002. The ADP contract would have terminated on September 30, 2002, but was extended by the Department of State through March 31, 2003. We expect to recompete for the C4I2SR, NVC and ADP contracts; however we cannot guarantee that we will win these recompetes. If we fail to win the recompete for any of these contracts or any of our other major contracts, or if the government does not increase the amount of aggregate expenditures authorized under the NVC contract, our business will be materially adversely affected.

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Our business could be adversely affected by changes in budgetary priorities of the federal government.

        Because we derive a significant portion of our revenue from contracts with the federal government, we believe that the success and development of our business will continue to depend on our successful participation in federal government contract programs. Changes in federal government budgetary priorities could directly affect our financial performance. A significant decline in government expenditures, a shift of expenditures away from programs which call for the types of services that we provide or a change in federal government contracting policies, could cause federal governmental agencies to reduce their expenditures under contracts, to exercise their right to terminate contracts at any time without penalty, not to exercise options to renew contracts or to delay or not enter into new contracts. Any of those actions could seriously harm our business, prospects, financial condition or operating results. Moreover, although our contracts with governmental agencies often contemplate that our services will be performed over a period of several years, Congress usually must approve funds for a given program each government fiscal year and may significantly reduce or eliminate funding for a program. Significant reductions in these appropriations by Congress could have a material adverse effect on our business. Additional factors that could have a serious adverse effect on our federal government contracting business include:

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changes in federal government programs or requirements;

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budgetary priorities limiting or delaying federal government spending generally, or by specific departments or agencies in particular, and changes in fiscal policies or available funding, including potential governmental shutdowns;

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reduction in the federal government's use of technology solutions firms; and

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an increase in the number of contracts reserved for small businesses, or small business set asides, which could result in our inability to compete directly for these prime contracts.

Our contracts with the federal government may be terminated or adversely modified prior to completion, which could adversely affect our business.

        Federal government contracts generally contain provisions, and are subject to laws and regulations, that give the federal government rights and remedies not typically found in commercial contracts, including provisions permitting the federal government to:

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terminate our existing contracts;

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reduce potential future income from our existing contracts;

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modify some of the terms and conditions in our existing contracts;

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suspend or permanently prohibit us from doing business with the federal government or with any specific government agency;

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impose fines and penalties;

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subject us to criminal prosecution;

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subject the award of some contracts to protest or challenge by competitors, which may require the contracting federal agency or department to suspend our performance pending the outcome of the protest or challenge and which may also require the government to solicit new bids for the contract or result in the termination, reduction or modification of the awarded contract;

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suspend work under existing multiple year contracts and related task orders if the necessary funds are not appropriated by Congress;

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decline to exercise an option to extend an existing multiple year contract; and

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claim rights in technologies and systems invented, developed or produced by us.

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        The federal government may terminate a contract with us either "for convenience" (for instance, due to a change in its perceived needs or its desire to consolidate work under another contract) or if we default by failing to perform under the contract. If the federal government terminates a contract with us for convenience, we generally would be entitled to recover only our incurred or committed costs, settlement expenses and profit on the work completed prior to termination. If the federal government terminates a contract with us based upon our default, we generally would be denied any recovery for undelivered work, and instead may be liable for excess costs incurred by the federal government in procuring undelivered items from an alternative source. As is common with government contractors, we have experienced and continue to experience occasional performance issues under some of our contracts. We may in the future receive show-cause or cure notices under contracts that, if not addressed to the federal government's satisfaction, could give the government the right to terminate those contracts for default or to cease procuring our services under those contracts.

        Our federal government contracts typically have terms of one or more base years and one or more option years. Many of the option periods cover more than half of the contract's potential term. Federal governmental agencies generally have the right not to exercise options to extend a contract. A decision to terminate or not to exercise options to extend our existing contracts could have a material adverse effect on our business, prospects, financial condition and results of operations.

        Certain of our federal government contracts also contain "organizational conflict of interest" clauses that could limit our ability to compete for certain related follow-on contracts. For example, when we work on the design of a particular solution, we may be precluded from competing for the contract to install that solution. While we actively monitor our contracts to avoid these conflicts, we cannot guarantee that we will be able to avoid all organizational conflict of interest issues.

If we fail to establish and maintain important relationships with government entities and agencies, our ability to successfully bid for new business may be adversely affected.

        To develop new business opportunities, we primarily rely on establishing and maintaining relationships with various government entities and agencies. We may be unable to successfully maintain our relationships with government entities and agencies, and any failure to do so may adversely affect our ability to compete successfully for new business.

We derive significant revenue from contracts and task orders awarded through a competitive bidding process. If we are unable to win new awards or successfully compete for renewal contracts, our business and prospects may be adversely affected.

        A significant number of our contracts and task orders with the federal government are awarded through a competitive bidding process. We expect that much of the business that we will seek in the foreseeable future will continue to be awarded through competitive bidding of new contracts and task orders and contracts subject to renewal. Recently, members of Congress and administration officials have authorized changes to the procurement process intended to increase competition among suppliers to the federal government. Budgetary pressures and reforms in the procurement process have caused many federal government clients to increasingly purchase goods and services through indefinite delivery/indefinite quantity, or ID/IQ, contracts, including General Services Administration contracts, or GSA contracts, and other government-wide acquisition contracts, or GWACs. These contracts have increased competition and pricing pressure by concentrating work under fewer contracts, and requiring competition both prior to the initial award of the contract and throughout the term of the contract in order to obtain task orders for the services we provide, requiring that we make sustained post-award marketing efforts to realize revenue under each such contract. These contracts generally approve particular contractors to provide specified goods and services to the applicable governmental agency but generally do not obligate the agency to purchase any particular amount of goods or services. To procure goods or services under the contract, the agency generally awards task orders to perform specified

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services or to supply specified goods pursuant to competitive bidding among approved contractors. Thus, the existence of a contract does not ensure future revenue; rather, the contract merely provides us the opportunity to compete for additional work. An agency may administer an ID/IQ contract in which it procures goods and services for itself. Under the same contract, other federal agencies may also procure goods and services. These contracts are known as GWACs. When multiple prime contractors hold GWACs for the same goods and services, all of them are eligible to supply goods and services under the contract. As a result, qualified contractors often compete with each other to obtain task orders under a GWAC. Similarly, GSA contracts, including contracts commonly known as GSA Schedule contracts, are procurement contracts administered by the GSA on behalf of the entire federal government. Like GWACs, multiple contractors may be awarded GSA contracts for the same goods and services. As a result, an agency may procure goods and services from any contractor awarded the GSA contract at the prices and on the terms stated in the contract. Moreover, even if we are highly qualified to work on a particular new contract or a contract subject to renewal, we might not be awarded business because of the federal government's policy and practice of procuring goods and services from multiple contractors in order to maintain a diverse base of contractors.

        The competitive bidding process presents a number of risks, including the following:

•

we expend substantial funds, managerial time and effort to prepare bids and proposals for contracts that we may not win;



•

we may be unable to estimate accurately the resources and cost that will be required to service any contract we win, which could result in substantial cost overruns; and



•

we may encounter expense and delay if our competitors protest or challenge awards of contracts to us in competitive bidding, and any such protest or challenge could result in a requirement to resubmit bids on modified specifications or in the termination, reduction or modification of the awarded contract.

        The government contracts for which we compete typically have multiple year terms, and if we are unable to win a particular contract, we generally will be foreclosed from competing again for that contract until its expiration several years later. If we are unable to win new contract awards, our business and prospects will be adversely affected. In addition, upon the expiration of a contract, if the client requires further services of the type provided by the contract, there is frequently a competitive rebidding process. Approximately 28.8% of our revenues during fiscal 2001 was derived from contracts that we expect will become subject to recompetition bids prior to the end of government fiscal 2003. To date, we have only submitted recompetition bids for three of our contracts for which we are prime contractor. There can be no assurance that we will win any particular bid or recompetition bid, or that we will be able to replace business lost upon expiration or completion of a contract, and the termination or nonrenewal of any of our significant contracts or a substantial portion of our other contracts could materially harm our operating results.

Our business may suffer if our facilities or our employees are unable to obtain or retain the security clearances or other qualifications needed to perform services for our clients.

        Many of our federal government contracts require employees and facilities used in specific engagements to hold security clearances and to clear National Agency Checks and Defense Security Service checks. Many of our contracts require us to employ personnel with specified levels of education, work experience and security clearances. Depending on the level of clearance, security clearances can be difficult and time-consuming to obtain. If our employees or our facilities lose or are unable to obtain necessary security clearances or successfully clear necessary National Agency or Defense Security Service checks, we may not be able to win new business and our existing clients could terminate their contracts with us or decide not to renew them. To the extent we cannot obtain or maintain the security clearances necessary for our facilities or our employees working on a particular

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contract or to the extent our facilities or our employees do not successfully clear necessary National Agency Checks or Defense Security Service checks, we may not derive the revenue anticipated from the contract, which could seriously harm our operating results.

We must comply with a variety of laws, regulations and procedures and our failure to comply could harm our operating results.

        We must observe laws and regulations relating to the formation, administration and performance of federal government contracts which affect how we do business with our clients and impose added costs on our business. For example, the Federal Acquisition Regulation and the industrial security regulations of the Department of Defense and related laws include provisions that:

•

allow our federal government clients to terminate or not renew our contracts if we come under foreign ownership, control or influence;



•

require us to disclose and certify cost and pricing data in connection with contract negotiations;



•

require us to prevent unauthorized access to classified information; and



•

require us to comply with laws and regulations intended to promote various social or economic goals.

        We are subject to industrial security regulations of the Department of Defense and other federal agencies that are designed to safeguard against foreigners' access to classified information. If we were to come under foreign ownership, control or influence, we could lose our facility security clearances, which could result in our federal government customers terminating or deciding not to renew our contracts, and could impair our ability to obtain new contracts.

        In addition, our employees often must comply with procedures required by the specific agency for which work is being performed, such as time recordation or prohibition on removal of materials from a location.

        Our failure to comply with applicable laws, regulations or procedures, including federal procurement regulations and regulations regarding the protection of classified information, could result in contract termination, loss of security clearances, suspension or prohibition from contracting with the federal government, civil fines and damages and criminal prosecution and penalties, any of which could have a material adverse effect on our business.

The federal government may revise its procurement or other practices in a manner adverse to us.

        The federal government may revise its procurement practices or adopt new contracting rules and regulations, such as cost accounting standards. It could also adopt new contracting methods relating to GSA contracts, GWACs or other government-wide contracts, or adopt new standards for contract awards intended to achieve certain social or other policy objectives, such as establishing new set-aside programs for small or minority-owned businesses. In addition, the federal government may face restrictions from new legislation or regulations, as well as pressure from government employees and their unions, on the nature and amount of services the federal government may obtain from private contractors. These changes could impair our ability to obtain new contracts or contracts under which we currently perform when those contracts are put up for recompetition bids. Any new contracting methods could be costly or administratively difficult for us to implement, and, as a result, could harm our operating results. For example, the Truthfulness, Responsibility and Accountability in Contracting Act, proposed in 2001, would have limited and severely delayed the federal government's ability to use private service contractors. Although this proposal was not enacted, it or similar legislation could be proposed at any time. Any reduction in the federal government's use of private contractors to provide federal information technology services would adversely impact our business.

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Our contracts and administrative processes and systems are subject to audits and cost adjustments by the federal government, which could reduce our revenue, disrupt our business or otherwise adversely affect our results of operations.

        Federal governmental agencies, including the Defense Contract Audit Agency, or DCAA, routinely audit and investigate government contracts and government contractors' administrative processes and systems. These agencies review our performance on contracts, pricing practices and cost structure. They also review our compliance with applicable laws, government regulations, policies and standards and the adequacy of our internal control systems and policies, including our purchasing, property, estimating, compensation and management information systems. Any costs found to be improperly allocated to a specific contract will not be reimbursed, and any such costs already reimbursed must be refunded. Moreover, if any of our administrative processes and systems are found not to comply with the applicable requirements, we may be subjected to increased government scrutiny or required to obtain additional governmental approvals that could delay or otherwise adversely affect our ability to compete for or perform contracts. Therefore, an unfavorable outcome to an audit by the DCAA or another government agency, such as the Defense Security Service, or DSS, which verifies security compliance, could materially adversely affect our competitive position and result in a substantial reduction of our revenues. If a government investigation uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeitures of profits, suspension of payments, fines and suspension or debarment from doing business with the federal government. In addition, we could suffer serious reputational harm if allegations of impropriety were made against us.

Failure to maintain strong relationships with other government contractors could result in a decline in our revenue.

        We derived approximately 18% of our total revenue in fiscal 2001 and in the nine months ended September 28, 2002 from contracts under which we acted as a subcontractor or from "teaming" arrangements in which we and other contractors jointly bid on particular contracts or programs. As a subcontractor or team member, we often lack control over fulfillment of a contract, and poor performance on the contract could tarnish our reputation, even when we perform as required. We expect to continue to depend on relationships with other contractors for a portion of our revenue in the foreseeable future. Moreover, our revenue and operating results could be adversely affected if any prime contractor or teammate chooses to offer a client services of the type that we provide or if any prime contractor or teammate teams with other companies to independently provide those services.

The calculation of our backlog is subject to numerous uncertainties, and we may not receive the full amounts of revenue estimated under the contracts included in our backlog, which could reduce our revenue in future periods.

        Backlog is our estimate of the amount of revenue we expect to realize over the remaining life of the signed contracts and task orders we have in hand as of the measurement date. Our total backlog consists of funded and unfunded backlog. We define funded backlog as estimated future revenues under government contracts and task orders for which funding has been appropriated by Congress and authorized for expenditure by the applicable agency, plus estimated future revenues we expect to receive under signed purchase orders with commercial clients. Unfunded backlog is the difference between total backlog and funded backlog. Unfunded backlog reflects our estimate of future revenues under signed government contracts and task orders for which either funding has not been appropriated or expenditures have not been authorized. Our total backlog does not include estimates of revenue from GWAC or GSA schedules beyond signed, funded task orders, but our unfunded backlog does include estimates of revenue beyond signed, funded task orders for other types of ID/IQ contracts, including our C4I2SR contract with the U.S. Air Force Space Command.

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        The calculation of backlog is highly subjective and is subject to numerous uncertainties and estimates, and there can be no assurance that we will in fact receive the amounts we have included in our backlog. Our assessment of a contract's potential value is based upon factors such as historical trends, competition and budget availability. In the case of contracts which may be renewed at the option of the applicable agency, we generally calculate backlog by assuming that the agency will exercise all of its renewal options; however, the applicable agency may elect not to exercise its renewal options. In addition, federal contracts typically are only partially funded at any point during their term, and all or some of the work to be performed under a contract may remain unfunded unless and until Congress makes subsequent appropriations and the procuring agency allocates funding to the contract. Our estimate of the portion of backlog from which we expect to recognize revenues in fiscal 2002 or any future period is likely to be inaccurate because the receipt and timing of any of these revenues is dependent upon subsequent appropriation and allocation of funding and is subject to various contingencies, such as timing of task orders, many of which are beyond our control. In addition, we may never receive revenues from some of the engagements that are included in our backlog and this risk is greater with respect to unfunded backlog. The actual receipt of revenues on engagements included in backlog may never occur or may change because a program schedule could change, the program could be canceled, the governmental agency could elect not to exercise renewal options under a contract or could select other contractors to perform services, or a contract could be reduced, modified or terminated. We adjust our backlog on a quarterly basis to reflect modifications to or renewals of existing contracts or task orders, awards of new contracts or task orders, or approvals of expenditures. Additionally, the maximum contract value specified under a government contract or task order awarded to us is not necessarily indicative of the revenues that we will realize under that contract. We also derive revenues from ID/IQ contracts, which typically do not require the government to purchase a specific amount of goods or services under the contract other than a minimum quantity which is generally very small. If we fail to realize revenue included in our backlog, our revenues and operating results for the then current fiscal year as well as future reporting periods may be materially harmed.

Loss of our GSA contracts or GWACs would impair our ability to attract new business.

        We are a prime contractor under several GSA contracts and GWAC schedule contracts. We believe that our ability to continue to provide services under these contracts will continue to be important to our business because of the multiple opportunities for new engagements each contract provides. If we were to lose our position as prime contractor on one or more of these contracts, we could lose substantial revenues and our operating results could suffer. GSA contracts and other GWACs typically have a one or two-year initial term with multiple options exercisable at the government client's discretion to extend the contract for one or more years. We cannot be assured that our government clients will continue to exercise the options remaining on our current contracts, nor can we be assured that our future clients will exercise options on any contracts we may receive in the future.

Risks Related to Our Business

We have incurred net losses to date and our revenue and operating results could be volatile.

        We incurred net losses attributable to common stockholders of $140,000, $2.3 million, $2.8 million and $44,000 for our 1999, 2000 and 2001 fiscal years and for the nine months ended September 28, 2002, respectively, and, at September 28, 2002, we had a total stockholders' deficit of $2.4 million. We cannot assure you that these losses will not continue in the future.

        Our revenue and operating results may vary significantly from quarter to quarter. In particular, if the federal government does not pass, or delays passing, an appropriation act for each government fiscal year beginning on October 1, or fails to pass a resolution maintaining current funding levels until passage of an appropriation act, federal agencies may be forced to suspend our contracts, delay

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payments for work performed and delay the award of new and follow-on contracts and task orders due to a lack of funding. We are unable to predict the amount and timing of equipment purchases required by the U.S. Air Force Space Command C4I2SR contract. The timing of purchases under this contract affects our revenue and operating results, sometimes substantially, and we expect that these fluctuations will continue for the term of the contract. Further, the rate at which the federal government procures technology may be negatively affected depending on priorities of presidential administrations or senior government officials. Therefore, our historical operating results may not be a good indication of our future performance. Our quarterly operating results may not meet the expectations of securities analysts or investors, which in turn may have an adverse effect on the market price of our common stock. Our quarterly operating results may also fluctuate due to impairment of goodwill charges required by recent changes in accounting standards.

We may lose money or generate less than anticipated profits if we do not accurately estimate the cost of our performance under fixed price or time and materials contracts.

        Some of our contracts require that we perform on a fixed price basis. We derived approximately 19% of our total revenue in fiscal 2001 and approximately 16% of our total revenue in the nine months ended September 28, 2002 from fixed price contracts. A fixed price contract generally provides that we will receive a specified price for our performance under the contract, regardless of the cost to us of such performance. This requires that we accurately estimate the cost that we will incur to perform our obligations under any contract at the time that we submit our proposal or offer to the applicable government agency. When making proposals for engagements on a fixed price basis, we rely on our estimates of costs and timing for completing the projects. These estimates are subject to numerous variables and uncertainties, and there can be no assurance that the costs of performing under any fixed price contract will not exceed, perhaps substantially, our estimates. Any increased or unexpected costs or unanticipated delays in connection with the performance of fixed price contracts, including costs and delays caused by factors outside our control, could make these contracts less profitable than anticipated or could cause us to incur losses, which could be substantial, on these contracts. In the past, we have from time to time incurred losses on some fixed price contracts and our profits on some fixed price contracts have been less than anticipated. Our operating results could be materially adversely affected if the actual costs of performing under these contracts exceed our estimates.

        Many of our contracts are performed on a time and materials basis. A time and materials contract typically provides that we are paid a fixed hourly rate for direct labor costs expended and reimbursed for allowable materials, costs and expenses. We derived approximately 41% of our total revenues in fiscal 2001 and approximately 43% of our total revenues for the nine months ended September 28, 2002 from time and materials contracts. While these types of contracts are generally subject to less uncertainty than fixed price contracts, to the extent that our actual labor costs are higher than the contract rates, we may lose money on the contract.

Our margins and operating results may suffer if cost reimbursable contracts increase as a percentage of our total government contracts.

        In general, cost reimbursable contracts are the least profitable of our government contracts. Our cost reimbursable contracts generally provide for reimbursement of costs which are determined to be reasonable, allowable and allocable to the contract, as well as payment of a fee representing the profit margin negotiated between us and the contracting agency, which may be fixed or performance based. Our time and materials contracts generally are more profitable than our cost reimbursable contracts. In fiscal 2001 and the nine months ended September 28, 2002, time and materials contracts represented approximately 41% and 43%, respectively, of our total revenues. Cost reimbursable contracts contributed approximately 40% and 41% of our total revenues in fiscal 2001 and the nine months

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ended September 28, 2002. To the extent that cost reimbursable contracts represent an increased proportion of our total government contracts, our operating results may suffer.

Our markets are highly competitive, and many of the companies we compete against have substantially greater resources.

        We operate in highly competitive markets that include a large number of participants and involve intense competition to win contracts. Many of our competitors may compete more effectively than we can because they are larger, have greater financial and other resources, have better or more extensive relationships with government officials involved in the procurement process and have greater brand or name recognition. In order to stay competitive in our industry, we must attract and retain the highly skilled employees necessary to provide our services and keep pace with changing technologies and client preferences. In addition, some of our competitors have established alliances or strategic relationships among themselves or with third parties in order to increase their ability to address client needs. As a result, new competitors or alliances among competitors may emerge and compete more effectively than we can. There is also a significant industry trend towards consolidation which may result in the emergence of larger companies that may be better able to compete with us. If we are unable to compete effectively, our business could be materially harmed.

Our failure to attract and retain qualified employees, including our executive and senior management team, may adversely affect our business.

        Our continued success depends to a substantial degree on our ability to recruit and retain the technically skilled personnel we need to serve our clients effectively. Our business involves the development of tailored technology solutions for our clients, a process that relies heavily upon the expertise and services of our employees. Competition for skilled personnel in the information technology services industry is intense, and technology service companies often experience high attrition among their skilled employees. Recruiting and training these employees require substantial resources. Our failure to attract and retain technical personnel could increase our costs of performing our contracts, reduce our ability to meet our clients' needs, limit our ability to win new business and constrain our ability to grow.

        In addition to attracting and retaining qualified technical personnel, we believe that our success will depend on the continued employment of our executive and senior management team and its ability to generate new business and execute projects successfully. We believe that the personal reputations of our management team members and the business relationships between individual members of our management team and governmental officials involved in the procurement process and related areas are critical elements of obtaining and maintaining client engagements in our industry, particularly with agencies performing classified operations. To create and maintain these client relationships, identify potential business opportunities and establish our reputation among our current and potential clients, we depend on our senior management team. The loss of any of our senior executives could cause us to lose client relationships or new business opportunities, which could seriously harm our business.

A substantial majority of our historical growth has been due to acquisitions and we may have difficulty identifying and executing future acquisitions on favorable terms, which may adversely affect our results of operations and stock price.

        The selective pursuit of acquisitions remains one of our key growth strategies. A substantial majority of our historical growth was due to acquisitions and we cannot assure you that we will be able to identify and execute suitable acquisitions in the future on terms that are favorable to us, or at all.

        We may encounter other risks in executing our acquisition strategy, including:

•

increased competition for acquisitions which may increase the price of our acquisitions; and

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•

our failure to discover material liabilities during the due diligence process, including the failure of prior owners of any acquired businesses or their employees to comply with applicable laws or regulations such as the Federal Acquisition Regulation and health, safety, employment and environmental laws, or their failure to fulfill their contractual obligations to the federal government or other clients.

        In connection with any future acquisitions, we may decide to consolidate the operations of any acquired business with our existing operations or to make other changes with respect to the acquired business, which could result in special charges or other expenses. Our results of operations also may be adversely affected by expenses we incur in making acquisitions and, in the event that any goodwill resulting from present or future acquisitions is found to be impaired, by goodwill impairment charges. As of September 28, 2002, we had approximately $39.8 million of goodwill resulting from acquisitions on our balance sheet and, to the extent we make future acquisitions, the amount of goodwill could increase, perhaps substantially. Any of the businesses we acquire may also have liabilities or adverse operating issues.

        In addition, our ability to make future acquisitions may require us to obtain additional financing and we may be materially adversely affected if we cannot obtain additional financing for any future acquisitions. To the extent that we seek to acquire other businesses in exchange for our common stock, fluctuations in our stock price could have a material adverse effect on our ability to complete acquisitions and the issuance of common stock to acquire other businesses could be dilutive to our stockholders. To the extent that we use borrowings to acquire other businesses, our debt service obligations could increase substantially and relevant debt instruments may, among other things, impose additional restrictions on our operations, require us to comply with additional financial covenants or require us to pledge additional assets to secure our borrowings.

We may have difficulty integrating the operations of any companies we acquire, which may adversely affect our results of operations.

        The success of our acquisition strategy will depend upon our ability to successfully integrate any businesses we may acquire in the future. The integration of these businesses into our operations may result in unforeseen events or operating difficulties, absorb significant management attention and require significant financial resources that would otherwise be available for the ongoing development of our business. These integration difficulties could include the integration of personnel with disparate business backgrounds, the transition to new information systems, coordination of geographically dispersed organizations, loss of key employees of acquired companies and reconciliation of different corporate cultures. For these or other reasons, we may be unable to retain key clients or to retain or renew contracts of acquired companies. Moreover, any acquired business may fail to generate the revenue or net income we expected or produce the efficiencies or cost-savings that we anticipated. Any of these outcomes could adversely affect our operating results.

If we are unable to manage our growth, our business may be adversely affected.

        Sustaining our growth has placed significant demands on our management, as well as on our administrative, operational and financial resources. If we continue to grow, we must improve our operational, financial and management information systems and expand, motivate and manage our workforce. If we are unable to do so, or if new systems that we implement to assist in managing any future growth do not produce the expected benefits, our business, prospects, financial condition or operating results could be adversely affected.

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Systems failures may disrupt our business and have an adverse effect on our results of operations.

        Any systems failures, including failure of network, software or hardware systems, whether caused by us, a third-party service provider, unauthorized intruders and hackers, computer viruses, natural disasters, power shortages or terrorist attacks, could cause loss of data and interruptions or delays in our business or that of our clients. In addition, the failure or disruption of mail, communications or utilities could cause us to interrupt or suspend our operations or otherwise harm our business. Our property and business interruption insurance may be inadequate to compensate us for losses that may occur as a result of any system or operational failure or disruption, and insurance to cover these types of risks may not be available in the future on terms that we consider acceptable, if at all.

        The systems and networks that we maintain for our clients, although redundant in their design, could also fail. If a system or network we maintain were to fail or experience service interruptions, we might experience loss of revenue or face claims for damages or contract termination. Our liability insurance may be inadequate to compensate us for damages that we might incur and liability insurance to cover these types of risks may not be available in the future on terms that we consider acceptable, or at all.

If our subcontractors fail to perform their contractual obligations, our performance as a prime contractor and our ability to obtain future business could be materially and adversely impacted.

        Approximately 10.6%, 13.4% and 13.2% of our total revenue in fiscal 2000, fiscal 2001 and the nine months ended September 28, 2002, respectively, was generated by work performed by subcontractors who perform a portion of the work we are obligated to deliver to our clients. A failure by one or more of our subcontractors to satisfactorily deliver on a timely basis the agreed-upon supplies and/or perform the agreed-upon services may materially and adversely affect our ability to perform our obligations as a prime contractor. In extreme cases, a subcontractor's performance deficiency could result in the federal government terminating our contract for default. A default termination could expose us to liability for excess costs of reprocurement by the government and have a material adverse effect on our ability to compete for future contracts and task orders.

Our indebtedness and debt service obligations may increase substantially and we will be subject to restriction under debt instruments.

        We intend to terminate our existing credit facility and enter into a new $35 million secured revolving credit facility contemporaneously with the closing of this offering. Although we expect that proceeds from this offering will be used to repay all borrowings under our existing credit facility, we intend to use borrowings available under our new credit facility to finance our future business needs, including acquisitions, when and if we identify suitable acquisition targets. Accordingly, after completion of this offering, the amount of our indebtedness will likely increase, perhaps substantially.

        Our indebtedness could have significant negative consequences, including:

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increasing our vulnerability to general adverse economic and industry conditions;



•

limiting our ability to obtain additional financing;



•

requiring that a substantial portion of our cash flow from operations be applied to pay our debt service obligations, thus reducing cash available for other purposes;



•

limiting our flexibility in planning for or reacting to changes in our business or in the industry in which we compete; and



•

placing us at a possible disadvantage compared to our competitors with less leverage or better access to capital.

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        We anticipate that borrowings under our new credit facility will bear interest at variable rates based upon prevailing market interest rates, which will expose us to the risk of increased interest rates. We also anticipate that our new credit facility will require that we comply with various financial covenants and impose restrictions on us, including restrictions on, among other things, our ability to incur additional indebtedness or liens, make acquisitions and pay dividends on our capital stock.

        In 2001, our capital expenditures exceeded the limits set by one of the financial covenants under our existing credit facility. The lenders agreed to amend the facility, thereby waiving the capital expenditures covenant for 2001. During the nine months ended September 28, 2002, we were not in compliance with the minimum EBITDA covenant under that credit facility. The lenders agreed to waive the covenant non-compliance as of September 28, 2002 and amend the facility to exclude certain nonrecurring charges from the computation of EBITDA in subsequent periods.

        If we fail to comply with the financial covenants in our new credit facility, our lenders may exercise remedies, including requiring immediate repayment of all outstanding amounts. We anticipate the borrowings and other amounts due under our new credit facility will be secured by substantially all of our current and future tangible and intangible assets, including accounts receivable, inventory and capital stock of our existing or future subsidiaries. Our ability to obtain other debt financing may therefore be adversely affected because the lenders under our new credit facility will have a prior lien on our assets to secure amounts we owe to them. In addition, we anticipate that, upon the occurrence of specified events of default under the new credit facility, the lenders would be entitled to demand immediate repayment of all borrowings and other amounts outstanding under the facility and to realize upon the collateral pledged under the facility to satisfy our obligations to them. These events of default will, among others, include the loss by us of any customer accounting for more than 10% of our revenue in the previous twelve months. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" for further information with respect to the anticipated terms of our new credit facility.

Risks Related to this Offering

The market price of our common stock could be volatile and could decline following this offering, resulting in a substantial loss on your investment.

        Prior to this offering, there has not been a public market for our common stock. An active trading market for our common stock may never develop nor be sustained, which could adversely affect your ability to sell your shares and could depress the market price of your shares. In addition, the initial public offering price will be determined through negotiations between us, the selling stockholders and the representatives of the underwriters and may bear no relationship to the price at which the common stock will trade upon completion of this offering.

        The stock market in general, and the market for technology-related stocks in particular, has been highly volatile. As a result, the market price of our common stock is likely to be similarly volatile, and investors in our common stock may experience a decrease, which could be substantial, in the value of their stock, including decreases unrelated to our operating performance or prospects. The price of our common stock could be subject to wide fluctuations in response to a number of factors, including those listed elsewhere in this "Risk Factors" section and others such as:

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variations in our operating performance and the performance of other similar companies;



•

actual or anticipated fluctuations in our quarterly operating results;



•

changes in our revenue or earnings estimates or recommendations by securities analysts;



•

publication of research reports about us or our industry by securities analysts or our failure to meet analysts' projections;

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•

additions and departures of key personnel;



•

changes in the relative proportions of our fixed price, time and materials and cost reimbursable contracts;



•

the extent we use subcontractors to perform services under our contracts;



•

strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy;



•

federal government spending levels, both generally and by our particular government clients;



•

the passage of legislation or other regulatory developments affecting us or our industry;



•

speculation in the press or investment community;



•

changes in the government information technology services industry;



•

changes in accounting principles;



•

terrorist acts, acts of war or periods of widespread civil unrest; and



•

changes in general market and economic conditions.

        In the past, securities class action litigation has often been initiated against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management's attention and resources, and could also require us to make substantial payments to satisfy judgments or to settle litigation.

Ownership of our stock is concentrated and this small group of stockholders may exercise substantial control over our actions.

        Immediately after completion of this offering and based on shares outstanding as of September 28, 2002, and calculated on a pro forma basis, investment partnerships and a limited liability company managed by Frontenac Company will beneficially own approximately 40% of our outstanding common stock, or approximately 34% if the underwriters' over-allotment option is exercised in full, and our officers and directors will beneficially own, in the aggregate, approximately 45% of our outstanding stock, or approximately 40% if the underwriters' over-allotment option is exercised in full. The percentage of our shares to be owned by our directors and officers as set forth in the preceding sentence includes the shares owned by partnerships and a limited liability company managed by Frontenac Company because two of our directors are affiliates of Frontenac Company and are therefore deemed to beneficially own those shares. These stockholders, if acting together, will have the ability to substantially influence the election of directors and other corporate actions. In addition, these partnerships and this limited liability company, if acting together, will also have the ability to substantially influence the election of directors and other corporate actions. This concentration of ownership may also have the effect of delaying or preventing a change in our control.

A substantial number of shares of our common stock will be eligible for sale in the near future, which could cause our common stock price to decline significantly.

        If our stockholders sell, or the market perceives that our stockholders intend to sell, substantial amounts of our common stock in the public market following this offering, the market price of our common stock could decline significantly. These sales may also make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem appropriate. Immediately after completion of this offering and based on the number of our shares outstanding as of September 28, 2002, calculated on a pro forma basis as described under "Prospectus Summary—The Offering," we will have 8,310,533 outstanding shares of common stock, assuming no exercise of

21

outstanding options. Of these shares, the shares sold in this offering will be freely tradable, approximately 121,991 additional shares of common stock will be available for sale in the public market 90 days after the date of this prospectus, and approximately 3,838,542 additional shares of common stock will be available for sale in the public market 180 days after the date of this prospectus following the expiration of lock-up agreements entered into by our executive officers, directors and some of our stockholders. Wachovia Securities, Inc., on behalf of the underwriters, may release the executive officers, directors and stockholders from their lock-up agreements with the underwriters' at any time and without notice, which would allow for earlier sale of shares in the public market. As restrictions on resale end, the market price of our common stock could drop significantly if the holders of restricted shares sell them or are perceived by the market as intending to sell them.

        Immediately after completion of this offering, holders of approximately 3,813,008 shares of our common stock will have the right to require us to register those shares under the Securities Act of 1933 for sale in the public market or to participate in subsequent registrations of our common stock. In addition, we intend to register the shares available for issuance under our stock option plans promptly upon completion of this offering.

Our management could apply the proceeds of this offering to uses that do not increase our market value or improve our operating results.

        We intend to apply approximately $41.3 million of our net proceeds from this offering to repay indebtedness and to repurchase some of our outstanding warrants. We intend to use the remaining net proceeds for other general corporate purposes, which may include future acquisitions of businesses. We have not reserved or allocated the remaining net proceeds for any specific purpose, and we cannot state with certainty how our management will use the remaining net proceeds. Accordingly, our management will have considerable discretion in applying the remaining net proceeds. We may use the remaining net proceeds for purposes that do not result in any increase in our market value or improve our results of operations.

If you invest in this offering, you will experience immediate dilution.

        We expect that the initial public offering price of our common stock will be substantially higher than the net tangible book value per share of the outstanding common stock. As a result, investors purchasing common stock in this offering will incur immediate dilution in the net tangible book value per share of the common stock. Investors who purchase shares in this offering:

•

will pay a price per share that substantially exceeds the per share tangible book value of our assets after subtracting our liabilities; and



•

will have contributed approximately 68% of the total amount of our equity funding since inception but will only own approximately 52% of the shares outstanding immediately after this offering, based on shares outstanding on September 28, 2002 calculated on a pro forma basis.

        In the past, we have offered, and we expect to continue to offer, stock options to our employees. Options issued in the past have had per share exercise prices below the initial public offering price per share. As of September 30, 2002 there were 240,881 shares of common stock issuable upon exercise of outstanding stock options at a weighted average exercise price of $11.13 per share calculated on a pro forma basis assuming the issuance of options to purchase shares of our common stock in connection with the SI Telecom merger.

        In addition, we may be required, or could elect, to seek additional equity financing in the future or to issue common stock to pay all or part of the purchase price for any companies we may acquire in the future. If we issue new equity securities under these circumstances, our stockholders may

22

experience additional dilution and the holders of any new equity securities may have rights, preferences and privileges senior to those of the holders of our common stock.

A portion of the net proceeds from this offering will be used to repay loans from one of the underwriters, which may present a potential conflict of interest.

        We intend to use a portion of the net proceeds from this offering to repay borrowings outstanding under our existing bank credit facility. An affiliate of Wachovia Securities, Inc. is a lender under that credit facility and will receive more than 10% of the net proceeds from this offering through the repayment of those borrowings, which may present a potential conflict of interest. Accordingly, this offering will be made pursuant to the provisions of Conduct Rule 2710(c)(8) of the National Association of Securities Dealers, Inc., which is intended to address potential conflicts of interest involving underwriters. See "Underwriting—NASD Matters".

Provisions of our charter and bylaws and Delaware law make a takeover of our company more difficult.

        Our basic corporate documents and Delaware law contain provisions that might enable our management to resist an attempt to take over our company. For example, our board of directors can issue shares of common stock and preferred stock without stockholder approval, and the board could issue stock to dilute and adversely affect various rights of a potential acquiror. Other provisions of our charter and bylaws that could deter or prevent a third party from acquiring us include:

•

the division of our board of directors into three separate classes serving staggered three-year terms;



•

the absence of cumulative voting in the election of our directors, which means that the holders of a majority of the voting power of our outstanding capital stock have the power to elect all of our directors;



•

limitations on the ability of our stockholders to remove directors and the provisions requiring that vacancies in our board of directors must be filled by the remaining directors;



•

prohibitions on our stockholders from acting by written consent or calling special meetings; and



•

procedures for advance notification of stockholder nominations.

        We are subject to Section 203 of the Delaware General Corporation Law that, subject to exceptions, would prohibit us from engaging in any business combination with any interested stockholder, as defined in that section, for a period of three years following the date on which that stockholder became an interested stockholder.

        The board could use these and other provisions to discourage, delay or prevent a change in the control of our company or a change in our management. These provisions might also discourage, delay or prevent an acquisition of our company at a price that you may find attractive. These provisions could also make it more difficult for you and our other stockholders to elect directors and take other corporate actions and could limit the price that investors might be willing to pay for shares of our common stock.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND MARKET DATA

        Some of the information in this prospectus contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as "expect," "anticipate," "plan," "believe," "seek," "estimate," "intend," "future" and similar words. Statements that we make in this prospectus that are not statements of historical fact may also be forward-looking statements. In particular, statements that we make in "Management's Discussion and Analysis of Financial Condition and Results of Operations" relating to our revenues, profitability and the sufficiency of contemplated sources of capital to meet our cash requirements and statements that we make in "Prospectus Summary" and "Business" as to industry trends or future periods are forward-looking statements. Forward-looking statements are not guarantees of our future performance, and involve risks, uncertainties and assumptions that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. There may be events in the future that we are not able to predict, or over which we have no control. You should not place undue reliance on forward-looking statements. We do not undertake any obligation to notify you if we learn that our assumptions or projections are wrong for any reason. Before you invest in our common stock, you should be aware that the factors we discuss in "Risk Factors" and elsewhere in this prospectus could cause our actual results to differ materially from any forward-looking statements.

        Backlog is our estimate of the amount of future revenue we expect to realize over the remaining life of signed contracts and task orders as of the measurement date. All statements regarding the amount of our backlog are forward-looking statements and are subject to the risks and uncertainties described above and elsewhere in this prospectus.

        In addition, this prospectus contains forecasts and estimates regarding the information technology market and federal government's spending and workforce and related matters, including estimates regarding projected growth in the federal government's information technology spending, projected federal government appropriations for homeland security, intelligence, national defense and similar matters, the projected increase in outsourcing by the federal government, the aging and projected retirement of the federal government's civilian workforce and employee turnover rates at other companies in our industry. This prospectus also includes historical information regarding information technology expenditures by the federal government, time required to procure products and services by the federal government, the decline in federal executive branch civilian employees and other matters relating to the information technology market and federal government procurement. These forecasts and estimates and this historical data have been derived from publicly available information, industry publications and data compiled by independent market research firms. Although we believe this information is reliable, we have not independently verified this information and we cannot assure you that it is accurate or that the forecasts will prove correct.

USE OF PROCEEDS

        We estimate that our net proceeds from the sale of the shares of common stock we are offering will be approximately $51.7 million, or $56.3 million if the underwriters' overallotment option is exercised in full, in each case after deducting underwriting discounts and commissions and estimated offering expenses payable by us and assuming a public offering price of $15.00 per share. We will not receive any proceeds from the sale of shares by the selling stockholders.

        We intend to use a portion of our net proceeds from the offering to repay borrowings outstanding under our existing credit facility, whereupon our existing credit facility will be terminated. As of September 28, 2002, we had approximately $30.6 million of borrowings outstanding under this credit facility, which bore interest at a weighted average rate of 5.6% annually. We anticipate that we will repay these borrowings in full, terminate our current credit facility and enter into a new $35.0 million

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revolving credit facility concurrently with the closing of this offering. See "Management's Discussion and Analysis of Financial Condition and Results of Operation—Liquidity and Capital Resources."

        We will also use a portion of our net proceeds to repay loans from some of our stockholders. As of September 28, 2002, there was an outstanding principal amount of $5.0 million under these loans bearing interest at a rate of 8.5% per annum with a maturity date of May 31, 2007 and an additional $0.8 million principal amount under these loans bearing interest at a rate of 8.5% per annum with a maturity date of September 18, 2008. In October 2002, these stockholders extended additional loans of $3.5 million, with an annual interest rate of 8.5% and a maturity date in October 2008. As of October 24, 2002 there was a total of $9.3 million outstanding in loans from these stockholders. For a more complete discussion of these loans, see "Related Party Transactions."

        In addition, we intend to use a portion of our net proceeds to repurchase outstanding warrants that entitle the holders to purchase approximately 91,756 shares of our common stock. We expect to pay $1.4 million to repurchase these warrants.

        We intend to use the remaining net proceeds we receive from the offering for other general corporate purposes, which may include acquisitions of businesses. Although we continually evaluate opportunities to acquire businesses that are complementary to ours, we currently do not have any commitments to acquire any other company. Pending their use, we plan to invest the net proceeds in short-term marketable securities.

DIVIDEND POLICY

        We have not paid or declared any cash dividends on our common stock since our inception and do not intend to pay any cash dividends on our common stock in the foreseeable future. We currently intend to retain all future earnings, if any, for use in the operation of our business. The terms of the new secured credit facility that we expect to enter into concurrently with the closing of this offering will prohibit us from paying dividends on our common stock.

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CAPITALIZATION

        The following table sets forth the following information as of September 28, 2002:

•

our current portion of notes payable and long-term debt and capitalization on a historical basis;



•

our pro forma current portion of notes payable and long-term debt and capitalization after giving effect to the conversion of all of the outstanding shares of our preferred stock into common stock (calculated on the basis of an assumed public offering price of $15.00 per share of our common stock and accrued dividends on our preferred stock through September 28, 2002), the issuance of shares of our common stock in connection with the SI Telecom merger, and the issuance of shares of our common stock upon the exercise of certain warrants as if those transactions had occurred as of September 28, 2002; and



•

our pro forma as adjusted current portion of notes payable and long-term debt and capitalization giving effect to:



•

the pro forma adjustments described above;



•

the sale of shares of common stock by us in this offering, less the underwriting discounts and commissions and estimated offering expenses payable by us, and receipt of the estimated net proceeds from the sale of these shares, assuming an initial public offering price of $15.00 per share; and



•

application of a portion of our net proceeds to repay indebtedness and to repurchase warrants as described under "Use of Proceeds," assuming a repurchase price of $1.4 million for the warrants.

        This table excludes:

•

326,250 shares of our common stock issuable by us upon exercise of the underwriters' over-allotment option (although the table does include 326,250 shares of our common stock that may be sold by the selling stockholders upon exercise of the underwriters' over-allotment option);



•

240,881 shares of common stock issuable upon the exercise of stock options outstanding under our stock option plans as of September 30, 2002 at a weighted average exercise price of $11.13 per share, calculated on a pro forma basis assuming the issuance of options to purchase shares of our common stock in connection with the SI Telecom merger as if it had occurred as of September 28, 2002, and 376,000 shares of common stock issuable upon exercise of options to be granted to some of our officers and directors and an additional 386,831 shares of common stock issuable upon exercise of options to be granted to some of our employees under our 2002 stock incentive plan prior to or contemporaneously with the closing of this offering at an exercise price equal to the public offering price per share in this offering;



•

837,169 additional shares of common stock reserved and available for issuance under our 2002 stock incentive plan as of September 30, 2002 plus annual increases in the number of shares that will be reserved for issuance under our 2002 stock incentive plan; and



•

18,083 additional shares of common stock to be issued upon conversion of our preferred stock as the result of dividends accruing from September 28, 2002 to November 13, 2002 (assuming conversion occurs on November 13, 2002).

        All of the information in this table gives pro forma effect to the approximately 18.54 for one reverse split of our common stock that we effected in November 2002. You should read this table in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and the related notes included elsewhere in this

26

prospectus. See "Management—Stock Option Plans" and "Description of Capital Stock" for additional information about our capitalization.

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DILUTION

        Our net tangible book deficit as of September 28, 2002, after giving pro forma effect to the conversion of our outstanding shares of preferred stock into common stock, the approximately 18.54 for one reverse stock split of our outstanding common stock, the issuance of shares of our common stock upon the exercise of certain warrants and the issuance of shares of our common stock in the SI Telecom merger as described under "Management's Discussion and Analysis of Financial Condition and Results of Operations" as if these transactions had occurred as of that date, was approximately $13.8 million, or $3.09 per share of common stock. Net tangible book deficit per share represents the amount of total tangible assets less total liabilities, divided by the number of shares of common stock outstanding.

        Dilution per share to new investors represents the difference between the amount per share paid by purchasers of our common stock in this offering and the net tangible book value per share of common stock immediately after completion of this offering. As of September 28, 2002, after giving pro forma effect to the conversion of our outstanding shares of preferred stock into common stock, the approximately 18.54 for one reverse stock split of our outstanding common stock, the issuance of shares of our common stock upon the exercise of certain warrants and the issuance of shares of our common stock in the SI Telecom merger as if such transactions had occurred as of that date and to:

•

the sale by us of 3,850,000 shares of common stock in this offering at an assumed initial public offering price of $15.00 per share,



•

the deduction of the underwriting discounts and commissions and estimated offering expenses payable by us, and



•

the application of our estimated net proceeds to repay indebtedness and repurchase the warrants as described under "Use of Proceeds,"

our pro forma net tangible book value would have been approximately $37.0 million, or $4.45 per share. The assumed initial public offering price of $15.00 per share exceeds $4.45 per share, which is the per share pro forma value of our total tangible assets less total liabilities as of September 28, 2002 after giving pro forma effect to the issuance of shares in this offering and the other transactions described above. This represents an immediate increase in pro forma net tangible book value of $7.54 per share to existing stockholders. Accordingly, new investors in the offering will suffer an immediate dilution of their investment of approximately $10.55 per share. The table below illustrates this per share dilution as of September 28, 2002:

        The following table summarizes, as of September 28, 2002, and after giving pro forma effect to the conversion of our outstanding shares of preferred stock into common stock, the approximately 18.54 for

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one reverse stock split of our outstanding common stock, the issuance of shares of our common stock upon the exercise of certain warrants and the issuance of shares of our common stock in the SI Telecom merger as if such transactions had occurred as of that date, the difference between the number of shares of common stock purchased from us, the total consideration paid for such shares and the average price per share paid by existing stockholders and by new investors. As shown in the following table, new investors will contribute approximately 67.9% of the total consideration paid to us in exchange for shares of our stock, in exchange for which they will own approximately 52.3% of our outstanding shares of common stock as of September 28, 2002 calculated on a pro forma basis as described above. The calculation below is based on the assumed initial offering price of $15.00 per share, before deducting underwriting discounts and commissions and our estimated expenses for this offering:

        If the underwriters' overallotment option is exercised in full, the number of shares held by new investors will increase to 5,002,500 shares, or approximately 57.9% of the total number of shares of common stock outstanding immediately after this offering, and the number of the shares to be held by existing investors will decrease to 3,634,283 shares, or approximately 42.1% of the total number of shares of our common stock outstanding immediately after this offering, in each case, based upon shares outstanding as of September 28, 2002 and calculated on a pro forma basis as described above.

        As of September 30, 2002 and assuming completion of the SI Telecom merger and the reverse stock split as of September 28, 2002, there would have been options outstanding under our stock plans to purchase a total of 240,881 shares of our common stock at a weighted average exercise price of $11.13 per share. To the extent these outstanding options are exercised, there will be further dilution to new investors.

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SELECTED CONSOLIDATED FINANCIAL DATA

        The selected financial data presented below for our 1999, 2000 and 2001 fiscal years, and as of the end of our 2000 and 2001 fiscal years, are derived from our audited consolidated financial statements included elsewhere in this prospectus. The selected financial data presented below as of the end of our 1999 fiscal year is derived from our audited consolidated financial statements not included in this prospectus. The selected financial data for, and as of the end of, fiscal years 1997 and 1998 under the heading "Predecessor" are derived from the audited financial statements of SI International Application Development, Inc., formerly known as Statistica, Inc. We were founded in 1998 and acquired SI International Application Development, Inc., or SI Development on January 15, 1999. SI Development is considered our predecessor for financial reporting purposes. The selected financial data presented below for, and as of the end of, the nine months ended September 29, 2001 and September 28, 2002 are derived from our unaudited financial statements included elsewhere in this prospectus and include all adjustments, consisting of normal and recurring adjustments, that we considered necessary for a fair presentation of the financial position and results of operations as of and for such periods. Financial results for any interim period are not necessarily indicative of the results that may be expected for the full fiscal year. You should read the selected financial data presented below in conjunction with the consolidated financial statements, the notes to the consolidated financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus.

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        Our fiscal year is based on the calendar year and ends each year on the Saturday closest to December 31 of that year. All fiscal years shown below include 52 weeks and both nine month periods shown below include 39 weeks.

(1)

On January 1, 2001, we transferred our telecommunications business to SI International Telecom Corporation, or SI Telecom, a corporation owned primarily by our stockholders. We acquired the telecommunications business as part of our acquisition of SI International Engineering, Inc., formerly known as System Technology Associates, Inc., on March 9, 2000. In October 2002, we merged SI Telecom with a wholly owned subsidiary of SI International Engineering, Inc. We sometimes refer to this merger as the "merger" or the "SI Telecom merger." Because of this merger, our financial statements and the other financial data with respect to us appearing in this prospectus have been prepared as if SI Telecom had been our wholly owned indirect subsidiary for all of fiscal 2001 and thereafter. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Company History" and Note 1 to our consolidated financial statements, included elsewhere in this prospectus, for a further discussion of the merger.

(2)

For fiscal 2002, we adopted SFAS No. 142 "Goodwill and Other Intangible Assets" which requires that goodwill no longer be amortized. If SFAS No. 142 had been effective for the nine months ended September 29, 2001, net loss attributable to

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common stockholders would have decreased by $1.9 million to net income of $0.2 million and basic and diluted loss per common share would have decreased by $0.74 to basic and diluted earnings of $0.09 per common share.

(3)

This per share data gives effect to the approximately 18.54 for one reverse stock split which occurred in November 2002 as if that transaction had occurred as of the first day of the respective periods presented.

(4)

Pro forma per share data gives effect to the conversion of all of our preferred stock into common stock (based on preferred stock dividends accrued through September 28, 2002) which is expected to occur prior to or contemporaneously with the closing of this offering, the approximately 18.54 for one reverse stock split which occurred in November 2002, and the issuance of additional shares of our common stock in connection with the SI Telecom merger and upon the exercise of certain warrants, both of which occurred in October 2002, as if those transactions had occurred as of the first day of the respective periods presented. See note 15 to our consolidated financial statements included elsewhere in this prospectus. Pro forma per share data does not reflect approximately 18,083 additional shares of our common stock to be issued upon conversion of our preferred stock as the result of dividends accruing from September 28, 2002 to November 13, 2002 (assuming conversion occurs on November 13, 2002).

(5)

EBITDA is defined as net income (loss) plus interest expense, income taxes, depreciation and amortization, certain non-cash compensation and charges resulting from changes in the fair value of our put warrants and minority interests. See Notes 11 and 13 to our consolidated financial statements which are included elsewhere in this prospectus. EBITDA as calculated by us may be calculated differently than EBITDA for other companies. We have provided EBITDA because it is a commonly used measure of financial performance as well as to enhance an understanding of our operating results. EBITDA should not be construed as either:

•

an alternative to net income (loss), as determined in accordance with generally accepted accounting principles in the United States, as an indicator of our operating performance; or

•

an alternative to cash flows as a measure of liquidity.

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

        The following discussion and analysis should be read in conjunction with the "Selected Consolidated Financial Data" and the consolidated financial statements and related notes included elsewhere in this prospectus. This section of this prospectus contains forward-looking statements that involve substantial risks and uncertainties, such as statements about our plans, objectives, expectations and intentions. We use words such as "expect," "anticipate," "plan," "believe," "seek," "estimate," "intend," "future" and similar expressions to identify forward-looking statements. In particular, statements that we make in this section relating to the sufficiency of anticipated sources of capital to meet our cash requirements are forward- looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including as a result of some of the factors described below and in the section titled "Risk Factors." You should not place undue reliance on these forward-looking statements, which apply only as of the date of this prospectus.

        Backlog is our estimate of the amount of future revenue we expect to realize over the remaining life of our signed contracts and task orders as of the measurement date. Accordingly, all statements regarding the amount of our backlog are forward-looking statements and are subject to the risks and uncertainties referred to above and elsewhere in this prospectus.

        Our fiscal year is based on a calendar year and ends each year on the Saturday closest to December 31 of that year. As a result, our fiscal year may be comprised of 52 or 53 weeks. Our 1999, 2000 and 2001 fiscal years each had 52 weeks and the first nine months of our 2001 and 2002 fiscal years each had 39 weeks.

Overview

        We are a provider of information technology and network solutions primarily to the federal government. Our clients include the U.S. Air Force Space Command, U.S. Army, the Department of State, the Immigration and Naturalization Service and the intelligence community. In addition, we provide our services to a small number of commercial entities. We combine our technological and industry expertise to provide a full spectrum of state-of-the-practice solutions and services, from design and development to implementation and operations, to assist our clients in achieving their missions. Our service offerings focus primarily on our clients' mission-critical needs in the areas of:

•

information technology applications;

•

systems engineering;

•

network and telecommunications engineering; and

•

outsourcing.

        In fiscal 2001 and the nine months ended September 28, 2002, we received 88.4% and 93.2%, respectively of our revenues from services we provided to various departments and agencies of the federal government and 11.6% and 6.8%, respectively of our total revenues from work performed for commercial entities. The following table shows our revenues from the client groups listed as a percentage of total revenue. Revenue data for the Department of Defense includes revenue generated from work performed under engagements for both the Department of Defense and the intelligence community.

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        We have derived a substantial majority of our revenues from governmental contracts under which we act as a prime contractor. We also provide services indirectly as a subcontractor. We intend to focus on retaining and increasing the percentage of our business as prime contractor because it provides us with stronger client relationships. The following table shows our revenues as prime contractor and as subcontractor as a percentage of our total revenue for the following periods:

        Our services are provided under three types of contracts: cost reimbursable, time and materials and fixed price contracts. The following table shows our revenues from each of these types of contracts as a percentage of our total revenue for the following periods:

        Under cost reimbursable contracts, we are reimbursed for costs which are determined to be reasonable, allowable and allocable to the contract, and paid a fee representing the profit margin negotiated between us and the contracting agency, which may be fixed or performance based. Under cost reimbursable contracts we recognize revenues and an estimate of applicable fees earned as costs are incurred. We consider fixed fees under cost reimbursable contracts to be earned in proportion to the allowable costs incurred in performance of the contract. For performance-based fees under cost reimbursable contracts, we recognize the relevant portion of the expected fee to be awarded by the client at the time such fee can be reasonably estimated, based on factors such as our prior award experience and communications with the client regarding performance. In general, cost reimbursable contracts are the least profitable of our government contracts. In fiscal 2001 and the nine months ended September 28, 2002, approximately 39.7% and 40.9%, respectively, of our revenues were derived from cost reimbursable contracts.

        Under time and materials contracts, we are reimbursed for labor at fixed hourly rates and generally reimbursed separately for allowable materials, costs and expenses. To the extent that our actual labor costs under a time and materials contract are higher or lower than the billing rates under the contract, our profit under the contract may either be greater or less than we anticipated or we may suffer a loss under the contract. We recognize revenues under time and materials contracts by multiplying the number of direct labor hours expended by the contract billing rates and adding the effect of other billable direct costs. In general, we realize a higher profit margin on work performed under time and materials contracts than cost reimbursable contract. In fiscal 2001 and the nine months ended September 28, 2002, approximately 41.4% and 43.1%, respectively, of our revenues were derived from time and materials contracts.

        Under fixed price contracts, we perform specific tasks for a fixed price. Compared to cost reimbursable and time and materials contracts, fixed price contracts generally offer higher profit margin opportunities but involve greater financial risk because we bear the impact of cost overruns in return for the full benefit of any cost savings. We generally do not undertake complex, high-risk work, such as software development, under fixed price terms. Fixed price contracts may include either a product

34

delivery or specific service performance throughout a period. Revenue on fixed price contracts under which we render services throughout a period is recognized as the service is provided. For fixed price contracts that provide for the delivery of a specific product with related client acceptance provisions, revenues and associated contract costs are recognized upon product delivery and client acceptance. In fiscal 2001 and the nine months ended September 28, 2002, approximately 18.9% and 16.0%, respectively, of our revenues were derived from fixed price contracts.

        If we anticipate a loss on a contract, we provide for the full amount of anticipated loss at the time of that determination.

        Our most significant expense is direct cost, which consists primarily of direct labor costs for program personnel and direct expenses incurred to complete contracts, including cost of materials and subcontract efforts. Our ability to predict accurately the number and types of personnel, their salaries, and other costs, can have a significant impact on our direct cost.

        The allowability of certain direct and indirect costs in federal contracts is subject to audit by the client, usually through the DCAA. Certain indirect costs are charged to contracts and paid by the client using provisional, or estimated, indirect rates which are subject to later revision based on the government audits of those costs.

        Approximately 28.8% of our revenue during fiscal 2001 was derived from contracts that we expect will become subject to recompetition bids prior to the end of government fiscal 2003. We actively monitor our relationships with our clients during our engagements, as well as the quality of the service we provide, to assist in our efforts to win recompetition bids. In addition, we strive to maintain good relationships with a wide variety of government contractors.

Company History

        SI International, Inc. was incorporated on October 14, 1998. Since January 1999 we have completed four acquisitions intended to implement our strategy of assembling core technical competencies and a base of government contracts through acquisitions. These acquired companies had aggregate revenues of approximately $105 million, measured for the 12 months prior to the respective acquisition dates. Through each of these acquisitions, we built and expanded our information technology capabilities and expanded our client relationships. All of these acquisitions were accounted for using the purchase method of accounting. Accordingly, the results of operations of the acquired businesses have been included in our financial statements from their respective acquisition dates.

        On January 15, 1999, we purchased all of the outstanding common stock of Statistica, Inc. for approximately $5.0 million in cash and subordinated notes. Statistica was a company that specialized in mission-critical information technology outsourcing and software application development. We allocated approximately $5.1 million of the purchase price and related acquisition costs to goodwill and intangible assets. In April 2002, we changed Statistica's name to SI International Application Development, Inc.

        On July 9, 1999, we purchased all of the outstanding common stock of WPI, Inc. for approximately $3.1 million in cash and subordinated notes plus 53,932 shares of our common stock (as adjusted for the approximately 18.54 for one stock split completed in November 2002). WPI was a company that specialized in developing learning and knowledge systems. We acquired WPI in order to perform post-delivery support of information technology systems. We allocated approximately $3.6 million of the purchase price and related acquisition costs to goodwill and intangible assets. In April 2002, we changed WPI, Inc.'s name to SI International Learning, Inc.

        On November 19, 1999, we purchased all of the outstanding common stock of Noblestar Federal Systems, Inc., for approximately $11.0 million in cash and subordinated notes. NFSI provided information technology consulting to the federal government market. We allocated approximately $9.4 million of the purchase price and related acquisition costs to goodwill and intangible assets. In April 2002, we changed NFSI's name to SI International Consulting, Inc.

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        On March 9, 2000, we purchased all of the outstanding common stock of System Technology Associates, Inc. for approximately $37.8 million in cash and subordinated notes. As of September 28, 2002, payment of approximately $0.5 million of the subordinated notes had been withheld since certain of System Technology Associates' accounts receivables had not been fully collected. STA was a company that specialized in the delivery of systems engineering, applications development, and network and telecommunications engineering to the defense and intelligence community, with particular emphasis on military space applications. This acquisition gave us a presence in Colorado Springs, Colorado, a hub for the nation's military space applications. We allocated approximately $28.9 million of the purchase price and related acquisition costs to goodwill and intangible assets. As required by SEC regulations, we have included financial statements for STA elsewhere in this prospectus. In April 2002, we changed STA's name to SI International Engineering, Inc.

        On January 1, 2001, we sold SI Engineering's telecommunications assets to SI International Telecom Corporation, a company under common ownership with us, as part of our determination to capitalize on the perceived growth opportunity in the commercial telecommunications market at the time by allowing the business of providing telecommunication solutions to develop in a focused manner through a separate company. In exchange for those assets, we received shares of SI Telecom's capital stock. We also received an option and a warrant to purchase shares of SI Telecom's capital stock. Subsequently, we determined that, as a result of deteriorating market conditions in the commercial telecom market, it was no longer in the best interests of our stockholders to grow and develop a business focused on the commercial telecom market. As a result, we made the decision in June 2002 to merge SI International Telecom back into SI International, allowing us to redirect SI Telecom's resources to our core government contracting business. We completed this merger in October 2002, and, as a result, SI Telecom is now our wholly owned indirect subsidiary.

        Pursuant to the merger, we issued shares of our common stock in exchange for all outstanding shares of SI Telecom's common stock and junior preferred stock that we did not own. In addition, we assumed all options to purchase shares of SI Telecom's common stock by converting all options to purchase shares of SI Telecom's common stock into options to purchase our common shares. As a result we issued 12,350 shares of our common stock in exchange for SI Telecom's common stock and junior preferred stock and granted options to purchase 943 additional shares of our common stock at a weighted average exercise price of approximately $556.26 per share. In addition, all outstanding warrants to purchase SI Telecom common stock were converted into warrants to purchase 77 shares of our common stock at an exercise price of $37.08 per share. We intend to apply a portion of the net proceeds from this offering to repurchase some of these warrants, together with some of the other outstanding warrants to purchase our common stock, as described under "Use of Proceeds".

        Prior to the closing of this offering, we expect to issue 1,808,911 shares of our common stock (calculated after giving effect to the reverse stock split referred to below) upon conversion of all outstanding shares of our preferred stock (assuming the conversion occurs on November 13, 2002). The number of common shares to be issued will be equal to the aggregate liquidation value of our preferred shares (which is $1,000 per share, plus all accrued and unpaid dividends at the time of the conversion) divided by a number which is equal to the initial public offering price per share of our common stock set forth on the cover page of this prospectus, which reflects the occurrence of the reverse stock split. In November 2002, we effected an approximately 18.54 for one reverse stock split of our common stock. Unless otherwise expressly stated or the context otherwise requires, all share amounts, including the number of authorized, issued and outstanding shares, the exercise price and number of shares subject to stock options and warrants and earnings per share have been adjusted to reflect the reverse split.

        As described in note 1 to our consolidated financial statements included elsewhere in this prospectus, our historical financial statements (including the notes thereto) and the other historical financial data with respect to us appearing in the following discussion has been prepared as if SI Telecom had been our wholly owned subsidiary for all of fiscal 2001 and thereafter. However, as described in Note 15 to our consolidated financial statements, our historical financial statements

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(including the notes thereto) and other historical financial data with respect to us appearing in this prospectus does not give effect to the anticipated issuance of shares of our common stock upon conversion of shares of our preferred stock, the issuance of shares of our common stock upon the exercise of certain warrants or the issuance of shares of our common stock and options and warrants to purchase our common stock in connection with the SI Telecom merger. See note 15 to our consolidated financial statements included elsewhere in this prospectus.

Results of Operations

        The following table sets forth certain items from our consolidated statements of operations as a percent of revenues for the periods indicated.

        Under the terms of our warrant agreement, the warrant holders have a right to require us to redeem the warrants for cash. Under Generally Accepted Accounting Principles, or GAAP, we are required to report the changes in market values of the warrants as a charge in our statement of operations. In October 2002, we issued 7,410 shares of our common stock upon the exercise of some of the warrants. Contemporaneously with the closing of this offering, we will redeem the remaining warrants for $1.4 million in cash. See Note 11 to our consolidated financial statements included elsewhere in this prospectus.

        In connection with the repayment of the existing credit facility with a portion of the proceeds of this offering, we expect to write down approximately $0.9 million of previously deferred debt arrangement fees and discounts. This will be reflected as a charge in the fourth quarter of fiscal 2002.

Nine months ended September 28, 2002 compared to nine months ended September 29, 2001

        Revenue.    For the nine months ended September 28, 2002, our revenues increased 1.2% to $107.2 million from $106.0 million for the same period in 2001. Revenues from work under government contracts, which is our core business, increased 7.9% to $100.0 million from $92.7 million for the same period in 2001. This increase was attributable primarily to an increase in our outsourcing activities. Commercial revenues decreased 45.1% to $7.3 million for the nine months ended September 28, 2002 from $13.3 million for the same period in 2001. This decrease was attributable primarily to our de-emphasis of commercial work. The decrease in our commercial work was primarily the result of

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decreased spending by our customers in the commercial telecom market and the oil field modeling business. Consistent with our decision in June 2002 to merge SI Telecom back into SI International and our decision to de-emphasize our oil field modeling business, we have concentrated our focus on our core government contracting business.

        Direct costs.    Direct costs include direct labor and other direct costs such as materials and subcontracts. Generally, changes in direct costs are correlated to changes in revenue as resources are consumed in the production of that revenue. For the nine months ended September 28, 2002, direct costs increased 4.2% to $65.4 million from $62.8 million for the same period in 2001. This increase was attributable primarily to the increase in revenue. As a percentage of revenue, direct costs were 61.0% for the nine months ended September 28, 2002 as compared to 59.2% for the same period in 2001. The increase in direct costs as a percentage of revenue in the nine months ended September 28, 2002 was primarily the result of the timing of materials purchases that did not directly correlate to revenue increases.

        Indirect costs.    Indirect costs include facilities, selling, bid and proposal, indirect labor, fringe benefits and other discretionary costs. For the nine months ended September 28, 2002, indirect costs increased 3.1% to $36.5 million from $35.4 million for the same period in 2001. This increase was attributable primarily to the following items: a $2.0 million charge incurred in connection with management's decision not to pursue collection of certain amounts contractually due from a customer and $0.9 million of legal and settlement costs, including settlement costs related to the SI Engineering litigation described under "Business—Legal Proceedings", legal costs incurred in connection with the SI Telecom Merger and legal fees associated with other litigation and legal proceedings. During the nine months ended September 28, 2002, management decided to increase the allowance for doubtful accounts by approximately $353,000 as a result of its decision not to pursue collection of certain indirect costs from this customer. As a percent of revenue, indirect costs, excluding the $2.9 million of charges described above, were 31.3% for the nine months ended September 28, 2002 as compared to 33.4% for the same period in 2001. Including these items, indirect costs were 34.0% of revenues for the nine months ended September 28, 2002 as compared to 33.4% of revenues for the same period in 2001.

        Depreciation.    For the nine months ended September 28, 2002, depreciation increased 35.0% to $1.5 million from $1.1 million for the same period in 2001. This increase was attributable primarily to our investment to modernize and standardize our information technology infrastructure to support future growth. As a percentage of revenue, depreciation was 1.4% for the nine months ended September 28, 2002 as compared to 1.1% for the same period in 2001.

        Amortization.    In compliance with SFAS 142, Goodwill and Other Intangible Assets, we discontinued the amortization of goodwill effective December 30, 2001. Accordingly, there was no amortization for the nine months ended September 28, 2002 compared to $2.7 million for the same period in 2001.

        Income from operations.    For the nine months ended September 28, 2002, income from operations decreased 4.7% to $3.8 million from $4.0 million for the same period in 2001. This decrease was attributable primarily to the increase in indirect and direct costs as described above, partially offset by the discontinuance of goodwill amortization. Excluding the $2.9 million of charges included within indirect costs incurred in the nine months ended September 28, 2002 and $2.7 million of goodwill amortization incurred in the nine months ended September 29, 2001, income from operations would have remained consistent at $6.7 million for the nine months ended September 28, 2002 and the same period in 2001.

        Interest expense.    For the nine months ended September 28, 2002, interest expense declined 28.2% to $2.0 million from $2.8 million for the same period in 2001. This decline was attributable primarily to the significant decline in interest rates and repayment of debt. As a percentage of revenue, interest expense was 1.9% for the nine months ended September 28, 2002 as compared to 2.6% for the same period in 2001.

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        Provision for income taxes.    The provision for income tax was $0.7 million in the nine months ended September 28, 2002, compared to a provision of $0.6 million for the comparable period in 2001. The change in the provision for income taxes for the nine months ended September 28, 2002 compared to the same period in 2001 relates primarily to non-deductible charges for put warrants and the implementation of SFAS 142 and the cessation of goodwill amortization for book purposes; significant amounts of goodwill remain deductible for tax purposes.

Fiscal year 2001 compared to fiscal year 2000

        Revenue.    For fiscal 2001, revenues increased 21.6% to $146.6 million from $120.6 million in fiscal 2000. This increase was attributable primarily to an increase in revenues received for work performed in all areas of our service offerings, including significant increases in the revenues we received from several large contracts, and the inclusion of a full year of results of operations from SI Engineering, which we acquired on March 9, 2000. Revenues from work under governmental contracts, which is our core business, increased 23.3% to $129.6 million in fiscal 2001 from $105.1 million in fiscal 2000. This increase was attributable primarily to an increase in revenue under our C4I2SR contract. Commercial revenues increased 9.7% to $17.0 million in fiscal 2001 from $15.5 million in fiscal 2000. This increase was attributable primarily to an increase in revenue attributable to our Petroleum Environmental Division Commercial Operations.

        Direct costs.    For fiscal 2001, direct costs, including direct labor and other direct costs such as materials and subcontracts, increased 21.2% to $87.1 million from $71.9 million in fiscal 2000. This increase was attributable primarily to direct costs necessary to support our growth in revenue, particularly increased direct labor costs as a result of a highly competitive labor market. As a percentage of revenue, direct costs were 59.4% in fiscal 2001 compared to 59.6% in fiscal 2000.

        Indirect costs.    For fiscal 2001, indirect costs, including fringe benefits, selling, bid and proposal costs, facilities costs, indirect labor costs and other discretionary costs, increased 22.2% to $49.5 million from $40.5 million in fiscal 2000. This increase was attributable primarily to indirect costs necessary to support our revenue growth and direct labor and other direct costs. As a percentage of revenue, indirect costs were 33.8% in fiscal 2001 compared to 33.6% in fiscal 2000.

        Depreciation.    For fiscal 2001, depreciation increased 66.6% to $1.7 million from $1.0 million in fiscal 2000. This increase was attributable primarily to our investment in the restructuring and upgrading of our information technology and systems infrastructure. As a percentage of revenue, depreciation was 1.1% of revenue in fiscal 2001 compared to 0.8% in fiscal 2000.

        Amortization.    For fiscal 2001, amortization increased 16.1% to $3.6 million from $3.1 million in fiscal 2000. This increase was attributable primarily to the inclusion of a full year of amortization of the goodwill incurred as a result of our acquisition of SI Engineering on March 9, 2000. As a percentage of revenue, amortization was 2.4% in fiscal 2001 compared to 2.6% in fiscal 2000.

        Income from operations.    For fiscal 2001, income from operations increased 15.9% to $4.8 million from $4.1 million in fiscal 2000. This increase was attributable primarily to the increased profitability in our mission-critical outsourcing activities and consulting practice, and the inclusion of a full year of results of operation form SI Engineering, which we acquired on March 9, 2000. As a percentage of revenue, income from operations decreased to 3.3% in fiscal 2001 from 3.4% in fiscal 2000.

        Interest expense.    For fiscal 2001, interest expense decreased 14.2% to $3.5 million from $4.0 million the year before. This decrease was attributable primarily to the significant decline in interest rates during the period and the reduction in the amount of debt outstanding under our credit agreement. As a percentage of revenue, interest expense was 2.4% in fiscal 2001 compared to 3.3% in fiscal 2000.

        Provision for income taxes.    The provision for income taxes increased from $0.4 million in fiscal 2000 to $0.7 million in fiscal 2001. Our fiscal 2001 tax provision represents an effective tax rate which is

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greater than the federal statutory rate of 34% due to nondeductible charges for put warrants and goodwill amortization.

Fiscal year 2000 compared to fiscal year 1999

        Revenue.    For fiscal 2000, revenues increased 255.8% to $120.6 million from $33.9 million in fiscal 1999. This growth was due primarily to an increase in our revenues due to our acquisitions of SI Learning on July 9, 1999, SI Consulting on November 19, 1999, and SI Engineering on March 9, 2000 and to a lesser extent, revenue growth resulting from new contracts prior to these acquisitions and our recompete win for the National Visa Center contract. Revenues from work under governmental contracts, which is our core, business, increased 231.5% to $105.1 million in fiscal 2000 from $31.7 million in fiscal 1999. This increase was attributable primarily to an increase in our revenue due to our acquisitions of SI Learning, SI Consulting and SI Engineering. Commercial revenues increased 604.5% to $15.5 million in fiscal 2000 from $2.2 million in fiscal 1999. This increase was attributable primarily to an increase in our revenue due to our acquisition of SI Consulting.

        Direct costs.    For fiscal 2000, direct costs increased 246.7% to $71.9 million from $20.7 million in fiscal 1999. This increase was attributable primarily to direct costs incurred to support the increase in revenue over the same period. As a percentage of revenue, direct costs were 59.6% in fiscal 2000 compared to 61.1% in fiscal 1999.

        Indirect costs.    For fiscal 2000, indirect costs increased 247.8% to $40.5 million from $11.6 million in fiscal 1999. This increase was attributable primarily to both the growth in revenue and the growth in direct costs. As a percentage of revenue, indirect costs were 33.6% in fiscal 2000 compared to 34.4% in fiscal 1999.

        Depreciation.    For fiscal 2000, depreciation increased 401.0% to $1.0 million from $0.2 million in fiscal 1999. This increase was attributable primarily to depreciation resulting from our acquisition activities and the capital expended to acquire and implement the information technology infrastructure required to integrate these companies and provide for future growth requirements. As a percentage of revenue, depreciation increased to 0.8% in fiscal 2000 from 0.6% in fiscal 1999.

        Amortization.    For fiscal 2000, amortization increased 497.3% to $3.1 million from $0.5 million in the prior fiscal year. This increase was attributable primarily to the aforementioned acquisitions. As a percentage of revenue, amortization increased to 2.6% in fiscal 2000 from 1.5% in fiscal 1999.

        Income from operations.    For fiscal 2000, income from operations increased 416.0% to $4.1 million from $0.8 million in the prior year. This increase was attributable primarily to the growth in revenue. As a percentage of revenue, income from operations increased to 3.4% in fiscal 2000 from 2.4% in fiscal 1999. This performance improvement was attributable primarily to the increased overall profitability of our contracts as a result of a change in margins.

        Interest expense.    For fiscal 2000, interest expense increased 860.1% to $4.0 million from $0.4 million in the prior year. This increase was attributable primarily to the increase in debt incurred to finance our acquisition activities. As a percentage of revenue, interest expense increased to 3.3% in fiscal 2000 from 1.3% in fiscal 1999.

        Provision for income taxes.    The provision for income taxes increased from $0.3 million in fiscal 1999 to $0.4 million in fiscal 2000 primarily due to an increase in the effective income tax rate.

Supplemental Quarterly Information

        The following table sets forth quarterly unaudited consolidated financial data for the fiscal quarters of 2000 and 2001 and the first three quarters of fiscal 2002, expressed in dollars and as a percentage of total revenues for the respective periods. We believe that this unaudited financial information includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the information for each period. Interim financial results for any quarter are not necessarily indicative of the results that may be expected for the full fiscal year. All of the fiscal quarters reflected in the following table had thirteen weeks.

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        Some unevenness of revenue from quarter to quarter exists primarily because of the timing of purchases of materials necessary to perform certain obligations under our C4I2SR contract with U.S. Air Force Space Command. In addition, the increase in revenue in the second quarter of fiscal 2000 was due primarily to our acquisition of SI Engineering, which closed on March 9, 2000.