Software development and applications group Integrity Software spent $1.5 million (€1.6 million) producing the Form S-1 listing documentation for flotation on the Nasdaq stock market in the US. As it prepared the documentation with its advisers over the early months of the year, chief executive Peter Nagle was confident the group could sell three million shares at $21.56 each to raise about $65 million.

But the mood of the market changed dramatically. With his group still in the pre-listing period, Mr Nagle could only watch as technology shares first started to wobble and then to fall dramatically.

On May 31st Integrity decided to pull its listing application "in the light of current market conditions". Its share price on the over-the-counter (OTC) Nasdaq market, where it was already quoted, had dropped to $7.

But Mr Nagle is nonplussed. He described the process as "a good learning experience". It forced him to examine the way the business was run. And Integrity is likely to apply again when market conditions improve. In the meantime he wants "to retune and enhance the business" which is expected to include acquisitions in Ireland, the US and Britain.

"We had 13 businesses which we had brought together under the one umbrella to form Integrity Software. They were all private businesses. People were doing everything properly, I think, but that does not necessarily mean that all the `i's were dotted and the `t's were crossed. We had to make sure we did."

As a result of the rigorous self-examination carried out to comply with the requirements of the US Securities and Exchange Commission (SEC), which polices US listings, Mr Nagle said all his management were now "crystal clear about what we are aiming at".

The process involved a change of name - from Integrity Holdings to Integrity Software - reincorporating in Delaware in the US, a two-for-five share split and restructuring operations into four business areas - business-to-business software, software research and development, general accounting and technical services, and computer finance services.

"Seeking a listing forced us to apply a management structure to account for and manage the business across the four areas," he said.

Describing seeking a listing on the Nasdaq stock exchange in the US as an expensive exercise with a lot of rules and regulations, Mr Nagle accepts this as necessary to protect the investors who buy Nasdaq quoted shares.

But for an acquisitive company like Integrity there was a major downside. "We had to stop making acquisitions because we had to give them (the company's advisers) a time point of reference - a fixed position to calculate the figures for the filing documents. It would be impractical to be making acquisitions during the process," he said.

Sticking strictly to the listing rules and taking the advice of the lawyers and bankers involved, the group undertook no acquisitions, product launches or publicity generating activities during the period. This "quiet period" was bad for Integrity, letting it fall out of the viewing range of investors, Mr Nagle asserted.

To reassure its 300 shareholders Mr Nagle is now preparing an assessment of the outlook for each of the business areas which will go out to them next week. He describes his shareholders as mainly private investors - people who bought speculatively on the OTC market and the original investors who backed his two brothers, Paul and Patrick (who is also called David) when they set up the company in 1998.

Peter Nagle only got involved in Integrity Holdings on December 7th, 1999. He was working in the UK, developing the same sort of business with his company Jyris when he and Paul started discussing where their businesses were going, he explained.

He rejected criticism that the group has been developed largely out of inter-family acquisitions. "That infers that there is something fishy going on . . . but Paul had a set of companies, Jyris had a set of companies and it made good business sense to put them together," he said.

On January 3rd Peter flew to New York where he met with specialist listing lawyers Clifford Chance and corporate bankers Needham & Co to explore options for moving forward. Seeking a Nasdaq listing and raising some $60 million to $70 million was seen as the best route. Peter flew home and made the recommendation to the board which agreed it.

As its own shares fell with the market in the run-up to the proposed listing, Integrity could not reassure its investors because it was in the pre-listing phase, Mr Nagle insisted.

Mr Nagle insisted that Integrity was one of the companies producing results. "We have a great business, the model is good and the business is strong and real, it is not a pipedream," he said.

Despite Mr Nagle's optimism, he is operating in a highly competitive market and the company reported losses for 1999.

Integrity's SEC filings for the group showed an operating loss for 1999 of $2.8 million after a profit of $757,000 for the previous year. Mr Nagle said the loss reflected stricter US accounting requiring faster writeoffs of goodwill and merger and restructuring costs.

"All of the business we have is acquired so goodwill is a huge elements of our costs," he said. In 1999 goodwill costs were up to $1.86 million from $58,551. But the real cost problem appears to be escalating administration and sales and marketing costs.

The 1999 figures show rapid growth in revenue to $49 million from $10 million, with the 390 per cent rise attributable to the inclusion of acquisitions made during the year. But costs increased much more rapidly, up over 1,000 per cent to $26.8 million.

General administration costs jumped to $17 million from $2.3 million, while sales and marketing costs were up to $5.8 million from $60,000.

Some market sources questioned whether Integrity would be able to improve its margins and reduce costs sufficiently to turn rising revenue into a profits growth stream.

But Peter Nagle remains optimistic. In the last six months he has restructured and rationalised, cutting staff levels from 400 at December 1999 to 300 now. Costs will be significantly lower this year, he forecast.

Integrity's research and development spend will more than double this year "last year we spent $2 million, this year that will rise to $5 million".

He said the group had returned to profit in the five months to end-May and that its forecast profit of about $8 million before goodwill amortisation for the year would be achieved.

The group will publish its firsthalf figures next month, he said.

Mr Nagle declined to explain "for legal reasons" why dealing in Integrity shares was examined by the Irish Stock Exchange some months ago after an insider dealing complaint.

But he insisted his company was "as clean as Irish linen" and that no company executive or director had been "selling shares improperly".

Currently looking at potential acquisitions, Mr Nagle appeared confident that the group would be back looking for a Nasdaq listing before too long, through he said it would depend on an improvement in technology share prices.