SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-K

              Annual Report Pursuant to Section 13 or 15(d) of the
                        Securities Exchange Act of 1934

     October 31, 1996                                        0-011228
 For the Fiscal Year Ended                            Commission File Number:

                          SYSTEMS ASSURANCE CORPORATION
             (Exact name of registrant as specified in its charter)

               DELAWARE                                          02-0337028  
(State or other jurisdiction of incorporation                (I.R.S. Employer
or organization)                                            Identification No.)

         18 West King Street, Malvern, PA 19355             19355
        (Address of principal executive offices)          (zip code)

                                 (610) 647 -7840
               Registrant's telephone number including area code:

           Securities registered pursuant to Section 12(b) of the Act:

                                      None

           Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, $.01 Par Value
                                (Title of Class)

                   Name of each exchange on which registered:
                                      None

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

                                  Yes X    No
Aggregate market value of voting stock held by non-affiliates of the registrant
at January 1, 1997:  $107,192

Number of shares of the Registrant's Common Stock, $.01 par value, outstanding
at October 31, 1996:   27,918,454

                    DOCUMENTS INCORPORATED BY REFERENCE: None

<PAGE>


                                     PART I
Item 1.   BUSINESS

Business Activities in Fiscal Year 1996

Systems Assurance Corporation, a Delaware corporation (the "Company" or "SAC")
is not presently engaged in any line of business and had no principal business
activity during the fiscal year ended October 31, 1996. Prior to fiscal year
1992, the Company had ceased the marketing and the installation of its automated
insurance processing and administration system. The system, named the Casualty
Insurers Business Information System ("CIBIS"), was a comprehensive, integrated
software system which supported the issuance and administration of insurance
policies and generated management and statistical reports. This activity was
being performed by Insurance Data Processing, Inc. ("IDP") under its assignment
and assumption agreement dated October 15, 1988 described below. The Company is
presently seeking investment opportunities but has not yet entered into any
substantive negotiations other than as described under Item 7.

Discontinuation of the Service Business for the CIBIS Customers by IDP

On October 15, 1988, the Company entered into an Assignment and Assumption
Agreement ("SAC-IDP Agreement") with IDP, pursuant to which IDP was granted an
exclusive license to market the Company's products and services, and under which
IDP assumed all responsibilities of the Company to service and support existing
CIBIS installations and for the administration, marketing, research and
development, sales and servicing pertaining to future CIBIS activities. Pursuant
to the SAC-IDP Agreement, IDP agreed to pay a royalty to the Company at the rate
of 7% of all revenue generated by IDP on account of CIBIS net of any
sublicensing fees (approximately $4,000 for each sale of each CIBIS system)
incurred in connection with the sale of CIBIS systems. Between October 15, 1988
and June 10, 1991 some royalty income had been earned by the Company; however,
an insufficient amount to remain in operation. On June 10, 1991, IDP agreed to
pay Key Bank $15,600 and return the IBM equipment used to service the CIBIS
customers in exchange for Key Bank's general release of $230,018 of indebtedness
that the Company had to Key Bank. Accordingly, IDP on December 31, 1991,
discontinued all service to CIBIS customers.

Employees

The Company currently, other than its officers, has no employees. The affairs of
the Company are administered by the Board of Directors. No officer or director
receives compensation or any other form of remuneration for his services.


Item 2.   DESCRIPTION OF PROPERTY

The Company vacated its office space in Yarmouth, Maine in December 1988, and
presently does not own, lease or otherwise possess any property.

                                       2

<PAGE>

Item 3.  LEGAL PROCEEDINGS

The Company is the defendant in an action brought in Massachusetts Superior
Court, County of Suffolk, by McDevitt Recruitment Advertisement, Inc. The
complaint was served in December 1986 and alleges a breach of an oral warranty
of fitness for a particular purpose of a computer system sold to the plaintiff
in 1982, which allegedly never performed properly. Plaintiff seeks damages of
$30,000. The Company believes that it is not liable for any damages; however, in
order to save the cost of potential litigation, has offered a settlement in the
amount of $1,000 to the attorney for the plaintiff. At this date, the attorney
has not been able to locate the plaintiff.


Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None


                                     PART II


Item 5.   MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED 
          STOCKHOLDER MATTERS

Until March of 1986, the Company's common stock was included on the automated
quotation system of the National Association of Securities Dealers, Inc.
("NASDAQ"). Based on the criteria for listing by NASDAQ, the company was
"de-listed" as of April 3, 1986.

As of October 31 1996, there were approximately 1,517 holders of record of the
Company's common stock.

The Company has never paid dividends and does not intend to pay any dividends in
the foreseeable future.




                                       3


<PAGE>


Item 6. SELECTED FINANCIAL DATA

Five Year Summary of Selected Financial Data
<TABLE>
<CAPTION>

                                                                     Year ended October 31,
                                           1996              1995              1994              1993              1992
<S>                                     <C>               <C>                  <C>               <C>             <C>    
Income Statement Data:

Revenues                           $         --      $         --      $         --      $         --      $         --
Operating profit (loss)                 (20,790)          (77,428)             (600)             (600)           (7,416)
Extraordinary income                         --            42,184           226,653            34,382            33,505
Net income (loss)                       (20,790)          (33,801)          226,053            33,782            24,644

Income (loss) per share:
     Extraordinary income                    --                --               .01                --                --
     Net income (loss)                       --                --               .01                --                --
Cash dividends on common stock               --                --                --                --                --

Balance Sheet Data:

Working capital                        $(50,959)         $(81,136)         $(47,585)        $(273,638)     $   (307,420)
Total assets                              2,140             1,824                --                --                --
Shareholders' deficit                   (50,959)          (81,136)          (47,585)         (273,638)         (307,420)
Average number of common
  and common equivalent
  shares                             26,470,509        23,374,843        23,118,454        23,118,454        23,118,454
</TABLE>


Item 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS

Results of Operations

For the fiscal years ended October 31, 1996, 1995 and 1994 the Company was not
operating. Consequently, it had no net revenues. The Company has had no hardware
sales since 1991. This lack of sales existed because of the discontinuance of
service. The Company incurred general and administrative expenses totaling
$18,882, $77,428, $600 and $600 in 1996, 1995, 1994, and 1993, respectively.
Interest expense in 1996 totaled $1,908. The increase in general and
administrative expenses during 1995 was attributable to various professional
fees for legal research and accounting. Extraordinary income of $42,184 and
$226,653 in 1995 and 1994 was mainly attributable to the reduction in
liabilities due to the operation of various statutes of limitation.

On June 10, 1991, IDP agreed to pay Key Bank $15,600 and to return the IBM
equipment used to service CIBIS customers in exchange for Key Bank's general
release of $230,018 of indebtedness that the Company had to Key Bank. IDP, on
December 31, 1991, discontinued all service to CIBIS customers.

                                       4

<PAGE>

Item 7.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (continued)

Financial Condition and Liquidity

Liquidity problems persisted in 1996. At October 31, 1996, current liabilities
exceeded current assets by $50,959. The Company has not operated since 1991, at
which time recorded liabilities exceeded assets by $332,064. The working capital
deficit decreased from $307,420 in 1992 to $47,585 in 1994 as a result of the
reduction in liabilities due to the operation of applicable statutes of
limitations. This reduction in liabilities did not require the use of cash. In
1995, the working capital deficit increased to $81,136 as a result of an
increase in expenses incurred relating to Company administration. During 1996,
an affiliate corporation of certain current shareholders of the Company
representing a majority interest in the ownership of the Company assumed certain
liabilities of the Company in exchange for 3,500,000 shares of common stock. The
Company has entered into certain agreements with an investment firm to actively
seek an investment opportunity acceptable to the Company. In connection with
those agreements, the investment firm has received irrevocable proxies from
certain of the Company's shareholders to vote their shares in connection with
any recapitalization of the Company's common stock, election of members of the
Board of Directors and any proposed merger candidate that meets certain minimum
requirements. The irrevocable proxies have been extended at the option of the
investment firm through December 31, 1996. As an incentive to enter into the
above agreements, the investment firm has lent the Company $50,000 evidenced by
a Promissory Note due and payable (including interest at the rate of 7%, per
annum) on the later of February 28, 1997 or the extended expiration of the
irrevocable proxies. The investment firm has additionally agreed to assume
responsibility for certain operating costs which may be incurred.


Item 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and notes thereto as listed in the accompanying index
to financial statements (Item 14) are filed as part of this Annual Report.


Item 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

None

                                       5

<PAGE>

Item 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Set forth below is certain information about the Directors and executive
officers of the Company:

      Name                   Age                Office and Positions

William E. Chipman, Sr.      51                 President and  Chairman

James C. Wagner              46                 Secretary and Director

Thomas R. Petree             49                 Treasurer and Director

Mr. William E. Chipman, Sr. is a member of the Board of Directors of Electronic
Technology Corporation, a wireless transmission technology corporation. Mr.
Chipman has been a member of the Board of Directors of Systems Assurance
Corporation since December 31, 1994. Mr. Chipman filed personal bankruptcy in
September 1992 and emerged therefrom on December 21, 1992.

Mr. James C. Wagner is President of American Affordable Housing, Inc., a real
estate consulting company. Mr. Wagner is also a member of the Board of Directors
of Merchants Square Network, Inc., a broadcast production facility. Mr. Wagner
is also a partner in the public accounting firm of Wagner Sharer Murtaugh &
Petree. Mr. Wagner has been a member of the Board of Directors of Systems
Assurance Corporation since December 31, 1994.

Mr. Thomas R. Petree is Treasurer and member of the Board of Directors of
Merchants Square Network, Inc., a broadcast production facility. Mr. Petree is
also a partner in the public accounting firm of Wagner Sharer Murtaugh & Petree.
Mr. Petree has been a member of the Board of Directors of Systems Assurance
Corporation since December 31, 1994.

All Directors hold office until the next annual meeting of stockholders of the
Company or until their successors have been elected and qualified. Each of the
executive officers serves at the discretion of the Board of Directors.


Item 11.   EXECUTIVE COMPENSATION

No executive officers received any compensation or other remuneration from the
Company during fiscal 1996, except as noted in Item 7.

1982 Stock Option and Appreciation Rights Plan

Under the Company's stock option and appreciation rights plan, the Compensation
Committee of the Board of Directors may grant incentive stock options or
non-qualified stock options to purchase shares of the Company's common stock to
officers and other key employees of the

                                       6

<PAGE>


Item 11.   EXECUTIVE COMPENSATION (continued)

Company. The exercise price may not be less than 100% of the fair market value
of the common stock on the date of the grant. The plan also provides that the
committee may issue stock appreciation rights ("Rights") in connection with the
options. A Right entitles the holder to receive the amount by which the market
value of the shares as to which the Rights are exercised exceeds the option
price for that number of shares. 900,000 shares of common stock have been
reserved under the incentive stock option plan. The Company currently has no
employees and the Compensation Committee has ceased to exist. No options or
rights are currently outstanding.


Item 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information known to the Company
regarding beneficial ownership of the Company's Common Stock at October 31, 1996
of (i) each beneficial owner of more than five percent of the Company's Common
Stock, (ii) each of the Company's Directors and (iii) all directors and officers
of the Company as a group.

                                  Amount and
                                   Nature of
                                   Beneficial          Percent
         Name                      Ownership           of Class
William E. Chipman, Sr. *           6,199,650           22.2%
James C. Wagner *                   2,479,860            8.9%
Thomas R. Petree *                  1,549,913            5.6%
Barry R. Sharer                     1,549,913            5.6%
Stephen C. Sadtler                  1,300,000            4.7%

* All directors and officers
  as a Group (3 persons)           10,229,423           36.7%


Item 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Certain shareholders of the Company have provided significant accounting and
consulting services to the Company and have funded the Company with cash and
additionally have paid certain other costs incurred by the Company. For the year
ended October 31, 1995, these shareholders provided and $51,205 of accounting
and consulting services to the Company, advanced $505 to the Company and have
paid other costs incurred by the Company for various legal and other fees
aggregating $9,250 and paid $3,000 for the settlement of debt. See Note 4 to the
financial statements filed as an exhibit hereto. During 1996, an affiliate
corporation of these same shareholders assumed certain liabilities of the
Company in exchange for 3,500,000 shares of common stock. In addition, $40,000
of the proceeds from the note issued by the Company to the investment firm as
explained in Item 7 was used in payment of certain shareholder advances.

                                       7

<PAGE>

Item 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (continued)

In 1993, IDP forgave additional expenses paid on behalf of the Company totaling
$5,358. Reference is made to Item 1, SAC-IDP Agreement, for a description of the
SAC-IDP Agreement.


                                     PART IV

Item 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
           FORM 8-K

(a.) (1)  Financial Statements:

          Report of Independent Certified Public Accountants

          Balance Sheets as of  October 31, 1996 and 1995

          Statements of Operations for the years ended October 31, 1996, 
          1995 and 1994

          Statements of  Capital Deficit for the  years ended October 31, 1996,
          1995 and 1994

          Statements of Cash Flows for the years ended October 31, 1996, 
          1995 and 1994

          Notes to Financial Statements


      (2) Schedules

         Schedules are omitted as they are either not applicable or not required
           or because the information required is contained in the financial
           statements or notes thereto.

      (3) Exhibits Required to be Filed by Item 601 of Regulation S-K.

         a.   SAC-IDP Agreement dated October 15, 1988, between Systems
              Assurance Corporation and Insurance Data Processing, Inc.,
              incorporated by reference to Exhibit 2.1 to the company's report
              on Form 10K dated March 6, 1989.

         b.   Certificate of Incorporation of the company as amended,
              incorporated herein by reference to Exhibit 3.1 to Registration
              Statement No. 2-78947 on Form S-1 and to Exhibits 4.1 and 4.2 to
              the company's report on Form 10-Q for the quarter ended April 30,
              1984.

         c.   Certificate of Incorporation of the Company, as amended, August
              29, 1986, and filed with the Secretary of State of the State of
              Delaware, incorporated herein by reference to Exhibit 3.3 to the
              company's annual report on Form 10-K for fiscal year 1986.

                                       8

<PAGE>

Item 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
           FORM 8-K (continued)

     (4) a.  Countersigned Commitment Letter from Key Bank of Southern Maine
              ("Key Bank") to the company dated April 24, 1985, as amended May
              14, 1985, incorporated herein by reference to Exhibit 2.1 to the
              company's current report on Form 8-K dated May 14, 1985.

         b.   Secured Working Capital Line of Credit Demand Note of the company
              dated May 14, 1985, incorporated herein by reference to Exhibit
              2.2 to the company's report on Form 8-K dated May 14, 1985.

         c.   Security Agreement between the company and Key Bank dated May 24,
              1985, incorporated herein by reference to Exhibit 2.3 to the
              company's current report on Form 8-K dated May 14, 1985.

         d.   Amendment dated January 20, 1986, to the Commitment Letter dated
              April 24, 1985, from Key Bank to the company extending the
              maturity date of the Secured Working Capital Line of Credit Demand
              Note of the company, incorporated herein by reference to Exhibit
              19.2 to the company's annual report on Form 10-K for fiscal year
              1985.

         e.   1982 Stock Option and Appreciation Rights Plan of the Company, as
              amended, incorporated herein by reference to Exhibit 10.2 to the
              company's annual report on Form 10-K for fiscal year 1984.

         f.   Stock Purchase Agreement effective as of December 31, 1994, by and
              among Insurance Data Processing, Inc., Peter D. Carlino and FLC
              Associates, LTD.

(b)       Reports on Form 8-K
                  None

<PAGE>


Report of Independent Certified Public Accountants


Systems Assurance Corporation
Malvern, Pennsylvania

We have audited the accompanying balance sheets of Systems Assurance Corporation
as of  October  31,  1996 and 1995 and the  related  statements  of  operations,
capital  deficit and cash flows for each of the three years in the period  ended
October  31,1996.  These  financial  statements  are the  responsibility  of the
management of Systems Assurance Corporation. Our responsibility is to express an
opinion on these financial statements based upon our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of Systems Assurance  Corporation
as of october 31, 1996 and 1995 and the results of its  operations  and its cash
flows  for each of the three  years in the  period  ended  October  31,  1996 in
conformity generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 9 to the
financial statements,  the Company has suffered recurring losses from operations
and has a capital deficit.  These conditions raise  substantial  doubt about the
Company's ability to continue as a going concern.  Management's plans, regarding
these matters are  discussed in Note 9. The financial  statements do not include
any adjustments that might result from the outcome of this uncertainty.


                                                        /s/ BDO Seidman, LLP

January 17, 1997


                                       F-1

<PAGE>

                               Systems Assurance Corporation

                                              Balance Sheets

October 31,                                        1996              1995


Assets

Current assets
  Cash                                                $698              $382
  Income taxes refundable                            1,442             1,442
                                               -----------       -----------

Total current assets                                 2,140             1,824
                                               -----------       -----------

                                                    $2,140            $1,824
                                               ===========       ===========


Liabilities and Capital Deficit

Current liabilities
  Notes payable                                    $50,000      $         --
  Accrued expenses                                   3,099            19,000
  Advances from stockholders                            --            63,960
                                               -----------       -----------

Total current liabilities                           53,099            82,960
                                               -----------       -----------

Capital deficit
  Common stock, par value $.01 per share;
    Authorized 30,000,000 shares
    Issued and outstanding 27,918,454 and
      24,418,454, respectively                     279,185           244,185
  Additional paid-in capital                     9,802,200         9,786,233
  Deficit                                      (10,132,344)      (10,111,554) 
                                               -----------       -----------  

Total capital deficit                              (50,959)          (81,136)
                                               -----------       -----------


                                                    $2,140            $1,824
                                               ===========       ===========

 The accompanying notes are an integral part of the financial statements.


                                       F-2

<PAGE>


                               Systems Assurance Corporation

                                    Statements of Operations

<TABLE>
<CAPTION>
<S>                                                <C>               <C>                  <C>
Year ended October 31,                               1996              1995              1994

Revenues                                     $         --      $         --      $         --

General and administrative expenses                18,882            77,428               600

Interest expense                                    1,908                --                --
                                               ----------        ----------        ----------


(Loss) before provision for income taxes
  and extraordinary income                        (20,790)          (77,428)             (600)

Provision (credit) for income taxes                    --            (1,443)               --
                                               ----------        ----------        ----------


(Loss) before extraordinary income                (20,790)          (75,985)             (600)

Extraordinary income
  Gain on settlement of debt                           --            42,184                --
  Reduction in liabilities due to
    statute of limitations                             --                --           226,653
                                               ----------        ----------        ----------


Net (loss) income                                $(20,790)         $(33,801)         $226,053
                                               ==========        ==========        ==========


Income (loss) per common share
  (Loss) before extraordinary income         $         --      $         --      $         --
  Extraordinary income                       $         --      $         --      $        .01
  Net income (loss)                          $         --      $         --      $        .01

Weighted average number
  of common shares                             26,470,509        23,374,843        23,118,454
                                               ==========        ==========        ==========
</TABLE>

 The accompanying notes are an integral part of the financial statements.

                                       F-3

<PAGE>


                               Systems Assurance Corporation

                               Statements of Capital Deficit


Year ended October 31,
<TABLE>
<CAPTION>

                                               Common Stock           Additional                           Total
                                            Number                       Paid-In                          Capital
                                         of Shares        Amount         Capital           Deficit        Deficit
<S>                                      <C>              <C>            <C>                                  <C>
Balance, October 31, 1993               23,118,454    $  231,185    $  9,798,983    $  (10,303,806)   $  (273,638)

Net income                                       -             -               -           226,053        226,053
                                        ----------    ----------    ------------     -------------    ----------- 


Balance, October 31, 1994               23,118,454       231,185       9,798,983       (10,077,753)       (47,585)

Issuance of common shares                1,300,000        13,000         (12,750)                -            250

Net (loss)                                       -             -               -           (33,801)       (33,801)
                                        ----------    ----------    ------------     -------------    -----------


Balance, October 31, 1995               24,418,454       244,185       9,786,233       (10,111,554)       (81,136)

Issuance of common shares                3,500,000        35,000          15,967                 -         50,967

Net (loss)                                       -             -               -           (20,790)       (20,790)
                                        ----------    ----------    ------------     -------------    -----------


Balance, October 31, 1996               27,918,454    $  279,185    $  9,802,200    $   (10,132,34)   $   (50,959)
                                        ==========    ==========    ============     =============    =========== 
</TABLE>



 The accompanying notes are an integral part of the financial statements.



                                       F-4

<PAGE>


                               Systems Assurance Corporation

                                    Statements of Cash Flows
<TABLE>
<CAPTION>

Year ended October 31,                                                         1996          1995            1994
<S>                                                                    <C>             <C>            <C>        
Cash flows from operating activities
  Net (loss) income                                                    $    (20,790)   $  (33,801)    $   226,053
  Adjustment to reconcile net (loss) income to
    net cash (used) in operating activities
      Gain on settlement of debt                                                  -       (42,184)              -
      Reduction in liabilities due to statute
        of limitations                                                            -             -        (226,653)
      Expenses paid by stockholders                                          16,207        60,455               -
      Changes in operating assets and liabilities
        Income taxes refundable                                                   -        (1,442)              -
        Accrued expenses                                                     (5,101)       16,599             600
                                                                       ------------    ----------     -----------


Net cash (used) in operating activities                                      (9,684)         (373)              -
                                                                       ------------    ----------     -----------


Cash flows from financing activities
  Proceeds from notes payable                                                50,000             -               -
  Stockholder advances                                                      (40,000)          505               -
  Proceeds from sale of common stock                                              -           250               -
                                                                       ------------    ----------     -----------

Net cash provided by financing activities                                    10,000           755               -
                                                                       ------------    ----------     -----------

Net increase in cash                                                            316           382               -
                                                                       ------------    ----------     -----------

Cash, at beginning of year                                                      382             -               -
                                                                       ------------    ----------     -----------

Cash, at end of year                                                   $        698    $      382     $         -
                                                                       ============    ==========     ===========

Supplemental disclosures of cash flow information
  Issuance of common stock to satisfy stockholder
    advances and assumption of liabilities
      Common stock, at par value                                       $     35,000    $        -     $         -
      Additional paid-in capital                                       $     15,967    $        -     $         -
                                                                       ============    ==========     ===========
</TABLE>


 The accompanying notes are an integral part of the financial statements.


                                       F-5

<PAGE>


                               Systems Assurance Corporation

                               Notes to Financial Statements


1. Summary of Significant Accounting Policies

     Operations of the Company

     Systems  Assurance  Corporation  (the  "Company")  has been inactive  since
     October 31, 1991 and consequently has had no operating  revenues since that
     time. The Company is presently seeking investment opportunities but has not
     yet entered into any negotiations.

     Income Taxes

     The Company  records  income  taxes under the  provisions  of  Statement of
     Financial Accounting  Standards No. 109 (SFAS 109),  "Accounting for Income
     Taxes".  SFAS 109 requires the asset and liability method of accounting for
     income taxes.  Under the asset and liability method,  deferred income taxes
     are  recognized  for the  tax  consequences  of  temporary  differences  by
     applying  enacted  statutory  tax  rates  applicable  to  future  years  to
     differences  between the financial  statement  carrying amounts and the tax
     bases of existing  assets and  liabilities.  Under SFAS 109,  the effect on
     deferred  taxes of a change  in tax  rates is  recognized  in income in the
     period that includes the enactment date. A valuation  allowance is recorded
     based on a determination  of the ultimate  realizability of future deferred
     tax assets.

     Net Income (Loss) Per Share

     Net income  (loss) per share of Common  Stock is computed  by dividing  net
     income by the weighted  average number of shares of Common Stock and Common
     Stock Equivalents, if dilutive, outstanding during the year.

     Use of Estimates

     The  preparation  of financial  statements  in  conformity  with  generally
     accepted  accounting  principles  requires management to make estimates and
     assumptions  that affect the reported amounts of assets and liabilities and
     disclosure  of  contingent  assets  and  liabilities  at  the  date  of the
     financial  statements  and the  reported  amounts of revenues  and expenses
     during  the  reporting  period.  Actual  results  could  differ  from those
     estimates.


                                       F-6

<PAGE>

     Fair Value of Financial Instruments

     The  carrying  amounts  reported in the balance  sheets,  if any, for cash,
     accounts receivable,  miscellaneous receivables,  accounts payable, accrued
     liabilities  and  short-term  debt  approximate  fair value  because of the
     immediate or short-term maturity of these financial instruments.

2. Reduction in Liabilities Due to Statute of Limitations

     Certain liabilities of the Company were determined to have exceeded various
     applicable  states  statutes  of  limitations  and were  written off by the
     Company in the years in which the statutes were determined to have expired.
     The effect on the  statement of  operations  for the year ended October 31,
     1994 was to increase net income by $226,653.

3. Gain on Settlement of Debt

     The Company  settled a note payable during the year ended October 31, 1995.
     The original note was in the amount of $30,000 and had accrued  interest of
     $15,184  through  October 31,  1994.  In complete  settlement  of the note,
     certain stockholders of the Company paid $3,000 to the noteholder on behalf
     of the Company and the  noteholder  released  the Company  from all further
     obligations under the note. Gain on settlement of debt amounting to $42,184
     is included in the statement of operations for 1995.

4. Related Party Transactions

     Certain   stockholders  of  the  Company  have  provided   significant  and
     consulting  services to the  Company and have funded the Company  with cash
     and have paid certain  costs  incurred by the  Company.  For the year ended
     October 31, 1995,  these  stockholders  provided  $51,205 of accounting and
     consulting  services to the Company,  advanced  $505 to the  Company,  paid
     costs incurred by the Company for various legal and other fees  aggregating
     $9,250 and paid the  settlement of debt referred to in Note 3,  aggregating
     $3,000.  The total of these  transactions is reflected in the  accompanying
     balance sheet at October 31, 1995 as advances from stockholders.



                                       F-7

<PAGE>

                               Systems Assurance Corporation

                               Notes to Financial Statements


     For the year ended October 31, 1996, the  stockholders  provided  $6,918 of
     accounting  and  consulting  services to the Company,  advanced $200 to the
     Company, and paid costs incurred by the Company for various legal and audit
     fees  aggregating  $9,090,  and  assumed  corporate  liabilities  totalling
     $10,800.

     On April 1, 1996, the  Corporation  issued  3,500,000  shares of its common
     stock in exchange for all stockholder  advances  existing at March 31, 1996
     in excess of $40,000. The remaining  stockholder advance balance of $40,000
     was repaid using proceeds of the note payable described in Note 8.

5.    Income Taxes

     The Company had no deferred tax  liabilities at either October 31, 1996 and
     1995.  Significant  components  of the  Company's  deferred  tax  assets at
     October 31, 1996 and 1995 are as follows:

          October 31,                                  1996         1995

          Deferred tax assets
                Net operating loss carryforwards      $8,375       $5,300
                Valuation allowance                   (8,375)      (5,300)
                                                      ------       ------

          Net deferred tax assets                    $    --      $    --
                                                      ======       ======


     Due to the purchase of shares by certain  individuals during the year ended
     October 31, 1995, the Company  exceeded the limits  allowable under the Tax
     Reform Act of 1986  related to changes in  ownership  percentage  governing
     future utilization of net operating and tax loss carryfowards,  effectively
     eliminating  the utilization of any  carryforwards  existing at the date of
     purchase. Accordingly, the related deferred tax assets have been eliminated
     and the valuation  allowance has been similarly  reduced.  The tax loss for
     the years  ended  October  31,  1996 and 1995 are not  subject  to any such
     limitation.

     The credit for income taxes for the year ended October 31, 1995 consists of
     a request  for refund of  alternative  minimum  taxes paid  during the year
     ended October 31, 1991.


                                       F-8

<PAGE>


                               Systems Assurance Corporation

                               Notes to Financial Statements

6. Litigation

     The Company is the defendant in an action brought in Massachusetts Superior
     Court, County of Suffolk, by McDevitt Recruitment  Advertisement,  Inc. The
     complaint  was  served  in  December  1986 and  alleges a breach of an oral
     warranty of fitness for a particular  purpose of a computer  system sold to
     plaintiff in 1982,  which  allegedly never  performed  properly.  Plaintiff
     seeks  damages of $30,000.  The Company  believes that it is not liable for
     any damages;  however,  in order to save the cost of potential  litigation,
     has  offered a  settlement  in the  amount of $1,000 to  attorneys  for the
     plaintiff  which it believes  is  sufficient  to settle this case.  At this
     date, the attorneys have not been able to locate plaintiff.

7. Incentive Stock Option Plan

     Under the Company's stock option and appreciation  rights plan, the Company
     may grant  incentive  stock  options  or  non-qualified  stock  options  to
     purchase  shares of the  Company's  common  stock to officers and other key
     employees of the Company.  The exercise  price may not be less than 100% of
     the fair  market  value of the common  stock on the date of the grant.  The
     plan also provides that the committee may issue stock  appreciation  rights
     ("Rights") in connection  with the options.  A Right entitles the holder to
     receive the amount by which the market  value of the shares as to which the
     Rights are  exercised  exceeds the option  price for that number of shares.
     900,000 shares of common stock have been reserved under the incentive stock
     option plan.

     No options or rights are currently outstanding. All previous grants made by
     the Company to its employees have expired.

8. Note Payable

     The  Company has  entered  into an  agreement  with an  investment  firm to
     actively  seek an  investment  opportunity  acceptable  to the Company.  In
     connection with the agreement, the investment firm has received irrevocable
     proxies from certain of the Company's  stockholders to vote their shares in
     connection  with  any  recapitalization  of  the  Company's  common  stock,
     election  of  members of the Board of  Directors  and any  proposed  merger
     candidate that meets certain minimum requirements.  The irrevocable proxies
     have been extended at the option of the  investment  firm through  February
     28, 1997. As an incentive to enter into the above agreement, the investment
     firm has lent the Company  $50,000  evidenced by a Promissory  Note due and
     payable (including interest at the rate of 7%, per annum) on the expiration
     of

                                      F-9


<PAGE>

     the irrevocable  proxies.  The investment firm has  additionally  agreed to
     assume responsibility for certain operating costs which may be incurred.

9. Going Concern

     The Company has suffered recurring losses, has not current  expectations of
     revenue  and has a capital  deficit.  Although  management  intends to seek
     funding for normal operating  expenses and is presently seeking  investment
     opportunities,  it is not certain that such  opportunities  or funding will
     become available, or if available, that it will be on acceptable terms.

10. Subsequent Event

     The Board of Directors of the Company adopted and declared the advisability
     of a  resolution  to effect a  one-for-seventy  reverse  stock split of the
     Systems  Assurance  Corporation  Common Stock (the "Reverse  Stock Split").
     Pursuant to the Reverse  Stock Split,  each share of the  Company's  Common
     Stock outstanding  immediately prior to the date of the Reverse Stock Split
     shall be combined into one validly  issued,  fully paid and  non-assessable
     share of Common  Stock,  $.01 par value of the Company.  The Reverse  Stock
     Split will require the  affirmative  vote of a majority of the  outstanding
     shares of Systems Assurance  Corporation  Common Stock at a Special Meeting
     of the Company's stockholders to be held on January 24, 1997.


                                      F-10

<PAGE>


                                   SIGNATURES

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

                                        SYSTEMS ASSURANCE CORPORATION
Date:

                                        By:  /s/William E. Chipman, Sr.
                                                William E. Chipman, Sr.
                                                President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:

Signature                       Title                                   Date

/s/William E. Chipman, Sr.    President                               01/24/97
    William E. Chipman, Sr.   (A Principal Executive and Director)

/s/James C. Wagner            Secretary                               01/24/97
    James C. Wagner           (A Principal Executive and Director)

/s/Thomas R. Petree           Treasurer                               01/24/97
    Thomas R. Petree          (Principal Financial Officer and Director)