<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-QSB

(Mark One)

  X       Quarterly Report Under Section 13 or 15(d) of The Securities Exchange
------    Act of 1934

For the quarterly period ended  September 30, 1999
                               --------------------

          Transaction Report Under Section 13 or 15(d) of the Securities
-----     Exchange Act

For the transition period from                 to
                                --------------    --------------

Commission File Number  0-4169
                       --------

                                      SYS
-------------------------------------------------------------------------------
        (Exact Name of Small Business Issuer as Specified in Its Charter)

             California                                       95-2467354
------------------------------------                  -------------------------
  (State or Other Jurisdiction of                          (I.R.S. Employer
   Incorporation or Organization)                          Identification No.)

          9620 Chesapeake Drive, Suite 201, San Diego, California 92123
-------------------------------------------------------------------------------
                    (Address of Principal Executive Offices)

                                 (858) 715-5500
-------------------------------------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)

-------------------------------------------------------------------------------
         (Former Name, Former Address and Former Fiscal Year, if Changed
                               Since Last Report)

     Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 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
    -----       -----

     State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 3,236,732 shares of common
stock, without par value, as of October 31, 1999.

     Transitional Small Business Disclosure Format (check one):

Yes          No   X
    -----       -----


                                      -1-
<PAGE>

                                TABLE OF CONTENTS

                                                                           Page
PART I - FINANCIAL INFORMATION                                           Number

     Item 1.  Financial Statements
              Condensed Balance Sheets
                 September 30, 1999 (unaudited) and June 30,
                 1999 (audited) ...........................................   3
              Condensed Statements of Operations (unaudited)
                 Three Months Ended September 30, 1999
                 and Three Months Ended September 30, 1998 ................   4
              Condensed Statements of Cash Flows (unaudited)
                 Three Months Ended September 30, 1999
                 and Three Months Ended September 30, 1998 ................   5
              Notes to Condensed Financial Statements (unaudited) .........   6

     Item 1a. Factors Which May Affect Future Results .....................   7

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

                 Description of Business ..................................  10
                 Results of Operations ....................................  11
                 Liquidity and Capital Resources ..........................  12
                 Impact of the Year 2000 ..................................  13

PART II - OTHER INFORMATION

     Item 1.  Legal Proceedings ...........................................  14

     Item 2.  Changes in Securities .......................................  14

     Item 3.  Defaults Upon Senior Securities .............................  14

     Item 4.  Submission of Matters to a Vote of Security Holders .........  14

     Item 5.  Other Information ...........................................  14

     Item 6.  Exhibits and Reports on Form 8-K ............................  14


                                      -2-
<PAGE>

                                     PART I
                              FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                                       SYS
                            CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                              9/30/99              6/30/99
                                                            ----------            ---------
                                                           (Unaudited)            (Audited)
<S>                                                        <C>                  <C>
ASSETS
---------------------------------------------------------
Current assets:
  Cash                                                     $  131,000           $  343,000
  Contract receivables, net                                 1,277,000            1,449,000
  Receivable from a related party                             179,000              125,000
  Deferred tax assets                                          50,000               72,000
  Other current assets                                         50,000               39,000
                                                           ----------           ----------
    Total current assets                                    1,687,000            2,028,000

Equipment, furniture and fixtures,
  at cost, less accumulated
  depreciation and amortization                               240,000              241,000
Other assets                                                   17,000               16,000
                                                           ----------           ----------
                                                           $1,944,000           $2,285,000
                                                           ==========           ==========
LIABILITIES & STOCKHOLDERS' EQUITY
---------------------------------------------------------
Current liabilities:
  Accounts payable                                         $  165,000           $  393,000
  Accrued payroll and related taxes                           269,000              330,000
  Income taxes payable                                         27,000              129,000
  Other accrued liabilities                                    26,000               35,000
  Current portion of other notes payable                       80,000               90,000
  Current portion of capital lease obligations                 44,000               12,000
                                                           ----------           ----------
    Total current liabilities                                 611,000              989,000

Other notes payable, net of current portion                    10,000               11,000
Capital lease obligations, net of current portion              41,000               43,000
Deferred tax liabilities                                            0               22,000
                                                           ----------           ----------
    Total liabilities                                         662,000            1,065,000
                                                           ----------           ----------
Stockholders' equity:
  Preferred stock                                              55,000               55,000
  Series B preference stock                                    70,000               70,000
  Common stock                                                494,000              494,000
  Retained earnings                                           663,000              601,000
                                                           ----------           ----------
    Total stockholders' equity                              1,282,000            1,220,000
                                                           ----------           ----------
                                                           $1,944,000           $2,285,000
                                                           ==========           ==========
</TABLE>


                                      -3-
<PAGE>

                                       SYS
                        CONDENSED STATEMENT OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                       Three months ended
                                                           September 30
                                                    --------------------------
                                                       1999            1998
                                                    ----------      ----------
<S>                                                 <C>             <C>
Contract revenues                                   $1,703,000      $1,865,000
                                                    ----------      ----------
Costs and expenses:
  Contract costs                                     1,415,000       1,478,000
  General and administrative                           205,000         261,000
                                                    ----------      ----------
    Totals                                           1,620,000       1,739,000
                                                    ----------      ----------
Income from operations                                  83,000         126,000
                                                    ----------      ----------
Other (income) expense:
  Interest income                                       (2,000)              0
  Interest expense                                       5,000           9,000
                                                    ----------      ----------
    Totals                                               3,000           9,000
                                                    ----------      ----------
Income before income taxes                              80,000         117,000
Provision for income taxes                              15,000          27,000
                                                    ----------      ----------
Net income                                              65,000          90,000
Dividends on preferred and preference shares             3,000           3,000
                                                    ----------      ----------
Net income applicable to common stock                   62,000          87,000
Retained earnings at beginning of period               601,000         315,000
                                                    ----------      ----------
Retained earnings at end of period                  $  663,000      $  402,000
                                                    ==========      ==========

Basic earnings per common share                     $     0.02      $     0.03
                                                    ==========      ==========
Diluted earnings per common share                   $     0.02      $     0.03
                                                    ==========      ==========

Weighted average number of common shares             3,236,732       3,149,061
                                                    ==========      ==========
</TABLE>


                                      -4-
<PAGE>

                                       SYS
                        CONDENSED STATEMENT OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                   Three months ended
                                                                      September 30
                                                             ---------------------------
                                                                1999             1998
                                                             ---------        ----------
<S>                                                          <C>              <C>
Operating activities:
  Net income                                                 $  65,000        $   90,000
  Adjustments to reconcile net income to net cash
  used for operating activities:
    Depreciation and amortization                               14,000            14,000
    Changes in operating assets and liabilities:
      Contract receivables                                     172,000            (3,000)
      Receivables from related party                           (54,000)           17,000
      Other current assets and other assets                    (12,000)           33,000
      Accounts payable                                        (228,000)         (120,000)
      Accrued payroll and related taxes                        (61,000)          (52,000)
      Income taxes payable                                    (102,000)           28,000
      Other accrued liabilities                                 (9,000)          (10,000)
                                                             ---------        ----------
Net cash used in operating activities                         (215,000)           (3,000)
                                                             ---------        ----------
Investing activities:
  Acquisition of furniture and equipment                       (13,000)          (28,000)
                                                             ---------       -----------
Net cash used in investing activities                          (13,000)          (28,000)
                                                             ---------       -----------
Financing activities:
  Proceeds from line of credit borrowings                       82,000         1,890,000
  Payments on line of credit borrowings                        (82,000)       (1,858,000)
  Proceeds from (payments on) other notes payable or
   capital leases                                               19,000           (19,000)
  Payments of preference stock dividends                        (3,000)           (3,000)
  Proceeds from issuance of common stock                             0             2,000
                                                             ---------       -----------
Net cash provided by financing activities                       16,000            12,000
                                                             ---------       -----------
Decrease in cash                                              (212,000)          (19,000)
Cash at beginning of period                                    343,000            28,000
                                                             ---------       -----------
Cash at end of period                                        $ 131,000       $     9,000
                                                             =========       ===========
</TABLE>


                                      -5-
<PAGE>

                     NOTES TO CONDENSED FINANCIAL STATEMENTS

(1)  In the opinion of the Registrant, the unaudited financial information in
this report reflects all adjustments, consisting only of normal recurring
accruals, which are considered necessary to a fair presentation of the results
of the periods shown. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to SEC
regulations. It is suggested that these financial statements be read in
conjunction with the audited financial statements included in the Registrant's
Report on Form 10-KSB for the fiscal year ended June 30, 1999.

(2)  Earnings per common share: Effective June 30, 1998, the Company adopted the
provisions of Statement of Financial Accounting Standards No. 128, EARNINGS PER
SHARE ("SFAS 128"), which replaced the presentation of "primary" and
"fully-diluted" earnings per common share required under previously promulgated
accounting standards with the presentation of "basic" and "diluted" earnings per
common share.

     Basic earnings per common share are calculated by dividing net income
applicable to common stock by the weighted average number of common shares
outstanding during the period. The calculation of diluted earnings per common
share is similar to that of basic earnings per common share, except that the
denominator is increased to include the number of additional common shares that
would have been outstanding if all potentially dilutive common shares,
principally those issuable upon the conversion of preferred stock and the
exercise of stock options, were issued during the period.

     The following table summarizes the calculation of basic and diluted
earnings per common share for each period:

<TABLE>
<CAPTION>
                                                         Three Months Ending
                                                             September 30
                                                     -------------------------
                                                         1999           1998
                                                     ----------     ----------
<S>                                                  <C>            <C>
  Numerators:
    Net income (A)                                   $   65,000     $   90,000
    Deduct - preference dividend requirements             3,000          3,000
                                                     ----------     ----------

    Net income applicable to common stock (B)        $   62,000     $   87,000
                                                     ==========     ==========

  Denominators:
    Weighted average shares for basic net
      earnings per common share (C)                   3,236,732      3,149,061
    Add effects of dilutive securities from
      assumed:
      Conversion of preference stock                          0          1,729
      Exercise of stock options                             101         37,440
                                                     ----------     ----------
    Weighted average shares for diluted net
      earnings per common share (D)                   3,236,833      3,188,230
                                                     ==========     ==========

  Basic net earnings per common share (B / C)           $0.02          $0.03
                                                        =====          =====


                                      -6-
<PAGE>

  Diluted net earnings per common share ( A / D)        $0.02          $0.03
                                                        =====          =====
</TABLE>

(3)  The results of operations for the quarter ended September 30, 1999, are
not necessarily indicative of the results to be expected for the full year.

ITEM 1a. FACTORS WHICH MAY AFFECT FUTURE RESULTS

     Information contained in this Form 10-QSB should be studied carefully by
any potential investor while considering the following risk factors to the
Company.

     1. LACK OF BUSINESS DIVERSIFICATION Essentially all the Company's business
at the present time is with the U.S. Navy. Even though the level of business
with its customers is growing and the Company has negotiated multiple-year
contracts, there is no certainty that budget changes in Congress or the Defense
Department will not seriously affect the Company.

     2. DEPENDENCE ON KEY PERSONNEL The Company has a few key management,
project and technical personnel that are intimately involved in their functions
and have day to day relationships with critical customers. The Company is not
able to afford extra standby staff. As a result, at its current size, it would
be affected in an uncertain way if any of these personnel were to be lost to the
Company.

     3. COMPETITION The Company has many competitors who vie for the same
customers as SYS. They are competent, experienced and continuously working to
take work projects away from the Company.

     4. RECEIVABLE FROM AFFILIATE Big Canyon Investments, Inc. (BCI), a wholly
owned subsidiary of UniPrise Systems, Inc. (UniPrise), a company partially owned
by Robert D. Mowry, a former Director, Chairman and Chief Executive Officer of
the Company, has entered into an agreement with the Company in which the Company
was providing collection services to BCI/UniPrise for certain receivables (the
"Receivables"). Under this arrangement, BCI/UniPrise owed the Company $179,000.
The Company could potentially benefit from these Receivables over and above the
amount owed. On September 24, 1999, the Board of Directors agreed to replace the
BCI/UniPrise debt with a Secured Negotiable Promissory Note (the "Note") for
$179,000 from Mowry and BCI. The Note is secured by the Receivables, Mowry's
personal guarantee and common stock of the Company held or controlled by Mowry.
While the Company believes that the Note is sufficiently secured, the Company
may incur losses.

     5. LIMITED ASSETS OF THE COMPANY The Company has very limited assets upon
which to rely on for adjusting to business variations and for growing new
businesses. While the Company is likely to look for new funding to assist in the
acquisition of other profitable businesses, it is uncertain whether such funds
will be available. While the Company's management believes that its financial
policies have been prudent, the Company's substantial reliance on a short term
bank loan with Scripps Bank and other short-term accruals impose certain
limitations on the Company. If the Company is to grow and expand its operations,
the Company will need to raise significant amounts of additional capital. There
can be no assurance that the Company will be successful in raising a sufficient
amount of additional capital, or if it is successful, that the Company will be
able to raise capital on reasonable terms in light of the Company's current
circumstances. In the event that the Company raises additional capital, the
Company's existing stockholders may incur substantial and immediate dilution.


                                      -7-
<PAGE>

     6. LIMITED MARKET FOR COMMON STOCK. The Company's stock is traded (OTC) on
the Electronic Bulletin Board. Trading for the stock is sporadic and at present
there is a limited market for the Company's Common Stock. There can be no
assurance that a market will in fact develop. Even if a market does develop, it
may not be sustained.

     7. POSSIBLE RULE 144 STOCK SALES. A total of 2,035,529 shares of the
Company's outstanding Common Stock are "restricted securities" and may be sold
only in compliance with Rule 144 adopted under the Securities Act of 1933 or
other applicable exemptions from registration. Rule 144 provides that a person
holding restricted securities for a period of one year may thereafter sell, in
brokerage transactions, an amount not exceeding in any three-month period the
greater of either (i) 1% of the Company's outstanding Common Stock, or (ii) the
average weekly trading volume during a period of four calendar weeks immediately
preceding any sale. Persons who are not affiliated with the Company and who have
held their restricted securities for at least two years are not subject to the
volume limitation. Possible or actual sales of the Company's Common Stock by
present shareholders under Rule 144 may have a depressive effect on the price of
the Company's Common Stock in any market which may develop.

     8. RISKS OF LOW PRICED STOCKS. Trading in the Company's stock is limited.
Consequently, a shareholder may find it more difficult to dispose of, or to
obtain, accurate quotations as to the price of, the Company's securities. In the
absence of a security being quoted on NASDAQ, trading in the Common Stock is
covered by Rule 3a51-1 promulgated under the Securities Exchange Act of 1934 for
non-NASDAQ and non-exchange listed securities.

     Under such rules, broker/dealers who recommend such securities to persons
other than established customers and accredited investors (generally
institutions with assets in excess of $5,000,000 or individuals with net worth
in excess of $1,000,000 or an annual income exceeding $200,000 or $300,000
jointly with their spouse) must make a special written suitability determination
for the purchaser and receive the purchaser's written agreement to a transaction
prior to sale. Securities are also exempt from this rule if the market price is
at least $5.00 per share, or, for warrants, if the warrants have an exercise
price of at least $5.00 per share. The Securities Enforcement and Penny Stock
Reform Act of 1990 requires additional disclosure related to the market for
penny stocks and for trades in any penny stock defined as a penny stock.

     The Commission has recently adopted regulations under such Act which define
a penny stock to be any NASDAQ or non-NASDAQ equity security that has a market
price or exercise price of less than $5.00 per share and allow for the
enforcement against violators of the proposed rules.

     In addition, unless exempt, the rules require the delivery, prior to any
transaction involving a penny stock, of a disclosure schedule prepared by the
Commission explaining important concepts involving a penny stock market, the
nature of such market, terms used in such market, the broker/dealer's duties to
the customer, a toll-free telephone number for inquiries about the
broker/dealer's disciplinary history, and the customer's rights and remedies in
case of fraud or abuse in the sale.

     Disclosure also must be made about commissions payable to both the
broker/dealer and the registered representative, current quotations for the
securities and, if the broker/dealer is the sole market maker, the broker/dealer
must disclose this fact and its control over the market.

     Monthly statements must be sent disclosing recent price information for the
penny stock held in the account and information on the limited market in penny
stocks. While many NASDAQ stocks are covered by the proposed definition of penny
stock, transactions in NASDAQ stocks are exempt from all but the sole
market-maker provision for (i) issuers with $2,000,000 in tangible assets
($5,000,000 if the issuer has not been in continuous operation for three years),
(ii) transactions in


                                      -8-
<PAGE>

which the customer is an institutional accredited investor and
(iii) transactions that are not recommended by the broker/dealer. In addition,
transactions in a NASDAQ security directly with the NASDAQ market maker for such
securities, are subject only to the sole market-maker disclosure, and the
disclosure with regard to commissions to be paid to the broker/dealer and the
registered representatives.

     Finally, all NASDAQ securities are exempt if NASDAQ raised its requirements
for continued listing so that any issuer with less than $2,000,000 in net
tangible assets or stockholders' equity would be subject to delisting. These
criteria are more stringent than the proposed increase in NASDAQ'S maintenance
requirements. The Company's securities are subject to the above rules on penny
stocks and the market liquidity for the Company's securities could be severely
affected by limiting the ability of broker/dealers to sell the Company's
securities.

     9. CONTROL BY OFFICERS AND DIRECTORS. Officers and Directors of the Company
own 52.8% or 1,709,593 shares of the Company's common stock (before including
any shares acquired upon exercise of any stock options) and thereby control the
Company's affairs.


                                      -9-
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

DESCRIPTION OF BUSINESS

     The Company provides management and technical services in systems planning,
management and analysis, systems engineering, naval architecture, marine
engineering, ordnance engineering, logistics analysis and engineering,
operations analysis, design development, reliability engineering and analysis,
hazardous materials reduction studies, computer systems analysis, office
automation, information management systems and related support services. The
Company also provides hardware integration and fabrication.

     The Company was formed and incorporated in the State of California in 1966
as Systems Associates, Inc. It became a public corporation in 1968, and engaged
in systems analysis, systems engineering, computer services and software for
Government and industry. In addition to providing these services, the Company
conducted other business activities in computer network operations and software
applications, water resources development and management, and in engineering
services for sanitary waste development and construction management, which it
subsequently (1975) sold to other companies. The Company changed its name to
Systems Associates, Inc. of California on December 4, 1979, and, as of March 18,
1985, it was changed to SYS. The Company corporate offices were moved to San
Diego, California in February 19, 1984, from Long Beach, California.

     The Company currently has three principal contracts with the U. S. Navy.
These prime contracts are Underway Replenishment; Management, Planning and
Administrative; and Naval Architecture and Marine Engineering.

     The Underway Replenishment (UNREP) Program had its first of three option
years exercised on December 4, 1998. This program accounted for about 30% of the
Company's revenue. This program provides in-service engineering support to the
U.S. Navy Fleet. The Company is continuing its support for the research and
development project to design and build a full size ship mock-up of a missile
rearming system. An Aegis Cruiser Vertical Launch Test System was fitted with a
full scale mock-up capable of demonstrating the rearming and strikedown system
feasibility for replenishing the Navy Standard Missile and the shipboard
Tomahawk missile system while underway at sea. This project continues to refine
the detail design. Shipboard technical assistance continues to gain strength and
is the basis for continued business confidence in the coming year. Due to the
declining number of Underway Replenishment Ships in the active U.S. Navy fleet
and the transfer of many of these assets to the Military Sealift Command (MSC),
a significant upgrade or backfit program has developed to extend the serviceable
life of these ships. The Company is playing a major role in this program
including design, asset procurement, shipboard installation and the subsequent
changes to the technical documentation. The Company also has a key role in
developing the UNREP depot repair capability for selected equipments.

     The Management, Planning and Administrative (MPA) Program had its fourth of
four option years exercised on February 1, 1999 and the Company has submitted a
proposal for this contract's recompetition. This program accounted for about 50%
of the Company's revenue. This program supports the U.S. Navy's Port Hueneme
Division, Naval Surface Warfare Center. The Statement of Work provides a broad
and flexible scope of work which allows a wide range of tasking. The Company has
developed work competencies in such areas as Management Consulting, Information
Services, Human Resource Services, Combat Systems Engineering and Facilities
Engineering. The


                                      -10-
<PAGE>

MPA program has received customer recognition for its high standards of
excellence and professionalism. Continued growth of this Program area is
anticipated.

     The Naval Architecture and Marine Engineering (NAME) Program had its third
of four option years exercised on November 25, 1998. This program accounted for
about 11% of the Company's revenue. This cost plus fixed fee contract was issued
by the U.S. Navy's Port Hueneme Division, Naval Surface Warfare Center (PHD
NSWC). The Company's largest customer on this contract is the Ship Self Defense
Department of PHD NSWC. Along with our Associate Subcontractor, John J. McMullen
Associates, Inc. (JJMA), the Company provides extensive support for Ship Self
Defense Systems in the areas of weapon systems installation design, planning and
coordination. The outlook for this contract next year is good, but challenging.
We are attempting to expand our customer base in an environment of decreasing
customer budgets. The Company is now supporting a new Army Navy Literage
Procurement Program providing logistics engineering services to the Naval
Facilities Engineering Command.

     The Company was awarded a three-year subcontract on August 2, 1999 from
Santa Barbara Applied Research, Inc. to continue its support to the Naval Air
Systems Command. This support provides environmental engineering and technical
services focusing on the identification and reduction of hazardous material when
providing maintenance to weapons and associated handling and shipping equipment.
Hazardous material reduction support is being expanded to include support for
Foreign Military Sales.

     Washington, D.C. Operations successfully recompeted a five-year subcontract
with their prime contractor, Tracor (now Marconi), on April 24, 1997. This will
allow continued program management support to the Program Executive Office,
Surface Combatants/AEGIS Program (PEO, SC/AP), PMS400. The Company provides
contract and other financial reconciliation and closure support for the Japanese
AEGIS Foreign Military Sales cases. The Company also provides other financial
management support including case closure processing support to PMS400.

     The General Services Administration (GSA) has awarded the Company two
contracts. The first contract awarded is for Information Technologies (IT). The
other contract is for Financial Management Services. The Company has a Blanket
Purchase Agreement (BPA) in place at SPAWAR headquarters in San Diego for the IT
contract. The Company anticipates expanding its business in the San Diego area
using these contract vehicles. The Company has had initial success in placing
orders on these contract vehicles in fiscal year 1999.

     The Company launched a new division in the last quarter of fiscal year 1999
that provides electronic records management. This division is expected to grow
considerably over the next year and is one of the reasons for the increased use
of the Company's GSA contracts. This new technical capability has served as an
entry into the Navy SEABEE Logistics Center providing capability to better
address combat readiness of Naval Construction Forces. This division booked its
first revenue in the first quarter of fiscal year 2000.

RESULTS OF OPERATIONS

         The Company revenue for this quarter is almost 9% less than those in
the same quarter in FY 1999. The primary reason for the decline in revenue is a
reduction in funding from the government which has adversely affected most of
the Company's programs during this first quarter.


                                      -11-
<PAGE>

         Total contract and general and administrative expenses were 95% and 93%
as a percentage of contract revenue for the three months ended September 30,
1999 and 1998, respectively. The reason for the higher expenses in FY 2000 is
primarily due to increased overhead labor. Interest expense continues to decline
with the decreased borrowing from the credit facility.

         Income from operations has declined to 4.87% from 6.76% for the three
months ended September 30, 1999 and 1998, respectively. Net income for the
quarter is $65,000 as compared to $90,000 for this quarter in the prior year.
The reason for the lower net income for the quarter is mainly attributable to
unallowable labor and costs. The negotiated contract backlog was approximately
$2,529,000 at the end of the first quarter.

         The outstanding balance on the Company's revolving line of credit with
Scripps Bank remained at zero at the end of the first quarter of FY 2000. At the
end of the same period in FY 1999, the line of credit balance was also at zero.

LIQUIDITY AND CAPITAL RESOURCES

         The Company had contract receivables (net) of $1,277,000 at the end of
the first quarter of FY 2000. For the same quarter in FY 1999, the contract
receivables (net) were $1,188,000.

         The Company had accounts payable of $165,000 at the end of the first
quarter of FY 2000. For the same quarter in FY 1999 the accounts payable were
$198,000. The payment status of these accounts payable is current.

         The Company maintains a $500,000 revolving credit facility with Scripps
Bank which matures on October 15, 2000. The loan is secured by all the Company's
assets including contract receivables. Scripps advances funds requested by the
Company of up to 80% of the Company's billed contract receivables which are less
than 90 days old. Scripps charges an interest rate of 1.5% over prime.

         Management believes that the Company will have sufficient cash flow
from operations and funds available under the revolving credit agreement with
Scripps Bank to finance its operating and capital requirements through at least
the current fiscal year.

         Several key factors indicating the Company's financial condition
include:

<TABLE>
<CAPTION>

                                   September 30, 1999       June 30, 1999
                                   ------------------       -------------
<S>                                <C>                      <C>
Current ratio                             2.76                   2.05
Maximum debt to net worth                 0.52                   0.87
Net worth                              $1,282,000             $1,220,000
Net working capital                    $1,076,000             $1,039,000
Debt to total assets                       34%                   47%
Book value per common share               $0.36                 $0.34
</TABLE>

     The Company continued to demonstrate improvements in the above financial
factors during the first quarter of fiscal year 2000. These Company trends are
positive, however, there can be no certainty that they will continue to be
positive. The current ratio is derived by dividing total current assets by total
current liabilities. Maximum debt to net worth is calculated by


                                      -12-
<PAGE>

dividing total liabilities (total current liabilities plus other liabilities) by
net worth. Net worth is total stockholders' equity. Net working capital is total
current assets less total current liabilities. Debt to total assets is total
liabilities divided by total assets. Book value per common share is
stockholders' equity related to common shares divided by the weighted average
number of common shares outstanding.

IMPACT OF THE YEAR 2000

     The Year 2000 issue exists because many computer systems and applications
use two-digit date fields to designate a year. As the century date change
occurs, date-sensitive systems may recognize the year 2000 as 1900, or not at
all. This inability to recognize or properly treat the year 2000 may cause
systems to process financial and operational information incorrectly. The
Company is continually upgrading its hardware and software and has upgraded its
financial software to insure compliance with the Year 2000 issue. The Company
believes that with these hardware and software upgrades, the Year 2000 issue
will not pose significant operational problems for its internal computer
systems. The Company has confirmed that its systems are Year 2000 compliant
through the use of internal and external resources and does not anticipate
incurring significant costs on this issue. There can be no assurance that the
systems of the Company's customers or suppliers will be converted on a timely
basis or that such failure to convert by another company will not have an
adverse effect on the Company. However, since the Company is primarily a
provider of services, the Company does not believe that suppliers will have a
significant impact on the Company's possible Year 2000 problems. The Company
does not expect the Year 2000 issue to have a material effect on its financial
position, results of operations or cash flows in any given year.


                                      -13-
<PAGE>

                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

     None

ITEM 2.  CHANGES IN SECURITIES

     None

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

     None

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

     None

ITEM 5.  OTHER INFORMATION

     At the November 19, 1997 Board of Directors meeting, the board approved
stock options for all outside directors in lieu of cash compensation for board
meeting attendance. Effective September 1, 1997, outside directors were to
receive stock options for 12,000 shares of the Company's common stock as annual
compensation at $0.75 per share. There are outstanding stock options for 69,800
common shares for the period of September 1, 1997 to August 31, 1998. Under the
same policy, for the period from September 1, 1998 through August 31, 1999,
stock options for 40,645 common shares at $0.68 per share are owed to outside
directors. Under the same policy, for the period from September 1, 1999 through
September 30, 1999, stock options for 2,000 common shares at $0.625 per share
are owed to outside directors.

     Effective September 21, 1999, the Board of Directors elected Mr. Kameron
Maxwell to fill the Board of Directors vacancy created by Mr. Robert D. Mowry's
resignation. Also effective September 21, 1999, the Company entered into a
Consulting Agreement and Amendment to Prior Understanding with Mr. Mowry.

     Effective September 24, 1999, the Board of Directors agreed to replace the
BCI/UniPrise debt with a Secured Negotiable Promissory Note (the "Note") for
$179,000 from Mr. Mowry and BCI. The Note is secured by the SEI receivables, Mr.
Mowry's personal guarantee and common stock of the Company held or controlled by
Mr. Mowry. The Note accrues interest at 10% per annum and principal and interest
are due on December 31, 1999.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     None


                                      -14-
<PAGE>

                                   SIGNATURES

     In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                                      SYS
                                        --------------------------------
                                                  (Registrant)

Date:    November 10, 1999              /s/ W. Gerald Newmin
      ------------------------          --------------------------------
                                        W. Gerald Newmin
                                        Chief Executive Officer


                                      -15-