**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**





**Washington,
      D.C. 20549**





**FORM
      10-Q**





**ý**
            
            **QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                OF 1934****FOR
                THE QUARTERLY PERIOD ENDED March 30, 2007****o**
            
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE
                ACT OF 1934**







**Commission
      file number 000-04169**





**SYS**


(Exact
      name of Registrant as specified in its charter)




**California**
            
            **95-2467354**(State
                or other jurisdiction of
              incorporation
                or organization)
            
            (I.R.S.
                Employer
              Identification
                No.)







**5050
                Murphy Canyon Road, Suite 200, San Diego, California
                92123**


**(858)
      715-5500**


(Address,
      including zip code, and telephone number, including


area
      code, of Registrant’s principal executive offices)





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 ý No o




Indicate
      by check mark whether the Registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Securities Exchange
      Act of 1934. (Check one):


Large
      accelerated filer o Accelerated
      filer o Non-accelerated
      filer x




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes o No x





As
      of May
      1, 2007 there were 18.9 million shares of the registrant’s common stock
      outstanding.












**SYS**




**FORM
      10-Q**




**FOR
      THE QUARTERLY PERIOD ENDED MARCH 30, 2007**




**INDEX**








**PART
              I.
              FINANCIAL INFORMATION**PageItem
                1.
            
            Financial
                StatementsCondensed
                Consolidated Balance Sheets as of March 30, 2007 and
                June 30, 2006 (unaudited)
            3Condensed
                Consolidated Statements of Operations for the Three
                and Nine Months Ended March 30, 2007 and March 31, 2006
                (unaudited)
            4Condensed
                Consolidated Statements of Cash Flows for the Nine
                Months Ended March 30, 2007 and March 31, 2006 (unaudited)
            5Notes
                to Condensed Consolidated Financial Statements
            7Item
                2.
            
            Management’s
                Discussion and Analysis of Financial Condition and
                Results of Operations
            17Item
                3.
            
            Quantitative
                and Qualitative Disclosures About Market
                Risk
            22Item
                4.
            
            Controls
                and Procedures
            22**PART
                II. OTHER INFORMATION**Item
                1.
            
            Legal
                Proceedings
            23Item
                1A.
            
            Risk
                Factors
            23Item
                2.
            
            Unregistered
                Sales of Equity Securities and Use of
                Proceeds
            24Item
                3.
            
            Defaults
                Upon Senior Securities
            24Item
                4.
            
            Submission
                of Matters to a Vote of Security Holders
            24Item
                5.
            
            Other
                Information
            24Item
                6.
            
            Exhibits
            25SignaturesExhibit
                31.1Exhibit
                31.2Exhibit
                32.1Exhibit
                32.2


2





**PART
      I. FINANCIAL INFORMATION**


**Item
      1. Financial Statements**


**SYS
                AND SUBSIDIARIES**
              **CONDENSED
                CONSOLIDATED BALANCE SHEETS (UNAUDITED)**
              **(amounts
                in thousands)****March
                30, 2007**
            
            **June
                30,**
              **2006**ASSETSCurrent
                Assets:Cash
            
            $
            1,665
            
            $
            2,106Accounts
                receivable, net
            
            
            16,249
            
            
            13,966Inventories,
                net
            
            
            476
            
            
            558Prepaid
                expenses
            
            
            472
            
            
            526Income
                tax refund receivable
            
            
            217
            
            
            836Total
                current assets
            
            
            19,079
            
            
            17,992Furniture,
                equipment and leasehold improvements, net
            
            
            1,986
            
            
            1,717Intangible
                assets, net
            
            
            6,368
            
            
            3,446Goodwill
            
            
            22,108
            
            
            18,575Deferred
                taxes
            
            
            210
            
            
            210Other
                assets
            
            
            238
            
            
            266Total
                assets
            
            $
            49,989
            
            $
            42,206LIABILITIES
                AND STOCKHOLDERS' EQUITYCurrent
                Liabilities:Line
                of credit
            
            $
            1,668
            
            $
            899Accounts
                payable
            
            
            2,772
            
            
            2,106Accrued
                payroll and related expenses
            
            
            2,656
            
            
            3,074Other
                accrued liabilities
            
            
            1,943
            
            
            1,280Deferred
                taxes
            
            
            94
            
            
            671Current
                portion of convertible notes payable, related party
            
            
            196
            
            
            992Current
                portion of convertible notes payable
            
            
            --
            
            
            1,080Current
                portion of note payable
            
            
            250
            
            
            250Deferred
                revenue
            
            
            1,715
            
            
            373Total
                current liabilities
            
            
            11,294
            
            
            10,725Convertible
                notes payable, net of current portion, related party
            
            
            975
            
            
            975Convertible
                notes payable, net of current portion
            
            
            2,150
            
            
            2,150Note
                payable, net of current portion
            
            
            562
            
            
            750Other
                long-term liabilities
            
            
            73
            
            
            4Deferred
                revenue, net of current portion
            
            
            390
            
            
            95Total
                liabilities
            
            
            15,444
            
            
            14,699Commitments
                and ContingenciesStockholders'
                Equity:4%
                convertible preferred stock, $.50 par value; 250 sharesauthorized;
                none issued or outstanding
            
            
            --
            
            
            --9%
                preference stock, $1.00 par value; 2,000 sharesauthorized;
                none issued or outstanding
            
            
            --
            
            
            --Common
                stock, no par value; 48,000 shares authorized;and
                18,898 and 15,353 shares issued and outstandingas
                of March 30, 2007 and June 30, 2006, respectively
            
            
            35,188
            
            
            26,638Retained
                earnings (deficit)
            
            
            (643
            )
            
            869Total
                stockholders’ equity
            
            
            34,545
            
            
            27,507Total
                liabilities and stockholders’ equity
            
            $
            49,989
            
            $
            42,206





See
      accompanying notes to unaudited condensed consolidated financial
      statements.


3





**SYS
                AND SUBSIDIARIES**
              **CONDENSED
                CONSOLIDATED STATEMENTS OF OPERATIONS**
              **(UNAUDITED)**
              **(amounts
                in thousands, except per share
                data)**




**Three
                Months Ended**
            
            **Nine
                Months Ended****March
                30,**
            
            **March
                31,**
            
            **March
                30,**
            
            **March
                31,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Revenues
            
            $
            19,069
            
            $
            13,388
            
            $
            54,528
            
            $
            38,930Operating
                costs and expenses:Costs
                of revenue
            
            
            14,811
            
            
            11,392
            
            
            42,138
            
            
            31,526Selling,
                general and administrative
            
            
            4,299
            
            
            2,901
            
            
            10,877
            
            
            5,942Research,
                engineering and development
            
            
            1,059
            
            
            926
            
            
            3,050
            
            
            1,987Total
                operating costs and expenses
            
            
            20,169
            
            
            15,219
            
            
            56,065
            
            
            39,455Loss
                from operations
            
            
            (1,100
            )
            
            (1,831
            )
            
            (1,537
            )
            
            (525
            )Other
                (income) expense:Other
                income
            
            
            (29
            )
            
            (35
            )
            
            (90
            )
            
            (93
            )Interest
                expense
            
            
            147
            
            
            123
            
            
            529
            
            
            313Total
                other expense
            
            
            118
            
            
            88
            
            
            439
            
            
            220Loss
                before income taxes
            
            
            (1,218
            )
            
            (1,919
            )
            
            (1,976
            )
            
            (745
            )Income
                tax benefit
            
            
            (162
            )
            
            (586
            )
            
            (464
            )
            
            (81
            )Net
                  loss
            
            $
            (1,056
            )
            $
            (1,333
            )
            $
            (1,512
            )
            $
            (664
            )Net
                loss per share:Basic
            
            $
            (0.06
            )
            $
            (0.10
            )
            $
            (0.09
            )
            $
            (0.06
            )Diluted
            
            $
            (0.06
            )
            $
            (0.10
            )
            $
            (0.09
            )
            $
            (0.06
            )Weighted
                average shares:Basic
            
            
            18,666
            
            
            13,133
            
            
            17,196
            
            
            11,958Diluted
            
            
            18,666
            
            
            13,133
            
            
            17,196
            
            
            11,958




See
      accompanying notes to unaudited condensed consolidated financial
      statements.


4


**SYS
                AND SUBSIDIARIES**
              **CONDENSED
                CONSOLIDATED STATEMENTS OF CASH FLOWS**
              **NINE
                MONTHS ENDED MARCH 30, 2007 AND MARCH 31, 2006**
              **(UNAUDITED)**
              **(amounts
                in thousands)**




**2007**
            
            **2006**Cash
                Flows from Operating Activities:Net
                loss
            
            $
            (1,512
            )
            $
            (664
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Depreciation
                and amortization
            
            
            1,443
            
            
            866Share-based
                compensation expense
            
            
            331
            
            
            409Accretion
                of debt discount
            
            
            28
            
            
            31Deferred
                taxes
            
            
            (577
            )
            
            (101
            )Bad
                debt expense
            
            
            165
            
            
            29Stock
                contributed to employee benefit plan
            
            
            733
            
            
            542Gain
                on disposition of equipment
            
            
            (4
            )
            
            --Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            (770
            )
            
            838Income
                tax receivable
            
            
            619
            
            
            (611
            )Inventories
            
            
            70
            
            
            4Prepaid
                expenses and other current assets
            
            
            130
            
            
            (239
            )Accounts
                payable
            
            
            641
            
            
            (199
            )Accrued
                payroll and related expenses
            
            
            (796
            )
            
            (967
            )Income
                taxes payable
            
            
            --
            
            
            (138
            )Other
                accrued and long term liabilities
            
            
            (152
            )
            
            (74
            )Deferred
                revenue
            
            
            (528
            )
            
            (83
            )Net
                cash used in operating activities
            
            
            (179
            )
            
            (357
            )Cash
                Flows from Investing Activities:Purchases
                of furniture, equipment and leasehold improvements
            
            
            (589
            )
            
            (581
            )Net
                cash (paid) received for acquisitions, net of cash
                acquired
            
            
            108
            
            
            (4,640
            )Proceeds
                from investment
            
            
            --
            
            
            90Other
            
            
            18
            
            
            (76
            )Net
                cash used in investing activities
            
            
            (463
            )
            
            (5,207
            )Cash
                Flows from Financing Activities:Line
                of credit borrowings
            
            
            26,478
            
            
            10,462Line
                of credit payments
            
            
            (25,709
            )
            
            (9,433
            )Payments
                of notes payable and other borrowings
            
            
            (967
            )
            
            (100
            )Proceeds
                from issuance of convertible notes
            
            
            --
            
            
            3,107Proceeds
                from issuance of common stock in private placement
            
            
            --
            
            
            3,107Issuance
                of stock to employee stock purchase plan
            
            
            266
            
            
            419Proceeds
                from exercise of stock options and warrants
            
            
            133
            
            
            798Registration
                costs
            
            
            --
            
            
            (43
            )Net
                cash provided by financing activities
            
            
            201
            
            
            8,317Net
                increase (decrease) in cash
            
            
            (441
            )
            
            2,753Cash
                at beginning of period
            
            
            2,106
            
            
            3,485Cash
                at end of period
            
            $
            1,665
            
            $
            6,238


5


**SYS
                AND SUBSIDIARIES**
              **CONDENSED
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)**
              **NINE
                MONTHS ENDED MARCH 30, 2007 AND MARCH 31, 2006
                (UNAUDITED)**
              **(amounts
                in thousands)**




**2007**
            
            **2006**Supplemental
                disclosure of cash flow information:Interest
                paid
            
            $
            479
            
            $
            238Income
                taxes paid (refunded)
            
            $
            (505
            )
            $
            769Supplemental
                disclosure of non-cash investing and financing activities:Common
                stock issued for acquisitions
            
            $
            5,962
            
            $
            2,414Acquisition
                of capital leases
            
            $
            80
            
            $
            --Common
                stock exchanged upon exercise of stock options
            
            $
            --
            
            $
            95Common
                stock issued on conversion of notes payable
            
            $
            1,125
            
            $
            1,085




See
      accompanying notes to unaudited condensed consolidated financial
      statements.


6




**SYS
      AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Unaudited)**




**1.
      Basis of Financial Statement Preparation and Significant Accounting Policies:**





The
      accompanying unaudited condensed consolidated financial information of SYS
      and
      its subsidiaries (SYS or the Company) should be read in conjunction with the
      consolidated financial statements and notes to consolidated financial statements
      contained in our Annual Report on Form 10-K for the year ended
      June 30, 2006 filed with the Securities and Exchange Commission (SEC). The
      accompanying unaudited condensed financial information includes all subsidiaries
      on a consolidated basis and all normal recurring adjustments which are
      considered necessary by the Company's management for a fair presentation of
      the
      financial position, results of operations and cash flows for the periods
      presented. However, these results are not necessarily indicative of results
      for
      a full fiscal year. All of the Company’s operations are primarily conducted in
      the United States.





The
      Company’s fiscal year is from July 1 through June 30.  The
      Company uses the 5-4-4 weeks per period method for each quarter; periods one
      (July) and twelve (June) may vary slightly in the actual number of days due
      to
      the beginning and end of each fiscal year.





**Use
      of Estimates:**




The
      preparation of financial statements in conformity with Generally Accepted
      Accounting Principles in the United States (US GAAP) requires management to
      make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities, the 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. In the future, the Company may realize actual
      results that differ from the current reported estimates.  The Company’s
      significant estimates include those related to revenues and customer billings,
      recovery of indirect costs, allowance for doubtful accounts, valuation of
      long-lived assets including identifiable intangibles and goodwill, accounting
      for income taxes including any related valuation allowance, contingencies,
      and
      share-based compensation.




**Indirect
      Expense Rate Variance:**




For
      interim reporting purposes, SYS applies overhead and selling, general and
      administrative expenses as a percentage of direct contract costs based on annual
      budgeted indirect expense rates. To the extent actual expenses for an interim
      period are greater than the budgeted rates, the variance is deferred if
      management believes it is probable that the variance will be absorbed by future
      contract activity. This probability assessment includes projecting whether
      future indirect costs will be sufficiently less than the annual budgeted rates
      or can be absorbed by seeking increased billing rates applied on cost-plus-fee
      contracts. At the end of each interim reporting period, management assesses
      the
      recoverability of any amount deferred to determine if any portion should be
      charged to expense. In assessing the recoverability of variances deferred,
      management takes into consideration estimates of the amount of direct labor
      and
      other direct costs to be incurred in future interim periods, the feasibility
      of
      modifications for provisional billing rates, and the likelihood that an approved
      increase in provisional billing rates can be passed along to a customer.
      Variances are charged to expense in the periods in which it is determined that
      such amounts are not probable of recovery. As of March 30, 2007, the favorable
      rate variance totaled $.2 million.





**Reclassifications:**





Certain
      amounts in the prior period financial statements have been reclassified to
      conform to the current period financial statement presentation. In particular,
      allocable overhead costs that were previously reported for the three and nine
      month period ended March 31, 2006 as costs of revenues were reclassified to
      selling, general and administrative expenses in the amount of
      $0.3
      million and $0.6 million, respectively, for the three and nine month periods
      and
      to research, engineering and development expenses in the amount of $0.2
      million and $0.3
      million, respectively, for the three and nine month periods . Additionally,
      $0.2 million of cash flows related to the Company’s Employee Stock Purchase Plan
      previously classified as financing activities for the nine months ended March
      31, 2006 were reclassified to operating activities. The Company believes these
      reclassifications were immaterial to the overall presentation of the
      accompanying financial statements.





**2.
      New Accounting Pronouncements:**





In
      July
      2006, the FASB issued FASB Interpretation No. 48 (FIN No. 48),
“Accounting for Uncertainty in Income Taxes”, which prescribes a recognition
      threshold and measurement process for recording in the financial statements
      uncertain tax positions taken or expected to be taken in a tax return.
      Additionally, FIN No. 48 provides guidance on the recognition,
      classification, accounting in interim periods and disclosure requirements for
      uncertain tax positions. The accounting provisions of FIN No. 48 will be
      effective July 1, 2007 and the Company is in the process of determining the
      effect, if any, the adoption of FIN No. 48 will have on its financial
      condition or results of operations.





In
      September 2006, the FASB issued FASB Statement No. 157 (SFAS 157), “Fair Value
      Measurements”. SFAS 157 proscribes a single definition of fair value as the
      price that would be received to sell an asset or paid to transfer a liability
      in
      an orderly transaction between market participants at the measurement date.
      The
      accounting provisions of SFAS 157 will be effective for the Company beginning
      July 1, 2008. The Company does not believe the adoption of SFAS 157 will have
      a
      material impact on its financial condition or results of
      operations.





In
      September 2006, the SEC issued Staff Accounting Bulletin No. 108 (SAB 108).
      SAB
      108 addresses how the effects of prior year uncorrected misstatements should
      be
      considered when quantifying misstatements in current year financial statements.
      SAB 108 requires companies to quantify misstatements using a balance sheet
      and
      income statement approach and to evaluate whether either approach results in
      quantifying an error that is material in light of relevant quantitative and
      qualitative factors. When the effect of initial adoption is material, companies
      will record the effect as a cumulative effect adjustment to beginning of year
      retained earnings. SAB 108 will be effective for the Company beginning July
      1,
      2007. The Company is in the process of determining whether the initial adoption
      will have a material impact on its financial statements.





In
      February, 2007, the Financial Accounting Standards Board (“FASB”) issued
      Statement No. 159, “The Fair Value Option for Financial Assets and Financial
      Liabilities, including an amendment of FASB Statement No. 115 (“SFAS 159”). SFAS
      159 permits entities to choose to measure many financial instruments and certain
      other items at fair value that are not currently required to be measured at
      fair
      value. SFAS 159 is effective for fiscal years beginning after November 15,
      2007.
      The Company currently does not expect that the adoption of SFAS 159 will have
      a
      material effect on the Company’s financial position or results of
      operations.


**3.
      Share-Based Compensation:**





The
      Company has two stock plans that provide or have provided for the grant to
      employees of stock options, permit the grant of non-statutory share-based awards
      to paid consultants, and provide for the automatic grant of non-statutory
      share-based awards to outside directors. The plans may have options with terms
      of no more than ten years. The maximum terms of the options granted under these
      plans have been seven years with a maximum vesting of five years. The Company
      also has an employee stock purchase plan (ESPP) for employees to purchase its
      common stock at a discount. The ESPP provides for enrollment on the first day
      of
      a six-month period in which the employees can elect payroll deductions for
      the
      purchase of the Company’s common stock. The exercise date of the ESPP is the
      last day of the six month period and the purchase price is 85% of the fair
      market value of a share of common stock on the enrollment or exercise date,
      whichever is lower.





The
      Company adopted Statement of Financial Accounting Standards No. 123
      (revised 2004), “Share-Based Payment” (“SFAS 123R”), effective July 1, 2005
      using a modified prospective application, as permitted under SFAS 123R. Under
      the modified-prospective-transition method, share-based compensation expense
      recognized during the three and nine months ended March 30, 2007 and March
      31,
      2006 includes stock options granted prior to, but not yet vested as of
      July 1, 2005, based on the grant-date fair value estimated in accordance
      with the original provisions of SFAS No. 123 and the following items based
      on the grant date values estimated in accordance with the provisions of SFAS
      No.
      123R: (a) stock options granted after June 30, 2005, (b) ESPP with offering
      periods commencing subsequent to June 30, 2005 and (c) stock issued to
      employees of the Company.


7





The
      following table summarizes certain information regarding stock options during
      the nine months ended March 30, 2007 (in thousands):





**Weighted****Weighted**
            
            **Average****Average**
            
            **Remaining**
            
            **Aggregate****Exercise**
            
            **Contractual**
            
            **Intrinsic****Shares**
            
            **Price**
            
            **Term
                (Yrs)**
            
            **Value**Balance
                outstanding at June 30, 2006
            
            
            1,924
            
            $
            2.48Granted
            
            
            494
            
            $
            2.41Exercised
            
            
            (86)
            
            $
            1.54Forfeited
            
            
            (46)
            
            $
            2.98Expired
            
            
            (79)
            
            $
            2.41Balance
                outstanding at March 30, 2007
            
            
            2,207
            
            $
            2.49
            
            
            2.51
            
            $
            227Options
                exercisable at March 30, 2007
            
            
            1,406
            
            $
            2.31
            
            
            2.13
            
            $
            224





The
      following is a summary of the share-based compensation expense recognized by
      the
      Company for the three and nine months ended March 30, 2007 and March 31, 2006
      (in thousands):




**Three
                Months Ended**
            
            **Nine
                Months Ended****March
                30,**
            
            **March
                31,**
            
            **March
                30,**
            
            **March
                31,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Stock
                options
            
            $
            51
            
            $
            36
            
            $
            163
            
            $
            101Employee
                stock purchase plan
            
            
            53
            
            
            68
            
            
            168
            
            
            144Employee
                stock purchase agreement
            
            
            --
            
            
            --
            
            
            --
            
            
            74Shares
                issued and issuable to employees in connection with the acquisition
                of
                Antin
            
            
            --
            
            
            39
            
            
            --
            
            
            90Total
            
            $
            104
            
            $
            143
            
            $
            331
            
            $
            409







The
      following table summarizes the weighted average assumptions used to estimate
      the
      value of share-based awards granted during the nine months ended March 30,
      2007
      and March 31, 2006 for the Company’s stock option plan and employee stock
      purchase plan:


**Stock
                Options**
            
            **ESPP****3/30/2007**
            
            **3/31/2006**
            
            **3/30/2007**
            
            **3/31/2006**Dividend
                yield
            
            
            0.0
            %
            
            0.0
            %
            
            0.0
            %
            
            0.0
            %Expected
                volatility
            
            
            38.8
            %
            
            33.7
            %
            
            42.4
            %
            
            51.9
            %Risk-free
                interest rate
            
            
            4.8
            %
            
            4.1
            %
            
            5.2
            %
            
            3.9
            %Expected
                lives (in years)
            
            
            3.73
            
            
            4.00
            
            
            0.50
            
            
            0.50





**4.
      Accounts Receivable:**




Accounts
      receivable consisted of the following (in thousands):


**March
                30,**
            
            **June
                30,****2007**
            
            **2006**Amounts
                billed
            
            $
            9,396
            
            $
            7,671Amounts
                unbilled
            
            
            7,146
            
            
            6,458Less
                allowance for doubtful accounts
            
            
            (293
            )
            
            (163
            )Totals
            
            $
            16,249
            
            $
            13,966





8





**5.
      Inventories:**





Inventories
      consisted of the following (in thousands):


**March
                30,**
            
            **June
                30,****2007**
            
            **2006**Raw
                materials, net
            
            $
            433
            
            $
            372Finished
                goods, net
            
            
            43
            
            
            186$
            476
            
            $
            558





**6.
      Furniture, Equipment and Leasehold Improvements:**





Furniture,
      equipment and leasehold improvements consisted of the following (in
      thousands):


**March
                30,**
            
            **June
                30,****2007**
            
            **2006**Furniture
                and equipment
            
            $
            4,087
            
            $
            3,273Leasehold
                improvements
            
            
            371
            
            
            3274,458
            
            
            3,600Less
                accumulated depreciation and amortization
            
            
            (2,472
            )
            
            (1,883
            )Net
            
            $
            1,986
            
            $
            1,717





Depreciation
      and amortization expense for furniture, equipment and leasehold improvements
      was
      $0.2 million and $0.1 million for the three months ended March 30, 2007 and
      March 31, 2006, respectively, and $0.6 million and $0.4 million for the nine
      months ended March 30, 2007 and March 31, 2006, respectively.





**7.
      Intangible Assets and Goodwill:**





Intangible
      assets consisted of the following (in thousands):





**Weighted****Average**
            
            **Gross****Amortization**
            
            **Carrying**
            
            **Accumulated****Period
                (Yrs)**
            
            **Value**
            
            **Amortization**
            
            **Net****March
                30, 2007**Technology
            
            
            9
            
            $
            2,550
            
            $
            (388
            )
            $
            2,162Trade
                name
            
            
            7
            
            
            1,727
            
            
            (334
            )
            
            1,393Customer
                relationships
            
            
            9
            
            
            3,254
            
            
            (470
            )
            
            2,784Patents
            
            
            -
            
            
            29
            
            
            (29
            )
            
            --Other
                intangibles
            
            
            1
            
            
            697
            
            
            (668
            )
            
            29Total
            
            
            
            
            $
            8,257
            
            $
            (1,889
            )
            $
            6,368**June
                30, 2006**Technology
            
            
            5
            
            $
            700
            
            $
            (215
            )
            $
            485Trade
                name
            
            
            3
            
            
            627
            
            
            (147
            )
            
            480Customer
                relationships
            
            
            8
            
            
            2,454
            
            
            (194
            )
            
            2,260Patents
            
            
            -
            
            
            29
            
            
            (29
            )
            
            --Other
                intangibles
            
            
            2
            
            
            697
            
            
            (476
            )
            
            221Total
            
            
            
            
            $
            4,507
            
            $
            (1,061
            )
            $
            3,446





Amortization
      expense for intangible assets was $0.3 million and $0.1 million for the three
      months ended March 30, 2007 and March 31, 2006, respectively, and $0.9 million
      and $0.3 million for the nine months ended March 30, 2007 and March 31, 2006,
      respectively.


9





Estimated
      aggregate future amortization expense for acquisition-related intangible assets
      in future fiscal years is as follows:


**Fiscal
                year**3
                months ending June 30, 2007
            
            $
            2612008
            
            
            1,0112009
            
            
            9202010
            
            
            7522011
            
            
            662Thereafter
            
            
            2,762Total
            
            $
            6,368





**Goodwill**





The
      changes in the carrying amount of goodwill during the nine months ended March
      30, 2007 are as follows (in thousands):


**DSG**
            
            **PSSIG**
            
            **Total**Balance
                June 30, 2006 (1)
            
            $
            11,277
            
            $
            7,298
            
            $
            18,575Acquisition
                of Ai Metrix (2)
            
            
            --
            
            
            3,467
            
            
            3,467Miscellaneous
                purchase price allocation adjustments
            
            
            66
            
            
            --
            
            
            66Balance
                March 30, 2007
            
            $
            11,343
            
            $
            10,765
            
            $
            22,108




(1)
      See
      Note 12 regarding the Company’s reportable segments.




(2)
      See
      Note 13 regarding the acquisition of Ai Metrix.




10





**8.
      Convertible Notes Payable and Other Debt (in thousands):**





As
      of
      March 30, 2007, the Company had outstanding convertible notes payable totaling
      $3.3 million, of which $.2 million was reported as a current liability and
      $3.1
      million was reported as a long-term liability.





The
      following table shows the detail of our convertible notes payable as March
      31,
      2007 and June 30, 2006 (amounts in thousands):





**Related
                Party****March
                30,**
            
            **June
                30,**
            
            **March
                30,**
            
            **June
                30,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Convertible
                notes payable, unsecured, bear interest at 10% per annum payable
                quarterly, principal due December 31, 2006, convertible at any time
                by
                holder into common stock at a rate of $2.20 per share.
            
            $
            --
            
            $
            800
            
            $
            --
            
            $
            713Unamortized
                discount related to convertible notes payable due December 31,
                2006
            
            
            --
            
            
            (15
            )
            
            --
            
            
            (13
            )Convertible
                notes payable, issued in conjunction with Polexis acquisition, unsecured
                and subordinate to the Company's bank debt, bear interest at 10%
                per annum
                payable quarterly, principal due March 31, 2007, convertible at any
                time
                by holder into common stock at the rate of $2.32 per
                share.
            
            
            --
            
            
            295
            
            
            --
            
            
            96Convertible
                note payable, issued in conjunction with Antin acquisition, unsecured,
                bears interest at 10% per annum payable quarterly, principal due
                May 11,
                2007, convertible at any time by holder into common stock at the
                rate of
                $2.50 per share.
            
            
            --
            
            
            --
            
            
            196
            
            
            196Convertible
                note payable, unsecured and subordinate to the Company’s bank debt, bear
                interest at 10% per annum payable quarterly, principal due February
                14,
                2009 and are convertible at any time into shares of common stock
                at a
                conversion rate of $3.60 per share.
            
            
            2,150
            
            
            2,150
            
            
            975
            
            
            9752,150
            
            
            3,230
            
            
            1,171
            
            
            1,967Less
                current portion
            
            
            --
            
            
            (1,080
            )
            
            (196
            )
            
            (992
            )Total
                convertible notes payable, net of current portion
            
            $
            2,150
            
            $
            2,150
            
            $
            975
            
            $
            975





Maturities
      of principal balances of convertible notes are: Fiscal 2007 - $0.2 million
      and
      2009 - $3.1 million.





Related
      parties consist of directors, officers and employees of the Company and their
      affiliates that are holders of the notes payable.





On
      December 31, 2006, approximately $1.5 million of outstanding convertible notes
      matured. Note holders converted approximately $1.1 million of the convertible
      notes into 511,380 shares of common stock and approximately $0.4 million was
      paid in cash.





Approximately
      $0.4 million of outstanding convertible notes maturing on March 31, 2007 were
      paid in cash on March 30, 2007.





The
      Company has a bank line of credit facility which provides for borrowings of
      up
      to $4.0 million. This facility expires on December 28, 2008.





This
      credit facility, as it relates to any balances outstanding on the line of
      credit, contains financial and other covenants, and is collateralized by
      substantially all of the assets of the Company. Borrowings pursuant to the
      line
      of credit bear interest at the bank’s prime rate plus 0.25% (8.50% as of March
      30, 2007). As of March 30, 2007, the Company had approximately $1.7 million
      of
      borrowings outstanding under this line of credit. On September 27, 2006, the
      Company and the lender amended the terms of the credit facility to eliminate
      the
      minimum quarterly net income covenant, the current assets to current liabilities
      covenant, the ratio of Senior debt to EBITDA covenant, and modified the tangible
      effective net worth covenant and cash flow coverage ratio covenant. As of March
      30, 2007, the Company was in compliance with the covenants of the credit
      facility.





The
      credit facility allows the Company to use, under a Sub Facility, up to $2.0
      million of the credit facility for permitted acquisition purposes and $750,000
      for minority investment purposes.  Borrowings under the sub-facility bear
      interest at the bank’s prime rate plus 0.50% (8.75% as of March 30, 2007). The
      Company is subject to certain restrictions on the permitted acquisitions and
      minority investments and in some cases must receive the lender’s consent prior
      to using the facility for such purposes.





If
      the
      Sub Facility is used for permitted acquisitions or minority investments, such
      borrowings must be repaid over 48 months. During fiscal 2006, in connection
      with
      the purchase of RBIS, the Company utilized $1.0 million of the line of credit
      for payment of a portion of the purchase consideration. In accordance with
      the
      terms of the credit facility, the $1.0 million was converted to a term note
      effective June 10, 2006. The term note is payable in monthly installments of
      $20,833 plus interest for the fiscal years 2007 through 2010, with payments
      beginning in October, 2006. As of March 30, 2007, approximately $0.8 million
      was
      outstanding under the term note, of which approximately $0.25 million was
      classified as a current liability. A total of $0.25 million of principal amounts
      of this note are due annually in fiscal years 2007, 2008, 2009 and 2010. The
      outstanding balance related to the Sub Facility reduces the maximum borrowings
      available under the line of credit. As a result, as of March 30, 2007, the
      maximum borrowing under the line of credit was $3.2 million and the remaining
      available borrowing capacity on the line of credit was approximately $1.5
      million.





11


**9.
      Net Loss Per Share:**




Basic
      net
      income (loss) per common share is calculated by dividing net income (loss)
      applicable to common stock by the weighted average number of common shares
      outstanding during the period. The calculation of diluted net income (loss)
      per
      common share is similar to that of basic net income (loss) 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 notes payable
      and the exercise of stock options and warrants, were issued during the
      period.





The
      following table summarizes the calculation of basic and diluted net income
      (loss) per common share for each period (in thousands except per share
      data):


**Three
                Months Ended**
            
            **Nine
                Months Ended****March
                30,**
            
            **March
                31,**
            
            **March
                30,**
            
            **March
                31,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Numerators:Net
                loss
            
            $
            (1,056
            )
            $
            (1,333
            )
            $
            (1,512
            )
            $
            (664
            )Denominators:Weighted
                average shares for basic and diluted net income per common
                share
            
            
            18,666
            
            
            13,133
            
            
            17,196
            
            
            11,958Basic
                net loss per common share
            
            $
            (0.06
            )
            $
            (0.10
            )
            $
            (0.09
            )
            $
            (0.06
            )Diluted
                net loss per common share
            
            $
            (0.06
            )
            $
            (0.10
            )
            $
            (0.09
            )
            $
            (0.06
            )





For
      the
      three and nine months ended March 30, 2007, a total of 1.8 million and 1.3
      million shares related to stock options, convertible notes and the ESPP were
      excluded from the calculation of diluted EPS because they were anti-dilutive.
      For the three and nine months ended March 31, 2006, a total of 2.6 million
      and
      2.8 million shares, respectively, related to stock options, warrants and
      convertible notes were excluded from the calculation of diluted EPS because
      they
      were anti-dilutive.




**10.
      Income Tax:**





The
      income tax benefit was $0.2 million and $0.5 million respectively for the three
      and nine month periods ended March 30, 2007 as compared to $0.6 million and
      $0.1
      million, respectively, in the same periods in fiscal 2006. Our effective tax
      rate was 13.3% and 23.5%, respectively, for the three and nine months ended
      March 30, 2007 as compared to 30.5% and 10.9% in the same periods for fiscal
      2006. Our effective tax rate is directly affected by share-based compensation
      expenses related to SFAS 123R, which are not deductible for tax purposes, but
      which are considered in estimating the annual effective tax rate as well as
      our
      forecast of annual income before taxes. These factors can lead to large
      fluctuations in the estimated effective tax rate from quarter to quarter.


The
      Internal Revenue Service (IRS) is currently examining the Company’s federal
      income tax return for the year ended June 30, 2004. The Company expects the
      IRS
      examination to be completed in fiscal 2008. At this time, there is insufficient
      information to quantify any possible changes or adjustments that may result
      from
      the IRS examination. While
      any
      adjustments resulting from this examination could affect our federal income
      tax
      returns, we do not believe that adjustments, if any, will have a material
      adverse effect on their financial condition or results of operations.
      Additionally, if the
      IRS exam results in an assessment that increases our tax obligation for the
      period under exam, the assessment may also include penalties and
      interest.


**11.
      Legal Matters:**





Periodically,
      the Company is involved in legal actions in the normal course of business,
      including audits and investigations by various governmental agencies that result
      from our work as a governmental contractor. There are currently no such legal
      matters outstanding.


12





**12.
      Segment Information:**





The
      Company reports operating results and financial data for two reporting segments:
      Defense Solutions Group (DSG) and Public Safety, Security and Industrial Systems
      Group (PSSIG). DSG provides engineering, technical, and financial and management
      services primarily to U.S. Government customers. Revenues
      in the PSSIG include products and equipment sales, software, engineering and
      installation services for industrial and commercial customers as well as
      government customers.





Effective
      July 1, 2006 certain business activities that were managed and reported under
      the DSG were moved into the PSSIG and are now managed and reported within that
      business group. The activities consisted principally of training related
      services and certain software services-based contracts that are inter-related
      with other activities in the PSSIG. Prior year amounts have been reclassified
      to
      reflect the inclusion of these activities in the PSSIG.





For
      the
      nine months ended March 30, 2007, the Company’s revenues were derived primarily
      from engineering and technical services, but also included product sales that
      represented approximately 7.5% of consolidated revenues. For the nine months
      ended March 31, 2006, the Company’s revenues were derived primarily from
      engineering and technical services with approximately 4.9% from product sales.
      The Company’s operations are primarily located in the U.S.





Sales
      to
      the government agencies, including both defense and non-defense agencies, and
      sales as a subcontractor as well as direct sales, aggregated approximately
      $48.4
      million, or 88.8% of consolidated revenues in the nine months ended March 30,
      2007. No single contract or individual customer accounted for more than 10%
      of
      total revenue for the three and nine months ended March 30, 2007 and March
      31,
      2006, respectively.





13





Selected
      financial data by segment is as follows (in thousands):


**Three
                Months Ended**
            
            **Nine
                Months Ended****March
                30,**
            
            **March
                31,**
            
            **March
                30,**
            
            **March
                31,****2007**
            
            **2006**
            
            **2007**
            
            **2006****Revenue:**DSG
            
            $
            12,169
            
            $
            10,267
            
            $
            37,037
            
            $
            31,583PSSIG
            
            
            6,900
            
            
            3,121
            
            
            17,491
            
            
            7,347**Totals**
            
            $
            19,069
            
            $
            13,388
            
            $
            54,528
            
            $
            38,930**Income
                (loss) from operations:**DSG
            
            $
            457
            
            $
            (1,676
            )
            $
            1,179
            
            $
            (566
            )PSSIG
            
            
            (1,557
            )
            
            (155
            )
            
            (2,716
            )
            
            41**Totals**
            
            $
            (1,100
            )
            $
            (1,831
            )
            $
            (1,537
            )
            $
            (525
            )**Capital
                expenditures:**DSG
            
            $
            51
            
            $
            189
            
            $
            96
            
            $
            383PSSIG
            
            
            97
            
            
            --
            
            
            457
            
            
            109Corporate
                and other
            
            
            9
            
            
            --
            
            
            36
            
            
            89**Totals**
            
            $
            157
            
            $
            189
            
            $
            589
            
            $
            581**Depreciation
                and amortization:**DSG
            
            $
            190
            
            $
            407
            
            $
            680
            
            $
            667PSSIG
            
            
            211
            
            
            --
            
            
            556
            
            
            117Corporate
                and other
            
            
            74
            
            
            --
            
            
            207
            
            
            82**Totals**
            
            $
            475
            
            $
            407
            
            $
            1,443
            
            $
            866**March
                30,**
              **2007**
            
            
            **June
                30,**
              **2006****Total
                assets:**DSG
            
            $
            25,017
            
            $
            27,606PSSIG
            
            
            22,061
            
            
            10,567Corporate
                and other
            
            
            2,911
            
            
            4,033**Totals**
            
            $
            49,989
            
            $
            42,206**Goodwill:**DSG
            
            $
            11,343
            
            $
            11,277PSSIG
            
            
            10,765
            
            
            7,298**Totals**
            
            $
            22,108
            
            $
            18,575





**13.
      Acquisitions:**





**Merger
      with Ai Metrix**





On
      October 17, 2006, the Company acquired all the outstanding common stock of
      Ai
      Metrix in a stock transaction for approximately $6.5 million, inclusive of
      approximately $0.5 million of transaction costs. The Company has included the
      financial results of Ai Metrix in its consolidated financial statements
      beginning October 17, 2006. Ai Metrix is a Reston, Virginia-based provider
      of
      innovative network management solutions. The merger furthers one of SYS’s goals
      of broadening its customer base for both commercial and governmental entities
      as
      well as broadening its existing product base.





In
      connection with the merger, the Company issued approximately 3.1 million shares
      of common stock, of which approximately 2.2 million were issued directly to
      Ai
      Metrix shareholders and 0.9 million shares were issued to an escrow agent for
      future contingencies and potential additional earn-out consideration, which
      are
      more fully described below. Additionally, the Company paid approximately $57,000
      in cash, of which approximately $16,000 was paid to an escrow agent for future
      contingencies, which are more fully described below.





***Consideration
      issued to escrow agent***


In
      accordance with the merger agreement, the Company issued approximately 0.9
      million shares and paid approximately $16,000 in cash to an escrow agent. Of
      the
      0.9 million shares issued, 0.3 million shares are being held for any possible
      indemnity claims and 0.6 million shares are being held for potential additional
      earn-out or claw-back consideration, which is more fully described below. Of
      the
      $16,000 in cash, approximately $6,000 is being held for any possible indemnity
      claims and $10,000 is being held for potential earn-out or claw back
      consideration, which is more fully described below.





***Purchase
      price***


The
      purchase price of approximately $6.5 million is preliminary and is subject
      to
      change. The purchase price was calculated by using the Company’s average closing
      stock price two days before and including the day of the transaction multiplied
      by 2.5 million shares (2.2 million shares issued directly to Ai Metrix
      shareholders and 0.3 million shares issued to an escrow agent for indemnity)
      and
      includes $0.5 million in direct acquisition costs and $41,000 of cash paid
      directly to Ai Metrix shareholders. The 0.3 million shares issued to an escrow
      agent for any possible indemnity claims are being included in the calculation
      of
      the purchase price because management believes the nature of the representations
      and warranties that are covered by the indemnity are non-subjective and the
      issuance of these shares can be determined beyond a reasonable doubt.





14


***Earn-out/Clawback***


Additional
      consideration may be earned and the purchase price may be increased if Ai Metrix
      generates earnings before interest, taxes, depreciation and amortization
      (EBITDA) in excess of $2.5 million for the measurement period beginning on
      the
      closing date of the transaction and ending on December 31, 2007. For each dollar
      of EBITDA generated in excess of $2.5 million, the Company will issue to the
      Ai
      Metrix shareholders one additional share of SYS common stock, up to a maximum
      of
      1.9 million shares. If Ai Metrix generates EBITDA of less than $1.5 million
      during the measurement period, the total purchase price will be reduced, and
      the
      Company will receive back one share of its common stock or one dollar of cash,
      for each dollar of EBITDA less than $1.5 million, up to a maximum of the 0.6
      million shares and $10,000 cash that is held by the escrow agent.





***Purchase
      price allocation***


The
      acquisition is being accounted for under the purchase method of accounting
      in
      accordance with SFAS 141. Under the purchase method of accounting, the
      total estimated purchase price is allocated to the net tangible and intangible
      assets of Ai Metrix acquired in connection with the merger, based on their
      estimated fair values as of the effective date of the merger. The preliminary
      allocation of the purchase price was based upon a preliminary valuation and
      our
      estimates and assumptions are subject to change. Management believes that the
      preliminary allocation of the purchase price is reasonable, however, in some
      cases the final allocation may change. The area of the purchase price allocation
      that has not yet been finalized relates to deferred taxes. The Company expects
      to finalize the purchase price allocation during the remainder of fiscal
      2007.





The
      following table summarizes the preliminary allocation of the purchase price,
      including transaction costs of approximately $0.5 million (amounts in
      thousands):


EstimatedValue
            
            Life
                in YearsCash
            
            $
            801Accounts
                receivable
            
            
            1,684Prepaid
                expenses and other current assets
            
            
            76Property,
                furniture and equipment
            
            
            145
            
            
            5Customer
                relationships
            
            
            800
            
            
            10Technology
            
            
            1,900
            
            
            10Trade
                name
            
            
            1,100
            
            
            10Goodwill
            
            
            3,467Total
                assets acquired
            
            
            9,973Accounts
                payable, accrued liabilities and other liabilities
            
            
            (1,231
            )Deferred
                revenue
            
            
            (2,198
            )Assets
                acquired less liabilities assumed
            
            $
            6,544





The
      goodwill recorded is not deductible for tax purposes and has been allocated
      to
      the PSSIG segment.





15


**Pro
      Forma Results of Operations**





The
      unaudited financial information in the table below summarizes the combined
      results of operations of the Company and Ai Metrix on a pro forma basis, as
      though the companies had been combined as of the beginning of each of the
      periods presented and includes adjustments that were directly attributable
      to
      the transaction and expected to have a continuing impact on the Company. The
      pro
      forma financial information is presented for informational purposes only and
      is
      not indicative of the results of operations that would have been achieved if
      the
      acquisition had taken place at the beginning of each period presented (in
      thousands, except per share data).





**Three
                months ended March 30, 2007 and March 31, 2006****2007**
            
            **2006****As
                Reported**
            
            **Pro
                Forma**
            
            **As
                Reported**
            
            **Pro
                Forma**Revenues
            
            $
            19,069
            
            $
            19,069
            
            $
            13,388
            
            $
            15,492Loss
                from operations
            
            $
            (1,100
            )
            $
            (1,100
            )
            $
            (1,831
            )
            $
            (1,606
            )Net
                loss
            
            $
            (1,056
            )
            $
            (1,056
            )
            $
            (1,333
            )
            $
            (1,197
            )Basic
                loss per share
            
            $
            (0.06
            )
            $
            (0.06
            )
            $
            (0.10
            )
            $
            (0.08
            )Diluted
                loss per share
            
            $
            (0.06
            )
            $
            (0.06
            )
            $
            (0.10
            )
            $
            (0.08
            )







**Nine
                months ended March 30, 2007 and March 31, 2006****2007**
            
            **2006****As
                Reported**
            
            **Pro
                Forma**
            
            **As
                Reported**
            
            **Pro
                Forma**Revenues
            
            $
            54,528
            
            $
            56,678
            
            $
            38,930
            
            $
            43,663Loss
                from operations
            
            $
            (1,537
            )
            $
            (1,491
            )
            $
            (525
            )
            $
            (1,326
            )Net
                loss
            
            $
            (1,512
            )
            $
            (1,485
            )
            $
            (664
            )
            $
            (1,154
            )Basic
                loss per share
            
            $
            (0.09
            )
            $
            (0.08
            )
            $
            (0.06
            )
            $
            (0.08
            )Diluted
                loss per share
            
            $
            (0.09
            )
            $
            (0.08
            )
            $
            (0.06
            )
            $
            (0.08
            )





**RBIS**





On
      April
      2, 2006, the Company acquired
      all of the outstanding shares of Reality Based IT Services, Ltd. (“RBIS”), a
      privately held, Laurel, Maryland-based provider of information systems
      consulting addressing information security issues for the U.S. Department of
      Defense. Pursuant to the Stock Purchase Agreement (SPA), part of the purchase
      consideration was escrowed to, among other things, provide recourse to SYS
      for
      any breach of the representations and warranties made by the shareholder of
      RBIS
      in the SPA. The Escrow Agreement required the release of any remaining escrow
      balances as of April 2, 2007 unless any indemnity claims have been made by
      the
      Company. As of April 2, 2007 the balance remaining in escrow consists of
      $180,000 cash and 125,408 of SYS stock. On March 29, 2007, the Company filed
      an
      indemnity claim citing breaches by the former RBIS shareholder of
      representations and warranties set forth in the SPA. The former RBIS shareholder
      rejected the claims of the Company and has elected to pursue arbitration in
      accordance with the SPA. Given the early stage of the proceedings and the
      inherent uncertainties of dispute resolution, it is not possible at this time
      to
      predict the outcome of this proceeding.





16


**Item
      2****.****Management’s
      Discussion and Analysis o****f
      Financial Condition and Results of Operations**





*To
      the extent that the information presented in this Quarterly Report on Form
      10-Q
      discusses financial projections, information or expectations about our business
      plans, results of operations, products or markets, or otherwise makes statements
      about future events, such statements are forward-looking. Such forward-looking
      statements can be identified by the use of words such as “intends”,
“anticipates”, “believes”, “estimates”, “projects”, “forecasts”, “expects”,
“plans” and “proposes”.*





*Although
      we believe that the expectations reflected in the forward-looking statements
      are
      reasonable, we cannot guarantee future results, levels of activity, performance
      or achievements. Moreover, neither we, nor any other person, assume
      responsibility for the accuracy and completeness of the forward-looking
      statements. We are under no obligation to update any of the forward-looking
      statements after the filing of this Quarterly Report on Form 10-Q to conform
      such statements to actual results or to changes in our
      expectations.*





*The
      following discussion should be read in conjunction with our unaudited condensed
      consolidated financial statements and the related notes and other financial
      information appearing elsewhere in this Form 10-Q. Readers are also urged to
      review and consider the various disclosures made by us which advise interested
      parties of the factors which affect our business, including without limitation
      the disclosures made under the caption “Management’s Discussion and Analysis of
      Financial Condition and Results of Operations,” under the caption “Risks Related
      to Our Business,” and in the audited consolidated financial statements and
      related notes included in our Annual Report filed on Form 10-K for the year
      ended June 30, 2006 and other reports and filings made with the Securities
      and
      Exchange Commission.*





**Overview**





SYS
      and
      its subsidiaries provide information connectivity solutions that capture,
      analyze and present real-time information to customers in the Department of
      Defense (DoD), Department of Homeland Security (DHS), other government agencies
      and commercial companies.  Using interoperable communications software,
      sensors, digital video broadcast and surveillance technologies, wireless
      networks, network management, decision-support tools and Net-Centric
      technologies, our technical experts enhance complex decision-making. Founded
      in
      1966, SYS is headquartered in San Diego and has principal offices in California
      and Virginia.





We
      deliver our solutions through two reportable segments, the Defense Solutions
      Group (DSG) and the Public Safety, Security and Industrial Systems Group
      (PSSIG). The DSG focuses on engineering, technical and management services
      to
      Federal Government agencies. The PSSIG focuses on providing ‘right-time”
situation status and mission execution support solutions for both commercial
      and
      government customers. We also provide solution lifecycle support with program,
      financial, test and logistical services, including classroom and online
      training.





**Events,
      Trends and Uncertainties**





Management
      currently considers the following events, trends and uncertainties to be
      important to understanding the financial condition and operating performance
      of
      SYS.





·
            **Contract
                Type**.
                Federal Government contracting practices tend to run in cycles. The
                preferred form of contracting varies and ranges from large contracts
                with
                multiple subcontractors and wide areas of work scope to small contracts
                with more specific areas of scope. Unless the Government has a very
                specific requirement, most of this work is done on an Indefinite-Delivery,
                Indefinite-Quantity type of contract. In general, the Government
                is now
                trending towards issuing large Multiple Award Contracts (“MAC”) where
                multiple winners continue to compete on a task by task basis. This
                trend
                was reinforced through the SeaPort-Enhanced MAC contract that has
                become a
                key contracting component for Naval Sea Air Command (NAVSEA) and
                SYS was
                awarded one such MAC contract. All tasks awarded under the
                SeaPort-Enhanced MAC type contracts are competitively bid among all
                eligible MAC holders. In addition, the cost plus nature of these
                tasks
                reduces performance risks but lowers the opportunity to make larger
                fees.





The
                task awards are frequently awarded on a cost reimbursable basis,
                cover a
                broader spectrum of activity and in general favor large businesses.
                SYS
                has been awarded a SeaPort-Enhanced contract which offers opportunity
                for
                SYS to bid on areas in which it might not otherwise have an opportunity
                to
                bid. On the other hand, if the scope of the task is too large, it
                may
                exceed SYS’ ability to respond. Despite the desire of upper level
                Government management to convert these contracts to fixed price contracts
                this is not usually achieved due to a lack of well defined specifications
                of the work to be performed. Thus, increasingly SYS is competing
                with
                larger companies for cost reimbursable contract opportunities that
                do not
                effectively consider innovation in the pricing evaluation and favor
                larger
                businesses doing business as usual where they may have a competitive
                pricing advantage and the advantage of performing on a larger scope
                of
                work. Reduction of this risk will depend on SYS’ ability to convince the
                Government that they can get better products at a better value by
                issuing
                more focused tasks versus large generic
                tasks.





In
                addition, SYS will pursue time and materials or fixed price contracts
                where SYS can be more agile and creative with process, technology,
                expertise, and management functions to provide a solution and to
                reduce
                the price for the customer.





Our
      gross
      margins (revenues less contract costs) are affected by the mix of contract
      types
      (cost reimbursement, fixed-price or time and materials) as well as the mix
      of
      prime contracts versus subcontracts. Further, with the inclusion of products
      based companies such as Logic, cVideo and Ai Metrix, our gross margins will
      be
      affected by the cost and availability of materials and components, product
      mix
      and other fixed and variable costs. Significant portions of our contracts are
      time and materials and cost reimbursement contracts. Subject to contract limits,
      we are reimbursed for labor hours at negotiated hourly billing rates and other
      direct expenses under time and materials contracts and reimbursed for all actual
      costs, plus a fee, or profit, under reimbursement contracts. The financial
      risks
      under these contracts are generally lower than those associated with other
      types
      of contracts, and margins are also typically lower than those on fixed-price
      contracts. The U.S. Government also has awarded us fixed-price contracts. Such
      contracts carry higher financial risks because we must deliver the products,
      systems or contract services at a cost below the fixed contract value in order
      to earn a profit.





17


The
      following table shows our revenues from each of these types of contracts as
      a
      percentage of our total contracts based revenues for the three and nine months
      ended March 30, 2007 and March 31, 2006:





**Three
                Months Ended**
            
            **Nine
                months Ended****2007**
            
            **2006**
            
            **2007**
            
            **2006**Cost
                reimbursable
            
            
            80
            %
            
            82
            %
            
            78
            %
            
            79
            %Time
                and materials
            
            
            14
            %
            
            9
            %
            
            16
            %
            
            14
            %Fixed
                price
            
            
            6
            %
            
            9
            %
            
            6
            %
            
            7
            %Total
            
            
            100
            %
            
            100
            %
            
            100
            %
            
            100
            %





We
      have
      derived a majority of our revenues from U.S. Government contracts under which
      we
      act as a prime contractor. We also provide services indirectly as a
      subcontractor. We intend to focus on the percentage of our business as a prime
      contractor because the direct customer relationship provides an opportunity
      for
      higher margins and longer term revenue streams.  At March 30, 2007, our mix
      of contracts consists of approximately 60% prime contracts and 40% subcontracts
      compared to a mix of 60% prime contracts and 40% subcontracts at March 31,
      2006.





Total
      backlog as of March 30, 2007 was $34.7 million, of which $27.5 million was
      funded and $7.2 million had been ordered, but not yet funded. Total backlog
      as
      of March 31, 2006 was $33.0 million, of which $17.0 million was funded and
      $16.0
      million had been ordered, but not yet funded.





All
      of
      our U.S. Government contracts are subject to audit and various cost controls
      and
      include standard provisions for termination for the convenience of the U.S.
      Government. Multi-year U.S. Government contracts and related orders are subject
      to cancellation if funds for contract performance for any subsequent year become
      unavailable.





·
            **Iraq
                and Other Crises**.
                The U.S. Government is currently prosecuting a major war effort in
                Iraq
                and a major global war on terrorism including troops in Afghanistan
                and
                other countries. The products and services that SYS offers in information
                connectivity, sensor networking, and command and control provide
                solutions
                to the real-time information and communications challenges faced
                in the
                efforts to address these crises.





However,
      defense firms and industry experts are concerned that money spent on Iraq is
      taking away from funding for these transformational technology solutions. At
      the
      same time, defense firms face concerns that existing programs could be cut
      or
      significantly slowed down or that their funding could be reallocated to other
      programs or directly to funding for Iraq.





Further,
      the funding for research and development or purchase of products to assist
      in
      dealing with future disasters often suffers while the rescue and rebuilding
      are
      in process. Our ability to generate decision support tools which will help
      in
      the response to future crises may be recognized, but there may not be funding
      to
      purchase our products and services and to provide funds to rebuild in disaster
      areas.





·
            **Revenue
                Mix**.
                Our business areas that encompass general administrative support
                in
                program management, financial management, base operations, and logistics
                have been in a continuous slow decline for the past five years while
                during this same period our C4ISR (command, control, communication,
                computer, intelligence, surveillance and reconnaissance) business
                has
                steadily grown. More recently we’ve achieved growth in our technical
                program development and assessment, enterprise architecture, and
                training
                solutions business. At the same time, there have been decreases in
                some of
                our software development activities in certain Net-Centric programs
                where
                the programs have migrated from initial software development activities
                to
                deployment by larger systems integrators. We anticipate that this
                trend
                will continue as the DoD continues to implement their focus on enhanced
                information technology and communications systems, data acquisition
                and
                real time situational awareness. This may result in a decrease in
                the DSG
                revenues on a comparable basis. At the same time, we anticipate that
                revenues in the PSSIG business will grow as we add to or expand existing
                product offerings.





·
            **Strategy**.
                Our business growth strategy is focused on continuing to develop
                our core
                strengths in C4ISR, information technology, and systems integration
                while
                adding products and capabilities that will allow us to grow our markets
                in
                these areas as well as expand into other markets, including commercial
                and
                industrial markets. We intend to accomplish this growth strategy
                through
                acquisitions and through productizing capabilities and solutions
                developed
                through our engineering services. We believe that this strategy will
                enable us to diversify our revenue sources, compete for larger DoD
                programs and ultimately grow our operating margins, especially through
                the
                inclusion of products.





·
            **Product
                Development and Sales and Marketing Expenses**.
                During the past twelve months we have significantly increased our
                research
                and development and sales and marketing activities associated with
                acquired products-based businesses and with newly developing product
                lines. We plan to continue investing in such activities for the
                foreseeable future.





18







**Results
      of Operations**





The
      following table sets forth selected items, including consolidated revenues
      for
      the three and nine month periods ended March 30, 2007 and March 31,
      2006:





**Three
                  Months Ended**
              
              **Nine
                  Months Ended****2007**
              
              
              **Percent**
              
              
              **2006**
              
              
              **Percent**
              
              
              
              **2007**
              
              
              **Percent**
              
              
              **2006**
              
              
              **Percent**Revenues
              
              $
              19,069
              
              
              100.0
              %
              $
              13,388
              
              
              100.0
              %
              
              $
              54,528
              
              
              100.0
              %
              $
              38,930
              
              
              100.0
              %Costs
                  of revenues
              
              
              14,811
              
              
              77.7
              %
              
              11,392
              
              
              85.1
              %
              
              
              42,138
              
              
              77.3
              %
              
              31,526
              
              
              81.0
              %Selling,
                  general & administrative
              
              
              4,299
              
              
              22.5
              %
              
              2,901
              
              
              21.7
              %
              
              
              10,877
              
              
              19.9
              %
              
              5,942
              
              
              15.3
              %Research,
                  engineering and development
              
              
              1,059
              
              
              5.6
              %
              
              926
              
              
              6.9
              %
              
              
              3,050
              
              
              5.6
              %
              
              1,987
              
              
              5.1
              %Loss
                  from operations
              
              
              (1,100
              )
              
              (5.8
              )%
              
              (1,831
              )
              
              (13.7
              )%
              
              
              (1,537
              )
              
              (2.8
              )%
              
              (525
              )
              
              (1.3
              )%Total
                  other expense
              
              
              118
              
              
              0.6
              %
              
              88
              
              
              0.7
              %
              
              
              439
              
              
              0.8
              %
              
              220
              
              
              0.6
              %Income
                  tax benefit
              
              $
              (162
              )
              
              (0.8
              )%
              
              (586
              )
              
              (4.4
              )%
              
              
              (464
              )
              
              (0.9
              )%
              
              (81
              )
              
              0.2
              %
 *Revenues* . 
        For the three months ended March 30, 2007, revenues were $19.1 million, up
        $5.7
        million or 42.4% compared to the same period in fiscal 2006. The increase
        included approximately $2.7 million contributed from acquisitions and $4.0
        million from increases in training, software engineering services and
        engineering and program management services which were partially offset by
        decreases of ($1.0) million in certain software development activities within
        our Net-Centric programs. For the nine months ended March 30, 2007 revenues
        were
        $54.5 million, up $15.6 million or 40.1% compared to the same period in fiscal
        2006. The increase included approximately $10.5 million contributed from
        acquisitions and $8.4 million from increases in training, software engineering
        services and engineering and program management services which were partially
        offset by decreases of ($3.3) million in certain software development activities
        within our Net-Centric programs.





Acquisition
      related revenues in the three and nine month periods were primarily attributable
      to the additions of Ai Metrix and RBIS, Ltd., both of which were completed
      subsequent to the prior year third quarter. Additional acquisition related
      revenues were generated from our acquisitions of Web tech, Logic and cVideo.





Revenues
      by reportable segment for the three and nine months ended March 30, 2007 and
      March 31, 2006 were as follows (in thousands):





**Three
                Months Ended**
            
            
            **Nine
                Months Ended****2007**
            
            **2006**
            
            Change
            
            %
            
            
            **2007**
            
            **2006**
            
            Change
            
            %DSG
            
            $
            12,169
            
            $
            10,267
            
            $
            1,902
            
            
            18.5
            %
            
            $
            37,037
            
            $
            31,583
            
            $
            5,454
            
            
            17.3
            %PSSIG
            
            
            6,900
            
            
            3,121
            
            
            3,779
            
            
            121.1
            %
            
            
            17,491
            
            
            7,347
            
            
            10,144
            
            
            138.1
            %Total
                revenues
            
            $
            19,069
            
            $
            13,388
            
            $
            5,681
            
            
            42.4
            %
            
            $
            54,528
            
            $
            38,930
            
            $
            15,598
            
            
            40.1
            %





Effective
      July 1, 2006 certain business activities that were managed and reported under
      the DSG were moved into the PSSIG and are now managed and reported within that
      business group. The activities consisted principally of training related
      services and certain software services based contracts that are inter-related
      with other activities in the PSSIG. Prior period amounts have been reclassified
      to reflect the inclusion of these activities in the PSSIG.





The
      growth in the DSG is attributable to the acquisition of RBIS, which added
      revenues of $1.6 million and $5.7 million, respectively, for the three and
      nine
      months ended March 30, 2007, and increases of $1.3 million and $3.1 million,
      respectively, for the three and nine months ended March 30, 2007 in revenues
      from training, software engineering services and engineering and program
      management services. These increases were partially offset by decreases of
      ($1.0) million and ($3.3) million, respectively, in certain software development
      activities within our Net-Centric programs for the three and nine months ended
      March 30, 2007.





The
      growth in the PSSIG for the three and nine months ended March 30, 2007 is
      attributable to i) growth from the acquisitions of Ai Metrix, WebTech cVideo
      and
      Logic Innovations, which together added incremental revenues of $1.1 million
      and
      $4.8 million, respectively, in the three and nine months ended March 30, 2007
      and ii) growth in training related services of $2.7 and $5.3 million,
      respectively, for the three and nine months ended March 30, 2007.


*Costs
      of revenue.* Costs of revenue for services includes all direct costs such as labor, materials
      and subcontractor costs.  Costs of revenue for services also includes
      indirect overhead costs such as facilities, indirect labor, fringe benefits
      and
      other discretionary costs which are pooled and allocated to contracts on a
      pro
      rata basis. Generally, changes in direct costs for services are correlated
      to
      changes in revenue as resources are consumed in the production of that revenue.
      Costs of revenue for products includes the direct costs and manufacturing
      indirect expenses associated with manufacturing our products.





As
      a
      percentage of revenue, costs of revenue were 77.7% for the three months ended
      March 30, 2007 compared to 85.1% for the same period in fiscal 2006 resulting
      in
      gross margins of 22.3% and 14.9%, respectively. For the nine months ended March
      30, 2007, costs of revenue were 77.3% as compared to 81.0% for the same period
      in fiscal 2006 resulting in gross margins of 22.7% and 19.0%, respectively.
      The
      increase in gross margins for the three and nine months ended March 30, 2007
      was
      the result of (i) increased product sales that carry a higher gross margin
      than
      do our services, (ii) the effect of the adjustment in the prior year’s third
      quarter to expense indirect expense rate variances that had been deferred
      through March 31, 2006, which lowered the gross margin, and (iii) the effect
      of
      the purchase price allocation for Logic which resulted in a step-up in the
      cost
      of goods sold by Logic during the third quarter of the prior year..





*Selling,
      general and administrative expenses* . 
      Selling, general and administrative expenses (SG&A) include labor, fringe
      benefits, sales and marketing, bid and proposal (B&P) and other indirect
      costs. SG&A expenses increased $1.4 million or 48.2%, to $4.3 million in the
      three months ended March 30, 2007 compared to the same period in fiscal 2006.
      SG&A expenses increased $4.9 million or 83.1% to $10.9 million in the nine
      months ended March 30, 2007 as compared to the same period in fiscal 2006.
      Increases in  SG&A
      during the three and nine months ended March 30, 2007 as compared to the same
      period in fiscal 2006 are attributable to the SG&A of the acquisitions and
      also continue to be driven by (i) increased spending for sales and marketing
      efforts, (ii) increased spending for our infrastructure support, (iii) increased
      amortization expense attributable to acquisitions, (iv) increased bad debt
      expense related to a certain customer (nine month period only) and (v) increased
      facility and other professional related expenses. We anticipate that this level
      of SG&A expenditures will be slightly lower in the fourth quarter based on
      cost reductions that have already taken place.





19


*Research,
      engineering and development expenses* .
      Research, engineering and development (R&D) expenses include burdened labor
      and material costs to develop new products as well as maintaining and enhancing
      our existing product capabilities. R&D expenses increased $0.1 million or
      14.4%, to $1.1 million in the three months ended March 30, 2007 compared to
      the
      same period in fiscal 2006. R&D expenses increased $1.1 million or 53.5% to
      $3.1 million in the nine months ended March 30, 2007 as compared to the same
      period in fiscal 2006. The increase in these expenses is primarily attributable
      to research and development as well as sustaining engineering related to
      Vigilys, Ai Metrix, Logic Innovations and the cVideo product lines. We
      anticipate that this level of R&D expenditures will be slightly lower in the
      fourth quarter based on cost reductions that have already taken
      place.





*Loss
      from operations.* The
      Company incurred a loss from operations of ($1.1) million in the three months
      ended March 30, 2007 as compared to a loss from operations of ($1.8) million
      in
      the same period in fiscal 2006 and a loss from operations of ($1.5) million
      in
      the nine months ended March 30, 2007 as compared to a loss from operations
      of
      ($0.5) million in the same period in fiscal 2006. This decrease in income from
      operations is primarily due to the increased spending for SG&A and R&D.





Loss
      from
      operations for the three and nine months ended March 30, 2007 includes
      share-based compensation expense of approximately $0.1 million and $0.3 million,
      respectively, as compared to $0.1 million and $0.4 million, respectively for
      the
      same periods in fiscal 2006. These expenses include non-cash expenses associated
      with stock options granted to employees, the employee stock purchase plan and,
      in the nine month period of fiscal 2006, non-cash expenses related to an
      employee stock purchase agreement. The recognition of these share-based
      compensation expenses is in accordance with SFAS No. 123R, which was adopted
      as
      of the beginning of the fiscal 2006.





*Other
      (income) expense* .
      Other
      (income) expense includes interest expense on our outstanding convertible notes
      and borrowings made under our credit facility and interest and other income.
      Other expense was $0.1 million and $0.4 million, respectively, for the three
      and
      nine months ended March 30, 2007 as compared to $0.1 million and $0.2 million,
      respectively, in the same periods in fiscal 2006. The increase in other expense
      in the nine months ending March 30, 2007 compared to the same period in fiscal
      2006 is due primarily to a net increase in interest expense related to the
      issuance of approximately $3.1 million in convertible notes in February 2006
      and
      interest on our term note issued in connection with the RBIS acquisition in
      the
      fourth quarter of fiscal 2006 partially offset by the decrease in interest
      expense resulting from the conversion of convertible notes during fiscal 2006
      and 2007.





*Income
      tax (benefit) provision.* The
      income tax (benefit) provision was ($0.2) million and ($0.5) million,
      respectively, for the three and nine months ended March 30, 2007 as compared
      to
      ($0.6) million and ($0.1) million, respectively, for the same periods in fiscal
      2006. Our effective tax rate was 13.3% and 23.5% for the three and nine months
      ended March 30, 2007, respectively, as compared to 30.5% and 10.9%,
      respectively, in the same periods in fiscal 2006. Our effective tax rate is
      directly affected by share-based compensation expenses related to SFAS 123R,
      which are not deductible for tax purposes, but which are considered in
      estimating the annual effective tax rate as well as our forecast of annual
      income before taxes. These factors can lead to large fluctuations in the
      estimated effective tax rate from quarter to quarter.





The
      Internal Revenue Service (IRS) is currently examining the Company’s federal
      income tax return for the year ended June 30, 2004. The Company expects the
      IRS
      examination to be completed in fiscal 2008. At this time, there is insufficient
      information to quantify any possible changes or adjustments that may result
      from
      the IRS examination. While
      any
      adjustments resulting from this examination could affect our federal income
      tax
      returns, we do not believe that adjustments, if any, will have a material
      adverse effect on their financial condition or results of operations.
      Additionally, if the
      IRS exam results in an assessment that increases our tax obligation for the
      period under exam, the assessment may also include penalties and
      interest.


**Liquidity
      and Capital Resources**





Historically,
      we have financed our operations and met our capital expenditure requirements
      through cash flows provided from operations, long-term borrowings (including
      the
      sale of convertible notes), sales of equity securities and the use of our line
      of credit. The significant components of our working capital are liquid assets
      such as cash, trade accounts receivable, inventories and income taxes
      receivable, reduced by accounts payable, accrued expenses, line of credit,
      the
      current portion of our term note, the current portion of our convertible notes
      payable, the current portion of our deferred tax liabilities and deferred
      revenue. Working capital was $7.8 million at March 30, 2007 compared to $7.3
      million at June 30, 2006.





*Cash
      flows from operating activities* .
      Cash
      flows from operating activities increased $0.2 million in the first nine months
      of fiscal 2007 compared to the same period in fiscal 2006.





*Cash
      flows from investing activities* .
      Cash
      flows used in investing activities was $0.5 million for the first nine months
      of
      fiscal year 2007 as compared to $5.2 million in the same period of fiscal 2006.
      Cash paid for acquisitions decreased $4.7 million in the first nine months
      of
      fiscal 2007 compared to the same period in fiscal 2006. Additionally, we
      received $0.1 million in proceeds on the liquidation of an investment in the
      first nine months of fiscal 2006.





*Cash
      flows from financing activities* .
      Cash
      flows from financing activities decreased $8.1 million in the first nine months
      of fiscal 2007 compared to the same period in fiscal 2006. The decrease was
      due
      primarily to a decrease of $6.2 million of proceeds related to the issuance
      of
      convertible notes and common stock issued in the private placement, a decrease
      of $0.7 million in proceeds related to stock option and warrant exercises and
      an
      increase of approximately $0.9 million in payments of notes payable and other
      borrowings.





As
      of
      March 30, 2007, we had convertible notes payable totaling $3.3 million
      consisting of $0.2 million issued in connection with the Antin acquisition
      and
      $3.1 million issued in conjunction with the private placement in February 2006.
      A total of $0.2 million of the convertible notes mature in the remainder of
      fiscal 2007.





On
      December 31, 2006, approximately $1.5 million of outstanding convertible notes
      from a 2004 financing matured. Note holders converted approximately $1.2 million
      of the convertible notes into 511,380 shares of common stock at a conversion
      price of $2.20 per share and approximately $0.3 million was paid in cash.





Approximately
      $0.4 million of outstanding convertible notes from the acquisition of Polexis
      in
      2004 maturing on March 31, 2007 were paid in cash on March 30, 2007. These
      notes
      had a conversion price of $2.32 per share.





One
      of
      our regular sources of liquidity is our revolving line of credit facility with
      Comerica for $4.0 million, which expires on December 28, 2008.





Our
      revolving line of credit had an outstanding balance of $1.7 million at March
      30,
      2007. The Company’s $4.0 million revolving line of credit facility allows SYS to
      use (i) the full $4.0 million for working capital purposes or (ii) under a
      Sub
      Facility, up to $2.0 million of the credit facility for permitted acquisition
      purposes and $750,000 for minority investment purposes. The line of credit
      is
      subject to certain restrictions on permitted acquisitions and minority
      investments, and in some cases, we must receive the lender’s consent prior to
      using the facility for such purposes. If used for permitted acquisitions or
      minority investments, these advances must be repaid over 48 months.





20


During
      fiscal 2006, in connection with the purchase of RBIS, we utilized $1.0 million
      of this line for payment of a portion of the purchase consideration. In
      accordance with the terms of the credit facility, the $1.0 million was converted
      to a term note effective June 10, 2006. The term note is payable in monthly
      installments of $20,833 plus interest for fiscal years 2007 through 2010, with
      payments beginning October, 2006. The balance of the term note as of March
      30,
      2007 was $0.8 million, of which $0.25 million was classified as a current
      liability. A total of $0.25 million of principal amounts of this note are due
      in
      fiscal years 2007, 2008, 2009 and 2010. The outstanding balance related to
      the
      Sub Facility reduces the maximum borrowings available under the line of credit.
      As a result, as of March 30, 2007, the maximum borrowing under the line of
      credit was $3.2 million and the remaining available borrowing capacity on the
      line of credit was approximately $1.5 million.





On
      September 27, 2006, SYS and the lender agreed to amend the terms of the line
      of
      credit to eliminate the minimum quarterly net income covenant, current assets
      to
      current liabilities covenant and ratio of senior debt to EBITDA covenant and
      modify the tangible effective net worth covenant and cash flow coverage ratio
      covenant.





We
      have
      the option of being charged prime plus 0.25% or LIBOR plus 300 basis points
      on
      the credit facility and prime plus 0.50% or LIBOR plus 325 basis points on
      the
      sub facility subject to minimum advance amounts and duration under the LIBOR
      option. The loan is collateralized by all of our assets including accounts
      receivable. Borrowings are limited to 80% of our billed accounts receivable
      that
      are less than 90 days old.





Management
      believes that SYS will have sufficient cash flow from operations and funds
      available under the revolving credit agreement to finance its operating and
      capital requirements for at least the next twelve months.





Long-term
      liquidity and continued acquisition related growth will depend on our ability
      to
      manage cash, raise cash through debt and equity financing transactions and
      regain profitability. We may seek to raise additional capital from time to
      time
      as market conditions permit and subject to Board approval. Our recent losses
      may
      impact our ability to raise capital.





**Commitments
      (amounts in thousands)**


**Total**
            
            **2007
                (3)**
            
            **2008**
            
            **2009**
            
            **2010**
            
            **2011**
            
            **Thereafter**Convertible
                notes (1), (2)
            
            $
            3,909
            
            $
            276
            
            $
            313
            
            $
            3,320
            
            $
            --
            
            $
            --
            
            $
            --Note
                payable (1)
            
            
            945
            
            
            84
            
            
            309
            
            
            287
            
            
            265
            
            
            --
            
            
            --Capital
                leases (1)
            
            
            85
            
            
            6
            
            
            22
            
            
            22
            
            
            22
            
            
            13Operating
                leases
            
            
            4,557
            
            
            552
            
            
            1,879
            
            
            1,195
            
            
            409
            
            
            319
            
            
            203Total
            
            $
            9,496
            
            $
            918
            
            $
            2,523
            
            $
            4,824
            
            $
            696
            
            $
            332
            
            $
            203




(1)
      Includes principal and interest




(2)
      For
      the nine months ended March 30, 2007, note holders converted approximately
      $1.1
      million of the convertible notes into 511,380 shares of common stock and
      approximately $0.4 million was paid in cash to the note holders for the notes
      that matured on December 31, 2006 and $0.4 million was paid in cash to the
      note
      holders for the notes that matured on March 31, 2007.




(3)
      Three
      months ending June 30, 2007.


**Off-Balance
      Sheet Arrangements**





SYS
      does
      not have any off
      balance sheet arrangements, investments in special purpose entities or
      undisclosed borrowings or debt. In addition, SYS has not entered into any
      derivative contracts.





**Critical
      Accounting Policies and Estimates**





The
      foregoing discussion of our financial condition and results of operations is
      based on the consolidated financial statements included in this Form 10-Q,
      which
      have been prepared in accordance with accounting principles generally accepted
      in the United States. The preparation of these financial statements requires
      us
      to make estimates and judgments that affect the reported amounts of assets,
      liabilities, sales and expenses, and the related disclosures of contingencies.
      We base these estimates on historical experience and on various other
      assumptions that are believed to be reasonable under the circumstances, the
      results of which form the basis for making judgments about the carrying values
      of assets and liabilities that are not readily apparent from other sources.
      Actual results may differ from these estimates.




During
      the nine months ended March 30, 2007, there were no significant changes to
      the
      critical accounting policies we disclosed in Management’s Discussion and
      Analysis of Financial Condition and Results of Operations in our Annual Report
      on Form 10-K for the year ended June 30, 2006.





For
      interim reporting purposes, SYS applies overhead and selling, general and
      administrative expenses as a percentage of direct contract costs based on annual
      budgeted indirect expense rates. To the extent actual expenses for an interim
      period are greater than the budgeted rates, the variance is deferred if
      management believes it is probable that the variance will be absorbed by future
      contract activity. This probability assessment includes projecting whether
      future indirect costs will be sufficiently less than the annual budgeted rates
      or can be absorbed by seeking increased billing rates applied on cost-plus-fee
      contracts. At the end of each interim reporting period, management assesses
      the
      recoverability of any amount deferred to determine if any portion should be
      charged to expense. In assessing the recoverability of variances deferred,
      management takes into consideration estimates of the amount of direct labor
      and
      other direct costs to be incurred in future interim periods, the feasibility
      of
      modifications for provisional billing rates, and the likelihood that an approved
      increase in provisional billing rates can be passed along to a customer.
      Variances are charged to expense in the periods in which it is determined that
      such amounts are not probable of recovery. As of March 30, 2007, the favorable
      rate variance totaled $.2 million.








21


**ITEM
      3. Quantitative and Qualitative Disclosures about Market
      Risk**





Our
      exposure to market risk for changes in interest rates relates primarily to
      our
      investment income and interest expense. As of March 30, 2007 our cash was
      primarily invested in a money market interest bearing account. A hypothetical
      10% adverse change in the average interest rate on our money market cash
      investments would have had no material effect on our results of operations
      or
      cash flows for the three and nine months ended March 30, 2007. We currently
      do
      not utilize any derivative financial instruments to hedge interest rate
      risks.





We
      have
      interest rate risk in that borrowings under our line of credit and term note
      are
      based on variable market interest rates. As of March 30, 2007, we had $1.7
      million of variable rate debt outstanding under our credit facility and $0.8
      million outstanding under a term note.  Presently, the revolving credit
      line bears interest at a rate of prime plus 0.25% and the term note bears
      interest at a rate of prime plus 0.50%. A hypothetical 10% increase in the
      weighted average interest rate on our combined line of credit and term note
      would not have had a material impact to our results of operations or cash flows
      for the three and nine months ended March 30, 2007.





Our
      privately issued convertible notes have fixed interest rates of 10%, but have
      exposure to changes in the debt’s fair value. We believe that the fair value of
      our total outstanding convertible notes is approximately $2.0 million based
      on
      the conversion prices of the notes and the closing price of our common stock
      on
      March 30, 2007.





**ITEM
      4. Controls and Procedures**





**Evaluation
      of Disclosure Controls and Procedures**




Our
      management, with the participation of our Chief Executive Officer and Chief
      Financial Officer, evaluated the effectiveness of our disclosure controls and
      procedures as of March 30, 2007. The term “disclosure controls and procedures,”
as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means
      controls and other procedures of a company that are designed to ensure that
      information required to be disclosed by a company in the reports that it files
      or submits under the Exchange Act is recorded, processed, summarized and
      reported, within the time periods specified in the SEC’s rules and forms.
      Disclosure controls and procedures include, without limitation, controls and
      procedures designed to ensure that information required to be disclosed by
      a
      company in the reports that it files or submits under the Exchange Act is
      accumulated and communicated to the company’s management, including its
      principal executive and principal financial officer, as appropriate to allow
      timely decisions regarding required disclosure. Based on the evaluation of
      our
      disclosure controls and procedures as of March 30, 2007, our Chief Executive
      Officer and Chief Financial Officer concluded that, as of such date, our
      disclosure controls and procedures were effective.





**Limitations
      on the Effectiveness of Internal Controls**


Management
      recognizes that any controls and procedures, no matter how well designed and
      operated, can provide only reasonable assurance of achieving their objectives,
      and management necessarily applies its judgment in evaluating the cost-benefit
      relationship of possible controls and procedures.





**Changes
      in Internal Control Over Financial Reporting**


There
      has
      been no change in our internal control over financial reporting during our
      most
      recent fiscal quarter that has materially affected, or is reasonably likely
      to
      materially affect, our internal control over financial reporting.


22




**PART
      II - OTHER INFORMATION**





**Item
      1** **.** **Legal Proceedings**





NONE




**Item
      1A** **.** **Risk Factors**




Other
      than the items listed below, no material changes to our risk factors as reported
      on our Form 10-K for the year ended June 30, 2006:





***We
      are currently under audit by the Internal Revenue Service, and the results
      of
      the audit could materially impact our financial statements and liquid
      assets.***





The
      Internal Revenue Service (IRS) is currently examining the Company’s federal
      income tax return for the year ended June 30, 2004. The Company expects the
      IRS
      examination to be completed in fiscal 2008. At this time, there is insufficient
      information to quantify any possible changes or adjustments that may result
      from
      the IRS examination. While
      any
      adjustments resulting from this examination could affect our federal income
      tax
      returns, we do not believe that adjustments, if any, will have a material
      adverse effect on their financial condition or results of operations.
      Additionally, if the
      IRS exam results in an assessment that increases our tax obligation for the
      period under exam, the assessment may also include penalties and
      interest.





***There
      are a large number of shares that are available for future sale, and the sale
      of
      these shares may depress the market price of our common
      stock.***




As
      of
      March 30, 2007, we had issued 19,443,666 shares of common stock. Up to 2,206,950
      shares of common stock were issuable upon the exercise of employee stock options
      at prices ranging from $1.23 to $4.90 per share, 78,400 shares were issuable
      upon the conversion of the convertible note payable from the Antin acquisition
      at $2.50 per share, 868,056 shares were issuable upon the conversion of
      convertible notes from the February 2006 Offering at $3.60 per share, 313,401
      shares were issuable upon the exercise of warrants issued in connection with
      the
      May 27, 2005 Offering at $2.50 per share, 50,000 shares were issuable upon
      the
      exercise of warrants issued in connection with the acquisition of the Lomasoft
      technology at $3.85 per share, 110,000 shares were issuable upon the exercise
      of
      warrants issued in connection with various transactions at $4.00 per
      share,  20,000 shares were issuable upon the exercise of warrants issued
      for services rendered to SmallCap Corporate Advisors, LLC at $2.44 per share
      and
      up to 3,619,363 shares contingently issuable under earn-out provisions in
      various acquisition transactions. Shares issued upon any conversion of our
      outstanding convertible notes or upon the exercise of outstanding options and
      warrants could adversely affect the market price of our common
      stock.




***Future
      sales of our common stock by existing shareholders under Rule 144 could decrease
      the trading price of our common stock.***




As
      of
      March 30, 2007, a total of 9,754,247 shares of our outstanding common stock
      were
“restricted securities” and could be sold in the public markets 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 issuer’s outstanding common stock or (ii) the
      average weekly trading volume in the securities during a period of four calendar
      weeks immediately preceding the sale. Persons who are not affiliated with the
      issuer and who have held their restricted securities for at least two years
      are
      not subject to the volume limitation. Possible or actual sales of our common
      stock by present shareholders under Rule 144 could have a depressive effect
      on
      the price of our common stock.




***Our
      directors, executive officers and affiliated persons beneficially own a
      significant amount of our stock, and their interests could conflict with
      yours.***




As
      of
      March 30, 2007, our directors, executive officers and ****** affiliated
      persons beneficially own approximately 31.9% of our common stock, including
      stock options exercisable within 60 days of March 30, 2007. As a result, our
      executive officers, directors and affiliated persons will have a significant
      ability to:




·
            Elect
                or defeat the election of our directors;


·
            amend
                or prevent amendment of our articles of incorporation or bylaws;


·
            effect
                or prevent a merger; sale of assets or other corporate transactions;
                and


·
            control
                the outcome of any other matters submitted to the shareholders for
                vote.





As
      a
      result of their ownership and positions, our directors, executive officers,
      and
      affiliated persons, collectively, are able to significantly influence all
      matters requiring shareholder approval, including the election of directors
      and
      approval of significant corporate transactions. In addition, sales of
      significant amounts of shares held by our directors and executive officers
      and
      affiliated persons, or the prospect of these sales, could adversely affect
      the
      market price of our common stock. Management’s stock ownership may discourage a
      potential acquirer from making a tender offer or otherwise attempting to obtain
      control of us, which in turn could reduce our stock price or prevent our
      shareholders from realizing a premium over our stock price.





23


***There
      are risks associated with our planned growth, such as a possible inability
      to
      manage our growth.***




We
      plan
      to grow our revenues and profits by adding to our existing customer base through
      organic growth and by the acquisition of other government services and
      government or commercial technology related companies. Over the past five years
      we have hired senior management personnel capable of establishing new business
      units within SYS. Rapid expansion through internal growth has required
      additional capital resources. We plan to continue this approach to building
      our
      business. There can be no assurances that such an approach will result in
      profitability in the future.




We
      believe that we can also grow through the acquisition of other government
      services companies and government or commercial technology related companies
      that have product offerings which may be sold to both commercial and government
      customers. The acquisition of other companies and growing those businesses
      is
      uncertain and contains a variety of business risks, including: integration,
      cultural differences, the retention of key personnel, competition, protection
      of
      intellectual property, industry changes and others. It also includes the risk
      that the parties to a transaction may have disputes that arise subsequent to
      the
      acquisition, which could lead to arbitration or other legal proceedings. We
      intend to attempt to expand our operations through the acquisition of other
      companies. Acquisitions and attempted acquisitions may place a strain on our
      limited personnel, financial and other resources. Our ability to manage this
      growth, should it occur, will require expansion of our capabilities and
      personnel. We may not be able to find qualified personnel to fill additional
      positions or be able to successfully manage a larger organization. Further,
      we
      intend to finance these transactions through a combination of cash and/or equity
      and debt financing transactions. Our ability to use our stock as an acquisition
      currency may be limited because the trading volume in our stock has been low,
      our stock price has been volatile, and our stock may not maintain a price
      sufficient to support transactions without excessive dilution.







**Item
      2.** **Unregistered
      Sales Of Equity Securities And Use Of Proceeds.**





NONE




**Item
      3****.****Defaults
      Upon Senior Securities**





NONE




**Item
      4** **.** **Submission of Matters to a Vote of Securities Holders**





NONE





**Item
      5****.****Other Information**





NONE


24





**Item
      6** **.** **Exhibits**





**Exhibit
                No.**
            
            **Description**2.1
            
            Certificate
                of Ownership filed with the California Secretary of State on
                November 28, 1979, filed as Exhibit 2.1 to the Company’s report on
                Form 10-K for the fiscal year ended June 30, 1979, and incorporated
                by this reference.2.2
            
            Certificate
                of Ownership filed with the California Secretary of State on
                March 18, 1985, incident to change of name of the Company, filed as
                Exhibit 3.6 to this Company’s report on Form 10-K for the fiscal year
                ended June 30, 1985, and incorporated by this
                reference.2.3
            
            Testmasters,
                Inc. Stock Purchase Agreement, filed as Exhibit 2.1 to this Company’s
                Registration Statement on Form SB-2 dated May 24, 2002, and incorporated
                by this reference.2.4
            
            Polexis
                merger agreement, filed as Exhibit 2.2 to this Company’s Registration
                Statement on Form SB-2 dated April 19, 2004, and incorporated by this
                reference.2.5
            
            Asset
                Purchase and Sale Agreement effective as of December 15, 2004, by and
                between SYS and Xsilogy, Inc filed as Exhibit 2.5 to this Company’s report
                on Form 10-QSB dated February 7, 2005, and incorporated by this
                reference.2.6
            
            Agreement
                and plan of merger effective as of January 3, 2005 among SYS, Shadow
                I, Inc., a wholly-owned subsidiary of SYS, Antin Engineering, Inc.,
                and
                the stockholders of Antin Engineering, Inc. filed as Exhibit 2.6
                to this
                Company’s report on Form 10-QSB dated February 7, 2005, and
                incorporated by this reference.2.7
            
            Agreement
                and Plan of Merger effective as of November 7, 2005 among SYS, Shadow
                II,
                Inc., a wholly owned subsidiary of SYS, Logic Innovations, Inc. and
                the
                stockholders of Logic Innovations, Inc., filed as Exhibit 2.7 to
                the
                Company’s report on Form 10-Q for the quarter ended December 30, 2005 and
                incorporated by this reference.2.8
            
            Asset
                Purchase and Sale Agreement effective December 2, 2005 among SYS,
                cVideo,
                Inc. and certain of the stockholders of cVideo, Inc., filed as Exhibit
                2.8
                to the Company’s report on Form 10-Q for the quarterly period ended
                December 30, 2005 and incorporated by this reference.2.9
            
            Stock
                Purchase Agreement effective as of April 2, 2006, between SYS and
                Gary E. Murphy (the sole stockholder of Reality Based IT Services,
                Ltd.),
                incorporated by reference from the Form 8-K dated April 6,
                2006.2.10
            
            Agreement
                and Plan of Merger Dated as of October 17, 2006 By and Among SYS,
                Shadow
                IV, Inc., Ai Metrix, Inc., The Majority Stockholders of Ai Metrix,
                Inc., and Victor E. Parker, as the Stockholder Representative, filed
                as
                Exhibit 2.9 to the Company’s report on Form 8-K dated October 18, 2006 and
                incorporated by this reference.3.1
            
            Articles
                of Incorporation for SYS, as amended, filed as Exhibit 3.1 to the
                Company’s Registration Statement on Form SB-2, filed May 24, 2002, and
                incorporated by this reference.3.2
            
            Bylaws
                of SYS incorporated by reference from our Registration Statement
                on Form
                SB-2 filed on May 24, 2002.4.1
            
            Certificate
                of Determination of Preferences of Preferred Shares of Systems Associates,
                Inc., filed by the Company with the California Secretary of State
                on
                July 28, 1968, filed as Exhibit 3.2 to the Company’s report on Form
                10-K for the fiscal year ended June 30, 1981, and incorporated by
                this reference.4.2
            
            Certificate
                of Determination of Preferences of Preference Shares of Systems
                Associates, Inc., filed by the Company with the California Secretary
                of
                State on December 27, 1968, filed as Exhibit 3.3 to the Company’s
                report on Form 10-K for the fiscal year ended June 30, 1981, and
                incorporated by this reference.4.3
            
            Certificate
                of Determination of Series B 9% Cumulative Convertible Callable Non-Voting
                Preference Stock was filed by the Company with the California Secretary
                of
                State on August 15, 1996, and included inExhibit
                3.1 to the Company’s Registration Statement on Form SB-2, filed May 24,
                2002, and incorporated by this reference.4.4
            
            Form
                of Subscription Agreement from the January 2002 Offering, filed as
                Exhibit
                4.1 to this Company’s Registration Statement on Form SB-2 dated May 24,
                2002 and incorporated by this reference.4.5
            
            Form
                of Convertible Note from the January 2002 Offering, filed as Exhibit
                4.2
                to this Company’s Registration Statement on Form SB-2 dated May 24,
                2002.4.6
            
            Form
                of Subscription Agreement from the February 2004 Offering (Convertible
                Note from December 2003 Offering included), filed as Exhibit 4.3 to
                this Company’s Registration Statement on Form SB-2 dated April 19,
                2004 and incorporated by this reference.4.7
            
            Securities
                Purchase Agreement, from the May 27, 2005 offering, by and among
                SYS and
                the investor parties as identified on the signature pages thereto,
                filed
                as exhibit 10.1 to Form 8-K filed on June 3, 2005 and incorporated
                by this
                reference.4.8
            
            Registration
                Rights Agreement, from the May 27, 2005, by and among SYS and the
                investor
                parties as identified on the signature pages thereto, filed as exhibit
                10.3 to Form 8-K filed on June 3, 2005 and incorporated by this
                reference.4.9
            
            Form
                of Warrant to be issued by SYS to the investors in connection with
                the
                Securities Purchase Agreement from May 27, 2005 Offering, filed as
                exhibit
                10.2 to Form 8-K filed on June 3, 2005 and incorporated by this
                reference.4.10
            
            Restricted
                stock purchase agreement between SYS and Ben Goodwin dated August
                16,
                2005, filed as Exhibit 99.1 to the Company’s report on Form 8-K filed
                August 18, 2005 and incorporated by this reference.4.11
            
            Form
                of Subscription Agreement from the Company’s February 14, 2006 Offering,
                filed as Exhibit 99.1 to the Company’s report on Form 8-K dated February
                14, 2006 and incorporated by this reference.4.12
            
            Form
                of Unsecured Subordinated Convertible Note from the Company’s
                February 14, 2006 Offering, filed as Exhibit 99.2 to the
                Company’s report on Form 8-K dated February 14, 2006 and incorporated
                by this reference.4.13
            
            Form
                of Subordination Agreement from the Company’s February 14, 2006
                Offering, filed as Exhibit 99.3 to the Company’s report on Form 8-K
                dated February 14, 2006, and incorporated by this
                reference.10.1
            
            SYS
                1997 Incentive Stock Option and Restricted Stock Plan filed as Attachment
                1 to the Company’s Proxy Statement filed on February 21, 1997, and
                incorporated by this reference.10.2
            
            SYS
                2003 Stock Option Plan filed as Exhibit 10.2 to the Company’s report on
                Form S-8 filed on April 8, 2003, and incorporated by this
                reference.10.3
            
            SYS
                2003 Employee Stock Purchase Plan filed as Exhibit 10.3 to the Company’s
                report on Form S-8 filed on April 8, 2003, and incorporated by this
                reference.10.4
            
            Employment
                contract for Clifton L. Cooke, Jr., the Company’s Chief Executive Officerfiled
                as Exhibit 10.4 to the Company’s report on Form 10-KSB for the fiscal year
                ended June 30, 2004, and incorporated by this reference.10.5
            
            Employment
                contract for Edward M. Lake, the Company’s Chief Financial Officer and
                Executive Vice President of the Company filed as Exhibit 10.5 to
                the
                Company’s report on Form 10-KSB for the fiscal year ended June 30,
                2004, and incorporated by this reference.10.6
            
            Employment
                contract for Michael W. Fink, the Company’s Secretary and Sr. Vice
                president of Finance and Contracts filed as Exhibit 10.6 to the Company’s
                report on Form 10-KSB for the fiscal year ended June 30, 2004, and
                incorporated by this reference.10.7
            
            Employment
                contract for Kenneth D. Regan, the President of the Company’s Defense
                Solutions Group’s and Executive Vice President of the Company filed as
                Exhibit 10.10 to the Company’s report on Form 10-KSB for the fiscal year
                ended June 30, 2004, and incorporated by this
                reference.10.8
            
            Employment
                contract for Ben Goodwin, the Company’sSenior
                Vice President of Sales and Marketing and President of the Public
                Safety,
                Security and Industrial Products Group filed as Appendix A to Form
                DEF 14A
                filed November 10, 2005.21.1
            
            List
                of all subsidiaries of SYS filed as Exhibit 21.1 to the Company’s report
                on Form 10Q for the quarter ended September 29, 2006 filed November
                13,
                2006.31.1
            
            Certification
                of Chief Executive Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002*31.2
            
            Certification
                of Chief Financial Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002*32.1
            
            Certification
                of Chief Executive Officer pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002*32.2
            
            Certification
                of Chief Financial Officer pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002*


*Filed
      herewith


25


**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:
            May
                14, 2007
            
            /s/
                Clifton L. Cooke, Jr.Clifton
                L. Cooke, Jr.Chief
                Executive OfficerDate:
            May
                14, 2007
            
            /s/
                Edward M. LakeEdward
                M. LakeChief
                Financial Officer








26


**Exhibit
      31.1**




**CERTIFICATION
      OF CHIEF EXECUTIVE OFFICER**




I,
      Clifton L. Cooke, Jr., certify that:




1.
      I have
      reviewed this Quarterly Report on Form 10-Q of SYS;




2.
      Based
      on my knowledge, this report does not contain any untrue statement of a material
      fact or omit to state a material fact necessary to make the statements made,
      in
      light of the circumstances under which such statements were made, not misleading
      with respect to the period covered by this report;





3.
      Based
      on my knowledge, the financial statements, and other financial information
      included in this report, fairly present in all material respects the financial
      condition, results of operations and cash flows of the registrant as of, and
      for, the periods presented in this report.




4.
      The
      registrant’s other certifying officer(s) and I are responsible for establishing
      and maintaining disclosure controls and procedures (as defined in Exchange
      Act
      Rules 13a-15(e) and 15d-15(e)) for the registrant and have:




a)
      Designed such disclosure controls and procedures, or caused such disclosure
      controls and procedures to be designed under our supervision, to ensure that
      material information relating to the registrant, including its consolidated
      subsidiaries, is made known to us by others within those entities, particularly
      during the period in which this report is being prepared; and




b)
      Evaluated the effectiveness of the registrant’s disclosure controls and
      procedures and presented in this report our conclusions about the effectiveness
      of the disclosure controls and procedures, as of the end of the period covered
      by this report based on such evaluation; and




c) 
      Disclosed in this report any change in the registrant’s internal control over
      financial reporting that occurred during the registrant’s most recent fiscal
      quarter (the registrant’s fourth fiscal quarter in the case of an annual report)
      that has materially affected, or is reasonably likely to materially affect,
      the
      registrant’s internal control over financial reporting; and




5.
      The
      registrant’s other certifying officer(s) and I have disclosed, based on our most
      recent evaluation of internal control over financial reporting, to the
      registrant’s auditors and the audit committee of registrant’s board of directors
      (or persons performing the equivalent functions):




a) 
      All significant deficiencies and material weaknesses in the design or operation
      of internal control over financial reporting which are reasonably likely to
      adversely affect the registrant’s ability to record, process, summarize and
      report financial information; and




b) 
      Any fraud, whether or not material, that involves management or other employees
      who have a significant role in the registrant’s internal control over financial
      reporting.






Dated:
                May 14, 2007
            
            By:
            /s/
Clifton
              L. Cooke, Jr.Clifton
                L. Cooke, Jr.Chief
                Executive Officer








27


**Exhibit
      31.2**




**CERTIFICATION
      OF CHIEF FINANCIAL OFFICER**




I,
      Edward
      M. Lake, certify that:




1.
      I have
      reviewed this Quarterly Report on Form 10-Q of SYS;




2.
      Based
      on my knowledge, this report does not contain any untrue statement of a material
      fact or omit to state a material fact necessary to make the statements made,
      in
      light of the circumstances under which such statements were made, not misleading
      with respect to the period covered by this report;




3.
      Based
      on my knowledge, the financial statements, and other financial information
      included in this report, fairly present in all material respects the financial
      condition, results of operations and cash flows of the registrant as of, and
      for, the periods presented in this report.




4.
      The
      registrant’s other certifying officer(s) and I are responsible for establishing
      and maintaining disclosure controls and procedures (as defined in Exchange
      Act
      Rules 13a-15(e) and 15d-15(e)) for the registrant and have:




a)
      Designed such disclosure controls and procedures, or caused such disclosure
      controls and procedures to be designed under our supervision, to ensure that
      material information relating to the registrant, including its consolidated
      subsidiaries, is made known to us by others within those entities, particularly
      during the period in which this report is being prepared; and




b)
      Evaluated the effectiveness of the registrant’s disclosure controls and
      procedures and presented in this report our conclusions about the effectiveness
      of the disclosure controls and procedures, as of the end of the period covered
      by this report based on such evaluation; and




c)
      Disclosed in this report any change in the registrant’s internal control over
      financial reporting that occurred during the registrant’s most recent fiscal
      quarter (the registrant’s fourth fiscal quarter in the case of an annual report)
      that has materially affected, or is reasonably likely to materially affect,
      the
      registrant’s internal control over financial reporting; and




5.
      The
      registrant’s other certifying officer(s) and I have disclosed, based on our most
      recent evaluation of internal control over financial reporting, to the
      registrant’s auditors and the audit committee of registrant’s board of directors
      (or persons performing the equivalent functions):




a)
      All
      significant deficiencies and material weaknesses in the design or operation
      of
      internal control over financial reporting which are reasonably likely to
      adversely affect the registrant’s ability to record, process, summarize and
      report financial information; and




b)
      Any
      fraud, whether or not material, that involves management or other employees
      who
      have a significant role in the registrant’s internal control over financial
      reporting.






Dated:
                May 14, 2007
            
            By:
            /s/
                Edward M. LakeEdward
                M. LakeChief
                Financial Officer








28


**Exhibit
      32.1**




**CERTIFICATION
      OF CHIEF EXECUTIVE OFFICER**




I,
      Clifton L. Cooke, Jr., Chief Executive Officer of SYS (the “Registrant”), do
      hereby certify pursuant to Rule 15d-14(b) of the Securities and Exchange Act
      of
      1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United
      States Code that:




(1)
      the
      Registrant’s Quarterly Report on Form 10-Q of the Registrant for the quarter
      ended March 30, 2007 (the “Report”), to which this statement is filed as an
      exhibit, fully complies with the requirements of Section 13(a) or 15(d) of
      the Securities Exchange Act of 1934, as amended; and




(2)
      the
      information contained in the Report fairly presents, in all material respects,
      the financial condition and results of operations of the
      Registrant.




Dated:
                May 14, 2007
            
            By:
            /s/
                Clifton L. Cooke, Jr.Clifton
                L. Cooke, Jr.Chief
                Executive Officer








29


**Exhibit
      32.2**




**CERTIFICATION
      OF CHIEF FINANCIAL OFFICER**




I,
      Edward
      M. Lake, Chief Financial Officer of SYS (the “Registrant”), do hereby certify
      pursuant to Rule 15d-14(b) of the Securities and Exchange Act of 1934, as
      amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code
      that:




(1)
      the
      Registrant’s Quarterly Report on Form 10-Q of the Registrant for the quarter
      ended March 30, 2007 (the “Report”), to which this statement is filed as an
      exhibit, fully complies with the requirements of Section 13(a) or 15(d) of
      the
      Securities Exchange Act of 1934, as amended; and




(2)
      the
      information contained in the Report fairly presents, in all material respects,
      the financial condition and results of operations of the
      Registrant.




Dated:
                May 14, 2007
            
            By:
            /s/
                Edward M. LakeEdward
                M. LakeChief
                Financial Officer