####                  U.S. SECURITIES ANDEXCHANGE COMMISSION     Washington, D.C.  20549**FORM10-QSB**

(Mark One)

  X        Quarterly Report Under Section 13 or15(d) of The Securities Exchange Act of 1934

For the quarterly periodended        March 29, 2003       

             Transaction Report UnderSection 13 or 15(d) of the Securities Exchange Act

For the transitionperiod from                               to ________________

Commission File Number    000-04169  

SYS(ExactName of Small Business Issuer as Specified in Its Charter)

                    California                                                                                   95-2467354       (State or Other Jurisdiction of                                                                     (I.R.S.EmployerIncorporation or Organization)                                                                    IdentificationNo.)

5050 Murphy CanyonRoad, Suite 200, San Diego, California 92123(Address of PrincipalExecutive Offices)

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

9620 ChesapeakeDrive, Suite 201, San Diego, California, 92123(Former Name, FormerAddress and Former Fiscal Year, if ChangedSince Last Report)

    Checkwhether the issuer: (1) filed all reports required to be filed by Section 13 or15(d) of the Securities Exchange Act during the past 12 months (or for suchshorter period that the registrant was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days.

Yes   X      No        

    Statethe number of shares outstanding of each of the issuer's classes of commonequity, as of the latest practicable date: 5,473,165 shares of common stock, withoutpar value, as of April 28, 2003.

TransitionalSmall Business Disclosure Format (check one):

Yes            No    X   

Page 1
**TABLE OF CONTENTS**

  

Page  

**PART I - FINANCIAL INFORMATION**  

Number 

Item 1.  Financial Statements 

                Condensed Consolidated Balance Sheet (unaudited)  

                     March 29, 2003 

3 

                Condensed Consolidated Statements of Operations (unaudited) 

                     Three Months and Nine Months Ended March 29, 2003 

                     and March 30, 2002 

5 

                Condensed Consolidated Statements of Cash Flows (unaudited) 

                     Nine Months Ended March 29, 2003 and March 30, 2002 

6 

                Notes to Condensed Consolidated Financial Statements (unaudited) 

8 

Item 2.   Management's Discussion and Analysis or Plan ofOperations 

                     New Accounting Pronouncements 

13 

                     Description of Business 

13 

                     Results of Operations 

16 

                     Liquidity and Capital Resources 

16 

Item 2a.  Factors Which May Affect Future Results 

17 

Item 3.   Controls and Procedures 

19 

**PART II - OTHER INFORMATION**

Item 1.   Legal Proceedings 

20 

Item 2.   Changes in Securities 

21 

Item 3.   Defaults Upon Senior Securities 

21 

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

21 

Item 5.   Other Information 

21 

Item 6.   Exhibits and Reports on Form 8-K 

22 

**SIGNATURES**

23 

Page 2
 PART IFINANCIAL INFORMATION

Item 1.      Financial Statements

SYS AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEET

March 29, 2003

ASSETS

(Unaudited)

Current assets:       Cash       Contract receivables,  net of allowance for doubtful            accounts of $26,000       Deferred tax assets       Income tax refund  receivable       Other current assets

  $        28,000       4,860,000          485,000          527,000       249,000

          Total current assets

    6,149,000

Furniture and  equipment, less accumulated       depreciation and  amortization of $1,050,000  Capitalized software  for internal use, net of       accumulated  amortization of $12,000  Non-current inventory  Other assets

          780,000

          90,000          116,000       147,000

          Total assets

$  7,282,000  =========

LIABILITIES &  STOCKHOLDERS' EQUITY

Current liabilities:       Borrowings under bank  line of credit       Working capital loan       Accounts payable       Accrued payroll and  related taxes       Other accrued liabilities       Current portion of  related party note payable       Current portion of  capital lease obligations

  $      138,000          325,000          985,000      1,190,000          255,000              7,000         32,000

          Total current  liabilities

    2,932,000

Convertible notes  payable  Convertible notes  payable to related parties  Capital lease  obligations, net of current portion  Deferred tax  liabilities

        450,000          550,000            68,000       147,000

          Total liabilities

    4,147,000

Page 3

Stockholders' equity:       9% preference stock,  $1.00 par value; 2,000,000            shares authorized;  69,781 Series B shares issued and            outstanding       Common stock, no par value;  48,000,000 shares            authorized; 5,458,165  shares issued and outstanding       Common stock subscriptions receivable  from            Company officers for  26,315 shares       Retained earnings

          

 70,000 

     2,931,000 

        (19,000)       153,000 

Total stockholders' equity

    3,135,000 

$  7,282,000   ========= 

 

 

 

See Notes to CondensedConsolidated Financial Statements.

Page 4
SYS AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

 

Three months ended

 

 

 

Nine months ended

March 29,    2003

 

March 30,    2002

 

March 29,    2003

 

March 30,    2002

Contract revenues

$   5,955,000 

$   4,653,000 

$18,129,000 

$11,668,000  

Costs and expenses:       Contract costs       General and  administrative            expenses       Legal settlement

      5,352,000         1,135,000                    0 

      4,025,000 

           512,000                    0 

    15,754,000 

       2,625,000         941,000 

    10,024,000  

     1,105,000  

          Totals

     6,487,000 

     4,537,000 

   19,320,000 

   11,129,000  

Income (loss) from  operations

       (532,000)

        116,000 

    (1,191,000)

        539,000  

Other (income)  expenses:       Interest income       Interest expense       Gain on sale and  disposition of            equipment

             (2,000)            55,000                      0 

            (8,000)            33,000 

                   0 

            (6,000)          167,000 

                   0 

          (10,000)           101,000  

           (5,000) 

          Totals

          53,000 

          25,000 

        161,000 

          86,000  

Income (loss) before  income taxes

       (585,000)

          91,000 

    (1,352,000)

        453,000  

Provision (credit) for  income taxes

      (198,000)

          39,000 

       (505,000)

        184,000  

Net income (loss)

       (387,000)

          52,000 

       (847,000)

        269,000  

Preference dividend  requirements

            3,000 

            3,000 

            6,000 

            7,000  

Income (loss)  applicable to common       stock

   $     (390,000)  ==========

  $        49,000   =========

  $     (853,000)  ==========

  $      262,000    =========

Basic income (loss)  per common       share

  $           (0.07)  ==========

  $            0.01   =========

  $           (0.17)  ==========

  $            0.07    =========

Diluted income (loss)  per common       share

  $           (0.07)  ==========

  $            0.01   =========

  $           (0.17)  ==========

  $            0.06    =========

 

See Notes to CondensedConsolidated Financial Statements.

Page 5
SYS AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)

Nine  months ended

March 29,    2003

 

March 30,    2002

Operating activities:       Net income (loss)       Adjustments to  reconcile net income (loss) to net cash       (used in)  operating activities:            Depreciation and  amortization            Deferred income taxes            Impairment of goodwill            Gain on sale and  disposition of equipment            Issuance of stock for  legal settlement            Accretion of debt discount            Bonus expense in lieu  of cash paid for exercise of                  stock options            Changes in operating  assets and liabilities:                  Contract receivables                  Other receivables                  Receivable from  related party                  Other current assets                  Other assets                  Accounts payable                  Accrued payroll and  related taxes                  Income taxes payable                  Other accrued  liabilities

  $      (847,000)

           205,000           (216,000)             84,000                      0            600,000              38,000              14,000 

      (413,000)                      0              22,000           (514,000)          (138,000)           443,000            485,000                       0          192,000 

  $      269,000 

          153,000                      0                      0             (5,000)                     0                      0                      0 

   (1,848,000)            56,000                      0         (100,000)        (139,000)          299,000           524,000         (138,000)         10,000 

Net cash used in operating activities

         (45,000)

      (919,000)

Investing activities:       Acquisition of furniture and equipment       Proceeds from sale of  equipment       Capitalization of  software costs       Net cash acquired in  acquisition

          (270,000)                      0                       0                     0 

       (290,000)              5,000         (319,000)       165,000 

Net cash used in  investing activities

       (270,000)

     (439,000)

Financing activities:       Net line of credit  borrowings (repayments)       Proceeds from private  offering       Payments of related  party note payable       Payments of other  notes payable       Payments on capital  lease obligations       Payments of dividends       Proceeds from issuance  of common shares       Proceeds from stock  options exercised       

           138,000                       0             (51,000)          (111,000)            (43,000)              (6,000)                      0          156,000 

       (720,000)       1,410,000                      0           (46,000)            (6,000)            (7,000)          999,000          15,000 

Net cash provided by  financing activities

           83,000 

    1,645,000 

Net increase  (decrease) in cash  Cash at beginning of  period

        (232,000)         260,000 

        287,000          25,000 

Cash at end of period

$         28,000   ==========

$     312,000   =========

Page 6
Supplemental  disclosure of cash flow data:       Interest paid

  $         99,000   ==========

  $     101,000   =========

     Income taxes paid

$         81,000   ==========

$     317,000   =========

Supplemental  disclosure of noncash investing and  financing activities:       Common stock issued  upon exercise of stock options            in exchange for  subscriptions receivable from Company            officers

 

 

 

 

 

$       64,000   =========

     Acquisition of  equipment under capital lease            obligations

  $       26,000   =========

     Offset of  subscriptions receivable from Company            officers with accrued  compensation

  $         45,000   ==========

 

See Notes to CondensedConsolidated Financial Statements.

Page 7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1)    In the opinion of the Registrant, theunaudited financial information in this report reflects all adjustments,consisting only of normal recurring accruals, which are considered necessaryfor a fair presentation of its financial position as of March 29, 2003 and itsresults of operations and cash flows for the periods shown.  Certain information and footnote disclosuresnormally included in financial statements prepared in conformity withaccounting principles generally accepted in the United States of America havebeen condensed or omitted pursuant to SEC regulations.  It is suggested that these financialstatements be read in conjunction with the audited financial statementsincluded in the Registrant's Report on Form 10-KSB for the fiscal year endedJune 30, 2002.

(2)    Basic income (loss) per common share iscalculated by dividing income (loss) applicable to common stock by the weightedaverage number of common shares outstanding during the period.  The calculation of diluted income per commonshare is similar to that of basic income per common share, except that thedenominator is increased to include the number of additional common shares thatwould have been outstanding if all potentially dilutive common shares,principally those issuable upon the conversion of notes and the exercise ofstock options, were issued during the period. For the three and nine months ended March 29, 2003, the assumed exerciseof stock options, conversion of convertible notes payable, and the interestassociated with the notes have not been presented because they would have beenantidilutive.

         The following tablesummarizes the calculation of basic and diluted income (loss) per common sharefor each period:

 

Three months ended

 

 

 

Nine months ended

March 29,2003

 

March 30,2002

 

March 29,2003

 

March 30,2002

Numerators:       Net income (loss)       Deduct - preferred and            preference dividend  requirements

  $(387,000)

        3,000 

  $   52,000

       3,000

  $(847,000)

        6,000 

  $269,000

       7,000

     Income (loss)  applicable to            common stock - basic  (A)

  (390,000)

     49,000

  (853,000)

   262,000

     Income (loss)  applicable to            common stock - diluted (B)

  $(390,000)  ========

  $   49,000  =======

  $(853,000)  ========

  $262,000  =======

Page 8
Denominators:       Weighted average  shares for            basic income (loss)  per common            share (C)       Add effects of  dilutive            securities from  assumed            exercise of stock  options and            warrants and conversion of notes            payable

                  

  5,300,648 

 

                  

                  

  3,949,914

     241,596

                  

  5,072,864 

 

                  

                  

  3,949,914

     230,958

     Weighted average  shares for            diluted income (loss)  per            common share (D)

 

  5,300,648   =======

 

4,191,510  =======

 

  5,072,864   =======

 

 4,180,872  =======

Basic income (loss)  per common       share (A/C)

   $     (0.07)  =======

 

   $       0.01  =======

 

  $     (0.17)  =======

 

  $       0.07  =======

Diluted income (loss)  per common       share (B/D)

  $     (0.07)  =======

  $       0.01  =======

  $     (0.17)  =======

  $       0.06  =======

(3)    The results of operations for the ninemonths ended March 29, 2003 are not necessarily indicative of the results to beexpected for the full year ending June 30, 2003.

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

(5)    The Company's primary source ofliquidity is its $1,500,000 revolving line of credit facility under a loanagreement with Comerica Bank-California that expires on December 28, 2003.  The loan is collateralized by all of theCompany's assets includingcontract receivables.  ComericaBank-California advances funds to the Company of up to 80% of the Company's billed contractreceivables which are less than 90 days old. Comerica Bank-California charges an interest rate of 0.750% overprime.  Comerica Bank-Californiarequires the Company to maintain certain covenants; at this time the Company isnot in compliance with all of those covenants.  Accordingly, the long-term portion of theworking capital loan has been reclassified to current liabilities.  The Company is currently seeking a waiverfrom the Bank.

(6)    The Company had reported segmentinformation in its previous filings for the operations associated with its SYSGovernment Services Division and Testmasters Division (the "TestmastersSegment") in the same format as reviewed by its Chief Operating DecisionMaker (the "CODM"). The sales, operating income and assets of theTestmasters Segment no longer meet the thresholds that require separatedisclosure and the CODM no longer separately reviews such information.Accordingly, the Company discontinued reporting segment information in thesecond quarter of the year ending June 30, 2003. 

        Substantially all of theCompany's operations are conducted in the United States. 

(7)    The following table summarizes certaininformation regarding stock options issued under the SYS 1997 Incentive StockOption and Restricted Stock Plan and warrants issued for the nine month periodsended:

Page 9
                                    March  29, 2003

Shares or Price    Per  Share

 

Weighted Average Exercise  Price

Balance outstanding at  beginning of period

        1,689,200 

               $1.01

Granted

           412,000 

               $1.28

Exercised

          (225,800)

               $0.76

Cancelled

                    ____________  

                        

Balance outstanding at  end of period

        1,875,400   ===========

               $1.10

Price range at end of  period

  $0.47 to $2.27 

Weighted average fair  value of options and warrants       granted during the  period

                 $0.75   ===========

    The Company accounts forstock options granted to employees under the recognition and measurementprinciples of APB Opinion No. 25, Accounting for Stock Issued to Employees, andRelated Interpretations, and has adopted the disclosure-only provisions ofStatement of Financial Accounting Standards No. 123, "Accounting forStock-Based Compensation".  Accordingly, only the intrinsic value hasbeen recognized in the financial statements as expense.  Had the Company's options beendetermined based on the fair value method, the results of operations would havebeen reduced to the pro forma amounts indicated below:

Three months ended

Nine months ended

March 29, 2003

 

March 30, 2002

March 29, 2003

 

March 30, 2002

Net income (loss) applicable to       common stock - as reported

  $      (390,000)

  $        49,000 

  $      (853,000)

  $      262,000  

Deduct total  stock-based       employee compensation expense       determined under fair value-       based method for all awards

 

           (60,000)

** **

          (47,000)

 

         (183,000)

 

 

        (142,000)

Net income (loss) applicable       to common stock -  pro forma

  $      (450,000)  ==========

 $          2,000   ========== 

$   (1,036,000)  ==========

$      120,000   ========== 

Basic income (loss)  per common       share:       As reported

     $             (0.07)  ==========

      $             0.01   ========== 

  $            (0.17)  ==========

 

  $            0.07   ========== 

Pro forma

$            (0.08)  ==========

$             0.00   ========== 

 $             (0.20)  ==========

$             0.03   ========== 

Diluted income (loss)       per common share:       As reported

 

   $             (0.07)  ==========

 

 $             0.01   ========== 

 

$            (0.17)  ==========

 

$            0.06   ========== 

     Pro forma

 $            (0.08)  ==========

 $             0.00   ========== 

$            (0.20)  ==========

$             0.03   ========== 

Page 10

    On September 13, 2002,the Company issued 54,443 shares of common stock to the Company's 401(k)/Employee StockOwnership Plan.  These shares, which hada fair value of $73,000, were part of the Company's contribution on behalf of the employeesfor 2002.

(8)    On March 19, 2003, the Company wasserved notice that it was named in a lawsuit filed in the Superior Court ofCalifornia, County of Orange, on March 10, 2003.  The lawsuit was brought by associates of former Company Chairmanand Chief Executive Officer, Robert D. Mowry who had a relationship with Mowrythrough Big Canyon Investments, Inc. and UniPrise, Inc.  The Plaintiffs are George M. Colin, WilliamCzapar, Dan Birdsall and Brian Patterson. In addition to the Company, the Defendants are Robert Mowry, anindividual; William Zures, an individual; UniPrise, Inc., a Californiacorporation; Acrylis, Inc., a Delaware corporation; Big Canyon Investments,Inc., a California corporation; Caldera International, Inc., a Utah corporationand several Does.

    The lawsuit lists fourcauses of action, but the Company is named only in the fourth.  The fourth cause of action is for breach ofinstallment factoring agreements.  TheCompany believes that the factoring agreements were between the Plaintiffs andUniPrise.  While the Plaintiffs allegethat the Company was represented by an agent (Mowry) in these factoringagreements, the Company has received a Declaration from Mowry stating, amongother things, "The Factoring Agreements were made by and betweenPlaintiffs and UniPrise.  SYS was not aparty to them, had no knowledge of them and did not benefit from them".

    The Plaintiffs claim tohave suffered losses and seek damages of the principal amounts of $980,000,plus interest, administrative fees and other consideration.  The Company has hired counsel and willvigorously defend the lawsuit.  Whilethe Company believes it has no liability in this matter, there can be noassurance that the Plaintiffs will not be successful in asserting that theCompany is liable to them.  The Companyis not able to predict the outcome of this litigation and there can be noassurance that the Company will not incur substantial and protracted litigationcosts.

(9)    On December 20, 2002, the Companyentered into a Letter of Intent with the holders of approximately 80% of theoutstanding shares of AP Labs, Inc. (AP Labs) to acquire all of their shares ofAP Labs.  AP Labs is a governmentcontractor that provides commercial off-the-shelf solutions and custom turnkeyproducts, specializing in the design, development and manufacturing of ruggedenclosures and integrated systems for high-end defense, aerospace andcommercial markets.  AP Labs alsoprovides in-house precision sheet metal fabrication, wiring harnesses, andcircuit card and enclosure assemblies. Most of AP Labs customers are primedefense contractors.

     As of March 29, 2003, the Company had incurred externalacquisition expenses of $141,000, all of which have been charged tooperations.  The Company will haveadditional acquisition expenses in the last quarter of this fiscal year. 

Page 11

(10)    As previously reported, the Company andfour employees were sued in Virginia by Systems Integration & Research, Inc.("SIR") in February 2002, which claimed that the Company and fouremployees had conspired to divert a contract that SIR was performing for theU.S. Navy.  The Company had sued SIR,its former Chairman and CEO and C-Cubed, Corp., its parent, in Californiaalleging damages suffered by the Company as a result of a failed acquisitionattempt by the Company of SIR.  InJanuary of 2003, all of SIR's claims against the Company and the four employeesand all of the Company's claims against SIR and C-Cubed, Corp. weredismissed.  However, the Company iscontinuing to pursue its case against the former Chairman and CEO of SIR.

    In connection with thedismissal of the lawsuit, on January 9, 2003, the Company signed a licenseagreement with C-Cubed Corp. ("C-Cubed") whereby the Company received a five year exclusive licenseto manufacture and sell C-Cubed's "ViewCASE".  ViewCASE is a portable, briefcase-sizedvideoconferencing system.  The Companyagreed to pay C-Cubed $150,000 in cash and 261,552 shares of the Company's common stock with afair value of approximately $600,000.  

    During the nine months ended March 29, 2003, the Companyincurred legal costs of approximately $291,000 in a successful defense of thelawsuit filed against it by C-Cubed Corp, which has been dismissed andsettled.  The Company anticipates a$100,000 reduction in these legal costs due to insurance claims.  During the nine months ended March 29, 2003,the Company recorded a reduction in legal expense of $100,000 and a receivablefrom various insurance companies of $100,000, which is classified in othercurrent assets on the balance sheet.

Page 12

Item 2.     Management'sDiscussion and Analysis or Plan of Operations

    To the extent that theinformation presented in this quarterly report discusses financial projections,information or expectations about our business plans, results of operations,products or markets, or otherwise makes statements about future events, suchstatements 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 expectationsreflected in these forward-looking statements are based on reasonableassumptions, there are a number of risks and uncertainties that could causeactual results to differ materially from such forward-lookingstatements.  These include, amongothers, the cautionary statements in the "Factors Which May Affect FutureResults" and "Management's Discussion andAnalysis or Plan of Operations" sections of this report. These cautionary statements identify important factors that could causeactual results to differ materially from those described in the forward-lookingstatements.  When considering forward-lookingstatements in this report, you should keep in mind the cautionary statements inthe "Factors Which May AffectFuture Results" and "Management's Discussion andAnalysis or Plan of Operations" sections, and other sections of this report.

New AccountingPronouncements

    During 2002, the Companyelected early adoption of the provisions of Statement of Financial AccountingStandards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.  The adoption of the new standard did nothave any effect on the accompanying condensed consolidated financialstatements.

    In June 2002, theFinancial Accounting Standards Board issued Statement of Financial AccountingStandards No. 146, Accounting for Costs Associated with Exit or DisposalActivities ("Statement146").  Management does not believethat the adoption of Statement 146 will have a material impact on the Company's financial position orresults of operations.

Description of Business

    The Company providesengineering, management and technical services to public and private sectorcustomers.  The Company was formed andincorporated in the State of California in 1966 as Systems Associates, Inc.  It became a public corporation in 1968 andengaged in systems analysis, systems engineering, computer services andsoftware for government and industry. The Company changed its name to Systems Associates, Inc. of Californiaon December 4, 1979, and, as of March 18, 1985, it was changed to SYS.  On June 19, 2002, the Board of Directorsadopted a resolution to use the DBA of SYS Technologies, Inc.  The Company corporate offices were moved toSan Diego, California on February 19, 1984, from Long Beach, California.  On May 4, 2001, the Company purchased all ofthe stock of Testmasters, Inc. (Testmasters), which is now our wholly owned subsidiary.  On March 27, 2002, the Company purchased allof the stock of Shadow Research International, Inc. (Shadow Research), which isnow our wholly owned subsidiary.

    The Company currentlyprovides engineering, management and technical consulting services to variousagencies of the U.S. government and private industry, as a prime contractor andsubcontractor.  The specific servicesprovided are primarily in the fields of:

Page 13
Systems Engineering

 Management and Analysis Consulting

Naval Architecture andMarine Engineering

 Software Development & Testing

Program Management

 Information Management Systems

EnvironmentalEngineering

 Logistics Analysisand Engineering

Electronic RecordManagement

 Cost Analysis and Forecasting

Information Operations

 TheaterAssessment Profiling

Effects Based Planning

 TotalOwnership Cost

Software Training

 Data Fusion and Knowledge Management

Joint C4I Architecture

 Information Assurance

    The Company has beenproviding Underway Replenishment (UNREP) services to the U.S. Navy since1982.  The latest UNREP contract becameeffective on September 16, 2002.  Thiscontract, which is cost plus fixed fee, is valued at $39.5 million over its tenyear term, assuming that all options are exercised.  The base year of this new contract is valued at $3.3million.  This program accounted forabout 8% of the Company's revenue so far infiscal year 2003.  The program providesin-service engineering to the U.S. Navy Fleet. This work is performed by the Company's Enterprise Solutions Division, which is basedin Oxnard, California.

    The Management,Planning, Analytical and Administrative (MPAA) Program had its third of fouroption years exercised on February 1, 2003. This third option year is valued at $4.5 million.  This program accounted for about 23% of theCompany's revenue so far infiscal year 2003.  This contract, whichis cost plus fixed fee, supports the U.S. Navy's Port Hueneme Division, Naval SurfaceWarfare Center.  The MPAA program hasreceived customer recognition for its high standards of excellence andprofessionalism.  This fiscal year, thegovernment rated the Company's performance as outstanding for both the base and optionyears of the contract.  This work isperformed by the Company's Enterprise SolutionsDivision.

    The Company iscontinuing to provide hazardous materials assessment support to the Naval AirSystems Command through a subcontract. This support provides environmental engineering and technical servicesfocusing on the identification and reduction of hazardous material whenproviding maintenance to weapons and associated handling and shippingequipment.  Hazardous material reductionsupport is being expanded to include support for Foreign Military Sales.  This work is performed by theCompany's Enterprise SolutionsDivision.    

    The Company has threecontracts from the General Services Administration (GSA).  These three contracts are for InformationTechnology, Financial Management Services and Professional EngineeringServices.  These contracts, which aretime and material, have proven to be successful as a means to develop newcustomers and they are registered in the GSA Advantage System.  The GSA Advantage System is an on-lineservice provided by GSA that lists the price schedules for all registeredcompanies.  The GSA contracts accountedfor about 36% of the Company's revenue so far in fiscal year 2003.  All of theCompany's divisions utilizethese GSA contracts.

    The Company continues toprovide Electronic Records Management (ERM) services. The Company's Information Technology(IT) GSA contract was amended to include ERM services.  This work is performed by theCompany's Enterprise SolutionsDivision.

    The Company iscontinuing to provide support services for information technology servicesthrough a subcontract in support of the Navy Marine Corps Intranet (NMCI).  This program accounted for about 3% of theCompany's revenue so far infiscal year 2003.  This work is performedby the Company's Enterprise SolutionsDivision.

    Page 14

    The Company's Command, Control,Communication, Computer, Intelligence, Surveillance and Recognizance (C4ISR)Division is primarily based in San Diego, California.  This group is providing top-level C4I system engineeringservices; system architecture design; advanced concept development; test andevaluation; effects-based operation planning, execution and assessment; programmanagement and business development support; organizational management analysis;and information technology and information operations (IO) support.  The customer base includes SPAWAR SystemsCenter San Diego and U.S. Navy Commander in Chief, Pacific.  The C4I personnel work closely with Officeof Naval Research, Defense Advanced Research Programs Agency, AssistantSecretary of the Navy for Research, Development and Acquisition, Chief of NavalOperations, Naval Warfare Development Command, Joint Forces Command, and otherservices and Joint Agencies.

    The Company is asubcontractor to Science Applications International Corporation (SAIC) on itsSPAWAR Systems Engineering & Integration contract.  This program accounted for about 13% of theCompany's revenue so far infiscal year 2003. This work is performed by the Company's C4ISR Division.

    The Company has a primecontract with SPAWAR Systems Center's Joint and National Systems Division.  The Company has two subcontractors on thiscontract, BAE and TRW.  Significantefforts include providing system engineering and architecture development forthe Joint Strike Fighter, Unmanned Aerial Vehicle, Surveillance and PrecisionEngagement Programs.  This program accountedfor about 4% of the Company's revenue so far in fiscal year 2003. This work is performedby the Company's C4ISR Division.

    At the beginning of thesecond quarter, the Company consolidated its Testmasters and Shadow Divisionsinto the C4ISR Division.

    The Company is asubcontractor on the Naval Sea Systems Command's Professional Support Servicescontract.  The Company received a subcontracteffective January 1, 2002.  Thiscontract has a base year and four option years.  This program accounted for about 4% of theCompany's revenue so far infiscal year 2003.  Most of the work forthis contract is being performed out of the Company's Systems Management andEngineering Division.

    In the first quarter ofFY 2003, the Company consolidated its training capabilities and established theSYS Training Division and opened an office in Carlsbad, California.  The Training Division brings together someof the Company's existing trainingcapabilities with a new group that will be offering a wide range ofinstructor-led training courses for Sun UNIX, Java Programming, MicrosoftWindows and Desktop Publishing Applications. As a Microsoft Certified Partner, the Company now offers a full line ofMicrosoft classes, including Microsoft Applications, NT and Windows 2000.

    The Company hasestablished a Walk-Up Systems Division. This Division provides automated ticketing kiosks and on-site digitaladvertising systems. It received its first contract on January 30, 2003 forabout $94,000(Canadian). 

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Results of Operations

    The Company's revenue for thisquarter is about 28% more than in the same quarter in FY 2002.  Year to date, theCompany's revenue is about 55%more than in the same period of FY 2002. The primary reasons for the increase in revenue are the Company's new contracts andadditional tasking on the Company's GSA, UNREP and MPAA contracts.

    Total contract andgeneral and administrative expenses were $18,379,000 for the first threequarters of FY 2003 and $11,129,000 for FY 2002; this calculation excludes thelegal settlement costs for FY 2003.  TheCompany has lost about $465,000 in its new Training Division and $113,000 inits new Walk-Up Systems Division in the first three quarters of FY 2003.  Through the first three quarters of FY 2003,the Company has incurred internal acquisition costs associated with the AP Labsacquisition of $316,000 and external costs of $141,000; all of these costs havebeen expensed.  In addition, the Companyhas taken a $220,000 reserve against its contract receivables and written downgoodwill and a note receivable that were associated with the acquisition ofShadow Research International, a total of $106,000.  The Company has also experienced large litigation costs in thefirst three quarters of FY 2003 due to two separate legal proceedings.  In January of 2003, the Company settled thelawsuit filed against it by C-Cubed Corp.; the Company charged $750,000 tooperations as part of the settlement. The Company's litigation against theformer Chairman and CEO of Systems Integration & Research is ongoing.  Interest expense is higher due to the debtassociated with the private placement completed in FY 2002 and increased use ofthe Company's line of credit withComerica Bank-California.

    Income (loss) fromoperations is ($1,191,000) and $539,000 in the first three quarters in FY 2003and 2002, respectively.  Net income(loss) is ($847,000) for the first three quarters in FY 2003 as compared to$269,000 for the prior period.  Thenegotiated contract backlog was approximately $12,012,000 at the end of thethird quarter of FY 2003 compared to $13,207,000 for the same quarter in FY 2002.

Liquidity and CapitalResources

    The Company had contractreceivables (net) of $4,860,000 at the end of the third quarter of FY2003.  For the same quarter in FY 2002,the contract receivables (net) were $4,751,000.  The reason for the increase in contract receivables is due to theCompany's increased revenue.

    The Company had accountspayable of $985,000 at the end of the third quarter of FY 2003.  For the same quarter in FY 2002 the accountspayable were $463,000.  Because of theincrease in revenue, the Company has hired new employees, requiring new officeand computer equipment.  In addition,the Company engaged new subcontractors, some of which had not been paid atMarch 29, 2003.

    The Company's primary source ofliquidity is its $1,500,000 revolving line of credit facility under a loan agreementwith Comerica Bank-California that expires on December 28, 2003.  The outstanding balance on theCompany's revolving line ofcredit was $138,000 at the end of the third quarter of FY 2003.  At the end of the same period in FY 2002,the line of credit balance was zero. The loan is collateralized by all of theCompany's assets includingcontract receivables.  ComericaBank-California advances funds to the Company of up to 80% of the Company's billed contractreceivables which are less than 90 days old. Comerica Bank-California charges an interest rate of 0.750% overprime.  Comerica Bank-Californiarequires the Company to maintain certain covenants; at this time the Company isnot in compliance with all of those covenants. The Company is seeking a waiver from Comerica Bank-California.

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    Management believes thatthe Company will have sufficient cash flow from operations and funds availableunder the revolving credit agreement with Comerica Bank-California to financeits current operating and capital requirements through at least the currentfiscal year.  This assumes that ComericaBank-California will grant the Company a waiver from the covenants discussedabove.  Long-term liquidity depends onthe Company's ability to managecash, raise cash and maintain profitability.

    Several key factorsindicating the Company's financial conditioninclude:

   Current ratio   Debt to net worth   Net worth   Net working capital   Debt to total assets   Book value per common   share

March 29, 20032.10   1.32   $3,135,000   $3,217,000   57%   $0.57

June 30, 20023.17   1.02   $3,100,000   $3,599,000   51%   $0.63

    Certain factors that mayeffect the Company's financial performanceare beyond the Company's control. The currentratio is derived by dividing total current assets by total current liabilities.  Debt to net worth is calculated by dividingtotal liabilities (total current liabilities plus other liabilities) by networth.  Net worth is total stockholders' equity.  Net working capital is total current assetsless total current liabilities.  Debt tototal assets is total liabilities divided by total assets.  Book value per common share isstockholders' equity related tocommon shares divided by the number of common shares outstanding at the end ofthe period.

Item 2a.     Factors Which May Affect Future Results

    Information contained inthis Form 10-QSB should be studied carefully by any potential investor whileconsidering the following risk factors to the Company.

    1.   Lack of Business Diversification Themajority of the Company's business at the presenttime is with the U.S. Navy.  The Companyhas successfully grown and diversified its U.S. Navy business to severalcontracts and subcontracts.  Even withthis growth and diversification, budget changes in Congress or the DefenseDepartment could seriously affect the Company.

    2.   Dependence on Key Personnel  The Company has a few key management,project and technical personnel that are intimately involved in their functionsand have day to day relationships with critical customers.  The Company is not able to afford extrastandby staff. As a result, at its current size, the loss of any of these keypersonnel could have a material and adverse affect on the Company.

    3.   Competition  The Company has many competitors who vie forthe same customers as the Company.  Theyare competent, experienced and continuously working to take work projects awayfrom the Company.  Many of thecompetitors have substantially greater resources than the Company.

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    4.   Limited Assets of the Company  The Company has very limited assets uponwhich to rely for adjusting to business variations and for growing newbusinesses.  While the Company is likelyto look for new funding to assist in the acquisition of other businesses, it isuncertain whether such funds will be available.  While the Company's management believes that its financial policies have beenprudent, the Company's substantial relianceon a bank loan with Comerica Bank, for which the Company is currently not incompliance with the Bank's loan covenants, and other short-term accruals imposepotential limitations on the Company. If the Company is to grow and expand its operations, the Company willneed to raise significant amounts of additional capital.  There can be no assurance that the Companywill be successful in raising a sufficient amount of additional capital, or ifit is successful, that the Company will be able to raise capital on reasonableterms in light of the Company's current circumstances. In the event that the Company raises additional capital, the Company's existing stockholdersmay incur substantial and immediate dilution.

     5.   Limited Market for Common Stock.  TheCompany's stock is traded (OTC) on the ElectronicBulletin Board.  Trading for the stockis sporadic and at present there is a limited market for the Company's Common Stock.  There can be no assurance that a more liquidmarket will in fact develop.  Even ifsuch market does develop, it may not be sustained.

    6.   Possible Rule 144 Stock Sales.  As of March 29, 2003, a total of 2,397,640shares of the Company's outstanding CommonStock are "restricted securities" and may be sold onlypursuant to a registration statement or in compliance with Rule 144 adoptedunder the Securities Act of 1933 or other applicable exemptions fromregistration.  Rule 144 provides that aperson holding restricted securities for a period of one year may thereaftersell, in brokerage transactions, an amount not exceeding in any three-monthperiod the greater of either (i) 1% of the Company's outstanding CommonStock, or (ii) the average weekly trading volume during a period of fourcalendar weeks immediately preceding any sale. Persons who are not affiliated with the Company and who have held theirrestricted securities for at least two years are not subject to the volume limitation.  Possible or actual sales of theCompany's Common Stock bypresent shareholders under Rule 144 may have a depressive effect on the priceof the Company's Common Stock in anymarket which may develop.

    7.   Risks of Low Priced Stocks.  Trading in theCompany's stock is limited.  Consequently, a shareholder may find it moredifficult to dispose of, or to obtain, accurate quotations as to the price of,the Company's securities.  In the absence of a security being quoted onNASDAQ, AMEX or the NYSE, trading in the Common Stock is covered by Rule 3a51-1promulgated under the Securities Exchange Act of 1934 for non-NASDAQ andnon-exchange listed securities.    Under such rules,broker/dealers who recommend such securities to persons other than establishedcustomers and accredited investors (generally institutions with assets inexcess of $5,000,000 or individuals with net worth in excess of $1,000,000 oran annual income exceeding $200,000 or $300,000 jointly with their spouse) mustmake a special written suitability determination for the purchaser and receivethe purchaser's written agreement to atransaction prior to sale.  Securitiesare also exempt from this rule if the market price is at least $5.00 per share,or, for warrants, if the warrants have an exercise price of at least $5.00 pershare.  The Securities Enforcement andPenny Stock Reform Act of 1990 requires additional disclosure to the market forpenny stocks and for trades in any penny stock defined as a penny stock.    The Commission hasadopted regulations under such Act which define a penny stock to be any NASDAQor non-NASDAQ equity security that has a market price or exercise price of lessthan $5.00 per share.

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    In addition, unlessexempt, the rules require the delivery, prior to any transaction involving apenny stock, of a disclosure schedule prepared by the Commission explainingimportant concepts involving a penny stock market, the nature of such market,terms used in such market, the broker/dealer's duties to the customer, a toll-free telephonenumber for inquiries about the broker/dealer's disciplinary history, and thecustomer's rights and remedies incase of fraud or abuse in the sale.    Disclosure also must bemade about commissions payable to both the broker/dealer and the registeredrepresentative, current quotations for the securities and, if the broker/dealeris the sole market maker, the broker/dealer must disclose this fact and itscontrol over the market.    Monthly statements mustbe sent disclosing recent price information for the penny stock held in theaccount and information on the limited market in penny stocks.  While many NASDAQ stocks are covered by theproposed definition of a penny stock, transactions in NASDAQ stocks are exemptfrom all but the sole market-maker provision for (i) issuers with $2,000,000 intangible assets ($5,000,000 if the issuer has not been in continuous operationfor three years), (ii) transactions in which the customer is an institutionalaccredited investor and (iii) transactions that are not recommended by thebroker/dealer.  In addition,transactions in a NASDAQ security directly with the NASDAQ market maker forsuch securities, are subject only to the sole market-maker disclosure, and thedisclosure with regard to commissions to be paid to the broker/dealer and theregistered representatives.

    8.   Control by Officers and Directors.  As of April 15, 2003, officers and directorsof the Company own 32.5% or 2,008,867 shares of the Company's common stock includingany stock options exercisable within 60 days of March 29, 2003 and therebycontrol the Company's affairs.

    9.   Acquisitions.  The Company has announced a growth strategy,which includes growth from within and through acquisitions.  This strategy could continue to impactearnings negatively, and has certain inherent risks.  Some of these risks include acquired companies that do not meettheir projected revenues and earnings, debt and interest associated with theacquired companies, and possible dilution of existing shareholders.

    10. Indirect Rates.  The Company's indirect billing rates are approved atleast annually by the Defense Contract Audit Agency (DCAA).  These rates can differ from theCompany's actual indirectrates.  The Company budgets to have itsactual indirect rates as close as possible to its DCAA approved indirect ratesat fiscal year end.  If the actualindirect rates at year-end are materially different from the DCAA approvedindirect rates, the Company would have to recognize that difference at year-end,which would affect the Company's operations.

Item 3.      Controls andProcedures

    Within 90 days prior to the date of this quarterlyreport on Form 10-QSB for the third quarter ended March 29, 2003, the Companycarried out an evaluation, under the supervision and with the participation ofthe Company's management, including the Company's Chief Executive Officer andPresident, our principal executive officer and the Company's Chief FinancialOfficer, our principal financial officer, of the effectiveness of the designand operation of the Company's disclosure controls and procedures pursuant toRule 13a-14 of the Securities Exchange Act of 1934.  Based upon that evaluation, these principal executive officersand principal financial officer concluded that the Company's disclosurecontrols and procedures are effective in timely alerting them to materialinformation relating to the Company, including its consolidated subsidiaries,required to be included in the Company's periodic SEC filings.  There have been no significant changes ininternal controls or in other factors that could significantly affect internalcontrols subsequent to the date of our most recent evaluation.

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PART II - OTHER INFORMATION

Item 1.      Legal Proceedings

    As previously reported,the Company and four employees were sued in Virginia by Systems Integration& Research, Inc. ("SIR") in February 2002, which claimed that theCompany and four employees had conspired to divert a contract that SIR wasperforming for the U.S. Navy. The Company had sued SIR, its former Chairman andCEO and C-Cubed, Corp., its parent, in California alleging damages suffered bythe Company as a result of a failed acquisition attempt by the Company of SIR.In January of 2003, all of SIR's claims against the Company and the fouremployees and all of the Company's claims against SIR and C-Cubed, Corp. weredismissed. However, the Company is continuing to pursue its case against theformer Chairman and CEO of SIR.

    In connection with the dismissal of the lawsuit, on January 9,2003, the Company signed a license agreement with C-Cubed Corp.("C-Cubed") whereby the Companyreceived a five year exclusive license to manufacture and sell C-Cubed's "ViewCASE".  ViewCASE is a portable, briefcase-sizedvideoconferencing system.  The Companyagreed to pay C-Cubed $150,000 in cash and 261,552 shares of the Company's common stock with afair value of approximately $600,000. In addition, the Company incurred approximately $291,000 in legalexpenses for the nine months ended March 29, 2003.  The Company anticipates recovering $100,000 of these legal feesthrough insurance.  At December 28,2002, the Company charged $750,000 of litigation settlement costs tooperations.

    On March 19, 2003, theCompany was served notice that it was named in a lawsuit filed in the SuperiorCourt of California, County of Orange, on March 10, 2003.  The lawsuit was brought by associates offormer Company Chairman and Chief Executive Officer, Robert D. Mowry who had arelationship with Mowry through Big Canyon Investments, Inc. and UniPrise,Inc.  The Plaintiffs are George M.Colin, William Czapar, Dan Birdsall and Brian Patterson.  In addition to the Company, the Defendantsare Robert Mowry, an individual; William Zures, an individual; UniPrise, Inc.,a California corporation; Acrylis, Inc., a Delaware corporation; Big CanyonInvestments, Inc., a California corporation; Caldera International, Inc., aUtah corporation and several Does.

    The lawsuit lists fourcauses of action, but the Company is named only in the fourth.  The fourth cause of action is for breach ofinstallment factoring agreements.  TheCompany believes that the factoring agreements were between the Plaintiffs andUniPrise.  While the Plaintiffs allegethat the Company was represented by an agent (Mowry) in these factoringagreements, the Company has received a Declaration from Mowry stating, amongother things, "The Factoring Agreements were made by and betweenPlaintiffs and UniPrise.  SYS was not aparty to them, had no knowledge of them and did not benefit from them".

    The Plaintiffs claim tohave suffered losses and seek damages of the principal amounts of $980,000,plus agreed interest, administrative fees and other consideration.  The Company has hired counsel and willvigorously defend the lawsuit.  Whilethe Company believes it has no liability in this matter, there can be noassurance that the Plaintiffs will not be successful in asserting that theCompany is liable to them.  The Companyis not able to predict the outcome of this litigation and there can be noassurance that the Company will not incur substantial and protracted litigationcosts.

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Item 2.      Changes in Securities

    On September 13, 2002,the Company issued 54,443 shares of common stock to the Company's 401(k)/Employee StockOwnership Plan.  These shares, which hada fair value of $73,000, were part of the Company's contribution on behalf of the employeesfor 2002.

    On January 9, 2003, theCompany settled its lawsuit with C-Cubed Corporation ("C-Cubed") whereby the Companyreceived a five year exclusive license to manufacture and sell C-Cubed's "ViewCASE".  ViewCASE is a portable, briefcase-sizedvideoconferencing system.  The Companypaid C-Cubed $150,000 cash and 261,552 shares of the Company's common stock with afair value of approximately $600,000.

Item 3.      Defaults Upon SeniorSecurities

    The Company has a lineof credit and working capital loan with Comerica Bank-California that hadbalances on March 29, 2003 of $138,000 and $325,000, respectively. The Bankrequires the Company to maintain certain covenants; at this time the Company isnot in compliance with all of those covenants. The Company is current with all payments in regards to thesesecurities.  The Company is seeking awaiver from the Bank.

Item 4.      Submission of Mattersto a Vote of Securities Holders

    On April 14, 2003, theCompany held its 2002 Annual Meeting of Shareholders.  There were 5,333,965 shares eligible as of the record date and4,005,381 shares were represented either in person or by proxy at the meeting.  The following matters were voted on at themeeting:

    (a.)    Proposal to elect the Directors pursuantto management's nominations.  This proposal was approved with 4,004,081shares voting in favor, 1,300 shares voting against.

    (b.)    Proposal to approve the appointment of J.H. Cohn LLP as the independent public accountants for the corporation for its2003 fiscal year.  This proposal wasapproved with 4,003,309 shares voting in favor, 1,000 shares voting against,and 1,072 shares abstaining.

    (c.)    Proposal to approve the Company's 2003 Stock OptionPlan.  This proposal was approved with3,379,489 shares voting in favor, 615,154 shares voting against, and 10,738shares abstaining.

    (d.)    Proposal to approve the Company's 2003 Employee StockPurchase Plan.  This proposal wasapproved with 3,671,537 shares voting in favor, 326,418 shares voting against,and 7,426 shares abstaining.

    (e.)     Proposal to approve the Amendment to theCompany's Articles ofIncorporation.  This proposal wasapproved with 3,353,786 shares voting in favor, 619,605 shares voting against,and 31,990 shares abstaining.

Item 5.      Other Information

    The Company moved itsSan Diego office effective April 7, 2003. The new address is 5050 Murphy Canyon Road, Suite 200, San Diego,California 92123.  The telephone numbershave remain unchanged.

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    At the Annual Board ofDirectors meeting held on April 14, 2003, the following were elected asChairman and Officers of the Company:

        David A. Derby                    Chairman        John M. Burns                     Vice-Chairman        Clifton L. Cooke, Jr.             Presidentand Chief Executive Officer        Michael W. Fink                   Secretaryand Chief Financial Officer        Robert A. Babbush               AssistantSecretary

    At the Annual Board ofDirectors meeting held on April 14, 2003, the following were elected asChairman and Members of the Board of Directors' Committees:

        Audit Committee:                 ExecutiveCommittee:        John M. Burns, Chairman      David A. Derby, Chairman        David A. Derby                     JohnM. Burns        Thomas A. Page                    Gen.Al Gray        Kameron W. Maxwell

Item 6.      Exhibits and Reportson Form 8-K

    On December 26, 2002,the Company filed an 8-K announcing it had entered into a Letter of Intent withSierra Genoa, Inc. and Mr. John M. Goode, the holders of approximately 80% ofthe outstanding shares of AP Labs, Inc. to acquire all of their shares of APLabs.

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SIGNATURES

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

                                                                                                               SYS                                                                                                           (Registrant)

Date:           May 19, 2003                                                               /s/ Clifton L.Cooke, Jr.                                                                                                         Clifton L. Cooke, Jr.                                                                                                        Chief Executive Officer         

 

Date:           May 19, 2003                                                             /s/Michael W. Fink                                                                                                             Michael W. Fink                                                                                                     Chief Financial Officer

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CERTIFICATION OF CHIEF EXECUTIVE OFFICER

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

1.            I have  reviewed this quarterly report on Form 10-QSB of SYS;

2.            Based  on my knowledge, this quarterly 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 quarterly  report;

3.            Based  on my knowledge, the financial statements, and other financial information  included in this quarterly 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 quarterly report.

4.            The  registrant's other certifying officers and I are responsible for establishing  and maintaining disclosure controls and procedures (as defined in Exchange Act  Rules 13a-14 and 15d-14) for the registrant and have:

             a)            designed  such disclosure controls and procedures 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 quarterly report is being prepared;

             b)            evaluated  the effectiveness of the registrant's disclosure controls and procedures as of  a date within 90 days prior to the filing date of this quarterly report (the  "Evaluation Date"); and

             c)            presented  in this quarterly report our conclusions about the effectiveness of the  disclosure controls and procedures based on our evaluation as of the  Evaluation Date;

5.            The  registrant's other certifying officers and I have disclosed, based on our most  recent evaluation, 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 in the design or operation of internal controls which could  adversely affect the registrant's ability to record, process, summarize and  report financial data and have identified for the registrant's auditors any  material weaknesses in internal controls; and

             b)         any fraud, whether or not  material, that involves management or other employees who have a significant  role in the registrant's internal controls; and

6.            The  registrant's other certifying officers and I have indicated in this quarterly  report whether or not there were significant changes in internal controls or  in other factors that could significantly affect internal controls subsequent  to the date of our most recent evaluation, including any corrective actions  with regard to significant deficiencies and material weaknesses.

Dated:   May 19, 2003                                             By:            /s/  Clifton L. Cooke, Jr.                                                                                                                       Clifton L. Cooke, Jr.                                                                                                   Chief Executive Officer

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CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Michael W. Fink, certify that:

1.            I have  reviewed this quarterly report on Form 10-QSB of SYS;

2.            Based  on my knowledge, this quarterly 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 quarterly  report;

3.            Based  on my knowledge, the financial statements, and other financial information  included in this quarterly 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 quarterly report.

4.            The  registrant's other certifying officers and I are responsible for establishing  and maintaining disclosure controls and procedures (as defined in Exchange Act  Rules 13a-14 and 15d-14) for the registrant and we have:

             a)            designed  such disclosure controls and procedures 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 quarterly report is being prepared;

             b)            evaluated  the effectiveness of the registrant's disclosure controls and procedures as of  a date within 90 days prior to the filing date of this quarterly report (the  "Evaluation Date"); and

             c)            presented  in this quarterly report our conclusions about the effectiveness of the  disclosure controls and procedures based on our evaluation as of the  Evaluation Date;

5.            The  registrant's other certifying officers and I have disclosed, based on our most  recent evaluation, 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 in the design or operation of internal controls which could  adversely affect the registrant's ability to record, process, summarize and  report financial data and have identified for the registrant's auditors any  material weaknesses in internal controls; and

             b)         any fraud, whether or not  material, that involves management or other employees who have a significant  role in the registrant's internal controls; and

6.            The  registrant's other certifying officers and I have indicated in this quarterly  report whether or not there were significant changes in internal controls or  in other factors that could significantly affect internal controls subsequent  to the date of our most recent evaluation, including any corrective actions  with regard to significant deficiencies and material weaknesses.

Dated: May 19, 2003                                               By:            /s/  Michael W. Fink                                                                                                     Michael W. Fink                                                                                                   Chief Financial Officer

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