#### **UNITEDSTATESSECURITIESAND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549**

**FORM 10-QSB**
| **(Mark One)**      |
|---------------------|
| **[X]**             | **Quarterly Report Under  Section 13 or 15(d) of The Securities Exchange Act of 1934** |
|                |   |
|                     |  |
| ** **          | **For the quarterly period ended  ** | **December 24, 2004** |
|                |   |   |
|                     |  |
| **[   ]** | **Transaction Report Under  Section 13 or 15(d) of the Securities Exchange Act** |
|                |   |
|                     |  |
| ** **          | **For the transition period from** | ** ** | **to** | ** ** |
|                |   |   |   |   |
|                     |  |
| ** **          | **Commission File Number  ** | **000-04169** |
|                     |  |  |  |  |  |  |  |

**SYS**

(Exact Name of SmallBusiness Issuer 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**          |
| (Address of  Principal Executive Offices)                                           |
|                                                                                |
|                                                                                     |            |                                       |
| **(858) 715-5500**                                                                  |
| (Issuer's Telephone  Number, Including Area Code)                                   |
|                                                                                |
|                                                                                     |            |                                       |
|                                                                                     |            |                                       |
| (Former Name,  Former Address and Former Fiscal Year, if Changed Since Last Report) |

Check whether the issuer: (1) filedall reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act during the past 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.

Yes [X]    No [   ]

State the number of sharesoutstanding of each of the issuer's classes of common equity, as of the latestpracticable date: 8,284,262 shares of common stock, without par value, as ofJanuary 31, 2005.

Transitional Small BusinessDisclosure Format (check one):

Yes [   ]    No [X]

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** TABLE OF CONTENTS**
| **PART I -  FINANCIAL INFORMATION**                                  |                                                                                                            |
|----------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------|
|                                                                      |                                                                                                            |
| Item 1. Financial  Statements                                        |
|                                                                      | Consolidated Balance Sheets December  24, 2004 and June 30, 2004                                      |
|                                                                      | Consolidated  Statements of Operations Three and Six Months Ended December 24, 2004 and December  26, 2003 |
|                                                                      | Consolidated  Statements of Cash Flows Six Months Ended December 24, 2004 and December 26,  2003           |
|                                                                      | Notes to  Consolidated Financial Statements                                                                |
|                                                                      |                                                                                                            |
| Item  2. Management's Discussion and Analysis or Plan of Operation   |
|                                                                      |                                                                                                            |
|                                                                      | Description of Business                                                                                    |
|                                                                      | Results of Operations                                                                                      |
|                                                                      | Liquidity and Capital  Resources                                                                           |
|                                                                      | Off-Balance Sheet Arrangements                                                                             |
|                                                                      | Critical  Accounting Policies and Estimates                                                                |
|                                                                      |                                                                                                            |
| Item 3. Controls and Procedures                                      |
|                                                                      |                                                                                                            |
|                                                                 |
| **PART II - OTHER INFORMATION**                                      |
|                                                                      |                                                                                                            |
| Item  1. Legal Proceedings                                           |
|                                                                      |                                                                                                            |
| Item 2. Unregistered  Sales of Equity Securities and Use of Proceeds |
|                                                                      |                                                                                                            |
| Item 3.  Defaults Upon Senior Securities                             |
|                                                                      |                                                                                                            |
| Item  4. Submission of Matters to a Vote of Security Holders         |
|                                                                      |                                                                                                            |
| Item  5. Other Information                                           |
|                                                                      |                                                                                                            |
| Item 6.  Exhibits and Reports on Form 8-K                            |
|                                                                 |
|                                                                      |                                                                                                            |
| **SIGNATURES**                                                       |                                                                                                            |
|                                                                      |                                                                                                            |  |  |

----

PART IFINANCIAL INFORMATION

Item 1.        FinancialStatements

SYS AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(Unaudited)
| ** **                                                                             | ** **                                                                                           |                    |            |                     | ** ** |
|----------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------|--------------------|------------|---------------------|------------|
| ** **                                                                             | ** **                                                                                           | December 24,  2004 |            | June 30,  2004 | ** ** |
| ASSETS                                                                                 |                                                                                                      |                    |            |                     |            |
| Current  assets:                                                                       |                                                                                                      |                    | ** ** |                     |            |  |  |
|                                                                                        | Cash                                                                                                 |                    | $          | 49,000              |            | $ | 2,159,000 |  |
|                                                                                        | Accounts receivables, net                                                                            |                    | 11,867,000 |                     | 8,118,000  |  |
|                                                                                        | Prepaid expenses                                                                                     |                    | 258,000    |                     | 442,000    |  |
|                                                                                        | Income tax refund receivable                                                                         |                    | 58,000     |                     | -          |  |
|                                                                                        | Inventory                                                                                            |                    | 160,000    |                     | -          |  |
|                                                                                        | Total current assets                                                                                 |                    | 12,392,000 |                     | 10,719,000 |  |
|                                                                                   |                                                                                                 |               |       |                |       |   |
|                                                                                        |                                                                                                      |                    |            |                     |            |
| Furniture  and equipment, less accumulated depreciation and amortization of $1,276,000 |                                                                                                      |                    |            |                     |            |
|                                                                                        | and  $1,145,000                                                                                      |                    | 985,000    |                     | 749,000    |  |
| Capitalized  software, net of accumulated amortization of $47,000 and $37,000          |                                                                                                      | 55,000             |            | 65,000              |            |
| Intangible  assets, net of accumulated amortization of $131,000 and $46,000            |                                                                                                      | 1,050,000          |            | 595,000             |            |
| Goodwill                                                                               |                                                                                                      | 5,418,000          |            | 5,452,000           |            |
| Other  assets                                                                          |                                                                                                      | 265,000            |            | 137,000             |            |
|                                                                                        | Totals                                                                                               |                    | $          | 20,165,000          |            | $ | 17,717,000 |  |
|                                                                                        |                                                                                                      |                    |            |                     |            |
|                                                                                   |                                                                                                 |               |       |                |       |
| LIABILITIES  AND STOCKHOLDERS' EQUITY                                                  |                                                                                                      |                    |            |                     |            |
|                                                                                        |                                                                                                      |                    |            |                     |            |
| Current  liabilities:                                                                  |                                                                                                      |                    |            |                     |            |
|                                                                                        | Borrowings under bank line of credit                                                                 |                    | $          | 829,000             |            | $ | - |  |
|                                                                                        | Accounts payable                                                                                     |                    | 2,487,000  |                     | 1,489,000  |  |
|                                                                                        | Accrued payroll and related taxes                                                                    |                    | 1,932,000  |                     | 2,470,000  |  |
|                                                                                        | Income taxes payable                                                                                 |                    | 242,000    |                     | -          |  |
|                                                                                        | Other accrued liabilities                                                                            |                    | 1,208,000  |                     | 837,000    |  |
|                                                                                        | Deferred revenue                                                                                     |                    | 52,000     |                     | -          |  |
|                                                                                        | Current portion of deferred tax liabilities                                                          |                    | 546,000    |                     | 546,000    |  |
|                                                                                        | Current portion of notes payable and other debt                                                      |                    | 240,000    |                     | 176,000    |  |
|                                                                                        | Current portion of notes payable to related parties                                                  |                    | 350,000    |                     | 12,000     |  |
|                                                                                        | Total current liabilities                                                                            |                    | 7,886,000  |                     | 5,530,000  |  |
|                                                                                        |                                                                                                      |                    |            |                     |            |
|                                                                                   |                                                                                                 |               |       |                |       |
| Convertible  notes payable, net of current portion                                     |                                                                                                      | 1,660,000          |            | 1,840,000           |            |
| Convertible  notes payable to related parties, net of current portion                  |                                                                                                      | 1,374,000          |            | 1,677,000           |            |
| Capital  lease obligations, net of current portion                                     |                                                                                                      | -                  |            | 33,000              |            |
| Deferred  tax liabilities                                                              |                                                                                                      | 289,000            |            | 289,000             |            |
|                                                                                        | Total liabilities                                                                                    |                    | 11,209,000 |                     | 9,369,000  |  |
| Stockholders' equity:                                                                  |                                                                                                      |                    |            |                     |            |
|                                                                                        | Common stock, no par value; 48,000,000 shares authorized;  8,161,566 and 8,121,921    |                    |            |                     |            |  |
|                                                                                        | shares issued and outstanding                                                                        |                    | 7,191,000  |                     | 7,143,000  |  |
|                                                                                        | Retained earnings                                                                                    |                    | 1,765,000  |                     | 1,205,000  |  |
|                                                                                        | Total stockholders' equity                                                                           |                    | 8,956,000  |                     | 8,348,000  |  |
|                                                                                        |                                                                                                      | $                  | 20,165,000 |                     | $          | 17,717,000 |  |
|                                                                                        |                                                                                                      |                    |            |                     |            |  |  |  |  |  |  |  |  |  |

See accompanying Notes to Consolidated Financial Statements.

----

SYS AND SUBSIDIARIESCONSOLIDATEDSTATEMENTS OF OPERATIONS(Unaudited)
| ** **                                                       | ** **                          | Three months ended |                  | Six months ended   | ** ** |
|------------------------------------------------------------------|-------------------------------------|--------------------|------------------|--------------------|------------|
| ** **                                                       | ** **                          | December 24,  2004 |                  | December 26,  2003 |            | December 24,  2004 |  | December 26,  2003 | ** ** |
|                                                                  |                                     |                    |                  |                    |            |  |  |  |  |
| Revenues                                                         |                                     | $                  | 10,462,000  |                    | $          | 7,658,000 |  | $ | 21,569,000 |  | $ | 15,210,000 |  |
| Operating costs  and expenses:                                   |                                     |                    |                  |                    |            |  |  |  |  |
|                                                                  | Contract costs                      |                    | 8,599,000        |                    | 6,152,000  |  | 18,105,000 |  | 12,512,000 |  |
|                                                                  | General and administrative expenses |                    | 1,297,000        |                    | 1,088,000  |  | 2,284,000 |  | 2,023,000 |  |
|                                                                  | Total operating costs and expenses  |                    | 9,896,000        |                    | 7,240,000  |  | 20,389,000 |  | 14,535,000 |  |
| Income from operations                                           |                                     | 566,000            |                  | 418,000            |            | 1,180,000 |  | 675,000 |  |
|                                                                  |                                     |                    |                  |                    |            |  |  |  |  |
|                                                             |                                |               |             |               |       |   |   |   |   |
| Other (income) expense:                                          |                                     |                    |                  |                    |            |  |  |  |  |
|                                                                  | Interest income                     |                    | -                |                    | (17,000    | ) | - |  | (31,000 | ) |
|                                                                  | Interest expense                    |                    | 122,000          |                    | 28,000     |  | 236,000 |  | 66,000 |  |
|                                                                  | Totals                              |                    | 122,000          |                    | 11,000     |  | 236,000 |  | 35,000 |  |
| Income  before income taxes                                      |                                     | 444,000            |                  | 407,000            |            | 944,000 |  | 640,000 |  |
| Income tax  provision                                            |                                     | 188,000            |                  | 170,000            |            | 384,000 |  | 270,000 |  |
| Net income                                                       |                                     | $                  | 256,000          |                    | $          | 237,000 |  | $ | 560,000 |  | $ | 370,000 |  |
| Preference  dividend requirements                                |                                     | -                  |                  | 1,000              |            | - |  | 4,000 |  |
| Net income  applicable to common stock                           |                                     | $                  | 256,000          |                    | $          | 236,000 |  | $ | 560,000 |  | $ | 366,000 |  |
| Basic net  income per common share                               |                                     | $                  | 0.03        |                    | $          | 0.04 |  | $ | 0.07  |  | $ | 0.06 |  |
| Diluted net  income per common share                             |                                     | $                  | 0.03             |                    | $          | 0.03 |  | $ | 0.06  |  | $ | 0.05 |  |
| Weighted  average shares for basic net income per common share   |                                     |                    | 8,159,177        |                    |            | 6,033,383 |  |  | 8,156,426 |  |  | 5,758,171 |  |
| Weighted  average shares for diluted net income per common share |                                     |                    | 10,884,093       |                    |            | 7,800,687 |  |  | 10,923,211 |  |  | 7,605,482 |  |
|                                                                  |                                     |                    |                  |                    |            |  |  |  |  |  |  |  |  |  |  |

See accompanying Notes to Consolidated Financial Statements.

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SYS AND SUBSIDIARIESCONSOLIDATEDSTATEMENTS OF CASH FLOWS(Unaudited)
| ** **                                                              | ** **                                                                     | Six months ended   | ** ** |
|-------------------------------------------------------------------------|--------------------------------------------------------------------------------|--------------------|------------|
| ** **                                                              | ** **                                                                     | December 24,  2004 |            | December 26,  2003 | ** ** |
| Cash flows from operating activities:                                   |                                                                                |                    |            |  |  |
|                                                                         | Net income                                                                     |                    | $          | 560,000 |  | $ | 370,000 |  |
|                                                                         | Adjustments to reconcile net  income to net cash used in operating activities: |                    |            |  |  |  |
|                                                                         | Depreciation and  amortization                                                 |                    | 226,000    |  | 125,000 |  |
|                                                                         | Deferred revenue                                                               |                    | 17,000     |  | - |  |
|                                                                         | Increase in allowance for  doubtful accounts                                   |                    | -          |  | 30,000 |  |
|                                                                         | Accretion of debt discount                                                     |                    | 23,000     |  | - |  |
|                                                                         | Gain on disposition of  equipment                                              |                    | (8,000     | ) | - |  |
|                                                                         | Changes in operating assets  and liabilities:                                  |                    |            |  |  |  |
|                                                                         | Contract receivables                                                           |                    | (3,709,000 | ) | (1,052,000 | ) |
|                                                                         | Income tax refund receivable                                                   |                    | -          |  | 65,000 |  |
|                                                                         | Other current assets                                                           |                    | 126,000    |  | (27,000 | ) |
|                                                                         | Other assets                                                                   |                    | (56,000    | )  | 71,000 |  |
|                                                                         | Accounts payable                                                               |                    | 998,000    |  | (684,000 | ) |
|                                                                         | Accrued payroll and related  taxes                                             |                    | (581,000   | )  | 445,000 |  |
|                                                                         | Income taxes payable                                                           |                    | 242,000    |  | 267,000 |  |
|                                                                         | Other accrued liabilities                                                      |                    | (70,000    | )  | 236,000 |  |
|                                                                         | Net cash used in operating  activities                                         |                    | (2,232,000 | )  | (154,000) |  |
| Cash flows from investing activities:                                   |                                                                                |                    |            |  |  |
|                                                                         | Additions to furniture and equipment                                           |                    | (319,000   | ) | (52,000 | ) |
|                                                                         | Cash paid for acquisitions                                                     |                    | (351,000   | ) | - |  |
|                                                                         | Net cash used in investing activities                                          |                    | (670,000   | ) | (52,000 | ) |
| Cash flows from financing activities:                                   |                                                                                |                    |            |  |  |
|                                                                         | Net line of credit  borrowings (payments)                                      |                    | 829,000    |  | (36,000 | ) |
|                                                                         | Payments of notes payable  and other borrowings                                |                    | (69,000    | ) | (69,000 | ) |
|                                                                         | Payments of capital lease  obligations                                         |                    | (16,000    | ) | (13,000 | ) |
|                                                                         | Payments of dividends on  preference stock                                     |                    | -          |  | (4,000 | ) |
|                                                                         | Cash paid due to call on  preference stock                                     |                    | -          |  | (60,000 | ) |
|                                                                         | Proceeds from convertible  notes payable                                       |                    | -          |  | 150,000 |  |
|                                                                         | Proceeds from issuance of  common stock                                        |                    | 48,000     |  | 509,000 |  |
|                                                                         | Net cash provided by financing activities                                      |                    | 792,000    |  | 477,000 |  |
| Net increase (decrease) in cash                                         |                                                                                | (2,110,000         | )     | 271,000 |  |
| Cash at beginning of period                                             |                                                                                | 2,159,000          |            | 19,000 |  |
| Cash at end of period                                                   |                                                                                | $                  | 49,000     |  | $ | 290,000 |  |
|                                                                         |                                                                                |                    |            |  |  |
|                                                                    |                                                                           |               |       |   |   |
| Supplemental disclosure of cash flow data:                              |                                                                                |                    |            |  |  |
|                                                                         | Interest paid                                                                  |                    | $          | 199,000 |  | $ | 38,000 |  |
|                                                                         | Income taxes paid                                                              |                    | $          | 141,000 |  | $ | - |  |
| Supplemental disclosure of noncash investing and  financing activities: |                                                                                |                    |            |  |  |
| Common stock issued upon exercise of convertible note                   |                                                                                |                    |            | $ | 225,000 |  |
| Common stock issued upon conversion of preference  stock                |                                                                                |                    |            | $ | 10,000 |  |
| Common stock issued for accrued liability                               |                                                                                |                    |            | $ | 82,000 |  |
| Common stock issued to ESOP as contribution                             |                                                                                |                    |            | $ | 168,000 |  |
|                                                                         |                                                                                |                    |            |  |  |
|                                                                         |                                                                                |                    |            |  |  |  |  |  |  |  |  |  |  |

See accompanying Notes to Consolidated Financial Statements.

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SYS AND SUBSIDIARIESNOTES TO CONSOLIDATEDFINANCIAL STATEMENTSDecember 24, 2004

(1)       General

In the opinionof the management, the unaudited financial information in this report reflectsall adjustments, consisting only of normal recurring accruals, which areconsidered necessary for a fair presentation of the consolidated financialposition of SYS and subsidiaries as of December 24, 2004 and June 30, 2004and the consolidated results of operations and cash flows for the periodsshown.  Certain information and footnote disclosures normally included infinancial statements prepared in conformity with accounting principlesgenerally accepted in the United States of America have been condensed oromitted pursuant to SEC regulations.  It is suggested that these financialstatements be read in conjunction with the audited financial statementsincluded in the Company's Report on Form 10-KSB for the fiscal year endedJune 30, 2004.

The preparationof financial statements in conformity with generally accepted accountingprinciples requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities and disclosure of contingentassets and liabilities at the date of the financial statements and the reportedamounts of revenues and expenses during the reporting period. Actual resultscould differ from those estimates.

The results ofoperations for the six months ended December 24, 2004 are not necessarilyindicative of the results to be expected for the full year ending June 30,2005.

The Company'sfiscal year is from July 1 through June 30.  The Company usesthe 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.

Substantially allof the Company's operations are conducted in the United States.

Certain amountsin the FY 2004 consolidated financial statements have been reclassified toconform to the FY 2005 presentation.

The December 24,2004 consolidated financial statements include the accounts of SYS and itswholly owned subsidiary, Polexis.  The Company purchased the assets and certainliabilities of Xsilogy on December 15, 2004, the results of which are includedfor the period subsequent to that date. All significant intercompany accountsand transactions are eliminated in consolidation.

(2)        Stock-BasedCompensation

As allowed bySFAS No. 123, "Accounting for Stock-Based Compensation," the Companyhas chosen to continue to account for stock-based compensation using theintrinsic value method prescribed in APB Opinion No. 25 and relatedinterpretations. Accordingly, compensation expense for stock options ismeasured as the excess, if any, of the fair market value of the company's stockat the date of the grant over the exercise price of the related option. Accordingly, the Company has issued all stock options at fair market value andtherefore, no compensation expense has been incurred.

Had compensationcosts for the company's stock options been determined based on the fair valuemethod under SFAS No. 123, the company's net income and earnings per sharewould have been as follows for the three and six months ended December 24, 2004and December 26, 2003, respectively:
| ** **                                                                                                       | ** **  | Three months ended |         | Six months ended   |
|------------------------------------------------------------------------------------------------------------------|-------------|--------------------|---------|--------------------|
| ** **                                                                                                       | ** **  | December 24,  2004 |         | December 26,  2003 |  | December 24,  2004 |  | December 26,  2003 |
| Net income  applicable to common stockholders - as reported - basic                                              |             | $                  | 256,000 |                    | $ | 236,000 |  | $ | 560,000 |  | $ | 366,000 |
| Deduct  total stock-based employee compensation expense determined under fair value  based method for all awards |             | 111,000            |         | 85,000             |  | 186,000 |  | 178,000 |
| Net income  applicable to common stock - pro forma - basic                                                       |             | $                  | 145,000 |                    | $ | 151,000 |  | $ | 374,000 |  | $ | 188,000 |
| Net income  applicable to common stockholders - as reported - diluted                                            |             | $                  | 308,000 |                    | $ | 250,000 |  | $ | 668,000 |  | $ | 394,000 |
| Deduct  total stock-based employee compensation expense determined under fair value  based method for all awards |             | 111,000            |         | 85,000             |  | 186,000 |  | 178,000 |
| Net income  applicable to common stockholders - pro forma - diluted                                              |             | $                  | 197,000 |                    | $ | 165,000 |  | $ | 482,000 |  | $ | 220,000 |
| Basic  income per common share:                                                                                  |             |                    |         |                    |  |  |  |  |
|                                                                                                                  | As reported |                    | $       | 0.03               |  | $ | 0.04 |  | $ | 0.07 |  | $ | 0.06 |
|                                                                                                                  | Pro forma   |                    | $       | 0.02               |  | $ | 0.03 |  | $ | 0.05 |  | $ | 0.03 |
| Diluted  income per common share:                                                                                |             |                    |         |                    |  |  |  |  |
|                                                                                                                  | As reported |                    | $       | 0.03               |  | $ | 0.03 |  | $ | 0.06 |  | $ | 0.04 |
|                                                                                                                  | Pro forma   |                    | $       | 0.02               |  | $ | 0.02 |  | $ | 0.04 |  | $ | 0.03 |

(3)        Accounts receivable:

Accounts receivable consist of thefollowing at December 24, 2004 and June 30, 2004:
| ** **                                         | ** ** | **December 24, 2004** | ** ** | **June 30, 2004** | ** ** |
|----------------------------------------------------|------------|-----------------------|------------|-------------------|------------|
| Amounts  billed                                    |            | $                     | 6,587,000  |                   | $          | 4,423,000 |  |
| Amounts  unbilled:                                 |            |                       |            |                   |            |
| Costs and  profits in excess of billings           |            | 4,733,000             |            | 3,188,000         |            |
| Retentions,  due upon completion of contracts      |            | 222,000               |            | 153,000           |            |
| Recoverable  costs subject to closure of contracts |            | 325,000               |            | 354,000           |            |
|                                                    |            |                       |            |                   |            |
|                                               |       |                  |       |              |       |   |   |
| Totals                                             |            | $                     | 11,867,000 |                   | $          | 8,118,000 |  |

At December 24,2004, costs and profits in excess of billings consisted of amounts billedsubsequent to year-end.  The balances comprising receivables pursuant to retainage provisions will be due upon completion of the contracts and audits ofoverhead rates by the customer; based on the Company's experience with similarcontracts in recent years, the balances at December 24, 2004 are expected to becollected in fiscal 2005, 2006 and 2007.

Recoverable costs subject to closure of contracts consistedprimarily of revenues recognized on specific delivery orders as a result ofactual indirect expense rates exceeding the provisionally approved indirectrates. These receivables will be billable upon closure of audits of overheadrates of the specific delivery orders or the contracts.

The Company does not recognize revenues in excess of theallowable funding limitations on any delivery order or contract until contractnegotiations are finalized.

 (4)       NotesPayable

During 2002,the Company issued $1,000,000 of three-year convertible unsecured notes payablein exchange for cash to related and unrelated parties.  The relatedparties are directors, officers and employees of the Company who hold noteswith a face value of $425,000.  The notes bear interest at an annual rateof 10%.  Only one note holder has not exercised his right to extend the noteone year and his $13,000 note matures on January 15, 2005; the remaining notesmature on various dates starting in November 2005. The outstanding balance ofthese notes is $719,000, of which, the holders of $706,000 in notes haveexercised the right to extend one year.  Subsequent to period end, the holderof the $13,000 note discussed above opted to convert his note to common stock.

Each note hasa conversion feature whereby the note holder can convert the unpaid principalbalance at any time at the rate of $1.00 per share into the Company's commonstock.  The Company deferred approximately $105,000 of expenses associatedwith the issuance of these notes payable, which are included in other assetsand are being amortized over the terms of the notes.

During 2004,the Company issued $1,600,000 of three-year convertible notes payable inexchange for cash to related and unrelated parties. The related parties aredirectors, officers and employees of the Company who hold notes with a facevalue of $675,000. The notes bear interest at an annual rate of 10%, mature onDecember 31, 2006 and are unsecured.  Each note has a conversionfeature whereby the note holder can convert at any time the unpaid principalbalance at the rate of $2.20 per share into the Company's common stock. These 10% notes were sold at an aggregate discount of $129,000. Accordingly,the discount is being accreted through interest expense over the term of thenotes.

Also during2004, the Company issued $1,375,000 of three-year convertible notes payable tothe shareholders of Polexis in connection with the acquisition ofPolexis.  Subsequent to the closing of the acquisition, notes valued at$4,000 were converted into common stock and an additional $2,000 in notes wereconverted to cash.  The notes bear interest at an annual rate of 10%, mature onMarch 31, 2007, are unsecured and are subordinated to the Company's bankdebt.  Each note has a conversion feature whereby the note holder canconvert the unpaid principal balance at any time at the rate of $2.32 per shareinto the Company's common stock.  The Company has a mandatory conversionoption commencing six months from the date of issue whereby if the Company'sstock trades above $3.00 per share for a specified period of time, the Companycan force a conversion of one-half of the notes outstanding at the statedconversion price.  Some of the former Polexis shareholders are now Companyemployees and, therefore, related parties. These employees hold notes valued at$577,000. 

Subsequent to December24, 2004, the Company's stock did trade above $3.00 per share for over fiveconsecutive days and the Company has notified the note holders that it isexercising its right to convert half of the notes or approximately $688,000 tocommon stock.  With a conversion price of $2.32 per share, approximately296,000 shares of common stock will be issued.

The Companyhas deferred approximately $56,000 of expenses associated with these notespayable, which are included in other assets and are being amortized over threeyears.

As of December24, 2004, the principal balance of all convertible notes payable to relatedparties amounted to $1,724,000 and the amount owed to unrelated parties was $1,872,000for a total discounted carrying value of $3,596,000.

In the currentliabilities section of the balance sheet, the current portion of notes payableand other debt is comprised of the following:
|                                               | December 24, 2004                                |           | June 30, 2004        |
|-----------------------------------------------|--------------------------------------------------|-----------|----------------------|
| Working capital loan                          | $   28,000                             |           | $   97,000 |
| Current portion of convertible  notes payable | 212,000                                          |           | 44,000               |
| Current portion of capital  lease obligations | -                                                |           | 35,000               |
|                                               | Current portion of notes  payable and other debt | $ 240,000 |                      | $ 176,000 |
|                                               |                                                  |           |                      |  |

(5)        EarningsPer Share

Basic net incomeper common share is calculated by dividing net income applicable to commonstock by the weighted average number of common shares outstanding during theperiod.  The calculation of diluted net income per common share is similarto that of basic net income per common share, except that the denominator isincreased to include the number of additional common shares that would havebeen outstanding if all potentially dilutive common shares, principally thoseissuable upon the conversion of notes payable and the exercise of stock optionsand warrants, were issued during the period.

The followingtable summarizes the calculation of basic and diluted net income per commonshare for each period:
| ** **                                                                                                       | ** **                                        | Three months ended |         | Six months ended   | ** ** |
|------------------------------------------------------------------------------------------------------------------|---------------------------------------------------|--------------------|---------|--------------------|------------|
| ** **                                                                                                       | ** **                                        | December 24,  2004 |         | December 26,  2003 |            | December 24,  2004 |  | December 26,  2003 | ** ** |
| Numerators:                                                                                                      |                                                   |                    |         |                    |            |  |  |  |  |
|                                                                                                                  | Net Income                                        |                    | $       | 256,000            |            | $ | 237,000 |  | $ | 560,000 |  | $ | 370,000 |  |
|                                                                                                                  | Deduct - preference stock dividend requirements   |                    | -       |                    | 1,000      |  | - |  | 4,000 |  |
|                                                                                                                  | Income applicable to common stockholders - basic  |                    | 256,000 |                    | 236,000    |  | 560,000 |  | 366,000 |  |
|                                                                                                                  | Add back - interest expense on convertible notes, |                    |         |                    |            |  |  |  |  |  |
|                                                                                                                  | net of tax effects                                |                    |         | 52,000             |            |  | 14,000 |  |  | 108,000 |  |  | 28,000 |  |
| Net income  applicable to common stockholders - diluted                                                          |                                                   | $                  | 308,000 |                    | $          | 250,000 |  | $ | 668,000 |  | $ | 394,000 |  |
|                                                                                                                  |                                                   |                    |         |                    |            |  |  |  |  |
|                                                                                                             |                                              |               |    |               |       |   |   |   |   |
| Denominators:                                                                                                    |                                                   |                    |         |                    |            |  |  |  |  |
| Weighted  average shares for basic net income per common share                                                   |                                                   | 8,159,177          |         | 6,033,383          |            | 8,156,426 |  | 5,758,171 |  |
| Add  dilutive effect of assumed exercise of stock options and warrants and  application of treasury stock method |                                                   | 688,644            |         | 806,041            |            | 730,513 |  | 867,004 |  |
| Add  dilutive effect of assumed conversion of convertible promissory notes                                       |                                                   | 2,036,272          |         | 961,263            |            | 2,036,272 |  | 980,307 |  |
| Weighted  average shares for diluted net income per common share                                                 |                                                   | 10,884,093         |         | 7,800,687          |            | 10,923,211 |  | 7,605,482 |  |
|                                                                                                                  |                                                   |                    |         |                    |            |  |  |  |  |
|                                                                                                             |                                              |               |    |               |       |   |   |   |   |   |   |   |   |
| Basic net  income per common share                                                                               |                                                   | $                  | 0.03    |                    | $          | 0.04 |  | $ | 0.07 |  | $ | 0.06 |  |
|                                                                                                                  |                                                   |                    |         |                    |            |  |  |  |  |
|                                                                                                             |                                              |               |    |               |       |   |   |   |   |   |   |   |   |
| Diluted  income per common share                                                                                 |                                                   | $                  | 0.03    |                    | $          | 0.03 |  | $ | 0.06 |  | $ | 0.05 |  |
|                                                                                                                  |                                                   |                    |         |                    |            |  |  |  |  |  |  |  |  |  |  |

Excluded fromthe treasury stock calculation in fiscal 2005 are 312,000 shares of commonstock at both the quarter and period ends, as these options were priced abovethe average stock price for the period and therefore would beanti-dilutive.  Excluded from the treasury stock calculation in fiscal 2004are 252,000 and 218,000 shares of common stock at the quarter and period ends, respectively,as these options were priced above the average stock price for the period andtherefore would be anti-dilutive.

(6)        Lineof Credit and Working Capital Loan

At December24, 2004, the Company had borrowings under a revolving line of credit facility("credit facility") provided by Comerica Bank - California of $829,000.The credit facility allows for maximum borrowings of up to $4,000,000("credit limit"), is limited to 80% of qualifying contractreceivables, is collateralized by substantially all of the assets of theCompany, as defined, and bears interest at 0.25% above the prime rate (aneffective rate of****5.50% at December 24, 2004).  The credit facilityexpires on December 28, 2006.  The Company had available borrowing capacity of$3,171,000 at December 24, 2004 on this credit facility.

The terms ofthe line of credit agreement require the Company to maintain certain financialratios and meet specified reporting requirements. As of December 24, 2004, theCompany was in compliance with the reporting requirements and financial ratios,which consist of, tangible effective net worth, current assets to currentliabilities, debt to net worth and cash flow coverage.

The creditfacility allows the Company to use (i) the full $4,000,000 for working capitalpurposes or (ii) under a Sub Facility, up to $2,000,000 of the credit facilityfor permitted acquisition purposes and $750,000 for minority investmentpurposes.  The Company is subject to certain restrictions on the permittedacquisitions and minority investments and in some cases must receive Comerica'sconsent prior to using the facility for such purposes.  If used forpermitted acquisitions or minority investments, such borrowings must be repaidover 48 months.  The Company has the option of being charged prime plus0.25% or LIBOR plus 300 basis points on the credit facility and prime plus0.50% or LIBOR plus 325 basis points on the Sub Facility subject to minimumadvance amounts and duration under the LIBOR option.

At December 24,2004, the Company had an outstanding balance of $28,000 under a $500,000working capital loan provided by the same bank, which matures onJanuary 31, 2005.  The loan is collateralized by substantially all ofthe assets of the Company and bears interest at 0.75% above the prime rate (aneffective rate of 6.00%****at December 24, 2004).

(7)        LegalMatters

Periodically, weare involved in legal actions in the normal course of business, includingaudits and investigations by various governmental agencies that result from ourwork as a governmental contractor. There are currently no such legal mattersoutstanding.

(8)        Stockholders'Equity

During the secondquarter of fiscal 2005, there were 3,400 shares of common stock issued due tothe exercise of stock options for $5,050.  Of these options, 3,000 had an exerciseprice of $1.45 and 400 had an exercise price of $1.75.

Subsequent to thequarter end, the Company will issue 57,406 shares of common stock to employeesthat participated in the Employee Stock Purchase Plan.  The period ofperformance is from July 1, 2004 to December 31, 2004.  The Company hascollected approximately $135,000 from employees that opted to participate inthis Plan.  These funds are currently held in Other accrued liabilities; oncethe stock certificates are issued this liability will be eliminated.

(9)        Acquisitions

            OnDecember 16, 2004, SYS acquired all of the assets and certain liabilities of Xsilogy, Inc. ("Xsilogy"), a privately held, San Diego-based providerof wireless sensor network technologies and applications. Xsilogy develops andmarkets low-cost wireless sensor modules, infrastructure products and softwarefor creating, deploying and managing large machine-to-machine ("M2M")networks in industrial applications. The assets purchased consisted principallyof intellectual property and technology, inventory, fixed assets and certainother intangible assets. The acquisition of Xsilogy'swireless sensor technology is an important part of the Company's growthstrategy, representing the Company's first expansion into the products-orientedbusiness and to customers outside of the Department of Defense (DoD). Xsilogyprovides the Company with the ability to expand our markets to the industrialarenas where the Company has a proven domain expertise, while offering existingcustomers, such as the US Military, Homeland Security and state and localgovernments, these new capabilities. The Company's goal is to integrateproducts and services so that we can provide complete systems solutions to theunique problems within these markets.

 Thetotal purchase price consisted of cash consideration, (i) $345,000, (ii) up toapproximately $900,000, of which up to $200,000 may be in the form of SYScommon stock and the remainder in cash,  may be earned and paid subject tocertain milestones to be achieved from the date of closing through June 30,2005 and (iii) up to a maximum of $3.5 million in additional contingentconsideration, of which up to $2.5 million may be in the form of SYS commonstock and the remainder in cash, which may be earned and paid in installmentsupon the completion of certain criteria from the date of closing through June30, 2009. The transaction was accounted for using the purchase method in accordancewith SFAS No. 141, Business Combinations, whereby the net tangible andintangible assets acquired and liabilities assumed were recognized at theirestimated fair market values at the date of acquisition, based on preliminaryestimates made by management.  The Company also recognized $40,000 ofacquisition related expenses.

 Anindependent valuation will be performed to determine the purchase priceallocation based upon the fair value of the assets and liabilities acquired, atwhich time the allocation of purchase price may be revised. Managementexpects to complete the independent valuation during the third quarter of fiscal2005. Due to the amount of contingent consideration, the initial purchase priceallocation is not expected to result in the recognition of any goodwillinitially, as the fair market value of net assets acquired is in excess ofconsideration paid. However, future goodwill could be recognized if contingentpayments are made.

            Thefollowing summary presents pro forma consolidated results of operations for thesix months ended December 24, 2004 and December 26, 2003 as if the acquisitiondescribed above had occurred at the beginning of each fiscal year ending June30, 2005 and 2004 and includes adjustments that were directly attributable tothe transaction or were expected to have a continuing impact on the Company.

            Thepro forma results are unaudited and for illustrative purposes only for theapplicable periods, and do not purport to be indicative of the actual resultswhich would have occurred had the transaction been completed as of thebeginning of the periods July 1, 2004 and 2003, nor are they indicative ofresults of operations which may occur in the future. 
|                                      |  | **Three  months ended**     |              | **Six  months ended** |  |
|--------------------------------------|--|-----------------------------|--------------|-----------------------|--|
|                                      |  | December  24, 2004	Proforma |    |                       |  | December  26, 2003	Proforma |  | December  24, 2004	Proforma |  |  |  | December  26, 2003	Proforma |  |
|                                      |  |                             |              |                       |  |  |  |  |  |  |  |  |  |
| Revenues                             |  | $                           | 10,507,000   |                       |  |  |  | $ | 7,785,000 |  | $ | 21,659,000 |  |  |  |  | $ | 15,464,000 |  |
| Income from operations               |  | $                           | 266,000      |                       |  |  |  | $ | (30,000 | ) | $ | 581,000 |  |  |  |  | $ | (219,000 | ) |
| Net income (loss)                    |  | $                           | (64,000      | )                     |  |  |  | $ | (204,000 | ) | $ | (79,000 | ) |  |  |  | $ | (510,000 | ) |
|                                      |  |                             |              |                       |  |  |  |  |  |  |  |  |  |
| Net income per common share:         |  |                             |              |                       |  |  |  |  |  |  |  |  |  |
| Basic                                |  | $                           | (0.01        | )                     |  |  |  | $ | (0.03 | ) | $ | (0.01 | ) |  |  |  | $ | (0.09 | ) |
| Diluted                              |  | $                           | (0.01        | )                     |  |  |  | $ | (0.03 | ) | $ | - |  |  |  |  | $ | (0.07 | ) |
| Weighted average shares outstanding: |  |                             |              |                       |  |  |  |  |  |  |  |  |  |
| Basic                                |  | 8,159,177                   |              |                       |  | 6,033,383 |  | 8,156,426 |  |  |  | 5,758,171 |  |
| Diluted                              |  | 10,885,093                  |              |                       |  | 7,800,687 |  | 10,923,211 |  |  |  | 7,605,482 |  |

(10)      Subsequent Event

            On January 6, 2005, the Company completedits acquisition of all of the outstanding securities of Antin Engineering, Inc.(Antin).  Antin is a defense contractor that provides information technology, C4ISR(command, control, communication, computer, intelligence, surveillance andreconnaissance), and technical support services.

            The consideration paid by the Company forthe Antin securities consists of up to approximately $2,600,000 which consistedof approximately $360,000 in cash and up to 696,000 shares of Company commonstock.  The transaction was completed pursuant to an Agreement and Plan ofMerger (the "Plan") by and among the Company, Shadow I, Inc. (a wholly-ownedsubsidiary of the Company), Antin, and all of the stockholders of Antin.

            A valuation willbe performed to determine the purchase price allocation based upon the fairvalue of the assets and liabilities acquired.

(11)       Recently Issued Accounting Standards

In December2004, the FASB revised Statement No. 123 (FAS 123R), "Share-BasedPayment," which requires companies to expense the estimated fair value ofemployee stock options and similar awards. The accounting provisions of FAS123R will be effective as of the beginning of the first interim or annualreporting period that begins after June 15 for non-small business issuers and December15, 2005 for small business issuers . The Company will adopt the provisions of FAS 123R using a modified prospective application. Under modified prospectiveapplication, FAS 123R, which provides certain changes to the method for valuingstock-based compensation among other changes, will apply to new awards and toawards that are outstanding on the effective date and are subsequently modifiedor cancelled. Compensation expense for outstanding awards for which therequisite service had not been rendered as of the effective date will be recognizedover the remaining service period using the compensation cost calculated forpro forma disclosure purposes under FAS 123. The Company is in the process ofdetermining how the new method of valuing stock-based compensation asprescribed in FAS 123R will be applied to valuing stock-based awards grantedafter the effective date and the impact the recognition of compensation expenserelated to such awards will have on its financial statements.

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

To the extentthat the information presented in this quarterly report discusses financialprojections, information or expectations about our business plans, results ofoperations, products or markets, or otherwise makes statements about future events,such statements are forward-looking.  Such forward-looking statements canbe identified by the use of words such as "intends","anticipates", "believes", "estimates","projects", "forecasts", "expects","plans" and "proposes".  Although we believe that theexpectations reflected in these forward-looking statements are based onreasonable assumptions, there are a number of risks and uncertainties thatcould cause actual results to differ materially from such forward-lookingstatements. These include, among others, the cautionary statements in the"Factors Which May Affect Future Results" and "Management'sDiscussion and Analysis or Plan of Operations" sections of thisreport.  These cautionary statements identify important factors that couldcause actual results to differ materially from those described in theforward-looking statements.

### Description ofBusiness

Overview

SYS Technologies("SYS or "the Company") has provided engineering, technical, financial andmanagement services to commercial and U.S. government customers since 1966.Headquartered in San Diego, California, the Company currently has severalmultiple-year management and engineering service contracts, primarily with theU.S. Navy and General Services Administration, in support of Navy, Army, andJoint programs for Defense and Civil Government organizations as well as largeindustrial customers.  SYS employees support these organizations at variouslocations across the country, and periodically overseas.  

During the first quarter of 2005 the Company reorganized its corporatestructure.  The Company's services were formerly delivered through threedivisions, which are listed below: 
>  Enterprise		Solutions Division Integrated		Information Solutions Division Systems Engineering		and Management Division

All of thethese Divisions have been consolidated into the Defense Solutions Group, whichat this time accounts for all of the Company's revenues.  

On December 15, 2004 the Company acquired all of the assets of Xsilogy,Inc. (Xsilogy).  Xsilogy is a provider of wireless sensor network technologiesand applications.  The Xsilogy business will form the basis of the new SensorNetworking Group.  The Sensor Networking Group is a new segment as definedunder the provisions of SFAS No. 131.  However, this Group's revenues andexpenses are immaterial for the quarter; therefore the Company has reportedjust one segment.

Our revenueshave grown internally by establishing new business units with experiencedsenior executives who have the ability to grow their market share and expandtheir customer base. In addition, during 2004 and 2005 we completedacquisitions; which have or will add to our revenues.  We will continue toevaluate acquisition opportunities and make acquisitions if the transactions arein line with our strategy of increasing our core competencies, profitablyincreasing our revenues and expanding our customer base.

Our operating margins are affected by the mix of contract types (costreimbursement, fixed-price or time and materials) as well as the mix of primecontracts versus subcontracts. Significant portions of our contracts are timeand materials and cost reimbursement contracts. We are reimbursed for laborhours at negotiated hourly billing rates and other direct expenses under timeand materials contracts and reimbursed for all actual costs, plus a fee, orprofit, under reimbursement contracts. The financial risks under thesecontracts are generally lower than those associated with other types ofcontracts, and margins are also typically lower than those on fixed-pricecontracts. The U.S. government also has awarded us fixed-price contracts. Suchcontracts carry higher financial risks because we must deliver the products,systems or contract services at a cost below the fixed contract value in orderto earn a profit. Of our total year to date revenues in 2005, approximately 25%were generated by time and materials contracts, approximately 65% weregenerated by cost reimbursement contracts and approximately 10% were generatedby fixed-price contracts.

One of the Company's successful strategic focuses during our last andcontinuing through this Fiscal Year has been to increase the number of prime contractsheld.  To that end, SYS has bid and won five prime contracts in both existingand new markets, with potential value well in excess of $250M over the nextfive years.  We have also formed strategic partnerships, successfully competingas subcontractors to get us into targeted new markets.

Defense Solutions Group (DSG)
| ** **       | ** ** | Three months ended |            | Six months ended   | ** ** |
|------------------|------------|--------------------|------------|--------------------|------------|
| ** **       | ** ** | December 24,  2004 |            | December 26,  2003 |            | December 24,  2004 |  | December 26,  2003 | ** ** |
| Revenue for  DSG |            | $                  | 10,462,000 |                    | $          | 7,658,000 |  | $ | 21,569,000 |  | $ | 15,210,000 |  |
|                  |            |                    |            |                    |            |  |  |  |  |  |  |  |  |

            TheDSG operates out of four major locations which include San Diego and Oxnard,California and Arlington and Chesapeake, Virginia.  The DSG has a minorpresence in other locations.

The Oxnard, California officeis adjacent to major U.S. Naval facilities activities, including the PortHueneme Division of the Naval Surface Warfare Center, the Naval FacilitiesExpeditionary Logistics Center and the Naval Air Warfare Center.  Workperformed through this office includes engineering services, operationalanalysis and information technology services in support of these Navy customers. Engineering services are in support of combat systems, ships, auxiliarysystems, components and equipment.   Operational analysis and services includea full range of business functions performed both at the Company's facilities andunder direct support at the customer site. Information technology servicesprovide requirements determination and analysis, software development, anddocumentation development as well as on-site administration, training and helpdesk operations as a subcontractor to a large information technology primecontractor.

            The San Diego, California officeis located near the Space and Naval Warfare Systems Command ("SPAWAR") andSPAWAR Systems Center San Diego.  The office's customer base not only includesthese San Diego based organizations, but also has employees working with NavalAir Systems Command ("NAVAIR"), Defense Advanced Research Programs Agency("DARPA"), the Defense Information Systems Agency ("DISA") and numerousoperational commands.   This office also provides direct support to other DODindustry partners such as Boeing, Cubic, EDS, and Rockwell Collins.  TheCompany's personnel work closely with Office of Naval Research, AssistantSecretary of the Navy for Research, Development and Acquisition, AdvancedResearch and Development Activity, Chief of Naval Operations, Naval WarfareDevelopment Command, Joint Forces Command, and other services and JointAgencies.

Work performedthrough this office includes Command, Control, Communication, Computer,Intelligence, Surveillance and Reconnaissance ("C4ISR") system engineeringservices and solutions.  Initiatives currently being supported include the useof our "The Assessment Profiling System ("TAPS") Decision Support System" tomanage the Information Operations Campaign by the 8th Army in Korea;Systems Engineering and high speed information transfer for the ground segmentsof the Global Hawk surveillance system; development of new communicationsarchitectures for combining strategic and tactical communications and datalinks into a single composite network; and supporting SPAWAR Headquartersassessments of FORCENet related capabilities and programs. FORCEnet is theoperational construct and architectural framework for naval warfare in theinformation age. In 2004, the Company acquired Polexis, Inc., bringingadditional information integration and knowledge management programs in theNavy, Army, and Joint Services, as well as a licensed, widely used productsuite, Extensible Information Systems ("XIS"). Now a division of the Company,the Polexis organization is developing the Army's Command Post of the Future,the Defense Information Systems Agency's ("DISA") Common Operating Environment,and two of SPAWAR's key initiatives: Composable FORCEnet and ExtensibleTactical C4I Framework.

The Arlington office islocated in the Crystal City Complex and near numerous government facilities. The Chesapeake office is located near Norfolk, Virginia.

Work performed through theVirginia offices includes Department of Defense acquisition program management,Navy combat system safety engineering, communications and other informationtechnology engineering and support services, port engineering for shipequipment installations, training, and budgeting and financial management. Typical systems supported are:  Battle Force Tactical Training (BFTT), FiberOptic Data Multiplex System (FODMS), the Combat System Operating SequencingSystem (CSOSS), High Energy Laser, National Defense University projects and theGlobal Command and Control System - Army (GCCS-A).

Some of the major contracts and task initiatives whichthe DSG is currently performing work under include: 
> 			 			U.S. Navy Underway Replenishment (UNREP) prime contract that has been held bythe Company since 1982. During the first quarter of 2005 the Company was awardeda new option year on this contract valued at approximately $5.0 million andrevenue recognition on this new option year began on the effective date. Insupport of this project, the Company is defining equipment loads, speeds,operating ranges, installation geometry and power necessary to achieve thesystem throughput requirements. In support of the Advanced UNREP Program, theCompany also provides engineering and technical services to develop andfabricate mockups and prototypes for new design concepts and designmodifications to underway replenishment equipment.  The Seaportcontract is a multiple award contract that the Company was awarded in FY 2004 bythe Naval Sea Systems Command to provide a broad range of comprehensiveengineering, technical, and programmatic support services. The first deliveryorder issued on the Seaport Prime Contract, supports the U.S. Navy's Port Hueneme Division, Naval Surface Warfare Center. This $4.0 million firm fixedprice delivery order was awarded in the first quarter of FY 2005 and work beganon August 1, 2004. This delivery order replaces the majority of the work thatwas previously performed under the Management, Planning, Analytical andAdministration (MPAA) contract.  Navy MarineCorps Intranet (NMCI) subcontract for information technology services.  Prime contract with SPAWAR Systems Center's Joint and National Systems Division.Subcontractors on this contract include Northrop-Grumman, Boeing, Lucent,Science Applications International Corporation (SAIC), and BAE.  Primecontract with SPAWAR Headquarters - Major Services Agreement to provideEngineering, Logistics, Integration, Test and Evaluation services to the SPAWARClaimancy and to the Program executive Office for C4I and Space. Subcontract toMaxim Corporation and Anteon Corporation for Program Management Support.  Subcontractwith SAIC on its SPAWAR Systems Engineering & Integration contract.   Primecontract with SPAWAR Systems Center's Information Assurance and EngineeringDivision. Subcontractors on this contract are SAIC, Booz-Allen & Hamilton, Inc,American Systems Corporation, Galaxy Scientific Corporation and Nathan Kunes,Inc.  Subcontractfor the Naval Sea Systems Command's Professional Support Services Multiple AwardContract (NAVSEA MAC).   Technicalsupport under a GSA contract to the Battle Force Tactical Training/Total ShipTraining Systems (BFTT/TSTS) program for Naval Sea Systems Command.  The Companyhas four contracts from the General Services Administration (GSA). These fourcontracts are for information technology, financial and business solutions,professional engineering services and management, organizational and businessimprovement services. These contracts, which are time and material based, haveproven to be a means to develop new customers and are registered in the GSAAdvantage System. The GSA Advantage System is an on-line service provided by GSAthat lists the price schedules for all registered companies.

### Results ofOperations

The followingtable sets forth certain items, including consolidated revenues for the threeand six-month periods ended for fiscal years 2005 and 2004 (in thousands):
| ** **                           | ** ** | Three Months Ended |        | Six Months Ended | ** ** |
|--------------------------------------|------------|--------------------|--------|------------------|------------|
| ** **                           | ** ** | Dec. 24  2004      |        | %                |            | Dec. 26  2003 |  | % |  | Dec. 24  2004 |  | % |  | Dec. 26  2003 |  | % | ** ** |
| Revenues                             |            | $                  | 10,462 |                  | 100.0      |  | $ | 7,658 |  | 100.0 |  | $ | 21,569 |  | 100.0 |  | $ | 15,210 |  | 100.0 |  |
| Operating costs  and expenses:       |            |                    |        |                  |            |  |  |  |  |  |  |  |  |  |  |  |  |
| Contract costs                       |            | 8,599              |        | 82.2             |            | 6,152 |  | 80.3 |  | 18,105 |  | 83.9 |  | 12,512 |  | 82.3 |  |
| General and  Administrative expenses |            | 1,297              |        | 12.4             |            | 1,088 |  | 14.2 |  | 2,284 |  | 10.6 |  | 2,023 |  | 13.3 |  |
| Total  operating costs and expenses  |            | 9,896              |        | 94.6             |            | 7,240 |  | 94.5 |  | 20,389 |  | 94.5 |  | 14,535 |  | 95.6 |  |
| Income from  operations              |            | 566                |        | 5.4              |            | 418 |  | 5.5 |  | 1,180 |  | 5.5 |  | 675 |  | 4.4 |  |
| Interest  expense, net               |            | 122                |        | 1.2              |            | 11 |  | 0.2 |  | 236 |  | 1.1 |  | 35 |  | 0.2 |  |
| Income  before income taxes          |            | 444                |        | 4.2              |            | 407 |  | 5.3 |  | 944 |  | 4.4 |  | 640 |  | 4.2 |  |
| Income tax  provision                |            | 188                |        | 1.8              |            | 170 |  | 2.2 |  | 384 |  | 1.8 |  | 270 |  | 1.8 |  |
| Net income                           |            | $                  | 256    |                  | 2.4        |  | $ | 237 |  | 3.1 |  | $ | 560 |  | 2.6 |  | $ | 370 |  | 2.4 |  |
|                                      |            |                    |        |                  |            |  |  |  |  |  |  |  |  |  |  |  |  |
|                                      |            |                    |        |                  |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

*Revenues*. For the second quarter of 2005, our revenues increased 37% to $10.5 millionfrom $7.7 million for the same period in 2004.  For the year to date, ourrevenues increased 42% to $21.6 million from $15.2 million for the same periodin 2004.   This increase is attributable to new contract awards,successful recompetition wins on existing programs, growth within existingprograms and the acquisition of Polexis in the fourth quarter of 2004.  

*Contractcosts*.  Includes all directcosts such as labor, materials and subcontractor costs.  Contract costsalso include indirect overhead costs which are pooled and allocated tocontracts on a pro rata basis. 

As a percentageof revenue, contract costs were 82.2% for the second quarter of 2005 as comparedto 80.3% for the same period in 2004.  For the year to date, contract costswere 83.9% as compared to 82.3% for the same period in 2004. This increase incontract costs as a percentage of revenues is due to increased subcontractorand overhead costs.

*General andadministrative expenses*.  General and Administrative (G&A)expenses include indirect labor, fringe benefits, bid and proposal and otherindirect costs.** **As a percentage of revenue, G&A costs were 12.4%for the second quarter of 2005 as compared to 14.2% for the same period in2004.  For the year to date, G&A costs were 10.6% as compared to 13.3% forthe same period in 2004.  As a percentage of revenues, G&A has decreaseddue to the growth in revenues.  However, the Company may increase the amount ofG&A expenditures during 2005 to develop new business lines and pursueacquisitions, which may increase G&A as a percentage of revenues.

*Income fromoperations*.  For the second quarter of 2005, income from operationsincreased 35% to $566,000 from $418,000 for the same period in 2004.  Theincome from operations margin dropped slightly from 5.5% to 5.4%.  This slightdecrease is due to revenues being derived from a higher mix of subcontractorsand other direct costs in the second quarter of 2005, which carries little orno fee as compared to revenues derived from direct labor costs.  This waspartially offset by a reduction of G&A costs as a percentage of revenues. For the six month period in the current year, income from operations margin wasup to 5.5% due largely to the reduction of G&A costs as a percentage ofrevenues.  For the year to date period, income from operations increased 75% to$1,180,000 from $675,000 for the same period in 2004.  This improvement isdirectly attributable to the Company's increasing revenues while having minimalincreases in the G&A expenses. 

*Interestexpense*.  For the second quarter of 2005, net interest expenseincreased to $122,000 from $11,000 for the same period in 2004.  For theyear to date, net interest expense increased to $236,000 from $35,000 for thesame period in 2004.  This increase is primarily attributable to increasedinterest expense from the convertible notes issued by the Company during 2004through its private placement and in connection with the Polexis acquisition andthe accretion of a debt discount related to the private placement.  On anannualized basis, the increase in interest expense resulting from these notes willbe approximately $300,000.

*Income taxprovision*.  For the second quarter of 2005, the income tax provision increased11% to $188,000 from $170,000 for the same period in 2004.  For the yearto date, the income tax provision increased 42% to $384,000 from $270,000 forthe same period in 2004.  Our 2005 tax provision represents an effectivetax rate of 40.7% versus 42.2% in 2004. 

*Dividends*. There were no dividends authorized or paid in 2005.  For the same periodin 2004, there were $4,000 in dividends paid on the Company's preferencestock.  This decrease was attributable to the redemption of the preferencestock in fiscal 2004.

### Liquidityand Capital Resources

At December 24,2004, the Company had cash and cash equivalents of $49,000. This represents anoverall decrease of approximately $2.1 million during 2005 most of whichoccurred in the first quarter. The decrease is a result of two factors. First,the Company had a significant amount of anticipated non-recurring paymentswhich included (i) costs associated with the Polexis acquisition for a leasebuy-out, severance and compensation (ii) incentive compensation payments earnedfor the prior fiscal year (iii) costs associated with an SB-2 registrationstatement and (iv) an unusually large amount of subcontractor payments. Second,our days outstanding on accounts receivable grew considerably due to (i) aresource shortage to keep current on our billings and (ii) the addition of alarge new government contract in which the customer took longer than expected toestablish its payment process.

We believe thatall of these items have been appropriately addressed by the Company during thesecond quarter. We have added resources to support our own billing processes.We have worked with our customers to remedy the billing issues we experiencedon their contracts. All of the non-recurring payments noted above wereconcluded in the first quarter. 

During thesecond quarter our cash provided by operating activities improved to a positive$475,000 versus the negative $2.7 million used in operating activities in thefirst quarter.  We did not receive any payments relating to the large newgovernment contract noted above; however, subsequent to the quarter end we didbegin to receive such payments.  We anticipate that the billings and paymentson this contract will now begin to track more closely to the costs incurred. Totalbilled and unbilled receivables on this contract were approximately $1.4million at December 24, 2004 of which $754,000 was received in January.  

The delay inpayment on this contract has had a significant impact on our days salesoutstanding.  As a result of the additional resources added and the recentpayments on the contract noted above, we expect to see our days outstanding onaccounts receivables return to a more normal rate during the second half of thefiscal year, and our net operating cash flow should improve as a result.

Additionally,during this quarter, the Company expended $385,000 in connection with theacquisition of the Xsilogy assets discussed in Note 8 to the ConsolidatedFinancial Statements.  

Net working capital was $4.6 million at December 24, 2004compared to $5.2 million at June 30, 2004.  Net working capital is totalcurrent assets less total current liabilities.  Accounts receivablesincreased by $3.7  million during the first half of 2005.  This increase wasdue primarily to an increase in the days outstanding for the Company's accountsreceivables as discussed above.  Accounts payable increased by $1.0million to $2.5 million during the first half of 2005.  This was primarilydue to an increase in materials and subcontractor costs.

The Company also has convertible notes payable totaling $3.6million consisting of $700,000 from a private placement completed during 2002;$1.5 million issued in connection with the private placement completed during2004, and $1.4 million issued in connection with the acquisition ofPolexis.  The Company used the funds received through the privateplacements to finance the Company's growth and to complete the acquisition ofPolexis.  Subsequent to quarter end, the Company exercised its mandatoryconversion option to force the conversion of $700,000 of these Polexis notes.

The Company's net assets increased by $608,000 during thefirst half of 2005 to $9.0 million.  Net assets are total assets lesstotal liabilities.  Net furniture and equipment increased by $236,000during the first half of 2005 due primarily to the acquisition of processimprovement software. The Company establishes a capital expenditures plan eachyear in connection with its annual budgeting process. The Company estimatesthat its capital expenditures for its current operations during this fiscalyear will range from $500,000 to $750,000.

The Company has a working capital loan and a revolving lineof credit facility with Comerica Bank-California (Comerica).  The Companyhad borrowed $500,000 under the working capital loan, of which $28,000 was owedat December 24, 2004.  The working capital loan is fully amortized overthree years.  The Company's line of credit had a balance of $829,000 andhad available borrowing capacity of $3,171,000 at December 24, 2004.

The Company'ssource of liquidity is from cash generated by operations and its revolving lineof credit facility under a loan agreement with Comerica for $4.0 million thatexpires on December 28, 2006.

The $4.0 millionrevolving line of credit facility allows the Company to use (i) the full $4.0million for working capital purposes or (ii) under a Sub Facility, up to $2.0million of the credit facility for permitted acquisition purposes and $750,000for minority investment purposes.  The Company must maintain certainfinancial covenants, including tangible effective net worth, current assets tocurrent liabilities, debt to worth and cash flow coverage, is subject tocertain restrictions on permitted acquisitions and minority investments, and insome cases must receive Comerica's consent prior to using the facility for suchpurposes.  If used for permitted acquisitions or minority investmentsthese advances must be repaid over 48 months.  The Company has the optionof being charged prime plus 0.25% or LIBOR plus 300 basis points on the creditfacility and prime plus 0.50% or LIBOR plus 325 basis points on the subfacility subject to minimum advance amounts and duration under the LIBORoption. 

The loan iscollateralized by all of the Company's assets including accounts receivable.Comerica advances funds to the Company of up to 80% of the Company's billedaccounts receivable that are less than 90 days old. Comerica requires theCompany to maintain certain covenants, including those described above, and at December24, 2004 the Company was in compliance with all of those covenants.

The Company alsofinances a portion of its operations through leases.  At December 24,2004, the Company had non-cancelable operating leases for its offices, whichexpire at various dates through December 2008. 

Annual futureminimum lease payments under non-facility operating leases with initial termsof one year or more as of December 24, 2004 totaled $244,000.

Annual future minimum lease payments under facility operatingleases with initial terms of one year or more as of December 24, 2004 totaled $2,324,000.

Management believes that the Company will have sufficientcash flow from operations and funds available under the revolving creditagreement with Comerica to finance its operating and capital requirementsthrough December 28, 2006. Long-term liquidity and continued acquisitionrelated growth will depend on the Company's ability to manage cash, raise cashand maintain profitability.

### Off-BalanceSheet Arrangements

The Company does not have anyoff-balance sheet arrangements other than the facility leases discussed in theLiquidity and Capital Resources section above.

CriticalAccounting Policies and Estimates

TheCompany's discussion and analysis of its financial condition and results ofoperations are based upon its consolidated financial statements, which havebeen prepared in accordance with accounting principles generally accepted inthe United States. The preparation of these financial statements requiresmanagement to make estimates and judgments that affect the reported amounts ofassets, liabilities, revenues and expenses, and related disclosure ofcontingent liabilities. On an ongoing basis, management evaluates its estimates,including those that relate to revenues and customer billings, recovery ofindirect costs, long-lived assets, intangible assets, income tax contingencies,stock based compensation and litigation. Management bases its estimates onhistorical experience and on various other assumptions that are believed to bereasonable under the circumstances, the results of which form the basis formaking judgments about the carrying values of assets and liabilities that arenot readily apparent from other sources. Actual results may differ from theseestimates under different assumptions and conditions. If actual resultssignificantly differ from management's estimates, the Company's financialcondition and results of operations could be materially impaired.

TheCompany believes the following critical accounting policies affect its moresignificant judgments and estimates used in the preparation of its consolidatedfinancial statements.

Revenuesare primarily derived from contracts with agencies of the U.S. Government. Werecord revenues on fixed-price contracts on the percentage of completion methodin the ratio that costs incurred bear to total estimated costs at completion.We record revenues on cost plus fixed fee contracts and time and materialcontracts, for which percentage-of-completion is not used, as work is performedand billed to the customer. Contract costs, including indirect costs, oncertain U.S. Government contracts are subject to audit by the Defense ContractAudit Agency (DCAA) before final payment is received. We record revenues andaccounts receivable at amounts expected to be realized upon final settlement.

Ouraccounts receivable balances include unbilled receivables which are comprisedof work-in-process which will be billed in accordance with contract terms anddelivery schedules, as well as amounts billable upon final execution ofcontracts, contract completion, milestones or completion of rate negotiations.Payments to us for performance on certain of our U.S. Government contracts aresubject to audit by the DCAA, and are subject to government funding. We providea allowance against our receivables for estimated losses that may result fromrate negotiations and audit adjustments. To the extent that actual adjustmentsdue to rate negotiations or audit adjustments differ from our estimates, ourrevenue may be impacted. Historically, the Company has not required significantallowances for these risks.

Sincethe Company's primary customer is the U.S. Government, the Company historicallyhas not recorded significant charges for bad debt expense. Bad debt charges, ifneeded, are recognized in the period in which they are identified.

Goodwillrepresents the excess of costs over fair value of assets of businessesacquired. Effective January 1, 2002, the Company adopted SFASNo. 142, "Goodwill and Other Intangible Assets," whichestablishes financial accounting and reporting for acquired goodwill and otherintangible assets and supersedes APB Opinion No. 17, "IntangibleAssets". Goodwill and intangible assets acquired in a purchase businesscombination and determined to have an indefinite useful life are not amortized,but instead tested for impairment at least annually in accordance with theprovisions of SFAS No. 142. SFAS No. 142 also requires that intangibleassets with estimable useful lives be amortized over their respective estimateduseful lives to their estimated residual values, and reviewed for impairment inaccordance with SFAS No. 144, "Accounting for Impairment or Disposalof Long-Lived Assets." 

SFASNo. 142 requires that goodwill be tested for impairment at the reportingunit level at adoption and at least annually thereafter, utilizing a two stepmethodology. The initial step requires the Company to assess whetherindications of impairment exist. If indications of impairment are determined toexist, the second step of measuring impairment is performed, wherein the fairvalue of the relevant reporting unit is compared to the carrying value,including goodwill, of such unit. If the fair value exceeds the carrying value,no impairment loss is recognized. However, if the carrying value of thereporting unit exceeds its fair value, the goodwill of the reporting unit isimpaired. 

The Companyperforms its annual testing for impairment of goodwill and other intangibleassets in the forth quarter of each year, prior to the release of the financialstatements for the current year. Based on management's annual testing as of theforth quarter of 2004, there were no indications of impairment.

Information containedin this Form 10-QSB should be studied carefully by any shareholder or potentialinvestor while considering the following risk factors to the Company.

**We depend upona single customer, the U.S. government, for the majority of our revenues, and adecrease in its demand for our services might harm our operating results.**

Asubstantial part of our business at the present time is with the U.S. Navy.Even though the level of business with this customer is growing and we havenegotiated multiple-year contracts that include option and award years, thereis no certainty that budget changes in Congress or the Department of Defense("DoD") will not seriously affect us.  In addition, there is nocertainty that the government will exercise each option or award year availableon a contract.

TheCompany may, depending on the contract, perform as a prime contractor or as asubcontractor to another prime contractor. In cases where the Company performsas a subcontractor, the Company may be subject to price modifications requiredby the prime contractor. Such price modifications, if not mitigated by acorresponding reduction of costs, could have a negative impact on the Company'sprofitability.

**Most of ourcustomers are government agencies subject to unique political and budgetaryconstraints and have special contracting requirements that may affect ourability to obtain new government customers.**

Mostof our customers are government agencies, principally DoD agencies. Theseagencies often do not set their own budgets and therefore have little controlover the amount of money they can spend. In addition, these agencies experiencepolitical pressure that may dictate the manner in which they spend money. Dueto political and budgetary processes and other scheduling delays thatfrequently occur in the contract or bidding process, some government agencyorders may be canceled or substantially delayed, and the receipt of revenues orpayments may be substantially delayed.

In addition, future sales to government agencies will dependon our ability to meet government contracting requirements, certain of whichmay be onerous or impossible to meet, resulting in our inability to obtain aparticular contract. Common requirements in government contracts includebonding, provisions permitting the purchasing agency to modify or terminate atwill the contract without penalty and provisions permitting the agency toperform investigations or audits of our business practices.

The U.S. Government has a program that encourages and sometimes requires large prime contractors to use small businesses.  TheGovernment restricts the competition on some contracts to only qualifying smallbusinesses.  Some of the Company's contracts and subcontracts have beenawarded based on its small business eligibility.  The definition of asmall business changes depending on the type of product or serviceprovided.  The Government uses the North American Industry ClassificationSystem (NAICS) codes to classify the small business size standards for all industries. One of the Company's primary NAICS codes has been for engineering services, andbeginning in Fiscal Year 2005, the Company will no longer qualify as a smallbusiness using this code.  The Company still qualifies as a small businessusing several other NAICS codes.  In addition, the small businesscontracts currently held by the Company do not expire as a result of no longermeeting the requirements of this specific NAICS Code.   Some of thesecontracts have option years that go out for five years. While the Company'srevenues to date include revenues based on the Company qualifying as a smallbusiness pursuant to Government regulations under which it is no longereligible as a small business, these revenues were not material.  TheCompany's future revenues may be impacted by not qualifying as a small businessunder certain NAICS codes.

**Any inabilityto adequately retain or protect our employees, customer relationships andproprietary technology could harm our ability to compete.**

Ourfuture success and ability to compete depends in part upon our employees andcustomer relationships, proprietary technology and trademarks, which we attemptto protect with a combination of patent, copyright, trademark and trade secretclaims, as well as with our confidentiality procedures and contractualprovisions. These legal protections afford only limited protection and aretime-consuming and expensive to obtain and/or maintain. Further, despite ourefforts, we may be unable to prevent third parties from soliciting our employeesor customers or infringing upon or misappropriating our intellectualproperty.  Our employees, customer relationships and intellectual propertymay not be adequate to provide us with a competitive advantage or to preventcompetitors from entering the markets for our products and services.Additionally, our competitors could independently develop non-infringingtechnologies that are competitive with, and equivalent or superior to, ourtechnology. Monitoring infringement and/or misappropriation of intellectualproperty can be difficult, and there is no guarantee that we would detect anyinfringement or misappropriation of our proprietary rights. Even if we dodetect infringement or misappropriation of our proprietary rights, litigationto enforce these rights could cause us to divert financial and other resourcesaway from our business operations.

**The departureof certain key personnel could harm the financial condition of the Company.**

CliftonL. Cooke, Jr., Michael W. Fink, Linda E. Gagnon, Edward M. Lake, and Kenneth D.Regan, are intimately involved in our business and some have day-to-dayrelationships with critical customers. Competition for highly skilled business,product development, technical and other personnel is intense, and there can beno assurance that we will be successful in recruiting new personnel or inretaining our existing personnel. A failure on our part to retain the servicesof these key personnel could have a material adverse effect on our operatingresults and financial condition. We do not maintain key man life insurance onany of our employees.

**We facenumerous competitors.**

Wehave many competitors with comparable characteristics and capabilities thatcompete for the same group of customers. Our competitors are competent and experiencedand are continuously working to take projects away from us. Some of ourcompetitors have greater financial, technical, marketing and other resourcesthan we do. Our ability to compete effectively may be adversely affected by theability of these competitors to devote greater resources to the sales andmarketing of their products and services than are available to us.

**We must complywith numerous Government Regulations.**

TheCompany could become liable for penalties under various procurement rules andregulations.  Changes in government regulations could harm our operatingresults.  Our business must comply with and is affected by variousgovernment regulations.  Among the most significant regulations are:
|  | the Federal Acquisition Regulations, and agency  regulations supplemental to the Federal Acquisition Regulations, which  comprehensively regulate the formation, administration and performance of  government contracts; |
|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | the Truth in Negotiations Act, which requires  certification and disclosure of all cost and pricing data in connection with  contract negotiations;                                                                       |
|  | government accounting regulations, which impose accounting  requirements that govern our right to reimbursement under certain cost-based government  contracts; and                                                       |
|  | laws, regulations and executive orders restricting the use  and dissemination of information classified for national security purposes  and the exportation of certain products and technical data.                       |

** Accuracy of Indirect Billing Rates iscritical.**

The Company's indirect billing rates are approved at leastannually by the Defense Contract Audit Agency (DCAA).  These rates candiffer from the Company's actual indirect rates.  The Company budgets tohave its actual indirect rates as close as possible to its DCAA approvedindirect rates at fiscal year end.  Throughout the year, managementassesses how these rates compare to forecasted rates for the year.  If asignificant variance is anticipated, provisions for such variance are recognizedat that time.  However, if the actual indirect rates at year-end arematerially different from the DCAA approved indirect rates, the Company wouldhave to recognize that difference at year-end, which could affect the Company'sresults of operations.

**We Rely on Subcontractors.**

The Companyregularly employs subcontractors to assist us in satisfying our contractualobligations. If these subcontractors fail to adequately perform theircontractual obligations, our prime contract performance and our ability toobtain future business could be materially and adversely impacted.

Our performanceof government contracts may involve the issuance of subcontracts to othercompanies upon which we rely to perform all or a portion of the work we areobligated to deliver to our customers.  There is a risk that we may havedisputes with subcontractors concerning a number of issues including thequality and timeliness of work performed by the subcontractor, customerconcerns about the subcontractor, our decision not to extend task orders orissue new task orders under a subcontract, or our hiring of former personnel ofa subcontractor.  A failure by one or more of our subcontractors tosatisfactorily deliver on a timely basis the agreed-upon supplies and/orperform the agreed-upon services may materially and adversely impact ourability to perform our obligations as a prime contractor.  In extremecases, such subcontractor performance deficiencies could result in thegovernment terminating our contract for default.  A default terminationcould expose us to liability for excess costs of procurement by the governmentand have a material adverse effect on our ability to compete for futurecontracts and task orders.

**Security Clearances arenecessary.**

If the Companycannot obtain the necessary security clearances, we may not be able to performclassified work for the government and our revenues may suffer.  Certaingovernment contracts require our facilities and some of our employees, tomaintain security clearances.  If we lose or are unable to obtain requiredsecurity clearances, the client can terminate the contract or decide not torenew it upon its expiration.  As a result, to the extent we cannot obtainthe required security clearances for our employees working on a particularcontract, we may not derive the revenue anticipated from the contract, which,if not replaced with revenue from other contracts, could seriously harm ouroperating results.

Securitybreaches in sensitive government systems could result in the loss of clientsand negative publicity.  Many of the systems we develop involve managingand protecting information involved in national security and other sensitivegovernment functions.  A security breach in one of these systems couldcause serious harm to our business, could result in negative publicity andcould prevent us from having further access to such critically sensitivesystems or other similarly sensitive areas for other government clients.

**There are risks associatedwith our planned growth.**

Weplan to grow the Company's revenues and profits by adding to our existingcustomer base through internal growth and by the acquisition of othergovernment services or technology related companies.  Over the past fewyears we have hired senior management personnel capable of establishing newbusiness units within the Company.  The DSG's San Diego operations wereestablished during FY 2001 and have grown steadily since inception.  TheDSG's Arlington and Chesapeake operations were established during FY 2002 andhave also grown steadily since inception.  All of these operations werestarted with no assurance that they would develop into successful businessunits.  Rapid expansion through internal growth has required additionalcapital resources.  We plan to continue this approach to building ourgovernment services business.  There can be no assurance that thisapproach will result in increased profitability in the future.

Managementbelieves that the Company can grow through the acquisition of other governmentservices companies and technology related companies that have product offeringswhich may be sold to both commercial and government customers.  Theacquisition of other companies is uncertain and contains a variety of businessrisks, including:  cultural differences, the retention of key personnel,competition, protection of intellectual property, profitability, industrychanges and others.  Although we do not have an agreement to acquire anyspecific company at this time, we intend to attempt to expand our operationsthrough the acquisition of other companies. Acquisitions and attemptedacquisitions may place a strain on our limited personnel, financial and otherresources. Our ability to manage this growth, should it occur, will requireexpansion of our capabilities and personnel.  We may not be able to findqualified personnel to fill additional positions or be able to successfullymanage a larger organization. Further, we intend to finance these transactionsthrough a combination of cash, equity and debt. Using our stock as a currencymay have limitations as the trading volume in our stock has been limited, ourstock price has been volatile, and our stock may not maintain a pricesufficient to support transactions without being excessively dilutive.

We have very limitedassets upon which to rely for adjusting to business variations and for growingnew businesses. While we are likely to look for new funding to assist in theacquisition of other profitable businesses, it is uncertain whether such fundswill be available. Our substantial reliance on our revolving line of creditwith Comerica Bank - California imposes certain limitations on us. If we are togrow and expand our operations, we will need to raise significant amounts ofadditional capital. There can be no assurance that we will be successful inraising a sufficient amount of additional capital, or if we are successful,that we will be able to raise capital on reasonable terms. If we do raiseadditional capital, our existing shareholders may incur substantial andimmediate dilution.

There are a large number of shares that may beavailable for future sale, and the sale of these shares may depress the marketprice of our common stock.

As of December 24, 2004, we had issued 8,161,566shares of common stock. Up to 2,189,050 shares of common stock were issuableupon exercise of employee stock options at prices ranging from $0.73 to $2.89per share, 718,750 shares were issuable upon the conversion of convertiblenotes from the 2002 Private Placement at $1.00 per share, 727,283 shares wereissuable upon the conversion of convertible notes from the 2004 PrivatePlacement at $2.20 per share, 590,317 shares were issuable upon the conversionof convertible notes from the Polexis acquisition at $2.32 per share, and 2,500shares were issuable upon the exercise of warrants to purchase common stock at$1.00 per share.  The sale of shares issued upon any conversion of ouroutstanding convertible notes or the exercise of outstanding options orwarrants could adversely affect the market price of our common stock.

**There is alimited market for our common stock.**

Ourcommon stock is traded on the American Stock Exchange.  Trading in our commonstock has been sporadic, and at present, there is a limited market for it.There can be no assurance that a stronger market will develop. Even if such amarket does develop, it may not be sustained.  There are no analystscurrently covering the Company.

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

Asof December 24, 2004, a total of 3,481,335 shares of our outstanding commonstock were "restricted securities" and could be sold in the publicmarkets only in compliance with Rule 144 adopted under the Securities Act of1933 or other applicable exemptions from registration. 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 issuer's outstanding common stock or(ii) the average weekly trading volume in the securities during a period offour calendar weeks immediately preceding the sale. Persons who are notaffiliated with the issuer and who have held their restricted securities for atleast two years are not subject to the volume limitation. Possible or actualsales of our common stock by present shareholders under Rule 144 could have adepressive effect on the price of our common stock.

**Our directors andexecutive officers beneficially own approximately 34.0% of our stock, includingstock options and warrants exercisable within 60 days of December 24, 2004;their interests could conflict with yours; significant sales of stock held bythem could have a negative effect on our stock price; shareholders may beunable to exercise control.**

Asof December 24, 2004, our executive officers, directors and affiliated personswere the beneficial owners of approximately 47.5% of our common stock,including stock options exercisable within 60 days of December 24, 2004. As aresult, our executive officers, directors and affiliated persons will have a significantability 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 transaction; and  |
|  | control the outcome of any other matter submitted to the  shareholders for vote. |

As a result of their ownership and positions, our directorsand executive officers, collectively, are able to significantly influence allmatters requiring shareholder approval, including the election of directors andapproval of significant corporate transactions. In addition, sales ofsignificant amounts of shares held by our directors and executive officers, orthe prospect of these sales, could adversely affect the market price of ourcommon stock. Management's stock ownership may discourage a potentialacquirer from making a tender offer or otherwise attempting to obtain controlof us, which in turn could reduce our stock price or prevent our shareholdersfrom realizing a premium over our stock price.

**Our common stock is subject to"penny stock" rules.**

Our common stockis classified as a penny stock by the Securities and Exchange Commission. Thisclassification severely and adversely affects the market liquidity for ourcommon stock. The Commission has adopted Rule 15g-9, which establishes thedefinition of a "penny stock," for the purposes relevant to us, asany equity security that has a market price of less than $5.00 per share orwith an exercise price of less than $5.00 per share, subject to certainexceptions. For any transaction involving a penny stock, unless exempt, therules require: (i) that a broker or dealer approve a person's account fortransactions in penny stocks; and (ii) the broker or dealer receive from theinvestor a written agreement to the transaction, setting forth the identity andquantity of the penny stock to be purchased. In order to approve a person'saccount for transactions in penny stocks, the broker or dealer must (i) obtainfinancial information and investment experience objectives of the person; and(ii) make a reasonable determination that the transactions in penny stocks aresuitable for that person and the person has sufficient knowledge and experiencein financial matters to be capable of evaluating the risks of transactions inpenny stocks. The broker or dealer must also deliver, prior to any transactionin a penny stock, a disclosure schedule prepared by the Commissionrelating to the penny stock market, which, in highlight form, sets forth (i)the basis on which the broker or dealer made the suitability determination and(ii) that the broker or dealer received a signed, written agreement from theinvestor prior to the transaction. Disclosure also has to be made about therisks of investing in penny stocks in public offerings and secondary tradingand about the commissions payable to the broker-dealer and registered representative,current quotations for the securities and the rights and remedies available toan investor in cases of fraud in penny stock transactions. Finally, monthlystatements have to be sent disclosing recent price information for the pennystock held in the account and information on the limited market in pennystocks.

Item 3.        Controls and Procedures

Evaluation ofDisclosure Controls and Procedures.

Underthe supervision and with the participation of our executive management,including our Chief Executive Officer and Chief Financial Officer, we performedan evaluation of the effectiveness and design of our disclosure controls andprocedures as of the end of the period covered by this report.  Based onthat evaluation, our executive management, including our Chief ExecutiveOfficer and our Chief Financial Officer, concluded that our disclosure controlsand procedures are effective as of December 24, 2004.

Changes ininternal controls.

Ourmanagement, including our Chief Executive Officer and Chief Financial Officer,also supervised and participated in an evaluation of any changes in internalcontrols as of the end of the period covered by this report and that havematerially affected, or are reasonably likely to materially affect, ourinternal controls over financial reporting.  Based on that evaluation, ourexecutive management, including our Chief Executive Officer and our ChiefFinancial Officer, concluded that there had been no changes to our internalcontrols that would have had a material affect over the financial reporting forthe period ending December 24, 2004.

----

PART II - OTHER INFORMATION

Item 1.        LegalProceedings

We areinvolved in legal actions in the normal course of business, including auditsand investigations by various governmental agencies that result from our workas a governmental contractor.

Item 2.        UnregisteredSales of Equity Securities and Use of Proceeds

During thesecond quarter of FY 2005, there were 3,400 shares of common stock issued dueto the exercise of stock options for $5,050.  Of these options, 3,000 had anexercise price of $1.45 and 400 had an exercise price of $1.75.

Subsequent toperiod end, the Company will issue 57,406 shares of common stock to employeesthat participated in the Employee Stock Purchase Plan.  The period ofperformance is from July 1, 2004 to December 31, 2004.  The Companywill receive proceeds of approximately $135,000.

Item 3.        DefaultsUpon Senior Securities

None.

Item 4.        Submissionof Matters to a Vote of Securities Holders

On November 15,2004, the Company held its 2004 Annual Meeting of Shareholders.  There were 8,158,166shares eligible as of the record date and 6,210,910 shares were representedeither in person or by proxy at the meeting.  The following matters were votedon at the meeting:

(a.) Proposalto elect the Directors pursuant to management's nominations.  This proposal wasapproved with 6,199,992 shares voting in favor, 10,918 shares voting against.

(b.) Proposal to approvethe appointment of KPMG LLP as the independent public accountants for thecorporation for its 2005 fiscal year.  This proposal was approved with 6,155,900shares voting in favor, 39,912 shares voting against, and 15,098 sharesabstaining.

(c.) Proposal to amendthe SYS Technologies, Inc. 2003 Stock Option Plan.  This proposal was approvedwith 5,969,576 shares voting in favor, 210,157 shares voting against, and 31,177shares abstaining.

Item 5.       OtherInformation

                At the RegularBoard of Directors meeting held on November 15, 2004, the following wereelected as Chairman and Officers of the Company:
> 
David A. Derby
   Chairman
John M. Burns
   Vice-Chairman
Clifton L. Cooke, Jr.
   President and Chief		Executive Officer
Edward M. Lake
   Chief Financial		Officer
Michael W. Fink
   Secretary
Robert A. Babbush
   Assistant Secretary
Kenneth D. Regan
   President, Defense		Solutions Group

At the RegularBoard of Directors meeting held on November 15, 2004, the following wereelected as Chairman and Members of the Board of Directors' Committees:
> Audit Committee:   ExecutiveCommittee:Thomas A.				Page, Chairman   David A.				Derby, ChairmanDavid A.				Derby   John M.				BurnsJohn R.				Hicks   Clifton L.				Cooke, Jr.    John R.				Hicks          CompensationCommittee:    SeniorAdvisory Committee:John M.				Burns, Chairman   Alfred M.				GrayThomas A.				Page   Clifton L.				Cooke, Jr.Gail K.Naughton   John R.				Hicks     

Item 6.        Exhibitsand Reports on Form 8-K

(a)    List of exhibits
> 
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  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 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 SB-2 dated May 24, 2002.

2.4
			 
Polexis merger agreement, filed as Exhibit 2.2 to this  Company's SB-2 dated April 19, 2004.

2.5
			 
Asset purchase and sale agreement effective as of December  15, 2004, by and between SYS and Xsilogy, Inc.

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.

3(i)
			 
Articles of Incorporation for SYS, as amended, filed as  Exhibit 3.1 to the Company's Registration Statement on Form SB-2, filed May  30, 2002, and incorporated by this reference.

3(ii)
			 
Bylaws of SYS filed as Exhibit 3.2 to the Company's  Registration Statement on Form SB-2, filed May 30, 2002, and incorporated by  this reference.

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 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 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 in  Exhibit 3(i).

4.4
			 
Form of Subscription Agreement from the November 2001  Offering, filed as Exhibit 4.1 to this Company's SB-2 dated May 24, 2002.

4.5
			 
Form of Convertible Note from the November 2001 Offering,  filed as Exhibit 4.2 to this Company's SB-2 dated May 24, 2002.

4.6
			 
Form of Subscription Agreement from the December 2003  Offering (Convertible Note from December 2003 Offering included), filed as  Exhibit 4.3 to this Company's SB-2 dated April 19, 2004.

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 an Attachment to the  Company's Proxy Statement filed on March 7, 2003, and incorporated by this  reference.

10.3
			 
SYS 2003 Employee Stock Purchase Plan filed as an  Attachment to the Company's Proxy Statement filed on March 7, 2003, and  incorporated by this reference.

10.4
			 
Employment contract for Clifton L. Cooke, Jr., the  Company's Chief Executive Officer filed as Exhibit 10.4 to the Company's 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 Financial Operations  filed as Exhibit 10.5 to the Company's 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 Form 10-KSB for the fiscal year ended June 30, 2004,  and incorporated by this reference.

10.7
			 
Employment contract for Robert A. Babbush, the Company's  Assistant Secretary and Sr. Vice President of Administration filed as Exhibit  10.7 to the Company's Form 10-KSB for the fiscal year ended June 30, 2004,  and incorporated by this reference.

10.8
			 
Employment contract for Colin Hirayama, the Company's Sr.  Vice President of Technology Assessment filed as Exhibit 10.8 to the  Company's Form 10-KSB for the fiscal year ended June 30, 2004, and incorporated  by this reference.

10.9
			 
Employment contract for Robert Holmes, the Company's  Defense Solutions Group's Sr. Vice President of Defense Operations filed as  Exhibit 10.9 to the Company's Form 10-KSB for the fiscal year ended June 30,  2004, and incorporated by this reference.

10.10
			 
Employment contract for Kenneth D. Regan, the Company's  Defense Solutions Group's President and Chief Operating Officer filed as  Exhibit 10.10 to the Company's Form 10-KSB for the fiscal year ended June 30,  2004, and incorporated by this reference.

10.11
			 
Employment contract for Linda E. Gagnon, the Company's  Defense Solutions Group's Division Sr. Vice President, Engineering and  Management Solutions filed as Exhibit 10.11 to the Company's Form 10-KSB for  the fiscal year ended June 30, 2004, and incorporated by this reference.

10.12
			 
Employment contract for Richard Kadel, the Company's  Defense Solutions Group's Division Sr. Vice President, Intelligent Solutions  filed as Exhibit 10.12 to the Company's Form 10-KSB for the fiscal year ended  June 30, 2004, and incorporated by this reference.

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.

(b)    Reports on Form 8-K

On December 29,2004, the Company filed an 8-K announcing that its stock would be listed on theAmerican Stock Exchange effective January 3, 2005.

OnDecember 30, 2004, the Company filed an 8-K announcing that it hadacquired all of the assets of Xsilogy, Inc.

On January 11,2005, the Company filed an 8-K announcing that it had acquired all of theoutstanding securities of Antin Engineering, Inc.

----

SIGNATURES

In accordance with the requirementsof the Exchange Act, the registrant caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized.
|        | SYS                     |
|--------|-------------------------|
|        | (Registrant)            |
|   |                    |
|        |                         |
|        |                         |
| Date:  |  February 4, 2005  |  | /s/ Clifton L. Cooke, Jr. |  |
|        | Clifton L. Cooke, Jr.   |
|        | Chief Executive Officer |
|   |                    |
|        |                         |
|        |                         |
| Date:  |  February 4, 2005  |  | /s/ Edward M. Lake |  |
|        | Edward M. Lake          |
|        | Chief Financial Officer |

----

**Exhibit 31.1**

**CERTIFICATION OF CHIEFEXECUTIVE 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 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: February 4, 2005 | By: | /s/  Clifton L. Cooke, Jr. |  |
|-------------------------|-----|---------------------------------|--|
|                         |     | Clifton L. Cooke, Jr.           |
|                         |     | Chief Executive Officer         |

----

Exhibit 31.2

CERTIFICATION OF CHIEFFINANCIAL OFFICER

I,Edward M. Lake, certify that:
| 1.     | I have		reviewed this quarterly report on Form 10-QSB 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: February 4, 2005 | By: | /s/  Edward M. Lake |  |
|-------------------------|-----|--------------------------|--|
|                         |     | Edward M. Lake           |
|                         |     | Chief Financial Officer  |

----

**Exhibit 32.1**

**CERTIFICATION OF CHIEFEXECUTIVE OFFICER**

I,Clifton L. Cooke, Jr., Chief Executive Officer of SYS (the "Registrant"), dohereby certify pursuant to Rule 15d-14(b) of the Securities and Exchange Act of1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the UnitedStates Code that:

(1)the Registrant's Quarterly Report on Form 10-QSB of the Registrant for thequarter ended December 24, 2004 (the "Report"), to which this statement isfiled 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 materialrespects, the financial condition and results of operations of the Registrant.
| Dated: February 4, 2005 | By: | /s/  Clifton L. Cooke, Jr. |  |
|-------------------------|-----|---------------------------------|--|
|                         |     | Clifton L. Cooke, Jr.           |
|                         |     | Chief Executive Officer         |

----

**Exhibit 32.2**

**CERTIFICATION OF CHIEFFINANCIAL OFFICER**

I,Edward M. Lake, Chief Financial Officer of SYS (the "Registrant"), do herebycertify 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 StatesCode that:

(1)the Registrant's Quarterly Report on Form 10-QSB of the Registrant for thequarter ended December 24, 2004 (the "Report"), to which this statement isfiled as an exhibit, fully complies with the requirements of Section 13(a) or15(d) of the Securities Exchange Act of 1934, as amended; and

(2)the information contained in the Report fairly presents, in all materialrespects, the financial condition and results of operations of the Registrant.
| Dated: February 4, 2005 | By: | /s/ Edward M. Lake      |  |
|-------------------------|-----|-------------------------|--|
|                         |     | Edward M. Lake          |
|                         |     | Chief Financial Officer |