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<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED COMMISSION FILE NO.
NOVEMBER 30, 1995 0-13920
SYSTEMS TECHNOLOGY ASSOCIATES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA 54-0802071
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER I.D. NO.)
INCORPORATION OR ORGANIZATION)
14 BRYANT COURT
STERLING, VIRGINIA 20166
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(703) 471-8000
(REGISTRANT'S TELEPHONE NUMBER)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date: Common Stock, par value $.50
per share; 3,424,363 shares outstanding as of November 30, 1995.
<PAGE> 2
PART I - FINANCIAL INFORMATION SYSTEMS TECHNOLOGY ASSOCIATES, INC.
Balance Sheet
ITEM I. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
ASSETS
Unaudited Audited
------------ ------------
NOVEMBER 30, May 31,
1995 1995
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash 97,007 35,263
Accounts Receivable 84,876 127,964
Costs and Estimated Earings in Excess 23,331 180,526
of Billings on Uncompleted Contracts
Inventory 313,808 313,808
Prepaid Expenses and Miscellaneous 8,682 5,319
------------ ------------
Total Current Assets 527,705 662,881
Fixed assets - cost net of accum deprn 25,817 30,055
------------ ------------
TOTAL ASSETS 553,522 692,936
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes Payable - Bank 12,500 12,500
Notes Payable - Other 48,740 59,850
Accounts Payable - Trade 43,101 118,668
Payroll Taxes Payable 2,747 1,304
Accrued Expenses 57,318 93,674
Advance From Customer 19,538 17,882
------------ ------------
Total Current Liabilities 183,944 303,878
------------ ------------
LONG-TERM LIABILITIES:
Notes Payable - Bank 20,458 26,708
Notes Payable - Other 164,259 169,916
Accrued Expenses 21,417 45,317
Deferred Interest-Former Officer 31,418 31,418
Deferred Accounts Payable 60,505 60,505
------------ ------------
Total Long-term Liabilities 298,057 333,864
------------ ------------
Total Liabilities 482,001 637,742
------------ ------------
STOCKHOLDERS' EQUITY
Redeemable Preferred Stock, $50 Par Value 100,000 100,000
2,000 Shrs Authorized 2,000 Issued and
Outstanding ($200,000 Aggregate Liquidation Preference)
Common Stock, $.50 Par Value, 8,000,000 Shares 1,712,635 1,712,635
Authorized, 3,425,269 Shrs Issued and
3,424,363 Shares Outstanding
Capital in Excess of Par Value 2,330,161 2,330,162
Retained Deficit (4,071,225) (4,087,553)
Treasury Stock (50) (50)
------------ ------------
Total Stockholders' Equity 71,521 55,194
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 553,522 692,936
============ ============
</TABLE>
<PAGE> 3
SYSTEMS TECHNOLOGY ASSOCIATES, INC.
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------
NOVEMBER 30, NOVEMBER 30,
1995 1994
-------------- -------------
<S> <C> <C>
Revenues:
Sales of product less sales discount 154,909 311,828
-------------- -------------
Cost of sales 129,443 206,171
Research and Development expense 0 4,582
Selling, general & administrative expense 45,334 39,233
Interest expense 4,588 6,674
-------------- -------------
179,365 256,660
-------------- -------------
Operating Income (Loss) (24,456) 55,168
Other Income
Extinguishment/Forgiveness of Indebtedness 30,857 219,356
-------------- -------------
Income(Loss) before provision for income taxes
and extraordinary item 6,401 274,524
Provision for income taxes 960 71,732
-------------- -------------
Net income(loss) before extraordinary item 5,441 202,792
Extraordinary Items:
Tax Benefit from Prior Year Net Operating Loss
Carryforward 960 71,732
-------------- -------------
Net Income (Loss) 6,401 274,524
============== =============
Earning (Loss) per share (based upon the weighted
average number of shares outstanding in each years:
Income before extraordinary items $0.00 $0.06
Extraordinary items 0.00 0.02
-------------- -------------
Net Income Per Share $0.00 $0.08
============== =============
Weighted average number of shares outstanding 3,424,363 3,424,363
============== =============
</TABLE>
<PAGE> 4
SYSTEMS TECHNOLOGY ASSOCIATES, INC.
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-------------------------------------
NOVEMBER 30, NOVEMBER 30,
1995 1994
------------ -------------
<S> <C> <C>
Revenues:
Sales of product less sales discount 513,653 468,065
------------ -------------
Cost of sales 420,635 336,033
Research and Development expense 0 15,187
Selling, general & administrative expense 97,727 76,465
Interest expense 10,040 14,200
------------ -------------
528,401 441,885
------------ -------------
Operating Income (Loss) (14,748) 26,180
Other Income
Extinguishment/Forgiveness of Indebtedness 30,857 219,356
------------ -------------
Income(Loss) before provision for income taxes
and extraordinary item 16,109 245,536
Provision for income taxes 2,416 71,732
------------ -------------
Net income(loss) before extraordinary item 13,693 173,804
Extraordinary Items:
Tax Benefit from Prior Year Net Operating Loss
Carryforward 2,416 71,732
------------ -------------
Net Income (Loss) 16,109 245,536
============ =============
Earning (Loss) per share (based upon the weighted
average number of shares outstanding in each years:
Income before extraordinary items $0.00 $0.05
Extraordinary items 0.01 0.02
------------ -------------
Net Income Per Share $0.01 $0.07
============ =============
Weighted average number of shares outstanding 3,424,363 3,424,363
============ =============
</TABLE>
<PAGE> 5
SYSTEMS TECHNOLOGY ASSOCIATES, INC.
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
NOVEMBER 30, NOVEMBER 30,
1995 1994
----------- ------------
<S> <C> <C>
OPERATING ACTIVITIES:
- -------------------------------------------
Net Income (Loss) $16,109 $245,536
Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided by (used in) Operating
Activities:
Depreciation and Amortization 4,238 3,642
Extinguishment/Forgiveness of Debt (30,857) (219,356)
Decrease (Increase) in Assets:
Accounts Receivable-Billed 43,088 11,082
Accounts Receivable-Unbilled 157,195 (119,717)
Inventory 0 (77,144)
Prepaid Expenses and Miscellaneous (3,363) (2,730)
Deposits 0 6,280
Increase (Decrease) in Liabilities:
Accounts Payable-Trade (75,567) 71,058
Payroll Taxes Payable 1,005 (19,511)
Accrued Expenses (28,743) 29,733
Advance from Customer 1,656 18,532
----------- ------------
Net Cash Provided by (Used in) operating
Activities $84,762 ($52,595)
----------- ------------
INVESTING ACTIVITIES:
- -------------------------------------------
Acquisition of Property and Equipment $0 ($12,114)
----------- ------------
Net Cash Used in Investing Activities $0 ($12,114)
----------- ------------
FINANCING ACTIVITIES:
- -------------------------------------------
Proceeds from Additional Borrowing $0.00 $92,500
Repayment of Notes Payable (23,018) (96,042)
Proceeds on Sale of Stocks 0 18,750
Net Increase in Long-Term Accrued Expenses 0 3,441
----------- ------------
Net Cash Provided by (Used in) Financing
Activities ($23,018) $18,649
----------- ------------
Net Increase (Decrease) in Cash 61,744 (46,060)
Cash-Beginning of Year 35,263 54,700
----------- ------------
Cash-Ending Balance $97,007 $8,640
=========== ============
</TABLE>
<PAGE> 6
SYSTEMS TECHNOLOGY ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS
1. Inventories:
Inventories consist of the following:
<TABLE>
<CAPTION>
11/30/95 11/30/94
--------- ---------
<S> <C> <C>
Raw Materials $ 253,000 $ 269,249
Work-In-Process -0- -0-
Sub-assembly 60,808 56,377
--------- ---------
Total: $ 313,808 $ 325,626
========== =========
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION OF ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
Sales for the three months ended November 30, 1995 totaled $154,909, down
substantially from last year's $311,828. Sales were weak across all of STA's
product lines. While weakness was expected in our older product lines, a drop
off in the lines where STA acts as a distributor was unexpected. Therefore, in
December, the Company hired a new sales manager and compensation will be linked
to the level of sales obtained.
Costs of Goods Sold exceeded the Company's sales for the quarter, thus
resulting in an operating loss of $24,456 as sales levels were not adequate to
cover both variable and fixed production costs. The Company managed to show
Income Before Taxes only because it reversed an accrued expense which was
dependent on reaching an established level of sales in one of the product
lines.
The Company will continue on the lookout for additional product lines that may
be of interest to our existing customer base. In addition, on December 18th,
the Company started up a new division called STA Network Services. Network
Services will operate in two related areas. First, it will install cabling to
transmission capabilities and speed and to link computer systems together in
networks. The second area of operations is to install both the hardware andd
software necessary for these computers to form a network. This is a new and
exciting field for the Company and management feels that it holds great promise
for the future. Sales for the Network Services division are expected to
approach $40,000 for January, its first full month of operation.
LIQUIDITY AND CAPITAL RESOURCES
While liquidity is adequate for the moment, it has deteriorated over the last
three months as profitability has suffered and the Company continued to make
mandatory payments ON its large level of debt. It is hoped that a
<PAGE> 7
more productive sales effort in product lines the Company distributes and in
the new Network Services division will improve sales and restore an acceptable
level of profitability. The Company also hopes to reduce payment levels on its
largest monthly debt obligations in order to retain funds necessary to foster
growth. While the Company has had operating income of over $350,000 in the
last four years, it has all been consumed by our stifling debt service
requirements.
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
a) Reference is made to the Exhibit Index immediately
following the signature page of this report.
b) There were no Form 8-K's filed during this quarter.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: 01 FEBRUARY 1996 Systems Technology Associates, Inc.
----------------- ---------------------------------------
(Registrant)
/s/ TERRY A. SCOTT
-------------------------
Terry A. Scott
Chairman of the Board
<PAGE> 8
EXHIBIT INDEX
Exhibits
* 3(a) - Articles of Incorporation of Registrant
* 3(b) - By-Laws of Registrant
27 - Financial Data Schedule
*Incorporated by reference from exhibits to Registrants for
S-18 Registration Statement, Registration No. 2-94042W.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-START> SEP-01-1995
<PERIOD-END> NOV-30-1995
<CASH> 97,007
<SECURITIES> 0
<RECEIVABLES> 108,207
<ALLOWANCES> 0
<INVENTORY> 313,808
<CURRENT-ASSETS> 527,705
<PP&E> 470,287
<DEPRECIATION> 444,470
<TOTAL-ASSETS> 553,522
<CURRENT-LIABILITIES> 183,944
<BONDS> 298,057
0
100,000
<COMMON> 1,712,635
<OTHER-SE> (1,741,114)
<TOTAL-LIABILITY-AND-EQUITY> 553,522
<SALES> 154,909
<TOTAL-REVENUES> 154,909
<CGS> 129,443
<TOTAL-COSTS> 129,443
<OTHER-EXPENSES> 49,922
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,588
<INCOME-PRETAX> 6,401
<INCOME-TAX> 960
<INCOME-CONTINUING> 6,401
<DISCONTINUED> 0
<EXTRAORDINARY> 960
<CHANGES> 0
<NET-INCOME> 6,401
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
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