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, 1996 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 ID 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 No X
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; 3,215,259 shares outstanding as of November 30, 1996.
SYSTEMS TECHNOLOGY ASSOCIATES, INC.
Notes to Financial Statements
<TABLE>
<CAPTION>
1. Inventories:
Inventories consist of the following:
<S> <C> <C>
11/30/96 11/30/95
Raw Materials $ 34,039 $ 253,000
Work-In-Process -0- - 0-
Sub-assembly 9,270 60,808
Total: $ 43,309 $ 313,808
</TABLE>
ITEM 2. Management's Discussion of Analysis of Financial
Condition and Results of Operations.
Results of Operations
Sales for the Quarter ended November 30, 1996 totaled $629,961, a substantial
increase over last year's sales of $154,909. Much of the Quarter's sales
resulted from one large order which does not represent an on going stream of
revenue. In spite of the large level of sales for the Quarter, the Company
incurred an operating loss of $6,203. There were two main reasons for the
loss. First the margins on the business generated were low, as the Company was
acting as a reseller for most of the sales generated. Secondly, the Company
substantially increased its overhead with the hiring of our new President and
an administrative manager.
Upon obtaining the results for the quarter and observing the results for
December and January, Management made an assessment of its resources, sales
potential, and its cost structure. As the Company has a negative net worth,
it cannot incur operation losses for any sustained period of time. Therefore,
the Company embarked on a drastic cost reduction program in February that
reduced monthly overhead from about $40,000 to $12,000 as of May 1, 1997.
Due to our current low margins as a reseller, the Company still needs to
generate about $100,000 in monthly sales to break even. While management
feels this is achievable, the Company has no protected territories for the
products it resells and thus competes directly with the manufacturers for
sales. The Company will undergo further cost cutting, if necessary, to survive.
In addition, the Company will work to find other related products where we can
both improve our slim margins and increase sales.
Liquidity and Capital Resources
Continuing losses have added to the existing negative net worth. Lack of capital
and on going debt payments continue to threaten the Company's survival, keeping
pressure on management and limiting our options for new directions.
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 was one Form 8-K 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: 11 June 1997 Systems Technology Associates, Inc.
(Registrant)
/s/ Terry A. Scott
Terry A. Scott
Chairman of the Board
EXHIBIT INDEX
Exhibits
* 3(a) - Articles of Incorporation of Registrant
* 3(b) - By-Laws of Registrant
*Incorporated by reference from exhibits to Registrants for
S-18 Registration Statement, Registration No. 2-94042W.
<TABLE>
<CAPTION>
SYSTEMS TECHNOLOGY ASSOCIATES, INC.
Balance Sheet
<S> <C> <C>
Unaudited Audited
ASSETS 11/30/96 5/31/96
CURRENT ASSETS:
Cash 20,445 24,859
Accounts Receivable 562,162 89,252
Costs and Estimated
Earnings in excess
of Billings on
Uncompleted Contracts 11,178 42,348
Inventory 43,309 43,309
Prepaid Expenses and
Miscellaneous 1,375 25
TOTAL CURRENT ASSETS 638,469 199,793
Fixed Assets Net of accum
deprn 15,854 14,294
TOTAL ASSETS 654,323 214,086
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes Payable-Bank 12,500 12,500
Notes Payable-Other 61,624 37,950
Accounts Payable-Trade 502,179 10,841
Payroll Taxes Payable 3,060 2,946
Accrued Expenses 18,964 24,934
TOTAL CURRENT LIABILITIES 598,327 89,171
LONG TERM LIABILITIES:
Notes Payable-Bank 7,958 14,208
Notes Payable-Other 78,233 154,233
Accrued Expenses 30,076 68,366
Deferred Accounts
Payable 16,700 63,650
TOTAL LONG TERM
LIABILITIES 132,967 300,458
TOTAL LIABILITIES 731,294 389,628
STOCKHOLDERS' EQUITY:
Redeemable Preferred
Stock, $50 Par
2000 shrs Authorized,
2000 issued - 100,000
Common Stock, $.50 Par,
8,000,000 shrs
Authorized,
3,424,363 shrs
Issued, 3,215,259
shrs Outstanding 1,754,585 1,712,635
Capital in Excess of
Par Value 2,464,536 2,330,161
Retained Deficit (4,276,352) (4,317,770)
Treasury Stock (19,740) (568)
TOTAL STOCKHOLDERS'
EQUITY (76,971) (175,542)
TOTAL LIABILITIES &
STOCKHOLDERS'
EQUITY 654,323 214,087
</TABLE>
<TABLE>
<CAPTION>
SYSTEMS TECHNOLOGY ASSOCIATES, INC.
Statements of Operations
(Unaudited)
<S> <C> <C>
THREE MONTHS
ENDED AS OF:
11/30/96 11/30/95
Revenues:
Sales of product less sales
discount 614,470 154,909
Cost of sales 533,314 129,443
Research and development
expense - -
Selling, general &
administrative expense 96,546 45,334
Interest expense 3,378 4,588
Total 633,238 179,365
Operating Income (18,768) (24,456)
Other Income
Extinguishment/Forgiveness
of Indebtedness - 30,857
Income (Loss) before
provision for income taxes
and extraordinary item (18,768) 6,401
Provision for income taxes - 960
Net income (loss)
before extraordinary item (18,768) 5,441
Extraordinary Items:
Tax Benefit from prior year
Net Operating Loss
Carryforward - 960
Net Income (Loss) (18,768) 6,401
Earnings (Loss) per share
(based on the weighted
average number of shares
outstanding in each year:
Income (Loss) before
extraordinary items $- $(0.0)
Extraordinary items $- $-
Net Income Per Share $- $0.0
Weighted average number of
shares outstanding 3,215,259 3 ,424,363
</TABLE>
<TABLE>
<CAPTION>
SYSTEMS TECHNOLOGY ASSOCIATES, INC.
Statements of Operations
(Unaudited)
<S> <C> <C>
SIX MONTHS ENDED
AS OF
11/30/96 11/30/95
Revenues:
Sales of product less
sales discount 746,053 513,653
Cost of sales 621,851 420,635
Selling, general &
administrative expense 152,214 97,726
Interest expense 6,874 10,040
Total 780,940 528,401
Operating Income (34,887) (14,748)
Other Income
Extinguishment/Forgiveness
of Indebtedness 76,305 30,857
Income (Loss) before
provision for income
taxes and extraordinary
item 41,418 16,109
Provision for income
taxes 6,213 2,416
Net income (loss)before
extraordinary item 35,205 13,693
Extraordinary Items:
Tax Benefit from prior
year Net Operating
Loss Carryforward 6,213 2,416
Net Income (Loss) 41,418 16,109
Earnings (Loss) per share
(based on the weighted
average number of shares
outstanding in each year:
Income (Loss) before
extraordinary items $- $-
Extraordinary items $0.02 $0.01
Net Income Per Share $0.01 $0.01
Weighted average number of
shares outstanding 3,215,259 3,424,363
</TABLE>
<TABLE>
<CAPTION>
SYSTEMS TECHNOLOGY ASSOCIATES, INC.
Statements of Cash Flow
(Unaudited)
<S> <C> <C>
11/30/96 11/30/95
OPERATING ACTIVITIES:
Net Income (Loss) 41,418 16,109
Adjustments to reconcile
Net Income (Loss) to
Net Cash provided by
operating activities:
Depreciation and
Amortization 3,333 4,238
Decrease (Increase)
in Assets:
Accounts Receivable-
Billed (472,911) 43,088
Accounts Receivable-
Unbilled 31,170 157,196
Inventory - -
Prepaid Expenses &
Miscellaneous (1,350) (3,363)
Deposits - -
Increase (Decrease) in
Liabilities:
Accounts Payable-
Trade 491,338 (75,567)
Payroll Taxes Payable 114 1,005
Accrued Expenses (12,990) (28,743)
Advance from Customer 7,020 1,656
Net Cash Provided by
(Used in) Operating
Activities 87,142 115,619
INVESTING ACTIVITIES:
Acquisition of Property &
Equipment (4,891) -
Net Cash Used in Investing
Activities (4,891) -
FINANCING ACTIVITIES:
Proceeds from Additional
Borrowing 26,000 -
Extinguishment/Forgiveness
of Debt (76,000) (30,857)
Repayment of Notes Payable (8,576) (23,018)
Increase Paid in Capital 134,374 -
Issue Common Stock 41,950 -
Purchase Treasury Stock (39,797) -
Sale of Treasury Stock 20,625 -
Retirement Preferred Stock (100,000) -
Retirement long-term
Deferred Payables (46,950) -
Net Change in long-term
Accrued Expenses (38,291) -
Net Cash Provided by
(Used in) Financing
Activities (86,665) (53,875)
Net Increase (Decrease)
in Cash (4,414) 61,744
Cash-Beginning of Year 24,859 35,263
Cash-Ending Balance 20,445 97,007
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> NOV-30-1996
<EXCHANGE-RATE> 1
<CASH> 20,445
<SECURITIES> 0
<RECEIVABLES> 256,162
<ALLOWANCES> 0
<INVENTORY> 43,309
<CURRENT-ASSETS> 638,469
<PP&E> 27,427
<DEPRECIATION> 11,573
<TOTAL-ASSETS> 654,323
<CURRENT-LIABILITIES> 598,327
<BONDS> 0
0
0
<COMMON> 1,754,585
<OTHER-SE> (1,831,556)
<TOTAL-LIABILITY-AND-EQUITY> 654,323
<SALES> 614,470
<TOTAL-REVENUES> 614,470
<CGS> 533,314
<TOTAL-COSTS> 533,314
<OTHER-EXPENSES> 99,924
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,378
<INCOME-PRETAX> (18,768)
<INCOME-TAX> 0
<INCOME-CONTINUING> (18,768)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18,768)
<EPS-PRIMARY> (0.070)
<EPS-DILUTED> (0.070)
</TABLE>
