CTA INCORPORATED, S-1, 1998-09-25

CTA INCORPORATED
S-1, 1998-09-25
COMPUTER PROGRAMMING SERVICES

Previous: UNITED RETAIL GROUP INC/DE, S-8 POS, 1998-09-25

Next: INTEGRATED PROCESS EQUIPMENT CORP, 10-K, 1998-09-25

<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 25, 1998.

REGISTRATION NO.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM S-1

REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
------------------------

COMPUTER TECHNOLOGY ASSOCIATES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
COLORADO 7373 84-0797618
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
ORGANIZATION)
</TABLE>

------------------------

6903 ROCKLEDGE DRIVE
BETHESDA, MARYLAND 20817
(301) 581-3200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

MR. GREGORY H. WAGNER
COMPUTER TECHNOLOGY ASSOCIATES, INC.
6903 ROCKLEDGE DRIVE
BETHESDA, MARYLAND 20817
(301) 581-3200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------

COPY TO:
DEAN M. SCHWARTZ, ESQ.
STRADLEY, RONON, STEVENS & YOUNG, LLP
2600 ONE COMMERCE SQUARE
PHILADELPHIA, PENNSYLVANIA 19103
(215) 564-8000
------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement and from
time to time thereafter.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
TITLE OF EACH MAXIMUM MAXIMUM
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $0.01 per
share............................ 1,916,334 $5.84 $11,191,391 $3,301.46
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

COMPUTER TECHNOLOGY ASSOCIATES, INC.

CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K

<TABLE>
<CAPTION>
FORM S-1 ITEM LOCATION IN PROSPECTUS
------------- ----------------------
<S> <C> <C>
1. Forepart of the Registration Statement and Outside Front Cover Page
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages Inside Front Cover Page; Outside Back
of Prospectus Cover Page
3. Summary Information, Risk Factors and Ratio The Company; Risk Factors
of Earnings to Fixed Charges
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Outside Front Cover Page; Determination of
Offering Price
6. Dilution Book Value Dilution
7. Selling Security Holders Plan of Distribution
8. Plan of Distribution Plan of Distribution
9. Description of Securities to be Registered Description of Capital Stock
10. Interests of Named Experts and Counsel Plan of Distribution; Management; Security
Ownership of Management and Principal
Stockholders
11. Information with Respect to the Registrant The Company; Risk Factors; Dividend Policy;
Selected Financial Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business; Management; Security Ownership
of Management and Principal Stockholders;
Certain Transactions; Description of
Capital Stock
12. Disclosure of Commission Position on Description of Capital Stock
Indemnification for Securities Act
Liabilities
</TABLE>
<PAGE> 3

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BY ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED SEPTEMBER 25, 1998

PROSPECTUS

1,916,334 SHARES OF COMMON STOCK

COMPUTER TECHNOLOGY ASSOCIATES, INC.

This Prospectus covers 1,916,334 shares of common stock, par value $.01 per
share (the "Common Stock"), of Computer Technology Associates, Inc., a Colorado
corporation ("CTA" or the "Company"), 1,303,568 shares of which may be offered
and sold by the Company and 612,766 shares of which may be offered and sold by
certain stockholders of the Company (the "Selling Shareholders"). See "Plan of
Distribution." The Company will not receive any portion of the net proceeds from
the sale of shares by the Selling Shareholders.

The 1,303,568 shares of Common Stock offered by the Company may be offered
for cash as follows: (i) shares may be offered and sold by the Company to
employees, consultants and directors in the limited market (the "Limited
Market") maintained by Capitol Securities Management Incorporated ("Capitol");
(ii) shares may be offered and sold to employees, consultants and directors
pursuant to the Company's 1991 Stock Option, Stock Purchase Right and Stock
Bonus Plan (the "1991 Plan"); (iii) shares may be offered and sold to a trustee
for the benefit of employees under the Company's Employee Stock Ownership Plan
(the "ESOP"); (iv) shares may be issued upon the exercise of options granted and
available to be granted under the Company's stock option plans other than the
1991 Plan and non-plan individual stock option agreements and (v) shares may be
issued to employees, consultants and directors pursuant to bonuses granted by
the Company from time to time outside the 1991 Plan. The 612,766 shares of
Common Stock offered by the Selling Shareholders may be offered and sold to
employees, consultants and directors of the Company in the Limited Market. See
"Plan of Distribution." All of the shares of Common Stock offered hereby will be
subject to certain restrictions (including restrictions on their
transferability) pursuant to the terms of stock restriction agreements (the
"Stock Restriction Agreements") and may be subject to certain other
contingencies. See "Plan of Distribution," "Management -- Executive
Compensation," "-- Employee Benefit Plans" and "Description of Capital
Stock -- Restrictions on Common Stock." The Selling Shareholders and all other
stockholders (other than the Company and the Retirement Plans, as defined
herein) will pay a commission to Capitol equal to 1.5 percent of the proceeds
from the sale of shares of Common Stock sold by them in the Limited Market.
Capitol is a registered broker-dealer which has agreed to effect purchases and
sales of the Company's securities. See "Determination of Offering Price -- The
Limited Market."

There is no public market for the Common Stock and there can be no
assurance that such a market will develop. See "Determination of Offering
Price -- The Limited Market."

See "Risk Factors" beginning on page 5 for a description of certain risks
that should be considered by prospective investors.

------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------

The purchase price of the shares of Common Stock offered hereby in the
Limited Market will be at the price determined by the Board of Directors (the
"Formula Price") pursuant to a valuation process, which includes the formula set
forth below (the "Formula"). The Board of Directors sets (i) the Discount
Factor, which is intended to reflect a discount for the limited liquidity of the
Common Stock, and (ii) the Market Index, which is a number intended to reflect
current securities market conditions for companies comparable to the Company, in
the Formula annually based upon the recommendation of an independent appraisal
firm. The 11.34 multiplier is a constant representing the factor necessary to
equalize the initial stock price calculated by the Formula to the appraised
price for the Common Stock on the date the Formula was adopted. The Formula
Price will be reviewed at least annually. The Formula used in determining the
Formula Price is as follows: the price per share is equal to the product of (i)
a number representing one minus the Discount Factor ("D") and (ii) a fraction,
the denominator of which is the number of outstanding shares and share
equivalents of the Company ("Wi") and the numerator of which is the sum of (a) a
number which is the product of 2.25 and the book value of the Company at the end
of the applicable period ("BV") and (b) a number which is the product of (1)
11.34 ("K") and (2) a number equal to the product of (I) the Market Index
("MI"), (II) the after-tax profits from operations for the last 12 month period
("P") and (III) a fraction, the denominator of which is 2 and the numerator of
which is the sum of (A) the change in contract margin ("CM"), which is a number
equal to the contract margin for the last 12 months divided by the contract
margin for the prior 12 month period, which contract margin is the contract fee
as a percentage of contract cost adjusted for program reserves and allowances
and (B) the change in revenue growth ("R"), which is a number equal to a
fraction, the numerator of which is revenue for the last 12 months and the
denominator of which is the revenue for the prior 12 month period multiplied by
the change in the consumer price index for that period. The Formula Price of the
Common Stock, expressed as an equation, is as follows:

math formula

On June 30, 1998, the Formula Price was $5.84.

The date of this Prospectus is , 1998.

<PAGE> 4

FORWARD-LOOKING STATEMENTS

This Prospectus contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These statements appear in
a number of places in this Prospectus and include statements regarding the
intent, belief or current expectations of the Company or its officers with
respect to, among other things, the Company's anticipated financial performance
or condition, business prospects, technological developments, new products, the
impact of competition and similar matters. Prospective investors are cautioned
that any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties and that actual results may
differ materially from those in the forward-looking statements as a result of
various factors. The accompanying information contained in this Prospectus,
including, without limitation, the information set forth under the caption "Risk
Factors" identifies important factors that could cause such differences. The
Company undertakes no obligation to publicly revise these forward-looking
statements to reflect events or circumstances that arise after the date hereof.

AVAILABLE INFORMATION

This Prospectus does not contain all the information set forth in the
Registration Statement on Form S-1 and exhibits thereto, including any
amendments (the "Registration Statement"), of which this Prospectus forms a
part, and which the Company has filed with the Securities and Exchange
Commission (the "SEC" or "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"). For further information with respect to the
Company and the securities offered hereby, reference is made to such
Registration Statement. Statements contained herein as to the provisions of
documents are necessarily summaries of such documents, and each such statement
is qualified in its entirety by reference to the copy of the applicable document
filed with the Commission.

The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information which
can be inspected and copied at the offices of the Commission at Room 1024, 450
Fifth Street, N.W., Washington, DC 20549; Suite 1400, Northwestern Atrium
Center, 500 West Madison Street, Chicago, IL 60661; and World Trade Center, New
York, NY 10048. Copies of such materials can be obtained at prescribed rates
from the Commission's Public Reference Section, Washington, DC 20549. The
Commission maintains a web site at http://www.sec.gov that contains reports,
proxy statements and other information regarding issuers that file
electronically with the Commission.

2
<PAGE> 5

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Forward-Looking Statements.................................. 2
Available Information....................................... 2
The Company................................................. 4
Risk Factors................................................ 5
Plan of Distribution........................................ 9
Determination of Offering Price............................. 11
Use of Proceeds............................................. 14
Dividend Policy............................................. 14
Book Value Dilution......................................... 15
Selected Financial Data..................................... 16
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 17
Business.................................................... 23
Management.................................................. 31
Security Ownership of Management and Principal
Shareholders.............................................. 36
Certain Transactions........................................ 37
Description of Common Stock................................. 37
Shares Eligible for Future Sale............................. 40
Legal Matters............................................... 41
Experts..................................................... 41
Index to Consolidated Financial Statements.................. 42
</TABLE>

3
<PAGE> 6

THE COMPANY

Computer Technology Associates, Inc. ("CTA" or the "Company," formerly CTA
Incorporated) was established as a Colorado corporation in 1979. The Company is
an information technology services provider headquartered in Bethesda, Maryland
with over 1,000 employees and independent contractors serving clients
nationwide.

CTA designs, develops and integrates complex information systems. The
Company's offerings include application/database development and integration,
system engineering and integration, E-commerce applications development and
legacy system modernization. CTA's objective is to provide rapid, reliable and
responsive information technology solutions through the use of advanced
technology and disciplined methodology combined with an in-depth understanding
of client goals.

The principal office and corporate headquarters of the Company are located
at 6903 Rockledge Drive, Bethesda, Maryland 20817. The Company's telephone
number is (301) 581-3200.

4
<PAGE> 7

RISK FACTORS

An investment in the shares of CTA Common Stock involves a high degree of
risk. In evaluating the Company's business and prior to making a decision to
purchase Common Stock, a purchaser should carefully consider all of the
information contained in this Prospectus, and, in particular, should consider
the following risk factors.

LACK OF MARKET AND RESTRICTIONS ON TRANSFERABILITY

There has never been a public trading market for the Common Stock in the
past and the Company does not believe that such a market is likely to develop.
However, the Company established a Limited Market for the Common Stock and
conducted its first trade in September 1992. A second trade was conducted in
1993, two more trades were conducted in 1994 and the last trade was conducted in
1995. There can be no assurance that such a market will continue or that it will
provide sufficient liquidity to shareholders. In addition, all of the Common
Stock offered hereby is subject to restrictions on transferability. To the
extent that the Limited Market does not provide sufficient liquidity for a
shareholder and the shareholder is unable to locate a buyer for his shares, the
shareholder could effectively be subject to a total loss of investment.
Accordingly, the purchase of Common Stock is suitable only for persons who have
no need for liquidity in this investment and who can afford a loss of their
investment in its entirety. In addition, in the event that a shareholder
terminates his employment or affiliation with the Company, the shareholder may
be required to sell his shares to the Company at the prevailing Formula Price.
See "Plan of Distribution" and "Determination of Offering Price -- The Limited
Market" and "Description of Capital Stock -- Stock Restriction Agreements."

OFFERING PRICE

The offering price is, and subsequent prices will be, determined according
to the Formula, as set forth on the cover page of this Prospectus. The Formula
is subject to redetermination by the Company. The Formula Price takes into
consideration the Company's financial performance, as evidenced by its after-tax
profits, revenue and contract margin, as well as the Company's book value and
capitalization. The Formula Price also gives effect to the market valuation of
comparable companies and the limited liquidity of the shares, as determined by
the Board of Directors based on an independent appraisal. The Formula Price has
been redetermined and equated to the price established by an appraisal by Legg
Mason Wood Walker, Incorporated. See "Determination of Offering Price --
Procedures for Determining Formula Price."

FLUCTUATIONS IN FINANCIAL RESULTS; RECENT AND ANTICIPATED NET LOSSES

The Company's revenue and operating results are subject to significant
fluctuations due to a number of factors including the timing of awards and
activities (such as milestone-dependent payments and revisions to cost
estimates) under contracts with the U.S. government and the Company's commercial
customers, delays incurred in connection with projects, the Company's ability to
retain key personnel, the ability of the Company to market its services, the
growth rate of the market for IT services and general economic conditions.
Unanticipated termination of one or more projects, including by the U.S.
government due to lack of funding, would have an adverse affect on revenues.
Further, because a material part of the company's expenses do not vary relative
to revenues, if revenues in a particular period do not meet expected levels,
operating results will be adversely affected.

The Company has incurred net losses for the years ending December 31, 1997
and 1996, and for the six months ended June 30, 1998. The Company attributes
such recent losses to its discontinued operations and continued investment in
infrastructure and in the initiatives required to implement the Company's
marketing strategies and increased focus on commercial markets. There can be no
assurance that the Company will generate sufficient revenues or attain
profitability during the balance of calendar year 1998 or thereafter.

CONCENTRATION OF CUSTOMERS

Approximately 64%, 80%, 95% and 100% of the Company's total revenues for
the six months ended June 30, 1998, and the years 1997, 1996 and 1995,
respectively, were derived from contracts with the U.S.

5
<PAGE> 8

government (or as subcontractor to companies doing business with the U.S.
government). Contracts funded by the Department of Defense ("DOD") accounted for
approximately 32%, 47%, 63% and 64% of the Company's total revenues in such
periods, respectively. Although the Company is attempting to diversify its
customer base, the Company believes that the success of its business will
continue to be dependent upon its ability to participate in U.S. government
contract programs. Accordingly, the Company's financial performance may be
directly affected by changes in U.S. government contracting policies. The loss
of a substantial amount of U.S. government contracting business would have a
material adverse affect on the Company's operating results and financial
condition. See "Business -- Types of Contracts."

BACKLOG

The Company's total backlog was approximately $270 million and $284 million
at June 30, 1998 and December 31, 1997, respectively. The Company's backlog is
comprised of the unrealized portions of the Company's government contracts,
government-related subcontracts and commercial contracts. Backlog for government
and government-related contracts consists of both funded and unfunded backlog.
Much of the Company's future revenue is dependent upon the eventual funding of
its currently unfunded backlog of government and government-related contracts.
Unfunded government backlog comprised approximately 53% of total backlog at June
30, 1998, as compared to approximately 57% of total backlog at December 31,
1997. The commercial contracts involving backlog are generally terminable
without penalty to the customer. Commercial and other backlog comprised
approximately 32% of total backlog at June 30, 1998 as compared to approximately
33% of total backlog at December 31, 1997. Because many of the Company's
contracts are multi-year contracts, total backlog includes revenues expected to
be realized several years into the future. Because there is no assurance that
the unfunded portion of backlog will be funded, or that the contracts involving
backlog will not be terminated before performance, the Company's total backlog
at June 30, 1998 and December 31, 1997 may not be representative of future
revenues. See "Business -- Backlog."

COMPETITION

The IT markets in which the Company operates are highly fragmented with no
single company or small group of companies in a dominant position. In both
markets, the Company's competitors include large, diversified firms with
substantially greater financial resources and larger technical staffs than the
Company. Such competitors include BDM International, Inc. ("BDM"), Cap Gemini
Sogeti SA ("Cap Gemini"), Computer Sciences Corporation ("CSC"), Electronic Data
Services Corporation ("EDS"), Lockheed Martin, PRC, Inc. (a subsidiary of Litton
Industries) ("PRC"), Science Applications International Corporation ("SAIC"), as
well as International Business Machines, Inc. ("IBM"), Computer Associates,
Inc., Keane, Inc. and Andersen Consulting. There can be no assurance that the
Company can maintain its competitive position against current and potential
competitors or that competitive pressures will not have a material adverse
affect on the Company's business, operating results and financial conditions.
See "Business -- Information Technology Services -- Competition."

The Company generally obtains its contracts through the process of
competitive bidding. There can be no assurance the Company will continue to be
successful in having its bids accepted or, if accepted, that awarded contracts
will generate sufficient revenues to result in profitability. In addition, the
Company has occasionally in the past submitted bids which would result in
minimal or no profitability with the expectation of more profitable follow-on
contracts. The minimum profitability of these contracts and the failure of the
Company to obtain more profitable follow-on contracts may have a material
adverse effect on the Company's results of operations.

CONTRACTS WITH FEDERAL, STATE AND LOCAL GOVERNMENTS

U.S. government contracts, by their terms, generally can be terminated at
any time by the U.S. government, without cause, for the convenience of the U.S.
government. If a U.S. government contract is so terminated, the Company is
entitled to receive compensation for the services provided or costs incurred
through the time of termination and may under certain circumstances be entitled
to a negotiated amount of profit on the contract. U.S. government contractors
who fail to comply with applicable government

6
<PAGE> 9

procurement-related statutes and regulations may also be subject to potential
contract termination, suspension or debarment from contracting with the U.S.
government. Most U.S. government contracts are also subject to modification in
the event of changes in funding, and the Company's contractual costs and
revenues are subject to adjustment as a result of audits by the Defense Contract
Audit Agency ("DCAA") and other U.S. government auditors. Audits have been
completed on incurred contract costs of the Company through 1995 and are
continuing for subsequent periods. While the Company has included an allowance
in its financial statements for excess billings and contract losses which it
believes is adequate based on its interpretation of contracting regulations and
past experience, there can be no assurance that this allowance will be adequate.
See "Business -- Types of Contracts." U.S. government contract awards may also
be protested by competitors.

The Company has various claims pending against the U.S. government
primarily relating to equitable adjustments under certain government contracts,
including claims for $1.5 million related to the Eastern Zone contract with the
General Services Administration ("GSA"). The Company typically records the
amounts it is seeking under these claims as unbilled receivables on its
financial statements. Adverse determinations of these claims in excess of the
Company's general operating reserves could have a material adverse effect on the
Company's results of operations in the quarter recorded.

Many of the types of provisions governing U.S. government contracts
described above also apply to the Company's contracts with state and local
governments and their agencies. In addition, with respect to state and local
government customers, budgeting pressures and other financial constraints may
result in reductions in funding of various programs, which may affect the
ability of the Company to obtain new contracts, may cause state and local
governments to terminate existing contracts for convenience or not to renew
thereunder and may result in the extension of the procurement and contract
funding process.

CONTRACT PROFIT EXPOSURE AND DEPENDENCE ON LONG-TERM FIXED-PRICE CONTRACTS

The Company's services are provided primarily through three types of
contracts: fixed-price, time-and-material and cost-reimbursable contracts.
Approximately 14% of the Company's total revenues in 1997 were attributable to
fixed-price contracts, which require the Company to perform services under a
contract at a stipulated price. The Company derived approximately 54% of its
total revenues during the same period from time-and-material contracts, which
reimburse the Company for the number of labor hours expended at established
hourly rates negotiated in the contract, plus the cost of materials incurred.
The balance of the Company's contracts (approximately 31%) are cost-reimbursable
contracts under which the Company is reimbursed for all actual costs incurred in
performing the contract to the extent that such costs are within the contract
ceiling and allowable under the terms of the contract, plus a fee or profit.

The Company assumes greater financial risk on fixed-price contracts than on
either time-and-material or cost-reimbursable contracts. The financial results
of long-term fixed-price contracts are recognized using the
percentage-of-completion method. As a result, revisions in revenues and profit
estimates are reflected in the period in which the conditions that require such
revisions become known and are estimable. Adjustments for profits or losses may
therefore have a material effect on results for the quarter in question. The
risks inherent in long-term fixed-price contracts include the difficulty of
forecasting costs and schedules, contract revenues that are related to
performance in accordance with contract specifications and potential for
component obsolescence in connection with long-term procurements. Failure to
anticipate technical problems, estimate costs accurately or control costs during
performance of a fixed-price contract may reduce the Company's profitability or
cause a loss.

Greater risks are involved under time-and-material contracts than under
cost-reimbursable contracts because the Company assumes the responsibility for
the delivery of specified skills at a fixed hourly rate. The failure by the
Company to adequately estimate its costs in bidding for such contracts could
have a material adverse effect on the Company's business.

Although the Company believes that adequate provision for its fixed-price
and time-and-material contracts is reflected in its financial statements, no
assurance can be given that this provision is adequate or

7
<PAGE> 10

that losses on fixed-price and time-and-material contracts will not occur in the
future. See "Business-Types of Contracts."

PROPRIETARY INFORMATION

The Company relies upon trade secrets, know-how and continuing
technological innovation and licensing to develop and maintain its competitive
position and believes that its business is dependent on its technical and
organizational knowledge, practices and procedures. The Company claims a
proprietary interest in certain of its work products, software programs,
methodologies and know-how and some of its proprietary information is protected
by confidentiality agreements and other means. There can be no assurance,
however, that these measures will prevent the unauthorized disclosure or use of
the Company's technical knowledge, practices and procedures or that others may
not independently develop similar knowledge, practices or procedures.

The U.S. government has certain proprietary rights to software programs and
other products that result from the Company's services under U.S. government
contracts or subcontracts. The U.S. government may disclose such information to
third parties, including competitors of the Company. In the case of
subcontracts, the prime contractors may also have certain rights to such
programs and products.

While the Company to date has not received any claims that its proprietary
rights infringe on the proprietary rights of third parties, the Company may be
the subject of future claims of third parties which assert that the Company's
use of certain software programs, methodologies, procedures and know-how
infringes on the patent, copyright or other proprietary rights of such third
parties. There can be no assurance that the adverse resolution of one or more of
these claims would not have a material adverse effect on the Company's business,
operating results and financial condition.

RISKS RELATING TO ACQUISITIONS

While the Company has no present commitments or agreements as to any
specific acquisition transactions, as part of the Company's strategy, the
Company regularly evaluates potential acquisition candidates. There is
significant competition for acquisition opportunities in the IT services area
which may make the completion of acquisitions more difficult and expensive. No
assurance can be given as to whether the Company will make acquisitions in the
future, such acquisitions will prove to be successful or that the Company will
successfully manage the growth attributable to such acquisitions. Moreover, the
Company may incur substantial debt and intangible amortization expenses in
making acquisitions.

INFLUENCE BY EXISTING STOCKHOLDER

Upon completion of the offering, Dr. C.E. Velez, President and Chief
Executive Officer of the Company, will beneficially own 46.4% of the outstanding
shares (exclusive of shares beneficially owned by the ESOP) of the Company's
voting stock and other executive officers, directors and the ESOP as a group
will beneficially own 20.3% of the outstanding shares of the Company's voting
stock. See "Principal Stockholders." Consequently, Dr. Velez and such executive
officers, directors and the ESOP as a group will continue to exercise
significant influence on the election of the directors of the Company and on the
outcome of all matters submitted to a vote of the Company's stockholders, as
well as on the Company's management, operations and policies. This degree of
ownership and control by Dr. Velez could have an effect in delaying, deferring
or preventing a change in control of the Company and discouraging a future
acquisition of the Company in which stockholders might otherwise receive a
higher value for their shares.

DEPENDENCE ON MANAGEMENT AND OTHER KEY PERSONNEL

The Company's future success depends to a significant extent on the efforts
and abilities of its executive officers. Although the Company's senior
management has extensive experience, the loss of Dr. Velez or one or more of the
Company's other senior executives could have a material adverse effect on the
Company's business, financial condition and results of operations. The Company
currently maintains life insurance on Dr. Velez. See "Management -- Directors
and Executive Officers."

8
<PAGE> 11

The Company believes that its future success also will depend significantly
upon its ability to attract, motivate and retain additional highly skilled
managerial, operational, and sales and marketing personnel. Competition for such
personnel is intense in the IT market and there can be no assurance that the
Company will be successful in attracting, assimilating and retaining the
personnel it requires to grow and operate profitably. See
"Business -- Employees."

RISKS ASSOCIATED WITH YEAR 2000 BUSINESS

The Company expects to derive a significant percentage of its revenues from
Year 2000 services through at least 1999. There can be no assurance that the
Company will be successful in increasing its Year 2000 business or, to the
extent that such business increases, that the Company will be able to meet the
demand for such services on a timely basis. Any failure of the Company to
increase such business or meet such demand could have a material adverse effect
on the Company's business, operating results and financial condition. The
Company expects this demand to begin to decrease as the implementation and
testing of many Year 2000 conversion projects is completed. Any such decrease,
to the extent it is not offset by an increase in the Company's other businesses,
could have a material adverse effect on the Company's business, operating
results and financial condition.

POTENTIAL LIABILITY TO CLIENTS

Much of the Company's business involves projects that are critical to the
operations of its clients' businesses. Any failure in a client's system could
result in a claim for substantial damages against the Company, regardless of the
Company's responsibility for such failure. While the Company attempts to
contractually limit its liability for damages arising from its IT services,
there can be no assurance the limitations of liability set forth in its
contractual relationships will be enforceable in all instances or would
otherwise protect the Company from liability for damages. While the Company
currently maintains general liability insurance including coverage for errors
and omissions, there can be no assurance that the Company will avoid significant
claims and attendant publicity. Furthermore, there can be no assurance that the
Company's insurance coverage will be adequate or that such coverage will remain
available at acceptable costs. Successful claims brought against the Company in
excess of its insurance coverage could have a material adverse effect on the
Company's business, operating results and financial condition.

PLAN OF DISTRIBUTION

SECURITIES OFFERED BY THE COMPANY

SALES TO EMPLOYEES, CONSULTANTS AND DIRECTORS

The Company believes that its success is principally dependent upon the
abilities of its employees, consultants and directors. Therefore, since its
inception, the Company has pursued a policy of offering such persons, as an
inducement to enter into and remain in the employ of the Company, an opportunity
to make an equity investment in the Company. At the discretion of the Board of
Directors or the Compensation

9
<PAGE> 12

Committee of the Board of Directors, pursuant to the 1991 Plan, employees,
consultants and directors may be granted purchase rights authorizing individuals
to purchase in the Limited Market a specified number of shares of Common Stock
offered hereby. Additionally, the Company may, pursuant to the 1991 Plan, offer
its employees or consultants options to purchase a specified number of shares of
Common Stock. Such purchase rights or options may be offered contingently upon
obtaining a certain level of contract awards for the Company within a specified
period or upon other performance criteria. The Company may also issue employees,
consultants and directors stock bonuses.

All purchasers or recipients of shares of Common Stock offered by the
Company as described above will be required to enter into Stock Restriction
Agreements with the Company. Such agreements provide that, to the extent the
purchaser is an employee, consultant or director of the Company, upon the
purchaser's termination of employment or affiliation with the Company, the
Company will have the right to repurchase all of the shares purchased pursuant
to the agreement, generally at the prevailing Formula Price at the time of
termination except that the consent of the shareholder must be obtained when
such repurchase would result in a loss to the shareholders. The Stock
Restriction Agreements also afford the Company a right of first refusal with
respect to the shares of Common Stock in the event that such person desires to
sell or transfer his shares outside of the Limited Market. See "Determination of
Offering Price -- Limited Market" and "Description of Capital Stock."

SECURITIES OFFERED BY THE SELLING SHAREHOLDERS

The Selling Shareholders may sell up to an aggregate of 2,439,034 shares of
Common Stock being offered hereby in the Limited Market. The Selling
Shareholders will pay to Capitol a commission generally equal to 1.5 percent of
the proceeds from such sales. See "Determination of Offering Price -- The
Limited Market."

The following table sets forth information as of August 31, 1998 with
respect to the number of shares of Common Stock owned by each Selling
Shareholder who is a director or officer of the Company or who owns greater than
10 percent of the outstanding Common Stock and by all Selling Shareholders as a
group (excluding shares allocated to such person's accounts as of such date
under the Company's employee benefit plans), and as adjusted to reflect the sale
of all shares of Common Stock being offered by the Selling Shareholders. The
table does not give effect to the sale of any shares of Common Stock being
offered by the Company. All of the shares are owned of record.

<TABLE>
<CAPTION>
OWNERSHIP PRIOR TO OWNERSHIP AFTER
OFFERING OFFERING**
----------------------- NUMBER -----------------------
NUMBER OF SHARES NUMBER
NAME/POSITION OF SHARES PERCENT (1) OFFERED OF SHARES PERCENT (1)
------------- --------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Terry J. Piddington, President, Systems
Engineering Group (2).................. 422,127 4.9 422,127 0 0
Gregory H. Wagner, Executive Vice
President, Chief Financial Officer and
Treasurer (2).......................... 118,328 1.4 118,328 0 0
Raymond V. McMillan, Director (2)........ 29,264 * 29,264 0 0
George W. Morganthaler, Director (2)..... 19,257 * 19,257 0 0
Harvey D. Kushner, Director (2).......... 11,455 * 11,455 0 0
James M. Papada, Director (2)............ 6,031 * 6,031 0 0
Arturo Silvestrini, Director (2)......... 4,025 * 4,025 0 0
David R. Mackie, Director (2)............ 2,279 * 2,279 0 0
All Other Selling Shareholders........... 1,826,268 21.1 1,826,268 0 0
All Selling Shareholders as a Group...... 2,439,034 28.1 2,439,034 0 0
</TABLE>

- ---------------
* Represents less than 1 percent of the outstanding shares of Common Stock.

** Assumes all shares offered by Selling Shareholders are sold.

(1) Based upon 8,696,432 outstanding shares of Common Stock at August 31, 1998.

10
<PAGE> 13

(2) See "Management -- Directors and Executive Officers" for additional
information regarding this Selling Shareholder's affiliation with the
Company and previous activity.

The 2,439,034 shares of Common Stock registered for sale by the Selling
Shareholders listed above represent the maximum number of shares that may be
sold pursuant to this Prospectus. The Selling Shareholders may sell less than
the maximum number of shares.

DETERMINATION OF OFFERING PRICE

There is no established public trading market for the Common Stock. The
Company has maintained a limited market ("Limited Market") as described below to
provide liquidity for its Common Stock.

THE LIMITED MARKET

Since its inception, the Company has pursued a policy of remaining
essentially employee owned and, therefore, there has never been a public market
for the Common Stock. Prior to September 1992, the Company offered to repurchase
shares from shareholders on several occasions primarily for contribution to the
Company's Employee Stock Ownership Plan ("ESOP"). In order to provide liquidity
for its shareholders, however, the Company established a Limited Market through
an agreement with Capitol Securities Management, Inc. ("Capitol") whereby
Capitol maintains the Limited Market. From September 1992 through December 1997,
five trades have been conducted in the Limited Market, one each in 1992, 1993
and 1995 and two in 1994. There were no trades conducted in 1996 or 1997.

It is anticipated that the Limited Market will continue to permit existing
shareholders to sell shares of Common Stock on at least one predetermined date
each year (the "Trade Date"). Such sales will be made at the prevailing Formula
Price, or such other price as may be determined by the Board of Directors with
the advice of an independent appraiser, to employees, consultants and directors
of the Company. In addition, the Company will be authorized, but not obligated,
to purchase shares of Common Stock in the Limited Market to satisfy its
requirements (including for sale to the trustees of the Company's ESOP), but
only if and to the extent that the number of shares offered for sale by
shareholders exceeds the number of shares sought to be purchased by authorized
buyers.

In the event that the aggregate number of shares offered for sale by the
sellers is greater than the aggregate number of shares sought to be purchased by
authorized buyers and the Company, offers to sell will be treated in the
following manner: Offers to sell 1,000 shares or less of Common Stock or up to
the first 1,000 shares if more than 1,000 shares of Common Stock are offered by
any seller will be accepted first. Offers to sell shares in excess of 1,000
shares of Common Stock will be accepted on a pro-rata basis based on the number
of shares owned by those shareholders wanting to sell shares. If, however, there
are insufficient purchase orders to support the primary allocation of 1,000
shares of Common Stock or less per seller, then the purchase orders will be
allocated equally among all of the proposed sellers up to the total number of
shares offered for sale. Subject to applicable legal or contractual restrictions
and the availability of funds, the Company currently intends to purchase
sufficient shares on each Trade Date so that each shareholder wishing to sell
shares will be able to sell at least 1,000 shares. Such restrictions include
those contained in the Colorado Business Corporation Act and restrictions in
contracts, currently in existence or which may be entered into, such as the
Company's credit agreement, which might restrict the Company's ability to buy
back Common Stock in the future under certain circumstances. The Company
currently has available funds to purchase up to 50,000 shares in the Limited
Market which it believes are adequate to meet its requirements and is not
currently restricted from making such purchases.

To the extent that the aggregate number of shares sought to be purchased
exceeds the aggregate number of shares offered for sale, the Company may, but is
not obligated to, sell authorized but unissued shares of Common Stock in the
Limited Market. All sellers in the Limited Market, other than the Company, pay
Capitol a commission generally equal to 1.5 percent of the proceeds from such
sales. No commission is paid by purchasers in the Limited Market.

11
<PAGE> 14

Prior to each Trade Date, Capitol will receive sell orders from
shareholders and buy orders from authorized purchasers and the Company. On each
Trade Date, Capitol will match sellers and buyers of the Company's Common Stock
(including, to the extent applicable, the Company) according to the proration
rules described above. Capitol will then forward payments to sellers, minus the
commission, and will issue in book-entry form, the shares of Common Stock to the
purchasers. Capitol will not buy or sell shares of Common Stock for its own
account or as an agent for the Company.

While the Company established the Limited Market to attempt to provide
liquidity to shareholders, there can be no assurance that there will be
sufficient liquidity to permit shareholders to resell their shares in the
Limited Market.

All persons who purchase shares of Common Stock in the Limited Market will
be required to enter into Stock Restriction Agreements with the Company. Such
agreements provide that, if the purchaser is an employee, consultant or director
of the Company, upon the purchaser's termination of employment or affiliation
with the Company, the Company will have the right to repurchase all of the
shares purchased pursuant to that agreement which such person owns of record or
beneficially owns at the time of such termination, generally at the prevailing
Formula Price at the time of such termination; provided, however, that to the
extent such Formula Price is less than the price paid by such purchaser for any
of his shares, the Company will not repurchase such shares without the
shareholder's consent. Such repurchase, if elected by the Company, will be
effected within one year following such termination. The Stock Restriction
Agreements also afford the Company a right of first refusal with respect to the
shares of Common Stock in the event that the holder desires to sell or transfer
his or her shares other than in the Limited Market.

THE FORMULA

The purchase price of the shares of Common Stock in the Limited Market will
be at the formula price described below (the "Formula Price"). The Formula Price
is established by the Board of Directors of the Company based on the performance
of the Company as measured by certain factors listed below as well as certain
other factors also listed below which are determined based on the recommendation
of an independent appraiser. The Formula Price will be redetermined at least
annually. The price is determined according to the following formula (the
"Formula"): the price per share is equal to the product of (i) a number
representing one minus the discount for the limited liquidity of the stock ("D")
and (ii) a fraction, the denominator of which is the number of outstanding
shares and share equivalents ("Wi") and the numerator of which is the sum of (A)
a number which is the product of 2.25 and the book value of the Company at the
end of the applicable period ("BV") and (B) a number which is the product of (a)
11.34 ("K") and (b) a number equal to the product of (I) a market index ("MI")
based on certain comparable companies, (II) the after tax profits from
operations for the last 12 month period ("P") and (III) a fraction, the
denominator of which is 2 and the numerator of which is the sum of (A) the
change in contract margin ("CM"), which is a number equal to the contract margin
for the last 12 months divided by the contract margin for the prior 12 month
period, where contract margin is the contract fee as a percentage of contract
cost adjusted for program reserves and allowances and (B) the change in revenue
growth ("R"), which is a number equal to a fraction, the numerator of which is
revenue for the last 12 months and the denominator of which is the revenue for
the prior 12 month period times the change in the consumer price index for that
period. The Formula Price of the Common Stock expressed as an equation, is as
follows:

CM+R
(------)
2.25BV+K (MI) (P) 2
Formula Price = D [---------------------------]
Wi

The "discount factor" is a number which is intended to reflect the discount
for the limited liquidity of the Common Stock and the "market index" is a number
which is intended to reflect existing securities market conditions. Both of
these factors are established annually by the Board of Directors based upon the
recommendation of an independent appraisal firm. The 11.34 multiplier is a
constant representing the factor

12
<PAGE> 15

necessary to equalize the initial stock price calculated by the Formula to the
appraised price for the Common Stock on the date the Formula was adopted. The
remainder of the factors will be based on the Company's historical financial
data.

PROCEDURES FOR DETERMINING SHARE PRICE

The Formula is used to determine the offering price at which the Common
Stock will be sold and will trade in the Limited Market, except in the
circumstances set forth below. The present Formula was adopted by the Board of
Directors on September 14, 1998, following a determination by the Board of
Directors that the prior formula was not resulting in a fair market value for
the Common Stock. The Board of Directors believes the current Formula results in
a fair market value for the Common Stock within a broad range of financial
criteria.

In redetermining the current Formula, net income for the trailing twelve
months was adjusted for all factors associated with the sale of the Company's
Space and Telecommunications business having a financial impact on continuing
operations in 1997. The adjusted net income for use in the Formula at June 30,
1998 was $2,482,000.

Annually, the Company provides audited financial statements and other data
as requested by the independent appraiser. The independent appraiser analyzes
that data and recommends two factors of the Formula: the Market Index ("MI") and
the Discount Factor ("D"). Based on this recommendation, the Board of Directors
determines the Formula Price. The Board of Directors also obtains an appraisal
of the current fair market value of the Common Stock from the independent
appraiser in order to confirm that the Formula has resulted in a price which
approximates the fair market value of the Common Stock.

In those circumstances when the Board of Directors determines the Formula
has not resulted in a fair market value for the Common Stock, the Company
establishes a price for the Common Stock within the range established by the
independent appraisal. The price of $5.05 per share at June 30, 1997 and at
December 31, 1997 was based solely on an independent appraisal as were all share
prices prior to the adoption of the Formula. Such appraisal is required on an
annual basis for purposes of valuing the assets contained in the Company's ESOP
and for determining the price at which the ESOP may purchase shares of Common
Stock.

PRICE RANGE OF COMMON STOCK

The following table sets forth the price per share (after giving effect for
all years presented for a 2 for 1 split of the Company's common stock in
February 1998) at which the Common Stock was valued by the Board of Directors
based on an appraisal performed by the Company's independent appraiser, Legg
Mason Wood Walker, Inc., for the last twelve years. The 1992, 1993, both 1994
and 1995 appraisal prices were also the prices at which shares were sold in the
Limited Market for each of the following periods ending on the dates set forth
below.

<TABLE>
<CAPTION>
EFFECTIVE DATE OF APPRAISAL PRICE PER SHARE
- --------------------------- ---------------
<S> <C>
June 30, 1998............................................... $5.840
December 31, 1997........................................... $5.050
June 30, 1997............................................... $5.050
December 31, 1995........................................... $4.745
December 31, 1994........................................... $4.695
June 30, 1994............................................... $4.485
December 31, 1993........................................... $4.364
December 31, 1992........................................... $3.583
December 31, 1991........................................... $3.002
December 31, 1990........................................... $2.088
December 31, 1989........................................... $2.050
December 31, 1988........................................... $2.015
</TABLE>

13
<PAGE> 16

<TABLE>
<CAPTION>
EFFECTIVE DATE OF APPRAISAL PRICE PER SHARE
- --------------------------- ---------------
<S> <C>
December 31, 1987........................................... $1.400
December 31, 1986........................................... $0.888
</TABLE>

REPORT OF INDEPENDENT APPRAISER

Since 1986, Legg Mason Wood Walker, Inc. ("Legg Mason") has been engaged by
the Company to act as the independent appraiser for the Company with respect to
the Common Stock. Legg Mason was selected because it is a nationally recognized
investment banking firm that has extensive experience in the valuation of
securities of all types, including closely-held and seldom traded securities.

In connection with the Board's determination of the Formula Price, Legg
Mason recommends to the Board of Directors (i) the discount factor ("D") to
reflect the limited liquidity of the Company's Common Stock and (ii) the market
index ("MI") to reflect existing securities market conditions. Legg Mason also
provides to the Board of Directors an assessment as to whether the Formula Price
calculated was within a range which Legg Mason considered reasonable.

DIVISION OF MARKET REGULATION

The Company has had discussions with the staff of the Division of Market
Regulation concerning the operation of the Limited Market in compliance with the
Exchange Act. While the Commission has not formally indicated to the Company any
specific concerns regarding the operation of the Limited Market it may do so in
the future. If the Commission raises such concerns, there can be no assurance
that the Company will be able to continue operation of the Limited Market.

USE OF PROCEEDS

The shares of Common Stock which are offered hereby are being offered to
permit the continued acquisition of Common Stock by the Company's employee
benefit plans as described herein and to permit the Company to offer shares of
Common Stock to employees, consultants and directors. The main purpose of this
offering is to broaden the participation of employees, consultants and directors
in the performance of the Company. See "Plan of Distribution" and "Determination
of Offering Price."

The Company does not intend or expect this offering to raise significant
capital. Any net proceeds received by the Company from the sale of shares of
Common Stock offered by the Company after deducting expenses will used for
working capital and general corporate purposes. Currently, the Company has no
specific plans for the use of such proceeds.

The Company will not receive any portion of the net proceeds from the sale
of shares by the Selling Shareholders.

DIVIDEND POLICY

It is the current policy of the Company to retain all earnings to provide
funds for the Company's growth. Therefore, the Company has no current intention
of paying cash dividends on the Common Stock. The Company has not made any
distributions to its shareholders since 1988. The Company's bank credit
agreement requires advance approval by the bank for the Company to pay any
dividends.

14
<PAGE> 17

BOOK VALUE DILUTION

At August 31, 1998, the Company had a net tangible book value per share of
Common Stock of $1.72. "Net tangible book value per share" represents the amount
of the Company's tangible net worth (total tangible assets less total
liabilities) divided by the total number of shares of Common Stock outstanding
at August 31, 1998. Assuming that all of the 1,303,568 shares offered by the
Company hereby had been sold at the current Formula Price of $5.84 per share, or
an aggregate of $7,557,837 net of expenses, the pro forma net tangible book
value of the Common Stock at August 31, 1998 would have been $2.25 per share.
That amount represents an immediate book value dilution of $3.59 per share (the
difference between the offering price and the net tangible book value per share
after the offering) to persons purchasing Common Stock in the offering. The
following table illustrates the per share dilution:

<TABLE>
<S> <C> <C>
Offering price to new investors............................. $5.84
Net tangible book value per share before offering........... $1.72
Net increase in net tangible book value per share
attributable to purchase of shares offered................ .53
-----
Pro forma net tangible book value per share after giving
effect to the offering.................................... 2.25
-----
Dilution in net tangible book value per share to purchasers
of shares in the offering................................. $3.59
=====
</TABLE>

The following table sets forth the number of shares purchased from the
Company, the total consideration paid and the average price per share paid by
existing shareholders since the Company's inception and to be paid by the new
investors in the offering:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing Shareholders............ 8,696,432 87.0 $ 7,979,000 51.4 $0.22
New Investors.................... 1,303,568 13.0 7,557,837 48.6 5.84
---------- ----- ----------- ----- -----
Total....................... 10,000,000 100.0 $15,536,837 100.0 $1.55
========== ===== =========== ===== =====
</TABLE>

The above computations do not give effect to the exercise of outstanding
non-qualified stock options to purchase 1,135,174 shares of Common Stock at a
weighted average price of $4.22 per share. To the extent all these options were
exercised contemporaneously with the offering, purchasers of shares in the
offering would experience dilution of $3.77 per share. See "Management --
Employee Benefit Plans -- Non-Qualified Stock Options" and "-- 1991 Plan." For
purposes of these calculations, the Company has assumed that (i) all options are
exercised at their respective option prices, (ii) the Company has repurchased
from shareholders the number of shares necessary for issuance to all those
exercising at the current Formula Price of $5.84, and (iii) all shares offered
pursuant to this Prospectus have been sold at the current Formula Price of
$5.84.

15
<PAGE> 18

SELECTED FINANCIAL DATA

The following selected consolidated financial data for each of the years in
the five year period ended December 31, 1997 and as of December 31, 1993, 1994,
1995, 1996 and 1997 have been derived from the consolidated financial statements
of the Company. The consolidated financial statements for each of the five years
ended December 31, 1993 through 1997 have been audited by Ernst & Young LLP,
independent auditors. The selected consolidated financial data for the six
months ended June 30, 1997 and 1998 and as of June 30, 1997 and 1998 are derived
from unaudited financial statements. The unaudited financial statements include
all adjustments which the Company considers necessary for a fair presentation of
the financial position and the results of operations for these periods and as of
such dates. Operating results for the six months ended June 30, 1998 are not
necessarily indicative of the results that may be expected for the entire year
ending December 31, 1998. The data (in thousands, except for per share data)
should be read in conjunction with the consolidated financial statements,
related notes, and other financial information included elsewhere in this
document.

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------------------------- -----------------
1993 1994 1995 1996 1997 1997 1998
------- -------- -------- -------- ------- ------- -------
(AMOUNTS IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Contract revenues............................ $92,072 $107,471 $105,224 $ 96,246 $92,239 $43,560 $52,733
Cost of contract revenues.................... 77,394 90,102 96,633 87,644 80,503 36,401 41,689
Selling, general and administrative
expenses................................... 5,277 6,723 4,117 5,431 7,649 4,003 6,858
Other expenses............................... 1,492 833 (292) 2,447 3,668 338 769
------- -------- -------- -------- ------- ------- -------
Operating profit............................. 7,909 9,813 4,766 724 419 2,818 3,417
Interest expense............................. 248 907 850 969 1,589 543 565
------- -------- -------- -------- ------- ------- -------
Income (loss) before income taxes............ 7,661 8,906 3,916 (245) (1,170) 2,275 2,852
Provision (benefit) for income taxes......... 3,370 3,830 1,567 (80) (500) 853 1,070
------- -------- -------- -------- ------- ------- -------
Income (loss) from continuing operations..... 4,291 5,076 2,349 (165) (670) 1,422 1,782
Income (loss) from discontinued operations,
net of income taxes(1)(2).................. 259 (617) (403) (10,872) 648 (1,399) (2,482)
------- -------- -------- -------- ------- ------- -------
Net income (loss)............................ $ 4,550 $ 4,459 $ 1,946 $(11,037) $ (22) $ 23 $ (700)
======= ======== ======== ======== ======= ======= =======
Basic earnings (loss) per share:
Continuing operations.................... $ 0.48 $ 0.53 $ 0.27 $ (0.02) $ (0.07) $ 0.15 $ 0.20
Discontinued operations.................. 0.03 (0.06) (0.05) (1.22) 0.07 (0.15) (0.28)
------- -------- -------- -------- ------- ------- -------
Earnings (loss) per share.................... $ 0.51 $ 0.47 $ 0.22 $ (1.24) $ 0.00 $ 0.00 $ (0.08)
======= ======== ======== ======== ======= ======= =======
Diluted earnings (loss) per share:
Continuing operations.................... $ 0.46 $ 0.50 $ 0.25 $ (0.02) $ (0.07) $ 0.15 $ 0.20
Discontinued operations.................. 0.03 (0.06) (0.04) (1.22) 0.07 (0.15) (0.28)
------- -------- -------- -------- ------- ------- -------
Earnings (loss) per share-diluted............ $ 0.49 $ 0.44 $ 0.21 $ (1.24) $ 0.00 $ 0.00 $ (0.08)
======= ======== ======== ======== ======= ======= =======
Weighted average number of shares
outstanding................................ 8,853 9,567 8,863 8,875 9,092 9,234 8,712
------- -------- -------- -------- ------- ------- -------
Diluted average number of shares
outstanding................................ 9,378 10,092 9,418 8,875 9,092 9,625 9,052
------- -------- -------- -------- ------- ------- -------
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
----------------------------------------------- -----------------
1993 1994 1995 1996 1997 1997 1998
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents....................... $ 1,390 $ 3,902 $ 235 $ 16 $ -- $ -- $ --
Working capital................................. 24,987 20,638 19,713 23,238 12,588 13,341 10,705
Total assets................................ 74,346 89,816 91,530 83,457 45,288 81,957 46,795
Short-term debt................................. 5,524 15,750 17,074 28,335 9,112 22,014 12,489
Long-term debt.................................. 15,000 15,000 15,000 15,000 3,333 13,500 2,500
Total stockholders' equity.................. 24,417 27,950 28,773 17,793 15,810 17,729 14,877
</TABLE>

- ---------------
(1) During 1997, the Company sold its Space and Telecommunications Systems and
its Mobile Information and Communications Services businesses to Orbital
Sciences Corporation. Results of operations have been restated to exclude
revenues and expenses of discontinued operations from captions applicable to
continuing operations. See Note 2 to the Consolidated Financial Statements.

(2) During 1995, the Company discontinued the operations of its Simulation
Systems Division, which manufactured aircraft flight simulators for sale or
lease, and sold its assets to a company substantially owned by one of the
Company's principal stockholders. Results of operations have been to exclude
revenues and expenses of discontinued operations from captions applicable to
continuing operations. See "Certain Transactions" and Note 2 to the
Consolidated Financial Statements.

16
<PAGE> 19

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with
the consolidated financial statements and notes thereto included elsewhere in
this Prospectus.

OVERVIEW

Computer Technology Associates, Inc. (the "Company," formerly CTA
INCORPORATED) provides information technology services to Federal, State and
commercial markets including Year 2000 services, network design and
implementation, mainframe to client-server conversions, software language
upgrades, database development and maintenance, electronic data interchange and
automated enterprise management technologies. During 1995, the Company disposed
of its aircraft simulation systems business. During 1997, the Company disposed
of its Space and Telecommunications Systems and its Mobile Information and
Communications Services businesses. In 1998, the Company realigned its corporate
organization to further refine its focus on the rapidly growing market for
commercial and governmental IT services creating the CTA Systems Engineering
Group and the CTA Software Engineering Group.

RESULTS OF OPERATIONS

The following tables set forth certain items in the Company's Statements of
Operations as a percentage of contract revenues:

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------ ---------------
1995 1996 1997 1997 1998
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Contract revenues............................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of contract revenues....................... 91.8 91.1 85.1 83.6 79.1
Selling, general and administrative expenses.... 3.9 5.6 10.4 9.2 13.0
Supplemental ESOP contribution.................. 0.0 0.0 3.2 0.0 0.0
Other expenses.................................. (0.3) 2.5 0.8 0.8 1.4
----- ----- ----- ----- -----
Operating profit (loss)......................... 4.5 0.8 0.4 6.4 6.5
Interest expense................................ 0.8 1.0 1.7 1.2 1.1
----- ----- ----- ----- -----
Income (loss) before income taxes............... 3.7 (0.2) (1.3) 5.2 5.4
Provision (benefit) for income taxes............ 1.5 (0.0) (0.6) 2.0 2.0
----- ----- ----- ----- -----
Income (loss) from continuing operations........ 2.2 (0.2) (0.7) 3.2 3.4
Income (loss) from discontinued operations, net
of income taxes............................... (0.4) (11.3) 0.7 (3.2) (4.7)
----- ----- ----- ----- -----
Net income (loss)............................... 1.8 (11.5) (0.0) (0.0) (1.3)
===== ===== ===== ===== =====
</TABLE>

The following tables set forth certain items in the Company's Statements of
Operations by operating segment:

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------ -------------------
1995 1996 1997 1997 1998
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Contract revenues:
Systems Engineering.............. $105,224 $ 91,953 $ 73,464 $ 36,790 $ 35,422
Software Engineering............. -- 4,293 18,775 6,770 17,311
-------- -------- -------- -------- --------
$105,224 $ 96,246 $ 92,239 $ 43,560 $ 52,733
======== ======== ======== ======== ========
Operating profit (loss):
Systems Engineering.............. $ 4,474 $ 2,442 $ 2,933 $ 2,119 $ 2,287
Software Engineering............. -- 729 1,154 1,037 1,899
Other expenses................... 292 (2,447) (3,668) (338) (769)
-------- -------- -------- -------- --------
$ 4,766 $ 724 $ 419 $ 2,818 $ 3,417
======== ======== ======== ======== ========
</TABLE>

17
<PAGE> 20

SIX MONTHS ENDED JUNE 30, 1998 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1997

Contract Revenues. Contract revenues increased 21% to $52.7 million for
the six months ended June 30, 1998 from $43.6 million for the six months ended
June 30, 1997, as a result of a 256% increase in software engineering contract
revenues.

Systems engineering contract revenues decreased 4% for the six months ended
June 30, 1998 from the comparable period in 1997. Decreases in revenues on the
GSA Eastern Zone contract, which ended in the third quarter of 1997, and on the
Technical Engineering and Management Support IV ("TEMS IV") program at Hanscom
Air Force Base, which is winding down, and smaller decreases in other Federal
programs, were partially offset by increases in contract revenues on a medical
information systems contract for the Department of Defense and on General
Services Administration ("GSA") Schedule contracts.

Software engineering contract revenues increased to $17.3 million, or 33%
of total contract revenues, for the six months ended June 30, 1998 from $6.8
million, or 16% of total contract revenues, for the six months ended June 30,
1997. The increase is primarily attributable to new Year 2000 conversion
contracts with the States of Iowa, Kansas, Texas and commercial companies such
as Cessna Aircraft.

Cost of Contract Revenues. Cost of contract revenues increased to $41.7
million, or 79.1% of contract revenues, for the six months ended June 30, 1998,
from $36.4 million, or 83.6% of contract revenues, for the comparable period in
1997. This decrease in cost of contract revenues as a percentage of contract
revenues resulted primarily from the increase of higher margin commercial
contracts as a percentage of overall contract revenues.

SG&A. Selling, general and administrative expenses ("SG&A") increased to
$6.9 million, or 13.0% of contract revenues, for the six months ended June 30,
1998, from $4.0 million, or 9.2% of contract revenues, for the comparable period
in 1997. The increase in SG&A reflects the Company's continued investment in
infrastructure and in the initiatives required to implement the Company's
marketing strategies and increased focus on commercial markets.

Other Expenses. Other expenses increased to $0.8 million in 1998 from $0.3
million in 1997 due to additional reserves and write-downs of certain contract
receivables.

Operating Profit. As a result of the foregoing, the Company had an
operating profit of $3.4 million for the six months ended June 30, 1998 and an
operating profit of $2.8 million for the comparable period in 1997.

Loss from Discontinued Operations. The loss from discontinued operations
for 1998 reflects an adjustment of $2.1 million for the final settlement of the
sales price of the Company's Space and Telecommunications business, which was
sold in the third quarter of 1997, and a binding arbitration award of $2.0
million to a former employee of that business. The amounts are presented net of
income tax benefit in the Condensed Statements of Operations.

1997 COMPARED WITH 1996

Contract Revenues. Contract revenues decreased 4.2% to $92.2 million in
1997 from $96.2 million in 1996. Software engineering contract revenues from the
Company's Year 2000 Century Date Change conversion contracts increased 467% to
$15.8 million in 1997 from $3.4 million in 1996. The Company performed such
services in 1997 for the States of Nebraska, Kansas, Iowa and others as well as
Cessna Aircraft and Virginia Tech.

A new Systems engineering contract in 1997, providing program management
and integration for the Assistant Secretary of Defense for Health Affairs,
generated revenues of $7.1 million. Another new program, the Defense Enterprise
Integration Services ("DEIS") subcontract to Computer Sciences Corporation
("CSC") generated revenues of $4.1 million in 1997. Contract revenues on the
Company's contact with the GSA's Federal Supply Service increased 65% from $6.5
million in 1996 to $10.8 million in 1997.

These increases in contract revenues were offset by decreases in revenues
from the TEMS IV program at Hanscom Air Force Base of $10.4 million in 1997
compared to 1996 as the program winds down. Revenues on

18
<PAGE> 21

the Naval Air Weapons Center ("NAWC") contract at China Lake, California
decreased in 1997 by $5.2 million compared to 1996. In the first quarter of
1996, the Company completed its five-year contract with the NAWC, the last of
the Company's significant contracts awarded during its period of eligibility for
small business awards which ended in 1992. Although it was ineligible to rebid
for this contract as the prime contractor, the Company is a major subcontractor
to the small business prime contractor who was awarded the NAWC follow-on
contract, from which the Company receives approximately 45% of the contract
revenues. Contract revenues on the NAWC subcontract increased by $0.3 million in
1997 compared to 1996.

Contract revenues in 1997 decreased by $2.0 million on the Range
Instrumentation Development contract and by $1.3 million on the AUA technical
assistance contract. Contracts which ended in 1997, such as the Systems
Engineering Analysis contract with NASA and the GSA Eastern Zone contract
contributed to the decline in revenues, as did the sale of the Advanced
Information Systems division. Contracts which ended in 1996, such as the Air
Force Warning System integration contract, also contributed to the overall
decline in contract revenues in 1997.

The Company revised its estimates of the full contract value and
profitability of its Eastern Zone contract with the GSA, resulting in a
reduction in revenues and operating profit in 1996 of $2.6 million, reflecting
the Company's then current estimate of the contract's profit at completion. The
Eastern Zone contract incurred significant start-up costs related to the
establishment of nine new facilities required for contract performance and to
difficulties encountered in cost-effective staffing of the personnel required
under the contract. The use of subcontract personnel to fill critical positions
resulted in cost overruns.

The Company initially expected that future contract performance over the
full contract term at originally anticipated staffing levels would result in
profit sufficient to offset early program losses. However, revenues on the
contract were not sufficient to offset these losses. The Company has submitted
claims against the U.S. government seeking recovery of $1.5 million of the
overrun. The Company has recorded these claims as an unbilled receivable,
against which it has certain reserves.

Cost of Contract Revenues. Cost of contract revenues decreased 10.4% to
$78.5 million, or 85.1% of contract revenues, in 1997 from $87.6 million, or
91.1% of contract revenues, in 1996. The decrease in cost of contract revenues
as a percentage of contract revenues resulted primarily from the effect of
changes in the estimated contract value and profitability of the Eastern Zone
contract in 1996. Without giving effect to the reduction in revenues due to the
Eastern Zone contract, the cost of contract revenues as a percentage of contract
revenues for 1996 was 88.7%. The decrease in cost of contract revenues in 1997
would have been even more significant were it not for the indirect cost impact
of $0.9 million related to the sale of the Space and Telecommunications business
and one-time start-up costs of $1.0 million related to certain software
engineering contracts.

SG&A. SG&A for 1997 increased 77.2% to $9.6 million, or 10.4% of contract
revenues, from $5.4 million, or 5.6% of contract revenues, in 1996. Higher costs
and reduced revenues accounted for the increase in SG&A as a percentage of
contract revenues in 1997. The increase in SG&A reflects the Company's continued
investment in infrastructure and in the initiatives required to implement the
Company's marketing strategies and increased focus on commercial markets as well
as the indirect cost impact of $0.3 million related to the sale of the Space and
Telecommunications business.

Supplemental ESOP Contribution. During 1997, the Board of Directors
elected to make a one-time supplemental contribution of approximately $3.0
million to the Company's employee stock ownership plan ("ESOP"). The ESOP allows
employees to share in the Company's profitability and helps the Company attract
and retain a quality workforce.

Other Expenses. Other expenses decreased to $0.7 million in 1997 from $2.4
million in 1996. The decrease is due primarily to the write-off in the fourth
quarter of 1996 of capitalized software costs of $0.8 million and $0.9 million
related to the Company's unsuccessful initial public offering.

Operating Profit (Loss). As a result of the foregoing, the Company had an
operating profit of $0.4 million in 1997 compared to an operating profit of $0.7
million in 1996.

19
<PAGE> 22

Interest Expense. Interest expense increased to $1.6 million in 1997 from
$1.0 million in 1996 due to the payment of additional interest on the
subordinated debt as a result of the sale of the Space and Telecommunications
Systems business to Orbital Sciences Corporation ("Orbital"). Interest expense
allocated to discontinued operations was $2.1 million in 1997 and $3.3 million
in 1996.

Income (Loss) from Discontinued Operations. The income from discontinued
operations in 1997 was $0.6 million, net of tax benefits of $1.4 million,
compared to a loss from discontinued operations of $10.9 million, net of tax
benefits of $5.6 million in 1996. The income in 1997 includes a gain on the sale
of the segments to Orbital of $3.9 million. The loss in 1996 includes charges
totaling $9.2 million related to lower profitability on a contract and the
write-off of the investment in GEMnet.

1996 COMPARED WITH 1995

Contract Revenues. Contract revenues decreased 8.5% to $96.2 million in
1996 from $105.2 million in 1995. An increase in revenue of $3.6 million on the
RID contract, $3.4 million on the Nebraska contract and $1.3 million on the
Maritech contract was more than offset by the decrease of $11.2 million on the
NAWC and NAWC follow-on contracts and $6.5 million on the Eastern Zone contract.

In the first quarter of 1996, the Company completed its five-year prime
contract with the NAWC at China Lake, California. This represented the last of
the Company's significant contracts awarded during its period of eligibility for
small business awards, which ended in 1992. This contract represented $20.4
million in revenues in 1995. Although it was ineligible to rebid for this
contract as the prime contractor, the Company is a major subcontractor to the
small business prime contractor who was awarded the NAWC follow-on contract in
April 1996, from which the Company receives approximately 45% of the contract
revenues. In 1996, the Company received revenues of $5.1 million from the
original NAWC contract and $4.1 million in revenues from the follow-on contract.

Cost of Contract Revenues. Cost of contract revenues decreased 9.3% to
$87.6 million, or 91.1% of contract revenues, in 1996 from $96.6 million, or
91.8% of contract revenues, in 1995. Without giving effect to the reduction in
revenues due to the Eastern Zone contract, the cost of contract revenues as a
percentage of contract revenues for 1996 was 88.7%.

SG&A. SG&A for 1996 increased 31.9% to $5.4 million, or 5.6% of contract
revenues, from $4.1 million, or 3.9% of contract revenues, in 1995. Higher costs
and reduced revenues accounted for the increase in SG&A as a percentage of
contract revenues in 1996. The increase in SG&A reflects the Company's continued
investment in infrastructure and in the initiatives required to implement the
Company's marketing strategies and increased focus on commercial markets.

Other Expenses. Other expenses increased to $2.4 million in 1996 from
$(0.3) million in 1995. The increase is due primarily to the write-off in the
fourth quarter of 1996 of capitalized software costs of $0.8 million and $0.9
million related to the Company's unsuccessful initial public offering. Lower
expenses in 1995 resulted from a reversal of certain amounts in reserves in 1995
set aside in 1994.

20
<PAGE> 23

Operating Profit (Loss). As a result of the foregoing, the Company had an
operating profit of $0.7 million in 1996 compared to an operating profit of $4.8
million in 1995.

Interest Expense. Interest expense increased to $1.0 million in 1996 from
$0.8 million in 1995 due to higher average balances on the bank credit facility
due to increased capital expenditures. Interest expense allocated to
discontinued operations was $3.3 million in 1996 and $3.2 million in 1995.

Income (Loss) from Discontinued Operations. The loss from discontinued
operations in 1996 was $10.9 million, net of tax benefits of $5.6 million,
compared to a loss from discontinued operations of $0.4 million, net of tax
benefits of $0.3 million in 1995. The loss in 1996 includes charges totaling
$9.2 million related to lower profitability on a contract and the write-off of
the investment in GEMnet. The loss in 1995 includes a loss of $0.5 million from
the disposal of the Simulation Systems Division.

LIQUIDITY AND CAPITAL RESOURCES

The Company's net income (loss) was ($0.7) million for the six months ended
June 30, 1998 and ($0.02) million, ($11.0) million, and $1.9 million for the
years ended December 31, 1997, 1996 and 1995, respectively. Its cash flow
provided by (used in) operating activities was $0.7 million for the six months
ended June 30, 1998 and ($10.2) million, ($5.6) million, and $2.4 million in
1997, 1996 and 1995, respectively. The principal factors accounting for the
provision (use) of cash in operating activities in the first six months of 1998
were a $4.2 million decrease in recoverable income taxes and changes in working
capital accounts providing $2.0 million of cash offset by an increase in
accounts receivable of $5.6 million. The principal factors accounting for the
provision (use) of cash in operating activities in 1997 were ($3.9) million
non-cash gain on disposal of segments, $2.8 million of depreciation and
amortization expense, ($3.6) million payment of previously accrued interest, and
changes in working capital accounts using $5.6 million of cash. The principal
factors accounting for the provision (use) of cash in operating activities in
1996 were the net loss of $11.0 million and an increase in accounts receivable
and other net assets of $6.6 million, offset by $5.6 million of depreciation and
amortization expense and the $6.4 million write-off of the investment in GEMnet.
The principal factors accounting for the provision (use) of cash in operating
activities in 1995 were a $0.7 million loss on the disposal of the Simulation
Systems Division, $3.2 million of depreciation and amortization expense, $1.0
million provision for receivable allowances, $1.1 million of accrued interest
and changes in working capital accounts using $4.0 million of cash.

Cash provided by (used in) investing activities totaled ($1.0) million for
the six months ended June 30, 1998 and $14.4 million, ($6.2) million, and ($5.2)
million for the years ended December 31, 1997, 1996 and 1995, respectively.
Proceeds from the sale of segments provided $18 million in 1997. Additions to
furniture and equipment were $1.0 million, $3.6 million, $6.5 million, and $4.3
million in 1998, 1997, 1996 and 1995, respectively. Software development
expenditures were $0.1 million in 1996 and $0.8 million in 1995.

Cash provided by (used in) financing activities was $0.2 million for the
six months ended June 30, 1998 and ($4.2) million, $11.5 million, and ($0.9)
million for the years ended December 31, 1997, 1996 and 1995, respectively.
Financing was primarily provided by borrowings under the Credit Facility and
offset by the repayment of long-term debt and acquisition notes and the purchase
of treasury stock for the ESOP. The Company's net borrowings (payments) under
the Credit Facility were $3.4 million for the six months ended June 30, 1998 and
($3.7) million, $12.0 million and $1.3 million for the years ended December 31,
1997, 1996 and 1995, respectively. The 1997 amount is net of $5 million proceeds
from a new three-year term loan. In connection with the sale of the segments to
Orbital, $27 million in debt was assumed by the purchaser. Net purchases of
treasury stock were $2.3 million for the six months ended June 30, 1998 and $0.1
million, $0.5 million, and $2.0 million for the years ended December 31, 1997,
1996 and 1995, respectively.

In November 1997, the Company entered into a new three-year agreement with
a bank for a credit facility providing the availability to borrow up to $20
million, including a revolving facility of $15 million, which includes a
facility for letters of credit up to $4 million, and a new $5 million term
facility. At June 30, 1998, there was $10.8 million outstanding under the
revolving credit facility and $4.2 million outstanding under the term facility,
to be repaid in equal quarterly payments.

21
<PAGE> 24

Borrowings under the credit facility are secured by substantially all of
the Company's assets and bear interest at either the lender's prime rate or
LIBOR plus 1.5% to 2.25% (based on the Company's ratio of total funded debt to
earnings before interest, taxes, depreciation and amortization) at the Company's
discretion. The weighted average rate in effect for short-term borrowings at
December 31, 1997 was approximately 7.7%. Under the agreement, the Company pays
an annual commitment fee on the unused credit line and an annual administration
fee on the total revolving credit line. The credit facility requires advance
approval by the bank for the Company to pay cash dividends. The agreement also
includes financial covenants which require the Company to maintain certain
financial ratios and restricts capital expenditures.

In January 1998, the Company completed the $2.0 million tender offer
accrued for as of December 31, 1997. The Company believes that cash flow from
operations and available bank borrowings will provide adequate funds for
continued operations for the next twelve months.

OTHER MATTERS

The "Year 2000" issue concerns the potential exposures related to existing
computer programs that use only two digits to identify a year in the date field.
These programs were designed and developed without considering the impact of the
upcoming change in the century. If not corrected, many computer applications
could fail or create erroneous results by or at the Year 2000. The Company has
evaluated, and continues to evaluate, whether the consequences of the Year 2000
issues would have a material effect on the Company's business, results of
operations or financial condition.

The Company believes that its principal payroll and human resources related
systems, which are licensed from and maintained by third party software
development companies, are Year 2000 compliant. The Company is in the process of
implementing a new financial accounting system, which is licensed from and
maintained by a third party software development company and is Year 2000
compliant. Management expects the new financial accounting system to be
operational by the end of 1998 at cost of less than $0.5 million. Management
does not anticipate that the remaining costs associated with assuring that its
other internal IT and non-IT systems will be Year 2000 compliant will be
material to its business, operations or financial condition.

Much of the Company's Year 2000 business involves projects that are
critical to the operations of its clients' businesses. Any failure in a client's
system could result in a claim for substantial damages against the Company,
regardless of the Company's responsibility for such failure. The Company
believes it has instituted reasonable contract management practices to control
the financial risk of performance on these contracts. While the Company attempts
to contractually limit its liability for damages arising from its IT services,
there can be no assurance the limitations of liability set forth in its
contractual relationships will be enforceable in all instances or would
otherwise protect the Company from liability for damages. While the Company
currently maintains general liability insurance including coverage for errors
and omissions, there can be no assurance that the Company will avoid significant
claims and attendant publicity. Furthermore, there can be no assurance that the
Company's insurance coverage will be adequate or that such coverage will remain
available at acceptable costs. Successful claims brought against the Company in
excess of its insurance coverage could have a material adverse effect on the
Company's business, operating results and financial condition.

22
<PAGE> 25

BUSINESS

CTA provides rapid development and deployment of advanced information
technology ("IT") to complex enterprise applications. The Company's offerings
include government systems, engineering support, network development and
integration, embedded IT systems engineering, object oriented applications
development, Enterprise Resource Planning ("ERP") installation and integration,
data warehousing and data base migrations, electronic commerce and other web
based applications development and legacy system modernization. CTA's mission is
to provide for the rapid, on budget, low risk installation and integration of
complex information technology through the use of a disciplined incremental
implementation approach. In addition to its strong technical and program
management capabilities, the Company has established a reputation for
consistently high levels of customer satisfaction based on a combination of
service, quality and value. The Company's current business strategy includes
developing an international client base which is balanced across both government
and commercial sectors of the IT services market.

COMPANY HISTORY

The Company was founded in 1979 as Computer Technology Associates Inc.,
specializing in consulting services related to the evaluation of computer
systems embedded in larger systems such as spacecraft, missiles and aircraft. In
the mid-1980's, the Company's consulting business expanded into systems
integration of avionics, command and control, and other decision support
systems. Originally qualified to receive small business related support from the
federal government, the Company established major relationships with U.S.
military operations at the Defense Department's Cheyenne Mountain Complex, the
Naval Air Warfare Center, Weapons Division, NASA's Goddard Space Flight Center
and the Air Force's Consolidated Space Operations Center. In 1992, the Company
ended its eligibility for government programs that assist small businesses, with
the last significant contract awarded under these programs completed in early
1996. Since 1992, the Company has replaced contracts awarded under these
assistance programs with contracts awarded under full and open competition. The
share of IT revenues derived from competitive awards grew from 19% in 1992 to
100% in 1997.

In the 1990's, the Company targeted U.S. government IT contracts that have
allowed it to broaden the Company's base of skills to include a number of
business oriented IT disciplines equally applicable to the federal civil agency
and state government IT markets. The Company then established strategic
alliances with certain specialized software companies that enabled it to enter
the commercial IT market and win contracts with commercial customers such as
Cessna, Reynolds Metals and Allied-Signal.

In 1992, the Company acquired a 79% interest in CTA Space Systems ("CTASS")
to expand its business from providing IT services related to space systems to
providing full turn-key space systems. In 1994, CTA acquired the remaining
minority interest in CTASS. CTASS pioneered small satellite-based store-and-
forward technology, which it originally developed to interrogate dispersed buoys
equipped with acoustic sensors. In 1994, the Company entered the commercial GEO
communications satellite market with CTASS' award of the contract for the
Indostar turn-key direct-to-home ("DTH") system from PT MediaCitra Indostar. The
contract provided for the Company to build a small, three-axis stabilized
commercial communications satellite, which was launched in 1997, and a complete
facility in Jakarta, Indonesia including broadcast and subscriber management
software, communications uplinking systems and hardware/software systems for
spacecraft telemetry, tracking and control. In late 1997, the Company sold CTASS
and certain related businesses to Orbital Sciences Corporation in order to focus
on its core IT business. See Note 2 of Notes to Consolidated Financial
Statements.

CORPORATE ORGANIZATION

In 1998, the Company realigned its corporate organization to further refine
its focus on the rapidly growing market for commercial and governmental IT
services. A streamlined corporate management structure supports both the CTA
Systems Engineering Group and the CTA Software Engineering Group.

23
<PAGE> 26

INFORMATION TECHNOLOGY SERVICES

The Company believes that it possesses a level of IT technical and project
management experience and expertise that allows it to offer rapid, high value,
solutions to a range of client IT requirements. The Company's principal business
focus is in the areas of 1) legacy information system modernization, including
Year 2000 compliance and European Currency ("Euro") conversion upgrades, 2)
electronic commerce implementations and other web based applications including
the engineering and implementation of secure and highly reliable computer and
network systems, 3) the development, migration and maintenance of large scale
databases, 4) the installation and integration of ERP software, and 5) a range
of IT services associated with complex embedded computer systems. The Company is
currently planning to focus the provision of these services to the financial
services, health care, transportation and government vertical markets.

The Company believes that it is one of the industry leaders in the rapidly
growing market for federal, state and commercial Year 2000 compliance upgrades
based on its combination of direct Year 2000 conversion experience, use of
automated tools and its ability to offer its customers solutions to both their
embedded and non-embedded Year 2000 compliance requirements. The Company expects
that it will continue to receive increased revenues from additional Year 2000
engagements during the next 18 months. However, these engagements and related
revenues are expected to peak prior to calendar year 2000 as customers address
their needs. Thereafter, the Company expects that revenues derived from year
2000 engagements will steadily decline. The Company believes that current Year
2000 related business will be replaced with similar conversion business (e.g.
Euro conversion beginning in 1999) and legacy system modernization projects
including web based applications and client-server conversions.

INFORMATION TECHNOLOGY SERVICES -- BUSINESS STRATEGY

The principal strategies that the Company is pursuing to expand its IT
services business include:

Increasing Penetration of Existing Customer Base. The Company focuses
heavily on achieving consistently high levels of customer satisfaction and
technical excellence. Due to its long-term incumbent position as a key systems
integrator for some of the nation's largest and most complex information
systems, the Company has gained a unique and profound understanding of those
systems. The Company believes this knowledge provides it with a substantial
advantage in terms of cost, technical expertise and demonstrated past
performance in competing for future work related to these systems. The Company
believes that its Year 2000 conversion initiative will result in a similar
competitive advantages with respect to a wide range of new customers.

Penetrating New Markets by Leveraging Core Competencies. The Company seeks
out and exploits opportunities to market to new customers the expertise it has
gained in past IT assignments. The Company's experience in federal government,
state government and commercial Year 2000 compliance projects has proven to be a
key factor differentiating the Company in competitive bidding situations with
new customers. The Company plans to use such engagements to establish
relationships with an expanded base of customers that can be used for marketing
the Company's expertise in additional areas such as legacy system modernization,
data base migrations, and web enabled applications development. Also, the
methodology and tools required to accomplish Year 2000 compliance are directly
applicable to that required to upgrade computer software to properly handle the
upcoming common European Currency conversion. It is estimated by some industry
experts that the market for such Euro currency upgrades may exceed the European
Year 2000 market in total cost.

Establishing Marketing Alliances to Offer Complete Solutions. The Company
has established, and needs to continue to establish, marketing alliances with a
number of software product and tool providers which allow the Company to offer
turn-key solutions for such applications as Enterprise Resource Planning and
electronic commerce.

Acquiring Strategic IT Services Businesses. The Company intends to pursue
acquisitions that will expand the Company's commercial IT services customer base
and provide specialized capabilities and skills that enhance the Company's
penetration of the commercial IT services market.

24
<PAGE> 27

INFORMATION TECHNOLOGY SERVICES -- CONTRACTS AND PROGRAMS

Certain of the Company's significant IT contracts and programs are
described below. Total contract values include both realized and unrealized
revenues. These contracts are typically funded annually and there are no
assurances that funding will continue beyond the current fiscal year or, if they
are funded beyond the current fiscal year, for how many additional years.

U.S. GOVERNMENT -- DOD

Range Systems Management. In 1993, the Company was awarded the Range
Instrumentation Development ("RID") contract, pursuant to which the Company
supports a wide variety of aircraft range system activities for the Naval Air
Warfare Center ("NAWC") located at China Lake, California, including software
development, test and evaluation, system integration and fabrication of
electronic threat simulators. The RID contract is a cost-plus-award-fee
contract, has a total value of $88 million and is scheduled for completion in
October 1998.

Avionics Systems Integration. The Company participates in the design,
development, fabrication, modification and testing of hardware for the NAWC,
performing a wide range of support activities. These activities include systems
engineering, systems analysis, software development, configuration management,
verification and validation, maintenance and operation services for various
naval aircraft and the development and maintenance of large-scale hybrid
simulators (which integrate computer simulations with actual aircraft avionics).
The Company has performed this work since its first NAWC contract, awarded in
1985. In 1995, this contract was recompeted under a program reserved for small
businesses and the Company successfully teamed with a small business contractor,
which was awarded the prime contract. The current NAWC contract is a
cost-plus-award-fee contract, has a total value to CTA of $33 million and is
scheduled for completion in March 2000.

Information Systems Security. The Company, as a subcontractor to SAIC, is
a member of the team awarded the Center for Information Systems Security
contract in 1995 by the Defense Information Systems Agency. Under this five-year
omnibus security engineering contract, the Company will continue to provide
technical support to information systems security activities within the DOD and
other U.S. government departments and agencies. Activities under this contract
include designing and implementing the measures necessary to detect, document
and counter a wide range of threats to on-line and stored information. The
Information Systems Security contract is a time-and-materials contract, has a
total value to CTA of $8 million and is scheduled for completion in July 2000.
In addition, the Company's clients for information system security services
include the Department of Treasury, General Services Administration, Defense
Finance and Accounting Service as well as several commercial companies.

Medical Information Systems. The Company is providing medical information
systems expertise to the DOD Department of Health Affairs Consolidated Health
Care System. This second generation medical information system implements the
most advanced technology available in the industry today. Its goal is a
paperless, globally accessible electronic patient record system that provides
authorized medical professionals with vital patient medical histories in near
real time, regardless of where the patient data may have been collected or
stored, or where the patient may be physically located when medical attention is
required. This technology not only enables more accurate record keeping but also
reduces the response time required to obtain medical information from days or
weeks to literally seconds. This contract is a cost-plus-fixed-fee contract, has
a total value of $30 million and is scheduled for completion in March 2001.

U.S. GOVERNMENT -- CIVILIAN AGENCIES

Federal Aviation Administration ("FAA"). For the FAA, the Company provides
services related to the design, development, integration and test of the U.S.
air traffic control ("ATC") system and has been

25
<PAGE> 28

supporting the FAA automation programs since 1982. Currently, the Company is
performing on the following programs for the FAA:

(i) providing engineering support to the FAA as a subcontractor to TRW
under the AUA Technical Assistance contract in implementing its programs to
replace the ATC system. This contract is a time-and-materials contract, has
a total value to CTA of $40 million and is scheduled for completion in
December 2002.

(ii) providing support to the FAA as a subcontractor to TRW under the
ASD SETA contract for the overall architectural design and evolution of the
National Airspace System. This contract is a time-and-materials contract,
has a total value to CTA of $17 million and is scheduled for completion in
September 2001.

(iii) assisting the FAA, as a subcontractor to TRW under the Weather
Technical Assistance contract in the areas of program engineering, hardware
and software engineering, program and project management, system test and
evaluation, system implementation and human factors. This contract is a
cost-plus-fixed-fee contract, has a total value to CTA of $3 million and is
scheduled for completion in March 2000.

(iv) providing engineering and management support services to the FAA
as a subcontractor to SRC under the ANN Technical Assistance contract. This
contract is a cost-plus-award-fee contract, has a total value to CTA of $5
million and is scheduled for completion in September 2000.

Department of Justice. In February 1994, the Department of Justice ("DOJ")
awarded the Company a contract to assist the FBI in its program to streamline,
consolidate and automate its Criminal Justice Information System, which serves
over 80,000 law enforcement users. Under this seven-year contract, the Company
is assisting the FBI in virtually every aspect of the engineering process, from
procurement of new information systems to the re-engineering of the processes
that this system supports. The DOJ contract is a combined fixed-price and
cost-plus contract, has a total value of $40 million and is scheduled for
completion in September 2001.

Treasury Department. Under a contract awarded in 1995, the Company
provides system engineering and technical analysis support to the Treasury
Department, primarily for the Internal Revenue Service's computer-based
information processing system modernization effort. The Company's support
functions include engineering services and telecommunication and security
services. In the longer term, the Company will be developing and assessing
advanced user interface concepts, technologies and prototypes (such as hypertext
and speech recognition) and assessing and recommending tools and environments to
support future software development. This contract is a time-and-materials
contract, has a total value of $40 million and is scheduled for completion in
June 2000.

General Services Administration. The Company provides support for the
Federal Supply Service's central offices, its eleven regional offices and its
various commodity centers and depots. The Company provides applications software
and database maintenance and upgrades, network administration, mainframe to
client-server conversions and implementation of electronic commerce
applications. The Company's current Federal Supply Service contract is a
follow-on contract to the original Federal Supply Service contract that was
awarded to the Company in 1992. The current contract has a total value of $31
million and is scheduled for completion in September 2001.

STATE GOVERNMENT AND COMMERCIAL

Year 2000 Conversion. The Company is a leading provider of Year 2000
compliance services to both commercial clients and state and local governments.
The Company currently has contracts to provide such services to 14 commercial
clients centered in the Financial Services and Process Manufacturing vertical
markets and 12 state and local governments. These contracts incorporate a wide
range of services including IT inventory assessment, code remediation, testing,
auditing of third party-vendor remediated systems and embedded systems
compliance evaluations. The Company's historical, positive performance track
record has fostered significant financial confidence within the customer base
that has resulted in multi-year contractual

26
<PAGE> 29

awards that range from $1 - $5 million for its commercial customers to $1 - $25
million for its state and local government customers.

IT Systems Engineering. In June of 1996, the company was awarded a
contract by USAA, a San Antonio, Texas-based, provider of insurance, banking and
investment services to provide technical and engineering support to the USAA
Information Technology Division. The Company's functions include (i) project
management support, including resource forecasting and tracking and scheduling,
(ii) systems engineering, including configuration management, systems
requirements management and test planning and execution, (iii) procurement
support, including the development of procurement strategies, evaluation
criteria and requests for proposals and (iv) development of cost estimates for
USAA procurement. The USAA contract is a time-and-materials contract, and is
scheduled for completion in March 2000.

Emerging Commercial Offerings & Programs. In keeping with its stated
strategy to leverage Year 2000 contracts, the Company has staffed its Year 2000
projects with senior business and systems professionals whose experience
profiles go far beyond those required to perform general Year 2000 assessments
and remediation. By incorporating a high-level skill set with a proven
methodology, customers have yielded an experience-enhanced view of their current
IT portfolios that not only accelerates Year 2000 remediation, but also provides
for cost-effective alternatives for contingency planning, platform
consolidation, systems maintenance and ERP integration. As a result, nearly all
the Company's commercial clients and a third of the state and local government
clients have requested assistance with non-Year 2000 IT systems efforts.

In order to better leverage this opportunity, the Company has combined its
service capabilities into three primary offerings: Platform Conversions and
Migrations, Application Integration and ERP enhancement. Platform Conversions
and Migrations focus on the transformation of code and data. Projects of this
type may be driven by customer requirements for system consolidation, by
"orphaned" (vendor abandoned) systems that are still considered to be mission
critical or by clients who need to modify their systems to handle Euro-Currency
transactions. Application Integration is directed toward the linkage of legacy
mainframe and client/server platforms. ERP enhancement consists of a combined
product and service offering that facilitates the integration of disparate ERP
systems within the corporate enterprise.

The Company is utilizing these offerings to enhance its competitive
positioning within its installed base and to create a compelling rationale for
new clients to consider working with CTA. For its Financial clients, the company
has targeted these offerings at this market's high demand for data mining and
customer portfolio management systems. These systems provide a comprehensive
view of customer product and service purchases, customer portfolio profitability
and customer activity trends. This offering is currently in the planning stages
at USAA, a San Antonio, Texas-based provider of insurance, as a natural
extension to the current contract with USAA for IT engineering services.

For the Company's process manufacturing clients, these offerings allow for
the successful implementation of a hybrid ERP system; where new investments in
packaged ERP systems (i.e. manufacturing, financial, inventory) and existing
investments in viable legacy systems (i.e. order processing, sales management,
distribution) provide for the framework of a unified system structure. The
Company is currently initiating these offerings at Dannon Foods and Centocor
Pharmaceuticals.

For its State and local clients, the Company's offerings provide a pathway
for migration from maintenance-intensive, sunset (obsolete) systems to advanced
open-systems technology. State and local government also have the need for
ERP-type systems, particularly in the areas of human resources services and
financial management. These initiatives are often hampered by the government's
ability to sustain expertise in aging legacy environments and hire and maintain
technical staff in a highly competitive marketplace. With the addition of
selective systems outsourcing as an adjunct to the standard IT Systems
Engineering offering, the Company has created a comprehensive program consisting
of Year 2000 compliance, sunset system maintenance support, phased platform
migration and ERP system support. Selective state agencies in California,
Connecticut, Kansas and Texas are reviewing these options as a natural extension
to their current Year 2000 contracts with CTA.

27
<PAGE> 30

INFORMATION TECHNOLOGY SERVICES -- COMPETITION

The IT services industry in which the Company operates is highly fragmented
with no single company or small group of companies in a dominant position. The
Company's competitors include large, diversified firms with substantially
greater financial resources and larger technical staffs than the Company, such
as BDM, Cap Gemini, CSC, EDS, IBM, Lockheed Martin, PRC, SAIC, as well as firms
that receive preferences under government programs for small businesses. The
firms that compete with the Company include consulting firms, computer services
firms, applications software companies and accounting firms, as well as the
computer service arms of computer manufacturing companies and defense and
aerospace firms. In addition, the internal staffs of client organizations,
non-profit federal contract research centers and universities are, in effect,
competitors of the Company.

The primary competitive factors in the information technology industry
include technical, management and marketing competence, as well as price. The
Company competes for commercial work by identification of unique market niches
in which the Company believes it has superior technical service capability.

TYPES OF CONTRACTS

General. The Company's services are provided primarily through three types
of contracts: fixed-price, time-and-material and cost-reimbursable contracts.
Fixed-price contracts require the Company to perform services under the contract
at a stipulated price. Time-and-material contracts reimburse the Company for the
number of labor hours expended at established hourly rates negotiated in the
contract and the cost of materials incurred. Cost-reimbursable contracts
reimburse the Company for all actual costs incurred in performing the contract,
to the extent that such costs are within a specified maximum and allowable under
the terms of the contract, plus a fee or profit.

The following table shows the approximate percentage of revenue by contract
type recognized by the Company's continuing operations during the indicated
periods:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------
TYPE OF CONTRACT 1995 1996 1997
- ---------------- ---- ---- ----
<S> <C> <C> <C>
Fixed-price................................................. 8% 11% 14%
Time-and-materials.......................................... 52% 53% 54%
Cost-reimbursable........................................... 40% 36% 32%
--- --- ---
Total.................................................. 100% 100% 100%
=== === ===
</TABLE>

Government Contract Requirements. Many of the government programs in which
the Company participates as a contractor or subcontractor may extend for several
years, but they are normally funded on an annual basis. The Company's U.S.
government contracts and subcontracts are subject to modification, curtailment
and termination in the event of changes in government funding. Accordingly, all
of the Company's contracts and subcontracts involving the U.S. government may be
terminated at any time by the U.S. government, without cause, for the
convenience of the U.S. government. If a U.S. government contract is terminated
for convenience, the Company would be entitled to receive compensation for the
services provided or costs incurred at the time of termination and a negotiated
amount of the profit on the contract.

Among the factors that could materially adversely affect the Company's U.S.
government contracting business are budgetary constraints, changes in fiscal
policies or available funding, reduction of defense or aerospace spending,
changes in U.S. government programs or requirements, curtailment of the U.S.
government's use of technology services firms, the adoption of new laws or
regulations, technological developments and general economic conditions. In
addition, increased competition and U.S. government budget constraints in the
defense area, and in areas not related to defense, may limit future growth in
Company revenues from U.S. government agencies and contractors.

The Company's costs and revenues under government contracts are subject to
adjustment as a result of annual audits performed by the DCAA on behalf of the
DOD. Audits of the Company by the DCAA and

28
<PAGE> 31

other agencies have been completed for all years through 1995 without material
adjustment. See "Risk Factors -- Contracts with Federal, State and Local
Governments."

BACKLOG

The Company's total backlog was approximately $270 million at June 30, 1998
and $284 million at December 31, 1997. The Company's backlog is comprised of the
unrealized portions of the Company's Federal government contracts, Federal
government-related contracts and commercial contracts. Backlog for government
and government-related contracts consists of either funded or unfunded backlog.
Funded backlog consists of the dollar portion of contracts that is currently
appropriated by the government client or other clients and allocated to the
contract by the purchasing government agency or otherwise authorized for payment
by the client upon completion of a specified portion of work, less amounts
realized to date. Unfunded backlog consists of the total unrealized award value
of the contract less the contract value funded by the customer, and includes
multi-year incrementally funded contracts, delivery orders, and task orders
which remain at the customers' discretion to fund. Unfunded government backlog
comprised approximately 53% and 57% of total backlog at June 30, 1998 and
December 31, 1997, respectively. Commercial and other backlog comprised
approximately 32% and 33% of total backlog at June 30, 1998 and December 31,
1997, respectively.

No individual contract or program represents more than 10% of total backlog
at June 30, 1998. The Company expects that approximately 24% of the Company's
total backlog as of June 30, 1998 will result in revenues in the year ending
December 31, 1998.

Although unfunded backlog can include up to the stated award value of the
contract including renewals or extensions that have been priced but still remain
at the discretion of the customer whether to fund, the Company, to be
conservative, often recognizes only a portion of stated award values on
multi-year contracts into its backlog records. Because many of the Company's
contracts are multi-year contracts, total backlog may include revenues expected
to be realized several years into the future. The unfunded backlog may not be an
indicator of future contract revenues or earnings because there is no assurance
that the unfunded portion of the Company's backlog will be funded. In addition,
many of the contracts included in backlog are subject to termination for the
convenience of the government customer.

EMPLOYEES

At June 30, 1998, the Company had 770 employees, approximately 80 percent
of whom are IT professionals and 20 percent in management and support positions.
The Company also utilizes the services of independent contractors and as of June
30, 1998 had approximately 175 independent contractors working on client
engagements. None of the Company's employees are represented by a labor union
and the Company believes its relations with its employees to be good.

The Company must compete against other employers for the acquisition of
high quality, professional staff members. The Company cannot assure the
retention of current staff or that replacement staff will be available at equal
cost. Competitors of the Company may be able to attract or retain employees more
successfully than the Company based on levels of benefits, demographics and
other factors.

The Company also regularly utilizes the services of consultants as an
integral part of its work on specific projects. The Company is not materially
dependent upon the services of any individual consultant or consulting firm.

PROPERTIES

The Company leases approximately 23,000 square feet at its corporate
headquarters in Bethesda, Maryland under a lease expiring in 2005. In addition,
the Company has principal leased facilities in Ridgecrest, California and
Colorado Springs, Colorado. The Company believes that these properties are
adequate to serve the Company's present business operations.

29
<PAGE> 32

LEGAL PROCEEDINGS

The Company is currently involved in certain legal proceedings incidental
to the ordinary course of its business. The Company does not believe that any
liabilities relating to the legal proceedings to which it is a party are likely
to be, individually or in the aggregate, material to its consolidated financial
position or results of operations.

30
<PAGE> 33

MANAGEMENT

The following table sets forth certain information regarding current
directors and executive officers of the Company:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
C.E. Velez............................ 58 President, Chief Executive Officer and
Chairman of the Board
Gregory H. Wagner..................... 50 Executive Vice President, Chief
Financial Officer and Treasurer
Terry J. Piddington................... 55 President, Systems Engineering Group
Sy Inwentarz.......................... 47 President, Software Engineering Group
Harvey D. Kushner(1).................. 67 Director
David R. Mackie(1).................... 59 Director
Raymond V. McMillan(1)................ 65 Director
George W. Morgenthaler(1)............. 71 Director
James M. Papada, III(1)............... 50 Director
Arturo Silvestrini(1)................. 68 Director
</TABLE>

- ---------------
(1) Member of the Compensation Committee and the Audit Committee of the Board of
Directors.

Dr. C.E. "Tom" Velez, a founder of the Company, has been President and
Chairman of the Board since the Company's organization in 1979. Prior to
founding the Company, Dr. Velez was employed by Martin Marietta Aerospace for
three years as Director, Software Engineering Research and Development, and was
previously employed at the NASA Goddard Space Flight Center for 12 years in
various positions including Chief of the Systems Development and Analysis
Branch.

Gregory H. Wagner has been Executive Vice President and Chief Financial
Officer and Treasurer of the Company since November 1992. From 1988 to 1992, he
was Vice President of Finance of the Company. Mr. Wagner was previously employed
with Martin Marietta Aerospace for ten years in various positions, most recently
as Director of Business Management.

Terry J. Piddington has been President of the Company's Systems Engineering
Group since October 1997 and before that had been Executive Vice President of
the Company since February 1987. From 1985 to 1987, he was a Vice President of
the Company's Systems Engineering Services Division.

Sy Inwentarz has been President of the Company's Software Engineering Group
since March 1998. From 1996 until he joined the Company, he was a Managing
Principal with IBM Global Services. From 1992 to 1996 he was a Vice President of
Computer Horizons Corp., a business solutions software supplier. Prior to 1992,
he held various positions with Hewlett Packard and American Hoechst.

Harvey D. Kushner has been a Director of the Company since July 1989. Mr.
Kushner formed Kushner Management Planning Corporation in 1988 which is a
professional services firm advising in management, business and technology
development. From 1987 to 1988, he was an officer of Atlantic Research
Corporation. Prior to 1987, Mr. Kushner had been employed by the ORI Group for
33 years, having served as Chairman of the Board of Directors, Chief Executive
Officer, and President for 20 years.

David R. Mackie has been a Director of the Company since 1997. Since 1985
he has been an independent consultant and is currently a Partner in Diplomatic
Resolutions, Inc. Prior to 1985, he held various positions with Hewlett-Packard
and Tandem Computers, where he was one of the co-founders.

Raymond V. McMillan has been a Director of the Company since August 1996
and President of Information Technology Services from April 1996 to his
retirement in October 1997. Before that had been Executive Vice President of the
Company since February 1991. From 1988 to 1991, he was a Vice President of the
Company. From 1984 to 1987, he was a Brigadier General in the Air Force
responsible for management of the integration and test of the DOD's Integrated
Tactical Warning and Attack Assessment System.

31
<PAGE> 34

George W. Morgenthaler has been a Director of the Company since August
1991. From 1986 to the present, he has served on the faculty of the University
of Colorado at Boulder as Professor, Aerospace Engineering Sciences. He
previously served four years as Department Chairman and Associate Dean of the
College of Engineering and Applied Science. From 1960 to 1986, he was with
Martin Marietta; his last position was as Vice President of Energy, Technology
and Special Products. He is on the Board of Directors of Dynamic Materials
Corp., a NASDAQ company.

James M. Papada, III has been a Director of the Company since August 1996.
Since prior to 1991, he has been a senior partner in the corporate department of
the law firm of Stradley, Ronon, Stevens & Young, LLP in Philadelphia,
Pennsylvania, specializing in merger and acquisition transactions. He is also
the Chairman of the Board of Technitrol, Inc., a multi-national, diversified
manufacturing company listed on the New York Stock Exchange. He is also a
Director of ParaChem Southern, Inc., a manufacturer of specialty chemical
products and GlassTech, Inc., a manufacturer of glass tempering and bending
systems. From February 1983 until December 1987, Mr. Papada was President and
Chief Operating Officer of Hordis Brothers, Inc., a privately held glass
fabricator.

Arturo Silvestrini has been a Director of the Company since August 1991.
Since November 1991 he has been President and CEO of Earth Observation Satellite
Corporation. From 1965 to 1991, he was with Computer Sciences Corporation, most
recently as Senior Vice President for European operations.

Executive officers are reviewed annually by the Board of Directors and
serve at the pleasure of the Board.

EXECUTIVE COMPENSATION

The following table sets forth information regarding the compensation for
1997, 1996 and 1995 of (i) the Company's Chief Executive Officer, (ii) the two
other most highly compensated executive officers of the Company serving in
office at December 31, 1997 and (iii) two former executive officers of the
Company who resigned during 1997 (the "Executive Officer Group") for services
rendered in all capacities to the Company. The Company has no other executive
officers.

32
<PAGE> 35

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------- ----------------------
OTHER RESTRICTED
ANNUAL STOCK OPTION ALL OTHER
SALARY BONUS COMPENSATION AWARDS AWARDS COMPENSATION
NAME AND PRINCIPAL POSITION(S) YEAR ($) ($) ($)(1) ($) (#) ($)(2)
- ------------------------------ ---- ---------- --------- ------------ ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
C.E. Velez, President, Chief.. 1997 280,000 -- 2,090 -- -- 14,480
Executive Officer and 1996 276,743 -- 1,870 -- 59,010 5,700
Chairman of the Board 1995 253,454 -- 1,691 -- -- 6,300

Gregory H. Wagner............. 1997 167,900 85,000 927 -- -- 32,461
Executive Vice President, 1996 167,900 -- 856 -- 85,828 5,700
Chief Financial Officer and 1995 150,007 -- 768 -- -- 27,085
Treasurer

Terry J. Piddington........... 1997 155,000 -- 1,396 -- -- 14,028
Executive Vice President 1996 153,350 -- 1,221 -- 32,666 5,700
1995 139,412 38,453 1,107 -- -- 4,800

Ricardo de Bastos(3).......... 1997 175,108 -- 1,540 44,339 -- 11,835
President-Space and 1996 134,616 -- 1,441 125,000 102,684 338,960(4)
Telecommunications Systems and 1995 -- -- -- -- -- --
Director

Raymond V. McMillan........... 1997 142,308 90,000 2,346 -- -- 50,759
President-Information 1996 182,779 -- 2,815 -- 178,988 12,180
Technology Services(5) 1995 166,385 -- 2,616 -- -- 16,915
</TABLE>

- ---------------
(1) Represents long term disability premiums and group life insurance premiums
for amounts in excess of $50,000.

(2) Includes amounts of the Company's contributions allocated to participants'
accounts pursuant to the Company's 401(k) plan and ESOP, other relocation
reimbursements and miscellaneous cash payments pursuant to the Company's
cafeteria plan.

(3) Mr. de Bastos joined the Company in April 1996 at an annual salary of
$200,000 and resigned effective August 15, 1997.

(4) Includes $125,000 (after tax) and relocation expense of $131,003 paid in
connection with hiring.

(5) Mr. McMillan retired in October 1997.

OPTION GRANTS DURING 1997

There were no options granted in fiscal 1997 to any member of the Executive
Officer Group.

AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES

The following table sets forth information concerning the exercise of stock
options during fiscal 1997 and the number and value of unexercised stock options
held at year end by each member of the Executive Officer Group.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FY-END(#) AT FY-END($)(1)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
---- ----------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
C.E. Velez................... -- -- 19,670/39,340 5,999/11,999
Gregory H. Wagner............ -- -- 11,942/73,886 1,821/22,535
Terry J. Piddington.......... -- -- 10,888/21,778 3,321/6,642
Ricardo de Bastos............ -- -- -- --
Raymond V. McMillan.......... -- -- 106,994/115,994 14,120/2,824
</TABLE>

- ---------------
(1) There was no public trading market for the Common Stock on December 31,
1997. Accordingly, solely for purposes of this table, the values in this
column have been calculated on the basis of an estimated market price of
$5.05 per share, less the aggregate exercise price of the options.

33
<PAGE> 36

DIRECTOR COMPENSATION

All directors are reimbursed for their expenses associated with attending
Board and Board committee meetings. Outside directors receive an annual retainer
fee of $10,000, payable in quarterly installments in shares of Common Stock, a
fee of $1,000 for each directors' meeting attended and a fee of $500 for each
committee meeting attended. Directors' fees for board and committee meetings are
payable at a director's election in cash or shares of Common Stock and, if paid
in Common Stock, the director is granted options to purchase an equal number of
shares of Common Stock. Directors may receive additional compensation for
consulting services provided to the Company. Directors who are also officers of
the Company received no separate compensation for their service as directors.

CONSULTING ARRANGEMENTS WITH DIRECTORS

The Company paid Mr. McMillan $36,442 in 1998 to date for consulting
services with respect to business development under a consulting agreement. The
agreement commenced in February 1998.

The Company paid Mr. Silvestrini $32,515 in 1998 to date for consulting
services with respect to business development under a consulting agreement. The
agreement commenced in February 1998.

The Company paid Mr. Kushner $14,404 in 1997 for consulting services with
respect to business development under a consulting agreement. The agreement
ended in 1997.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee of the Board of Directors is currently composed
of Messrs. Kushner, Mackie, McMillan, Morgenthaler, Papada and Silvestrini. Mr.
McMillan was appointed to the Compensation Committee upon his retirement as
President of Information Technology Services of the Company in October 1997. The
Company is not aware of any compensation committee interlocks.

EMPLOYEE BENEFIT PLANS

NON-QUALIFIED STOCK OPTIONS

Non-qualified stock options have been granted to directors and certain key
employees pursuant to individual agreements. As of August 31, 1998,
non-qualified stock options to purchase 1,144,184 shares of Common Stock having
a weighted average exercise price of $4.20 per share were outstanding.

1991 PLAN

In 1991, the Company established the 1991 Plan in which directors, officers
and other employees of, and consultants to, the Company may participate. Options
granted under the 1991 Plan can be qualified or non-qualified stock options. An
aggregate of 2,600,000 shares of the Common Stock is authorized for issuance
under the 1991 Plan, of which 1,455,816 shares remain available for grant. The
1991 Plan is administered by the Compensation Committee of the Board of
Directors. The Compensation Committee determines, among other things, to whom
options or stock bonuses will be granted and the times at which grants will be
made, as well as the terms of each option or bonus.

BONUS PLAN

The Company has individual incentive plans for its executive officers which
provide for cash bonuses to be awarded based upon financial performance in
relation to criteria set forth in the incentive plans. Payment of these bonuses
is usually made after year-end. The Company also provides two levels of awards
for specific achievements by all levels of Company employees. Spot bonus awards
and major contribution awards may be made based upon the written recommendation
and approval of the appropriate levels of management. Bonus expense is recorded
each year to match the incentive plans pertaining to that year. Any unpaid bonus
amounts are recorded as a liability and subsequent payments reduce the liability
balance when made.

34
<PAGE> 37

THE 401(k) PLAN

The Company sponsors a qualified 401(k) plan (the "401(k) Plan") which
allows participants to make before-tax salary deferral contributions. Employees
may contribute to the 401(k) Plan up to 15% of their 401(k) Plan eligible
compensation with a maximum in 1998 of $10,000. The Company will match employee
contributions for an amount up to 4% of each employee's 401(k) Plan eligible
compensation. The Company may contribute additional amounts not based upon the
employee's elective contributions at the discretion of the Board of Directors,
which are allocated on the basis of each participant's compensation. The
Company's contributions to the 401(k) Plan generally vest over four years.

The Company added its Common Stock as an investment alternative in the
401(k) Plan in December 1993. Participants are restricted to not more than 20%
of their balances as an investment in Common Stock.

DESCRIPTION OF THE ESOP PLAN

The Company sponsors an employee stock ownership plan ("ESOP"), which was
adopted in 1988. The ESOP is a qualified stock bonus plan under Section 401(a)
of the Code and an employee stock ownership plan under Section 4975(e)(7) of the
Code. The ESOP is designed to enable participating employees to share in the
growth and prosperity of the Company while providing them with the opportunity
to accumulate capital for their future. All contributions to the ESOP are made
by the Company. Contributions are proportionately allocated on the basis of each
eligible participant's compensation. ESOP shares vest over four years. Upon
distribution of ESOP shares to participants and their beneficiaries, the Company
may be required to purchase such shares at fair market value if such shares are
not readily tradable on an established market. The ESOP presently holds
1,615,318 shares of Common Stock. See "Principal Stockholders."

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

In August 1998, the Company adopted a Supplemental Executive Retirement
Plan ("SERP"). Eligibility for participation is determined by the Compensation
Committee of the Board of Directors and the Board may terminate or suspend the
SERP at any time. The SERP will provide normal benefits of sixty percent of
average final compensation upon retirement at age sixty-two and will be funded
with Corporate Owned Life Insurance ("COLI") in a Rabbi Trust.

35
<PAGE> 38

SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS

At August 31, 1998, the Common Stock was held of record by 286 holders. The
following table sets forth certain information with regard to the beneficial
ownership of the Common Stock as of August 31, 1998, as adjusted to reflect the
sale of the shares of Common Stock offered hereby, by (i) each person known by
the Company to own beneficially more than 5% of the outstanding shares of Common
Stock, (ii) each director, each executive officer and each member of the
Executive Officer Group and (iii) all current directors and executive officers
of the Company as a group. Except as otherwise indicated, all persons listed
below have sole voting and investment power with respect to all shares
beneficially owned, except to the extent shared with spouses under applicable
law.

<TABLE>
<CAPTION>
PERCENT BENEFICIALLY
OWNED(3)
-------------------------
SHARES BENEFICIALLY PRIOR TO
NAME AND ADDRESS OF BENEFICIAL OWNER(1)(2) OWNED(1) OFFERING AFTER OFFERING
------------------------------------------ ------------------- -------- --------------
<S> <C> <C> <C>
C.E. Velez.............................................. 4,681,420(4) 53.6% 46.8%
ESOP.................................................... 1,615,318 18.6 16.2
B.A. Claussen........................................... 919,634(5) 10.3 9.2
Terry J. Piddington..................................... 443,903(6) 5.1 4.4
Raymond V. McMillan..................................... 229,252(7) 2.6 2.3
Gregory H. Wagner....................................... 192,212(8) 2.2 1.9
George W. Morgenthaler.................................. 19,783(9) * *
Harvey D. Kushner....................................... 16,273(10) * *
James M. Papada, III.................................... 6,241(11) * *
Arturo Silvestrini...................................... 4,025 * *
David R. Mackie......................................... 2,279 * *
Sy Inwentarz............................................ -- * *
Ricardo de Bastos....................................... 4,270 * *
All current directors and executive officers as a group
(10 persons as of August 31, 1998).................... 5,595,388(12) 61.9% 56.0%
</TABLE>

- ---------------
* Less than 1%

(1) Beneficial ownership as of August 31, 1998 for each person includes shares
subject to options held by such persons (but not held by any other person)
which are exercisable within 60 days after such date. All share amounts are
exclusive of shares beneficially owned through the ESOP. Beneficial
ownership is determined in accordance with the rules of the SEC and
generally includes voting or investment power with respect to securities.

(2) The address for each beneficial owner except for Mr. Claussen is c/o
Computer Technology Associates, Inc., 6903 Rockledge Drive, Bethesda,
Maryland 20817. Mr. Claussen's address is c/o SymSystems, LLC, 12508 E.
Briarwood Avenue, Englewood, Colorado 80112.

(3) Assumes all 1,303,568 shares of Common Stock offered by the Company in this
offering are sold, 8,696,432 shares of Common Stock are outstanding before
this offering, 10,000,000 shares of Common Stock are outstanding after this
offering, and outstanding options to purchase 1,135,174 shares of Common
Stock have not been exercised.

(4) Includes non-qualified options to purchase 39,340 shares of Common Stock.

(5) Includes non-qualified options to purchase 200,000 shares of Common Stock.

(6) Includes non-qualified options to purchase 21,776 shares of Common Stock.

(7) Includes non-qualified options to purchase 199,988 shares of Common Stock.

(8) Includes non-qualified options to purchase 73,884 shares of Common Stock.

(9) Includes non-qualified options to purchase 526 shares of Common Stock.

(10) Includes non-qualified options to purchase 4,818 shares of Common Stock.

(11) Includes non-qualified options to purchase 210 shares of Common Stock.

(12) Includes non-qualified options to purchase 340,542 shares of Common Stock.

36
<PAGE> 39

CERTAIN TRANSACTIONS

During 1995, the Company discontinued the operations of its Simulation
Systems Division, which manufactured aircraft flight simulators for sale or
lease. The assets of the division consisted primarily of a cockpit flight
simulator and various fixed assets, which had an aggregate value of $3.1
million, net of accumulated depreciation. These assets were sold on September 1,
1995 to a company principally owned by B.A. Claussen, one of the Company's
principal stockholders, for two notes secured by the assets sold with an
aggregate principal amount of $2.2 million, bearing interest at the Company's
borrowing rate which has ranged between 6.00% and 7.75% per annum, and a 15%
minority interest in the entity purchasing the division, which has been assigned
a value of $0.2 million. The Company received $0.2 million in cash on the $1.8
million note and forgave the balance (which will be charged against the
Company's allowance for doubtful accounts). The other note will be repaid from
the Company's common stock held by Mr. Claussen and the Company's minority
interest reduced to 10.6%.

In March 1991, the Company made a loan to Mr. Claussen of $368,623 for the
purchase of his new residence. The interest rate on this loan varied from 4.69%
to 7.75% per annum and equaled the interest rate on the Company's revolving line
of credit under the Credit Facility. Mr. Claussen paid all outstanding principal
and accrued interest on the loan in January 1996. During 1997, the Company and
Mr. Claussen entered into an employee separation and non-competition agreement
under which he will be paid $175,000 per year for a period of five years.

Between May 1993 and July 1995, the Company made loans aggregating $500,000
to Dr. Velez for the purchase and construction of a new residence, evidenced by
a revolving promissory note due August 2000 bearing interest at the same rates
applicable to the Company under its Credit Facility. Dr. Velez paid all
outstanding principal and accrued interest on the loan in November 1997.

DESCRIPTION OF CAPITAL STOCK

GENERAL

The authorized capital stock of the Company currently consists of (i)
20,000,000 shares of Common Stock, par value $.01 per share and (ii) 1,000,000
shares of Preferred Stock, par value $0.01 per share (the "Preferred Stock").

COMMON STOCK

As of August 31, 1998, there were outstanding 8,696,432 shares of Common
Stock held of record by 284 persons. Upon the consummation of this offering,
there will be 10,000,000 shares of Common Stock outstanding assuming no exercise
of outstanding options to purchase an aggregate of 1,135,174 shares of Common
Stock. Holders of Common Stock are entitled to one vote per share in all matters
to be voted on by the stockholders of the Company and do not have cumulative
voting rights. Subject to preferences that may be applicable to any Preferred
Stock outstanding at the time, holders of Common Stock are entitled to receive
ratably such dividends, if any, as may be declared from time to time by the
Board of Directors out of funds legally available therefor. See "Dividend
Policy." In the event of a liquidation, dissolution or winding up of the
Company, holders of Common Stock are entitled to share ratably in all assets
remaining after payment of the Company's liabilities and the liquidation
preference, if any, of any outstanding Preferred Stock. Holders of shares of
Common Stock have no preemptive, subscription, redemption or conversion rights.
There are no redemption or sinking fund provisions applicable to the Common
Stock. All of the outstanding shares of Common Stock are, and the shares offered
by the Company in this offering will be, when issued and paid for, fully paid
and non-assessable. The rights, preferences and privileges of holders of Common
Stock are subject to, and may be adversely affected by, the rights of the
holders of shares of any series of Preferred Stock which the Company may
designate and issue in the future.

37
<PAGE> 40

PREFERRED STOCK

The Board of Directors has the authority, without any further vote or
action by the stockholders, to provide for the issuance of up to 1,000,000
shares of Preferred Stock from time to time in one or more series with such
designations, rights, preferences and limitations as the Board of Directors may
determine, including the consideration received therefor. The Board also has the
authority to determine the number of shares comprising each series, dividend
rates, redemption provisions, liquidation preferences, sinking fund provisions,
conversion rights and voting rights without approval by the holders of Common
Stock. Although it is not possible to state the effect that any issuance of
Preferred Stock might have on the rights of holders of Common Stock, the
issuance of Preferred Stock may have one or more of the following effects: (i)
to restrict Common Stock dividends if Preferred Stock dividends have not been
paid, (ii) to dilute the voting power and equity interest of holders of Common
Stock to the extent that any Preferred Stock series has voting rights or is
convertible into Common Stock or (iii) to prevent current holders of Common
Stock from participating in the Company's assets upon liquidation until any
liquidation preferences granted to holders of Preferred Stock are satisfied. In
addition, the issuance of Preferred Stock may, under certain circumstances, have
the effect of discouraging a change in control of the Company by, for example,
granting voting rights to holders of Preferred Stock that require approval by
the separate vote of the holders of Preferred Stock for any amendment to the
Articles of Incorporation or any reorganization, consolidation, merger or other
similar transaction involving the Company. As a result, the issuance of such
Preferred Stock may discourage bids for the Common Stock at a premium over the
market price therefor, and could have a materially adverse effect on the market
value of the Common Stock.

STOCK RESTRICTION AGREEMENTS

The shares of Common Stock offered hereby will be subject to certain
restrictions on their transferability set forth in the Stock Restriction
Agreements which will be required to be entered into by the original purchasers
thereof and all subsequent transferees. The material terms of such Stock
Restriction Agreements are as follows:

Right of Repurchase upon Termination of Employment or Affiliation. All
shares of Common Stock owned by any employee, director or consultant of the
Company will be subject to the Company's right to repurchase such shares upon
the death or termination of such holder's employment or affiliation with the
Company at the Formula Price per share on the date of such termination of
employment or affiliation. The Company's right of repurchase will be exercisable
by mailing written notice to such holder within one year following his or her
termination of employment or affiliation provided, however, that in the event
that the Formula Price to be paid by the Company is less than the price paid by
such holder for any such shares, the Company will not exercise its right to
repurchase any such shares without the shareholder's consent. The Company will
pay for any shares repurchased in cash as soon as practicable after receipt by
the Company of the certificate or certificates representing such shares.

Right of First Refusal. In the event that a holder of Common Stock desires
to sell any of his or her shares to a third party other than in the Limited
Market, such person must first give notice to the Secretary of the Company
consisting of: (a) a signed statement setting forth such holder's desire to sell
his or her shares of Common Stock and that he or she has received a bona fide
offer to purchase such shares; (b) a statement signed by the intended purchaser
containing (i) the intended purchaser's full name, address and taxpayer
identification number, (ii) the number of shares to be purchased, (iii) the
price per share to be paid, (iv) the other terms upon which the purchase is
intended to be made, (v) a representation that the offer, under the terms
specified, is bona fide and (vi) a representation that such purchaser will enter
into an agreement with the Company on substantially the same terms as set forth
in the Stock Restriction Agreement; and (c) if the purchase price is payable in
cash, in whole or in part, a copy of a certified check, cashier's check or money
order payable to such holder from the purchaser in the amount of the purchase
price which is to be paid in cash.

Upon receiving such notice, the Company will have the option, exercisable
within 30 days, to purchase all of the shares specified in the notice at the
offer price and upon the same terms as set forth in the notice. In the

38
<PAGE> 41

event the Company does not exercise such option and consents to a sale, the
holder may sell the shares specified in the notice within 30 days thereafter to
the person specified in the notice at the price and upon the terms and
conditions set forth therein. The holder may not sell such shares to any other
person or at any different price or on any different terms without first
re-offering the shares to the Company.

All Transfers. Except for sales in the Limited Market, no holder of Common
Stock may sell, assign, pledge, transfer or otherwise dispose of or encumber any
shares of Common Stock without abiding by the terms of the Stock Restriction
Agreement, and any attempt to do so will be null and void. In addition, no such
transfer may be made unless the transferee enters into an agreement with the
Company on substantially the same terms as set forth in the Stock Restriction
Agreement. See "Risk Factors -- No Public Market; Lack of Liquidity."

Lapse or Waiver of Restrictions. All transfer restrictions imposed on the
Common Stock by the Stock Restriction Agreement will automatically terminate (i)
if the Company makes an underwritten offering of any class of its Common Stock,
or securities convertible into any class of Common Stock, to the general public
or (ii) if the Company applies to have any class of its Common Stock, or
securities convertible into any class of its Common Stock, listed on a national
securities exchange. In addition, the Board of Directors may waive any or all of
the restrictions on the shares of Common Stock imposed by the Stock Restriction
Agreement where the Board deems it appropriate.

The foregoing summary is qualified in its entirety by the provisions of the
form of Stock Restriction Agreement, a copy of which has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part.

CERTAIN PROVISIONS OF ARTICLES OF INCORPORATION

Right to Restrict Capital Stock. The Company's Articles of Incorporation
give the Company the right to impose restrictions on transferability of its
capital stock and to become a party to agreements entered into with any of its
shareholders restricting transfer or encumbrance of any of its shares, or
subjecting any of its shares to repurchase or resale obligations. In order to
remain predominantly employee-owned, the Company has no present intention to
amend its Articles to alter this right.

Anti-Takeover Provisions. With certain exceptions, the Company's Articles
also generally prohibit the Company from engaging in any business combination
with any "interested shareholder" for a period of three years following the time
such shareholder became an interested stockholder unless:

(i) prior to such time the Board of Directors approved either the
business combination or the transaction which resulted in the shareholder
becoming an interested shareholder;

(ii) upon consummation of the transaction which resulted in the
shareholder becoming an interested shareholder, the interested shareholder
owned at least 85% of the outstanding voting stock of the Company,
excluding for purposes of calculating the shares outstanding shares owned
by (a) persons who are both directors and officers and (b) employee stock
plans in which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be tendered in
a tender or exchange offer; or

(iii) at or subsequent to such time the business combination is
approved by the Board of Directors and authorized at an annual or special
meeting of shareholders by the affirmative vote of at least two thirds of
the outstanding voting stock not owned by the interested stockholder.

As used in the Articles, "interested stockholder" means any person (other
than the Company or any direct or indirect majority-owned subsidiary thereof)
that (i) is the owner of 15% or more of the outstanding voting stock of the
Company or (ii) is an affiliate or associate of the Company and was the owner of
15% or more of the outstanding voting stock of the Company at any time within
the past three years; provided, however, that the term "interested stockholder"
shall not include:

(a) any person who (x) owned shares in excess of the 15% limitation as
of September 18, 1996 and either (1) continued to own shares in excess of
such 15% limitation or would have but for action by the

39
<PAGE> 42

Company or (2) is an affiliate or associate of the Company and so continued
(or would have so continued but for action of the Company) to be the owner
of 15% or more of the outstanding voting stock at any time within the past
three years or (y) acquired said shares from a person described in clause
(x) of this paragraph by gift, inheritance or in a transaction in which no
consideration was exchanged; or

(b) any person whose ownership of shares in excess of the 15%
limitation is the result of action taken solely by the Company; provided
that such person will be an interested stockholder if thereafter such
person acquires additional shares of voting stock of the Company other than
through additional corporate action not caused, directly or indirectly, by
such person or pursuant to any stock option, stock purchase or similar plan
or arrangement for the benefit of employees of the Company or its
subsidiaries in effect on September 18, 1996, or thereafter adopted by the
Board of Directors of the Company.

The foregoing summary is qualified in its entirety by the provisions of the
Company's Amended and Restated Articles of Incorporation, as further amended to
date, a copy of which has been filed as an exhibit to the Registration Statement
of which this Prospectus forms a part.

LIMITATIONS ON DIRECTORS' LIABILITY

The Articles of Incorporation provide that no director of the Company shall
be liable to the Company or its shareholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Company or its shareholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) in respect of certain acts set forth in the Colorado
Business Corporation Act or (iv) for any transaction from which the director
derived an improper personal benefit. The effect of these provisions will be to
eliminate the rights of the Company and its shareholders (through shareholders'
derivative suits on behalf of the Company) to recover monetary damages against a
director for breach of fiduciary duty as a director (including breaches
resulting from gross negligence), except in the situations described above. The
limitations on liability do not limit the ability of shareholders to obtain
equitable or injunctive relief. The effectiveness of shareholders' other,
non-monetary alternatives to enforcing directors' fiduciary duties, such as
equitable or injunctive relief, may be limited as a practical matter by such
factors as the ability of shareholders to seek non-monetary relief in a timely
fashion and procedural considerations. The limitation of liability under state
law does not affect any liability under federal securities laws.

In addition, the Articles of Incorporation provide that the Company must
indemnify its directors and executive officers to the fullest extent provided by
law and may indemnify its other officers, employees and agents to the fullest
extent provided by law.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the offering, the Company will have outstanding up to
10,000,000 shares of Common Stock. Of these shares, the maximum of 3,742,602
shares sold in the offering will, not withstanding contractual restrictions on
transferability, be freely tradable in the Limited Market without restriction or
further registration under the Securities Act except for any shares purchased by
an "affiliate" of the Company, as defined in Rule 144 under the Securities Act.

Shares held by Dr. Velez and the ESOP are not being registered and will be
eligible for sale only if they are registered pursuant to Section 5 of the
Securities Act or an exemption from registration is relied upon.

As of August 31, 1998, options to purchase 1,135,174 shares of Common Stock
were outstanding. Of the outstanding options, 708,938 shares are vested and
exercisable or will become exercisable within sixty

40
<PAGE> 43

(60) days of such date. A total of 1,464,826 shares of Common Stock are
currently available for future grants of options.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Sherman & Howard, L.L.C., Denver, Colorado.

EXPERTS

The consolidated financial statements of Computer Technology Associates,
Inc. at December 31, 1997 and December 31, 1996, and for each of the three years
in the period ended December 31, 1997, appearing in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon appearing elsewhere herein, and
are included in reliance upon such reports given upon the authority of such firm
as experts in accounting and auditing.

41
<PAGE> 44

COMPUTER TECHNOLOGY ASSOCIATES, INC.

CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 1998 AND FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1998
AND AS OF DECEMBER 31, 1997 AND 1996 AND FOR EACH OF THE THREE YEARS IN
THE PERIOD ENDED DECEMBER 31, 1997

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS:
Report of Independent Auditors.............................. F-1
Consolidated Balance Sheets................................. F-2
Consolidated Statements of Operations....................... F-3
Consolidated Statements of Stockholders' Equity............. F-4
Consolidated Statements of Cash Flows....................... F-5
Notes to Consolidated Financial Statements.................. F-6
</TABLE>

42
<PAGE> 45

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders
Computer Technology Associates, Inc.

We have audited the accompanying consolidated balance sheets of Computer
Technology Associates, Inc. (formerly CTA INCORPORATED) and subsidiaries as of
December 31, 1997 and 1996, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Computer
Technology Associates, Inc. and subsidiaries at December 31, 1997 and 1996, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.

/s/ Ernst & Young LLP

Washington, D.C.
February 28, 1998

F-1
<PAGE> 46

COMPUTER TECHNOLOGY ASSOCIATES, INC.

CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
-------------------- JUNE 30,
1996 1997 1998
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT FOR SHARE
DATA)

<CAPTION>
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents.............................. $ 16 $ -- $ --
Accounts receivable (Notes 1 and 3).................... 30,665 33,300 39,080
Net assets of discontinued operations (Note 2)......... 34,484 -- --
Other current assets (Note 4).......................... 1,690 1,222 328
Recoverable income taxes (Note 8)...................... 3,537 3,576 215
------- ------- -------
Total current assets.............................. 70,392 38,098 39,623
Furniture and equipment (Notes 1 and 4)..................... 11,795 11,110 11,207
Accumulated depreciation and amortization.............. (8,888) (8,066) (7,651)
------- ------- -------
2,907 3,044 3,556
Costs in excess of net assets acquired...................... 5,048 -- --
Other assets (Notes 1, 4, and 8)............................ 5,110 4,146 3,616
------- ------- -------
Total assets...................................... $83,457 $45,288 $46,795
======= ======= =======
Liabilities and stockholders' equity
Current liabilities:
Notes payable -- line of credit (Note 5)............... $28,335 $ 7,445 $10,822
Current portion of long-term debt...................... -- 1,667 1,667
Accounts payable....................................... 10,266 5,788 6,988
Accrued expenses (Note 4).............................. 3,686 3,156 3,062
Excess of billings over costs and contract
prepayments.......................................... 2,733 2,738 3,309
Other current liabilities.............................. 757 270 270
Accrued tender offer (Note 7).......................... -- 2,019 --
Deferred income taxes (Note 8)......................... 1,377 2,427 2,800
------- ------- -------
Total current liabilities......................... 47,154 25,510 28,918
Long-term debt, less current portion (Note 5)............... 15,000 3,333 2,500
Other long-term liabilities................................. 3,510 635 500
Commitments and contingencies (Note 11)..................... -- -- --
Stockholders' equity (Note 7):
Preferred stock, $.01 par value, 1,000,000 shares
authorized and note issued........................... -- -- --
Common stock, $.01 par value, 20,000,000 shares
authorized and 10,000,000 issued..................... 100 100 100
Capital in excess of par value......................... 7,943 7,869 7,879
Retained earnings...................................... 14,550 14,528 13,828
------- ------- -------
22,593 22,497 21,807
Notes receivable from employees (Note 10)................... (698) (698) (698)
Treasury stock, at cost (894,704 shares in 1996, 1,248,980
shares in 1997 and 1,295,067 shares in 1998).............. (4,102) (5,989) (6,232)
------- ------- -------
Total stockholders' equity........................ 17,793 15,810 14,877
------- ------- -------
Total liabilities and stockholders' equity........ $83,457 $45,288 $46,795
======= ======= =======
</TABLE>

See accompanying notes.
F-2
<PAGE> 47

COMPUTER TECHNOLOGY ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31 JUNE 30
----------------------------- -----------------
1995 1996 1997 1997 1998
-------- -------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT FOR SHARE DATA)

<CAPTION>
<S> <C> <C> <C> <C> <C>
Contract revenues............................ $105,224 $ 96,246 $92,239 $43,650 $52,733
Cost of contract revenues.................... 96,633 87,644 78,530 36,401 41,689
Selling, general and administrative
expenses................................... 4,117 5,431 9,622 4,003 6,858
Supplemental ESOP contribution (Note 6)...... -- -- 2,958 -- --
Other expenses............................... (292) 2,447 710 338 769
-------- -------- ------- ------- -------
Operating profit............................. 4,766 724 419 2,818 3,417
Interest expense............................. 850 969 1,589 543 565
-------- -------- ------- ------- -------
Income (loss) before income taxes............ 3,916 (245) (1,170) 2,275 2,852
Income taxes (benefit) (Note 8).............. 1,567 (80) (500) 853 1,070
-------- -------- ------- ------- -------
Income (loss) from continuing operations..... 2,349 (165) (670) 1,422 1,782
-------- -------- ------- ------- -------
Discontinued operations(Note 2):
Income (loss) from discontinued operations,
net of income taxes........................ 62 (10,872) (3,272) (1,399) (1,094)
Gain (loss) on disposal of segments, net of
income taxes............................... (465) -- 3,920 -- (1,388)
-------- -------- ------- ------- -------
Income (loss) from discontinued operations... (403) (10,872) 648 (1,399) (2,482)
-------- -------- ------- ------- -------
Net income (loss)............................ $ 1,946 $(11,037) $ (22) $ 23 $ (700)
======== ======== ======= ======= =======
Earnings (loss) per share (Note 9):
Continuing operations................... $ .27 $ (.02) $ (.07) $ .15 $ .20
Discontinued operations................. (.05) (1.22) .07 (.15) (.28)
-------- -------- ------- ------- -------
Earnings (loss) per share.................... $ .22 $ (1.24) $ .00 $ .00 $ (.08)
======== ======== ======= ======= =======
Earnings (loss) per share -- assuming
dilution (Note 9):
Continuing operations................... $ .25 $ (.02) $ (.07) $ .15 $ .20
Discontinued operations................. (.04) (1.22) .07 (.15) (.28)
-------- -------- ------- ------- -------
Earnings (loss) per share -- assuming
dilution................................... $ .21 $ (1.24) $ .00 $ .00 $ (.08)
======== ======== ======= ======= =======
</TABLE>

See accompanying notes.
F-3
<PAGE> 48

COMPUTER TECHNOLOGY ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
NOTES
STOCK CAPITAL IN RECEIVABLE TREASURY STOCK
COMMON PAR EXCESS OF RETAINED FROM -------------------
SHARES VALUE PAR VALUE EARNINGS EMPLOYEES SHARES COST
---------- ----- ---------- --------- ---------- --------- -------
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995......... 10,000,000 $100 $ 8,872 $ 23,641 $ -- 1,108,370 $ 4,663
Purchase of treasury stock.... -- -- -- -- -- 147,684 684
Exercise of stock options..... -- -- (46) -- -- (79,000) (283)
Compensatory issuance of
common stock to
employees/directors......... -- -- 58 -- -- (52,274) (187)
Issuance of stock for
acquisition notes payable... -- -- 89 -- -- (79,872) (286)
Purchase of treasury stock
from ESOP................... -- -- -- -- -- 276,200 1,296
Net income.................... -- -- -- 1,946 -- -- --
---------- ---- ------- -------- ---- --------- -------
Balance at December 31, 1995....... 10,000,000 100 8,973 25,587 -- 1,321,108 5,887
Purchase of treasury stock.... -- -- -- -- -- 125,368 590
Sale of treasury stock........ -- -- 8 -- -- (7,826) (28)
Exercise of stock options..... -- -- (1,452) -- -- (449,340) (1,935)
Compensatory issuance of
common stock to
employees/directors......... -- -- 7 -- -- (15,576) (67)
Issuance of stock for
acquisition notes payable... -- -- 30 -- -- (79,030) (345)
Tax benefit of non-qualified
stock options exercised..... -- -- 377 -- -- -- --
Issuance of stock to employees
for notes receivable........ -- -- -- -- 698 -- --
Net loss...................... -- -- -- (11,037) -- -- --
---------- ---- ------- -------- ---- --------- -------
Balance at December 31, 1996....... 10,000,000 100 7,943 14,550 698 894,704 4,102
Purchase of treasury stock
(Note 7).................... -- -- -- -- -- 466,500 2,381
Exercise of stock options..... -- -- (191) -- -- (89,870) (392)
Compensatory issuance of
common stock to
employees/directors......... -- -- 12 -- (22,354) (102)
Tax benefit of non-qualified
stock options exercised..... -- -- 105 -- -- -- --
Net loss...................... -- -- -- (22) -- -- --
---------- ---- ------- -------- ---- --------- -------
Balance at December 31, 1997....... 10,000,000 100 7,869 14,528 698 1,248,980 5,989
Purchase of treasury stock
(Note 7).................... -- -- -- -- -- 55,003 278
Compensatory issuance of
common stock to
employees/directors......... -- -- 10 -- -- (8,916) (35)
Net loss...................... -- -- -- (700) -- -- --
---------- ---- ------- -------- ---- --------- -------
Balance at June 30, 1998
(unaudited)................. 10,000,000 $100 $ 7,879 $ 13,828 $698 1,295,067 $ 6,232
========== ==== ======= ======== ==== ========= =======
</TABLE>

See accompanying notes.
F-4
<PAGE> 49

COMPUTER TECHNOLOGY ASSOCIATES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31 JUNE 30
----------------------------- -----------------
1995 1996 1997 1997 1998
------- -------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)

<CAPTION>
<S> <C> <C> <C> <C> <C>
Operating activities
Net income (loss).......................................... $ 1,946 $(11,037) $ (22) $ 23 $ (700)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Loss on disposal of SIM................................ 718 -- -- -- --
Gain on disposal of segments........................... -- -- (3,920) -- --
Depreciation and amortization:
Furniture and equipment.............................. 2,877 3,734 2,612 1,480 865
Capitalized software development costs............... 131 1,108 76 76 --
Other noncurrent assets.............................. 610 1,018 390 293 --
Deferred lease incentives............................ (382) (292) (271) (136) (135)
Provision for receivable allowances.................... (990) 300 360 -- (182)
Accrued interest on debt............................... 1,063 1,034 (3,590) 517 287
Other noncash expenses................................. 432 (8) (224) 449 25
Changes in assets and liabilities:
Accounts receivable.................................. (233) (4,106) 901 9,535 (5,598)
Recoverable income taxes............................. (2,707) (639) (906) 2,674 4,221
Other assets......................................... 933 (2,353) 463 (61) 152
GEMnet investment.................................... (1,011) 6,437 -- -- --
Accounts payable and accrued expenses................ 5,089 1,595 (5,017) (784) 857
Excess of billings over costs and contract
prepayments........................................ (4,816) 1,556 (3,180) (2,444) 571
Deferred income taxes, net........................... (1,299) (3,900) 2,100 -- 373
------- -------- -------- ------- -------
Net cash provided by (used in) operating activities........ 2,361 (5,553) (10,228) 11,622 736
------- -------- -------- ------- -------
Investing activities
Investments in furniture and equipment..................... (4,327) (6,469) (3,584) (1,492) (965)
Proceeds from sale of segments............................. -- -- 18,000 -- --
Capitalized computer software.............................. (832) (87) -- -- --
Other...................................................... -- 351 -- -- --
------- -------- -------- ------- -------
Net cash provided by (used in) investing activities........ (5,159) (6,205) 14,416 (1,492) (965)
------- -------- -------- ------- -------
Financing activities
Net borrowings (payments) under bank line of credit
agreement................................................ 1,324 12,011 (8,684) (7,821) 3,377
Proceeds from term loan.................................... -- -- 5,000 -- --
Repayment of long-term debt................................ -- -- (450) -- (833)
Repayment of acquisition notes............................. (375) (375) -- -- --
Proceeds from deferred lease incentives.................... 150 315 -- -- --
Purchase of treasury stock................................. (1,980) (458) (104) (90) (2,315)
Proceeds from exercise of stock options.................... 12 10 34 -- --
Other...................................................... -- 36 -- -- --
------- -------- -------- ------- -------
Net cash provided by (used in) financing activities........ (869) 11,539 (4,204) (7,911) 229
------- -------- -------- ------- -------
Net increase (decrease) in cash and cash equivalents....... (3,667) (219) (16) 2,219 --
Cash and cash equivalents at beginning of period........... 3,902 235 16 16 --
------- -------- -------- ------- -------
Cash and cash equivalents at end of period................. $ 235 $ 16 $ -- $ 2,235 $ --
======= ======== ======== ======= =======
Supplemental Information
Cash paid during the year for:
Income taxes........................................... $ 5,115 $ 226 $ 117 $ 7 $ 309
======= ======== ======== ======= =======
Interest............................................... $ 2,863 $ 2,836 $ 8,807 $ 1,342 $ 278
======= ======== ======== ======= =======
Noncash investing and financing activities:
Debt assumed by purchaser (Note 2)..................... $ -- $ -- $ 27,000 $ -- $ --
======= ======== ======== ======= =======
Purchase of treasury stock (Note 7).................... $ -- $ -- $ 2,019 $ -- $ --
======= ======== ======== ======= =======
Investment in EarthWatch............................... $ -- $ 2,038 $ -- $ -- $ --
======= ======== ======== ======= =======
Conversion of note to common stock..................... $ 375 $ 375 $ -- $ -- $ --
======= ======== ======== ======= =======
Common stock issued for notes.......................... $ 225 $ 473 $ -- $ -- $ --
======= ======== ======== ======= =======
</TABLE>

See accompanying notes.
F-5
<PAGE> 50

COMPUTER TECHNOLOGY ASSOCIATES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998

1. THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES

Computer Technology Associates, Inc. (the Company, formerly CTA
INCORPORATED) provides information technology services to Federal, State and
commercial markets including Year 2000 services, network design and
implementation, mainframe to client-server conversions, software language
upgrades, database development and maintenance, electronic data interchange and
automated enterprise management technologies. During 1995, the Company disposed
of its aircraft simulation systems business. During 1997, the Company disposed
of its Space and Telecommunications Systems and its Mobile Information and
Communications Services businesses.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its subsidiaries. Significant intercompany accounts and transactions have
been eliminated in consolidation.

UNAUDITED INFORMATION

Financial information for the six months ended June 30, 1997 and 1998 are
unaudited but have been prepared on the same basis as the audited consolidated
financial statements and, in the opinion of management, contain all adjustments
necessary for the fair presentation of the financial position, results of
operations and cash flows for those periods. The consolidated results of
operations for the six months ended June 30, 1998 are not necessarily indicative
of the results to be expected for any future period.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes, in particular, estimates of contract cost and revenues used
in the earnings recognition process. Actual results could differ from those
estimates.

An important focus of the Company's efforts to pursue commercial markets is
to assist state and local governments and commercial companies address the Year
2000 Issue with their information systems. The Year 2000 Issue arises because
many electronic data processing systems will be unable to process year-date data
accurately beyond the year 1999. The Company believes it has instituted
reasonable contract management practices to control the financial risk of
performance on these contracts.

CASH AND CASH EQUIVALENTS

The Company considers highly liquid investments with original maturities of
three months or less to be cash equivalents.

FURNITURE AND EQUIPMENT

Furniture and equipment are carried at cost. Depreciation is computed based
upon accelerated methods using estimated useful lives of three to seven years.
Leasehold improvements are amortized on a straight-line basis over the terms of
the leases, which range from one to ten years. Purchased computer software used
by the Company is amortized on a straight-line basis over a three-year period.

F-6
<PAGE> 51
COMPUTER TECHNOLOGY ASSOCIATES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1. THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
CONTRACTS REVENUES AND RELATED CONTRACT COSTS

Revenues result from services performed for the U.S. government and
commercial customers under a variety of long-term contracts and subcontracts,
some of which provide for reimbursement of costs plus fixed fees and/or award
fees, and others which are fixed-price type. Revenues on cost-type contracts are
recognized as costs are incurred on the basis of direct costs plus allowable
indirect expenses and an allocable portion of a fixed fee. Award fees on
cost-type contracts are recognized as earned. Revenues on fixed-price type
contracts are recognized using the percentage-of-completion method of
accounting, based on contract costs incurred to date compared with total
estimated costs at completion or other measures of progress on the contract.
Estimated contract revenue at completion includes contract incentive fees at
estimated realizable amounts. Revenues from time and materials contracts are
recognized based on hours worked at amounts represented by the agreed-upon
billing amounts.

When adjustments in contract value or estimated costs are determined, any
changes from prior estimates are reflected in earnings in the current period.
The effect of these adjustments could be material to interim or annual operating
results. The Company provides for anticipated losses, if any, on contracts and
allowances for receivables during the period in which they are first identified.

Contract costs, including indirect costs for cost-type contracts, are
subject to audit by government representatives. Such audits have been completed
through 1995. Management believes that any adjustments resulting from
determinations for subsequent periods and contract close-outs will not have a
significant impact on the Company's consolidated financial position or results
of operations.

STOCK-BASED COMPENSATION

Compensation expense is recognized for stock options and other stock grants
to the extent the exercise price is less than the fair market value of the
Company's common stock at the date of grant.

NEW ACCOUNTING PRONOUNCEMENTS

In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, Earnings Per Share. SFAS No. 128
replaced the calculation of primary and fully diluted earnings per share with
basic and diluted earnings per share. Unlike primary earnings per share, basic
earnings per share excludes any dilutive effects of options, warrants and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. All earnings per share
amounts for all periods presented have been restated to conform to the SFAS No.
128 requirements (see Note 9).

The Company adopted SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information, in 1997. SFAS No. 131 supercedes SFAS No.
14, replacing the "industry segment approach" with the "management approach,"
whereby companies report financial and descriptive information about their
operating segments. Operating segments are revenue-producing components of the
enterprise for which separate financial information is produced internally and
are subject to evaluation by the chief operating decision maker in deciding how
to allocate resources to segments (see Note 13).

RECLASSIFICATIONS

Certain prior year balances have been reclassified to conform with the
current period presentation.

2. DISPOSAL OF SEGMENTS

In August 1997, the Company sold its Space and Telecommunications Systems
and its Mobile Information and Communications Services businesses to Orbital
Sciences Corporation ("Orbital") in
F-7
<PAGE> 52
COMPUTER TECHNOLOGY ASSOCIATES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. DISPOSAL OF SEGMENTS -- (CONTINUED)

exchange for $18 million in cash and assumption by Orbital of certain
liabilities of the Company. In addition, Orbital paid to certain lenders of the
Company an aggregate of $27 million in partial satisfaction of the Company's
obligations to such lenders. The final purchase price was subject to certain
adjustments and was subsequently reduced by $2.1 million in 1998 The Company
also is entitled to receive certain deferred consideration for future sales of
STARBus satellites and satellite busses and 3% of all cumulative revenues
attributable to the GEMtrak monitoring system in excess of a threshold amount of
$50 million.

The consolidated statements of operations exclude sales and expenses of
discontinued operations from captions applicable to continuing operations. The
discontinued operations include an allocation of interest expense based on the
proportion of debt paid by Orbital to the Company's total debt outstanding at
the time of the sale. Interest expense allocated to discontinued operations was
$2.1 million in 1997, $3.3 million in 1996 and $3.2 million in 1995. Net sales
of the Space and Telecommunications Systems business prior to its disposition
were $66.8 million in 1997, $83.5 million in 1996 and $111.8 million in 1995.
There were no sales for the Mobile Information and Communications Services
business prior to its disposition. The income (loss) from operations of the
disposed businesses was $(3.3) million in 1997, $(10.9) million in 1996 and $1.3
million in 1995, net of income tax. The operating loss in 1996 includes charges
totaling $9.2 million related to lower profitability on a contract and the
write-off of the investment in GEMnet. The 1997 gain from disposal of the
businesses was $3.9 million, net of income tax. The income tax provision
(benefit) related to these discontinued segments was $(1.4) million in 1997,
$(5.6) million in 1996 and $0.9 million in 1995.

The loss from discontinued operations for 1998 reflects an adjustment of
$2.1 million for the final settlement of the sales price to Orbital and a
binding arbitration award of $2.0 million to a former employee of that business.
The amounts are presented net of income tax benefit in the Condensed Statements
of Operations. Net revenues of the Space and Telecommunications business for the
six months ended June 30, 1997 were $36.4 million.

During 1997, the Company also sold its Advanced Information Systems (AIS)
division for approximately $0.4 million. The net contract revenues of AIS prior
to its disposition were $0.9 million in 1997, $2.9 million in 1996 and $3.7
million in 1995 and are included in continuing operations.

In September 1995, the Company sold its Simulation Systems Division (SIM)
to a former director and a principal stockholder of the Company and other
investors in exchange for two notes secured by the assets of the division with
an aggregate principal amount of $2.2 million, bearing interest at the Company's
borrowing rate and a 15% minority interest in the purchasing entity, valued at
$0.2 million. The notes were paid in 1998 and the Company's minority interest
reduced to 10.6%.

Net sales of SIM prior to its disposition were $0.5 million in 1995. The
loss from operations of the SIM business, which is reported in discontinued
operations, was $1.3 million in 1995, net of income tax. The 1995 loss from
disposal of the business was $0.5 million, net of income tax. The income tax
benefit related to this discontinued business was $1.2 million in 1995.

F-8
<PAGE> 53
COMPUTER TECHNOLOGY ASSOCIATES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. ACCOUNTS RECEIVABLE

<TABLE>
<CAPTION>
DECEMBER 31
----------------- JUNE 30,
1996 1997 1998
------- ------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Accounts receivable:
U.S. Government:
Billed............................................ $21,969 $17,556 $18,136
Unbilled:
Contracts in progress........................ 6,106 4,659 4,643
Amounts awaiting contractual coverage........ 4,338 4,192 5,037
Revenue awaiting government approval of final
indirect rates or contract close-out....... 1,360 242 266
Commercial Customers:
Billed................................................. -- 5,646 6,799
Unbilled:
Contracts in progress................................ -- 4,473 7,485
------- ------- -------
33,773 36,768 42,366
Less allowances............................................. (3,108) (3,468) (3,286)
------- ------- -------
$30,665 $33,300 $39,080
======= ======= =======
</TABLE>

Contracts in progress consist primarily of revenues on long-term contracts
that have been recognized under the percentage-of-completion method for
accounting purposes but not billed to customers. These amounts generally will be
billable upon product delivery or satisfaction of other contract requirements.

Amounts awaiting contractual coverage include amounts for which the Company
expects to obtain the necessary contract modifications in the normal course of
business. At December 31, 1996 and 1997, approximately $2.9 million and $2.2
million respectively, is related to situations where disputes regarding the
extent of contractual coverage have resulted in legal actions or formal claims.
The Company has provided allowances that it believes adequately provide for the
resolution of these and other matters. The Company expects to realize
substantially all billed and unbilled receivables within one year.

4. COMPOSITION OF CERTAIN FINANCIAL STATEMENT BALANCES

<TABLE>
<CAPTION>
DECEMBER 31,
----------------- JUNE 30,
1996 1997 1998
------- ------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Other current assets:
Receivables from employees and stockholders (Note
10).................................................. $ 1,175 $ 76 $ 106
Prepaid expenses....................................... 253 495 222
Other.................................................. 262 651 --
------- ------- -------
$ 1,690 $ 1,222 $ 328
======= ======= =======
Furniture and equipment:
Data processing equipment.............................. $ 8,353 $ 7,513 $ 5,289
Office furniture and equipment......................... 2,425 2,805 2,223
Other equipment........................................ 351 115 3,185
Leasehold improvements................................. 666 677 360
------- ------- -------
11,795 11,110 11,207
Accumulated depreciation and amortization................... (8,888) (8,066) (7,651)
------- ------- -------
$ 2,907 $ 3,044 $ 3,556
======= ======= =======
</TABLE>

F-9
<PAGE> 54
COMPUTER TECHNOLOGY ASSOCIATES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. COMPOSITION OF CERTAIN FINANCIAL STATEMENT BALANCES -- (CONTINUED)

<TABLE>
<CAPTION>
DECEMBER 31,
----------------- JUNE 30,
1996 1997 1998
------- ------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Other assets:
Investment in and notes receivable from SIM (Note 2)... $ 2,138 $ 2,218 $ 2,147
Capitalized software costs, net........................ 525 -- --
Deferred tax asset (Note 8)............................ 1,385 935 868
Other.................................................. 1,062 993 601
------- ------- -------
$ 5,110 $ 4,146 $ 3,616
======= ======= =======
Accrued expenses:
Salaries and incentives................................ $ 3,253 $ 3,106 $ 2,682
Employee benefit plans................................. 147 -- 338
Other.................................................. 286 50 42
------- ------- -------
$ 3,686 $ 3,156 $ 3,062
======= ======= =======
</TABLE>

5. NOTES PAYABLE AND SUBORDINATED DEBT

BANK DEBT

In November 1997, the Company entered into a new three-year agreement with
a bank for a revolving credit facility providing the availability to borrow up
to $15 million, which includes a facility for letters of credit up to $4 million
and which also provides a new $5 million term facility. At June 30, 1998 and
December 31, 1997, there was $10.8 million and $7.4 million, respectively,
outstanding under the revolving credit facility and $4.2 million and $5 million,
respectively, outstanding under the term facility, to be repaid in equal
quarterly payments.

Borrowings under the credit facility are secured by substantially all of
the Company's assets and bear interest at either the lender's prime rate or
LIBOR plus 1.5% to 2.25% (based on the Company's ratio of total funded debt to
earnings before interest, taxes, depreciation and amortization) at the Company's
discretion. The weighted average rate in effect for short-term borrowings at
December 31, 1997 was approximately 7.7%. Under the agreement, the Company pays
an annual commitment fee on the unused credit line and an annual administration
fee on the total revolving credit line. The credit facility requires advance
approval by the bank for the Company to pay dividends. The agreement also
includes financial covenants which require the Company to maintain certain
financial ratios and restricts capital expenditures.

The balance outstanding at December 31, 1996 under the previous credit
facility was $28.3 million. The weighted average interest rate in effect for
short-term borrowings at that date was approximately 7.6%.

SUBORDINATED DEBT

In December 1993, the Company entered into a note purchase agreement (the
"Notes Agreement") providing for $15 million aggregate principal amount of
unsecured, senior subordinated notes (the "Notes"). The Notes bore interest at
12.0% per annum (13.0% effective April 1, 1996), payable quarterly. The Company
was required at the election of the holder to repurchase the Notes at the unpaid
principal amount, plus accrued interest, at the occurrence of a transaction
which resulted in a change in control of ownership of the Company or a
"Qualifying Sale" of the Company's common stock as defined by the Notes
Agreement. The Notes also provided for payment of contingent interest over and
above the 13.0% fixed rate upon the occurrence of a "Qualifying Sale." The sale
of the Space and Telecommunications Systems business as

F-10
<PAGE> 55
COMPUTER TECHNOLOGY ASSOCIATES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. NOTES PAYABLE AND SUBORDINATED DEBT -- (CONTINUED)
described in Note 2 was a "Qualifying Sale." As a result, the subordinated debt
was repaid along with accrued interest and contingent interest of $5.8 million.

6. EMPLOYEE BENEFIT PLANS

Substantially all of the Company's employees are eligible to participate in
the Company's employee stock ownership plan (ESOP). The ESOP is designed to
enable participating employees to share in the growth and prosperity of the
Company while providing them with the opportunity to accumulate capital for
their future. The ESOP allows only Company contributions, in cash or in common
stock, as determined by the Board of Directors. During 1997, the Board elected
to make a one-time supplemental contribution of approximately $2.9 million.
Contributions are proportionately allocated on the basis of each eligible
participant's compensation. Employee vesting in benefits ranges from 40% at the
end of two years to 100% at the end of four years. Shares of the Company's
common stock which may ultimately be distributed by the ESOP to participants
carry certain limited provisions for repurchase by the Company. Through June 30,
1998, no shares of the Company's common stock have been distributed by the ESOP.
At December 31, 1996 and 1997 and June 30, 1998, the ESOP owned 1,029,440,
1,615,318 and 1,615,318 shares, respectively, of the Company's common stock, all
of which have been allocated to plan participants.

The Company and its subsidiaries maintain 401(k) savings plans which allow
for Company and employee contributions based upon a percentage of the
participating employee's salary. Employee vesting in Company contributions
ranges from one to four years. The Company's 401(k) plan owned 140,000 shares of
the Company's common stock at December 31, 1996 and 1997 and June 30, 1998.

Amounts charged to expense under the above plans were approximately $2.1
million, $2.0 million and $4.2 million (including the supplemental contribution)
for the years ended December 31, 1995, 1996 and 1997, respectively. The Company
currently provides no significant other post retirement benefits.

7. COMMON STOCK AND STOCK OPTIONS

All of the Company's outstanding shares contain restrictions on
transferability. Shares of common stock held by the Company's principal
stockholder are subject to a buy-sell arrangement with the Company which
contains repurchase features under specified circumstances. At December 31, 1997
and June 30, 1998, none of the specified circumstances exist.

The Company completed a tender offer for 399,946 shares at $5.05 per share
on December 31, 1997 which resulted in a corresponding increase of treasury
stock. The Board of Directors declared a two-for-one stock split for all shares
outstanding on January 15, 1998 which is reflected for all periods presented in
these financial statements.

In December 1991, the Company adopted the 1991 Stock Option and Purchase
Plan which reserves 2,600,000 common shares for the granting of incentive or
non-qualified stock options or stock purchase rights through 2001. The
Compensation Committee of the Board of Directors is authorized to grant options
and purchase rights and to establish the respective terms, subject to certain
restrictions. Options generally are for terms of five to ten years and provide
for vesting periods of three years. As of December 31, 1997, options for
1,504,750 shares are available for grant under this plan. The weighted average
grant date fair value of an option granted during the years ended December 31,
1995, 1996 and 1997 was $2.03, $1.91 and $1.60, respectively. The Company uses
the Black-Scholes model to estimate the fair values of options, assuming a
risk-free interest rate equal to the ninety-day U.S. Treasury Bill rate,
expected lives of five to ten years, an

F-11
<PAGE> 56
COMPUTER TECHNOLOGY ASSOCIATES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. COMMON STOCK AND STOCK OPTIONS -- (CONTINUED)
expected volatility factor of .236 and no expected dividends. The Company
recognized no compensation expense for stock option grants during the three
years in the period ended December 31, 1997.

<TABLE>
<CAPTION>
SIX
NUMBER OF SHARES MONTHS
YEAR ENDED DECEMBER 31 ENDED
--------------------------------- JUNE 30
1995 1996 1997 1998
--------- --------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Options outstanding at beginning of period
(weighted average exercise price of $2.08 in
1995, $1.90 in 1996, $3.96 in 1997 and $4.08 in
1998)........................................... 1,175,950 934,450 1,282,126 847,880
Granted (weighted average exercise price of $4.68
in 1995, $4.74 in 1996 and $5.05 in 1997 and
1998)........................................... 30,500 799,016 13,574 342,690
Canceled (weighted average exercise price of $3.04
in 1995, $2.09 in 1996, $4.61 in 1997 and $4.63
in 1998)........................................ (193,000) (2,000) (357,950) (46,386)
Exercised (weighted average exercise price of
$3.00 in 1995, $1.07 in 1996 and $2.24 in
1997)........................................... (79,000) (449,340) (89,870) --
--------- --------- --------- ---------
Options outstanding at end of period (weighted
average exercise price of $1.90 in 1995, $3.96
in 1996, $4.08 in 1997 and $4.20 in 1998)....... 934,450 1,282,126 847,880 1,144,184
========= ========= ========= =========
Options exercisable at end of period (weighted
average exercise price of $1.66 in 1995, $2.48
in 1996, $3.16 in 1997 and $3.47 in 1998)....... 824,244 391,022 462,648 571,112
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31
Range of Exercise Prices 1997
-------

<CAPTION>
<S> <C>
$2.01-$3.00:
Options outstanding:
Number of shares..................................... 266,000
Weighted average exercise price...................... $2.17
Weighted average remaining contractual life (in
years).............................................. 1.7
Options exercisable:
Number of shares..................................... 266,000
Weighted average exercise price...................... $2.17
$3.58-$5.05:
Options outstanding:
Number of shares..................................... 581,880
Weighted average exercise price...................... $4.95
Weighted average remaining contractual life (in
years).............................................. 3.2
Options exercisable:
Number of shares..................................... 196,648
Weighted average exercise price...................... $4.49
</TABLE>

Pro forma compensation expense associated with options granted subsequent
to December 31, 1994 generally is recognized over a three year vesting period;
therefore, the initial impact of applying SFAS No. 123 on pro forma net income
(loss) for 1995 and 1996 is not representative of the impact on pro forma net
income
F-12
<PAGE> 57
COMPUTER TECHNOLOGY ASSOCIATES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. COMMON STOCK AND STOCK OPTIONS -- (CONTINUED)
in 1997 and future years, when the pro forma effect is fully reflected. The
Company's pro forma information follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------
1995 1996 1997
------- ------ ------
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<S> <C> <C> <C>
Pro forma income (loss) from continuing operations.... $2,325 $(327) $(964)
====== ===== =====
Pro forma earnings (loss) per share
Basic............................................ $ .26 $(.04) $(.10)
====== ===== =====
Diluted.......................................... $ .24 $(.04) $(.10)
====== ===== =====
</TABLE>

8. INCOME TAXES

The provision (benefit) for income taxes attributable to continuing
operations consisted of the following components:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 SIX MONTHS
----------------------- ENDED JUNE 30
1995 1996 1997 1998
------ ---- ------- -------------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C>
Current:
Federal.................................... $2,140 $(20) $(2,400) $ 520
State...................................... 410 -- (200) 110
------ ---- ------- ------
2,550 (20) (2,600) 630
------ ---- ------- ------
Deferred:
Federal.................................... (875) (50) 2,000 360
State...................................... (108) (10) 100 80
------ ---- ------- ------
(983) (60) 2,100 440
------ ---- ------- ------
$1,567 $(80) $ (500) $1,070
====== ==== ======= ======
</TABLE>

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
DECEMBER 31
--------------- JUNE 30
1996 1997 1998
------ ------ -----------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C>
Current deferred tax liabilities:
Unbilled receivables................................ $5,820 $5,425 $6,077
Other............................................... 185 135 121
------ ------ ------
6,005 5,560 6,198
------ ------ ------
Current deferred tax assets:
Contract provisions and allowances.................. 3,707 2,482 2,448
Accrued vacation.................................... 704 510 813
Other accruals...................................... 217 141 136
------ ------ ------
4,628 3,133 3,398
------ ------ ------
</TABLE>

F-13
<PAGE> 58
COMPUTER TECHNOLOGY ASSOCIATES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. INCOME TAXES -- (CONTINUED)

<TABLE>
<CAPTION>
DECEMBER 31
--------------- JUNE 30
1996 1997 1998
------ ------ -----------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C>
Net current deferred tax liabilities..................... $1,377 $2,427 $2,800
====== ====== ======
Long-term deferred tax assets:
Accrued interest on subordinated debt............... $1,240 $ -- $--
Net operating loss carryforward..................... 504 350 350
Other............................................... 145 935 868
------ ------ ------
1,889 1,285 1,218
Less: valuation allowance........................... (504) (350) (350)
------ ------ ------
Net long-term deferred tax assets........................ $1,385 $ 935 $ 868
====== ====== ======
</TABLE>

A reconciliation of income tax expense at the statutory Federal rate to
income tax expense related to continuing operations at the Company's effective
income tax rate is as follows:

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31 ENDED
------------------------ JUNE 30
1995 1996 1997 1998
------- ----- ------ -----------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C>
Federal income taxes at statutory rate............. $1,331 $(83) $(398) $ 970
State income taxes, net of Federal tax benefit..... 181 (31) (60) 70
Other.............................................. 55 34 (42) 30
------ ---- ----- ------
$1,567 $(80) $(500) $1,070
====== ==== ===== ======
</TABLE>

F-14
<PAGE> 59
COMPUTER TECHNOLOGY ASSOCIATES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted
earnings per share:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 SIX MONTHS ENDED JUNE 30
------------------------------------ -------------------------
1995 1996 1997 1997 1998
---------- ---------- ---------- ----------- -----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<S> <C> <C> <C> <C> <C>
Numerator:
Income (loss) from continuing
operations.................. $ 2,349 $ (165) $ (670) $ 1,422 $ 1,782
Income (loss) from
discontinued operations..... (403) (10,872) 648 (1,399) (2,482)
---------- ---------- ---------- ---------- ----------
Net income (loss) for both basic
and diluted earnings per share... $ 1,946 $ (11,037) $ (22) $ 23 $ (700)
========== ========== ========== ========== ==========
Denominator:
Denominator for basic earnings
per share -- Weighted
average shares
outstanding................. 8,862,530 8,875,086 9,092,214 9,234,410 8,711,883
Dilutive potential common
shares:
Employee stock options...... 556,006 -- -- 391,022 340,225
---------- ---------- ---------- ---------- ----------
Denominator for diluted earnings
per share -- Adjusted weighted
average shares and assumed
conversions...................... 9,418,536 8,875,086 9,092,214 9,625,432 9,052,108
========== ========== ========== ========== ==========
</TABLE>

Due to a loss from continuing operations in the years ended December 31,
1996 and 1997, employee stock options are considered anti-dilutive and not
included in the denominator for diluted earnings per share.

10. TRANSACTIONS WITH RELATED PARTIES

The Company made loans in prior years to two of its principal stockholders
for relocation costs that include the purchase of new residences. The loans were
made in exchange for promissory notes and were secured by deeds of trust on
residential property. The loans bore interest at the same rates applicable to
the Company's revolving line of credit. The remaining indebtedness of
approximately $111,000 on one of these loans was paid in 1996. The remaining
outstanding loan of approximately $600,000 was repaid in 1997.

The Company made loans in prior years totaling $884,000 to certain officers
and employees related to the exercise of options to acquire common stock.
Amounts related to the stock exercise price are presented as a reduction of
stockholders' equity. The notes are for five years and bear interest at the same
rates paid by the Company.

11. COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

The Company has operating leases for all of its office space and various
computer and office equipment. Most of the office space leases require the
Company to pay maintenance and operating expenses such as taxes, insurance and
utilities and also include provisions for renewal.

Certain of the leases contain provisions for periodic rate escalations to
reflect changes in the consumer price index. Total rent expense from continuing
operations for the six months ended June 30, 1998 and the

F-15
<PAGE> 60
COMPUTER TECHNOLOGY ASSOCIATES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
years ended December 31, 1995, 1996 and 1997 was $1.1 million, $3.1 million,
$2.7 million and $2.4 million, respectively.

At December 31, 1997, total future minimum rental commitments under
non-cancelable leases are summarized as follows (in thousands):

<TABLE>
<S> <C>
1998........................................................ $2,650
1999........................................................ 1,743
2000........................................................ 794
2001........................................................ 544
2002........................................................ 354
2003 and after.............................................. 321
------
$6,406
======
</TABLE>

LITIGATION

In October 1996, a former employee of the Company filed suit against the
Company alleging, among other things, breach of contract in connection with a
profit sharing agreement. Subsequently, the litigation was stayed by agreement
of the parties because the profit sharing agreement called for mandatory and
binding arbitration. The arbitration was settled in June 1998 with an award of
$2.0 million which is included in the loss from discontinued operations.

The Company is involved in certain other litigation incidental to its
business. Management of the Company, after reviewing developments with legal
counsel, is of the opinion that the outcome of such matters will not have a
material adverse effect on the financial position or future operations of the
Company.

12. OTHER INFORMATION

MAJOR CUSTOMERS

The percentage of contract revenues from U.S. Government customers that
comprise 10% or more of total revenues were as follows:

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31 JUNE 30
------------------ -----------
1995 1996 1997 1997 1998
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Department of Defense................................... 64% 63% 47% 44% 32%
General Services Administration......................... 17% 14% 16% 19% 18%
</TABLE>

13. OPERATING SEGMENTS

The Company has two principal operating segments: the Systems Engineering
Group and the Software Engineering Group. Segment data has been adjusted from
previously reported amounts to reflect treatment of the Space and
Telecommunications Systems and the Mobile Information and Communications
Services

F-16
<PAGE> 61
COMPUTER TECHNOLOGY ASSOCIATES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. OPERATING SEGMENTS -- (CONTINUED)
businesses and Simulation Systems Division as discontinued operations. The
following table provides certain financial information for each operating
segment:

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31 ENDED JUNE 30
---------------------- -------------
1995 1996 1997 1997 1998
------ ----- ----- ----- -----
(UNAUDITED)
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Contract revenues:
Systems Engineering................................ $105.2 $91.9 $73.4 $36.8 $35.4
Software Engineering............................... -- 4.3 18.8 6.8 17.3
------ ----- ----- ----- -----
$105.2 $96.2 $92.2 $43.6 $52.7
====== ===== ===== ===== =====
Operating profit (loss):
Systems Engineering................................ $ 4.5 $ 2.4 $ 3.0 $ 2.1 $ 2.3
Software Engineering............................... -- 0.7 1.1 1.0 1.9
Other expense...................................... 0.3 (2.4) (3.7) (0.3) (0.8)
------ ----- ----- ----- -----
$ 4.8 $ 0.7 $ 0.4 $ 2.8 $ 3.4
====== ===== ===== ===== =====
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31 ENDED JUNE 30
------------------------ -------------
1995 1996 1997 1997 1998
------ ------ ------ ----- -----
(UNAUDITED)
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Depreciation and amortization expense:
Systems Engineering................................. $ 1.6 $ 2.4 $ 0.8 $ 0.4 $ 0.4
Software Engineering................................ -- -- 0.4 -- 0.2
Discontinued operations............................. 1.6 3.2 1.6 1.0 --
Capital expenditures:
Systems Engineering................................. $ 1.4 $ 1.0 $ 0.4 $ 0.1 $ 0.2
Software Engineering................................ -- -- 1.4 0.3 0.3
Discontinued operations............................. 3.8 5.5 1.8 1.1 --
Identifiable assets:
Systems Engineering................................. $42.4 $29.8 $27.4 $26.0 $26.4
Software Engineering................................ -- 3.0 12.0 6.9 15.5
Discontinued operations............................. 39.5 42.8 -- 40.1 --
General corporate assets............................ 9.7 7.8 5.9 9.0 4.9
----- ----- ----- ----- -----
$91.6 $83.4 $45.3 $82.0 $46.8
===== ===== ===== ===== =====
</TABLE>

The operating profit in 1996 for the Systems operating segment was
adversely impacted by a $2.6 million adjustment to the profitability of the
General Services Administration -- Eastern Zone contract. Other expenses in 1996
include $0.9 million related to an unsuccessful initial public offering. Other
expenses for the year ended December 31, 1997 include $2.9 million for a
supplemental ESOP contribution.

F-17
<PAGE> 62

- ------------------------------------------------------
- ------------------------------------------------------

NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED IN CONNECTION WITH ANY
OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER
THAN AS CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY,
OR THE SELLING SHAREHOLDERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY BY ANY PERSON ANY SECURITIES COVERED
BY THIS PROSPECTUS IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON
TO MAKE SUCH AN OFFERING OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE IMPLY THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.

- ------------------------------------------------------

TABLE OF CONTENTS
- ------------------------------------------------------

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Company.......................... 4
Risk Factors......................... 5
Plan of Distribution................. 9
Determination of Offering Price...... 11
Use of Proceeds...................... 14
Dividend Policy...................... 14
Book Value Dilution.................. 15
Selected Financial Data.............. 16
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 17
Business............................. 23
Management........................... 31
Security Ownership of Management and
Principal Shareholders............. 36
Certain Transactions................. 37
Description of Capital Stock......... 37
Shares Eligible for Future Sale...... 40
Legal Matters........................ 41
Experts.............................. 41
Index to Consolidated Financial
Statements......................... 42

- -------------------------------------
- -------------------------------------
</TABLE>

- ------------------------------------------------------
- ------------------------------------------------------

3,742,602 SHARES

COMPUTER
TECHNOLOGY
ASSOCIATES, INC.

COMMON STOCK

PROSPECTUS

, 1998

- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 63

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following expenses (other than the SEC filing fee) are estimated. All
such expenses will or have been paid by the Company.

<TABLE>
<S> <C>
SEC registration fee........................................ $ 3,301
Printing and engraving expenses............................. 10,000
Legal fees and expenses..................................... 25,000
Blue Sky fees and expenses.................................. 6,000
Accounting fees and expenses................................ 10,000
Miscellaneous............................................... 699
-------
TOTAL.................................................. $55,000
=======
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

As authorized by Section 7-109-101 et. seq. of the Colorado Business
Corporation Act, each director and officer of the Company may be indemnified by
the Company against expenses (including attorneys' fees, judgments, fines and
amounts paid in settlement) actually and reasonably incurred in connection with
the defense or settlement of any threatened, pending or completed legal
proceedings in which he is involved by reason of the fact that he is or was a
director or officer of the Company if (i) he acted in good faith, (ii) he
reasonably believed (a) in the case of conduct in an official capacity with the
Company, that his conduct was in the Company's best interests, or (b) in all
other cases, that his conduct was at least not opposed to the Company's best
interests, and, (iii) with respect to any criminal proceeding, he had no
reasonable cause to believe that his conduct was unlawful. If the legal
proceeding, however, is by or in the right of the Company, a director or officer
may not be indemnified in respect of any claim, issue or matter as to which he
shall have been adjudged to be liable to the Company. In addition, a director or
officer may not be indemnified in connection with any proceeding charging that
the director derived an improper personal benefit, whether or not involving
action in an official capacity, if the director or officer is adjudged liable on
the basis that he derived an improper personal benefit.

Article XI of the Articles of Incorporation of the Company provides that no
director of the Company shall be liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain acts set forth in the Colorado Business Corporation Act or (iv) for any
transaction from which the director derived an improper personal benefit. In
addition, Article XII of the Articles of Incorporation provides that the Company
must indemnify directors and executive officers to the fullest extent permitted
by law and may indemnify other officers or employee, agents or fiduciaries to
the fullest extent permitted by law.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

None

II-1
<PAGE> 64

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

A. EXHIBITS

The Exhibits listed in the following Exhibit Index are filed as part of the
Registration Statement:

<TABLE>
<CAPTION>
DESCRIPTION
-----------
<C> <S>
3.1 Restated Articles of Incorporation of the Company*
3.2 By-laws of the Company, as amended*
4.1 Form of Stock Purchase Rights Agreement between the Company
and each person purchasing the Common Stock (1)
4.2 Form of Stock Option Agreement between the Company and each
person granted an option to purchase shares of Common Stock
(1)
4.3 Form of Stock Restriction Agreement between the Company and
each person receiving shares of Common Stock (1)
5 Opinion of Sherman & Howard, L.L.C.*
10.1 Lease Agreement dated May 22, 1998 between Democracy
Associates Limited Partnership and the Company concerning
the Company's Bethesda, Maryland corporate headquarters*
10.2 Financing and Security Agreement dated November 6, 1997
between the Company and First Union Commercial Corporation
(3)
10.2.1 First Amendment to Financing and Security Agreement dated
March 25, 1998 between the Company and First Union
Commercial Corporation*
10.3 Asset Acquisition Agreement dated July 11, 1997 between the
Company, as Seller, and Orbital Sciences Corporation, as
Buyer*
10.4 1984 Stock Option Plan (1)
10.5 1991 Stock Option, Purchase Right and Bonus Plan (1)
10.5.1 Amendment to 1991 Stock Option, Purchase Right and Bonus
Plan (1)
10.6 401(k) Plan (1)
10.7 Employee Stock Ownership Plan (1)
10.8 Supplemental Executive Retirement Plan*
10.9 Memorandum of Agreement dated November 17, 1997 between the
Company and Capitol Securities Management, Incorporated*
23.1 Consent of Sherman & Howard, L.L.C.*
23.2 Consent of Ernst & Young LLP+
23.3 Consent of Legg Mason Wood Walker, Inc.+
28.1 Share Purchase Policy of the Company adopted by the Board of
Directors on November 15, 1991. (1)
28.2 Letter dated November 15, 1991 to the Company from Legg
Mason Wood
Walker, Inc. (1)
28.3 Letter and Report dated September 14, 1998 to the Company
from Legg Mason Wood Walker, Inc. regarding the appraisal of
the Common Stock.+
</TABLE>

- ---------------
* To be filed by amendment.

+ Filed herewith

(1) Previously filed with Registration Statement on Form S-1 (File No. 33-44510)
(the "Registration Statement") on December 12, 1991 and incorporated herein
by reference.

(2) Previously filed with Amendment No. 3 to the Registration Statement on March
23, 1992 and incorporated herein by reference.

(3) Previously filed with Form SC 13E4 on November 26, 1997 and incorporated
herein by reference.

B. FINANCIAL STATEMENT SCHEDULES

The financial statement schedule listed below is filed as part of this
Registration Statement.

II-2
<PAGE> 65

Schedule II Valuation and Qualifying Accounts and Reserves

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
and, therefore, is unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

The undersigned Registrant hereby undertakes:

1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:

(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

(b) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement;

(c) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.

2. That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

3. To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.

II-3
<PAGE> 66

SIGNATURES

Pursuant to the requirements the Securities Act of 1933, the Registrant has
duly caused this Registration Statement on Form S-1 to be signed on its behalf
by the undersigned, thereunto duly authorized in Bethesda, Maryland on September
25, 1998.

COMPUTER TECHNOLOGY ASSOCIATES, INC.

By: /s/ C.E. VELEZ
------------------------------------
C.E. VELEZ
Chairman of the Board
and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 5 to Registration Statement on Form S-1 has been
signed by the following persons in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>

/s/ C.E. VELEZ Chairman of the Board, September 25, 1998
- --------------------------------------------------- President, Chief Executive
C.E. VELEZ Officer and Director

/s/ GREGORY H. WAGNER Executive Vice President, September 25, 1998
- --------------------------------------------------- Chief Financial Officer,
GREGORY H. WAGNER Principal Accounting Officer
and Treasurer

/s/ HARVEY D. KUSHNER Director September 25, 1998
- ---------------------------------------------------
HARVEY D. KUSHNER

/s/ DAVID R. MACKIE Director September 25, 1998
- ---------------------------------------------------
DAVID R. MACKIE

/s/ RAYMOND V. MCMILLAN Director September 25, 1998
- ---------------------------------------------------
RAYMOND V. MCMILLAN

/s/ GEORGE W. MORGANTHALER Director September 25, 1998
- ---------------------------------------------------
GEORGE W. MORGANTHALER

/s/ JAMES M. PAPADA, III Director September 25, 1998
- ---------------------------------------------------
JAMES M. PAPADA, III

/s/ ARTURO SILVESTRINI Director September 25, 1998
- ---------------------------------------------------
ARTURO SILVESTRINI
</TABLE>

II-4
<PAGE> 67

REPORT OF INDEPENDENT AUDITORS ON A SCHEDULE

The Board of Directors and Shareholders
Computer Technology Associates, Inc.

We have audited the consolidated financial statements of Computer
Technology Associates, Inc. (formerly CTA INCORPORATED) as of December 31, 1997
and 1996, and for each of the three years in the period ended December 31, 1997,
and have issued our report thereon dated February 28, 1998 (included elsewhere
in this Registration Statement). Our audits also included the financial
statement schedule listed in Item 16(b) of this Registration Statement. This
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits.

In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

/s/ ERNST & YOUNG LLP

Washington, D.C.
February 28, 1998

S-1
<PAGE> 68

SCHEDULE II

COMPUTER TECHNOLOGY ASSOCIATES, INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
($000)

ALLOWANCE FOR DOUBTFUL ACCOUNTS

<TABLE>
<CAPTION>
BALANCE, CHARGED TO CHARGED TO BALANCE,
BEGINNING COSTS AND OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
----------- --------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
For the year ended December 31, 1995........ $3,690 $200 $292 $1,482 $2,700
For the year ended December 31, 1996........ $2,700 $300 $108 $ 0 $3,108
For the year ended December 31, 1997........ $3,108 $600 $ 94 $ 334 $3,468
</TABLE>

S-2
<PAGE> 69

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
DESCRIPTION
-----------
<C> <S>
3.1 Restated Articles of Incorporation of the Company*
3.2 By-laws of the Company, as amended*
4.1 Form of Stock Purchase Rights Agreement between the Company
and each person purchasing the Common Stock (1)
4.2 Form of Stock Option Agreement between the Company and each
person granted an option to purchase shares of Common Stock
(1)
4.3 Form of Stock Restriction Agreement between the Company and
each person receiving shares of Common Stock (1)
5 Opinion of Sherman & Howard, L.L.C.*
10.1 Lease Agreement dated May 22, 1998 between Democracy
Associates Limited Partnership and the Company concerning
the Company's Bethesda, Maryland corporate headquarters*
10.2 Financing and Security Agreement dated November 6, 1997
between the Company and First Union Commercial
Corporation(3)
10.2.1 First Amendment to Financing and Security Agreement dated
March 25, 1998 between the Company and First Union
Commercial Corporation*
10.3 Asset Acquisition Agreement dated July 11, 1997 between the
Company, as Seller, and Orbital Sciences Corporation, as
Buyer*
10.4 1984 Stock Option Plan (1)
10.5 1991 Stock Option, Purchase Right and Bonus Plan (1)
10.5.1 Amendment to 1991 Stock Option, Purchase Right and Bonus
Plan (1)
10.6 401(k) Plan (1)
10.7 Employee Stock Ownership Plan (1)
10.8 Supplemental Executive Retirement Plan*
10.9 Memorandum of Agreement dated November 17, 1997 between the
Company and Capitol Securities Management, Incorporated*
23.1 Consent of Sherman & Howard, L.L.C.*
23.2 Consent of Ernst & Young LLP+
23.3 Consent of Legg Mason Wood Walker, Inc.+
28.1 Share Purchase Policy of the Company adopted by the Board of
Directors on November 15, 1991. (1)
28.2 Letter dated November 15, 1991 to the Company from Legg
Mason Wood
Walker, Inc. (1)
28.3 Letter and Report dated September 14, 1998 to the Company
from Legg Mason Wood Walker, Inc. regarding the appraisal of
the Common Stock.+
</TABLE>

- ---------------
* To be filed by amendment.

+ Filed herewith

(1) Previously filed with Registration Statement on Form S-1 (File No. 33-44510)
(the "Registration Statement") on December 12, 1991 and incorporated herein
by reference.

(2) Previously filed with Amendment No. 3 to the Registration Statement on March
23, 1992 and incorporated herein by reference.

(3) Previously filed with Form SC 13E4 on November 26, 1997 and incorporated
herein by reference.

S-3

<PAGE> 1
EXHIBIT 23.2

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts"
and to the use of our reports dated February 28, 1998, in the Registration
Statement on Form S-1 and related Prospectus of Computer Technology Associates,
Inc. (formerly CTA INCORPORATED) for the registration of 3,742,602 shares
of its common stock.

/s/ Ernst & Young LLP

Washington, D.C.
September 25, 1998

<PAGE> 1
EXHIBIT 23.3

CONSENT OF LEGG MASON WOOD WALKER, INCORPORATED

We consent to the use of our report dated September 14, 1998, in the
Registration Statement on Form S-1 and related Prospectus of Computer
Technology Associates, Inc. for the registration of 3,742,602 shares
of its common stock.

/s/ Legg Mason Wood Walker, Incorporated

Baltimore, MD
September 25, 1998

<PAGE> 1

EXHIBIT 28.3

REPORT OF LEGG MASON WOOD WALKER, INC., INDEPENDENT APPRAISERS

September 14, 1998

Board of Directors
Computer Technology Associates, Inc.
6903 Rockledge Drive, Suite 800
Bethesda, Maryland 20817

Members of the Board:

You have requested our advice with regard to certain factors
impacting the formula price of the Common Stock of Computer Technology
Associates, Inc. ("CTA" or the "Company") as of June 30, 1998. Specifically, you
have asked us to provide you with (i) a discount factor to reflect the limited
liquidity of CTA Common Stock (the "Discount Factor") (ii) a market index to
reflect existing securities market conditions, including their relationship to
public companies we have deemed comparable to CTA (the "Market Index") and (iii)
our assessment as to whether or not the price produced by the formula for CTA
Common Stock as of June 30, 1998 falls within a range we consider reasonable
(together, our "Opinion"). In that regard, and pursuant to the terms and
conditions of our letter agreement dated September 11, 1998, we are pleased to
respond with this letter and related exhibits.

In rendering our Opinion we have, among other things: (i) reviewed
the Annual Reports to Shareholders and the Annual Reports on Form 10-K for the
three years ended December 31, 1997; (ii) reviewed certain interim reports to
shareholders and Quarterly Reports on Form 10-Q; (iii) reviewed certain other
information relating to the business, earnings, cash flow, assets and prospects
of the Company; (iv) reviewed contract backlog data and contract profiles
prepared by management; (v) reviewed certain data regarding the financial
performance and market valuation of selected public companies we deemed to be
engaged in operations similar to those of CTA; (vi) reviewed data relating to
recent merger and acquisition activity we deemed to be engaged in operations
similar to those of CTA; and, (vii) met with senior management of CTA to discuss
the operating performance and future prospects of the Company.

We have relied without independent verification on information
supplied to us by CTA and its employees, representatives and independent public
accountants as well as information available from generally recognized public
sources and, accordingly, do not assume responsibility for the accuracy or
completeness of such information. Additionally, we have not made an appraisal of
any assets of CTA. Our Opinion herein is necessarily based upon conditions and
circumstances as they exist, have been disclosed to us and can be evaluated as
of the date hereof.

In recommending a 17.5% Discount Factor for the minority holdings of
CTA Common Stock we note that while there is no active trading market for the
Common Stock, there have been limited treasury stock purchases by the Company,
its Employee Stock Option Plan and employees of CTA.

Regarding a Market Index, we note that the Company has decided to
reset Market Index to 1.000 as of September 10, 1998. On this date, we note that
the Dow Jones Industrial Average closed at 7,615.54 and the S&P 500 Index closed
at 980.19.

Based upon our analyses of the foregoing and upon such other data as
we have considered relevant to our analysis, it is our Opinion that (i) the
appropriate Discount Factor is 17.5% (ii) the reset Market Index is 1.000, and
(iii) the formula produced price for CTA Common Stock of $5.84 per share does
fall within the range we believe represents fair market value.

<PAGE> 2

Very truly yours,

LEGG MASON WOOD WALKER, INCORPORATED

By: /s/ Scott R. Cousino

Scott R. Cousino
Managing Director