-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SCj7edieOHUfWmZTobDWYeQY/Oe07cVYVTi5TQIJ/2gFQcK+4ZwZpf+4WduWD1Wf dl+pQ5a7mtiyv0B/mSMoPQ== 0000756824-97-000006.txt : 19970605 0000756824-97-000006.hdr.sgml : 19970605 ACCESSION NUMBER: 0000756824-97-000006 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960531 FILED AS OF DATE: 19970604 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYSTEMS TECHNOLOGY ASSOCIATES INC CENTRAL INDEX KEY: 0000756824 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE & TELEGRAPH APPARATUS [3661] IRS NUMBER: 540802071 STATE OF INCORPORATION: FL FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-13920 FILM NUMBER: 97618849 BUSINESS ADDRESS: STREET 1: 14 BRYANT COURT CITY: STERLING STATE: VA ZIP: 22170 BUSINESS PHONE: 7034718000 MAIL ADDRESS: STREET 1: 14 BRYANT COURT CITY: STERLING STATE: VA ZIP: 22170 10-K 1 FORM 10-K FOR YEAR ENDING MAY 31, 1996 SYSTEMS TECHNOLOGY ASSOCIATES, INC. BALANCE SHEETS MAY 31, 1996 AND 1995

Exhibit A

Exhibit D Sheet 1 SYSTEMS TECHNOLOGY ASSOCIATES, INC. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED MAY 31, 1996, 1995 AND 1994

Depreciation expense for the years ended May 31, 1996, 1995 and 1994, was $10,830, $9,461, and $7,078, respectively. The property and equipment are pledged as security against the outstanding bank loan. NOTE 4 - NOTES PAYABLE Related parties and other notes payable as of May 31, 1996 and 1995, consist of the following:

Terms of the notes payable are as follows: Tysons National Bank - $50,000 note payable dated October 7, 1994. Interest is variable and payable monthly at prime plus 2.25%. Principal payments of $1,042 are due monthly beginning November 1994, with payment in full due October 1998. The note is guaranteed by Mr. Terry A. Scott, an 1999. officer of the Corporation, and is collateralized by 2000. all business assets of the Corporation. Metrology, Inc. and Friedland Notes Metrology, Inc. - $25,000 unsecured demand note payable, issued December 1987, originally bearing interest at 10%. Metrology, Inc. is controlled by Mr. Friedland, formerly an officer and director of the Corporation. Marvin S. Friedland - $20,000, $25,000 and $6,000 unsecured demand notes payable, issued September - October 1989, originally bearing interest at 15%. Mr. Friedland was formerly an officer and director of the Corporation. In October 1993, the Corporation entered into an agreement regarding these notes whereby the interest rate from date of issuance was reduced to 2% per annum. Accrued interest from the date of issuance was reduced through a $2,000 payment at the time of the modification and continued monthly payments of $1,000 beginning February 1994 until paid in full. For the years ended May 31, 1996 and 1995, no principal payments were made. Interest accrues at 2% from September 1, 1993, until the outstanding balance due to IRS (see Note 5) is satisfied and then at 8% until the notes are paid in full. Principal payments will be made monthly at $2,000 beginning one month after the balance due to IRS is satisfied. Payments will be allocated between the Friedland and Metrology notes in proportion to the dollar values of the notes due each party. See Note 12 for subsequent events affecting these notes. June Benning - $10,733 unsecured note payable, originally accruing interest at 15%. On May 5, 1993, an agreement was signed whereby interest prior to January 1, 1993, was forgiven; interest accrues at 10% after that date. Principal payments of no less than $1,000 per month will begin no later than one month after satisfaction of the balance due to IRS (Note 5). Mrs. Benning is the wife of a former officer and director of the Corporation. Walter Benning - $40,000 unsecured note payable, originally accruing interest at 15%. On May 5, 1993, an agreement was signed whereby interest will accrue at 8% beginning July 1, 1994; interest prior to that date is forgiven. Principal payments of not less than $1,000 per month will begin in the month following payoff of the balance due to IRS (Note 5) and payoff of the balance due to June Benning. Mr. Benning is a former officer and director of the Corporation. Daniel N. Carter - $15,000 and $10,000 unsecured notes payable dated May 20, 1994, and October 1, 1994, respectively. Interest is payable monthly at 8% and 10% per annum, respectively; principal payments of $500 per month are due on the $15,000 note beginning September 30, 1994, with payment in full due May 20, 1995, and October 1, 1996, respectively. For the year ended May 31, 1996, $2,200 in principal payments were made. Edward P. Myers - $10,000 unsecured note payable dated May 24, 1994. Interest is payable monthly at 8% per annum; principal payments of $500 per month are due beginning September 30, 1994, with payment in full due May 20, 1995. For the year ended May 31, 1996, $1,200 in principal payments were made. Mr. Myers is a director of the Corporation. Terry A. Scott - $10,000, $12,500 and $10,000 unsecured notes payable dated May 24, 1994, October 7, 1994, and October 7, 1994. Interest is payable monthly at 8%, 10% and 10% per annum; principal payments of $500 per month are due beginning September 30, 1994, with payment in full due May 20, 1995, October 7, 1996, and October 7, 1995. For the year ended May 31, 1996, $6,300 in 1996. principal payments were made. Mr. Scott is an 1997. officer of the Corporation John D. Sanders - $5,000 unsecured note payable, modified March 30, 1994, so that no interest will accrue until the outstanding balance due to IRS (Note 5) is satisfied. Interest will then accrue at prime plus 2% and reasonable efforts are to be made to pay off the loan and accrued interest as soon as possible. Mr. Sanders is a shareholder and former director of the Corporation. Michael S. Juhasz - $18,600 unsecured note payable dated October 1, 1992, with principal originally due December 31, 1992, was orally modified so that monthly principal payments of $250 will be made until the entire debt is satisfied. Interest accrues at 5% on this debt. This note was paid in full during the year ended May 31, 1996. Avnet, Inc. - $45,000 payable in settlement of a judgment against the Corporation was established in November 1993. After an initial $5,000 payment in November 1993, monthly payments of $1,000 will be due through November 1995; monthly payments of $2,000 will be due through July 1996. Liability is secured by a lien on all assets of the Corporation. In February 1996, the Corporation paid the judgment after Avnet agreed to forgive $2,000. John F. Erickson - $10,000 unsecured note payable. Interest is payable monthly at 8% per annum; principal payments of $500 per month are due beginning September 25, 1994, with full payment due May 24, 1995. For the year ended May 31, 1996, $1,200 in principal payments were made. Mr. Erickson is a shareholder of the Corporation. Interest expense on related party notes amounted to approximately $11,000 for each of the years ended May 31, 1996, 1995 and 1994, respectively. Accrued interest to related parties at May 31, 1996 and 1995, was $14,563 and $44,897, respectively, and is included in accrued expenses. The principal maturities of related parties and notes payable for the subsequent five years are as follows:

NOTE 5 - PAYROLL TAX OBLIGATION In October 1992, the Corporation signed an installment agreement with the Internal Revenue Service to pay delinquent payroll taxes and related penalties and interest. The Corporation is to make monthly payments of $3,000 for 36 months beginning October 1992, after which time the Corporation's financial circumstances will be reevaluated. In September 1995, the Internal Revenue Service ruled that the Corporation was to make monthly payments of $3,000 until all taxes, penalties and interest are paid in full. In March 1996, the Internal Revenue Service agreed to reduce the monthly payments to $1,000. In March 1993, the Corporation and the Commonwealth of Virginia agreed upon a payment plan regarding delinquent payroll taxes and related penalties and interest. At May 31, 1996, all payroll taxes, penalties and interest were paid in full. NOTE 6 - STOCK OPTIONS The Corporation has issued stock options to various directors, an officer and a lender. Under the terms of the options, also discussed in Note 11, options for 30,000, 30,000 and 77,500 shares are outstanding and exercisable at $.125, $.10 and $.25 per share, respectively. A summary of stock option activity as of May 31, 1996 and 1995, is as follows:

NOTE 9 - OPERATING LEASE The Corporation leases its facilities under a month-to-month operating lease. Minimum annual rents for the years ended May 31, 1996, 1995 and 1994, were $40,000, $54,000 and $54,000, respectively. In November 1995, the Corporation reduced its space by approximately 50%, with a proportionate decrease in minimum monthly rent. NOTE 10 - INCOME TAXES The Corporation has available net operating loss carryforwards approximating $4 million to apply against future taxable income. These carryforwards will expire over the years 2001 to 2011. The Financial Accounting Standards Boards released a statement on the method of accounting for income taxes, SFAS 109, which addresses the accounting problems faced when revenues, expenses, gains or losses are included in taxable income of an earlier or later year than the year in which they are recognized for financial statement purposes. The amounts of current taxes payable or refundable and deferred tax liabilities or assets to be recognized at the date of the financial statements are the amounts which result from all events which have been recognized in the financial statements or tax returns as measured by the provisions of currently enacted tax laws. The Corporation's management has implemented this new standard effective June 1, 1993. There was no cumulative effect of the change in accounting principle to be recorded in determining net income for the year ended May 31, 1994, as a net operating loss carryforward was the only item which would have created a deferred tax asset to be recognized, and projected future net income was not considered realizable to offset the loss carryforward. The provision for income taxes attributable to continuing operations consists of the following components:

The provision for income taxes attributable to extraordinary items consists of the following components:

The net deferred tax benefits in the accompanying balance sheets include the following components:

NOTE 11 - RELATED PARTIES TRANSACTIONS Under an agreement dated October 25, 1993, the Corporation has an agreement with two shareholders whereby the Corporation or its designate has a three- year option to purchase the 636,213 shares held by the shareholders at $.0625 per share and an option for the following two years to purchase the shares at $.10 per share. The Corporation must exercise its option in blocks of 10,000 or more shares. As discussed in Note 7, the Corporation purchased 100,000 of its shares from a former officer and director at $.0625 per share. The Corporation entered into a License Agreement effective June 1, 1994, with Coherent whereby the Corporation acquired nonexclusive rights to use technology in connection with the manufacture and sale of telecommunications products. In consideration for these rights and the acquisition of certain inventory and equipment, the Corporation facilitated the transfer (through the exercise of options by Coherent as the Corporation's designate), of 100,000 common shares held by a shareholder to Coherent. In addition, the Corporation also paid Coherent $45,000 for various inventory items acquired as part of the exchange. In consideration for the advancement of funds under various promissory note agreements with an officer, a director and a vendor, options regarding the purchase of stock were granted to the lenders. The options grant the right to purchase a total of 77,500 shares of stock at $.25 per share for a two-year period ending October 1996. In July 1993, the Board authorized the issuance of options to purchase a total of 30,000 shares at $.10 per share to three Directors. In December 1995, the Board authorized the issuance of options to purchase a total of 30,000 shares at $.125 per share to three Directors As further described in Note 4, various related parties have loaned funds to the Corporation. A corporation controlled by a former officer and director of the Corporation forgave a claim in the amount of $112,500 during the year ended May 31, 1994. NOTE 12 - SUBSEQUENT EVENTS In July 1996, the Corporation was named as a defendant in a lawsuit arising in the ordinary course of business. Plaintiff is seeking $112,500 in sales commissions and related installation costs in connection with the sale of the Corporations products. Management has recorded commission expense amounting to approximately $20,000 in prior years for this matter, with $6,500 being due as of May 31, 1996. The Corporation intends to vigorously contest this matter. While the outcome of this lawsuit cannot be predicted with certainty, management does not expect this matter to have a material adverse effect on the financial position and results of operations of the Corporation. On July 29, 1996, the Corporation entered into an agreement with Marvin S. Friedland and Metrology, Inc. to restructure the notes described in Note 4 above. The Friedland note was settled for $50,000 cash plus a $1,000 note payable in four installments. The Metrology, Inc. note was settled for a new $25,000 noninterest-bearing note of the Corporation due $500 per month for 50 months. As additional consideration, Friedland agreed to sell 611,753 shares back to the Corporation and to forgive $24,304 of accrued interest on the notes. Metrology, Inc. agreed to sell 24,500 common shares and 2,000 preferred shares of the Corporation back to the Corporation and to forgive $12,163 of accrued interest on its notes. EX-27 2
5 1 YEAR MAY-31-1996 JUN-1-1995 MAY-31-1996 24,859 0 89,252 17,245 43,3093 199,793 14,294 440,232 214,087 89,171 0 0 100,000 1,712,635 (1,988,176) 214,087 902,520 937,876 676,474 676,474 493,619 0 17,902 (232,217) 0 (267,573) 0 2,000 0 (230,217) (0.070) (0.070)

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