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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period___________ to _____________
Commission file number: 0-28114
PARAVANT COMPUTER SYSTEMS, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Florida 59-2209179
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
1615A West Nasa Boulevard
Melbourne, Florida 32901
(Address of Principal Executive Offices)
407-727-3672
(Issuer's Telephone Number)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days [X] Yes [ ] No
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
At May 5, 1997, there were outstanding
7,984,325 shares of Common Stock, $.015 par value per share.
Transitional Small Business Disclosure Format (check one): [ ] Yes [X] No
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PARAVANT COMPUTER SYSTEMS, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Condensed Balance Sheet - March 31, 1997..................................................... 2
Condensed Statements of Earnings for the three months ended March 31,
1997 and 1996.............................................................................. 4
Condensed Statements of Earnings for the six months ended March 31,
1997 and 1996.............................................................................. 5
Condensed Statements of Cash Flows for the six months
ended March 31, 1997 and 1996.............................................................. 6
Notes to Condensed Financial Statements...................................................... 8
Item 2. Management's Discussion and Analysis of Operations............................ 10
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders........................... 15
Item 6. Exhibits and Reports on Form 8-K.............................................. 15
SIGNATURES................................................................................... 16
</TABLE>
1
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PART I - FINANCIAL INFORMATION
PARAVANT COMPUTER SYSTEMS, INC.
Condensed Balance Sheet
March 31, 1997
ASSETS
<TABLE>
<CAPTION>
(Unaudited)
<S> <C>
Current assets:
Cash and cash equivalents $ 64,686
Accounts receivable, net 5,042,475
Employee receivables and advances 13,450
Inventory (note 2) 3,552,290
Prepaid expenses 119,877
Deferred income taxes 167,047
----------
Total current assets 8,959,825
Property, plant and equipment, net 732,271
Intangible assets, net 79,875
Demonstration pool and custom mold, net 355,614
Other assets 36,364
----------
Total assets $10,163,949
==========
</TABLE>
See accompanying notes to condensed financial statements.
2
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LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(Unaudited)
<S> <C>
Current liabilities:
Note payable to bank $ 300,000
Other note payable 50,000
Current maturities of long-term debt 110,004
Current maturities of capital lease obligations 115,607
Accounts payable 778,828
Accrued commissions 317,110
Accrued expenses 499,646
Accrued incentive compensation 91,488
Income taxes payable 67,081
---------
Total current liabilities 2,329,764
Long-term debt, less current maturities 564,149
Capital lease obligations, less current maturities 77,072
Deferred income taxes 7,657
---------
Total liabilities 2,978,642
---------
Stockholders' equity:
Preferred stock, par value $.01 per share. Authorized
2,000,000 shares, none issued -
Common stock, par value $.015 per share. Authorized
30,000,000 shares, issued and outstanding 7,984,325 119,309
Additional paid-in capital 5,060,090
Retained earnings 2,005,908
---------
Total stockholders' equity 7,185,307
---------
$10,163,949
==========
</TABLE>
3
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PARAVANT COMPUTER SYSTEMS, INC.
Condensed Statements of Earnings
For the three months ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
Revenues $ 3,196,218 959,608
Cost of revenues 1,665,762 825,732
----------- ----------
Gross profit 1,530,456 133,876
Selling and administrative expense 1,169,938 482,188
----------- ----------
Income (loss) from operations 360,518 (348,312)
Other income (expense):
Interest expense (21,080) (97,057)
Miscellaneous 18,121 (97)
----------- ----------
Income (loss) before income taxes 357,559 (445,466)
Income tax benefit (expense) (124,651) 167,629
----------- ----------
Net income (loss) $ 232,908 (277,837)
=========== ==========
Weighted average number of shares outstanding 12,832,984 4,500,000
----------- ----------
Earnings (loss) per share $ .02 (.06)
=========== ==========
</TABLE>
See accompanying notes to condensed financial statements.
4
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PARAVANT COMPUTER SYSTEMS, INC.
Condensed Statements of Earnings
For the six months ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
Revenues $ 5,127,310 1,724,882
Cost of revenues 2,719,889 1,131,911
----------- ----------
Gross profit 2,407,421 592,971
Selling and administrative expense 2,167,921 1,408,657
----------- ----------
Income (loss) from operations 239,500 (815,686)
Other income (expense):
Interest expense (65,293) (222,202)
Miscellaneous 18,223 (1,356)
----------- ----------
Income (loss) before income taxes 192,430 (1,039,244)
Income tax benefit (expense) (67,081) 391,068
----------- ----------
Net income (loss) $ 125,349 (648,176)
=========== ==========
Weighted average number of shares outstanding 12,832,984 4,500,000
----------- ----------
Earnings (loss) per share $ .01 (.14)
=========== ==========
</TABLE>
See accompanying notes to condensed financial statements.
5
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PARAVANT COMPUTER SYSTEMS, INC.
Condensed Statements of Cash Flows
For the six months ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 125,349 (648,176)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 224,898 100,248
Deferred income taxes (27,320) -
Increase (decrease) in cash caused by change in:
Accounts receivable 2,118,717 3,102,997
Employee receivables and advances 60,052 8,145
Inventory (1,048,398) (1,083,908)
Costs and estimated earnings in excess of billings on
uncompleted contracts - 181,163
Prepaid expenses 21,314 19,041
Income taxes receivable - (330,403)
Capitalized offering costs - (110,724)
Other assets (20,228) (13,804)
Accounts payable (264,903) (556,675)
Accrued commissions (132,141) (261,926)
Accrued expenses 68,746 (500,125)
Accrued incentive compensation (48,512) -
Income taxes payable (267,912) (280,521)
-------- --------
Net cash provided by (used in) operating activities 809,662 (374,668)
-------- --------
Cash flows from investing activities:
Acquisitions of property, plant and equipment (281,109) (54,568)
Acquisitions of demonstration pool and custom mold (101,904) (1,627)
Acquisition of rights (5,000) -
-------- ---------
Net cash used in investing activities (388,013) (56,195)
-------- ---------
</TABLE>
(Continued)
6
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PARAVANT COMPUTER SYSTEMS, INC.
Condensed Statements of Cash Flows, Continued
<TABLE>
<CAPTION>
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from financing activities:
Net proceeds from (repayments on) note payable to bank (240,000) 315,000
Repayments on other note payable (50,000) -
Repayments on long-term debt (55,002) (55,191)
Repayments on capital lease obligations (91,143) (36,799)
Proceeds from sale of common stock 14,113 -
-------- --------
Net cash provided by (used in) financing activities (422,032) 223,010
-------- --------
Net decrease in cash and cash equivalents (383) (207,853)
Cash and cash equivalents at beginning of the period 65,069 211,426
-------- --------
Cash and cash equivalents at end of the period $ 64,686 3,573
======== =========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 65,495 232,401
======== =========
Income taxes $ 315,000 280,521
======== =========
Supplemental disclosure of noncash investing and financing
activities:
The Company entered into a capital lease agreement for
office equipment totaling $116,695 for the period ended
March 31, 1997.
</TABLE>
See accompanying notes to condensed financial statements.
7
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PARAVANT COMPUTER SYSTEMS, INC.
Notes to Condensed Financial Statements
March 31, 1997 and 1996
(1) BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements of Paravant
Computer Systems, Inc. (the "Company" or "Paravant"), have been prepared
in accordance with the instructions and requirements of Regulation S-B
and, therefore, do not include all information and footnotes necessary for
a fair presentation of financial position, results of operations and cash
flows in conformity with generally accepted accounting principles. In
the opinion of management, such financial statements reflect all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair statement of financial position, results of operations and
cash flows for the interim periods presented. Operating results for the
interim periods are not necessarily indicative of the results that may be
expected for the full fiscal year.
These condensed financial statements and footnotes should be read in
conjunction with the Company's audited financial statements for the fiscal
years ending September 30, 1996 and 1995 included in the Company's Annual
Report on Form 10-KSB as filed with the Securities and Exchange
Commission. The accounting principles used in preparing these condensed
financial statements are the same as those described in such statements.
(2) INVENTORY
The following is a summary of inventory at March 31, 1997:
<TABLE>
<S> <C>
Raw materials $ 2,626,653
Work in process 736,578
Finished goods 264,636
---------
3,627,867
Reserve for obsolete inventory (75,577)
---------
$ 3,552,290
==========
</TABLE>
(Continued)
8
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PARAVANT COMPUTER SYSTEMS, INC.
Notes to Condensed Financial Statements
(3) STOCK OPTIONS
On November 29, 1996, the Company granted options under its incentive
stock option plan to employees to purchase 208,000 shares of the Company's
common stock at an exercise price of $5.125 per share, which was
the market price of the shares at the date of issuance.
On February 27, 1997, the Company granted options under its nonemployee
director stock option plan to purchase 15,000 shares of the Company's
common stock at an exercise price of $6.00 per share, which was the
market price of the shares at the date of issuance.
(4) EARNINGS (LOSS) PER SHARE
Earnings (loss) per share have been computed by dividing net income (loss)
by the weighted average number of common shares outstanding. The weighted
average number of shares outstanding have been determined assuming shares
and options issued subsequent to March 31, 1997 were outstanding for the
periods presented. When dilutive, stock options and warrants are included
as common share equivalents using the treasury stock method. Fully diluted
earnings per common share amounts did not differ from amounts computed
under the primary computation for the periods ended March 31, 1997 and
1996.
(5) FUTURE APPLICATION OF ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per
Share." Statement 128 supersedes APB Opinion No. 15, "Earnings per
Share," and specifies the computation, presentation, and disclosure
requirements for earnings per share ("EPS") for entities with publicly
held common stock or potential common stock. Statement 128 was issued to
simplify the computation of EPS. It requires dual presentation of basic
and diluted EPS on the face of the income statement for all entities with
complex capital structures and requires a reconciliation of the numerator
and denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation.
Statement 128 is effective for financial statments for both interim and
annual periods ending after December 15, 1997. Earlier application is not
permitted. After adoption, all prior EPS data presented shall be restated
to conform with Statement 128. The Company does not expect the adoption of
Statement 128 to have a material impact on the EPS data that has been
presented.
(6) SUBSEQUENT EVENT
In April 1997, the Company renegotiated the terms of its line of credit
arrangement with a bank. Under the new terms, all borrowings bear
interest at the bank's prime rate or at the 30 or 60 day LIBOR plus 2.70%.
9
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<PAGE>
ITEM 2. Management's Discussion and Analysis of Operations
RESULTS OF OPERATIONS
Three months ended March 31, 1997 vs. March 31, 1996
Revenues for the quarter ended March 31, 1997 were $3,196,218, an
increase of $2,236,610 or 233% over the quarter ended March 31, 1996 revenues of
$959,608. This increase is primarily due to Paravant's strong backlog
($11,046,871 at March 31, 1997) and continued full scale production deliveries
to Raytheon in support of the U.S. Marine Corps HAWK/AVENGER Air Defense
missile system upgrade and additional requirements of Lockheed Martin's Enhanced
Diagnostic Aid ("EDNA") systems for use by the U.S. Air Force on F-16 Fighter
Aircraft.
Gross profit was Sl,530,456 for the quarter ended March 31, 1997, or 48%
of sales, compared to $133,876 or 14% of sales in the quarter ended March 31,
1996, a total increase of $1,396,580 or 1,043%. This increase in gross
profitability reflects a return to the Company's annual historic gross profit
levels (45% and 46% for the fiscal years ended September 30, 1996 and 1995,
respectively) as compared to the low revenue levels and related adverse
manufacturing variances associated with the very low levels of operations, in
the quarter ended March 31, 1996.
Selling and administrative expenses of $1,169,938 in the quarter ended
March 31, 1997, increased by $687,750 or 143% from the quarter ended March 31,
1996 expenses of $482,188. As a percentage of sales, selling and administrative
expenses were 37% and 50% in the quarters ended March 31, 1997 and 1996,
respectively. The increased selling and administrative costs are due primarily
to increased sales commissions directly attributable to the increased
sales discussed earlier herein, increased professional fees and increased
expenditures for Research and Development.
Income from operations improved to $360,518 for the quarter ended March
31, 1997 from a loss of $(348,312) in the quarter ended March 31, 1996, an
improvement of $708,830. As a percentage of sales, income from operations
improved to 11% in the quarter ended March 31, 1997 from a loss of (36%) in the
quarter ended March 31, 1996. The improvement in income/(loss) from operations
overall resulted primarily from increased revenues and gross profits,
offset in part by increased selling and administrative expenses as discussed
above.
Interest expense for the quarter ended March 31, 1997 was reduced by
$75,977 or 78% to $21,080 compared to $97,057 in the quarter ended March 31,
1996. As a percentage of sales, interest expense decreased to 1% in the quarter
ended March 31, 1997 from 10% in the quarter ended March 31, 1996. This decrease
is due to a significant decline in outstanding credit balances made possible by
application of a portion of the proceeds of the Company's initial public
offering of securities in June, 1996 (IPO).
As a result, the Company's net income improved by 184% to $232,908 in
the quarter ended March 31, 1997 when compared to a loss of $(277,837) in 1996
an increase of $510,745 in total. Net income as a percentage of sales was 7%
in the quarter ended March 31, 1997 and net loss as a percentage of sales was
(29%) in the quarter ended March 31, 1996. The improvement in net income
overall resulted primarily from increased revenue and gross profits, offset
in part by increased selling and administrative expenses as discussed above.
10
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<PAGE>
Six months ended March 31, 1997 vs. March 31, 1996
Revenues for the six months ended March 31, 1997 were $5,127,310, an
increase of $3,402,248 or 197% over the six months ended March 31, 1996
revenues of S1,724,882. This increase is primarily due to Paravant's strong
backlog ($11,046,871 at March 31, 1997) and continued full scale production
deliveries to Raytheon in support of the U.S. Marine Corps HAWK/AVENGER Air
Defense missile system upgrade and additional requirements of Lockheed Martin's
Enhanced Diagnostic Aid ("EDNA") systems for use by the U.S. Air Force on F-16
Fighter Aircraft.
Gross profit was $2,407,421 for the six months ended March 31, 1997, or
47% of sales, compared to $592,971 or 34% of sales in the six months ended
March 31, 1996, a total increase of $1,814,450 or 306%. This increase in gross
profitability reflects a return to the Company's annual historic gross profit
levels (45% and 46% for the fiscal years ended September 30, 1996 and 1995,
respectively) as compared to the low revenue levels and related adverse
manufacturing variances associated with the very low levels of operations in
the six months ended March 31, 1996.
Selling and administrative expenses of $2,167,921 in the six months
ended March 31, 1997, increased by $759,264 or 54% from the six months ended
March 31, 1996 expenses of $1,408,657. As a percentage of sales, selling and
administrative expenses were 42% and 82% in the six months ended March 31, 1997
and 1996, respectively. The increased selling and administrative costs are due
primarily to increased sales commissions directly attributable to the
increased sales discussed earlier herein, increased professional fees and
increased expenditures for Research and Development.
Income from operations improved to $239,500 for the six months ended
March 31, 1997 from a loss of $(815,686) in the six months ended March 31, 1996,
an improvement of $1,055,186. As a percentage of sales, income from operations
improved to 5% in the six months ended March 31, 1997 from a loss of (47%) in
the six months ended March 31, 1996. The improvement in income/(loss) from
operations overall resulted primarily from increased revenues and gross
profits, offset in part by increased selling and administrative expenses as
discussed above.
Interest expense for the six months ended March 31, 1997 was reduced by
$156,909 or 71% to $65,293 compared to $222,202 in the six months ended March
31, 1996. As a percentage of sales, interest expense decreased to 1% in the six
months ended March 31, 1997 from 13% in the six months ended March 31, 1996.
This decrease is due to a significant decline in outstanding credit balances
made possible by the proceeds of the Company's IPO in June, 1996.
As a result, the Company's net income improved by 119% to $125,349 in
the six months ended March 31, 1997 when compared to a net loss of $(648,176) in
1996 an increase of $773,525 in total. Net income as a percentage of sales was
2% in the six months ended March 31, 1997 and net loss as a percentage of sales
was (38%) in the six months ended March 31, 1996. The improvement in net income
overall resulted primarily from increased revenue and gross profits, offset in
part by increased selling and administrative expenses as discussed above.
11
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LIQUIDITY AND CAPITAL RESOURCES
In June 1996, the Company completed its IPO, resulting in aggregate net
proceeds of $4,594,332 to the Company after deducting certain commissions,
expenses and offering costs. The Company used a portion of the net proceeds of
the IPO to repay certain loans referred to below in the aggregate principal
amount of $1,102,294, and paid approximately $88,000 of the net proceeds of the
IPO to reimburse UES, Inc., an affiliate of the Company which is controlled by
Krishan K. Joshi, the Company's Chairman ("UES"), for certain health insurance
and other expenses paid on the Company's behalf. Substantially all of the
remaining balance of the net proceeds of the IPO were utilized to reduce
indebtedness then outstanding under the Company's revolving credit arrangement
with National City Bank in Dayton, Ohio described below, resulting in increased
availability under the credit arrangement for working capital needs and general
corporate purposes.
The Company has a secured revolving credit arrangement with National
City Bank in Dayton, Ohio (the "Bank") for a credit line of up to $4,000,000
that is due on demand and bears interest at the prime rate, or 30 or 60 day
LIBOR rates plus 2.70%. All borrowings are collateralized by accounts
receivable, inventory and equipment. As of March 31, 1997, an aggregate of
$300,000 was outstanding under this arrangement. The Company intends to maintain
this arrangement with the Bank for the foreseeable future, although there can be
no assurance that the Bank will not in the future demand repayment of any
amounts then outstanding under its loan arrangement. The Company also has a
secured term loan provided by the Bank bearing interest at a rate adjusted
monthly to prime plus 1.5% at March 31, 1997. Monthly principal payments of
$9,167 are due through October 1998. All borrowings thereunder are secured by a
lien on accounts receivable, inventory and equipment. As of March 31, 1997,
there was approximately $174,153 outstanding under this arrangement with the
Bank. The Company also has capital lease obligations of $192,679 at March 31,
1997. These capital lease obligations bear interest rates of 1.25% to 1.50% over
the prime rate and are expected to be satisfied within 3 years.
As of March 31, 1997, the Company also has a note payable to the Bank in
an aggregate principal amount of $500,000, bearing interest at the prime rate,
which note is due and payable in March 1998. On April 22, 1997, this note was
paid in full.
In August 1995, the Company borrowed $400,000 pursuant to bridge notes
("Notes") from a group of private investors at an annual interest rate of 6%. In
addition, the Company sold to the same investors warrants to purchase 480,000
shares of Common Stock, exercisable until June 3, 2001 at an exercise price of
$2.00 per share. The Notes, which bear interest at 6%, have an outstanding
balance of $5O,000 at March 31, 1997.
In connection with certain sales of shares of common stock in March 1996
by UES Florida, Inc. (a subsidiary of UES), Richard P. McNeight, the President
and Chief Operating Officer of the Company, William R. Craven, the Vice
President of Marketing of the Company, and another shareholder, such
shareholders loaned to the Company in April 1996, for working capital purposes,
the sums of $646,294; $78,000; $26,000 and $52,000, respectively, or an
aggregate of $802,294 of the proceeds realized from such sales, at an interest
rate of 6% per annum. Such loans, plus accrued interest thereon in an aggregate
amount of $8,681, were repaid in June 1996 in accordance with their terms from a
portion of the net proceeds of the IPO.
The Company has, and continues to have, a dependence upon a few major
customers for a significant portion of its revenues. This dependence for
revenues has not been responsible for any unusual fluctuations in operating
results in the past, and management does not believe this concentration will
generate fluctuations in operating results in the future. However, the potential
impact of losing a major customer without securing offsetting and equivalent
orders could result in a significant negative impact to the operating results of
the Company. The gross margin contributions of
12
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the Company's major customers are not generally different than those from its
other customers as a whole.
The Company's operating cash flow was $809,662 for the six months ended
March 31, 1997. The improvement in the Company's operating cash flow results
primarily from improved net income as more fully described in Management's
Discussion and Analysis of Operations for the three and six months ended
March 31, 1997 and improved working capital as more fully presented in the
Condensed Statments of Cash Flows for the same period. Negative cash flows for
the years ended September 30, 1996 and 1995, $(1,426,090) and $(298,577),
respectively, were primarily associated with general increases in inventory
levels and temporary increases associated with accounts receivable, all in
support of the Company's rapid increase in operations reflected by the growth
in annual revenues from $4,621,527 in fiscal 1993 to $10,495,063 in fiscal
1996, an increase of almost 127%. In addition, the Company invested $281,109
in the six months ended March 31, 1997, $127,352 in fiscal 1996 and $60,350 in
fiscal l995 to acquire manufacturing equipment also in support of these
expanded operating levels.
Due to the Company's orders related to U.S. Department of Defense
procurements, the operations of the Company have been cyclical and has
historically resulted in a significant increase in deliveries and revenues in
the fourth quarter of its fiscal year ending on September 30. Due to the
Company's strong backlog and increased revenues, this cycle is less significant
in first six months of the current fiscal year, resulting in a significant
improvement in cash provided from operations, as discussed earlier herein and
less significant changes in inventory levels than the prior period.
As of March 31, 1997, management believes inventory balances are not in
excess of requirements for deliveries and normal minimum stocking levels.
Generally, accounts receivable at the end of each quarter are collected
within the following quarter. However, the Company's major customer, Raytheon,
has traditionally averaged approximately 80 to 100 days in satisfaction of
outstanding accounts receivable balances. This situation is improving through
negotiation with Raytheon, and Management believes that average outstanding
balances will be reduced to more traditional levels approximating 45 days, in
the future although there can be no assurance of such. The Company's total
outstanding account receivable balance of $5,042,475 at March 31, 1997 has been
subsequently reduced by approximately $2,900,000 in cash collections.
Notwithstanding this condition, the Company has not been required to write off
any significant bad debt in the past, and management does not believe that any
significant accounts receivable at March 31, 1997 are likely to be
uncollectible.
As of March 31, 1997 and 1996, the Company's backlog was $11,046,871 and
$6,161,843, respectively, consisting of firm fixed price purchase orders. All of
these purchase orders are expected to generate profits within the Company's
historical levels and the Company believes that the completion of the orders
comprising its backlog, and any new orders which may be accepted by the Company
in the future, should not result in additional liquidity pressures which cannot
be addressed in a manner consistent with the Company's past practices. The
Company presently expects to manufacture and deliver most of the products in
backlog within the next 12 months.
The Company anticipates, based on its currently proposed plans and
assumptions relating to its operations, that the proceeds of the IPO, which was
consummated in June 1996, together with estimated working capital from
operations and other sources of funds, will be adequate to sustain operations
for at least a 24-month period after the IPO. As the Company continues to grow,
additional bank borrowings, other debt placements and equity
offerings may be considered, in part or in combination, as the situation
warrants. In addition, in the event the Company's plans change or its
assumptions change or prove to be inaccurate, or if projected cash flow
otherwise proves insufficient to fund operations, the Company might need to seek
other sources of financing to conduct its operations. There can be no assurance
that any such other sources of financing would be available when needed, on
commercially reasonable terms, or at all.
13
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CAUTIONARY STATEMENT
This Quarterly Report on Form 10-QSB contains certain forward-looking
statements. Actual results could differ materially from those projected in the
forward-looking statements as a result of various factors, including but not
limited to the budgetary and appropriations policies of the Company's
governmental customers, the competitive environment for the Company's products
and services, the timing of new orders and the degree of market penetration of
the Company's new products.
14
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Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of the Company (the "Annual
Meeting") was held on February 27, 1997. At the Annual Meeting, the
shareholders of the Company voted upon the election of five directors, with all
five nominees being elected. The election of directors was the only matter voted
upon at the Annual Meeting, with the votes being cast as set forth below. No
other director's term of office continued after the Annual Meeting.
NUMBER OF VOTES NUMBER OF VOTES
NAME FOR WITHHELD
--------------- ---------------
Krishan K. Joshi 7,531,419 19,230
Richard P. McNeight 7,531,419 18,630
William R. Craven 7,531,419 18,630
James E. Clifford 7,531,419 18,630
Michael F. Maguire 7,531,419 18,630
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<S> <C>
10 Letter agreement dated April 18, 1997 between the Registrant and
National City Bank, Dayton.
11 Statement re: computation of per share earnings (not required because the relevant
computation can be clearly determined from material contained in the financial
statements).
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Registrant during the quarter
ended March 31, 1997.
15
<PAGE>
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PARAVANT COMPUTER SYSTEMS, INC.
Date: May 14, 1997 By /s/ Kevin J. Bartczak
--------------------------
Kevin J. Bartczak, Vice
President, Treasurer and
Chief Financial Officer
(as both a duly authorized
officer of Registrant and
as principal financial
officer of Registrant)
16
<PAGE>
<PAGE>
[letterhead]
April 18, 1997
Mr. Kevin J. Bartczak, CFO
Paravant Computer Systems, Inc.
1615A West NASA Blvd.
Melbourne, FL 32901
Dear Kevin:
National City Bank, Dayton (hereinafter referred to as "Bank") is pleased to
make the following credit facility available to Paravant Computer Systems, Inc.
(hereinafter referred to as "Borrower"):
<TABLE>
<S> <C>
AMOUNT AND TYPE OF LOAN: $4,000,000.00 secured non-reporting, demand line of credit.
PURPOSE: To provide working capital for the on-going operations of the
Borrower.
INTEREST RATE: The Bank's Prime Rate it exists from time-to-time.
(or)
30 or 60 day LIBOR plus 2.70%. Rates are 8.39% and 8.54% respectively
using today's LIBOR rates.
ADVANCE RATES: NONE (No reporting required)
COLLATERAL: This credit facility shall be secured by a first security interest in
all accounts, accounts receivable, inventory and equipment and by
other such security as Bank may reasonably request pursuant to the
terms and conditions of any loan agreement which the Bank may require
to effect this loan.
GUARANTORS: NONE
</TABLE>
<PAGE>
<PAGE>
Paravant Computer Systems, Inc.
Richard P. McNeight
April 18, 1997
Page 2
<TABLE>
<S> <C>
AMORTIZATION: Revolving, i.e., principal may be drawn as needed and repaid as able
prior to maturity. However, principal is due in full upon demand.
Interest is due monthly.
EXPIRATION: On demand, but credit shall be reviewed annually on or before January
31.
PRE-PAYMENT PENALTY: None, if Prime rate option is selected. If LIBOR option is selected
Bank may impose its make-whole provision wherein it may recover the
value of interest income foregone.
FEES: The Borrower shall be responsible for all fees, legal or otherwise,
incurred by it or by Bank on the Borrower's behalf in processing,
closing and maintaining the credit facility.
OTHER CONDITIONS: 1. Borrower is to maintain its principal banking accounts with Bank.
2. Borrower is to submit to Bank quarterly financial statements within
60 days of the close of the accounting period, and annual financial
statements within 120 days of the close of the fiscal year end.
Quarterly statements may be compilations or management prepared, and
annual statements are to be audited by a certified public accountant.
Such statements are to be prepared using the accrual basis of
accounting as defined under the Generally Accepted Accounting
Principles ("GAAP").
3. Borrower is to furnish Bank a quarterly certificate showing that it
is in compliance with all terms of the credit facility.
</TABLE>
<PAGE>
<PAGE>
Paravant Computer Systems, Inc.
Richard P. McNeight
April 18, 1997
Page 3
<TABLE>
<S> <C>
4. Borrower is to maintain adequate levels of hazard insurance on
pledged assets with evidence of insurance delivered to Bank prior to
first disbursement. Bank must be listed as loss payee and/or mortgagee
on policies.
5. Third parties should in no way rely on this letter and the Bank is
not liable for any actions taken by a third party because of their
reliance on this letter.
</TABLE>
As is our normal practice, the continued availability of credit under this
reporting line of credit will be contingent upon the Borrower's maintenance of a
sound financial condition and a satisfactory relationship with the Bank.
This agreement supersedes Borrower's loan application to Bank and all other
prior oral and written understanding between Bank and Borrower with regard to
the transactions provided for herein.
If this facility is accepted by the Borrower but not consummated, this letter,
at Bank's option, may be considered canceled but Borrower will still be liable
for all out of pocket expenses incurred by the Bank in preparation for the
closing.
Please indicate acceptance of the stated terms of this letter by executing the
enclosed copy and returning the same to us on or before May 15, 1997.
If acceptance is not received by this date, this agreement will be considered
canceled and void. In the event Borrower desires to change any of the terms or
conditions of our agreement as stated herein, we reserve the right to review and
approve any changes in writing, or cancel this agreement in its entirety if we
deem it appropriate. Funding of this facility shall take place no later than May
30, 1997.
Very truly yours,
/s/HUNTER D. PARKER
Hunter D. Parker
Vice President
<PAGE>
<PAGE>
Paravant Computer Systems, Inc.
Richard P. McNeight
April 18, 1997
Page 4
The undersigned hereby accepts the foregoing demand line of credit of National
City Bank, Dayton, Ohio, and the terms and conditions set forth herein, this
24th day of April, 1997.
Paravant Computer Systems, Inc.
By: /s/ RICHARD P. McNEIGHT
------------------------------
Richard P. McNeight, President
By: /s/ KEVIN J. BARTCZAK
------------------------------
Kevin J. Bartczak, CFO
Date: 24 April 97
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEETS AND STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY OF PARAVANT
COMPUTER SYSTEMS, INC. AS OF MARCH 31, 1997 AND THE RELATED STATEMENTS OF
EARNINGS AND CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1996
<PERIOD-END> MAR-31-1997
<PERIOD-TYPE> 6-MOS
<CASH> 64,686
<SECURITIES> 0
<RECEIVABLES> 5,005,925
<ALLOWANCES> 0
<INVENTORY> 3,552,290
<CURRENT-ASSETS> 8,959,825
<PP&E> 1,552,276
<DEPRECIATION> 820,005
<TOTAL-ASSETS> 10,163,949
<CURRENT-LIABILITIES> 2,329,764
<BONDS> 564,149
<COMMON> 119,309
0
0
<OTHER-SE> 7,065,998
<TOTAL-LIABILITY-AND-EQUITY> 10,163,949
<SALES> 5,127,310
<TOTAL-REVENUES> 5,127,310
<CGS> 2,719,889
<TOTAL-COSTS> 2,719,889
<OTHER-EXPENSES> 2,149,698
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 65,293
<INCOME-PRETAX> 192,430
<INCOME-TAX> 67,081
<INCOME-CONTINUING> 125,349
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 125,349
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
