<PAGE>
<PAGE>
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, 1998
[ ] 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)
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 April 24, 1998, there were outstanding 8,149,938
shares of Common Stock, $.015 par value per share.
Transitional Small Business Disclosure Format (check one): [ ] Yes [X] No
<PAGE>
<PAGE>
PARAVANT COMPUTER SYSTEMS. INC.
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Condensed Balance Sheet - March 31, 1998 ................................... 3
Condensed Statements of Operations for the three months ended March 31,
1998 and 1997 .............................................................. 5
Condensed Statements of Operations for the six months ended March 31,
1998 and 1997 .............................................................. 6
Condensed Statements of Cash Flows for the six months
ended March 31, 1998 and 1997 .............................................. 7
Notes to Condensed Financial Statements .................................... 9
Item 2. Management's Discussion and Analysis of Operations ................. 11
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders................. 17
Item 6. Exhibits and Reports on Form 8-K ................................... 18
SIGNATURES ................................................................. 19
Index to Exhibits Filed with Form 10-QSB dated May 13, 1998................. 20
</TABLE>
<PAGE>
<PAGE>
PARAVANT COMPUTER SYSTEMS, INC.
Condensed Balance Sheet
March 31, 1998
Assets
<TABLE>
<CAPTION>
(Unaudited)
<S> <C>
Current assets:
Cash and cash equivalents $ 2,909,848
Accounts receivable, net 2,803,897
Employee receivables and advances 16,950
Inventory, net (note 2) 3,479,473
Prepaid expenses 93,206
Deferred income taxes 426,263
-----------
Total current assets 9,729,637
Prepaid expenses 268,588
Property, plant and equipment, net 883,871
Intangible assets, net 50,625
Demonstration pool and custom molds, net 255,407
Other assets 578,369
-----------
Total assets $11,766,497
===========
</TABLE>
See accompanying notes to condensed financial statements
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity
(Unaudited)
<S> <C>
Current liabilities:
Current maturities of long-term debt $ 64,149
Current maturities of capital lease obligations 82,001
Accounts payable 816,129
Accrued commissions 550,714
Accrued expenses 721,674
Accrued incentive compensation 121,886
Income taxes payable 285,524
-----------
Total current liabilities 2,642,077
Capital lease obligations, less current maturities 46,867
Deferred income taxes, net 78,820
-----------
Total liabilities 2,767,764
-----------
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 8,149,938 shares 122,249
Additional paid-in capital 5,325,806
Retained earnings 3,550,678
-----------
Total stockholders' equity 8,998,733
-----------
Commitments (note 4)
Total liabilities and stockholders' equity $11,766,497
===========
</TABLE>
<PAGE>
<PAGE>
PARAVANT COMPUTER SYSTEMS, INC.
Condensed Statements of Operations
For the three months ended March 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
(Unaudited)
<S> <C> <C>
Revenues $ 4,050,388 3,196,218
Cost of revenues 2,028,044 1,665,762
------------ ------------
Gross profit 2,022,344 1,530,456
Selling and administrative expense 1,537,713 1,169,938
------------ ------------
Income from operations 484,631 360,518
Other income (expense):
Interest expense (5,098) (21,080)
Miscellaneous 25,765 18,121
------------ ------------
Income before income taxes 505,298 357,559
Income tax expense (174,129) (124,651)
------------ ------------
Net income $ 331,169 232,908
============ ============
Basic earnings per share $ .041 .030
============ ============
Diluted earnings per share $ .029 .024
============ ============
Weighted average number of common shares outstanding 8,035,012 7,968,375
============ ============
Weighted average number of common shares and dilutive
potential common shares outstanding 11,555,651 12,752,652
============ ============
See accompanying notes to condensed financial statements.
</TABLE>
<PAGE>
<PAGE>
PARAVANT COMPUTER SYSTEMS, INC.
Condensed Statements of Operations
For the six months ended March 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
(Unaudited)
<S> <C> <C>
Revenues $ 7,648,353 5,127,310
Cost of revenues 4,003,313 2,719,889
------------ ------------
Gross profit 3,645,040 2,407,421
Selling and administrative expense 2,883,933 2,167,921
------------ ------------
Income from operations 761,107 239,500
Other income (expense):
Interest expense (11,461) (65,293)
Miscellaneous 53,651 18,223
------------ ------------
Income before income taxes 803,297 192,430
Income tax expense (274,969) (67,081)
------------ ------------
Net income $ 528,328 125,349
============ ============
Basic earnings per share $ .066 .016
============ ============
Diluted earnings per share $ .046 .010
============ ============
Weighted average number of common shares outstanding 8,035,012 7,968,375
============ ============
Weighted average number of common shares and dilutive
potential common shares outstanding 11,555,651 12,752,652
============ ============
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
<PAGE>
PARAVANT COMPUTER SYSTEMS, INC.
Condensed Statements of Cash Flows
For the six months ended March 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 528,328 125,349
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 225,539 224,898
Writedown on leasehold improvements 11,311 --
Deferred income taxes -- (27,320)
Increase (decrease) in cash caused by changes in:
Accounts receivable 1,279,018 2,118,717
Employee receivables and advances 11,171 60,052
Inventory (17,700) (1,048,398)
Prepaid expenses 4,379 21,314
Other assets (527,977) (20,228)
Accounts payable 220,762 (264,903)
Accrued commissions (19,845) (132,141)
Accrued expenses (17,584) 68,746
Accrued incentive compensation (140,400) (48,512)
Income taxes payable (213,431) (267,912)
------------ ------------
Net cash provided by operating activities 1,343,571 809,662
------------ ------------
Cash flows fiom investing activities:
Acquisitions of property, plant and equipment (164,432) (281,109)
Acquisitions of demonstration pool and custom molds (20,485) (101,904)
Acquisitions of rights -- (5,000)
------------ ------------
Net cash used in investing activities (184,917) (388,013)
------------ ------------
</TABLE>
(Continued)
<PAGE>
<PAGE>
-2
PARAVANT COMPUTER SYSTEMS, INC.
Condensed Statements of Cash Flows, Continued
<TABLE>
<CAPTION>
1998 1997
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from financing activities:
Net repayments on notes
payable to bank -- (240,000)
Repayments on other notes payable -- (50,000)
Repayments on long-term debt (55,002) (55,002)
Repayments on capital lease obligations (67,323) (91,143)
Proceeds from issuance of common stock 24,520 14,113
Proceeds from issuance of warrants 236,372 --
------------ ------------
Net cash provided by (used in) financing
activities 138,567 (422,032)
------------ ------------
Net increase (decrease) in cash and cash
equivalents 1,297,221 (383)
Cash and cash equivalents at beginning of the period 1,612,627 65,069
------------ ------------
Cash and cash equivalents at end of the period $ 2,909,848 64,686
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 11,873 65,495
============ ============
Income taxes $ 488,400 315,000
============ ============
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
<PAGE>
PARAVANT COMPUTER SYSTEMS, INC
Notes to Condensed Financial Statements
March 31, 1998 and 1997
(1) Basis of Presentation
The accompanying unaudited condensed financial statements of Paravant
Computer Systems, Inc. (the "Company"), 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 years.
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, 1997 and 1996 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, 1998:
<TABLE>
<S> <C>
Raw materials $ 2,789,162
Work in progress 1,045,832
Finished goods 86,244
-----------
3,921,238
Reserve for obsolete inventory (441,765)
-----------
$ 3,479,473
===========
</TABLE>
(Continued)
<PAGE>
<PAGE>
-2
PARAVANT COMPUTER SYSTEMS, INC.
Notes to Condensed Financial Statements
(3) Basic and Diluted Earnings Per Share
On October 1, 1997, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share". SFAS
No. 128 superseded APB Opinion No. 15, "Earnings Per Share", and specifies
the computation, presentation, and disclosure requirements for earnings
per share for entities with publicly held common stock or potential common
stock. It also requires that prior period earnings per share be restated
to conform to the requirements of SFAS No. 128.
Basic earnings per share for the three and six months ended March 31, 1998
and 1997 have been computed by dividing net income by the weighted average
number of common shares outstanding. Diluted earnings per share for the
three and six months ended March 31, 1998 and 1997 have been computed by
dividing net income by the weighted average number of common shares and
dilutive potential common shares outstanding.
(4) Commitment
On March 31, 1998, the Company entered into an acquisition agreement to
purchase the common stock of Engineering Development Laboratories,
Incorporated (EDL) and substantially all of the business and operating
assets of Signal Technology Laboratories, Inc. (STL). Under the terms of
the agreement, the Company would pay approximately $8.5 million in cash,
8%, three year notes aggregating $4.8 million, 3,950,000 shares of the
Company's common stock and a cash earn-out payable over five years based
on EDL/STL's future profits. The agreement is subject to the approval of
the Company's shareholders and certain other conditions.
<PAGE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of
Operations
RESULTS OF OPERATIONS
Three Months ended March 31, 1998 vs. March 31, 1997
Revenues for the quarter ended March 31, 1998 were $4,050,388, an increase
of $854,170 or 27% over the quarter ended March 31, 1997 revenues of $3,196,218.
This increase is primarily due to Paravant's strong backlog ($10,107,826 at
March 31, 1998) and continued full scale production deliveries to Raytheon in
support of the U.S. Marine Corps 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 and the F-117A
Stealth Fighter.
Gross profit was $2,022,344 for the quarter ended March 31, 1998 or 50% of
sales, compared to $1,530,456 or 48% of sales in the quarter ended March 31,
1997, a total increase of $491,888 or 32%. This increase in gross profitability
results primarily from the increased revenues discussed above.
Selling and administrative expenses of $1,537,713 in the quarter ended
March 31, 1998, increased by $367,775 or 31% from the quarter ended March 31,
1997 expenses of $1,169,938. As a percentage of sales, selling and
administrative expenses were 38% and 37% in the quarters ended March 31, 1998
and 1997, respectively. The increased selling and administrative expenses are
due primarily to increased sales commissions directly attributable to the
increased sales discussed earlier herein and on-going research and development
projects.
Income from operations was $484,631 for the quarter ended March 31, 1998
compared to $360,518 in the quarter ended March 31, 1997, an improvement of
$124,113. As a percentage of sales, income from operations improved to 12% in
the quarter ended March 31, 1998 from 11% in the quarter ended March 31, 1997.
The improvement to income 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, 1998 was reduced by
$15,982 or 76% to $5,098 compared to $21,080 in the quarter ended March 31,
1997. As a percentage of sales, interest expense decreased to 0.1% in the
quarter ended March 31, 1998 from .7% in the quarter ended March 31, 1997. This
decrease is due to a continued decline in outstanding credit balances made
possible by continued growth in revenues and gross profits, offset in part by
increased selling and administrative expenses as discussed above.
As a result, the Company's net income improved by 42% to $331,169 in the
quarter ended March 31, 1998 compared to $232,908 in 1997. Net income as a
percentage of sales was 8% in the quarter ended March 31, 1998 compared to 7% in
the quarter ended March 31, 1997. The improvement in net income overall,
resulted primarily from increased revenues and gross profits, offset in part by
increased selling and administrative expenses as discussed above.
<PAGE>
<PAGE>
Six Months ended March 31, 1998 vs. March 31, 1997
Revenues for the six months ended March 31, 1998 were $7,648,353, an
increase of $2,521,043 or 49% over the six months ended March 31, 1997 revenues
of $5,127,310. This increase is primarily due to Paravant's strong backlog
($10,107,826 at March 31, 1998) and continued full scale production deliveries
to Raytheon in support of the U.S. Marine Corps 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 and the F-117A Stealth Fighter.
Gross profit was $3,645,040 for the six months ended March 31, 1998 or 48%
of sales, compared to $2,407,421 or 47% in the six months ended March 31, 1997,
a total increase of $1,237,619 or 51%. This increase in gross profitability
results primarily from the increased revenues discussed above.
Selling and administrative expenses of $2,883,933 in the six months ended
March 31, 1998, increased by $716,012 or 33% from the six months ended March 31,
1997 expenses of $2,167,921. As a percentage of sales, selling and
administrative expenses were 38% and 42% in the six months ended March 31, 1998
and 1997, respectively. The increased selling and administrative expenses are
due primarily to increased sales commissions directly attributable to the
increased sales discussed earlier herein and on-going research and development
projects.
Income from operations was $761,107 for the six months ended March 31,
1998 compared to $239,500 in the six months ended March 31, 1997, an improvement
of $521,607. As a percentage of sales, income from operations improved to 10% in
the six months ended March 31, 1998 from 5% in the six months ended March 31,
1997. The improvement to income 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, 1998 was reduced by
$53,832 or 82% to $11,461 compared to $65,293 in the six months ended March 31,
1997. As a percentage of sales, interest expense decreased to 0.1% in the six
months ended March 31, 1998 from 1% in the six months ended March 31, 1997. This
decrease is due to a significant decline in outstanding credit balances made
possible by continued growth in revenues and gross profits, offset in part by
increased selling and administrative expenses as discussed above.
As a result, the Company's net income improved by 321% to $528,328 in the
six months ended March 31, 1998 compared to $125,349 in 1997. Net income as a
percentage of sales was 7% in the six months ended March 31, 1998 compared to 2%
in the six months ended March 31, 1997. The improvement in net income overall,
resulted primarily from increased revenues and gross profits, offset in part by
increased selling and administrative expenses as discussed above.
<PAGE>
<PAGE>
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 for secured borrowings and
prime rate plus 0.5% for undersecured borrowings. All borrowings are
collateralized by accounts receivable, inventory and equipment. Such arrangement
is subject to a borrowing base formula involving certain accounts receivable,
inventory and equipment. As of March 31, 1998, there were no borrowings
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, 1998. 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, 1998, there was
$64,149 outstanding under this arrangement with the Bank. The Company also has
capital lease obligations of $128,868 at March 31, 1998. 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.
On April 22, 1997, the Company retired a note payable to the Bank in an
aggregate principal amount of $500,000, bearing interest at the prime rate,
which note was due and payable in March 1998.
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 were paid in full on August 8, 1997.
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 the Company's major customers are
not generally different than those from its other customers as a whole.
<PAGE>
<PAGE>
The Company's operating cash flow was $1,343,571 and $809,662 for the six
months ended March 31, 1998 and 1997, respectively, $3,448,740 for fiscal 1997,
and negative $(1,426,090) in fiscal 1996. The improvement in the Company's
operating cash flow results primarily from improved net income as discussed
above and improved working capital as more fully presented in the Condensed
Statements of Cash Flows for the six months ended March 31, 1998. Negative cash
flow for the year ended September 30, 1996 was 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
$13,209,541 in fiscal 1997, an increase of almost 186%.
Due to the Company's orders related to U.S. Department of Defense
procurements, the operations of the Company have been cyclical and generally
result 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 the current
and prior quarters, 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. This change is evidenced by an increase
in both first and second quarter revenues and operating cash flows.
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 accounts receivable balance of $2,803,897 at March 31, 1998 has been
subsequently reduced by approximately $976,800 in cash collections. We recently
have provided a reserve for certain older balances of $150,497. This reserve is
believed to be more than sufficient to address any uncollectible balances
outstanding as of March 31, 1998.
As of March 31, 1998 and 1997, the Company's backlog was $10,107,826 and
$11,046,871, 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 $4,608,463 of the products
in backlog within the next 12 months. The remaining $5,499,363 of products in
backlog will be completed over the next 36 months.
The Company anticipates, based on its currently proposed plans and
assumptions relating to its operations, that the proceeds of the IPO and ongoing
stock offerings, together with the Company's existing working capital and
anticipated cash flows from the Company's operations, will be sufficient to
satisfy the Company's cash requirements for at least twelve months. 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.
<PAGE>
<PAGE>
On March 31, 1998 the Company signed a definitive agreement to acquire two
privately-held, affiliated companies, Engineering Development Laboratories,
Incorporated ("EDL"), in a stock sale, and Signal Technology Laboratories, Inc.
("STL"), in an asset sale, for approximately $8.5 million in cash, 8%,
three-year notes aggregating $4.8 million, 3,950,000 shares of the Company's
common stock and a cash earn-out payable over five years based on EDL-STL's
future profits. The Company intends to finance the cash portion of the
consideration to be paid by the Company at the closing. The Company has received
a conditional commitment from National City Bank, Dayton, Ohio for floating rate
financing which would increase the Company's revolving line of credit to
$14,000,000 with a maturity date of December 31, 2000 convertible thereafter to
five year term debt. The line of credit would be secured by a first security
interest in accounts, contract rights, inventory, equipment and other security
reasonably requested by the lender.
<PAGE>
<PAGE>
CAUTIONARY STATEMENT
This Quarterly Report of 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.
<PAGE>
<PAGE>
Part II - OTHER INFORMATION
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 March 12, 1998. At the Annual Meeting, the shareholders of the
Company voted upon the election of five directors, with all five nominees being
elected, with the votes being cast as set forth below. No other director's term
of office continued after the Annual Meeting.
<TABLE>
<CAPTION>
NUMBER OF VOTES NUMBER OF VOTES
NAME FOR WITHHELD
--------------- ----------------
<S> <C> <C>
Krishan K. Joshi 7,448,464 47,458
Richard P. McNeight 7,451,964 43,958
William R. Craven 7,451,889 44,033
Michael F. Maguire 7,448,264 47,658
John P. Singleton 7451,264 47,658
</TABLE>
In addition, the shareholders voted to approve an amendment to the
Company's Incentive Stock Option Plan with 7,138,720 votes for the amendment,
283,608 votes against the amendment and 73,594 votes withheld. The shareholders
also voted to approve an amendment to the Company's Nonemployee Directors' Stock
Option Plan with 7,159,649 votes for the amendment, 247,958 votes against the
amendment and 88,315 votes withheld.
These items were the only matters voted upon at the annual meeting,
<PAGE>
<PAGE>
Item 6. Exhibits and Reports on Form 8 K
(a) Exhibits
<TABLE>
<S> <C>
2.1 Acquisition agreement dated as of March 31, 1998 by and among
Paravant Computer Systems, Inc., Engineering Development
Laboratories, Incorporated, Signal Technology Laboratories, Inc.,
James E. Clifford, Edward W. Stefanko, C. David Lambertson, C.
Hyland Schooley, Peter Oberbeck and Leo S. Torresani (incorporated
by reference to Exhibit 2.1 to Form 8-K Current Report dated March
31, 1998).
10.3B Incentive stock option plan, as amended March 12, 1998.
10.14A Non-employee directors' stock option plan, as amended March 12, 1998.
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 thirteen
weeks ended March 31, 1998. However, Form 8-K, dated March 31, 1998, was
filed on April 28,1998 reporting under Item 5 an acquisition agreement by
and among Paravant Computer Systems, Inc., Engineering Development
Laboratories, Incorporated, Signal Technology Laboratories, Inc., James E.
Clifford, Edward W. Stefanko, C. David Lambertson, C. Hyland Schooley,
Peter Oberbeck and Leo S. Torresani.
<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 13, 1998 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)
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<PAGE>
PARAVANT COMPUTER SYSTEMS, INC.
Index to Exhibits filed with Form 10-QSB dated May 12, 1998
Exhibit Description of Exhibit
- ------- ----------------------
10.3B Incentive stock option plan, as amended March 12, 1998.
10.14A Non-employee directors' stock option plan, as amended March 12, 1998.
27 Financial Data Schedule
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Exhibit 10.3B
Incentive Stock Option Plan
of
PARAVANT COMPUTER SYSTEMS, INC.
(As Amended March 12, 1998)
1. PURPOSE
This Incentive Stock Option Plan (the "Plan") is intended as an incentive
for and encouragement of stock ownership by certain officers, directors and key
employees of Paravant Computer Systems Inc., (the "Corporation") so that they
may acquire or increase their proprietary interest in the success of the
Corporation, and to encourage them to remain in its employ. It is further
intended that Options issued pursuant to this Plan shall constitute qualified
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").
2. ADMINISTRATION
The Plan shall be administered by a committee appointed by the Board of
Directors of the Corporation (the "Committee"). The Committee shall consist of
two or more members of the Corporation's Board of Directors. The Board of
Directors may, from time to time, remove members from, or add members to, the
Committee. Vacancies on the Committee, however caused, shall be filled by the
Board of Directors. The Committee shall select one of its members as
Chairperson, and shall hold meetings at such times and places as it may
determine. Action by a majority of the Committee, shall be the valid acts of the
Committee. The Committee shall, from time to time at its discretion, consult
with management of the Corporation and make recommendations to the Board of
Directors with respect to the officers, directors and the key employees who
shall be granted options and the amount of stock to be optioned to each.
The interpretation and construction by the Committee of any provisions of
the Plan or of any Option granted under it shall be final unless otherwise
determined by the Board of Directors. No member of the Board of Directors or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any Option granted under it.
3. ADMINISTRATION
The persons who shall be eligible to receive Options shall be officers,
directors and key executive employees of the Corporation as the Board of
Directors shall select from time to time from among those nominated by the
Committee. An Optionee may hold more than one Option, but only on the terms and
subject to the restrictions hereafter set forth. No person shall be eligible to
receive an Option for a larger number of shares than is recommended for him by
the Committee.
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4. STOCK
The stock subject to the Options shall be share of the Corporation's
authorized but unissued or reacquired par value $0.015 per share common stock
hereafter sometimes called Common Stock. The aggregate number of shares which
may be issued under Options shall not exceed 2,955,000 shares of Common Stock.
The aggregate number of shares which may be issued pursuant to this Plan shall
be subject to adjustment as provided in Article 5(G) of the Plan.
In the event that any outstanding Option under the Plan for any reason
expires or is terminated, the shares of Common Stock allocable to the
unexercised portion of such Option may again be subjected to an Option under the
Plan.
5. TERMS AND CONDITIONS OF OPTIONS
Stock Options granted pursuant to the Plan shall be authorized by the
Board of Directors and shall be evidenced by agreements in such form as the
Committee shall from time to time approve, which agreements shall comply with
and be subject to the following terms and conditions:
(A) Number of Shares
(1) Each Option shall state the number of shares to which it
pertains.
(2) If the aggregate fair market of the shares of stock (determined
as of the time of grant of such option(s) with respect to which incentive stock
options are exercisable for the first time by an optionee during any calendar
year (under all such plans of the Corporation and its parent and subsidiary
corporations, if any) exceeds $100,000 then only the first $100,000 of such
shares so purchased will be treated as exercised under this Plan, and any excess
over $100,000 so purchased shall be treated as options which are not incentive
stock options; provided, however, that this rule shall be applied by taking
options into account in the order or sequence in which they were granted.
(3) For purposes of computing the annual limitation, the fair market
value of Common Stock of the Corporation granted under this Plan shall be
aggregated with the fair market value of any other stock of the Corporation
granted to such optionee under this Plan or any other plan or plans maintained
by the Corporation.
(B) Option Price
Each Option shall state the Option price, which shall not be less
than 100% of the fair market value of the shares of Common Stock of the
Corporation on the date of the granting of the Option; provided, however, that
if the Option is granted to an Optionee who, at the time of the grant, owns (as
determined in accordance with Section 425(d) of the Code) stock of the
Corporation possessing more than 10% of the total voting power of all classes of
the Corporation, then the option price shall be not less than 110% of the fair
market value of the shares of Common Stock of the Corporation on the date of the
granting of the Option.
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During such time as such stock is not listed upon an established
stock exchange or exchanges or NASDAQ System the fair market value per share
shall be the mean between dealer "bid" and "ask" process of the Common Stock in
the over-the-counter market on the day the Option is granted, as reported by the
National Association of Securities Dealers, Inc. If the stock is listed upon an
established stock exchange or exchanges or NASDAQ System, such fair market value
shall be deemed to be the highest closing price of the Common Stock on such
stock exchange or exchanges or system, the day the Option is granted or if no
sale of the Corporation's Common Stock shall have been made on any stock
exchange or such system on that day, on the next preceding day on which there
was a sale of such stock. If the stock is neither listed on an established stock
exchange or the NASDAQ System nor traded over-the-counter, the Committee shall
determine such fair market value under the general principles of valuing the
stock of corporations whose shares are not publicly traded. Subject to the
foregoing, the Board of Directors and the Committee in fixing the Option price
shall have full authority and discretion and be fully protected in doing so.
(C) Medium and Time of Payment
The Option price shall be payable in cash, or by check, upon the
exercise of the Option; provided, however, the Board of Directors, in its sole
discretion, may accept other forms of payment, including, but not limited to,
other stock of the Corporation then owned by Optionee.
(D) Term and Exercise of Options
(1) Each Option shall specify the dates upon which such Options can
be exercised, and shall designate the maximum number of shares granted by the
Option that can be exercised on such dates. To the extent that the maximum
number of shares permitted to be exercised on such date or dates are not so
exercised, such shares may be so exercised at any subsequent date not later than
ten (10) years after the Option was granted; provided, however, that no Option
granted to an Optionee who, at the time of the grant, owns stock of the
Corporation (as determined in accordance with Section 425(d) of the Code)
possessing more than 10% of the total voting power of all classes of stock of
the Corporation, shall be exercisable more than five (5) years after such Option
was granted.
(2) During the lifetime of the Optionee, the Option shall be
exercisable only by him and shall not be assignable or transferable by him, and
no other person shall acquire any rights herein.
(E) Termination of Employment Except Death
(1) In the event that an Optionee shall voluntarily terminate his
employment with the Corporation other than as a result of his death and shall be
no longer in its employ, subject to the condition that no Option shall be
exercisable after the expiration of ten (10) years from the date it is granted
(or after the expiration of five (5) years if such shorter period is
applicable), such Optionee shall have the right to exercise the Option at any
time within five (5) days prior to such termination of employment, but only to
the extent his right to exercise such Option had accrued as specified in such
Option and had not previously been exercised at the date of his termination from
employment. Whether authorized leaves of absence or absence for military or
governmental service shall constitute termination of employment, for the
purposes of the Plan, shall be determined by the Committee, which determination,
unless overruled by the Board of Directors, shall be final and conclusive.
<PAGE>
<PAGE>
(2) In the event that an Optionee shall have his employment with the
Corporation involuntarily terminated for reasons other than his death, any
Options held by such employee and not exercised as of the date of such
termination may be exercised within 30 days thereof to the extent currently
exercisable otherwise they shall be cancelled, and no longer exercisable.
(3) The Board of Directors, at its sole discretion, may redeem any
accrued but unexercised Options of an employee whose employment with it has
terminated by paying to such employee an amount equal to the difference between
the Option price and the then fair market value of the stock, as determined in
accordance with Article 5(B) of the Plan.
(F) Death of Optionee and Transfer of Option
If the Optionee shall die while in the employ of the Corporation and
shall not have fully exercised the Option, and the Option may be exercised,
subject to the condition that no Option shall be exercisable after the
expiration of ten (10) years from the date, it is granted, (or after the
expiration of five (5) years), if such shorter period is applicable), at any
time within one (1) year after the Optionee's death, by the executors,
administrators or personal representatives of the Optionee or by bequest or
inheritance, but only to the extent that the Optionee's right to exercise such
Option had accrued as specified in the Option at the time of his death and had
not previously been exercised.
No Option shall be transferable by the Optionee other than by will
or the applicable laws of descent and distribution.
(G) Adjustment of Shares
Subject to any required action by the stockholders, the number of
shares of Common Stock covered by each outstanding Option, and the price per
share thereof of each such Option shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock of the
Corporation resulting from a subdivision or consolidation of shares or the
payment of a stock dividend (but only on the Common Stock) or any other increase
or decrease in the number of such shares effected without receipt of
consideration by the Corporation.
Subject to any required action by the stockholders, if the
Corporation shall be the surviving corporation in any merger or consolidation,
each outstanding Option shall pertain to and apply to the securities to which a
holder of the number of shares of Common Stock subject to the Option would have
been entitled. A dissolution or liquidation of the Corporation or a merger or
consolidation in which the Corporation is not the surviving corporation, shall
cause each outstanding Option to terminate; provided, however, that each
Optionee shall, in such event, have the right immediately prior to such
dissolution or liquidation, or merger or consolidation in which the Corporation
is not the surviving Corporation, to exercise limitations contained in the
Option.
In the event of a change in the common stock of the Corporation as
presently constituted which is limited to a change of all its authorized shares
into the same number of shares with the stated par value the share resulting
from any such change shall be deemed to be the Common Stock within the meaning
of the Plan.
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Except as hereinbefore expressly provided in this Article 5(G), the
Optionee shall have no rights by reason of subdivision or consolidation of
shares of stock of any class or the payment of any stock dividend or any other
increase or decrease in the number of shares of stock of any class or by reason
of any dissolution, liquidation, merger or consolidation or spin-off of assets
or stock of another corporation, and any issue by the Corporation of shares of
stock of any class, or securities convertible into shares of Common Stock
subject to the Option.
The grant of an Option pursuant to the Plan shall not affect in any
way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merger or to consolidate or to dissolve, liquidate or sell, or
transfer all or any part of its business or assets.
(H) Rights as a Stockholder
An Optionee or a transferee of an Option shall have no rights as a
stockholder with respect to any shares covered by his Option until the date of
the issuance of a stock certificate to him for such shares. No adjustment shall
be made for dividends (ordinary or extraordinary, whether in case, securities or
other property) or distributions or other rights for which the record date is
prior to the date such stock certificate is issued, except as provided in
Article 5(G) hereof.
(I) Modification, Extension and Renewal of Option
Subject to the terms and conditions and within the limitations of
the Plan, the Board of Directors may modify, extend or renew outstanding Options
(to the extent not theretofore exercised) and authorize the granting of new
Options in substitutions therefore (to the extent not theretofore exercised).
However, no modifications of an Option shall, without the consent of the
Optionee, alter or impair any rights or obligations under any Option theretofore
granted under the plan.
(J) Investment Purpose
Each Option under the Plan shall be granted on the condition that
the purchases of Common Stock thereunder shall be for investment purposes, and
not with a view to resale or distribution except that in the event the Common
Stock subject to such Option is registered under the Securities Act of 1933, as
amended, or in the event a resale of such stock without such registration would
otherwise be permissible, such condition shall be inoperative if in the opinion
of counsel for the Corporation such condition is not required under the
Securities Act of 1933 or any other applicable law, regulation or rule of any
governmental agency. Each Optionee shall give to the Company an investment
letter, in a form prescribed by the Board of Directors, as a condition precedent
to the issuance of certificates representing shares exercised by such Optionee.
(K) Other Provisions
The Option agreements authorized under the Plan shall contain such
other provisions, including, without limitation, restrictions upon the exercise
of the Option, as the Committee and the Board of Directors of the Corporation
shall deem advisable. Any such Option agreement shall contain such limitations
and restrictions upon the exercise of the Option, and the amount of such Option,
as shall be necessary in order that such Option will be an "incentive stock
Option" as defined in Section 422 of the Code or to conform to any change in the
law.
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6. TERM OF PLAN
Options may be granted pursuant to the Plan from time to time within
a period of ten years from the date the Plan is adopted, or the date the Plan is
approved by the Stockholders, whichever is earlier.
7. INDEMNIFICATION OF COMMITTEE
In addition to such other rights of indemnification as they may have
as directors or as members of the Committee, the members of the Committee shall
be indemnified by the Corporation against the reasonable expenses, including
attorneys' fees actually and necessarily incurred in connection with the defense
of any action, suit or proceeding, or in connection with any appeal therein, to
which they or any of them may be a party by reason of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan or any Option granted thereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Corporation) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such Committee member is liable for negligence or misconduct in
the performance of his duties; provided that within 60 days after institution of
any such action, suit, or proceeding a Committee member shall in writing offer
the Corporation the opportunity at its own expense, to handle and defend the
same.
8. AMENDMENT OF THE PLAN
The Board of Directors of the Corporation may, insofar as permitted
by the law, from time to time, with respect to any share at the time not subject
to Options, suspend or discontinue the Plan or revise or amend it in any respect
whatsoever except that, without approval of the stockholders, no such revision
or amendment shall change the number of shares subject to the Plan, change the
designation of the class of employees eligible to receive Options, decrease the
price at which Options may be granted, remove the administration of the Plan
from the Committee, or render any member of the committee eligible to receive an
Option under the Plan while serving thereon. Furthermore, the Plan may not,
without the approval of the stockholders, be amended in any manner that will
cause Options issued under it to fail to meet the requirements of incentive
stock Options as defined in Section 422 of the Code.
9. APPLICATION OF FUNDS
The proceeds received by the Corporation from the sale of Common
Stock pursuant to Options will be used for general corporate purposes.
10. NO OBLIGATION TO EXERCISE OPTION
The granting of an Option shall impose no obligation upon the
Optionee to exercise such Option.
11. APPROVAL OF PLAN, AS AMENDED
The Plan as hereinbefore set forth, constitutes the Plan, amended to
increase the number of shares of Common Stock which may be subject to Options
from 1,455,000 shares (after adjustment for the 3 for 1 stock split effective
July 25, 1996) to 2,955,000 shares as ratified and approved by the stockholders
of the Corporation on March 12, 1998.
<PAGE>
<PAGE>
Exhibit 10.14A
PARAVANT COMPUTER SYSTEMS, INC.
Nonemployee Directors' Stock Option Plan
(As Amended March 12, 1998)
1. Establishment. There is hereby established the Paravant Computer
Systems, Inc. Nonemployee Directors' Stock Option Plan (the "Directors' Plan")
pursuant to which certain directors of Paravant Computer Systems, Inc. (The
"Corporation") may be granted options to purchase shares of common stock, par
value $0.015 per share ("Common Stock"), and thereby share in the future growth
of the business. The purposes of the Directors' Plan is to attract and retain
the services of non-employee members of the Board of Directors and to provide
them with increased motivation and incentive to exert their best efforts on
behalf of the Corporation by enlarging their personal stake in the Corporation.
2. Status of Options. The options to be issued pursuant to this Directors'
Plan ("Options") shall not constitute incentive stock options within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
3. Eligibility. All directors of the Corporation who are not employees of
the Corporation or any of its subsidiaries (collectively, the "Participants")
shall be eligible to be granted Options under this Directors' Plan.
4. Number of Shares Covered by Options; No Preemptive Rights. The total
number of shares which may be issued and sold pursuant to Options granted under
this Directors' Plan shall be 135,000 shares of Common Stock (or the number and
kind of shares of stock or other securities which, in accordance with Section 8
of this Directors' Plan, shall be substituted for such shares of Common Stock or
to which said shares shall be adjusted; hereinafter, all references to shares of
Common Stock are deemed to be references to said shares or shares so adjusted).
The issuance of shares upon exercise of an Option shall be free from any
preemptive or preferential right of subscription or purchase on the part of any
stockholder. If any outstanding Option granted under this Directors' Plan is
terminated for any reason, the shares of Common Stock subject to the unexercised
portion of the Option will again be available for Options issued under this
Directors' Plan.
5. Administration.
(a) The Directors' Plan shall be administered by a committee
consisting of from two (2) to five (5) individuals who are members of the Board
("Committee"). The Committee shall be appointed by the Board, which may at any
time, and from time to time, remove any member of the Committee, with or without
cause, appoint additional members to the Committee and fill vacancies, however
caused, in the Committee. A majority of the members of the Committee shall
constitute a quorum and all determinations of the Committee shall be made by a
majority of such quorum. Any decision or determination of the Committee reduced
to writing and signed by all of the members of the Committee shall be fully as
effective as if it had been made at a meeting duly called and held. A
Participant may receive Options under this Directors' Plan whether or not such
Participant also serves as a member of the Committee.
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(b) Options shall be automatically granted to Participants in
accordance with Section 6 hereof and shall be issued upon the terms and
conditions set forth in Section 7 hereof. Accordingly, the persons to whom
Options shall be granted, the number of shares subject thereto and the material
terms and conditions governing the Options, will not be subject to the
discretion of the Committee. However, if any questions of interpretation of this
Directors' Plan or of any Options issued hereunder shall arise, they shall be
determined by the Committee and such determination shall be final and binding
upon all persons having an interest in the Directors' Plan.
6. Non-discretionary Grants. Subject to approval of the Plan by the
stockholders of the Corporation, Options shall be automatically granted to
Participants as follows:
(a) An Option to purchase 7,500 shares of Common Stock will be
granted to each Participant upon such Participant's initial election or
appointment as a director of the Corporation; and
(b) An additional Option to purchase 7,500 shares of Common Stock
will be granted to each Participant at each Annual Meeting of the Board
immediately following the Annual Meeting of Stockholders in each year,
commencing in 1997, during the term of this Directors Plan. If the number of
shares remaining in the Directors' Plan on any such date is insufficient to
grant each Participant an Option to purchase 7,500 shares of Common Stock, each
Participant will automatically receive an Option to purchase a number of shares
of Common Stock to be determined by dividing the total number of shares
remaining in this Directors' Plan by the number of Participants at that time
and, if necessary, rounding down to the nearest whole number of shares.
7. Terms and Conditions of Options; Stock Option Agreements. Each Option
granted pursuant to this Directors' Plan shall be evidenced by a written
agreement between the Participant and the Corporation which shall contain the
following terms:
(a) Option Price. The exercise price of each Director's Option shall
be one hundred percent (100%) of the fair market value of the shares subject to
such Option on the date of grant. For purposes of this Section, the fair market
value of the shares of Common Stock on any day shall be (i) in the event the
Common Stock is not publicly traded, the fair market value on such day as
determined in good faith by the Committee or (ii) in the event the Common Stock
is publicly traded, the last sale price of a share of Common Stock as reported
by the principal quotation service on which the Common Stock is listed, if
available, or, if last sale prices are not reported with respect to the Common
Stock, the mean of the high bid and low asked prices of a share of Common Stock
as reported by such principal quotation service, or, if there is no such report
by such quotation service for such day, such fair market value shall be the
average of (i) the last sale price (or, if last sale prices are not reported
with respect to the Common Stock, the mean of the high bid and low asked prices)
of the day next preceding such day for which there was a report and (ii) the
last sale price (or, if last sale prices are not reported with respect to the
Common Stock, the mean of the high bid and low asked prices) on the day next
succeeding such day for which there was a report, or as otherwise determined by
the Committee in its discretion.
(b) Medium and Time of Payment. The exercise price of the shares to
be purchased pursuant to an Option shall be paid (i) in full in cash or by
check, (ii) by delivery of shares of Common Stock of the Corporation then owned
by the Participant with a fair market value at the time of the exercise of the
Option equal to the exercise price, or (iii) by a combination of (i) and (ii).
(c) Term and Exercise of Options. The term of each Option shall
commence on the date it is granted and, unless sooner terminated as set forth
herein, shall expire ten years after its date of grant unless extended as set
forth herein. In the event a Participant shall cease to be a director of the
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<PAGE>
Corporation for any reason other than death or disability, the Option shall
terminate on the earlier to occur of (i) the later of ninety (90) days after the
date of termination of service after such Participant's last purchase or sale of
shares of Common Stock prior to his termination of service as a director, or
(ii) the expiration date of the Option. If the Participant shall die or become
disabled within the meaning of Section 22(e)(3) of the Code while still serving
as a director or prior to the termination of the Option in accordance with the
preceding sentence, the Option shall terminate on the first anniversary of the
participant's death or disability, as the case may be. In the event of the
Participant's death, the Option may be exercised by the person or persons
entitled to do so under the Participant's will or, if the Participant shall fail
to make testamentary disposition of the Option, or shall die intestate, by the
Participant's legal representative.
(d) Transferability. Each Option shall be non-transferable by the
Participant except by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order, and shall be exercisable only
by the Participant.
(e) Investment Purpose. Each Participant shall represent and
warrant that he is acquiring the Option and, in the event the
Option is exercised, the shares of Common Stock issuable
thereunder, for investment, for his own account and not with a
view to the distribution thereof, and that he will not offer
or sell the shares unless a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), and
any applicable state securities law is in effect, or unless
counsel satisfactory to the Corporation renders a reasoned
opinion that the proposed sale is exempt from the registration
requirements of the Securities Act and such state securities
act. The Corporation shall not be obligated to issue or
deliver any shares upon exercise of an Option if to do so
would violate the Securities Act or any state securities law
and the Corporation shall have no obligation to file any
registration statement or take any other action required or
permitted by any such law.
8. Adjustment of Number of Shares.
(a) In the event that a dividend shall be declared upon the shares
of Common Stock payable in shares of Common Stock, the number of shares of
Common Stock then subject to any Option granted hereunder, and the number of
shares reserved for issuance pursuant to this Directors' Plan but not yet
covered by an Option, shall be adjusted by adding to each of such shares the
number of shares which would be distributable thereon if such shares had been
outstanding on the date fixed for determining the stockholders entitled to
receive such stock dividend. In the event that the outstanding shares of Common
Stock shall be changed into or exchanged for a different number or kind of
shares of stock or other securities of the Corporation or of another
corporation, whether through reorganization, recapitalization, stock split-up,
combination of shares, merger or consolidation, then there shall be substituted
for each share of Common Stock subject to any such Option and for each share of
Common Stock reserved for issuance pursuant to this Directors' Plan but not yet
covered by an Option, the number and kind of shares of stock or other securities
into which each outstanding share of Common Stock shall be so changed or for
which each such share shall be exchanged; provided, however, that in the event
that such change or exchange results from a merger or consolidation, and in the
judgment of the Committee such substitution cannot be effected or would be
inappropriate, or if the Company shall sell all or substantially all of its
assets, the Company shall use reasonable efforts to effect some other adjustment
of each then outstanding Option which the Committee, in its sole discretion,
shall deem equitable. In the
<PAGE>
<PAGE>
8. Adjustment of Number of Shares. (continued)
event that there shall be any change, other than as specified above in this
Section 8(a), in the number or kind of outstanding shares of Common Stock or of
any stock or other securities into which such shares of Common Stock shall have
been changed or for which they shall have been exchanged, then, if the Committee
shall determine that such change equitably requires an adjustment in the number
or kind of shares theretofore reserved for issuance pursuant to the Plan but not
yet covered by an Option and of the shares then subject to an Option or Options,
such adjustment shall be made by the Committee and shall be effective and
binding for all purposes of this Plan and of each stock option agreement. In the
case of any such substitution or adjustment as provided for in this Section, the
option price in each stock option agreement for each share covered thereby prior
to such substitution or adjustment will be the total option price for all shares
of stock or other securities which shall have been substituted for each such
share or to which such share shall have been adjusted pursuant to this Section
8. No adjustment or substitution provided for in this Section shall require the
Corporation, in any stock option agreement, to sell a fractional share, and the
total substitution or adjustment with respect to each stock option agreement
shall be limited accordingly.
(b) In the event that the Corporation shall effect a distribution,
other than a normal and customary cash dividend, upon shares of Common Stock,
the Committee may, in order to prevent significant diminution in the value of
options as a result of any such distribution, take such measures as it deems
fair and equitable, including, without limitation, the adjustment of the Option
Price per share for Shares not issued and sold hereunder prior to the record
date for said distribution.
9. Effective Date and Term of Plan. This Directors' Plan, as amended,
became effective on March 12, 1998, and is a continuation of the Plan originally
adopted by the Corporation on March 2, 1995. Except to the extent necessary to
govern outstanding Options issued, this Directors' Plan shall terminate on March
2, 2005, and no additional Options shall be granted after March 1, 2005, unless
the Plan is earlier terminated by the Committee in accordance with Section 10
hereof.
10. Amendment of the Plan. This Directors' Plan may be terminated or
amended from time to time by vote of the Committee; provided, however, that no
such termination or amendment shall materially adversely affect or impair any
then outstanding Directors' Option without the consent of the Participant. The
approval of the Corporation's stockholders is required in respect of any
amendment which would (i) increase the maximum number of shares subject to this
Directors' Plan; or (ii) change the designation of the Participants eligible to
receive Options under this Directors' Plan.
11. Approval of Plan, as Amended. The Plan as hereinbefore set forth,
constitutes the Plan, amended to increase the number of shares of Common Stock
which may be subject to Options from 45,000 shares (after adjustment for the 3
for 1 stock split effective July 25, 1996) to 135,000 shares as ratified and
approved by the stockholders of the Corporation on March 12, 1998.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET OF PARAVANT COMPUTER SYSTEMS, INC. AS OF MARCH 31, 1998 AND THE RELATED
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
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