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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, 1999
[ ] 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 INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
<TABLE>
<S> <C>
Florida 59-2209179
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
</TABLE>
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 May 4, 1999, there were outstanding 12,299,981
shares of Common Stock, $.015 par value per share.
Transitional Small Business Disclosure Format (check one): [ ] Yes [X] No
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PARAVANT INC.
INDEX
<TABLE>
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheet - March 31, 1999......................................3
Condensed Consolidated Statements of Operations for the three
months ended March 31, 1999 and 1998.......................................................5
Condensed Consolidated Statements of Operations for the six
months ended March 31, 1999 and 1998........................................................6
Condensed Consolidated Statements of Cash Flows for the six months
ended March 31, 1999 and 1998...............................................................7
Notes to Condensed Consolidated Financial Statements........................................9
Item 2. Management's Discussion and Analysis of Operations................................16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.................................................................22
Item 4. Submission of Matters to a Vote of Security Holders...............................23
Item 6. Exhibits and Reports on Form 8-K..................................................23
SIGNATURES.................................................................................24
Index to Exhibits Filed with Form 10-QSB dated May 4, 1999.................................25
</TABLE>
2
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PARAVANT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1999
<TABLE>
<CAPTION>
ASSETS
(Unaudited)
<S> <C>
Current assets:
Cash and cash equivalents $ 310,131
Accounts receivable 2,840,032
Amounts due from related party 2,059,255
Costs and estimated earnings in excess of billings on
uncompleted contracts 8,102,822
Inventory 5,264,994
Other current assets 583,531
-----------
Total current assets 19,160,765
-----------
Property, plant and equipment, net 1,551,847
Demonstration pool and custom molds, net 724,349
Employee note receivable 215,685
Other assets 770,829
Intangible assets, net 5,574,243
Goodwill, net 12,193,582
-----------
Total assets $40,191,300
===========
</TABLE>
See accompanying notes to condensed consolidated financial statements
3
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<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
(Unaudited)
<S> <C>
Current liabilities:
Current maturities of notes payable to related parties $ 1,600,000
Current maturities of capital lease obligations 21,413
Accounts payable 1,690,778
Billings in excess of costs and estimated earnings on
uncompleted contracts 276,876
Accrued expenses 1,981,509
Income taxes payable 818,570
-----------
Total current liabilities 6,389,146
-----------
Revolving line of credit 11,063,016
Notes payable to related parties, net of current maturities 3,200,000
Capital lease obligations, net of current maturities 27,071
Deferred compensation 213,037
Deferred income taxes, net 207,067
-----------
Total liabilities 21,099,337
-----------
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
12,299,981 shares 184,500
Additional paid-in capital 11,423,788
Retained earnings 7,483,675
-----------
Total stockholders' equity 19,091,963
-----------
Commitments and contingencies (Note 9)
Total liabilities and stockholders' equity $40,191,300
===========
</TABLE>
4
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<PAGE>
PARAVANT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
(Unaudited)
<S> <C> <C>
Revenues $ 12,297,733 4,050,388
Cost of revenues 4,986,380 2,028,044
------------ ------------
Gross profit 7,311,353 2,022,344
Sales and marketing 513,989 597,934
Research, development & engineering 1,026,838 412,329
General and administrative 1,613,821 506,525
Amortization of goodwill and intangible assets 514,375 20,925
------------ ------------
Total selling and administrative expense 3,669,023 1,537,713
------------ ------------
Income from operations 3,642,330 484,631
Other income (expense):
Interest (239,728) (5,098)
Miscellaneous 15,837 25,765
------------ ------------
Income before income taxes 3,418,439 505,298
Income tax expense 1,350,283 174,129
------------ ------------
Net income $ 2,068,156 331,169
============ ============
Basic earnings per share $ .17 .04
============ ============
Diluted earnings per share $ .16 .03
============ ============
Weighted average number of common shares outstanding 12,299,889 8,075,028
============ ============
Weighted average number of common shares and dilutive
potential common shares outstanding 13,318,554 11,261,224
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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PARAVANT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
(Unaudited)
<S> <C> <C>
Revenues $ 20,780,026 7,648,353
Cost of revenues 8,475,159 4,003,313
------------ ------------
Gross profit 12,304,867 3,645,040
Sales and marketing 1,024,604 1,163,990
Research, development & engineering 1,904,015 741,119
General and administrative 2,981,178 936,974
Amortization of goodwill and intangible assets 1,021,685 41,850
------------ ------------
Total selling and administrative expense 6,931,482 2,883,933
------------ ------------
Income from operations 5,373,385 761,107
Other income (expense):
Interest (486,672) (11,461)
Miscellaneous 74,821 53,651
------------ ------------
Income before income taxes 4,961,534 803,297
Income tax expense 1,959,806 274,969
------------ ------------
Net income $ 3,001,728 $ 528,328
============ ============
Basic earnings per share $ .25 .07
============ ============
Diluted earnings per share $ .24 .05
============ ============
Weighted average number of common shares outstanding 12,276,104 8,035,012
============ ============
Weighted average number of common shares and dilutive
potential common shares outstanding 12,701,185 11,555,651
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
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PARAVANT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,001,728 528,328
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 1,155,363 225,539
Writedown on leasehold improvements -- 11,311
Increase (decrease) in cash caused by changes in:
Accounts receivable 1,635,951 1,279,018
Amounts due from related party (2,281,902) --
Employee receivables and advances 7,054 11,171
Contracts in progress (6,438,901) --
Inventory (1,888,275) (17,700)
Prepaid expenses 19,964 4,379
Other assets 273,071 (527,977)
Accounts payable 1,194,818 220,762
Accrued commissions (253,736) (19,845)
Accrued expenses (87,153) (17,584)
Accrued incentive compensation 163,624 (140,400)
Deferred compensation 213,037 --
Income taxes payable 96,259 (213,431)
----------- -----------
Net cash provided by (used in) operating activities (3,189,098) 1,343,571
----------- -----------
Cash flows from investing activities:
Payments for acquired subsidiaries, net of cash acquired (8,989,332) --
Acquisitions of property, plant and equipment (165,317) (164,432)
Acquisitions of demonstration pool and custom molds -- (20,485)
Proceeds from collection of note receivable 750,000 --
----------- -----------
Net cash used in investing activities (8,404,649) (184,917)
----------- -----------
</TABLE>
(Continued)
7
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PARAVANT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, (CONTINUED)
<TABLE>
<CAPTION>
1999 1998
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from financing activities:
Repayments on previous line of credit (225,000) --
Net proceeds on revolving line of credit 11,063,016 --
Repayments on long-term debt (9,147) (55,002)
Repayments on capital lease obligations (42,258) (67,323)
Proceeds from issuance of common stock 1,719 24,520
Proceeds from exercise of warrants 200 236,372
Stock registration fees (22,440) --
Payments for retirement of underwriters' warrants (50,000) --
------------ ------------
Net cash provided by financing activities 10,716,090 138,567
------------ ------------
Net increase (decrease) in cash and cash equivalents (877,657) 1,297,221
Cash and cash equivalents at beginning of the period 1,187,788 1,612,627
------------ ------------
Cash and cash equivalents at end of the period $ 310,131 2,909,848
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 296,512 11,873
============ ============
Income taxes $ 1,500,355 488,400
============ ============
Supplemental disclosure of noncash investing and financing activities:
The Company entered into notes payable agreements with related parties
totaling $4,800,000 and issued common stock totaling $5,925,000 in
connection with the purchase business combination during the six
months ended March 31, 1999.
</TABLE>
See accompanying notes to condensed consolidated financial statements.
8
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<PAGE>
PARAVANT INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements of Paravant Inc. and Subsidiaries (the "Company") have been
prepared in accordance with the instructions and requirements of Form 10-QSB
and 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 consolidated financial statements and footnotes
should be read in conjunction with the Company's audited financial
statements for the fiscal year ended September 30, 1998 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 consolidated financial statements are the same as those described
in such statements, or as discussed below.
(b) REPORTING ENTITY
The accompanying unaudited condensed consolidated financial
statements of the Company include the financial statements of its wholly
owned subsidiaries, Engineering Development Laboratories, Incorporated
("EDL") and STL of Ohio, Inc. ("STL of Ohio"). Intercompany transactions and
accounts have been eliminated upon consolidation.
(c) BUSINESS
The Company is engaged in the design, development, production and
sales of military electronic hardware. The products include computer and
communication systems, specializing in rugged, hand-held and laptop computer
products with primarily military applications, airborne and avionics systems
for the United States Department of Defense and electronic signal
conditioning and analysis systems, for foreign and domestic intelligence
agencies. In addition, the Company has expanded into the medical market and
now provides a line of programmers, which are used to provide programming
information to medical pumps and related devices.
The principal customers of the Company are United States Government
agencies and contractors who are subject to federal budgetary implications.
The work is performed under general fixed price purchase orders and on a
general production basis.
9
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<PAGE>
PARAVANT INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
(d) REVENUE AND COST RECOGNITION
The Company recognizes revenues on product sales for military
computers and medical programmers when the customer accepts title, which
typically occurs upon shipment. Contracts to design, develop and manufacture
complex aerospace and electronic equipment to a buyer's specification or to
provide services related to the performance of such contracts are accounted
for using the percentage-of-completion method of accounting. Accordingly,
revenues are recognized in the ratio that contract costs incurred are to
estimated total contract costs. Losses expected to be incurred on contracts
are charged to operations in the period that such losses are determined.
Federal government contracts costs, including indirect expenses, are
subject to audit and adjustment by the Defense Contract Audit Agency
("DCAA"). Contract revenues have been recorded in amounts that are expected
to be realized upon final settlement. In management's opinion, adjustments
resulting from any DCAA audit will not have a material adverse effect on the
consolidated financial position or the results of operations.
(e) INVENTORY
Inventory is stated at the lower of cost or market using the
weighted average cost method. The Company provides an obsolescence reserve
for inventory, as it becomes unusable or obsolete.
(f) DEPRECIATION AND AMORTIZATION
The cost of property, plant and equipment is depreciated over the
estimated useful lives of the related assets ranging from 5 to 7 years using
the straight-line method. Intangible assets include the exclusive rights to
a printed circuit board and certain software, and non-compete agreements and
are being amortized over the estimated useful lives of the technology of
five to ten years and the estimated lives of the non-compete agreements of
eight and one-half years using the straight-line method. Demonstration pool
assets are being amortized over their estimated useful lives of three years
using the straight-line method. The Company also has custom molds, which are
amortized over their estimated useful lives of ten years using the
straight-line method. Goodwill, representing the excess of cost over the net
tangible and identifiable intangible assets of the company's wholly-owned
subsidiaries, is stated at cost and is being amortized over the estimated
future periods to be benefited of ten years using the straight-line method.
When events and circumstances so indicate, all long-term assets, including
goodwill, are assessed for recoverability based upon cash flow forecasts.
An impairment loss would be recorded in the period such determination is
made based on the fair value of the related business.
(g) BASIC AND DILUTED EARNINGS PER SHARE
Basic earnings per share for the three and six months ended March
31, 1999 and 1998 has 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, 1999 and 1998 has been computed by
dividing net income by the weighted average number of common shares and
dilutive potential common shares outstanding.
10
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<PAGE>
PARAVANT INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
A reconciliation of the weighted average number of shares
outstanding used in the computation of basic and diluted earnings per share
is as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
1999 1998
---- ----
<S> <C> <C>
Basic:
Weighted average number of common
shares outstanding 12,299,889 8,075,028
========== ==========
Diluted:
Weighted average number of common
shares outstanding 12,299,889 8,075,028
Dilutive stock options 439,163 664,199
Dilutive warrants 579,502 2,521,997
---------- ----------
13,318,554 11,261,224
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended March 31
-----------------------------
1999 1998
---- ----
<S> <C> <C>
Basic:
Weighted average number of common
shares outstanding 12,276,104 8,035,012
========== ==========
Diluted:
Weighted average number of common
shares outstanding 12,276,104 8,035,012
Dilutive stock options 371,484 688,435
Dilutive warrants 53,597 2,832,204
---------- ----------
12,701,185 11,555,651
========== ==========
</TABLE>
Options to purchase 684,872 and 203,015 shares of common stock were
excluded from the calculation of diluted earnings per share for the three
months ended March 31, 1999 and 1998, respectively, because their exercise
prices exceeded the average market price of common shares for the period.
Options to purchase 834,410 and 115,571 shares of common stock were excluded
from the calculation of diluted earnings per share for the six months ended
March 31, 1999 and 1998, respectively, because their exercise prices
exceeded the average market price of common shares for the periods.
11
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<PAGE>
PARAVANT INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
(2) ACQUISITION
On October 8, 1998 the Company consummated a purchase business
combination (the "Acquisition"), effective October 1, 1998, of all of the
outstanding common stock of EDL and substantially all of the assets of
Signal Technology Laboratories, Inc. ("STL"), EDL's majority-owned
subsidiary. Pursuant to the Acquisition Agreement the Company paid an
aggregate consideration consisting of (i) $8.7 million in cash, (ii)
three-year $4.8 million notes bearing interest at the rate of 8% and (iii)
3,950,000 shares of Common Stock. In connection with the Acquisition a
contingent cash earn-out will be payable by the Company under specified
circumstances over a period of up to five years based on future profits of
the acquired operation. The earn-out will be recorded as a current expense
in the year it is earned. The cash portion of the consideration paid by the
Company in connection with the Acquisition was financed using floating rate
financing obtained through National City Bank in Dayton, Ohio (the "Bank")
in an amount up to $14,000,000 under a revolving line of credit with a
maturity date of December 31, 2001, convertible thereafter to five year term
debt. (See Notes 7 and 8)
The following unauditied pro forma financial information presents the
combined results of operations of the Company, EDL and STL as if the
Acquisition had occurred as of October 1, 1998 and 1997, after giving effect
to certain adjustments, including amortization of goodwill, additional
depreciation expense, increased interest expense on debt related to the
Acquisition, and related income tax effects. The pro forma financial
information does not necessarily reflect the results of operations that
would have occurred had the Company, EDL and STL constituted a single entity
during such periods.
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
1999 1998
---- ----
(Unaudited)
<S> <C> <C>
Net revenues $ 12,297,733 12,568,409
=========== ===========
Net income $ 2,086,156 2,646,934
============ ===========
Basic earnings per share $ .17 .22
============ ===========
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended March 31
-------------------------
1999 1998
---- ----
(Unaudited)
<S> <C> <C>
Net revenues $ 20,780,026 29,262,260
============ ===========
Net income $ 3,001,728 6,364,142
============ ===========
Basic earnings per share $ .25 .53
============ ===========
</TABLE>
12
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PARAVANT INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
(3) COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Contracts in progress and advance billings on such contracts consist of
the following as of March 31, 1999:
<TABLE>
<S> <C>
Costs incurred on uncompleted contracts $ 16,752,738
Estimated earnings thereon 6,459,837
------------
23,212,575
Billings to date (15,386,629)
------------
$ 7,825,946
============
</TABLE>
The above amount is included in the accompanying condensed consolidated
balance sheet under the following captions:
<TABLE>
<S> <C>
Costs and estimated earnings in excess of billings on
uncompleted contracts $ 8,102,822
Billings in excess of costs and estimated earnings
on uncompleted contracts (276,876)
--------------
$ 7,825,946
==============
</TABLE>
(4) INVENTORY
The following is a summary of inventory at March 31, 1999:
<TABLE>
<S> <C>
Raw materials $ 4,576,621
Work in process 968,983
Finished goods 131,383
--------------
5,676,987
Reserve for obsolete inventory (411,993)
--------------
$ 5,264,994
==============
13
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<PAGE>
PARAVANT INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
(5) INTANGIBLE ASSETS
These assets consist of exclusive rights to a printed circuit board
and certain software, as well as non-compete agreements obtained through the
Acquisition. Cost and accumulated amortization of these assets at March 31,
1999 are as follows:
</TABLE>
<TABLE>
<S> <C>
Cost $ 6,169,750
Accumulated amortization (595,507)
-------------
$ 5,574,243
=============
</TABLE>
(6) GOODWILL
Goodwill represents the excess of cost over the net tangible and
identifiable intangible assets of the Company's wholly-owned subsidiaries.
Cost and accumulated amortization of these assets at March 31, 1999 are as
follows:
<TABLE>
<S> <C>
Cost $ 12,828,285
Accumulated amortization (634,703)
-------------
$ 12,193,582
=============
</TABLE>
(7) REVOLVING LINE OF CREDIT
The Company has floating rate financing with the Bank in an amount
up to $14,000,000 under a revolving line of credit with a maturity date of
December 31, 2001, convertible thereafter to five year term debt. Pursuant
to the loan agreement, the rate of interest is to be determined at a rate
equal to the Bank's prime rate, the federal funds or LIBOR rate plus a
margin which ranges from 1.5% to 2% based on the debt to tangible net worth
ratio at the beginning of the applicable LIBOR rate contract period. The
Company may elect among the rates based upon conditions on the dates upon
which funds are drawn. The line of credit is secured by a first security
interest in accounts receivable, contract rights, inventory, equipment and
other security reasonably requested by the lender. As of March 31, 1999,
borrowings outstanding under this line of credit totaled $11,063,016.
14
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<PAGE>
PARAVANT INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
(8) NOTES PAYABLE TO RELATED PARTIES
The following is a summary of notes payable to related parties at
March 31, 1999:
<TABLE>
<S> <C>
Notes payable to related parties bearing a fixed
rate of interest of 8%; interest and principal
due in quarterly installments including
principal of $400,000, beginning April 1, 1999;
final payment due January 1, 2002. These
notes are subordinate to the revolving line of
credit payable to Bank. $ 4,800,000
Less current maturities (1,600,000)
------------
Notes payable to related parties, net of current maturities $ 3,200,000
============
</TABLE>
(9) SUBSEQUENT EVENTS
On April 5, 1999, the Company signed a letter of intent to acquire
General Atronics Corporation ("GAC"), a privately-held technology defense
electronics company, for $11.0 million in cash and a $2.0 million note due
September 30, 2001, bearing interest at the rate of 7.5%. The Bank has
committed to increasing the Company's current revolving line of credit to
$24.0 million for purposes of financing this transaction. The acquisition,
which is subject to completion of certain due diligence by the Company and
the negotiation and execution of a definitive acquisition agreement, is
expected to be completed by July 1, 1999.
On April 12, 1999, the Company announced that it is calling for
redemption its redeemable common stock purchase warrants issued in
connection with its initial public offering in June 1996. On April 23, 1999,
the Company announced that it is also calling its redeemable common stock
purchase warrants issued in connection with its August 1995 private
placement financing. These redemptions will occur on June 8, 1999 at the
redemption price of $0.0167 per warrant. Warrant holders may exercise their
warrants at any time prior to the redemption date for an exercise price of
$2.00 per share.
15
<PAGE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results Of Operations
THREE MONTHS ENDED MARCH 31, 1999 VS. MARCH 31, 1998
Revenues for the quarter ended March 31, 1999 were $12,297,733, an increase
of $8,247,345 or 204% over the quarter ended March 31, 1998 revenues of
$4,050,388. This increase is primarily due to the addition of revenues from
acquired operations (See Note 2 of Condensed Consolidated Financial Statements),
which account for $10,007,432 of the 1999 revenues. The increase provided by the
acquisition is offset by a reduction in the computer systems business, which is
due primarily to timing of contracts, as well as changes in the composition of
the current backlog. For the fiscal year, production related to 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 are expected to be
comparable to sales last year; however, the majority of deliveries are scheduled
for the third and fourth quarters of fiscal 1999. Production of the U.S. Marine
Corps AVENGER Air Defense missile system upgrade for Raytheon will be
approximately half of the prior year's production and began delivery in the
second quarter of fiscal 1999. However, the decrease in the AVENGER program is
expected to be more than offset by a significant increase in sales of medical
computers starting in the third quarter and continuing into the next fiscal
year.
Gross profit was $7,311,353 for the quarter ended March 31, 1999 or 59% of
revenues, compared to $2,022,344 or 50% of revenues in the quarter ended March
31, 1998, a total increase of $5,289,009 or 262%. This increase in gross
profitability results primarily from the increased revenues contributed by the
acquired subsidiaries, which account for $6,344,541 of gross profits. The
increase provided by these subsidiaries is offset by a decrease in the computer
systems gross profit, which is due to the decrease in computer systems revenues.
Selling and administrative expenses of $3,669,023 in the quarter ended March
31, 1999 increased by $2,131,310 or 139% from the quarter ended March 31, 1998
expenses of $1,537,713. As a percentage of revenues, selling and administrative
expenses were 30% and 38% in the quarters ended March 31, 1999 and 1998,
respectively. The increased selling and administrative expenses are due
primarily to the addition of the acquired subsidiaries, which represent
$1,572,659 of the total increase. The remaining increase is due primarily to
amortization of goodwill and intangible assets.
Income from operations was $3,642,330 for the quarter ended March 31, 1999
compared to $484,631 in the quarter ended March 31, 1998, an improvement of
$3,157,699. As a percentage of revenues, income from operations increased to 30%
in the quarter ended March 31, 1999 from 12% in the quarter ended March 31,
1998. The improvement to income from operations overall resulted primarily from
increased revenues and gross profits associated with the acquired subsidiaries,
offset in part by a decrease in computer systems business and increased selling
and administrative expenses as discussed above.
Interest expense for the quarter ended March 31, 1999 was increased by
$234,630 to $239,728 compared to $5,098 in the quarter ended March 31, 1998. As
a percentage of revenues, interest expense increased to 2% in the quarter ended
March 31, 1999 from less than 0.1% in the quarter ended March 31, 1998. This
increase is due to an increase in outstanding credit balances required to
purchase and finance the acquired operations.
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The Company's net income improved by 525% to $2,068,156 or $0.16 diluted
earnings per share in the quarter ended March 31, 1999 compared to $331,169 or
$0.03 diluted earnings per share in 1998. Net income as a percentage of
revenues increased to 17% in the quarter ended March 31, 1999 from 8% in the
quarter ended March 31, 1998. The improvement in net income overall resulted
primarily from increased revenues and gross profits, offset in part by increased
selling and administrative expenses.
SIX MONTHS ENDED MARCH 31, 1999 VS. MARCH 31, 1998
Revenues for the six months ended March 31, 1999 were $20,780,026, an
increase of $13,131,673 or 172% over the six months ended March 31, 1998
revenues of $7,648,353. This increase is primarily due to the addition of
revenues from acquired operations, which account for $16,526,213 of the 1999
revenues. The increase provided by the acquisition is offset by a reduction in
the computer systems business, which is due primarily to timing of contracts, as
well as, changes in the composition of the current backlog. For the fiscal year,
production related to Lockheed Martin's EDNA systems for use by the U.S. Air
Force on F-16 Fighter Aircraft and the F-117A Stealth Fighter are expected to be
comparable to sales last year; however, the majority of deliveries are scheduled
for the third and fourth quarters of fiscal 1999. Production of the U.S. Marine
Corps AVENGER Air Defense missile system upgrade for Raytheon will be
approximately half of the prior year's production and began delivery in the
second quarter of fiscal 1999. However, the decrease in the AVENGER program is
expected to be more than offset by a significant increase in sales of medical
computers starting in the third quarter and continuing into the next fiscal
year.
Gross profit was $12,304,867 for the six months ended March 31, 1999 or 59%
of revenues, compared to $3,645,040 or 48% of revenues in the six months ended
March 31, 1998, a total increase of $8,659,827 or 238%. This increase in gross
profitability results primarily from the increased revenues contributed by the
acquired subsidiaries, which account for $10,319,071 of gross profits. The
increase provided by these subsidiaries is offset by a decrease in the computer
systems gross profit, which is due to the decrease in computer systems revenues.
Selling and administrative expenses of $6,931,482 in the six months ended
March 31, 1999, increased by $4,047,549 or 140% from the six months ended March
31, 1998 expenses of $2,883,933. As a percentage of revenues, selling and
administrative expenses were 33% and 38% in the six months ended March 31, 1999
and 1998, respectively. The increased selling and administrative expenses are
due primarily to the addition of the acquired subsidiaries, which represent
$2,911,673 of the total increase. The remaining increase is due primarily to
amortization of goodwill and intangible assets.
Income from operations was $5,373,385 for the six months ended March 31,
1999 compared to $761,107 in the six months ended March 31, 1998, an improvement
of $4,612,277. As a percentage of revenues, income from operations increased to
26% in the six months ended March 31, 1999 from 10% in the six months ended
March 31, 1998. The improvement to income from operations overall resulted
primarily from increased revenues and gross profits associated with the acquired
subsidiaries, offset in part by a decrease in computer systems business and
increased selling and administrative expenses as discussed above.
Interest expense for the six months ended March 31, 1999 was increased by
$475,211 to $486,672 compared to $11,461 in the six months ended March
31, 1998. As a percentage of revenues, interest expense increased to 2% in the
six months ended March 31, 1999 from less than 0.1% in the six months ended
March 31, 1998. This increase is due to an increase in outstanding credit
balances required to purchase and finance the acquired operations.
17
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<PAGE>
The Company's net income improved by 468% to $3,001,728 or $0.24 diluted
earnings per share in the six months ended March 31, 1999 compared to $528,328
or $0.05 diluted earnings per share in 1998. Net income as a percentage of
revenues increased to 14% for the six months ended March 31, 1999 from 7% in the
six months ended March 31, 1998. The improvement in net income overall resulted
primarily from increased revenues and gross profits, offset in part by increased
selling and administrative expense.
LIQUIDITY AND CAPITAL RESOURCES
The Company has floating rate financing with National City Bank (the "Bank")
in an amount up to $14,000,000 under a revolving line of credit with a maturity
date of December 31, 2001, convertible thereafter to five year term debt.
Pursuant to the loan agreement, the rate of interest is to be determined at a
rate equal to the Bank's prime rate, the federal funds or LIBOR rate plus a
margin which ranges from 1.5% to 2% based on the debt to tangible net worth
of the applicable LIBOR rate contract period. The Company may elect among the
rates based upon conditions on the dates upon which funds are drawn. The line of
credit is secured by a first security interest in accounts receivable, contract
rights, inventory, equipment and other security reasonably requested by the
lender. The loan agreement includes various loan covenants and restrictions of a
customary nature which may, under certain circumstances, limit the ability of
the Company to pay cash dividends, undertake additional acquisitions, make
certain changes in the Company's management, or otherwise limit obligations
undertaken by, or operations of, the Company. As of March 31, 1999, there was
$11,063,016 outstanding under this arrangement with the Bank.
As of April 16, 1999, the Bank committed to increasing the revolving line of
credit to $24,000,000 for purposes of financing the acquisition of General
Atronics Corporation ("GAC"). (See Note 9 of the Condensed Consolidated
Financial Statements for additional discussion.)
In addition, the Company has subordinated notes, payable to each of the
previous shareholders of Engineering Development Laboratories, Incorporated
("EDL") and Signal Technology Laboratories, Inc. ("STL"), aggregating
$4,800,000. These notes bear interest at 8%, are payable in quarterly payments
beginning April 1, 1999 and mature on January 1, 2002. These notes are
subordinate to the rights of the Bank.
The Company has 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 from
those from its other customers as a whole.
The Company's operating cash flow was $(3,189,098) and $1,343,571 for the
six months ended March 31, 1999 and 1998, respectively, and $2,049,678 for the
fiscal year ended September 30, 1998. The reduction in the Company's operating
cash flow results primarily from increases in amounts due from a related party,
contracts in progress and inventory for the six months ended March 31, 1999.
As of March 31, 1999, management believes inventory balances are not in
excess of requirements for deliveries and normal minimum stocking levels.
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Generally, accounts receivable at the end of each quarter are collected
within the following quarter. The Company's total outstanding accounts
receivable balance was $2,840,032 at March 31, 1999. The Company has provided a
reserve for certain older balances of $46,500. This reserve is believed to be
more than sufficient to address any uncollectible balances outstanding as of
March 31, 1999.
On June 3, 1998, the Company entered into a loan agreement with an officer
and director of the Company. The note receivable of $215,685 bears interest at
the rate of interest then applicable for borrowings by the Company under the
Company's then-existing line of credit or other primary lending arrangement with
its primary lender, with interest payable annually, and matures on June 3, 2003.
As of March 31, 1999 and 1998, the Company's backlog was approximately $18.8
million and $10.1 million, 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 currently expects to manufacture and deliver substantially all 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 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, such as
under the revolving line of credit, as previously described, 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.
YEAR 2000 COMPLIANCE
The Company recognizes that year 2000 issues could result in system failures
or miscalculations causing disruptions of operations, including, among others, a
temporary inability to process transactions, send invoices or engage in similar
normal business activities.
The Company has been engaged in an evaluation of its year 2000 readiness
concerning various aspects of its business. Specifically, the Company has
focused on its information technology and non-information technology systems. In
addition, the Company has analyzed its production processes and products. The
Company has also attempted to analyze year 2000 issues relating to third parties
with whom the Company has a business relationship. The current status of the
Company's efforts is as follows:
Information Technology Systems: The Company's accounting software
provider and operating system provider have advised the Company that
such software is year 2000 compliant.
Non-Information Technology Systems: Although the Company does not
believe that non-information technology systems are material to its
business, the Company has begun reviewing
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and testing such systems. The Company does not believe that it will
incur any material costs in connection with the review and testing of
such systems.
Products: The Company's products are date sensitive. Engineering has
already accomplished a review of Paravant products and has published a
list by product as to whether the product meets year 2000 readiness
requirements, or if not, what must be accomplished for the product to
meet these requirements. In these incidences, the worst case scenario
is the product operator would, after 0001 hours January 1, 2000, enter
the time and date into the product's set up and reboot the product.
Therefore, the Company does not believe it has any material exposure
with regard to its products as a result of the year 2000 issue.
Suppliers: Certain products purchased by the Company are obtained from
a limited group of suppliers. The Company surveyed such suppliers in
1998 regarding their year 2000 status. Absent widespread difficulties
affecting several major vendors, the Company does not anticipate that
vendors' year 2000 issues would have a material adverse effect on the
Company, because the Company believes alternative sources of supply are
available for al1 required components.
The Company is not currently aware of the year 2000 readiness of
certain outside services companies. Any adverse effect caused by the
failure of these providers to be year 2000 compliant is not currently
susceptible to quantification.
Customers: Because the customer base is expected to change from year to
year, the Company is unable to predict the identity of most of its
major customers in the year 2000 and thereafter. Accordingly, the
Company is unable to make an inquiry as to whether the customers'
computer driven payment or purchasing processes are year 2000
compliant. A customer's year 2000 issues could cause a delay in receipt
of purchase orders or in payment. If year 2000 issues are widespread
among the Company's customers, the Company's revenues and cash flow
could be materially affected. However, the Company has a plan in place,
through the contracts department, to mitigate the potential effects of
customers' year 2000 issues.
EDL-STL ACQUISITION
On October 8, 1998 the Company consummated a purchase business combination
(the "Acquisition"), effective October 1, 1998, of all of the outstanding
capital stock of EDL and substantially all of the assets of STL, EDL's
majority-owned subsidiary. The assets of STL were transferred to the newly
formed, wholly owned subsidiary, STL of Ohio Inc. ("STL of Ohio"). EDL and STL
were engaged in the business of designing, developing and producing equipment
to meet U.S. and foreign government requirements. EDL, whose primary customers
include the U.S. Air Force, U.S. Navy and U.S. Marines and allied military
forces, specializes in designing, developing and producing avionics equipment
used to modify the airborne platforms employed by Special Operations forces.
STL, whose customers include several U.S. government agencies and government
prime contractors, designed and produced digital signal processing hardware,
digital switch matrices for signal routing purposes, and other products for
signal enhancement and modification. Pursuant to the Acquisition Agreement the
Company paid an aggregate consideration consisting of (i) $8.7 million in cash,
(ii) three-year $4.8 million notes bearing interest at the rate of 8% and (iii)
3,950,000 shares of Common Stock. In connection with the Acquisition a
contingent cash earn-out will be payable by the Company under specified
circumstances over a period of up to five years based on combined future
profits of the acquired operations. The earn-out will be recorded as a current
expense the year it is earned. The cash
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portion of the consideration paid by the Company in connection with the
Acquisition was financed under the revolving line of credit, as previously
discussed.
In connection with the Acquisition, the Board of Directors increased the
size of the Board to eight members and appointed as additional members of the
Board three former shareholders and directors of EDL and STL. These directors
include Edward W. Stefanko, President and Chief Executive Officer of EDL, C.
Hyland Schooley, President of STL and James E. Clifford, Executive Vice
President and Chief Operating Officer of STL.
Mr. Clifford was a member of the Board of Directors from 1995 through
December 30, 1997. He resigned as a director to allow the negotiations for the
Acquisition to be conducted at arm's length. Although the negotiations began
prior to Mr. Clifford's resignation, he was excused from any discussion of the
Acquisition by the Board.
Consistent with the long range plans of the Board of Directors to further
diversify the business activities of the Company in the defense, communications
and related electronics industry, the Board recommended a change in the name of
the Company from Paravant Computer Systems, Inc. to Paravant Inc. The proposal
to change the name of the company was approved by the shareholders of the
Company on September 17, 1998 at a special meeting of the Company's
Shareholders. The name change was effective on November 1, 1998.
LEGAL PROCEEDING SETTLEMENT
In March 1996, the Company's former counsel, Cascone & Cole (the
"plaintiff'), rendered an invoice to the Company in the amount of approximately
$365,000 which was subsequently increased to approximately $415,000 for legal
fees and expenses to which such counsel claimed to be entitled in connection
with its representation of the Company for both general corporate services and
services relating to the Company's initial public offering. On December 21,
1998, the parties agreed to a settlement of this case in an amount of $200,000
cash, approximating the amount accrued on September 30, 1998, and the plaintiff
delivered to the Company a general release of liability. The settlement became
final following the filing with the court of a stipulation of discontinuance
with prejudice in January 1999.
SUBSEQUENT EVENTS
ACQUIRED BACKLOG RESOLUTION
In connection with the Acquisition, the Company's subsidiary, STL of Ohio,
and STL agreed that STL would place firm fixed price subcontracts with STL of
Ohio to complete the backlog of STL's contracts existing at the time of closing
of the Acquisition. On January 28, 1999, the Company was notified by STL that it
was disputing the backlog value of such contracts and the allocations of profits
obtained from fulfillment of such contracts. This dispute has been resolved with
no material adverse impact to the Company's operations.
GAC LETTER OF INTENT
On April 5, 1999, the Company signed a letter of intent to acquire GAC, a
privately-held technology defense electronics company, for $11.0 million in cash
and a $2.0 million note due September 30, 2001, bearing interest at the rate of
7.5%. The Bank has committed to increasing the Company's current
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revolving line of credit to $24.0 million for purposes of financing this
transaction. The acquisition, which is subject to completion of certain due
diligence by the Company and the negotiation and execution of a definitive
acquisition agreement, is expected to be completed by July 1, 1999.
WARRANT REDEMPTION
On April 12, 1999, the Company announced that it is calling for redemption
its redeemable common stock purchase warrants issued in connection with its
initial public offering in June 1996. On April 23, 1999, the Company announced
that it is also calling its redeemable common stock purchase warrants issued
in connection with its August 1995 private placement financing. These
redemptions will occur on June 8, 1999 at the redemption price of $0.0167 per
warrant. Warrant holders may exercise their warrants at any time prior to the
redemption date for an exercise price of $2.00 per share.
CAUTIONARY STATEMENT
This Quarterly Report on Form 10-QSB contains certain forward-looking
statements that involve a number of risks and uncertainties. Such
forward-looking statements are within the meaning of that term in Section 27A of
the Securities Act of 1933, as amended and Section 21E of the Securities Act of
1934, as amended. Factors that could cause actual results to differ materially
from those projected in such forward-looking statements include the following:
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. The words "believe," "estimate," "expect," "intend," "anticipate,"
"will," "could," "may," and similar expressions and variations thereof identify
certain of such forward-looking statements, which speak only as of the dates on
which they were made. The Company undertakes no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events, or otherwise. Readers are cautioned that any such forward-looking
statements are not guarantees of future performance and involve risks and
uncertainties, and that actual results may differ materially from those
indicated in the forward-looking statements as a result of various factors.
Readers are cautioned not to place undue reliance on these forward-looking
statements.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The information set forth under the caption "Legal Proceeding Settlement" in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" above is hereby incorporated by reference into this item.
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Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of the Shareholders of the Company (the "Annual Meeting")
was held on March 11, 1999. At the Annual Meeting, the shareholders of the
Company voted upon the election of eight directors, and all eight nominees were
elected, with the votes being cast as follows:
<TABLE>
<CAPTION>
Name Number of Votes For Number of Votes Withheld
---- ------------------- ------------------------
<S> <C> <C>
Krishan K. Joshi 12,055,750 33,947
Richard P. McNeight 12,055,450 34,247
William R. Craven 12,055,750 33,947
Michael F. Maguire 12,056,650 33,047
John P. Singleton 12,040,800 48,897
James E. Clifford 12,055,450 34.247
Edward W. Stefanko 12,054,950 34,727
C. Hyland Schooley 12,056,950 32,747
</TABLE>
No other director's term of office continued after the Annual Meeting.
In addition, the shareholders voted to approve an amendment to the Company's
Nonemployee Directors' Stock Option Plan to increase the total number of shares
which may be subject to options granted over the life of the plan by 90,000 to a
maximum of 225,000, increase from 7,500 to 10,000 the number of options granted
to each nonemployee director upon initial election or appointment and at each
annual meeting of the Board of Directors following the annual meeting of the
shareholders, and increase from 90 days to two years the period following the
termination of service as a director during which a former nonemployee director
may exercise options granted under the plan. 11,699,213 votes were cast for the
amendment, 324,064 votes were cast against the amendment, and 66,420 shares
abstained from voting.
These items were the only matters voted upon at the Annual Meeting.
Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBITS
The following exhibits are filed as part of this Quarterly Report on
Form 10-QSB:
<TABLE>
<S> <C>
3(i) Amended and Restated Articles of Incorporation.*
3(ii) Amended and Restated Bylaws.**
10.45 Non-employee Director's Stock Option Plan, as amended March 11, 1999.
10.46 Settlement Agreement and Release among Paravant Inc., Signal Technology
Laboratories, Inc. and shareholders of Signal Technology Laboratories,
Inc.
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>
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* Incorporated by reference from the Registrant's Annual Report on Form
10-KSB for the fiscal year ended September 30, 1998.
** Incorporated by reference from Exhibit 3.2 of the Registrant's Quarterly
Report on Form 10-QSB for the period ended June 30, 1996.
(b) REPORTS ON FORM 8-K:
No reports on Form 8-K were filed by Registrant during the quarter ended
March 31, 1999. However, Form 8-K dated April 5, 1999 was filed on April 21,
1999 reporting under Item 5 a letter of intent to acquire GAC.
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 INC.
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)
Date: May 4, 1999
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PARAVANT INC.
INDEX TO EXHIBITS FILED WITH FORM 10-QSB DATED MAY 4, 1999
<TABLE>
<CAPTION>
Exhibit Description of Exhibit
- ------- ----------------------
<S> <C>
3(i) Amended and Restated Articles of Incorporation.*
3(ii) Amended and Restated Bylaws.**
10.45 Non-employee Director's Stock Option Plan, as amended March 11, 1999.
10.46 Settlement Agreement and Release among Paravant Inc., Signal Technology
Laboratories, Inc. and shareholders of Signal Technology Laboratories,
Inc.
27 Financial Data Schedule.
</TABLE>
* Incorporated by reference from the Registrant's Annual Report on Form
10-KSB for the fiscal year ended September 30, 1998.
** Incorporated by reference from Exhibit 3.2 of the Registrant's Quarterly
Report on Form 10-QSB for the period ended June 30, 1996.
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Exhibit 10.45
PARAVANT INC.
NONEMPLOYEE DIRECTORS' STOCK OPTION PLAN
(AS AMENDED MARCH 12, 1998 AND MARCH 11, 1999)
1. ESTABLISHMENT. There is hereby established the Paravant Inc. Nonemployee
Directors' Stock Option Plan (the "Directors' Plan") pursuant to which certain
directors of Paravant Inc. (the "Corporation") may be granted options to
purchase shares of common stock, par value $0.015 par 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 225,000 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 the Directors' Plan whether or not
such Participant also serves as a member of the Committee.
<PAGE>
<PAGE>
(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 10,000 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 10,000 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 10,000 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
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<PAGE>
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 Corporation for any
reason other than death or disability, the Option (including any Option
outstanding as of March 11, 1999) shall terminate on the earlier to occur of (i)
the later of two (2) years after the date of termination of service or 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,
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<PAGE>
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 Corporation shall sell all or
substantially all of its assets, the Corporation 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 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 11, 1999, and is a continuation of the Plan originally
adopted by the Corporation on March 2, 1995 and amended on March 12, 1998.
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, and
29
<PAGE>
<PAGE>
further amended to increase the number of shares of Common Stock which may be
subject to Options to 225,000 shares and to make certain other changes as
ratified and approved by the stockholders of the Corporation on March 11, 1999.
30
<PAGE>
<PAGE>
Exhibit 10.46
PARAVANT INC.
SETTLEMENT AGREEMENT AND RELEASE
This Settlement Agreement and Release ("Agreement") is made and entered
into as of April 30, 1999, by and among Paravant Inc., a Florida corporation
("Paravant"), and Signal Technology Laboratories, Incorporated, an Ohio
corporation ("STL"), James E. Clifford ("Clifford"), Edward W. Stefanko
("Stefanko"), C. David Lambertson ("Lambertson"), C. Hyland Schooley
("Schooley"), Peter Oberbeck ("Oberbeck") and Leo S. Torresani ("Torresani")
(Clifford, Stefanko, Lambertson, Schooley, Oberbeck and Torresani are
collectively referred to herein as the "Shareholders"). Paravant, STL and the
Shareholders are collectively referred to herein as the "Parties".
BACKGROUND
Paravant, STL, the Shareholders and certain other parties entered into
an Acquisition Agreement dated as of March 31, 1998, as amended (the
"Acquisition Agreement") and a Closing Agreement dated as of October 1, 1998
(the "Closing Agreement"). The Parties have had a dispute under the Acquisition
Agreement and the Closing Agreement with respect to the size of the STL backlog
as of October 1, 1998 described in Section 2(i)(a) of the Closing Agreement and
certain other matters. The Parties desire to settle all such disputes upon the
terms and subject to the conditions described in this Agreement. Accordingly, in
consideration of the premises and the mutual promises, terms, and conditions
herein made, the Parties, intending to be legally bound, agree as follows:
TERMS
1. STL Backlog Determination. The Parties hereby agree that notwithstanding
any provisions of the Acquisition Agreement and the Closing Agreement that may
otherwise appear to be or be interpreted to be to the contrary, the STL backlog
as of October 1, 1998, as described in Section 2(i)(a) of the Closing Agreement,
shall be deemed by reason of this Agreement to be and have been $12,813,561 for
all purposes related to the Acquisition Agreement and the Closing Agreement and
for all other purposes, including but not limited to closing the transactions
contemplated by the Acquisition Agreement and the Closing Agreement and
determining the payment of and entitlement to the results of completion of such
backlog (notwithstanding the results determined in accordance with percentage of
completion accounting). The Parties acknowledge and agree that such STL backlog
amount shall be used to calculate the two percent (2%) discount retained by STL
pursuant to the Acquisition Agreement.
2. Release by STL and Shareholders. In exchange for the consideration set
forth herein, the receipt and sufficiency of which are hereby acknowledged, each
of STL and the Shareholders, on behalf of themselves, their heirs, legal
representatives, executors, administrators, successors, assigns, parent,
affiliated and subsidiary companies, and their officers, directors and
shareholders, do hereby remise, release, acquit and forever discharge Paravant,
its subsidiary and affiliated companies and their officers, directors,
shareholders, successors and assigns ("Releasees"), of and from any and all
actions and causes of action, suits, covenants, claims, contracts,
controversies, agreements, promises, liabilities,
31
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<PAGE>
obligations, guarantees, indemnities, variances, damages, debts, sums of money,
accounts, reckonings, bonds, bills, trespasses, executions, judgments, defenses
and demands whatsoever, whether the same be liquidated or unliquidated,
contingent or fixed, matured or unmatured, determined or undetermined, whether
past or present, whether the same be at law or in equity, and whether or not
well-founded in fact or in law, which each such Party, its heirs, legal
representatives, executors, administrators, successors, assigns, parent,
affiliated and subsidiary companies, and their officers, directors and
shareholders, ever had, now have or may have had against Releasees arising out
of or related to the Acquisition Agreement and the Closing Agreement and of
which such Party had knowledge prior to the date of this Agreement and which was
communicated to Paravant in writing by or on behalf of such Party, except that,
other than to the extent, if any, that the STL backlog determination may affect
the calculation of the Cash Earn-Out (as defined in the Acquisition Agreement),
such release shall not affect any rights of STL or the Shareholders (i) with
respect to the Cash Earn-Out and (ii) which have not accrued as of the date of
this Agreement, nor does this Agreement, except as set forth herein, waive or
alter any other rights and obligations of any Party set forth in the Acquisition
Agreement or the Closing Agreement.
3. Waiver of Notice and Meeting Participation by Board Members. Each of
Clifford, Stefanko and Schooley, in his capacity as a member of the Board of
Directors of Paravant, hereby waives notice of and the right to attend and
participate in the meeting of the Board of Directors held on March 30, 1999, at
which meeting the Board of Directors of Paravant authorized this Agreement.
4. Representations and Warranties of STL and Shareholders. Each of STL and
the Shareholders represents, warrants and agrees as follows:
(a) Such Party has the legal capacity to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby.
(b) The execution, delivery and performance by STL of this Agreement and any
related documents, and the consummation of the transactions contemplated hereby
and thereby, have been duly and validly authorized and approved by all necessary
corporate action of STL.
(c) This Agreement is valid and binding upon such Party and enforceable, in
accordance with its terms, against such Party, except to the extent that
enforcement thereof may be limited by applicable bankruptcy, reorganization,
insolvency or moratorium laws, or other laws affecting the enforcement of
creditors' rights or by the principles governing the availability of equitable
remedies.
(d) Such Party is not aware of any actions and causes of action, suits,
covenants, claims, contracts, controversies, agreements, promises, liabilities,
obligations, guarantees, indemnities, variances, damages, debts, sums of money,
accounts, reckonings, bonds, bills, trespasses, executions, judgments, defenses
and demands whatsoever that such Party ever had, now have or may have had
against Paravant, its subsidiary and affiliated companies and their officers,
directors, shareholders, successors and assigns arising out of or related to the
Acquisition Agreement and the Closing Agreement prior to the date of this
Agreement except as previously communicated in writing to Paravant by or on
behalf of such Party.
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<PAGE>
<PAGE>
5. Representations and Warranties of Paravant. Paravant represents, warrants
and agrees as follows:
(a) The execution, delivery and performance by Paravant of this Agreement
and any related documents, and the consummation of the transactions contemplated
hereby and thereby, have been duly and validly authorized and approved by all
necessary corporate action of Paravant.
(b) This Agreement is valid and binding upon Paravant and enforceable, in
accordance with its terms, against Paravant, except to the extent that
enforcement thereof may be limited by applicable bankruptcy, reorganization,
insolvency or moratorium laws, or other laws affecting the enforcement of
creditors' rights or by the principles governing the availability of equitable
remedies.
6. Dispute Resolution.
(a) Any claim or dispute between STL and/or the Shareholders on one side and
Paravant on the other side arising out of or in connection with this Agreement,
the Acquisition Agreement or the Closing Agreement or any alleged breach hereof
or thereof (a "Claim") (but specifically excluding any claim or dispute arising
out of or in connection with the promissory notes issued pursuant to the
Acquisition Agreement or the employment agreements entered into pursuant to the
Acquisition Agreement) shall be submitted in writing for resolution to the Chief
Executive Officer of Paravant and a representative designated by STL, who shall
exchange information within 15 business days of such submission and shall use
their best efforts to seek in good faith to negotiate a mutually acceptable
settlement, which shall include exchanges of written positions, basis and
documentation thereof, and face-to-face discussions with the stated intent to
resolve any such matters.
(b) Any Claim not settled by the Parties within 90 days after written notice
of the Claim is first given by any Party shall be finally settled by arbitration
under the Commercial Arbitration Rules (the "Rules") of the American Arbitration
Association ("AAA"), and judgment upon the award rendered in such arbitration
may be entered in any state or federal court of competent jurisdiction;
provided, however, that if a Party does not negotiate in good faith during such
90 day period, the other Party may request that such arbitration commence prior
to the expiration of such period, and the arbitrator shall not delay such
commencement if it determines that such Party failed to negotiate in good faith.
The arbitration shall be conducted in Atlanta, Georgia.
(c) The arbitration shall be conducted by a single arbitrator (the
"Arbitrator") to be selected by the Parties. If the Parties are unable to agree
on an Arbitrator, then each Party will select a representative within 15 days,
and those representatives shall select the Arbitrator within 15 days after their
appointment. For the purposes of this Section 6(c), STL and the Shareholders
shall be deemed a single Party. The Arbitrator shall be compensated at his or
her normal hourly or per diem rates for all time spent in connection with the
arbitration proceeding, and, pending final award, appropriate compensation and
expenses shall be advanced equally by the Parties.
(d) The Arbitrator shall determine the rights, remedies and obligations of
the parties according to the laws of the State of Florida. The Florida Rules of
Evidence and Civil Procedure shall apply to the arbitration hearing. The
pre-trial discovery procedures of Rule 26(a) and (f) of the Federal Rules of
Civil Procedure shall apply to the arbitration, with all disclosures to be made
within 30 days after the
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<PAGE>
<PAGE>
written notice of Claim is first given by any Party. All privileges recognized
by Florida law shall apply to the arbitration.
(e) The arbitration hearing shall be held not later than 120 days after the
appointment of the Arbitrator. The Arbitrator shall render the final award not
later than 20 days after the closing of the arbitration hearing. The Arbitrator
shall award to the prevailing party in such arbitration recovery of all of its
costs and expenses incurred in ascertaining, preparing to enforce and enforcing
such party's rights, including the arbitrator's compensation and the other
expenses of the arbitration, reasonable experts' fees and attorneys' fees, costs
and expenses; provided, however, that the Arbitrator may allocate any or all of
such costs and expenses among the Parties based on its consideration of their
good faith efforts to negotiate a settlement under Section 6(a) above.
(f) Except as required by law, all arbitration proceedings under this
Section 6 shall be confidential, and the Arbitrator may issue appropriate orders
to safeguard confidential information. Except as required by law or to permit a
court of competent jurisdiction to enter judgment upon the award rendered in the
arbitration, no Party shall make (or instruct the arbitrator to make) any public
announcement with respect to the proceedings or decision of any arbitration
without the consent of the other Parties.
(g) Notwithstanding anything to the contrary in this Section 6, any Party
may seek immediate injunctive or other interim relief or other equitable
remedies in any state or federal court of competent jurisdiction without resort
to arbitration as necessary to prevent breaches of this Agreement, the
Acquisition Agreement and the Closing Agreement and to enforce specifically this
Agreement, the Acquisition Agreement and the Closing Agreement, in addition to
any other remedy to which such Party may be entitled at law or in equity.
(h) Any Party may make service on the other Parties by sending or delivering
a copy of the process to the Party to be served in accordance with Section 8
below. Nothing in this Section 6(h) shall affect the right of any Party to serve
legal process in any other manner permitted by law or in equity. Each Party
agrees that a final judgment in any action or proceeding so brought shall be
conclusive and may be enforced by suit on the judgment or in any other manner
provided by law or in equity.
(i) Notwithstanding any other provision of this Section 6, in the event of
any claim or dispute between STL and/or the Shareholders on one side and
Paravant on the other side arising out of or in connection with the Cash
Earn-Out, the Parties agree that (A) to the extent that the amount of any Cash
Earn-Out is not in dispute, Paravant shall pay such amount pursuant to the terms
of the Acquisition Agreement without delay, and (B) any award by the Arbitrator
of the amount of the Cash Earn-Out in dispute to the Shareholders shall include
interest thereon through the date of payment at the prime rate published in the
Wall Street Journal.
7. Further Assurances. The Parties agree that, from time to time hereafter
and upon request, each of them will execute, acknowledge and deliver such other
instruments as may be reasonably required to more effectively carry out the
terms and conditions of this Agreement.
8. Notices. All notices or other communications in connection with this
Agreement shall be in writing and shall be considered given when personally
delivered or when mailed by registered or certified mail, postage prepaid,
return receipt requested, or when sent via overnight delivery,
34
<PAGE>
<PAGE>
commercial courier or telecopier, directed to the address of the Party as set
forth in the Acquisition Agreement.
9. Entire Agreement. This Agreement (which includes the schedules and
exhibits hereto) sets forth the Parties' final and entire agreement with respect
to its subject matter and supersedes any and all prior understandings and
agreements. This Agreement can be amended, supplemented, or changed, and any
provision hereof can be waived, only by a written instrument making specific
reference to this Agreement signed by the Party against whom enforcement of any
such amendment, supplement, change, or waiver is sought.
10. Successors. This Agreement shall be binding upon and shall inure to the
benefit of the Parties hereto and their respective heirs, executors,
administrators, personal representatives, successors, and assigns; provided,
however, that neither this Agreement nor any right or obligation hereunder may
be assigned or transferred without the prior written consent of the other
Parties.
11. Construction of Agreement. The section headings in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. When the context in which the words are used
in this Agreement indicates that such is the intent, words in the singular
number shall include the plural and vice versa. References to any gender shall
include any other gender that may be applicable in the circumstances. This
Agreement shall be construed without regard to any presumption or other rule
requiring construction against the Party causing this Agreement to be drafted.
12. Severability. If any provision of this Agreement shall be held by any
court of competent jurisdiction to be illegal, invalid, or unenforceable, such
provision shall be construed and enforced as if it had been more narrowly drawn
so as not to be illegal, invalid or unenforceable, and such illegality,
invalidity or unenforceability shall have no effect upon and shall not impair
the enforceability of any other provision of this Agreement.
13. Expenses. Each Party shall bear its own expenses in connection with the
negotiation and execution of this Agreement and the consummation of the
transactions contemplated by this Agreement, including, without limitation,
legal and accounting fees and expenses.
14. Counterparts. This Agreement may be executed in one or more
counterparts, each one of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Delivery of an executed
counterpart of this Agreement via telephone facsimile transmission shall be as
effective as delivery of a manually executed counterpart of this Agreement.
15. Governing Law. The validity, interpretation, and enforcement of this
Agreement, of the rights and obligations of the Parties hereto, and of the other
documents delivered in connection herewith shall be governed by, and construed
and interpreted in accordance with, the laws of the State of Florida, excluding
those laws relating to the resolution of conflicts between laws of different
jurisdictions.
16. Attorneys' Fees. In the event of litigation that relates to or arises
from this Agreement or any of the terms contained herein, the prevailing Party
shall be entitled to reimbursement by the non-prevailing Party(ies) for
attorneys' fees and costs, including fees and costs at the appellate level, that
were incurred by the prevailing Party.
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<PAGE>
17. Construction. As used herein, unless the context otherwise requires: (i)
references to "Article" or "Section" are to an article or section hereof; (ii)
all "Exhibits" and "Schedules" referred to herein are to Exhibits and schedules
attached hereto and are incorporated herein by reference and made a part hereof;
(iii) "include," "includes" and "including" are deemed to be followed by
"without limitation" whether or not they are in fact followed by such words or
words of like import; and (iv) the table of contents, captions and other
headings of the various articles, sections and other subdivisions hereof are for
convenience of reference only and shall not modify, define or limit, or affect
the interpretation of any of the terms, meaning or provisions hereof.
IN WITNESS WHEREOF, as of date first above written, the Parties have
duly executed this Agreement.
Paravant Inc.
By: /s/ William R. Craven
_________________________________
William R. Craven
Executive Vice President
Signal Technology Laboratories, Inc.
By: /s/ C. Hyland Schooley
_________________________________
C. Hyland Schooley, President
/s/ James E. Clifford
____________________________________
James E. Clifford
/s/ Edward W. Stefanko
____________________________________
Edward W. Stefanko
/s/ C. David Lambertson
____________________________________
C. David Lambertson
/s/ C. Hyland Schooley
____________________________________
C. Hyland Schooley
/s/ Peter Oberbeck
____________________________________
Peter Oberbeck
/s/ Leo S. Torresani
____________________________________
Leo S. Torresani
36
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET OF PARAVANT INC. AND SUBSIDIARIES AS OF MARCH 31, 1999 AND THE RELATED
STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> SEP-30-1999 SEP-30-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> MAR-31-1999 MAR-31-1998
<CASH> 310,131 2,909,848
<SECURITIES> 0 0
<RECEIVABLES> 2,840,032 2,971,344
<ALLOWANCES> 46,500 150,497
<INVENTORY> 13,367,816 3,497,473
<CURRENT-ASSETS> 19,160,765 9,729,638
<PP&E> 1,551,847 1,940,808
<DEPRECIATION> 1,096,154 1,056,937
<TOTAL-ASSETS> 40,191,300 11,766,498
<CURRENT-LIABILITIES> 6,389,146 2,642,077
<BONDS> 15,863,016 0
<COMMON> 184,500 122,249
0 0
0 0
<OTHER-SE> 15,905,735 8,876,484
<TOTAL-LIABILITY-AND-EQUITY> 40,191,300 11,766,497
<SALES> 12,297,733 4,050,388
<TOTAL-REVENUES> 12,297,733 4,050,388
<CGS> 4,986,380 2,028,044
<TOTAL-COSTS> 4,986,830 2,028,044
<OTHER-EXPENSES> 3,669,023 1,537,713
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 239,728 5,098
<INCOME-PRETAX> 3,418,439 505,298
<INCOME-TAX> 1,350,283 174,129
<INCOME-CONTINUING> 2,068,156 331,169
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,068,156 331,169
<EPS-PRIMARY> 0.168 0.041
<EPS-DILUTED> 0.155 0.029
</TABLE>
