<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: June 30, 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 August 4, 1999, there were outstanding 17,454,661 shares
of Common Stock, $.015 par value per share.
Transitional Small Business Disclosure Format (check one): [ ] Yes [X] No
<PAGE>
PARAVANT INC.
INDEX
<TABLE>
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheet - June 30, 1999...........................3
Condensed Consolidated Statements of Operations for the three
months ended June 30, 1999 and 1998.......................................5
Condensed Consolidated Statements of Operations for the nine
months ended June 30, 1999 and 1998.......................................6
Condensed Consolidated Statements of Cash Flows for the nine months
ended June 30, 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 2. Changes in Securities and Use of Proceeds............................22
Item 6. Exhibits and Reports on Form 8-K.....................................23
SIGNATURES....................................................................24
Index to Exhibits Filed with Form 10-QSB dated August __, 1999................25
</TABLE>
<PAGE>
PARAVANT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
ASSETS
<TABLE>
<CAPTION>
(Unaudited)
<S> <C>
Current assets:
Cash and cash equivalents $ 552,714
Accounts receivable 7,857,472
Amounts due from related party 67,192
Costs and estimated earnings in excess of billings on
uncompleted contracts 6,866,735
Inventory 6,038,426
Other current assets 806,262
-----------
Total current assets 22,188,801
-----------
Property, plant and equipment, net 1,707,120
Demonstration pool and custom molds, net 708,105
Employee note receivable 215,685
Other assets 860,369
Intangible assets, net 5,394,552
Goodwill, net 11,886,827
-----------
Total assets $42,961,459
===========
</TABLE>
See accompanying notes to condensed consolidated financial statements
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(Unaudited)
<S> <C>
Current liabilities:
Current maturities of notes payable to related parties $ 738,750
Current maturities of capital lease obligations 49,134
Accounts payable 3,478,544
Billings in excess of costs and estimated earnings on
uncompleted contracts 2,886,019
Accrued expenses 2,155,810
Income taxes payable 276,141
-----------
Total current liabilities 9,584,398
Notes payable to related parties, net of current maturities 1,723,750
Capital lease obligations, net of current maturities 112,930
Deferred revenue 54,180
Deferred compensation 381,523
Deferred income taxes, net 207,067
-----------
Total liabilities 12,063,848
-----------
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
17,437,069 shares 261,558
Additional paid-in capital 21,609,136
Retained earnings 9,026,917
-----------
Total stockholders' equity 30,897,611
-----------
Commitments and contingencies
Total liabilities and stockholders' equity $42,961,459
===========
</TABLE>
<PAGE>
PARAVANT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
(Unaudited)
<S> <C> <C>
Revenues $ 9,958,690 4,170,160
Cost of revenues 3,900,273 2,078,738
----------- ---------
Gross profit 6,058,417 2,091,422
Sales and marketing 615,426 533,346
Research, development & engineering 901,954 665,005
General and administrative 1,353,573 446,833
Amortization of goodwill and intangible assets 493,832 33,490
----------- ---------
Total selling and administrative expense 3,364,785 1,678,674
----------- ---------
Income from operations 2,693,632 412,748
Other income (expense):
Interest (203,315) (4,056)
Miscellaneous 60,496 22,768
----------- ---------
Income before income taxes 2,550,814 431,460
Income tax expense 1,007,571 147,688
----------- ---------
Net income $ 1,543,242 283,772
=========== =========
Basic earnings per share $ .11 .03
=========== =========
Diluted earnings per share $ .11 .03
=========== =========
Weighted average number of common shares outstanding 13,837,059 8,281,882
=========== =========
Weighted average number of common shares and dilutive
potential common shares outstanding 14,384,143 11,410,060
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
PARAVANT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
(Unaudited)
<S> <C> <C>
Revenues $ 30,738,716 11,818,513
Cost of revenues 12,375,784 6,081,979
------------ ------------
Gross profit 18,362,932 5,736,534
Sales and marketing 1,640,030 1,697,335
Research, development & engineering 2,805,969 1,450,249
General and administrative 4,376,601 1,339,755
Amortization of goodwill and intangible assets 1,473,667 75,340
------------ ------------
Total selling and administrative expense 10,296,267 4,562,679
------------ ------------
Income from operations 8,066,665 1,173,855
Other income (expense):
Interest (689,988) (15,517)
Miscellaneous 135,670 76,419
------------ ------------
Income before income taxes 7,512,347 1,234,757
Income tax expense 2,967,377 422,657
------------ ------------
Net income $ 4,544,970 812,100
============ ============
Basic earnings per share $ .36 .10
============ ============
Diluted earnings per share $ .34 .07
============ ============
Weighted average number of common shares outstanding 12,796,423 8,117,302
============ ============
Weighted average number of common shares and dilutive
potential common shares outstanding 13,213,631 10,973,091
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
PARAVANT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1999 AND 1998
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<CAPTION>
1999 1998
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,544,970 812,100
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,990,368 355,275
Increase (decrease) in cash caused by changes in:
Accounts receivable (3,451,907) 1,150,098
Amounts due from related party (67,192) --
Contracts in progress (2,523,253) --
Inventory (2,661,707) 71,032
Other assets (12,181) (662,144)
Accounts payable 2,982,584 51,406
Accrued expenses (203,577) (102,514)
Deferred revenue 32,146 --
Deferred compensation 381,523 --
Income taxes payable (446,170) 50,136
----------- -----------
Net cash provided by operating activities 565,604 1,725,389
----------- -----------
Cash flows from investing activities:
Payments for acquired subsidiaries, net of cash acquired (9,003,843) --
Issuance of employee note receivable -- (215,685)
Acquisitions of property, plant and equipment (512,536) (238,587)
Acquisitions of demonstration pool and custom molds -- (46,668)
Payment of EDL acquisition costs -- (514,524)
Proceeds from collection of note receivable 750,000 --
----------- -----------
Net cash used in investing activities (8,766,379) (1,015,464)
----------- -----------
</TABLE>
(Continued)
<PAGE>
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) --
Proceeds on revolving line of credit 20,374,181 --
Repayments on revolving line of credit (20,374,181)
Repayments on long-term debt (2,346,647) (82,503)
Repayments on capital lease obligations (54,536) (94,679)
Proceeds from issuance of common stock 13,020 158,580
Proceeds from exercise of warrants 10,251,874 261,521
Payments for redemption of warrants (570)
Stock registration fees (22,440) --
Payments for retirement of underwriters' warrants (50,000) --
------------ ------------
Net cash provided by financing activities 7,565,701 242,919
------------ ------------
Net increase (decrease) in cash and cash equivalents (635,074) 952,844
Cash and cash equivalents at beginning of the period 1,187,788 1,612,627
------------ ------------
Cash and cash equivalents at end of the period $ 552,714 2,565,471
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 699,560 15,929
============ ============
Income taxes $ 2,779,650 539,598
============ ============
</TABLE>
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 nine months
ended June 30, 1999
See accompanying notes to condensed consolidated financial statements.
<PAGE>
PARAVANT INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 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 sale
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 that 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.
<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) COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board (`FASB") issued
SFAS 130, "Reporting Comprehensive Income," which established standards for
reporting and display of comprehensive income and its components. This
statement requires a separate statement to report the components of
comprehensive income for each period reported. The provisions of this
statement were effective for fiscal years beginning after December 15,
1997. The Company has no components of comprehensive income and therefore
does not require a separate statement of disclosure.
<PAGE>
(h) FUTURE APPLICATION OF ACCOUNTING STANDARDS
In June 1997, the FASB issued SFAS 131, "Disclosures About Segments of
an Enterprise and Related Information." The standard requires that
companies disclose "operating segments" based on the way management
disaggregates the company for making internal operating decisions. The new
rules will be effective for the 1999 fiscal year. Abbreviated quarterly
disclosure will be required beginning first quarter of fiscal 2000, with
both 2000 and 1999 information. The Company does not believe that the new
standard will have a material impact on the reporting of its segments.
(i) BASIC AND DILUTED EARNINGS PER SHARE
Basic earnings per share for the three and nine months ended June 30,
1999 and 1998 have been computed by dividing net income by the weighted
average number of common shares outstanding. Diluted earnings per share for
the three and nine months ended June 30, 1999 and 1998 have been computed
by dividing net income by the weighted average number of common shares and
dilutive potential common shares outstanding.
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 June 30
---------------------------------
1999 1998
---- ----
<S> <C> <C>
Basic:
Weighted average number of common
shares outstanding 13,837,059 8,281,882
=========== ==========
Diluted:
Weighted average number of common
shares outstanding 13,837,059 8,281,882
Dilutive stock options 529,079 517,938
Dilutive warrants 18,005 2,610,240
----------- -----------
14,384,143 11,410,060
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Nine months Ended June 30
--------------------------------
1999 1998
---- ----
<S> <C> <C>
Basic:
Weighted average number of common
shares outstanding 12,796,423 8,117,302
=========== ===========
Diluted:
Weighted average number of common
shares outstanding 12,796,423 8,117,302
Dilutive stock options 411,691 501,641
Dilutive warrants 5,518 2,354,148
----------- -----------
13,213,631 10,973,091
=========== ===========
</TABLE>
<PAGE>
Options and warrants to purchase 670,100 and 628,750 shares of common
stock were excluded from the calculation of diluted earnings per share for
the three months ended June 30, 1999 and 1998, respectively, because their
exercise prices exceeded the average market price of common shares for the
period. Options and warrants to purchase 770,100 and 643,750 shares of
common stock were excluded from the calculation of diluted earnings per
share for the nine months ended June 30, 1999 and 1998, respectively,
because their exercise prices exceeded the average market price of common
shares for the periods.
(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 unaudited 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 June 30
--------------------------
1999 1998
---- ----
(Unaudited)
<S> <C> <C>
Net revenues $9,958,690 11,543,299
=========== ==========
Net income $1,543,242 2,184,008
=========== ===========
Basic earnings per share $ .11 .18
=========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nine months Ended June 30
-------------------------
1999 1998
---- ----
(Unaudited)
<S> <C> <C>
Net revenues $30,738,716 40,805,559
=========== ===========
Net income $ 4,544,970 8,548,150
=========== ===========
Basic earnings per share $ .36 .71
=========== ===========
</TABLE>
(3) COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Contracts in progress and advance billings on such contracts consist of
the following as of June 30, 1999:
<TABLE>
<S> <C>
Costs incurred on uncompleted contracts $ 12,797,076
Estimated earnings thereon 11,798,294
------------
24,595,370
Billings to date (20,614,654)
------------
$ 3,980,716
============
</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 $ 6,866,735
Billings in excess of costs and estimated earnings
on uncompleted contracts (2,886,019)
-----------
$ 3,980,716
===========
</TABLE>
(4) INVENTORY
The following is a summary of inventory at June 30, 1999:
<TABLE>
<S> <C>
Raw materials $5,024,707
Work in process 1,077,530
Finished goods 348,182
----------
6,450,419
Reserve for obsolete inventory (411,993)
----------
$6,038,426
==========
</TABLE>
<PAGE>
(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 June 30,
1999 are as follows:
<TABLE>
<S> <C>
Cost $6,169,750
Accumulated amortization (775,199)
----------
$5,394,551
==========
</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 June 30, 1999 are as
follows:
<TABLE>
<S> <C>
Cost $12,842,796
Accumulated amortization (955,969)
-----------
$11,886,827
===========
</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 June 30, 1999,
there were no borrowings outstanding under this line of credit.
<PAGE>
(8) NOTES PAYABLE TO RELATED PARTIES
The following is a summary of notes payable to related parties at June
30, 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 $2,462,500
Less current maturities (738,750)
----------
Notes payable to related parties, net of current maturities $1,723,750
==========
</TABLE>
(9) WARRANT REDEMPTION
On April 12, 1999, the Company called for redemption of its redeemable
common stock purchase warrants issued in connection with its initial public
offering in June 1996. On April 23, 1999, the Company called for redemption
of its redeemable common stock purchase warrants issued in connection with
its August 1995 private placement offering. The redemption date for these
warrants was June 8, 1999, and the redemption price was $0.0167 per
warrant; the exercise price was $2.00 per share of common stock. Prior to
the redemption date, a total of 5,125,837 warrants were exercised,
resulting in proceeds to the Company of $10,251,674 and increasing the
number of shares of common stock outstanding to 17,437,069 as of June 30.
The Company has used the net proceeds it has received from the exercise of
the warrants (1) to reduce the indebtedness owed to the former shareholders
of EDL and STL (including Messrs. Stefanko, Clifford and Schooley,
directors of the Company) under promissory notes issued to them in
connection with the October 1998 acquisition of EDL and STL as required by
the acquisition agreement, and (2) to repay all indebtedness to the Bank
under the revolving line of credit.
(10) THIRD QUARTER RESULTS
An adjustment was made to increase cost of sales during the three
months ended June 30, 1999, in the amount of approximately $327,000 of
which approximately $198,000 related to the first and second quarters of
fiscal 1999, in the amounts of approximately $99,000 for each of the prior
quarters. This adjustment was made to correct the rate of overhead
absorption and results in the cost of sales being understated in the three
months ended December 31, 1998 and March 31, 1999 and overstated in the
three months ended June 30, 1999. The net effect of this adjustment for the
nine months ended June 30, 1999 is $0.
<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 JUNE 30, 1999 VS. JUNE 30, 1998
Revenues for the quarter ended June 30, 1999 were $9,958,690, an increase
of $5,788,530 or 139% over the quarter ended June 30, 1998 revenues of
$4,170,160. This increase is primarily due to the addition of revenues from
acquired operations (See Note 2 of Condensed Consolidated Financial Statements).
The increase provided by the acquisition is offset in part 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. As previously
reported, the timing of computer systems deliveries is heavily weighted in the
fourth quarter.
Gross profit was $6,058,417 for the quarter ended June 30, 1999 or 61% of
revenues, compared to $2,091,422 or 50% of revenues in the quarter ended June
30, 1998, a total increase of $3,966,995 or 190%. This increase in gross
profitability results primarily from the increased revenues contributed by the
acquired subsidiaries, which account for $5,396,707 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 $3,364,785 in the quarter ended June
30, 1999 increased by $1,686,111 or 100% from the quarter ended June 30, 1998
expenses of $1,678,674. As a percentage of revenues, selling and administrative
expenses were 34% and 40% in the quarters ended June 30, 1999 and 1998,
respectively. The increased selling and administrative expenses are due
primarily to the addition of the acquired subsidiaries, which represent
$1,406,171 of the total increase. The remaining increase is due primarily to
amortization of goodwill and intangible assets.
Income from operations was $2,693,632 for the quarter ended June 30, 1999
compared to $412,748 in the quarter ended June 30, 1998, an improvement of
$2,280,884. As a percentage of revenues, income from operations increased to 27%
in the quarter ended June 30, 1999 from 10% in the quarter ended June 30, 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 June 30, 1999 was increased by
$199,259 to $203,315 compared to $4,056 in the quarter ended June 30, 1998. As a
percentage of revenues, interest expense increased to 2% in the quarter ended
June 30, 1999 from less than 0.1% in the quarter ended June 30, 1998. This
increase is due to an increase in outstanding credit balances required to
purchase and finance the acquired operations.
The Company's net income improved by 444% to $1,543,242 or $0.11 diluted
earnings per share in the quarter ended June 30, 1999 compared to $283,772 or
$0.03 diluted earnings per share in 1998. Net income as a percentage of revenues
increased to 15% in the quarter ended June 30, 1999 from 7% in the quarter ended
June 30, 1998. The improvement in net income overall resulted primarily from
increased revenues and gross profits, offset in part by increased selling and
administrative expenses.
<PAGE>
NINE MONTHS ENDED JUNE 30, 1999 VS. JUNE 30, 1998
Revenues for the nine months ended June 30, 1999 were $30,738,716, an
increase of $18,920,203 or 160% over the nine months ended June 30, 1998
revenues of $11,818,513. This increase is primarily due to the addition of
revenues from acquired operations. The increase provided by the acquisition is
offset in part 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. As previously reported, the timing of computer systems
deliveries is heavily weighted in the fourth quarter.
Gross profit was $18,362,932 for the nine months ended June 30, 1999 or 60%
of revenues, compared to $5,738,534 or 49% of revenues in the nine months ended
June 30, 1998, a total increase of $12,626,398 or 220%. This increase in gross
profitability results primarily from the increased revenues contributed by the
acquired subsidiaries, which account for $15,715,426 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 $10,296,267 in the nine months ended
June 30, 1999, increased by $5,733,588 or 126% from the nine months ended June
30, 1998 expenses of $4,562,679. As a percentage of revenues, selling and
administrative expenses were 33% and 39% in the nine months ended June 30, 1999
and 1998, respectively. The increased selling and administrative expenses are
due primarily to the addition of the acquired subsidiaries, which represent
$4,317,844 of the total increase. The remaining increase is due primarily to
amortization of goodwill and intangible assets.
Income from operations was $8,066,665 for the nine months ended June 30,
1999 compared to $1,173,855 in the nine months ended June 30, 1998, an
improvement of $6,892,811. As a percentage of revenues, income from operations
increased to 26% in the nine months ended June 30, 1999 from 10% in the nine
months ended June 30, 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 nine months ended June 30, 1999 was increased by
$674,471 to $689,988 compared to $15,517 in the nine months ended June 30, 1998.
As a percentage of revenues, interest expense increased to 2% in the nine months
ended June 30, 1999 from less than 0.1% in the nine months ended June 30, 1998.
This increase is due to an increase in outstanding credit balances required to
purchase and finance the acquired operations.
The Company's net income improved by 460% to $4,544,970 or $0.34 diluted
earnings per share in the nine months ended June 30, 1999 compared to $812,100
or $0.07 diluted earnings per share in 1998. Net income as a percentage of
revenues increased to 15% for the nine months ended June 30, 1999 from 7% in the
nine months ended June 30, 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 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
<PAGE>
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. 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 June 30, 1999, there were no borrowings
outstanding under this arrangement with the Bank.
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
$2,462,500, as of June 30, 1999. These notes bear interest at 8%, are payable in
quarterly payments which began April 1, 1999 and mature on January 1, 2002.
These notes are subordinate to the rights of the Bank.
On April 12, 1999, the Company called for redemption of its redeemable
common stock purchase warrants issued in connection with its initial public
offering in June 1996. On April 23, 1999, the Company called for redemption of
its redeemable common stock purchase warrants issued in connection with its
August 1995 private placement offering. The redemption date for these warrants
was June 8, 1999, and the redemption price was $0.0167 per warrant; the exercise
price was $2.00 per share of common stock. Prior to the redemption date, a total
of 5,125,837 warrants were exercised, resulting in proceeds to the Company of
$10,251,674 and increasing the number of shares of common stock outstanding to
17,437,069 as of June 30. The Company has used the net proceeds it has received
from the exercise of the warrants (1) to reduce the indebtedness owed to the
former shareholders of EDL and STL (including Messrs. Stefanko, Clifford and
Schooley, directors of the Company) under promissory notes issued to them in
connection with the October 1998 acquisition of EDL and STL as required by the
acquisition agreement, and (2) to repay all indebtedness to the Bank under the
revolving line of credit. The remainder of the net proceeds from the exercise of
the warrants are being used for general corporate purposes, including working
capital requirements. The Company may also use a portion of these proceeds to
fund growth through acquisition; however, no plans or agreements for any
acquisitions exist at this time.
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 $565,604 and $1,725,389 for the nine
months ended June 30, 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 accounts receivable, contracts in
progress and inventory, offset by an increase in accounts payable for the nine
months ended June 30, 1999.
As of June 30, 1999, management believes inventory balances are not in
excess of requirements for deliveries and normal minimum stocking levels.
<PAGE>
Generally, accounts receivable at the end of each quarter are collected
within the following quarter. The Company's total outstanding accounts
receivable balance of $7,857,472 at June 30, 1999 has been subsequently reduced
by approximately $5,200,000 in cash collections. 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
June 30, 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 June 30, 1999 and 1998, the Company's backlog was approximately $15.5
million and $9.4 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 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.
<PAGE>
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, and 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.
Outside Services: 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 portion of the consideration paid by the Company
in connection with the Acquisition was financed under the revolving line of
credit, as previously discussed.
<PAGE>
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.
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 2. Changes in Securities and Use of Proceeds
On April 12, 1999, the Company called for redemption of its redeemable
common stock purchase warrants issued in connection with its initial public
offering in June 1996. On April 23, 1999, the Company called for redemption
of its redeemable common stock purchase warrants issued in connection with
its August 1995 private placement offering. The redemption date for these
warrants was June 8, 1999, and the redemption price was $0.0167 per
warrant; the exercise price was $2.00 per share of common stock. Prior to
the redemption date, a total of 5,125,837 warrants were exercised,
resulting in proceeds to the Company of $10,251,674 and increasing the
number of shares of common stock outstanding to 17,437,069 as of June 30.
The common stock issued upon exercise of the warrants was registered
pursuant to registration statements filed on October 20, 1997 (File No.
333-
<PAGE>
38279) and September 25, 1998 (File No. 333-64341). There was no
underwriter with respect to the issuance of the common stock upon the
exercise of the warrants. Total expenses incurred in connection with the
exercise of the warrants during the quarter ended June 30, 1999, was
approximately $7,800, resulting in net proceeds to the Company of
$10,251,674.
The Company has used the net proceeds it has received from the exercise
of the warrants as follows:
$1,537,500 to reduce the indebtedness owed to the former
shareholders of EDL and STL (including Messrs. Stefanko, Clifford
and Schooley, directors of the Company) under promissory notes
issued to them in connection with the October 1998 acquisition of
EDL and STL as required by the acquisition agreement; and
$8,706,374 to repay all indebtedness to the Bank under the
revolving line of credit.
The remainder of the net proceeds from the exercise of the warrants are
being used for general corporate purposes, including working capital
requirements. The Company may also use a portion of these proceeds to fund
growth through acquisition; however, no plans or agreements for any acquisitions
exist at this time.
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.*
4.2 Amended and Restated Bylaws.**
10.3B Incentive Stock Option Plan, as amended June 4, 1999.
10.47 Employment Agreement between Paravant Inc. and Richard P. McNeight.
10.48 Employment Agreement between Paravant Inc. and Kevin J. Bartczak.
10.49 Employment Agreement between Paravant Computer Systems, Inc. and William R. Craven.
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.
* 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 4.2 of the Registrant's Registration Statement on
Form S-3 dated July 9, 1999.
</TABLE>
<PAGE>
(b) REPORTS ON FORM 8-K:
Form 8-K dated April 5, 1999 was filed on April 21, 1999 reporting
under Item 5 a letter of intent to acquire GAC.
Form 8-K dated June 3, 1999 was filed on June 3, 1999 reporting under
Item 5 a mutual agreement to terminate discussions regarding the
acquisition of 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: August 4, 1999
<PAGE>
PARAVANT INC.
INDEX TO EXHIBITS FILED WITH FORM 10-QSB DATED AUGUST 4, 1999
<TABLE>
<CAPTION>
Exhibit Description of Exhibit
- ------- ----------------------
<S> <C>
3(i) Amended and Restated Articles of Incorporation.*
4.2 Amended and Restated Bylaws.**
10.3B Incentive Stock Option Plan, as amended June 4, 1999.
10.47 Employment Agreement between Paravant Inc. and Richard P. McNeight.
10.48 Employment Agreement between Paravant Inc. and Kevin J. Bartczak.
10.49 Employment Agreement between Paravant Computer Systems, Inc. and William R. Craven.
27 Financial Data Schedule.
* 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 4.2 of the Registrant's Registration Statement
on S-3 dated July 9, 1999.
</TABLE>
<PAGE>
EXHIBIT 10.3B
INCENTIVE STOCK OPTION PLAN
OF
PARAVANT INC.
(FORMERLY KNOWN AS PARAVANT COMPUTER SYSTEMS, INC.)
(AS AMENDED MARCH 12, 1998 AND JUNE 4, 1999)
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 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.
<PAGE>
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.
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
<PAGE>
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 paid in full in cash or by
check, by delivery of shares of Common Stock then owned by the Optionee
with a fair market value at the time of the exercise of the Option equal to
the Option price, or by a combination thereof; provided, however, that no
Optionee may exercise Options to purchase more than 10,000 shares during
any one-year period by delivery of shares of Common Stock then owned by
such Optionee with a fair market value at the time of exercise of the
Option equal to the Option price unless approved by the Board of Directors.
(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 thirty (30) days following 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.
(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
<PAGE>
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.
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
<PAGE>
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.
6. TERM OF PLAN
<PAGE>
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, expect
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
<PAGE>
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, and as further amended by the Board of
Directors of the Corporation on June 4, 1999.
<PAGE>
EXHIBIT 10.47
EMPLOYMENT AGREEMENT
This AGREEMENT is made and entered into as of the 1st day of January 1999, by
and between PARAVANT INC., a Florida corporation (the "Company") and
RICHARD P. McNEIGHT, (the "Employee").
WHEREAS, the Company desires to obtain the benefit of the services of the
Employee, and the Employee desires to render such services on the terms and
conditions hereinafter set forth; and,
WHEREAS, the Company and the Employee desire to provide limited protection of
the Employee's employment in the event of a change in ownership of the
Company by virtue of a sale, merger by the Company into, or the combination
with, another corporation or other form of takeover wherein the new
ownership may terminate the employee without cause.
NOW, THEREFORE, the Parties hereto, in consideration of the premises and the
mutual covenants herein contained, hereby agree as follows:
1. Termination of Prior Agreement. Upon the execution of this Agreement, all
prior employment agreements between the Employee, and the Company or any of
its affiliates, subsidiaries, and predecessor constituent corporations are
terminated and of no further force and effect.
2. Term of Employment. Subject to the terms and conditions hereinafter set
forth, the Company hereby enters into the employment of the Employee, or
any of subsidiary or affiliate of the Company, as the Company shall, from
time to time, select, for an employment term commencing on the date of
execution of this Agreement and terminating on 31 December 2001. The period
during which the Employee is employed pursuant to this Agreement is
hereinafter called the "Term of Employment." The Term of Employment will
normally be submitted to the Board of Directors, at the first board meeting
each fiscal year, for the succeeding calendar year, for review and updates
of terms and conditions.
3. Scope of Employment. During the Term of Employment, the Employee shall be
employed as an officer of the Company with duties and responsibilities
commensurate with those of President of Paravant Computer Systems Business
Unit. In addition, the Employee shall well and faithfully render and
perform such other executive and managerial services, as may be assigned to
him, from time to time, by or under the authority of the Board of Directors
of the Company or of any subsidiary or affiliate of the Company. The
Employee's duties and responsibilities must regularly be performed in
Melbourne, Florida or within a 25-mile radius thereof. The Employee will
devote his full time and efforts to the business and affairs of the
Company, or such subsidiary, or affiliate as now or hereafter conducted,
and shall be at all times subject to the direction and control of the Board
of Directors of the Company or such subsidiary or affiliate. The Employee
shall render such services that are in accordance with his utmost abilities
and shall use his best efforts to promote the interests of the Company and
subsidiaries and affiliates. The Employee will not engage in any capacity
or activity which is, or may be, contrary to the welfare, interest or
benefit of the business now or hereafter conducted by the Company and its
subsidiaries and affiliates.
<PAGE>
4. Compensation. As full compensation for all services provided for herein,
including without limiting the generality of the foregoing, all services to
be rendered by the Employee as an officer or director of the Company or of
any subsidiary or affiliate of the Company, the Company will pay, cause to
be paid, to the Employee, and the Employee will accept, a salary, during
the Term of Employment, at a minimum annual rate of One Hundred Eighty-one
Thousand and Six Hundred and Eighty Dollars ($181,680) to be paid in
regular installments in accordance with the Company's usual paying
practices. Such payments will be subjected to such deductions by the
Company as the Company is from time to time required to make pursuant to
law, government regulations or order or by agreement with, or consent of,
the Employee. The Board of Directors shall have the authority to increase
the Employee's salary, at its discretion from time to time, and the Board
of Directors also shall have the authority to enhance any bonus or other
forms of compensation to the Employee
5. Expenses. The Employee shall be entitled to reimbursement by the Company
for reasonable expenses actually incurred by him on its behalf in the
course of his employment by the Company, upon the presentation by the
Employee, from time to time, of an itemized account of such expenditures,
together with such vouchers and other receipts as the Company may request.
6. Vacation. The Employee shall be entitled to vacations in accordance with
the Company's prevailing policy for its operating executives.
7. Benefits. The Employee shall be entitled to participate in all group life
insurance, medical and hospitalization plans, and pension, stock option and
profit sharing plans as are presently being offered by the Company or which
may hereafter during the Term of Employment be offered by the Company
generally to its operating executives
8. Payments on Death or Disability. In the event that the Employee shall die
or become disabled during the Term of Employment or any renewal thereof,
the Company shall pay to his heirs in the case of his death, or to him or
his guardian, in case of his disability, a lump sum payment equal to 12
months of compensation due to him at that time hereunder or equal monthly
installments covering such 12 months compensation at the discretion of the
Employee, his or her guardian, whatever the case may be. For purposes of
this Agreement, disability of the Employee shall have occurred if (a) the
Employee shall become physically or mentally incapable of properly
performing his services to the Company as provided hereunder excluding
infrequent and temporary absences due to ordinary illnesses, (b) such
incapacity shall exist or be reasonably expected to exist for more than 90
days in the aggregate during any 12 consecutive months covered hereunder or
in any renewals hereof, and (c) either the Employee or the Company shall
have given the other 30 days written notice of his or its intention to
terminate the Employee's active employment by the Company due to such
disability. For purposes of this Agreement, the Employee shall on or
immediately after executing this Agreement provide the Company with a
written list of his heirs in order of preference regarding death payment
benefits hereunder. This list may be altered and changed from time to time
by the Employee by giving written notice of such changes or new list
thereof to the Company as provided herein.
9. Severance. In the event that the Employee's employment with the Company is
terminated thereby 'without cause,' which includes any Company or Board
action contrary to the
<PAGE>
Employee's scope of employment as set forth in Paragraph 3, during the Term
thereof, the Employee shall be entitled to, as severance hereunder, two
year's full salary, and the Employee shall also be entitled to 12 months
benefits as provided for and paid out in the manner specified herein.
Termination for cause shall include Employee's failure to perform his
duties hereunder, his conviction of a felony, alcoholism, illegal drug
abuse, violations of corporate or securities laws or similar infractions.
10. Vesting of Benefits etc. Upon the effective termination date of the
Executive's employment: (a) by the Company without Cause (Paragraph 9), (b)
due to Disability (Paragraph 8), or (c) in the case of Change of Control
(Paragraph 15):
(1) The Executive shall become vested immediately in any unvested stock
options (other than incentive stock options under a "qualified" plan)
that the Executive may have at the time of his termination; and must
exercise all stock options within 90 days of termination or forfeit
either all unexercised options;
(2) To the extent, and only to the extent, that the same is permitted by
law without thereby disqualifying any plan of the Company or an
affiliate that is a "qualified" plan under the Internal Revenue Code or
that otherwise enjoys or provides tax benefits to employees under the
Internal Revenue Code, the Executive shall become vested immediately in
any and all other benefits under each and every benefit plan of the
Company or any affiliate and in which the Executive, at the time of his
termination, had unvested benefits.
(3) The company will indemnify and defend the Executive in the same manner
and to the same degree as if he was an employee, executive, officer and
director of the Company, for all litigation or other actions brought
against the Executive originating as a result of association of the
Executive with the Company, including but not limited to all claims,
liability, damage, loss, expense, attorneys' fees, court costs,
judgements, settlements, fines, etc.
11. Covenant not to Compete. During the Term of Employment and for a period of
two (2) years after the Term of Employment, the Employee shall not engage,
directly or indirectly, within the United States in any business engaged in
the design, development, manufacture and sale of rugged computers. For the
purpose of this paragraph, the Employee will be deemed, directly or
indirectly, engaged in a business if he participates in such business as
proprietor, partner, joint venturer, stockholder, director, officer,
lender, manager, employee, consultant, advisor or agent or if he otherwise
controls such business. The Employee shall not, for purposes of this
paragraph, be deemed stockholder if he holds less than one (1 %) percent of
the outstanding shares of any publicly owned corporation engaged in the
same or similar business to that of the Company or any of its divisions,
subsidiaries or affiliates; provided, however, that the Employee shall not
be in a control position with regard to such corporation. In addition, the
Employee shall not be in a control position with regard to such
corporation. In addition, the Employee shall not at any time, during or
after the termination of this Agreement, engage in any business which uses
as its name, in whole or in part, "Paravant Inc.," or any other name then
used by the Company or any of its affiliates or subsidiaries.
12. Non-Disclosure: Except as may be required by law or with the express
permission of the Company's Board of Directors, the Employee will not at
any time, directly or indirectly,
<PAGE>
disclose or furnish to any other person, firm or corporation: (a) the
methods of conducting the business of the Company or its subsidiaries or
affiliates; (b) a description of any of the methods of obtaining business,
or manufacturing or advertising products, or of obtaining customers
thereof; and/or (c) any confidential information acquired by him during the
course of his employment by the Company, its predecessors, subsidiaries or
affiliates, including, without limiting the generality of the foregoing,
the names of any new customers or prospective customers of, or any person,
firm or corporation, who or which have, or shall have, traded or dealt with
(whether such customers have been obtained by the Employee or otherwise)
the Company, its predecessors, subsidiaries or affiliates.
13. Inventions. As between the Employee and the Company, all products, designs,
styles, processes, discoveries, materials, ideas, creations, inventions and
properties, whether or not furnished by the Employee, created, developed,
invented or used in connection with the Employee's employment hereunder or
prior to this Agreement, will be the sole and absolute property of the
Company for any and all purposes whatever in perpetuity, whether or not
conceived, discovered and/or developed during regular working hours. The
Employee will not have, and will not claim to have, under this Agreement or
otherwise, any right, title or interest of any kind or nature whatsoever in
or to any such products, processes, discoveries, materials ideals,
creations, inventions and properties.
14. Arbitration. Any controversy arising out of or relating to this Agreement
shall be resolved by arbitration in the State of Florida pursuant to the
rules of the American Arbitration Association then in effect.
15. Change of Control. In the event of a change in the control of the Company
by virtue of a sale, merger by the Company into, or the combination with,
another corporation or other form of takeover wherein the resulting entity
controls thirty-three percent (33%) or more of the voting stock, and there
is more than a 50% change in the composition of the Board, then if the
Employee is terminated without cause, as contemplated in Paragraph 9,
during the first one year following the change of control, the Employee's
severance benefits under Section 9 will be increased by 12 months, but in
no case will the total severance exceed 3 years base salary.
16. Further Instruments. The Employee will execute and deliver all such other
further instruments and documents as may be necessary, in the opinion of
the Company, to carry out the purposes of this Agreement, or to confirm,
assign, or convey to the Company any products, processes, discoveries,
materials, ideas, creations, inventions or properties referred to in
Paragraph 12 hereof, including the execution of all patent applications.
17. Notice. Any written notices required hereunder shall be deemed sufficient
if delivered personally or by certified mail to the Employer at its regular
business office and to the Employee at his home address on file with the
Company.
18. Assignment. A party hereto may not assign this Agreement or any rights or
obligations hereunder, without the consent of the other party hereto.
Provided, however, that upon the sale or transfer of all or substantially
all of the assets of the Company or upon the sale, merger by the Company
into, or the combination with, another corporation or other form of
takeover, this Agreement will (subject to the provisions of Paragraph 2
hereof) inure to the benefits of and be binding upon the person, firm or
corporation purchasing such assets, or the corporation
<PAGE>
surviving such merger or consolidation or takeover, as the case may be.
The provisions of the Agreement are binding upon the heirs of the
Employee and upon the successors and assigns of the Company hereto.
19. Waiver of Breach. Waiver by either party of a breach of any provision of
this Agreement by the other shall not operate or be constructed as a waiver
of any subsequent breach by such other party.
20. Entire Agreement. This instrument contains the entire agreement of the
parties as to the subject matter hereof. It may not be changed orally, but
only by an agreement in writing signed by the party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought.
21. Applicable Law. This Agreement shall be constructed in accordance with the
laws of the State of Florida.
22. Severability. If any provision of this Agreement is held to be invalid or
unenforceable by any court or tribunal of competent jurisdiction, the
remainder of this Agreement shall not be affected by such judgement, and
such provision shall be carried out as nearly as possible according to its
original terms and intent to eliminate such invalidity or unenforceability.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as of the
day and year first above written.
PARAVANT INC.
BY:
/s/ Krishan K. Joshi May 17, 1999
__________________________________ ___________________
Krishan K. Joshi, Chairman Date
/s/ Richard P. McNeight May 17, 1999
__________________________________ ___________________
Richard P. McNeight, Employee Date
<PAGE>
EXHIBIT 10.48
EMPLOYMENT AGREEMENT
This AGREEMENT is made and entered into as of the 1st day of January 1999, by
and between PARAVANT INC., a Florida corporation (the "Company") and KEVIN
J. BARTCZAK, (the "Employee").
WHEREAS, the Company desires to obtain the benefit of the services of the
Employee, and the Employee desires to render such services on the terms and
conditions hereinafter set forth; and,
WHEREAS, the Company and the Employee desire to provide limited protection of
the Employee's employment in the event of a change in ownership of the
Company by virtue of a sale, merger by the Company into, or the combination
with, another corporation or other form of takeover wherein the new
ownership may terminate the employee without cause.
NOW, THEREFORE, the Parties hereto, in consideration of the premises and the
mutual covenants herein contained, hereby agree as follows:
1. Termination of Prior Agreement. Upon the execution of this Agreement, all
prior employment agreements between the Employee, and the Company or any of
its affiliates, subsidiaries, and predecessor constituent corporations are
terminated and of no further force and effect.
2. Term of Employment. Subject to the terms and conditions hereinafter set
forth, the Company hereby enters into the employment of the Employee, or
any of subsidiary or affiliate of the Company, as the Company shall, from
time to time, select, for an employment term commencing on the date of
execution of this Agreement and terminating on 31 December 2000. The period
during which the Employee is employed pursuant to this Agreement is
hereinafter called the "Term of Employment." The Term of Employment will
normally be submitted to the Board of Directors, at the first board meeting
each fiscal year, for the succeeding calendar year, for review and updates
of terms and conditions.
3. Scope of Employment. During the Term of Employment, the Employee shall be
employed as an officer of the Company with duties and responsibilities
commensurate with those of Vice President, Chief Financial Officer, and
Treasurer of Paravant Inc. In addition, the Employee shall well and
faithfully render and perform such other executive and managerial services,
as may be assigned to him, from time to time, by or under the authority of
the Board of Directors of the Company or of any subsidiary or affiliate of
the Company. If, for any reason, the Employee ceases to occupy the role of
Vice President, Chief Financial Officer, and Treasurer of the Company, the
Employee's duties and responsibilities will be commensurate with those of
Vice President, Chief Financial Officer of Paravant Computer Systems
Business Unit. The Employee's duties and responsibilities must regularly be
performed in Melbourne, Florida or within a 25-mile radius thereof. The
Employee will devote his full time and efforts to the business and affairs
of the Company, or such subsidiary, or affiliate as now or hereafter
conducted, and shall be at all times subject to the direction and control
of the Board of Directors of the Company or such subsidiary or affiliate.
The Employee shall render such services which are in accordance with his
utmost abilities and shall use his best efforts to promote the interests of
the Company and subsidiaries and affiliates. The Employee will not
<PAGE>
engage in any capacity or activity which is, or may be, contrary to the
welfare, interest or benefit of the business now or hereafter conducted by
the Company and its subsidiaries and affiliates.
4. Compensation. As full compensation for all services provided for herein,
including without limiting the generality of the foregoing, all services to
be rendered by the Employee as an officer or director of the Company or of
any subsidiary or affiliate of the Company, the Company will pay, cause to
be paid, to the Employee, and the Employee will accept, a salary, during
the Term of Employment, at a minimum annual rate of One Hundred and
Twenty-One Thousand Dollars ($121,000) to be paid in regular installments
in accordance with the Company's usual paying practices. Such payments will
be subjected to such deductions by the Company as the Company is from time
to time required to make pursuant to law, government regulations or order
or by agreement with, or consent of, the Employee. The Board of Directors
shall have the authority to increase the Employee's salary, at its
discretion from time to time, and the Board of Directors also shall have
the authority to enhance any bonus or other forms of compensation to the
Employee.
5. Expenses. The Employee shall be entitled to reimbursement by the Company
for reasonable expenses actually incurred by him on its behalf in the
course of his employment by the Company, upon the presentation by the
Employee, from time to time, of an itemized account of such expenditures,
together with such vouchers and other receipts as the Company may request.
6. Vacation. The Employee shall be entitled to vacations in accordance
with the Company's prevailing policy for its operating executives.
7. Benefits. The Employee shall be entitled to participate in all group life
insurance, medical and hospitalization plans, and pension, stock option and
profit sharing plans as are presently being offered by the Company or which
may hereafter during the Term of Employment be offered by the Company
generally to its operating executives.
8. Payments on Death or Disability. In the event that the Employee shall die
or become disabled during the Term of Employment or any renewal thereof,
the Company shall pay to his heirs in the case of his death, or to him or
his guardian, in case of his disability, a lump sum payment equal to 6
months of compensation due to him at that time hereunder or equal monthly
installments covering such 6 months compensation at the discretion of the
Employee, his or her guardian, whatever the case may be. For purposes of
this Agreement, disability of the Employee shall have occurred if (a) the
Employee shall become physically or mentally incapable of properly
performing his services to the Company as provided hereunder excluding
infrequent and temporary absences due to ordinary illnesses, (b) such
incapacity shall exist or be reasonably expected to exist for more than 90
days in the aggregate during any 12 consecutive months covered hereunder or
in any renewals hereof, and (c) either the Employee or the Company shall
have given the other 30 days written notice of his or its intention to
terminate the Employee's active employment by the Company due to such
disability. For purposes of this Agreement, the Employee shall on or
immediately after executing this Agreement provide the Company with a
written list of his heirs in order of preference regarding death payment
benefits hereunder. This list may be altered and changed from time to
<PAGE>
time by the Employee by giving written notice of such changes or new list
thereof to the Company as provided herein.
9. Severance. In the event that the Employee's employment with the Company is
terminated thereby 'without cause,' which includes any Company or Board
action contrary to the Employee's scope of employment as set forth in
Paragraph 3, during the Term thereof, the Employee shall be entitled to, as
severance hereunder, one year's full salary, and the Employee shall also be
entitled to 6 months benefits as provided for and paid out in the manner
specified herein. Termination for cause shall include Employee's failure to
perform his duties hereunder, his conviction of a felony, alcoholism,
illegal drug abuse, violations of corporate or securities laws or similar
infractions.
10. Vesting of Benefits. etc. Upon the effective termination date of the
Executive's employment: (a) by the Company without Cause (Paragraph 9), (b)
due to Disability (Paragraph 8), or (c) in the case of Change of Control
(Paragraph 15):
(1) The Executive shall become vested immediately in any unvested stock
options (other than incentive stock options under a "qualified" plan)
that the Executive may have at the time of his termination; and must
exercise all stock options within 90 days of termination or forfeit
either all unexercised options;
(2) To the extent, and only to the extent, that the same is permitted by
law without thereby disqualifying any plan of the Company or an
affiliate that is a "qualified" plan under the Internal Revenue Code or
that otherwise enjoys or provides tax benefits to employees under the
Internal Revenue Code, the Executive shall become vested immediately in
any and all other benefits under each and every benefit plan of the
Company or any affiliate and in which the Executive, at the time of his
termination, had unvested benefits.
(3) The company will indemnify and defend the Executive in the same manner
and to the same degree as if he was an employee, executive, officer and
director of the Company, for all litigation or other actions brought
against the Executive originating as a result of association of the
Executive with the Company, including but not limited to all claims,
liability, damage, loss, expense, attorneys' fees, court costs,
judgements, settlements, fines, etc.
11. Covenant not to Compete. During the Term of Employment and for a
period of one (1) year after the Term of Employment, the Employee shall not
engage, directly or indirectly, within the United States in any business
engaged in the design, development, manufacture and sale of rugged
computers. For the purpose of this paragraph, the Employee will be deemed,
directly or indirectly, engaged in a business if he participates in such
business as proprietor, partner, joint venturer, stockholder, director,
officer, lender, manager, employee, consultant, advisor or agent or if he
otherwise controls such business. The Employee shall not, for purposes of
this paragraph, be deemed stockholder if he holds less than one (1%)
percent of the outstanding shares of any publicly owned corporation engaged
in the same or similar business to that of the Company or any of its
divisions, subsidiaries or affiliates; provided, however, that the Employee
shall not be in a control position with regard to such corporation. In
addition, the Employee shall not be in a control position with regard to
such corporation. In addition, the Employee shall not at any time, during
or after the termination of this
<PAGE>
Agreement, engage in any business which uses as its name, in whole or in
part, "Paravant Inc.," or any other name then used by the Company or any of
its affiliates or subsidiaries.
12. Non-Disclosure: Except as may be required by law or with the express
permission of the Company's Board of Directors, the Employee will not at
any time, directly or indirectly, disclose or furnish to any other person,
firm or corporation: (a) the methods of conducting the business of the
Company or its subsidiaries or affiliates; (b) a description of any of the
methods of obtaining business, or manufacturing or advertising products, or
of obtaining customers thereof; and/or (c) any confidential information
acquired by him during the course of his employment by the Company, its
predecessors, subsidiaries or affiliates, including, without limiting the
generality of the foregoing, the names of any new customers or prospective
customers of, or any person, firm or corporation, who or which have, or
shall have, traded or dealt with (whether such customers have been obtained
by the Employee or otherwise) the Company, its predecessors, subsidiaries
or affiliates.
13. Inventions. As between the Employee and the Company, all products, designs,
styles, processes, discoveries, materials, ideas, creations, inventions and
properties, whether or not furnished by the Employee, created, developed,
invented or used in connection with the Employee's employment hereunder or
prior to this Agreement, will be the sole and absolute property of the
Company for any and all purposes whatever in perpetuity, whether or not
conceived, discovered and/or developed during regular working hours. The
Employee will not have, and will not claim to have, under this Agreement or
otherwise, any right, title or interest of any kind or nature whatsoever in
or to any such products, processes, discoveries, materials ideals,
creations, inventions and properties.
14. Arbitration. Any controversy arising out of or relating to this Agreement
shall be resolved by arbitration in the State of Florida pursuant to the
rules of the American Arbitration Association then in effect.
15. Change of Control. In the event of a change in the control of the Company
by virtue of a sale, merger by the Company into, or the combination with,
another corporation or other form of takeover wherein the resulting entity
controls thirty-three percent (33%) or more of the voting stock, and there
is more than a 50% change in the composition of the Board, then if the
Employee is terminated without cause, as contemplated in Paragraph 9,
during the first one year following the change of control, the Employee's
severance benefits under Section 9 will be increased by 12 months, but in
no case will the total severance exceed 2 years base salary.
Further, at the unilateral discretion of Mr. Bartczak within the first 6
months after the change in control, Mr. Bartczak may resign and receive
$121,000 as total severance with no further benefits.
16. Further Instruments. The Employee will execute and deliver all such other
further instruments and documents as may be necessary, in the opinion of
the Company, to carry out the purposes of this Agreement, or to confirm,
assign, or convey to the Company any products, processes, discoveries,
materials, ideas, creations, inventions or properties referred to in
Paragraph 12 hereof, including the execution of all patent applications.
<PAGE>
17. Notice. Any written notices required hereunder shall be deemed sufficient
if delivered personally or by certified mail to the Employer at its regular
business office and to the Employee at his home address on file with the
Company.
18. Assignment. A party hereto may not assign this Agreement or any rights or
obligations hereunder, without the consent of the other party hereto.
Provided, however, that upon the sale or transfer of all or substantially
all of the assets of the Company or upon the sale, merger by the Company
into, or the combination with, another corporation or other form of
takeover, this Agreement will (subject to the provisions of Paragraph 2
hereof) inure to the benefits of and be binding upon the person, firm or
corporation purchasing such assets, or the corporation surviving such
merger or consolidation or takeover, as the case may be. The provisions of
the Agreement are binding upon the heirs of the Employee and upon the
successors and assigns of the Company hereto.
19. Waiver of Breach. Waiver by either party of a breach of any provision of
this Agreement by the other shall not operate or be constructed as a waiver
of any subsequent breach by such other party.
20. Entire Agreement. This instrument contains the entire agreement of the
parties as to the subject matter hereof. It may not be changed orally, but
only by an agreement in writing signed by the party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought.
21. Applicable Law. This Agreement shall be constructed in accordance with the
laws of the State of Florida.
22. Severability. If any provision of this Agreement is held to be invalid or
unenforceable by any court or tribunal of competent jurisdiction, the
remainder of this Agreement shall not be affected by such judgement, and
such provision shall be carried out as nearly as possible according to its
original terms and intent to eliminate such invalidity or unenforceability.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as of the
day and year first above written.
PARAVANT INC.
BY:
/s/ Krishan K. Joshi May 17, 1999
- ------------------------------- --------------------
Krishan K. Joshi, Chairman Date
/s/ Kevin J. Bartczak May 17, 1999
- ------------------------------- --------------------
Kevin J. Bartczak, Employee Date
<PAGE>
EXHIBIT 10.49
EMPLOYMENT AGREEMENT
This AGREEMENT is made and entered into as of the 15th day of
December, 1998, by and between PARAVANT COMPUTER SYSTEMS, INC., a Florida
corporation (the "Company") and WILLIAM R. CRAVEN, (the "Employee").
WHEREAS, the Company desires to obtain the benefit of the services
of the Employee, and the Employee desires to render such services on the
terms and conditions hereinafter set forth, and,
WHEREAS, the Company and the Employee desire to provide limited
protection of the Employee's employment in the event of a change in
ownership of the Company by virtue of a sale, merger by the Company into,
or the combination with, another corporation or other form of takeover
wherein the new ownership may terminate the employee without cause.
NOW, THEREFORE, the Parties hereto, in consideration of the
premises and the mutual covenants herein contained, hereby agree as
follows:
1. Termination of Prior Agreement. Upon the execution of this Agreement, all
prior employment agreements between the Employee, and the Company or any of
its affiliates, subsidiaries, and predecessor constituent corporations are
terminated and of no further force and effect.
2. Term of Employment. Subject to the terms and conditions hereinafter set
forth, the Company hereby enters into the employment of the Employee, or
any of subsidiary or affiliate of the Company, as the Company shall, from
time to time, select, for an employment term commencing on the date of
execution of this Agreement and terminating on 31 December 2000. The period
during which the Employee is employed pursuant to this Agreement is
hereinafter called the "Term of Employment." The Term of Employment will
normally be submitted to the Board of Directors, at the first board meeting
each fiscal year, for the succeeding calendar year for review and updates
of terms and conditions.
3. Scope of Employment. During the Term of Employment, the Employee shall
be employed as an officer of the Company with duties and responsibilities
commensurate with the execution of the Paravant Computer Systems' core
business. In addition, thc Employee shall well and faithfully render and
perform such other executive and managerial services, as may be assigned to
him, from time to time, by or under the authority of the Board of Directors
of the Company or of any subsidiary or affiliate of the Company. The
Employee will devote his full time and efforts to the business and affairs
of thc Company, or such subsidiary, or affiliate as now or hereafter
conducted, and shall be at all times subject to the direction and control
of the Board of Directors of the Company or such subsidiary or affiliate.
The Employee shall render such services which are in accordance with his
utmost abilities and shall use his best efforts to promote the interests of
the Company and subsidiaries and affiliates. The Employee will not engage
in any capacity or activity which is, or may be, contrary to the welfare,
interest or benefit of the business now or hereafter conducted by the
Company and its subsidiaries and affiliates.
4. Compensation. As full compensation for all services provided for
herein, including without limiting the generality of the foregoing, all
services to be rendered by the Employee as an officer or director of the
Company or of any subsidiary or affiliate of the Company, the Company will
pay, cause to be paid, to the Employee, and the Employee will accept, a
<PAGE>
salary, during the Term of Employment, at an annual rate of One Hundred and
Fifty-Seven Thousand and Four Hundred and Twenty Dollars ($157,420) to be
paid in regular installments in accordance with the Company's usual paying
practices. Such payments will be subjected to such deductions by the
Company as the Company is from time to time required to make pursuant to
law, government regulations or order or by agreement with, or consent of,
the Employee. The Board of Directors shall have the authority to increase
such compensation, at its discretion from time to time, with the award and
payment of bonuses and other forms of compensation to the Employee.
5. Expenses. The Employee shall be entitled to reimbursement by the Company
for reasonable expenses actually incurred by him on its behalf in the
course of his employment by the Company, upon the presentation by the
Employee, from time to time, of an itemized account of such expenditures,
together with such vouchers and other receipts as the Company may request.
6. Vacation. The Employee shall be entitled to vacations in accordance
with the Company's prevailing policy for its operating executives.
7. Benefits. The Employee shall be entitled to participate in all group life
insurance, medical and hospitalization plans, and pension, stock option and
profit sharing plans as are presently being offered by the Company or which
may hereafter during the Term of Employment be offered by the Company
generally to its operating executives.
8. Payments on Death or Disability. In the event that the Employee shall die
or become disabled during the Term of Employment or any renewal thereof,
the Company shall pay to his heirs in the case of his death, or to him or
his guardian, in case of his disability, a lump sum payment equal to 6
months of compensation due to him at that time hereunder or equal monthly
installments covering such 6 months compensation at the discretion of the
Employee, his or her guardian, whatever the case may be. For purposes of
this Agreement, disability of the Employee shall have occurred if (a) the
Employee shall become physically or mentally incapable of properly
performing his services to the Company as provided hereunder excluding
infrequent and temporary absences due to ordinary illnesses, (b) such
incapacity shall exist or be reasonably expected to exist for more than 90
days in the aggregate during any 12 consecutive months covered hereunder or
in any renewals hereof' and (c) either the Employee or the Company shall
have given the other 30 days written notice of his or its intention to
terminate the Employee's active employment by the Company due to such
disability. For purposes of this Agreement, the Employee shall on or
immediately after executing this Agreement provide the Company with a
written list of his heirs in order of preference regarding death payment
benefits hereunder. This list may be altered and changed from time to time
by the Employee by giving written notice of such changes or new list
thereof to the Company as provided herein.
9. Severance. In the event that the Employee's employment with the Company is
terminated thereby 'without cause' during the Term thereof, the Employee
shall be entitled to, as severance hereunder, one year's full compensation
and 6 months benefits as provided for and paid out in the manner specified
herein. Termination for cause shall include Employee's failure to perfon1
his duties hereunder, his conviction of felony, alcoholism, illegal drug
abuse, violations of corporate or securities laws or similar infractions.
<PAGE>
10. Vesting of Benefits, etc. Upon the effective termination date of the
Executive's employment (a) by the Company without Cause (Paragraph 9), (b)
due to Disability (Paragraph 8), or (c) in the case of Change of Control
(Paragraph 15);
(1) The Executive shall become vested immediately in any unvested stock
options (other than incentive stock options under a "qualified" plan)
that the Executive may have at the time of his termination; and must
exercise all stock options within 90 days of termination or forfeit
either all unexercised options,
(2) To the extent, and only to the extent, that the same is permitted by
law without thereby disqualifying any plan of the Company or an
affiliate that is a "qualified" plan under the Internal Revenue Code or
that otherwise enjoys or provides tax benefits to employees under the
Internal Revenue Code, the Executive shall become vested immediately in
any and all other benefits under each and every benefit plan of the
Company or any affiliate and in which the Executive, at the time of his
termination, had unvested benefits.
(3) The company will indemnify and defend the Executive in the same manner
and to the same degree as if he was an employee, executive, officer and
director of the Company, for all litigation or other actions brought
against the Executive originating as a result of association of the
Executive with the Company, including but not limited to all claims,
liability, damage, loss, expense, attorneys' fees, court costs,
judgements, settlements, fines, etc.
11. Covenant not to Compete. During the Term of Employment and for a period
of one (1) year after the Term of Employment, the Employee shall not
engage, directly or indirectly, within the United States in any business
engaged in the design, development, manufacture and sale of rugged
computers. For the purpose of this paragraph, the Employee will be deemed,
directly or indirectly, engaged in a business if he participates in such
business as proprietor, partner, joint venturer, stockholder, director,
officer, lender, manager, employee, consultant, advisor or agent or if he
otherwise controls such business. The Employee shall not, for purposes of
this paragraph, be deemed stockholder if he holds less than one (1%)
percent of the outstanding shares of any publicly owned corporation engaged
in the same or similar business to that of the Company or ally of its
divisions, subsidiaries or affiliates; provided, however, that the Employee
shall not be in a control position with regard to such corporation. In
addition, the Employee shall not be in a control position with regard to
such corporation. In addition, the Employee shall not at any time, during
or after the termination of this Agreement, engage in any business which
uses as its name, in whole or in part, "Paravant Computer Systems, Inc.,"
"PCS" or any other name then used by the Company or any of its affiliates
or subsidiaries.
12. Non-Disclosure. Except as may be required by law or with the express
permission of the Company's Board of Directors, the Employee will not at
any time, directly or indirectly, disclose or furnish to any other person,
firm or corporation: (a) the methods of conducting the business of the
Company or its subsidiaries or affiliates, (b) a description of any of the
methods of obtaining business, or manufacturing or advertising products, or
of obtaining customers thereof, and/or (c) any confidential information
acquired by him during the course of his employment by the Company, its
predecessors, subsidiaries or affiliates,
<PAGE>
including, without limiting the generality of the foregoing, the names of
any new customers or prospective customers of, or any person, firm or
corporation, who or which have, or shall have, traded or dealt with
(whether such customers have been obtained by the Employee or otherwise)
the Company, its predecessors, subsidiaries or affiliates.
13. Inventions. As between the Employee and the Company, all products, designs,
styles, processes, discoveries, materials, ideas, creations, inventions and
properties, whether or not furnished by the Employee, created, developed,
invented or used in connection with the Employee's employment hereunder or
prior to this Agreement, will be the sole and absolute property of the
Company for any and all purposes whatever in perpetuity, whether or not
conceived, discovered and/or developed during regular working hours. The
Employee will not have, and will not claim to have, under this Agreement or
otherwise, any right, title or interest of any kind or nature whatsoever in
or to any such products, processes, discoveries, materials ideals,
creations, inventions and properties.
14. Arbitration. Any controversy arising out of or relating to this Agreement
shall be resolved by arbitration in the State of Florida pursuant to the
rules of the American Arbitration Association then in effect.
15. Change of Control. In the event of a change in the control of the Company
by virtue of a sale, merger by the Company into, or the combination with,
another corporation or other form of takeover wherein the resulting entity
controls thirty-three percent (33%) or more of the voting stock, and there
is more than a 50% change in the composition of the Board, then if the
Employee is terminated without cause during the first six months following
the change of control, the Employee's severance benefits under Section 9
will be increased by 12 months.
16. Further Instruments. The Employee will execute and deliver all such other
further instruments and documents as may be necessary, in the opinion of
the Company, to carry out the purposes of this Agreement, or to confirm,
assign, or convey to the Company any products, processes, discoveries,
materials, ideas, creations, inventions or properties referred to in
Paragraph 12 hereof, including the execution of all patent applications.
17. Notice. Any written notices required hereunder shall be deemed sufficient
if delivered personally or by certified mail to the Employer at its regular
business office and to the Employee at his home address on file with the
Company.
18. Assignment. A party hereto may not assign this Agreement or any rights or
obligations hereunder, without the consent of the other party hereto.
Provided, however, that upon the sale or transfer of all or substantially
all of the assets of the Company or upon the sale, merger by the Company
into, or the combination with, another corporation or other form of
takeover, this Agreement will (subject to the provisions of Paragraph 2
hereof) inure to the benefits of and be binding upon the person, firm or
corporation purchasing such assets, or the corporation surviving such
merger or consolidation or takeover, as the case may be. The provisions of
the Agreement are binding, upon the heirs of the Employee and upon the
successors and assigns of the Company hereto.
<PAGE>
19. Waiver of Breach. Waiver by either party of a breach of any provision of
this Agreement by the other shall not operate or be constructed as a waiver
of any subsequent breach by such other party.
20. Entire Agreement. This instrument contains the entire agreement of the
parties as to the subject matter hereof. It may not be changed orally, but
only by an agreement in writing signed by the party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought.
21. Applicable Law. This Agreement shall be constructed in accordance with the
laws of the State of Florida.
22. Severability. If any provision of this Agreement is held to be invalid or
unenforceable by any court or tribunal of competent jurisdiction, the
remainder of this Agreement shall not be affected by such judgement, and
such provision shall be earned out as nearly as possible according to its
original terms and intent to eliminate such invalidity or unenforceability.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, as of the day and year first above written.
PARAVANT COMPUTER SYSTEMS, INC.
BY:
/s/ Krishan K. Joshi
- -------------------------------------
Krishan K. Joshi, Chairman
/s/ William R. Craven
- -------------------------------------
William R. Craven, Employee
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET OF PARAVANT INC. AND SUBSIDIARIES AS OF JUNE 30, 1999 AND THE RELATED
STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 552,714
<SECURITIES> 0
<RECEIVABLES> 7,903,972
<ALLOWANCES> 46,500
<INVENTORY> 12,905,161
<CURRENT-ASSETS> 22,188,802
<PP&E> 2,981,527
<DEPRECIATION> 1,274,407
<TOTAL-ASSETS> 42,961,459
<CURRENT-LIABILITIES> 9,584,399
<BONDS> 2,462,500
<COMMON> 261,558
0
0
<OTHER-SE> 30,636,054
<TOTAL-LIABILITY-AND-EQUITY> 42,961,459
<SALES> 9,958,690
<TOTAL-REVENUES> 9,598,690
<CGS> 3,900,273
<TOTAL-COSTS> 3,900,273
<OTHER-EXPENSES> 3,364,785
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 203,315
<INCOME-PRETAX> 2,550,814
<INCOME-TAX> 1,007,571
<INCOME-CONTINUING> 1,543,242
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,543,242
<EPS-BASIC> 0.112
<EPS-DILUTED> 0.107
</TABLE>
