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Filed Pursaunt to Rule 424(b)(3)
Registration No. 333-82649
PROSPECTUS
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PARAVANT INC.
5,443,775 SHARES OF COMMON STOCK
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This is an offering of shares of common stock of Paravant Inc. The selling
stockholders identified in this prospectus are offering all of these shares. We
will not receive any of the proceeds from the sale of these shares by the
selling stockholders.
The selling stockholders may from time to time sell these shares to or
through one or more underwriters, directly to other purchasers or through
agents, on the Nasdaq National Market in ordinary brokerage transactions, in
negotiated transactions or otherwise, at market prices prevailing at the time of
sale, at prices related to the then-prevailing market price or at negotiated
prices. For additional information on the methods of sale, you should refer to
the section entitled 'Plan of Distribution.'
Our common stock is listed on the Nasdaq National Market under the symbol
'PVAT'.
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INVESTING IN THE COMMON STOCK INVOLVES RISKS. SEE 'RISK FACTORS' BEGINNING
ON PAGE 5 FOR A DISCUSSION OF FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
INVESTORS.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED ON THE
ADEQUACY OR ACCURACY OF THE DISCLOSURES IN THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS JULY 22, 1999.
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WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934 and file reports, proxy statements and other information with the
SEC. You may read and copy these materials at the SEC's Public Reference Room at
450 Fifth Street, NW, Washington D.C. 20549. You may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The
SEC maintains an Internet web site at http://www.sec.gov that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the SEC.
We have filed with the SEC a registration statement on Form S-3, of which
this prospectus is a part, under the Securities Act of 1933 to register the
offering of these shares. This prospectus does not contain all of the
information shown in the registration statement. In addition, certain documents
filed by us with the SEC have been incorporated into this prospectus by
reference or omitted from this prospectus as permitted by the rules and
regulations of the SEC. Statements in this prospectus concerning the contents of
any of these documents are not necessarily complete. With respect to each of
these documents that were filed with the SEC as an exhibit to the registration
statement, you are referred to the exhibit for a more complete description, and
each of these statements is qualified in its entirety by this reference.
INCORPORATION BY REFERENCE
The SEC permits us to 'incorporate by reference' information into this
prospectus. This means that we may refer you to important information about us
provided in other documents on file with the SEC. The information incorporated
by reference is considered to be part of this prospectus, unless that
information has been updated in this prospectus. In addition, we may, from time
to time, update information in this prospectus or in another document that is
incorporated by reference. Whenever we file a document with the SEC that updates
information in this prospectus or in any other document incorporated by
reference, the new information will be considered to replace the old
information. Any statement in this document that is subsequently updated will no
longer be considered a part of this prospectus.
The following documents that we previously filed with the SEC are
incorporated into this prospectus by reference:
(1) Annual Report on Form 10-KSB for the year ended September 30,
1998.
(2) Quarterly Report on Form 10-QSB for the quarter ended
December 31, 1998.
(3) Quarterly Report on Form 10-QSB for the quarter ended March 31,
1999.
(4) Current Reports on Form 8-K filed on June 3, 1999, April 21, 1999,
and October 23, 1998 (as amended on December 22, 1998 and December 23,
1998).
(5) Form 8-A (with respect to the description of our common stock
contained in that document) filed on May 30, 1996.
(6) Proxy Statement filed on January 19, 1999.
All documents we file under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act after the date of this prospectus and before termination
of the offering of these shares are also incorporated by reference into this
prospectus as of the date of filing of those documents.
We will provide without charge to any person who receives a copy of this
prospectus, on the written or oral request of that person, a copy of any or all
of the information that has been incorporated by reference into this prospectus.
We will not provide exhibits to any of those documents unless the exhibits are
specifically incorporated by reference into this prospectus. You may make
written or oral requests to us, attention William R. Craven, Secretary, at 1615A
West Nasa Boulevard, Melbourne, Florida 32901, telephone number (407) 727-3672.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus
or incorporated into this prospectus by reference. It is not complete and may
not contain all of the information that you should consider before investing in
our common stock. You should read this entire prospectus carefully before
deciding whether to purchase shares of our common stock.
THE COMPANY
We serve the defense industry with a range of electronic products
engineered to meet applications within aircraft support, fire control and signal
intelligence. We also offer software design and integration services and
extensive customization services to modify our standard products to the specific
needs of end users. Our products have a reputation for high-level performance
and reliability in difficult circumstances.
We were incorporated in Florida in June 1982 under the name Paravant
Computer Systems, Inc. We completed our IPO in June 1996. We changed our name to
Paravant Inc. in November 1998.
In October 1998, we completed the acquisitions of the stock of EDL, a
manufacturer of various military-qualified avionics for U.S. and friendly
foreign airborne applications, and the assets of STL, a designer and producer of
instruments and devices used in governmental signal collection and analysis
laboratories located in the U.S. and foreign countries.
Products. We offer signal processing equipment, aircraft support technology
and a line of rugged, portable computers. We make a standard line of digital
signal processing equipment that we offer to the signal intelligence community
as standard commercial off-the-shelf items. We typically package the electronic
equipment in standard format industrial racks. We work to continually upgrade
the performance and capabilities of this line. The equipment is available for a
variety of signal processing applications.
In the area of aircraft support, we design upgrades and improvements to
rotary wing and fixed wing aircraft used primarily by the U.S. Special
Operations Forces. We offer a range of upgrades to improve and update the
aircraft. Past upgrades include the NVIS lighting flight controls that permit
the use of night vision goggles while operating the aircraft. Other products
include an in-flight video recorder and rear color displays. We have also
developed a highly cost-effective autopilot system, the AHHS, that allows the
pilot of an older helicopter to automatically hold altitude and/or hover
position at low flight levels, resulting in increased safety for the crew.
Our ruggedized computers are designed to meet and exceed certain military
specifications for operations in harsh environments and for insulation from
electromagnetic interference. In the military area, our computers are
incorporated into aircraft and shipboard diagnostics, testing and maintenance
systems, controller and radar displays for missile systems, performance
recorders in training exercises, mission loaders and verifiers of data and field
command control systems. In the medical area, we offer custom platforms,
including medical power supplies, custom interfaces to support telemetry
hardware and protocols, a display, and various forms of input devices. These
products permit the medical practitioner to communicate with and adjust
implanted medical devices.
Customization. We provide our customers and end users with engineering
services to modify or adjust our products to meet their specific needs and
requirements. Because our competitors generally do not provide customization
services for electronics, we believe that these services distinguish our
products in the marketplace.
Customers. We sell our products, directly or indirectly, to
the U.S. military and foreign allied military establishments;
large aerospace and military contractors supplying these military
establishments;
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government agencies regulating environmental, geologic and forestry
matters;
state departments of transportation;
forest product companies; and
medical device manufacturers.
Our principal executive offices are located at 1615A West Nasa Boulevard,
Melbourne, Florida 32901 and our telephone number is (407) 727-3672.
RECENT DEVELOPMENTS
Warrant Redemption. On June 8, 1999, we completed the redemption of
warrants to purchase our common stock that were issued in connection with our
IPO and a 1995 private placement. A total of 5,125,837 warrants were exercised
before the June 8 deadline, increasing the total number of shares of common
stock outstanding to 17,426,568 as of June 15, 1999.
Termination of General Atronics Letter of Intent. On April 5, 1999, we
signed a letter of intent to acquire General Atronics Corporation, a
privately-held high technology defense electronics company. On June 2, 1999, we
announced that we reached a mutual agreement with General Atronics to terminate
our discussions regarding our proposed acquisition of General Atronics.
THE OFFERING
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<S> <C>
Securities Offered........................ Up to 5,443,775 shares of common stock, 45,000 of which
are issuable upon the exercise of outstanding warrants.
Common Stock Outstanding as of June 15,
1999.................................... 17,426,568 shares(1)
Use of Proceeds........................... We will not receive any proceeds from the sale of this
common stock by the selling stockholders.
Risk Factors.............................. Our common stock is speculative and involves a high
degree of risk and should not be purchased by investors
who cannot afford the loss of their entire investment.
See 'Risk Factors.'
Nasdaq National Market symbol............. 'PVAT'
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(1) Includes all of the common stock being offered by the selling stockholders
except the 45,000 issuable upon the exercise of outstanding warrants held by
The Equity Group, Inc. Does not include a total of 1,971,421 shares of
common stock reserved for issuance upon the exercise of outstanding stock
options and warrants and 1,237,442 shares of common stock reserved for
issuance upon the exercise of future stock options granted.
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RISK FACTORS
You should carefully consider the following risk factors and other
information contained and incorporated by reference into this prospectus before
deciding to invest in our common stock. This section includes or refers to
forward-looking statements. You should refer to the explanation of the
qualification and limitations on those forward-looking statements discussed on
Page 11 of this prospectus.
OUR SUCCESS DEPENDS UPON MILITARY AND SIGNAL INTELLIGENCE COMMUNITY EXPENDITURES
Most of our historical sales have been to the United States military,
foreign allied militaries, military suppliers or the signal intelligence
community. Our future success depends on the military's continued purchase of
our portable computers or equipment manufactured by others which contains our
devices and the signal intelligence community's continued purchase of our
digital processing equipment.
Many governments have attempted to reduce military expenditures for a
number of reasons, including budget deficit reduction and a perceived easing of
global tensions. For the past several years, the uncertain defense budget
situation has caused delays in contract awards and reduced funding for various
military programs. We expect that these downward trends will continue for the
foreseeable future. Although to date we have generally not been adversely
affected by delays in contract awards or reductions in spending, any future
delays or reductions may have a material adverse effect on our business.
Recent announcements from the U.S. Congress and Department of Defense
indicate that overall defense spending may stabilize or increase modestly;
however, we cannot predict the amount or pattern of this spending. We believe
that in the foreseeable future military spending on new weapon systems will
continue to be restricted to research and development of military hardware
already under development and to limited production of those systems. During
this period, we anticipate that the U.S. military will still emphasize the
upgrading, repair and extended use of older systems. Should the U.S. military
alter this policy and seek full-scale production of new systems, sales of our
products may decrease.
WE MUST COMPLY WITH REGULATORY OPERATIONAL STANDARDS TO EXPAND OUR SALES
Our manufacturing and assembly facility and procedures in Melbourne have
been certified as compliant with the quality and assurance standards of
ISO-9001, an international standard promulgated by the International
Organization for Standardization, a worldwide federation of standards bodies
from approximately 100 countries. The European Economic Community has adopted
this standard as its preferred quality standard, as has, to some degree, the
Department of Defense and the FDA. The FDA has also approved us as a contract
manufacturer for manufacturers of specific medical products. Our Dayton, Ohio
facilities are not so certified, nor do we intend to have those facilities
become ISO-certified in the near future. If we fail to maintain compliance with
these standards for our Melbourne facility, we may be unable to expand our
presence in the domestic and international military markets for ruggedized
computers, which could have a material adverse effect on our direct and indirect
sales to the U.S. military as well as to foreign customers. Further, if we fail
to maintain FDA approval, our sales in the medical market and our ability to
expand into this market could be materially and adversely affected.
WE ARE SUBJECT TO GOVERNMENT REGULATION AND RISKS RELATED TO THE TERMS OF
GOVERNMENT CONTRACTS
As a supplier of equipment and services, directly or indirectly, to the
United States government, we are subject to risks of dependence on government
appropriations, termination of contracts without cause, contract renegotiation,
and competition for the available Department of Defense business. While we
believe we do not have a material amount of our business subject to contracts
with the Department of Defense allowing renegotiation, we could become subject
to these terms in the future. In addition, many of our government contracts
provide the Department
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of Defense the right to audit our cost records and are subject to regulations
providing for price reductions if we submit inaccurate cost information.
A SIGNIFICANT AMOUNT OF OUR REVENUES COMES FROM A FEW CUSTOMERS
Our business substantially depends on a relatively small number of
customers and Department of Defense programs. In recent fiscal years, Raytheon
Company's Missile Systems Division and Lockheed Martin Corporation have
accounted for a significant portion of our total sales. In addition, as of
March 31, 1999, our backlog was approximately $18.8 million, consisting of firm
fixed price purchase orders, 78% of which was represented by large orders from 3
customers. If we experience a loss or diminution of orders from any of these
customers, our results of operations or financial condition could be materially
and adversely affected.
Also, in recent years prime contractors serving the defense industry have
undergone consolidation. The reduction in the number of defense contractors
could negatively impact our business.
OUR QUARTERLY RESULTS FLUCTUATE SIGNIFICANTLY
We experience, and expect to continue to experience, significant
fluctuations in our results of operations from quarter to quarter. Because so
much of our sales are related to the U.S. military and government procurement,
our business is greatly influenced by the timing of these purchases. Variations
in the timing of deliveries under outstanding purchase orders, variations in the
size of purchase orders and related deliveries, and the cancellations or
reductions of purchase orders are all factors that could cause our quarterly
results to vary. Consequently, our results of operations for a particular
quarter may not meet the expectations of public market analysts and investors.
This could materially and adversely affect the price of our common stock.
THE COMPLETION OF OUR BACKLOG MAY NOT BE PROFITABLE AND COULD ADVERSELY EFFECT
OUR LIQUIDITY
The purchase orders included in our backlog may not generate profits within
historical levels. In addition, the completion of the orders constituting our
backlog, and any new orders which may be accepted by us, could result in
additional liquidity pressures that cannot be addressed in a manner consistent
with our past practices. If we fail to obtain additional purchase orders before
completion of our backlog, our liquidity, results of operations and financial
condition could be materially and adversely affected.
WE MUST DEVELOP NEW PRODUCTS AND ENHANCE CURRENT PRODUCTS TO KEEP UP WITH RAPID
TECHNOLOGICAL CHANGE
Rapid technological advances, changes in customer requirements, and
frequent new product introductions and enhancements characterize our markets.
Our business requires substantial ongoing research and development efforts and
expenditures, and our future success will depend in large measure on our ability
to enhance our current products and develop and introduce new products that keep
pace with technological developments in response to evolving customer
requirements. In addition, we may misgauge market needs and introduce products
that fail to gain the necessary market acceptance due to a variety of factors,
including pricing. If we fail to anticipate or respond adequately to
technological developments and changing customer requirements, or experience
significant delays in new product development or introduction or technological
failures of our products or the systems in which they are incorporated, we could
face a material loss of anticipated future revenues and a serious impairment of
our competitiveness.
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OUR SALES CYCLE IS LENGTHY
On the military side of our business, we often experience a lengthy sales
cycle that, from beginning to end, may run for as long as five years. There are
generally a number of crucial points in this cycle, including:
identifying a product need in a military program;
retaining the prime contractor;
retaining the subcontractors for each element;
assembling the elements for prototype systems;
testing of the systems;
funding for production runs of the systems; and
executing the production contracts for the prime contractor and the
sub-contractors.
Not only does this cycle take a long time, but it is also susceptible to failure
at each crucial point.
In addition, we will also experience a lengthy sales cycle with respect to
our medical-related computer products, primarily due to the length of time
required to obtain approval of these products from the FDA. In developing
programmers for implantable medical device manufacturers, we must first design
each particular programmer based on the unique specifications of the particular
manufacturer with respect to its implantable medical device. Once the programmer
has been tested and approved by the manufacturer, the manufacturer must
thereafter submit the complete implantable device, including our programmer, for
FDA approval, which can take from three to eighteen months. Any delays in
obtaining FDA approval for any of these devices, whether resulting from the
portion of the device relating to our programmer or from the portion of the
device developed by the manufacturer of the implantable device, could have a
material adverse effect on our business and operations.
Consequently, we invest heavily in time, money and manpower to obtain
subcontracts for military production runs on our products and to design and
implement our medical computer products. Delays in our sales cycle could
materially and adversely affect our results of operations and financial
condition. Further, our investments may yield no business at all or may take so
long to develop that our resources are strained or other more profitable
opportunities are missed.
OUR MARKETS ARE HIGHLY COMPETITIVE
We compete in the rugged portable computer business with a wide variety of
computer manufacturers and repackagers, many of which are larger, better known
and have more financial, technological, manufacturing and marketing resources
than we do. We compete in the aircraft support business with original aircraft
manufacturers such as Sikorsky and in the signal intelligence business with the
former E Systems Division of Raytheon and a specialty division of TRW. In the
medical systems business, we compete with medical systems integrators and the
in-house engineering groups of our customers. We compete on the basis of
customization capabilities, price, performance, delivery and quality. In many
situations, we are the highest-priced bidder by a large margin. For computer
applications where harsh environmental and operational conditions prevail,
customers are sometimes willing to pay our higher prices. However, in less
demanding conditions, our computer products are at a competitive disadvantage
and our sales are adversely affected.
Military procurement policies requiring purchases of computers for the
military under Indefinite Delivery, Indefinite Quantity contracts may seriously
restrict our selling efforts to the military. These contracts encourage large
purchases of computers and favor large companies with the resources to handle
orders of that magnitude. Unless we can form strategic alliances with larger
military contractors, our sale of computers to the military may be materially
and adversely affected by these policies.
In the military and government markets, we will often be engaged, directly
or indirectly, in the process of seeking competitive bid or negotiated contracts
with government departments and
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agencies. We may have difficulty complying with the rules and regulations that
apply to these government contracts.
WE RELY ON A FEW SUB-CONTRACTORS AND SUPPLIERS FOR KEY COMPONENTS
We subcontract the fabrication of our computer boards to a few third party
manufacturers and the fabrication of some electronic circuitboards for our
digital signal processing equipment to Catalina Research. We purchase the metal
cases, hard disk drives, brackets, window panels and the keyboards for our
portable computers from sole sources such as Distec, Xcel and HiTech. We also
license our software from sole sources, including Microsoft, Phoenix Technology,
Magnavox and JFK Associates. Outside suppliers furnish many of the other
components we use. Except for our software suppliers, we do not have written
agreements with any of these subcontractors or suppliers. This reliance on a few
subcontractors, sole sources and other suppliers may result in delays in
deliveries and may result in quality control and production problems. During any
interruption in supplies, we may have to curtail the production and sale of our
computers for an indefinite period. Accordingly, any interruption, suspension or
termination of component deliveries from our suppliers could have a material
adverse effect on our business.
PROTECTION OF OUR INTELLECTUAL PROPERTY IS LIMITED
We have no patent or copyright protection for our products. Our ability to
compete effectively with other companies depends on our ability to maintain the
proprietary nature of our technologies. We intend to rely substantially on
unpatented proprietary information and know-how. Others may develop this
information and know-how independently or otherwise obtain access to our
technology, which could have a material adverse effect on our business.
In addition, although we do not believe that any of our technologies
infringes on the rights of others, we may face these claims in the future.
Infringement claims could result in substantial costs and diversion of our
resources. A claimant could obtain equitable relief preventing us from selling
the allegedly infringing product. In such a case, we could attempt to obtain a
license from the claimant covering the intellectual property, but the terms of
that license may not be acceptable.
PRODUCT DEFECTS COULD RESULT IN LIABILITY
Our products may malfunction and cause a loss of or error in data, loss of
man hours, damage to, or destruction of, equipment, or delays. Consequently, we
may be subject to claims if malfunctions or breakdowns occur. While we maintain
product liability insurance, our coverage may not be adequate to satisfy future
claims. Our sales contracts for medical products require our customers to
indemnify us from or provide insurance for any claims brought against us as a
result of any malfunctions in the programmable devices sold by our customers.
These rights may not be adequate to satisfy future claims. Further, we may not
be able to secure these provisions in future sales contracts. Liability for
product malfunctions or breakdowns in excess of our insurance coverage could
have a material adverse effect on our financial condition and results of
operations.
WE MAY NEED ADDITIONAL FINANCING
While we anticipate that our existing working capital and anticipated cash
flow from operations will be sufficient to satisfy our cash requirements for at
least twelve months, if our plans change or existing working capital and
projected cash flow are insufficient to fund operations, we could be required to
seek additional financing. Except for our current line of credit, we have no
current arrangements with respect to, or sources of, additional financing.
Accordingly, additional financing may not be available to us when needed on
acceptable terms, or at all. If we fail to obtain additional financing, our
long-term liquidity and our expansion plans could be materially and adversely
affected.
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RISKS ASSOCIATED WITH OUR ACQUISITION STRATEGY
We evaluate, on an ongoing basis, potential acquisitions of, or investments
in, businesses that complement or expand our existing operations. We cannot
assure that any future acquisitions will be successful or improve our operating
results. In addition, our ability to complete acquisitions will depend on the
availability of both suitable target businesses and acceptable financing. Any
future acquisitions may result in a dilutive issuance of additional equity
securities, the incurrence of additional debt or increased working capital
requirements. Any acquisition may also result in earnings dilution, the
amortization of goodwill and other intangible assets, or other charges to
operations, any of which could have a material adverse effect on our business,
financial condition or results of operations. Future acquisitions may divert
management's attention from our operations and entail difficulties assimilating
the operations, products, services and personnel of any acquired company.
Although we attempt to evaluate the risks inherent in any particular
acquisition, we may not properly ascertain or assess all significant risks
before consummating any acquisition.
YEAR 2000 COMPLIANCE ISSUES COULD ADVERSELY AFFECT OUR BUSINESS
We recognize that Year 2000 issues could result in system failures or
miscalculations, resulting in disruptions of operations. We have engaged in an
evaluation of the Year 2000 readiness of our information technology and
non-information technology systems. We believe that the worst-case Year 2000
scenario for our products would require users to enter time and date information
after 0100 hours on January 1 and reboot the products. Because our customer base
changes from year to year, we have been unable to identify our primary customers
in the Year 2000. If our customers have Year 2000 compliance problems, we could
face delays in receiving payments, adversely affecting our sales and cash flow.
Our contracts department has developed a contingency plan to mitigate the effect
of our customers' Year 2000 problems.
OUR DIRECTORS AND OFFICERS CAN EXERCISE CONTROL THROUGH THEIR OWNERSHIP OF
COMMON STOCK
As of June 15, 1999, our directors and executive officers beneficially
owned approximately 34.4% of our common stock. Although they do not hold, in the
aggregate, a majority of our common stock, their ownership enables them to
substantially control the election of directors and the results of any other
matters submitted to a vote of stockholders.
OUR STOCK PRICE AND LIQUIDITY COULD BE ADVERSELY AFFECTED IF WE FAIL TO MEET THE
REQUIREMENTS OF THE NASDAQ NATIONAL MARKET SYSTEM
Our common stock is quoted on the Nasdaq National Market System. To remain
listed, we must have, among other things, either
$4,000,000 in net tangible assets, a public float of at least 750,000
shares with a market value of at least $5,000,000 and a minimum bid
price of $1.00 per share; or, alternatively,
a market capitalization of $50,000,000 or total assets and total
revenues of $50,000,000 each, a public float of at least 1,100,000
shares with a market value of at least $15,000,000 and a minimum bid
price of $5.00.
If we fail to satisfy the Nasdaq National Market's maintenance criteria in
the future, our common stock could be delisted. We would then seek to list its
securities on the Nasdaq SmallCap Market. However, if we were unsuccessful,
trading in our common stock would thereafter be conducted in the
over-the-counter market in the so-called 'pink sheets' or the NASD's Electronic
Bulletin Board. A delisting would make it more difficult to dispose of or to
obtain quotations as to the price of our common stock.
THE ISSUANCE OF PREFERRED STOCK COULD ADVERSELY AFFECT OUR STOCK PRICE
Our board may issue shares of preferred stock, without stockholder
approval, on such terms as it may determine. The rights of the holders of common
stock will be subject to, and may be
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adversely affected by, the rights of the holders of any preferred stock that may
be issued in the future. If we issue preferred stock, a third party may find it
more difficult to acquire, or may be discouraged from acquiring, a majority of
our common stock, even if our stockholders believe that such an acquisition
would be in their interests. This could prevent an increase or cause a decline
in the price of our common stock.
OUR STOCK PRICE MAY CONTINUE TO BE VOLATILE
The price of our common stock has fluctuated substantially since our IPO in
June 1996 and may continue to do so. In addition, the stock market has
experienced significant price and volume fluctuations that have affected the
market prices of equity securities of many companies and that often have been
unrelated to the operating performance of these companies. These broad market
fluctuations may adversely affect the price of our common stock. Following
periods of volatility in stock prices, some companies have faced securities
class action litigation. If we were to face this type of litigation, which often
results in substantial costs and a diversion of management's attention and
resources, our business, operating results and financial condition could be
materially and adversely affected.
THE SALE, OR THE POSSIBILITY OF A SALE, OF A LARGE NUMBER OF THE SHARES COVERED
BY THIS PROSPECTUS COULD CAUSE OUR STOCK PRICE TO FALL
All of the shares of our common stock covered by this prospectus that were
issued to shareholders of EDL and STL are subject to a lock-up agreement. Under
this agreement, these shares will become eligible for sale on April 1, 2000. As
this date approaches, the price of our common stock may fall. Mr. Joshi, our
Chairman and Chief Executive Officer, beneficially owns a majority of the other
shares covered by this prospectus. If he sold large amounts of this common
stock, the price of our common stock would probably fall. In addition, these
sales, or the possibility of these sales, could make it more difficult for us to
sell common stock in the future.
WE MUST RETAIN OUR KEY EXECUTIVES
We are highly dependent on the services of our executive officers. We have
entered into employment contracts with each of them other than Mr. Joshi. Each
employment agreement has a term expiring more than twelve months after the date
of this prospectus. The loss of the services of any of these executive officers
could materially and adversely affect our business and operations.
FOREIGN SALES ENTAIL UNIQUE RISKS
We derived approximately 5% and 1% of our total sales from foreign markets
for the fiscal years ended September 30, 1998 and 1997, respectively. We expect
that foreign sales will represent a greater portion of our revenues in the
future. In addition, foreign sales of our products by both Raytheon and Lockheed
Martin represent an important percentage of their sales opportunities. The
following risks associated with foreign sales could materially and adversely
affect our business:
political and economic instability;
restrictive trade policies of foreign governments;
inconsistent product regulation by foreign agencies or governments;
currency valuation variations;
exchange control problems;
imposition of product tariffs; and
burdens of complying with a wide variety of international and U.S.
export laws and differing regulatory requirements.
To date, we have transacted our foreign sales in U.S. dollars, and payments have
generally been supported by letters of credit. If any future foreign sales are
transacted in a foreign currency or
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not supported by letters of credit, we could face losses due to foreign currency
fluctuations and difficulties associated with collection of accounts receivable
abroad. In the event any of these risks occur, there could be a material adverse
effect on our business, financial condition or results of operations.
WE HAVE NOT PAID AND DO NOT ANTICIPATE PAYING ANY DIVIDENDS
We have not paid any dividends on our common stock and intend to follow a
policy of retaining any earnings to finance the development and growth of our
business. Accordingly, we do not anticipate the payment of cash dividends in the
foreseeable future. However, the payment of dividends rests within the
discretion of the board and will depend upon, among other things, our earnings,
capital requirements, overall financial condition and any restrictions appearing
in our current loan agreements.
FORWARD-LOOKING STATEMENTS
This prospectus contains and incorporates by reference forward-looking
statements. The factors identified under 'Risk Factors' are important factors
(but not necessarily all important factors) that could cause our actual results
to differ materially from those expressed in any forward-looking statement.
Where any forward-looking statement includes a statement of the assumptions
or bases underlying that forward-looking statement, we caution that, while the
assumptions or bases are believed to be reasonable and are made in good faith,
assumed facts or bases almost always vary from actual results. The differences
between assumed facts or bases and actual results can be material, depending on
the circumstances. Where, in any forward-looking statement, we express an
expectation or belief as to future results, that expectation or belief is
expressed in good faith and is believed to have a reasonable basis. We cannot
assure that the statement of expectation or belief will result or be achieved or
accomplished. The words 'believe,' 'expect,' 'estimate,' 'project,'
'anticipate,' 'intend,' 'will,' 'could' and 'may' and similar expressions
identify the forward-looking statements.
RECENT DEVELOPMENTS
Warrant Redemption. On June 8, 1999, we completed the redemption of
warrants to purchase our common stock that were issued in connection with our
IPO and a 1995 private placement. A total of 5,125,837 warrants were exercised
before the June 8 deadline, increasing the total number of shares of common
stock outstanding to 17,426,568 as of June 15, 1999.
Termination of General Atronics Letter of Intent. On April 5, 1999, we
signed a letter of intent to acquire General Atronics Corporation, a
privately-held high technology defense electronics company. On June 2, 1999, we
announced that we reached a mutual agreement with General Atronics to terminate
our discussions regarding our proposed acquisition of General Atronics.
USE OF PROCEEDS
We will not receive any proceeds from the sale of common stock by the
selling stockholders.
11
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth the number of shares of common stock
beneficially owned by each of the selling stockholders as of June 15, 1999, and
covered by this prospectus, and the nature of any relationship that the selling
stockholders have had within the past three years with us. The shares offered by
this prospectus may be offered from time to time by the selling stockholders
named below.
<TABLE>
<CAPTION>
COMMON STOCK COMMON STOCK
OWNED PRIOR COMMON STOCK OWNED AFTER
TO THIS OFFERING BEING OFFERED THIS OFFERING(1)
---------------------------- ------------- -----------------------------------
NAME OF SELLING STOCKHOLDER SHARES % SHARES SHARES %
--------------------------- ------ - ------ ------ -
<S> <C> <C> <C> <C> <C>
UES Inc.(2)............................... 1,408,775 8.1% 1,408,775 0 *
James E. Clifford(3)(4)................... 695,666 4.0% 682,167 13,499 *
Edward W. Stefanko(3)(5).................. 882,166 5.1% 882,166 0 *
C. David Lambertson(3)(6)................. 882,167 5.1% 882,167 0 *
C. Hyland Schooley(3)(7).................. 652,750 3.8% 651,750 1,000 *
Leo S. Torresani(3)(8).................... 325,875 1.9% 325,875 0 *
Peter Oberbeck(3)(9)...................... 325,875 1.9% 325,875 0 *
Christopher J. Clifford(10)............... 100,000 * 100,000 0 *
Lisa A. Merkadeau(11)..................... 100,000 * 100,000 0 *
The Equity Group, Inc.(12)................ 45,000 * 45,000 0 *
John G. Gruenwald(13)..................... 15,500 * 10,000 5,500 *
Larry E. Clay(14)......................... 14,000 * 10,000 4,000 *
Ray A. Cox(14)............................ 10,000 * 10,000 0 *
David Ponitz(14).......................... 10,000 * 10,000 0 *
Total................................ 5,467,774 31.4% 5,443,775 23,999 *
</TABLE>
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* Less than one percent.
(1) Assumes that The Equity Group, Inc. exercises its warrant to purchase
45,000 shares covered by this prospectus, that all shares held by the
selling stockholder and covered by this prospectus will be offered and
sold, and that the shares will not be sold to affiliates of the selling
stockholder.
(2) Mr. Krishan K. Joshi, the Chairman, President and Chief Executive Officer
of Paravant, is the Chairman and a director of UES, and he owns
approximately 74% of the outstanding voting stock of UES. UES intends to
offer its shares covered by this prospectus to its shareholders, including
Mr. Joshi. See 'Plan of Distribution.'
(3) Messrs. Clifford, Stefanko, Lambertson, Schooley, Torresani and Oberbeck
were all shareholders of EDL or STL. Paravant completed the acquisition of
EDL and STL on October 8, 1998 in exchange for the Paravant shares received
by them and covered by this prospectus, $8.7 million in cash and three-year
$4.8 million notes bearing interest at the rate of 8%. In addition, a
contingent cash earn-out will be payable by Paravant under specified
circumstances over a period of up to five years based on the future profits
of EDL and STL.
(4) Mr. James Clifford is Paravant's Vice President of Mergers and Acquisitions
and a director.
(5) Mr. Stefanko is Paravant's President of EDL Operations and a director.
(6) Mr. Lambertson is Senior Vice President, Engineering of EDL.
(7) Mr. Schooley is Paravant's President of STL Operations and a director.
(8) Mr. Torresani is Vice President, Business Development, of STL.
(9) Mr. Oberbeck is a retired former employee of STL.
(10) Mr. Christopher Clifford is the son of Mr. James Clifford.
(11) Ms. Merkadeau is the daughter of Mr. James Clifford.
(12) On April 15, 1998, The Equity Group, Inc. was issued a warrant to purchase
these 45,000 shares of common stock pursuant to Sections 4(2) and 4(6) of
the Securities Act and Rule 506 of Regulation D thereunder. The warrants
are exercisable until April 14, 2003 and have an exercise price of $2.75
per share.
(13) Mr. Gruenwald is the Vice President of Finance of UES.
(14) Messrs. Clay, Cox and Ponitz are directors of UES.
12
<PAGE>
PLAN OF DISTRIBUTION
The common stock covered by this prospectus may be offered and sold from
time to time by the selling stockholders. The selling stockholders will act
independently of Paravant in making decisions with respect to the timing, manner
and size of each sale. As used herein, 'selling stockholders' includes pledgees,
donees, transferees and other successors in interest to the selling stockholders
selling shares received from a selling stockholder after the date of this
prospectus. Sales may be made on the Nasdaq National Market in ordinary
brokerage transactions or otherwise, at market prices prevailing at the time of
the sale, at prices related to the then-prevailing market price or in negotiated
transactions, including pursuant to an underwritten offering or pursuant to one
or more of the following methods: (1) purchases by a broker-dealer as principal
and resale by the broker-dealer for its account pursuant to this prospectus;
(2) ordinary brokerage transactions and transactions in which a broker solicits
purchasers; (3) block trades in which a broker-dealer so engaged will attempt to
sell the shares as agent but may take a position and resell a portion of the
block as principal to facilitate the transaction; and (4) exchange distributions
in accordance with applicable rules. In effecting sales, broker-dealers engaged
by the selling stockholders may arrange for other broker-dealers to participate.
Broker-dealers may receive commissions or discounts from the selling
stockholders in amounts to be negotiated immediately before the sale.
In connection with distributions of the common stock or otherwise, the
selling stockholders may enter into hedging transactions with broker-dealers. In
connection with these transactions, broker-dealers may engage in short sales of
the common stock in the course of hedging the positions they assume with the
selling stockholders. The selling stockholders may also sell the common stock
short and redeliver the common stock to close out the short positions. The
selling stockholders may also enter into option or other transactions with
broker-dealers which require the delivery to the broker-dealer of common stock,
which the broker-dealer may resell or otherwise transfer. The selling
stockholders may also loan or pledge common stock to a broker-dealer and the
broker-dealer may sell the shares so loaned, or upon a default the broker-dealer
may effect sales of the pledged shares.
In connection with sales of common stock, underwriters or agents may
receive compensation from the selling stockholders or from purchasers of the
shares for whom they may act as agents, in the form of discounts, concessions or
commissions. Underwriters may sell shares to or through dealers and the dealers
may receive compensation in the form of discounts, concessions or commissions
from the underwriters and/or commissions from the purchasers for whom they act
as agents. Underwriters, dealers and agents that participate in the distribution
of common stock may be deemed to be underwriters, and any discounts or
commissions received by them from the selling stockholders and any profit on the
resale of shares by them may be deemed to be underwriting discounts and
commissions under the Securities Act.
The selling stockholders may agree to indemnify any broker-dealer or agent
that participates in transactions involving sales of common stock against
certain liabilities, including liabilities under the Securities Act.
We have informed the selling stockholders that the anti-manipulation rules
under the Exchange Act may apply to sales of their shares in the market and to
the activities of the selling stockholders and their affiliates. These rules
prohibit, with certain exceptions, a selling stockholder or its affiliate from
bidding for or purchasing for an account in which the selling stockholder or
affiliate has a beneficial interest any stock that is the subject of a
distribution during a defined restricted period.
The offering of the common stock pursuant to this prospectus will terminate
at the time when all of the shares offered pursuant to this prospectus have been
sold by the selling stockholders.
Each of the selling stockholders other than UES is party to a lock-up
agreement contained in Paravant's acquisition agreement for EDL and STL. This
lock-up agreement generally prohibits these selling stockholders from selling or
otherwise disposing of any of the common stock until April 1, 2000. The lock-up
will expire before that date upon the occurrence of certain events,
13
<PAGE>
including a change in control of Paravant or the sale by UES and Mr. Joshi of
800,000 or more shares of Paravant. Those selling stockholders have agreed to
waive the provisions of this section upon the sale of the shares covered by this
prospectus by UES so long as 800,000 or more shares are not sold to persons
other than Mr. Joshi.
UES intends to offer its Paravant shares covered by this prospectus to its
current shareholders based on the class and proportion of UES shares owned by
these shareholders. Mr. Joshi owns approximately 74% of the outstanding voting
shares of UES and intends to purchase the Paravant shares to be offered to him
in connection with this prospectus. UES intends to offer the Paravant shares to
its shareholders at a discount from the current market price of the Paravant
shares or in exchange for the redemption of certain classes of UES stock.
LEGAL MATTERS
Holland & Knight LLP, Orlando, Florida, will pass upon certain legal
matters in connection with the offering and sale of the common stock covered by
this prospectus.
EXPERTS
The financial statements of Paravant as of September 30, 1998, and for each
of the years in the two year period ended September 30, 1998, and the combined
financial statements of EDL and STL as of September 30, 1998 and for the year
then ended and for the nine month period ended October 4, 1997, have been
incorporated by reference into this prospectus and in the registration statement
on Form S-3 in reliance upon the reports of KPMG LLP, independent certified
public accountants, incorporated by reference into this prospectus, and upon the
authority of said firm as experts in accounting and auditing.
DISCLOSURE OF SEC POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES
Paravant's Board of Directors has authorized it to provide a general
indemnification to its officers, directors and employees regarding any claims or
liabilities incurred in the course of their employment. The Florida Business
Corporation Act provides that each officer and director of Paravant shall be
indemnified by Paravant against certain costs, expenses and liabilities which he
or she may incur in his or her capacity as such. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to our directors,
officers, and controlling persons, we have been advised that in the opinion of
the SEC this indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
14
<PAGE>
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WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE ANY
INFORMATION OR TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST
NOT RELY UPON ANY UNAUTHORIZED INFORMATION. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY
JURISDICTION WHERE AN OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN OUR AFFAIRS SINCE THE DATE OF THIS
PROSPECTUS OR THAT THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AS OF
ANY TIME AFTER THE DATE OF THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Where You Can Find More Information......................... 2
Incorporation by Reference.................................. 2
Prospectus Summary.......................................... 3
Risk Factors................................................ 5
Forward-Looking Statements.................................. 11
Recent Developments......................................... 11
Use of Proceeds............................................. 11
Selling Stockholders........................................ 12
Plan of Distribution........................................ 13
Legal Matters............................................... 14
Experts..................................................... 14
Disclosure of SEC Position on Indemnification for Securities
Act Liabilities........................................... 14
</TABLE>
PARAVANT INC.
5,443,775 SHARES
OF COMMON STOCK
---------------------
PROSPECTUS
---------------------
July 22, 1999
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