<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2000
[ ] 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)
Florida 59-2209179
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
1615A West Nasa Boulevard
Melbourne, Florida 32901
(Address of Principal Executive Offices)
321-727-3672
(Issuer's Telephone Number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days
[X] Yes [ ] No
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
At May 9, 2000, there were outstanding 17,498,571
shares of Common Stock, $.015 par value per share.
Transitional Small Business Disclosure Format (check one): [ ] Yes [X] No
<PAGE>
PARAVANT INC.
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheet - March 31, 2000...................... 2
Condensed Consolidated Statements of Operations for the three
months ended March 31, 2000 and 1999.................................. 4
Condensed Consolidated Statements of Operations for the six
months ended March 31, 2000 and 1999.................................. 5
Condensed Consolidated Statements of Cash Flows for the six months
ended March 31, 2000 and 1999......................................... 6
Notes to Condensed Consolidated Financial Statements....................... 8
Item 2. Management's Discussion and Analysis of Operations................ 12
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders............... 17
Item 5. Other Information................................................. 17
Item 6. Exhibits and Reports on Form 8-K.................................. 17
SIGNATURES................................................................. 18
Index to Exhibits Filed with Form 10-QSB dated May 11, 2000................ 19
<PAGE>
PARAVANT INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
March 31, 2000
Assets
<TABLE>
<CAPTION>
(Unaudited)
<S> <C>
Current assets:
Cash and cash equivalents $ 3,158,860
Marketable securities 1,035,080
Accounts receivable 5,595,876
Costs and estimated earnings in excess of billings on
uncompleted contracts 4,231,474
Inventories 4,269,086
Deferred income taxes 1,290,905
Other current assets 241,513
-----------
Total current assets 19,822,794
-----------
Property, plant and equipment, net 2,593,200
Demonstration pool and custom molds, net 539,077
Employee note receivable 215,685
Other assets 1,405,821
Intangible assets, net 4,836,453
Goodwill, net 10,962,110
-----------
Total assets $40,375,140
===========
</TABLE>
See accompanying notes to condensed consolidated financial statements
Page 2
<PAGE>
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity
(Unaudited)
<S> <C>
Current liabilities:
Current installments of notes payable to related parties $ 985,000
Current installments of capital lease obligations 19,200
Accounts payable 1,407,596
Billings in excess of costs and estimated earnings on
uncompleted contracts 111,531
Provision for estimated losses on uncompleted contracts 306,151
Accrued expenses 1,433,033
-----------
Total current liabilities 4,262,511
-----------
Notes payable to related parties, excluding current installments 959,983
Mortgage payable 956,418
Capital lease obligations, excluding current installments 55,268
Deferred compensation 1,369,718
Deferred income taxes 127,324
-----------
Total liabilities 7,731,222
-----------
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 17,639,975 and outstanding
17,498,571 shares 264,601
Additional paid-in capital 21,711,196
Retained earnings 11,053,033
-----------
33,028,830
Less treasury stock, at cost, 141,404 shares (384,912)
-----------
Total stockholders' equity 32,643,918
-----------
Commitments and contingencies
Total liabilities and stockholders' equity $40,375,140
===========
</TABLE>
Page 3
<PAGE>
PARAVANT INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
For the three months ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
---- ----
(Unaudited)
<S> <C> <C>
Revenues $ 7,894,805 12,297,733
Cost of revenues 4,472,090 5,623,911
------------ ----------
Gross profit 3,422,715 6,673,822
Sales and marketing 492,388 513,989
Research, development & engineering 469,540 679,083
General and administrative 1,341,910 1,324,045
Amortization of goodwill and intangible assets 508,181 514,375
Non-recurring expense 685,813 --
------------ ----------
Total selling and administrative expense 3,497,832 3,031,492
------------ ----------
Income (loss) from operations (75,117) 3,642,330
Other income (expense):
Interest expense (46,464) (239,728)
Investment income 232,859 712
Miscellaneous 2,752 15,125
------------ ----------
Income before income taxes 114,030 3,418,439
Income tax expense 54,506 1,350,283
------------ ----------
Net income $ 59,524 2,068,156
============ ==========
Basic earnings per share $ .00 .17
============ ==========
Diluted earnings per share $ .00 .16
============ ==========
Weighted average number of common shares outstanding 17,506,124 12,299,889
============ ==========
Weighted average number of common and equivalent
shares outstanding 18,087,544 13,318,554
============ ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 4
<PAGE>
PARAVANT INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
For the six months ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
---- ----
(Unaudited)
<S> <C> <C>
Revenues $ 15,599,835 20,780,026
Cost of revenues 8,163,655 9,731,781
------------ -----------
Gross profit 7,436,180 11,048,245
Sales and marketing 996,615 1,024,604
Research, development & engineering 1,085,999 1,224,538
General and administrative 2,499,471 2,404,033
Amortization of goodwill and intangible assets 1,016,363 1,021,685
Non-recurring expense 685,813 --
------------ -----------
Total selling and administrative expense 6,284,261 5,674,860
------------ -----------
Income from operations 1,151,919 5,373,385
Other income (expense):
Interest expense (93,891) (486,672)
Investment income 245,963 47,105
Miscellaneous 9,120 27,716
------------ -----------
Income before income taxes 1,313,111 4,961,534
Income tax expense 627,667 1,959,806
------------ -----------
Net income $ 685,444 3,001,728
============ ==========
Basic earnings per share $ .04 .25
============ ==========
Diluted earnings per share $ .04 .24
============ ==========
Weighted average number of common shares outstanding 17,539,163 12,276,104
============ ==========
Weighted average number of common and equivalent
shares outstanding 18,043,873 12,701,185
============ ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 5
<PAGE>
PARAVANT INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the six months ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 685,444 3,001,728
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization 1,406,959 1,155,363
Loss on sale of fixed assets 206 --
Increase in marketable securities (including unrealized
appreciation of $221,297) (605,767) --
Non-recurring expense 685,813
Increase (decrease) in cash caused by changes in:
Accounts receivable 3,572,467 1,635,951
Amounts due from related party -- (2,281,902)
Contracts in progress (462,856) (6,438,901)
Inventory 347,404 (1,888,275)
Other assets (358,541) 300,089
Accounts payable (520,997) 1,194,818
Accrued expenses (1,147,744) (177,265)
Deferred compensation 524,059 213,037
Income taxes payable (717,879) 96,259
----------- -----------
Net cash provided (used) by operating activities 3,408,568 (3,189,098)
----------- -----------
Cash flows from investing activities:
Payments for acquired subsidiaries, net of cash acquired -- (8,989,332)
Acquisitions of property, plant and equipment (1,366,335) (165,317)
Proceeds from sale of property, plant and equipment 2,900 --
Proceeds from collection of note receivable -- 750,000
----------- -----------
Net cash used in investing activities (1,363,435) (8,404,649)
----------- -----------
</TABLE>
(Continued)
Page 6
<PAGE>
PARAVANT INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows, (Continued)
<TABLE>
<CAPTION>
2000 1999
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from financing activities:
Net proceeds on revolving line of credit -- 10,838,016
Repayments on long-term debt (517,516) (9,147)
Proceeds on mortgage payable 956,418 --
Payments for purchase of treasury stock (279,832) --
Repayments on capital lease obligations (45,070) (42,258)
Proceeds from issuance of common stock 50,314 1,719
Proceeds from exercise of warrants -- 200
Stock registration fees -- (22,440)
Payments for retirement of underwriters' warrants -- (50,000)
----------- ----------
Net cash provided by financing activities 164,313 10,716,090
----------- ----------
Net increase (decrease) in cash and cash equivalents 2,209,446 (877,657)
Cash and cash equivalents at beginning of the period 949,414 1,187,788
----------- ----------
Cash and cash equivalents at end of the period $ 3,158,860 310,131
=========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 106,600 296,512
=========== ==========
Income taxes $ 1,422,000 1,500,355
=========== ==========
Supplemental disclosure of noncash investing and financing
activities:
The Company issued stock through a cashless exercise of
stock options and received treasury stock $ 4,583 --
=========== ==========
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 three months ended
December 31, 1998
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 7
<PAGE>
PARAVANT INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2000 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, 1999 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) Basic and Diluted Earnings Per Share
Basic earnings per share for the three and six months ended March 31, 2000
and 1999 have been computed by dividing net income by the weighted average
number of common shares outstanding. Diluted earnings per share for the three
and six months ended March 31, 2000 and 1999 have been computed by dividing
net income by the weighted average number of common and equivalent 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 March 31
---------------------------
2000 1999
---- ----
<S> <C> <C>
Basic:
Weighted average number of common
shares outstanding 17,506,124 12,299,889
========== ==========
Diluted:
Weighted average number of common
shares outstanding 17,539,163 12,299,889
Dilutive stock options 545,711 439,163
Dilutive warrants 35,708 579,502
---------- ----------
18,087,544 13,318,554
========== ==========
</TABLE>
Page 8
<PAGE>
PARAVANT INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements-(Continued)
<TABLE>
<CAPTION>
Six Months Ended March 31
-------------------------
2000 1999
---- ----
<S> <C> <C>
Basic:
Weighted average number of common
shares outstanding 17,539,163 12,276,104
========== ==========
Diluted:
Weighted average number of common
shares outstanding 17,539,163 12,276,104
Dilutive stock options 477,505 371,484
Dilutive warrants 27,205 53,597
---------- ----------
18,043,873 12,701,185
========== ==========
</TABLE>
Options and warrants to purchase 620,017 and 684,872 shares of common stock
were excluded from the calculation of diluted earnings per share for the three
months ended March 31, 2000 and 1999, respectively, because their exercise
prices exceeded the average market price of common shares for the period.
Options and warrants to purchase 647,017 and 834,410 shares of common stock were
excluded from the calculation of diluted earnings per share for the six months
ended March 31, 2000 and 1999, respectively, because their exercise prices
exceeded the average market price of common shares for the period.
(c) Change in Accounting Estimate
During the quarter ended March 31, 2000, the Company made a change in
accounting estimate totaling $150,000 ($77,250 after tax) due to a change in the
estimated useful life of certain tooling and engineering assets related to the
Company's medical products. The Company will reach the end of the estimated
useful life of these assets with the completion of their last remaining medical
contract in the third quarter of 2000.
(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 Engineering Development Laboratories, Incorporated, Inc. ("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 additional consideration,
increasing the amount of goodwill, which will be amortized over the remaining
life of the asset. 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.
Page 9
<PAGE>
PARAVANT INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements-(Continued)
(3) Contracts
Contracts in progress and advance billings on such contracts consist of the
following as of March 31, 2000:
<TABLE>
<S> <C>
Costs incurred on uncompleted contracts $ 7,966,016
Estimated earnings thereon 1,969,229
-----------
9,935,245
Billings to date (6,121,453)
-----------
$ 3,813,792
===========
</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 $ 4,231,474
Billings in excess of costs and estimated earnings
on uncompleted contracts (111,531)
Provision for estimated losses on uncompleted contracts (306,151)
-----------
$ 3,813,792
===========
</TABLE>
(4) Inventories
The following is a summary of inventories as of March 31, 2000:
<TABLE>
<S> <C>
Raw materials $ 4,003,881
Work in process 483,292
Finished goods 202,063
-----------
4,689,236
Provision for obsolete inventory (420,150)
-----------
$ 4,269,086
===========
</TABLE>
Page 10
<PAGE>
PARAVANT INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements-(Continued)
(5) Property, Plant and Equipment
The following is a summary of property, plant and equipment as of March 31,
2000:
<TABLE>
<S> <C>
Land $ 420,330
Office equipment 1,873,401
Factory equipment 544,535
Leasehold improvements 329,098
Construction-in-progress 666,114
-----------
3,833,478
Accumulated depreciation (1,240,278)
-----------
$ 2,593,200
===========
</TABLE>
Page 11
<PAGE>
PART I - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results Of Operations
Three Months ended March 31, 2000 vs. March 31, 1999
Revenues for the quarter ended March 31, 2000 were $7,894,805, a decrease
of $4,402,928 or 36% from the quarter ended March 31, 1999 revenues of
$12,297,733. This decrease in revenues was primarily due to a decrease of
approximately 70% in signal intelligence products revenue which was partially
offset by an increase of approximately 66% in command, control, communications
and computers ("C4") products revenue in this quarter.
Gross profit was $3,422,715 for the quarter ended March 31, 2000 or 43% of
revenues, compared to $6,673,822 or 54% of revenues in the quarter ended March
31, 1999, a total decrease of $3,251,107 or 49%. This decrease in gross
profitability was primarily a result of the decreased revenues and related
product mix discussed above. In addition, the Company made a change in
accounting estimate totaling $150,000 due to a change in the estimated useful
life of certain tooling and engineering assets related to the Company's medical
products. The Company will reach the end of the estimated useful life of these
assets with the completion of their last remaining medical contract in the third
quarter of 2000.
Sales and marketing expenses of $492,388 for the quarter ended March 31,
2000 decreased by $21,601 or 4% from the quarter ended March 31, 1999 expenses
of $513,989. Sales and marketing expenses were substantially unchanged between
the periods. As a percentage of revenues, sales and marketing expenses were
approximately 6% and 4% in the quarters ended March 31, 2000 and 1999,
respectively.
Research, development and engineering expenses of $469,540 in the quarter
ended March 31, 2000 decreased by $209,543 or 31% from the quarter ended March
31, 1999 expenses of $679,083. As a percentage of revenues, research,
development and engineering expenses were 6% in both quarters ended March 31,
2000 and 1999. The decreased research, development and engineering expenses were
due primarily to the Company's completion of work on a large proposal, which was
subsequently awarded to the Company and resulted in all additional development
expenses being charged directly to the contract.
General and administrative expenses of $1,341,910 for the quarter ended
March 31, 2000 increased by $17,865 or 1% from the quarter ended March 31, 1999
expenses of $1,324,045. As a percentage of revenues, general and administrative
expenses were 17% and 11% for the quarters ended March 31, 2000 and 1999,
respectively. The general and administrative expenses increase was due primarily
to an increase in amounts due under deferred compensation arrangements. The
deferred compensation arrangements are related to the Company's investment in
marketable securities whereby increases or decreases in the fair value of
these investments have a corresponding increase or decrease in deferred
compensation. Accordingly, there is no effect on income before taxes.
Non-recurring expense was $685,813 for the quarter ended March 31, 2000
compared to $0 for the quarter ended March 31, 1999. The non-recurring expense
relates to the amendment and/or separation negotiations related to certain
employment agreements during the quarter ended March 31, 2000.
Income (loss) from operations was ($75,117) for the quarter ended March 31,
2000 compared to $3,642,330 in the quarter ended March 31, 1999, a decrease of
$3,717,447. As a percentage of revenues, The loss from operations for the
quarter ended March 31, 2000 was a negative 1% of revenues compared
Page 12
<PAGE>
to the income from operations for the quarter ended March 31, 1999 which was 30%
of revenues. The reduction in income from operations overall resulted primarily
from decreased revenues and gross profits, and the non-recurring expense as
discussed above.
Interest expense for the quarter ended March 31, 2000 was decreased by
$193,264 to $46,464 compared to $239,728 in the quarter ended March 31, 1999.
This decrease was due to a reduction in outstanding credit balances for the
period ended March 31, 2000.
Investment income for the quarter ended March 31, 2000 increased by
$232,147 to $232,859 compared to $712 for the quarter ended March 31, 1999. This
increase was due to the recognition of the increase in fair value of the
Company's marketable securities, classified as trading securities, of $221,297,
which are associated with the Company's deferred compensation plan, as discussed
above under general and administrative expenses.
The Company's net income was $59,524 in the quarter ended March 31, 2000
compared to $2,068,156 in 1999. Net income as a percentage of revenues decreased
to 1% in the quarter ended March 31, 2000 from 17% in the quarter ended March
31, 1999. The reduction in net income overall resulted from decreased revenues
and gross profits and the non-recurring expense, as discussed above.
The Company's basic earnings per share were $0.00 ($0.00 diluted) in the
quarter ended March 31, 2000 compared to $0.17 ($0.16 diluted) in 1999. The
reduction in earnings per share was due in part to the reduced net income, but
was also affected by the increase in shares outstanding from the exercise of
outstanding warrants following the warrant call which took place in June 1999.
Basic shares outstanding increased to 17,506,124 from 12,299,889 for the three
months ended March 31, 2000 and 1999, respectively, and fully diluted shares
outstanding increased to 18,087,544 from 13,318,554 for the three months ended
March 31, 2000 and 1999, respectively.
Six Months ended March 31, 2000 vs. March 31, 1999
Revenues for the six months ended March 31, 2000 were $15,599,835, a
decrease of $5,180,191 or 25% from the six months ended March 31, 1999 revenues
of $20,780,026. This decrease in revenues was primarily due to a decrease of
approximately 56% in signal intelligence products revenue which was partially
offset by an increase of approximately 41% in C4 products revenue in this six
months.
Gross profit was $7,436,180 for the six months ended March 31, 2000 or 48%
of revenues, compared to $11,048,245 or 51% of revenues in the six months ended
March 31, 1999, a total decrease of $3,612,065 or 33%. This decrease in gross
profitability was a direct result of the decreased revenues and the related
product mix, as discussed above. In addition, the Company made a change in
accounting estimate totaling $150,000 due to a change in the estimated useful
life of certain tooling and engineering assets related to the Company's medical
products. The Company will reach the end of the estimated useful life of these
assets with the completion of their last remaining medical contract in the third
quarter of 2000.
Sales and marketing expenses of $996,615 for the six months ended March 31,
2000 decreased by $27,989 or 3% from the six months ended March 31, 1999
expenses of $1,024,604. Sales and marketing expense were substantially unchanged
between the periods. As a percentage of revenues, sales and marketing expenses
were approximately 6% and 5% in the six months ended March 31, 2000 and 1999,
respectively.
Page 13
<PAGE>
Research, development and engineering expenses of $1,085,999 for the six
months ended March 31, 2000 decreased by $138,539 or 11% from the six months
ended March 31, 1999 expenses of $1,224,538. As a percentage of revenues,
research, development and engineering expenses were 7% and 6% in the six months
ended March 31, 2000 and 1999, respectively. The decreased research, development
and engineering expenses were due primarily to the Company's completion of work
on a large proposal during the quarter ended March 31, 2000, which was
subsequently awarded to the Company.
General and administrative expenses of $2,499,471 in the six months ended
March 31, 2000 increased by $95,438 or 4% from the six months ended March 31,
1999 expenses of $2,404,033. As a percentage of revenues, general and
administrative expenses were 16% and 12% in the six months ended March 31, 2000
and 1999, respectively. The general and administrative expenses increase was due
primarily to an increase in amounts due under deferred compensation
arrangements. The deferred compensation arrangements are related to the
Company's investment in marketable securities whereby increases or decreases in
the fair value of these investments have a corresponding increase or decrease in
deferred compensation. Accordingly, there is no effect on income before taxes.
Income from operations was $1,151,919 for the six months ended March 31,
2000 compared to $5,373,385 for the six months ended March 31, 1999, a decrease
of $4,221,466. As a percentage of revenues, income from operations decreased to
7% for the six months ended March 31, 2000 from 24% for the six months ended
March 31, 1999. The reduction in income from operations overall resulted
primarily from decreased revenues and gross profits, increased general and
administrative expenses and non-recurring expense as discussed above.
Interest expense for the six months ended March 31, 2000 decreased by
$392,781 to $93,891 compared to $486,672 for the six months ended March 31,
1999. This decrease was due to a reduction in outstanding credit balances for
the six months ended March 31, 2000.
Investment income for the six months ended March 31, 2000 increased by
$198,858 to $245,963 compared to $47,106 for the quarter ended March 31, 1999.
This increase was due to the recognition of the increase in fair value of the
Company's marketable securities classified as trading securities of $221,297,
which are associated with the Company's deferred compensation plan, as discussed
above under general and administrative expenses.
The Company's net income was $685,444 for the six months ended March 31,
2000 compared to $3,001,728 for the six months ended March 31, 1999. Net income
as a percentage of revenues decreased to 4% in the six months ended March 31,
2000 from 14% in the six months ended March 31, 1999. The reduction in net
income overall resulted primarily from decreased revenues and gross profits and
the non-recurring expense, as discussed above.
The Company's basic earnings per share were $0.04 ($0.04 diluted) for the
six months ended March 31, 2000 compared to $0.25 ($0.24 diluted) for 1999. The
reduction in earnings per share was due in part to the reduced net income, but
was also affected by the increase in shares outstanding from the exercise of
outstanding warrants following the warrant call which took place in June 1999.
Basic shares outstanding increased to 17,539,163 from 12,276,104 for the six
months ended March 31, 2000 and 1999, respectively, and diluted shares
outstanding increased to 18,043,873 for the six months ended March 31, 2000 from
12,701,185 for the six months ended March 31, 1999.
Page 14
<PAGE>
Liquidity and Capital Resources
The Company has floating rate financing with National City Bank (the
"Bank") in an amount up to $18,000,000 under a revolving line of credit with a
maturity date of December 31, 2001, convertible thereafter to five year term
debt. The loan agreement includes various loan covenants and restrictions of a
customary nature which may, under certain circumstances, limit the ability of
the Company to pay cash dividends, undertake additional acquisitions, make
certain changes in the Company's management, or otherwise limit obligations
undertaken by, or operations of, the Company. As of March 31, 2000, 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 EDL and STL, aggregating $1,944,983, as of March 31,
2000. 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.
The Company incurred $666,114 of costs, including capitalized interest of
$5,071, related to the acquisition and initial build-out of a new manufacturing
facility in Melbourne, acquired during the quarter ended March 31, 2000. The
Company expects the total costs to be approximately $1.6 million for the first
phase and the initial build-out to be complete by the quarter ended June 30,
2000. The acquisition of the land and building amounted to $558,655. The
acquisition and subsequent build-out was financed by a mortgage note payable
with First Union National Bank ("First Union"). The mortgage note payable
provides up to $3,200,000 with a variable interest rate based on the one month
LIBOR plus 1.65%. Payments of interest only will be made through December 2001
after which monthly payments of principal and interest will be made until note
matures on December 1, 2016.
The Company has a dependence upon a few major customers for a significant
portion of its revenues. This dependence for revenues has not been responsible
for any unusual fluctuations in operating results in the past, and management
does not believe this concentration will generate fluctuations in operating
results in the future. However, the potential impact of losing a major customer
without securing offsetting and equivalent orders could result in a significant
negative impact to the operating results of the Company. The gross margin
contributions of the Company's major customers are not generally different from
those from its other customers as a whole.
The Company's operating cash flow was $3,408,568 for the six months ended
March 31, 2000 compared to a $3,189,098 use of net cash in operating activities
during the six month period ended March 31, 1999. This resulted primarily from
decreases in accounts receivable and inventory, offset by decreases in accounts
payable and accrued expenses for the six months ended March 31, 2000.
As of March 31, 2000, management believes inventory balances are not in
excess of requirements for deliveries and normal minimum stocking levels.
Generally, accounts receivable at the end of each quarter are collected
within the following quarter. The Company's total outstanding accounts
receivable balance of $5,595,876 at March 31, 2000 has been subsequently reduced
by approximately $3,665,334 in cash collections. The Company has provided an
allowance for certain older balances of $66,962. This allowance is believed to
be sufficient to address any uncollectible balances outstanding as of March 31,
2000.
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
Page 15
<PAGE>
borrowings by the Company under the Company's then-existing line of credit or
other primary lending arrangement with its primary lender, with interest payable
annually, and matures on June 3, 2003.
As of March 31, 2000 and 1999, the Company's backlog was approximately $17.3
million and $18.8 million, respectively, consisting of firm fixed price purchase
orders. These purchase orders are expected to generate profits, 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. In addition to the firm fixed price purchase orders, the Company has
approximately $7.9 million in unfunded deliverables from an indefinite delivery,
indefinite quantity ("IDIQ") contract to be completed over the next 48 months.
On November 2, 1999, the Board of Directors authorized the Company to
repurchase up to 1,000,000 of its outstanding shares of common stock within the
twelve month period following such date for a maximum purchase price, including
commissions, not to exceed $3,500,000 in the aggregate. During the six months
ended March 31, 2000, the Company repurchased 102,673 shares of its common stock
for a total cost of $384,914 at an average purchase price of $2.72 per share.
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.
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.
Page 16
<PAGE>
Part II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of the Shareholders of the Company (the "Annual
Meeting") was held on March 23, 2000. At the Annual Meeting, the shareholders of
the Company voted upon the election of seven directors, and all seven nominees
were elected, with the votes being cast as follows:
<TABLE>
<CAPTION>
Name Number of Votes For Number of Votes Withheld
- ---- ------------------- ------------------------
<S> <C> <C>
Krishan K. Joshi 14,276,875 1,032,119
Richard P. McNeight 14,262,875 1,046,119
William R. Craven 14,271,800 1,037,194
Michael F. Maguire 14,269,975 1,039,019
John P. Singleton 14,270,875 1,038,119
James E. Clifford 14,265,875 1,043,119
C. Hyland Schooley 14,266,375 1,042,619
</TABLE>
No other director's term of office continued after the Annual Meeting. This was
the only matter voted upon at the Annual Meeting.
Item 5. Other Information
Ed Stefanko resigned as EDL's President and Chief Executive Officer
effective January 21, 2000 for personal reasons. The Company appointed Brian
Kirby as President of EDL effective January 24, 2000. An amendment to Ed
Stefanko's employment contract is attached as Exhibit 10.57.
The Company is in the process of establishing Principle Executive Offices
at Morristown, New Jersey. For personal reasons, Kevin J. Bartczak, the
Company's Vice President, Chief Financial Officer and Treasurer, has decided to
seek other professional opportunities instead of joining the relocation.
Accordingly, on March 27, 2000, the Company and Mr. Bartczak entered into a
separation agreement. The separation agreement is attached as Exhibit 10.58.
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.**
10.57 Amendment to Employment Agreement between Edward W. Stefanko and
Paravant Inc., dated January 14, 2000.
10.58 Severance Agreement between Kevin J. Bartczak and Paravant Inc., dated
March 27, 2000.
</TABLE>
Page 17
<PAGE>
<TABLE>
<S> <C>
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.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by Registrant during the quarter
ended March 31, 2000.
</TABLE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Paravant Inc.
By /s/ Kevin J. Bartczak
---------------------------------------------------
Kevin J. Bartczak,
Vice President, Treasurer and Chief Financial Officer
(as both a duly authorized officer of Registrant
and as principal financial officer of Registrant)
Date: May 11, 2000
Page 18
<PAGE>
Paravant Inc.
Index to Exhibits filed with Form 10-QSB dated February 4, 2000
<TABLE>
<CAPTION>
Exhibit Description of Exhibit
- ------- ----------------------
<S> <C>
3(i) Amended and Restated Articles of Incorporation.*
4.2 Amended and Restated Bylaws.**
10.57 Amendment to Employment Agreement between Edward W. Stefanko and Paravant Inc.,
dated January 14, 2000.
10.58 Severance Agreement between Kevin J. Bartczak and Paravant Inc.,
dated March 27, 2000.
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 19
<PAGE>
Exhibit 10.57
AMENDMENT TO EMPLOYMENT AGREEMENT
To: Edward W. Stefanko
President and CEO of EDL
From: Krishan J. Joshi
Chairman and CEO of Paravant Inc.
Reference: Our negotiation this date of your resignation
Date: January 14, 2000
Your resignation will be effective no later than January 21, 2000, with your
signature on this settlement agreement.
1. EDL/Paravant will continue to pay your salary and certain benefits.
a. An annual salary of $169,300 until March 31, 2002.
b. A non-qualified deferred compensation (funded) of 40% of your salary,
which is $67,720 based upon current plan.
c. Current personal leave balance earned as of January 14, 2000, maximum
of 14 days, will be paid as a lump sum at the time of your resignation.
d. Continued premiums for life insurance of $169,300 (1 x your salary).
e. Continuation of health care coverage for employee and spouse until
March 31, 2002, after which you shall be covered for as long as you
remain qualified under the special amendment to Plan No. 501.
Note: Payment of the above will be treated as if Edward W. Stefanko remains
an employee.
2. Your participation in the earn-out, if any, under the Acquisition Agreement
will remain unaffected by the termination of your employment.
3. You agree not to bring any action against Paravant based on the original
employment agreement.
We intend to appoint Brian Kirby as President and CEO of EDL next week, and we
appreciate your recommendation of key employees.
/s/ Edward W. Stefanko 1-14-2000
- ------------------------------------------- ---------
Edward W. Stefanko, President and CEO of EDL Date
<PAGE>
Exhibit 10.58
SEPARATION AGREEMENT
This Separation Agreement ("Agreement") is made and entered into as of
March 27, 2000, by and between Paravant Inc., a Florida corporation (the
"Company") and Kevin J. Bartczak ("Bartczak").
Background
Bartczak is currently employed by the Company as its Vice President, Chief
Financial Officer and Treasurer pursuant to an Employment Agreement dated
January 1, 1999 (the "Employment Agreement"). The Company and Bartczak wish
to terminate the Employment Agreement and to mutually, amicably and finally
settle all matters relating to Bartczak's employment with and separation
from the Company. In consideration of the mutual promises contained herein
and for other good valuable consideration, the receipt, adequacy and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
Terms
1. Termination of Employment. Bartczak and the Company hereby
agree to terminate Bartczak's employment with the Company pursuant to the
Employment Agreement by mutual agreement, effective as of June 30, 2000
(the "Last Day Worked"); provided, however, that Bartczak may elect under
this Agreement to terminate his employment with the Company pursuant to the
Employment Agreement prior to June 30, 2000 to begin employment with
another business entity (an "Early Termination"), in which case Bartczak's
"Last Day Worked" hereunder shall be his final working day with the Company
prior to his departure for employment with the other business entity.
Except as provided in this Agreement, from the date of this Agreement
through the Last Day Worked, Bartczak shall continue to receive his current
compensation and benefits from the Company pursuant to the Employment
Agreement. Except as provided in this Agreement, from and after the Last
Day Worked, Bartczak shall not be entitled to receive any further
compensation or benefits from the Company pursuant to the Employment
Agreement or otherwise.
2. Duties. From the date of this Agreement through the Last Day
Worked, Bartczak shall continue to devote his full business time and
attention to the performance of his duties as set forth in Section 3 of the
Employment Agreement; provided, however, that the Company agrees that
Bartczak may use reasonable amounts of time to pursue and interview for
other employment so long as such efforts do not interfere with his duties
under Section 3 of the Employment Agreement.
3. Severance Payments.
3.1 For a period of 6 months following Bartczak's Last Day
Worked, the Company shall make severance payments to Bartczak in the form
of continuation of his annual base salary of $121,000 in effect on the Last
Day Worked in regular installments in accordance with the Company's usual
payroll practices.
1
<PAGE>
3.2 Upon the Company's first regular payroll date following the
end of the 6-month period set forth in Section 3.1 above, the Company shall
make a lump sum payment to Bartczak equal to one-half of his annual base
salary of $121,000 in effect on the Last Day Worked.
3.3 Notwithstanding the foregoing, in the event of an Early
Termination under Section 1 above, in lieu of the payments referred to in
Sections 3.1 and 3.2 above, the Company shall make a lump sum payment to
Bartczak equal to his annual base salary of $121,000 in effect on the Last
Day Worked upon the Company's first regular payroll date following his Last
Day Worked.
4. Health Insurance. Bartczak will be provided with separate
notice of his COBRA rights. In the event Bartczak elects health care
continuation coverage under COBRA, the Company will pay his COBRA insurance
premiums (except that Bartczak will continue to pay any applicable employee
share of these premiums as if he were an active employee) until the earlier
of (i) 6 months after the Last Day Worked or (ii) the date upon which
Bartczak has become employed by another business entity and becomes
eligible for coverage by a health insurance plan providing substantially
similar coverage. Thereafter, Bartczak shall be solely responsible for the
payment of any COBRA premiums.
5. Severance Period Benefits. Provided that there has not been
an Early Termination under Section 1 above, for a period of 6 months
following Bartczak's Last Day Worked, the Company shall provide the
following benefits to Bartczak:
5.1 The Company shall pay for Bartczak's cell phone charges in
accordance with his AT&T Digital One Rate Plan (not to exceed $120 per
month).
5.2 The Company shall pay Bartczak's Eau Gallie Yacht Club
expenses (not to exceed $250 per month) in addition to any applicable
monthly or annual dues.
5.3 Bartczak shall be entitled to retain his voice mail box at
the Company and shall have reasonable access to temporary administrative
assistance (including fax and typing service), such assistance to be
coordinated through the Company's Director of Human Resources.
6. Other Agreements.
6.1 Following his Last Day Worked, Bartczak shall be entitled to
retain his Sony laptop computer and its accessories (and Bartczak shall be
responsible for any related tax liability).
6.2 Bartczak shall continue to have the use of the automobile
leased for him by the Company for 30 days following his Last Day Worked,
and the Company shall pay all taxes, insurance and lease payments during
such period. Bartczak shall return the leased automobile to the Company
immediately following the end of such 30 day period.
6.3 Notwithstanding the provisions of Section 2.01 of the
Non-Qualified Designated Employee Deferred Compensation Plan and Agreement
dated December 15, 1998 (the "Plan") requiring that Bartczak continue
employment for three years from the date of the Plan, Bartczak will be
deemed to have earned all benefits that have accrued under the Plan as of
the Last Day Worked. In addition, at the time of any payment made to
Bartczak pursuant to Section 3 of this Agreement, the Company also shall
credit to Bartczak under the Plan an amount equal to 20% of such payment,
which amount shall be treated as additional deferred compensation earned
under the Plan (the "Severance Deferred Compensation"). Such accrued
benefits under the Plan (including the Severance Deferred
2
<PAGE>
Compensation), and all earnings through the date of payment provided in
accordance with Section 1.02 of the Plan (which together shall be referred
to as the "Deferred Compensation"), shall be paid in a single lump sum (net
of any withholding taxes) on the first anniversary of the Last Day Worked,
provided that Bartczak has not violated Article XV of the Plan during such
one-year period. Until such time as the foregoing Deferred Compensation is
paid to Bartczak, all terms and conditions of the Plan shall remain in
effect except as specifically modified herein, and Bartczak shall remain a
general unsecured creditor of the Company subject to the forfeiture
provisions of Section 2.01 and Article XV of the Plan.
6.4 Bartczak shall continue to accrue vacation during the period
commencing on the date of this Agreement and ending on his Last Day Worked
in accordance with the Company's prevailing policy for its operating
executives and may use all such accrued vacation (in addition to any
previously accrued vacation) prior to his Last Day Worked.
7. Stock Options. Bartczak and the Company acknowledge that
Bartczak previously has been granted options to purchase shares of Company
common stock as set forth on Exhibit A to this Agreement (the "Options").
Bartczak and the Company agree that, notwithstanding the terms of the
Options and their related agreements, all unvested Options shall become
fully vested and immediately exercisable on the Last Day Worked. Bartczak
shall have 30 days following the Last Day Worked to exercise any such
Options, and such Options will terminate if not exercised; provided,
however, that if the Company's Incentive Stock Option Plan is amended prior
to the Last Day Worked to permit a longer period for exercise following
termination of employment, Bartczak shall have such longer period to
exercise such Options. Bartczak may, at his sole election with respect to
any of the Options, engage in a cashless exercise of his Options under
Section 5(C) of the Incentive Stock Option Plan through the delivery of
shares of common stock with a fair market value at the time of exercise of
the Options equal to the aggregate exercise price of the Options; provided,
however, that the foregoing shall not obligate Bartczak to engage in a
cashless (or other) exercise of any of his Options.
8. Taxes. Bartczak shall be solely responsible for paying any
taxes on amounts he receives pursuant to this Agreement. Bartczak agrees
that the Company will withhold all taxes it determines it is legally
required to withhold.
9. Certain Indemnity. Following Bartczak's Last Day Worked, the
Company will indemnify and defend Bartczak 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 Bartczak
originating as a result of association of Bartczak with the Company,
including but not limited to all claims, liability, damage, loss, expense,
attorneys' fees, court costs, judgments, settlements, and fines.
10. Survival of Certain Provisions of Employment Agreement.
Notwithstanding any other provision of this Agreement, Sections 11, 12 and
13 of the Employment Agreement shall remain in full force and effect and
continue to be binding upon the parties; provided, however, that for the
purposes of Section 11 of the Employment Agreement, the one year period
shall commence on January 1, 2001.
11. Nondisclosure. Bartczak shall keep the terms and existence
of this Agreement completely and strictly confidential, and shall not
disclose any information concerning this Agreement to any person other than
his attorneys and accountants or as required by law. Bartczak recognizes
that the Company may be obligated to disclose this Agreement and the terms
and conditions hereof in any securities offering documents and periodic
reports the Company may become required to file under U.S. federal
securities laws.
3
<PAGE>
12. Mutual Release. In consideration of the mutual promises
contained herein, and except as specifically agreed in this Agreement, the
Company hereby releases and forever discharges Bartczak, and Bartczak
hereby releases and forever discharges the Company, its affiliates and each
of their respective directors, officers, employees, agents, representatives
and attorneys, from any and all claims, demands or liabilities whatsoever
in connection with or arising from Bartczak's employment with the Company
or the termination of that employment, including but not limited to: any
and all claims for breach of contract, express or implied; any form of
compensation or benefits; wrongful termination; constructive discharge;
discrimination of any type (including but not limited to any form of age
discrimination under the Age Discrimination in Employment Act); any tort of
any nature; and any and all client claims arising under any federal, state
or local statute, law, ordinance or regulation.
13. Dispute Resolution. If a legally cognizable dispute arises
out of or relates to this Agreement or the breach, termination or validity
thereof, or the compensation, promotion, demotion, discipline, discharge or
terms and conditions of employment of Bartczak, and if said dispute cannot
be resolved through direct discussions, the parties agree to try in good
faith to settle the dispute by mediation administered by the American
Arbitration Association under its National Rules for the Resolution of
Employment Disputes. If the parties cannot settle the dispute by mediation,
the parties agree to settle the dispute by binding arbitration in
accordance with the National Rules for the Resolution of Employment
Disputes of the American Arbitration Association. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof, except that disputes involving or concerning the provisions of
Sections 11, 12 and 13 of the Employment Agreement, may, at the Company's
discretion, be settled by any court having jurisdiction thereof or decided
by mediation/arbitration pursuant to this section. Disputes subject to
binding arbitration pursuant to this section include all tort and contract
claims as well as claims brought under all applicable federal, state or
local statutes, laws, regulations or ordinances. Each party shall pay for
its own fees and expenses of mediation and arbitration.
14. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the law of the State of Florida.
15. Severability. If any provision or part of any provision of
this Agreement shall not be valid for any reason, such provision shall be
entirely severable from, and shall have no effect upon, the remainder of
this Agreement.
16. The Company's Assignees and Successors. The Company may
assign this Agreement to its successors and assigns and any such successors
and assigns shall be entitled to all of the Company's rights hereunder.
17. Entire Agreement. This Agreement constitutes the sole and
entire Agreement between the Company and Bartczak. All prior contracts,
agreements, or promises of any kind relating to the employment relationship
of the parties are hereby canceled and discharged and have no further
effect whatsoever. Except as specifically provided herein, this Agreement
can be modified only by a written agreement duly executed by the parties
hereto.
18. Plain Meaning. This Agreement shall be interpreted in
accordance with the plain meaning of its terms and not for or against the
drafter.
4
<PAGE>
19. Voluntary Nature of Agreement. The parties hereto are
entering into this Agreement voluntarily without duress on the part of
either party. Bartczak has been advised to, and has had an opportunity to,
consult with an attorney before signing this Agreement. Bartczak has also
been advised that he may take up to twenty-one (21) days to consider this
Agreement before signing it and that he may revoke this Agreement within
seven (7) days after signing it. Should Bartczak revoke this Agreement
within seven (7) days after signing it, this Agreement shall become null
and void.
20. Nondisparagement. Bartczak agrees that he will not at any
time intentionally disparage the Company in any manner or the personal or
business reputation of any of its directors or officers, and the Company
agrees that neither it nor its officers or directors will at any time
intentionally disparage Bartczak or his personal or business reputation;
provided, however, that each party shall testify truthfully under oath
pursuant to a subpoena, court order or other valid legal process.
5
<PAGE>
IN WITNESS WHEREOF, the parties have voluntarily and with
knowledge of their rights executed this Agreement as of the date first
written above.
BARTCZAK:
/s/ Kevin J. Bartczak
----------------------------
Kevin J. Bartczak
COMPANY:
Paravant Inc.
By /s/ William R. Craven
--------------------------
William R. Craven
President and Chief Operating Officer
6
<PAGE>
Exhibit A
---------
Options
<TABLE>
<CAPTION>
Grant Date Type of Option Number of Shares Exercise Price
---------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
3/2/1995 Incentive Stock Option 30,000 $0.7170
11/16/95 Incentive Stock Option 15,000 $1.3330
11/29/96 Incentive Stock Option 15,000 $5.1250
11/20/97 Incentive Stock Option 30,000 $4.2500
11/19/98 Incentive Stock Option 50,000 $1.9380
12/03/99 Incentive Stock Option 25,000 $2.6250
-------
Total: 165,000
- ----- =======
</TABLE>
Page 1 of 1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET OF PARAVANT INC. AND SUBSIDIARIES AS OF MARCH 31, 2000 AND THE RELATED
STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<PERIOD-TYPE> 6-MOS
<CASH> 3,158,860
<SECURITIES> 1,035,080
<RECEIVABLES> 5,662,838
<ALLOWANCES> 66,962
<INVENTORY> 8,500,560
<CURRENT-ASSETS> 19,822,794
<PP&E> 3,833,478
<DEPRECIATION> 1,240,277
<TOTAL-ASSETS> 40,375,140
<CURRENT-LIABILITIES> 4,262,511
<BONDS> 2,901,402
<COMMON> 264,601
0
0
<OTHER-SE> 32,764,229
<TOTAL-LIABILITY-AND-EQUITY> 40,375,140
<SALES> 7,894,805
<TOTAL-REVENUES> 7,894,805
<CGS> 4,472,091
<TOTAL-COSTS> 4,472,091
<OTHER-EXPENSES> 3,497,832
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46,464
<INCOME-PRETAX> 114,030
<INCOME-TAX> 54,506
<INCOME-CONTINUING> 59,524
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 59,524
<EPS-BASIC> 0.00
<EPS-DILUTED> 0.00
</TABLE>
