-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UHH3ofUoFxBS5i3ELebaV4FsHqz0NeOIroz1fKfD5ddgxDTZsELQ9DqMZIJwyxh+ wKH8N+ZtxbBl48wt8ylnKQ== 0001058217-00-000205.txt : 20000504 0001058217-00-000205.hdr.sgml : 20000504 ACCESSION NUMBER: 0001058217-00-000205 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000503 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PARAGON ACQUISITION CO INC CENTRAL INDEX KEY: 0001017484 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-07775 FILM NUMBER: 618365 BUSINESS ADDRESS: STREET 1: 277 PARK AVE CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2129411400 MAIL ADDRESS: STREET 1: 277 PARK AVE CITY: NEW YORK STATE: NY ZIP: 10172 10-Q 1 FORM 10-Q ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended March 31, 2000 Commission File No. 333-7775 - -------------- ----------------------------- PARAGON ACQUISITION COMPANY, INC. - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in its Charter) DELAWARE 13-3895049 -------- ---------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 277 Park Avenue New York, NY 10017 ---------------- -------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212)350-5367 ------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. Class (Outstanding at March 31, 2000) ----- ------------------------------- Common Stock, $.01 par value 3,414,191 - ---------------------------- --------- ================================================================================ PARAGON ACQUISITION COMPANY, INC. FORM 10-Q INDEX PART I. FINANCIAL INFORMATION (UNAUDITED) PAGE - ------------------------------ ---- Balance Sheets- December 31, 1999 and March 31, 2000 3 Statements of Operations - Quarters ended March 31, 1999 and March 31, 2000, and Period from June 19, 1996 (inception) to March 31, 2000 4 Statement of Stockholders' Equity (Deficit) - Period from June 19, 1996 (inception) to March 31, 2000 5 Statements of Cash Flows - Quarters ended March 31, 1999 and March 31, 2000, and Period from June 19, 1996 (inception) to March 31, 2000 6 Notes to Financial Statements 7-9 Management's Discussion and Analysis of Financial Condition and Results of Operations 10 PART II. OTHER INFORMATION 11 Signatures 12 Exhibit (27) 13 PARAGON ACQUISITION COMPANY, INC. (a corporation in the development stage) BALANCE SHEETS ASSETS
December 31 March 31 1999 2000 ---- ---- (unaudited) Current Assets Cash 90 $ 4,079 Prepayments 20,800 5,200 ------ ----- Total Assets 20,890 9,279 ====== ======= LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities Accrued expenses $1,500 $6,400 Loan due to Stockholder PAR Holding Co., LLC, plus accrued interest (Note 3) 308,208 318,133 ------- ------- Total Current Liabilities 309,708 324,533 ------- ------- Commitment (Note 4) Stockholders' deficit (Notes 2, 5 and 6): Preferred stock, $.01 par value shares - authorized: 1,000,000; None issued Common stock, $.01 par value shares - authorized: 20,000,000; outstanding 3,414,191 and 3,414,191 34,141 34,141 Additional paid-in capital 121,000 121,000 Deficit accumulated during the development stage (443,959) (470,395) --------- --------- Total stockholders' deficit (288,818) (315,254) -------- --------- $ 20,890 $ 9,279 ========== =========
See accompanying notes to Financial Statements. 3 PARAGON ACQUISITION COMPANY, INC. (a corporation in the development stage) STATEMENTS OF OPERATIONS (unaudited)
Period from June 19, 1996 Quarter ended Quarter Ended (inception) to March 31, 1999 March 31, 2000 March 31, 2000 -------------- -------------- -------------- General and administrative expenses $25,562 $ 22,196 $305,305 Write-off of deferred 134,612 registration costs (Note 1) - - Interest expense 3,175 4,240 30,478 ----- ----- ------ Net loss for the period 28,737 $26,436 $470,395 ====== ======= ======== Net loss per common share, basic and diluted ($0.01) ($0.01) Weighted average common shares outstanding 3,414,191 3,414,191 ========= =========
See accompanying notes to Financial Statements. 4 PARAGON ACQUISITION COMPANY, INC. (a corporation in the development stage) STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) Period Ended March 31, 2000
Deficit Accumulated Additional During the Total Common Paid-In Development Stockholders' Shares Amount Capital Stage Equity(Deficit) ------- ------ ------- ----- --------------- Balance, January 1, 1998 3,414,919 $34,141 $121,000 ($80,256) $74,885 - Net loss for the year ended December 31, 1998 - - - (127,041) (127,041) ----------- ----------- ------------ ------------ ------------ Balance, December 31, 1998 3,414,191 $34,141 $121,000 ($207,297) ($52,156) - Net loss for the year ended December 31, 1999 - - - ( 236,662) ( 236,662) ----------- ----------- ------------ ------------ ------------ Balance, December 31, 1999 3,414,191 $34,141 $121,000 ($443,959) ($288,818) Net loss for the quarter ended March 31, 2000 (unaudited) - - - ( 26,436) ( 26,436) --------- --------- Balance, March 31, 2000 (unaudited) 3,414,191 $34,141 $121,000 ($470,395) ($315,254) ========== ======= ======== ========== ==========
See accompanying notes to Financial Statements. 5 PARAGON ACQUISITION COMPANY, INC. (a corporation in the development stage) STATEMENTS OF CASH FLOWS (unaudited)
Period from June 19, 1996 Quarter ended Quarter Ended (inception) to March 31, 1999 March 31, 2000 March 31, 2000 -------------- -------------- -------------- Cash flows from operating activities Net loss $(28,737) (26,436) (470,395) Adjustments to reconcile net loss to net cash used in operating activities Write-off of deferred registration costs - - 134,612 Changes in assets and liabilities: (Increase) Decrease in prepayments 18,720 15,600 (5,200) Increase in accrued expenses and interest 8,175 9,140 36,878 ------- ------ ------ Net cash used in operating activities $ (1,842) (1,696) (304,105) ========= ======= ========= Cash flows from financing activities: Proceeds from sale of common stock - - 155,141 Loan from PAR Holding Co., LLC - 5,685 287,655 Deferred registration costs - - (134,612) -------- -------- --------- Net cash provided by financing activities $ 0 5,685 308,184 -------- -------- ------- Net increase (decrease) in cash $ (1,842) (3,989) $ 4,079 Cash, beginning of period 8,097 90 ---0--- -------- -------- -------- Cash, end of period $ 6,255 $ 4,079 $ 4,079 ======= ======= =======
See accompanying notes to Financial Statements. 6 PARAGON ACQUISITION COMPANY, INC. (a corporation in the development stage) Notes to Financial Statements 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. BASIS OF PRESENTATION The accompanying financial statements are unaudited; however, in the opinion of management, all adjustments necessary for a fair statement of financial position and results for the stated periods have been included. These adjustments are of a normal recurring nature. Results for interim periods are not necessarily indicative of the results to be expected for an entire fiscal year. It is suggested that these condensed financial statements be read in conjunction with the audited financial statements and notes thereto as of and for the period ended December 31, 1999. GENERAL The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company is in the development stage and has incurred a loss since its inception and there can be no assurance that the planned acquisition activities of the Company (see Note 2) will be successful in the near term. The Company has, however, other funding sources available, principally lending commitments from related parties, sufficient to sustain operations for at least the next twelve months. INCOME TAXES The Company follows Statement of Financial Accounting Standards No. 109 ("FAS 109"), "Accounting for Income Taxes." FAS 109 is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. The Company has net operating loss carry forwards of approximately $335,000 available to reduce any future income taxes. The tax benefit of these losses, approximately $134,000, has been offset by a valuation allowance due to the uncertainty of its realization. DEFERRED REGISTRATION COSTS Through December 31, 1997, the Company had incurred deferred registration costs of $134,612 relating to expenses incurred in connection with the Proposed Distribution (See Note 2). No further registration costs were incurred during the period ended March 31, 2000. Since the Registration Statement on Form S-1 has expired and is no longer effective to permit distribution of the Shares and Subscription Rights in connection with the Proposed Distribution (Note 2) without an amendment or an additional or new Registration Statement being filed and approved, the deferred registration costs of $134,612 were written off in the Statement of Operations for the year ended December 31, 1999. 7 USE OF ESTIMATES The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NET LOSS PER COMMON SHARE In 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share." Statement 128 replaced the calculation of primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Diluted earnings per share is very similar to the previously reported fully diluted earnings per share. All earnings per share amounts for all periods have been presented to conform to the Statement 128 requirements. COMPREHENSIVE INCOME Effective January 1, 1998, Paragon Acquisition Company, Inc. (the "Company") adopted SFAS No. 130, "Reporting Comprehensive Income", which establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Adoption of the standard has had no effect on financial statement disclosures. 2. ORGANIZATION AND BUSINESS OPERATIONS. The Company was incorporated in Delaware on June 19, 1996 to serve as a vehicle to effect a merger, exchange of capital stock, asset acquisition or other business combination (the "Business Combination") with an operating business (the "Target Business"). At March 31, 2000, the Company had not yet commenced any formal business operations and all activity to date relates to the Company's formation and proposed fund raising. The Company's fiscal year end is December 31. The Company's ability to commence operations is contingent upon its ability to identify a prospective Target Business and raise the capital it will require through the issuance of equity securities, debt securities, bank borrowings or a combination thereof. The Company intends to obtain adequate financial resources through the registration of a distribution of shares of its Common Stock and Subscription Rights to its shareholders (the "Distribution"). The Subscription Rights will entitle the holder to purchase two (2) shares of Common Stock of the Company for each Subscription Right held for a purchase price to be determined by the Company's Board of Directors at the time a Business Combination is identified, such price to be not more than $2.00 per Subscription Right. Subscription Rights will not be exercisable until after a Post-Effective Amendment to the Form S-1 Registration Statement to be filed by the Company with the Securities and Exchange Commission describes a Business Combination, establishes the Subscription Price and the number of Subscription Rights which may be exercised in such Subscription Period and specifies the Subscription Period established by the Company. The Shares to be distributed to the shareholders, the Subscription Rights and any Shares issuable upon exercise of Subscription Rights are being held in escrow and may not be sold or transferred until the Company has consummated a Business Combination. After the Business Combination is consummated, the Shares will be released from escrow. 8 Due to the terms of the Distribution, the Company has not established a time period within which to exercise the Subscription Rights as such exercise is dependent upon the identification of a Target Business. The Company anticipates that, due to the time constraints imposed on the management of the Company, it is not possible to predict the length of the identification process. 3. LOAN DUE TO PAR HOLDING CO., LLC. On June 4, 1997, PAR Holding Co., LLC, a major stockholder, loaned the Company $60,000. Such loan is evidenced by a Promissory Note dated June 4, 1997, in the principal amount of $60,000. During November, 1997, March, 1998, May, 1998, and September, 1998, May, 1999 and March, 2000 further loans for the sums of $10,000, $26,970, $100,000, $10,000, $75,000 and $5,685 respectively, were received. The loans bear interest at the annual rate of 5.5%, compounded monthly, and are payable on demand. 4. COMMITMENT. The Company presently occupies office space provided by a stockholder. Such stockholder has agreed that, until the acquisition of a Target Business by the Company, it will make such office space, as well as certain office and secretarial service, available to the Company, as may be required by the Company from time to time at no charge. 5. PREFERRED STOCK. The Company is authorized to issue 1,000,000 shares of preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the Board of Directors. 6. COMMON STOCK. On June 25, 1996 the Company issued 2,900,000 shares of Common Stock, par value $.01 per share, to PAR Holding Co., LLC for a consideration of $150,000. On March 6, 1997 the Company issued a further 514,191 shares of Common Stock, par value $.01 per share, to St. Lawrence Seaway Corporation for a total consideration of $5,141. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE PERIOD ENDED MARCH 31, 2000 RESULTS OF OPERATIONS Paragon was incorporated on June 19, 1996 to serve as a vehicle to effect a merger, exchange of capital stock, asset acquisition or other business combination with an operating business. On March 21, 1997, the Registration Statement on Form S-1 filed by Paragon with respect to the Distribution was declared effective and Paragon became subject to the reporting requirements of the Securities and Exchange Commission. At March 31, 2000, Paragon had not yet commenced any formal business operations and all activities to date relate only to Paragon's formation and on-going reporting obligations with the Securities and Exchange Commission. LIQUIDITY AND CAPITAL RESOURCES At March 31, 2000, Paragon had a net working capital shortfall of $315,254 and an accumulated deficit, since inception of $470,395 which consists primarily of general and administrative expenses of $305,305 (including professional fees incurred with respect to compliance with SEC reporting requirements and premiums incurred on directors and officers insurance policies) and $134,612 related to deferred registration costs incurred in earlier years and expensed in 1999. To date, PAR Holding Co., LLC, a principal Shareholder of Paragon has loaned Paragon a total of $287,655 to cover its working capital shortfall, consisting 9 of a $60,000 loan in June, 1997, a $10,000 loan in November, 1997, a $26,970 loan in March, 1998, a $100,000 loan in May, 1998, a $10,000 loan in September, 1998, and a $5,685 loan in March, 2000. All such loans are evidenced by promissory notes and loans bear interest at an annual rate of 5.5% compounded monthly; interest and principal are payable on demand. PAR Holding Co., LLC has committed to continue to fund Paragon's working capital shortfalls during its pre-acquisition stage. YEAR 2000 Paragon has not commenced formal business operations and thus had no computer systems which could have been affected by the Year 2000 problem. To date, Paragon's transfer agent, Continental Stock Transfer and Trust Company, has not experienced any Year 2000 problems which affected Paragon. 10 PARAGON ACQUISITION COMPANY, INC. PART II. OTHER INFORMATION Item 1. LEGAL PROCEEDING - Not Applicable Item 2. CHANGES IN SECURITIES - Not Applicable Item 3. DEFAULTS UPON SENIOR SECURITIES - Not Applicable Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - Not Applicable Item 5. OTHER INFORMATION - Not Applicable Item 6. EXHIBITS AND REPORTS ON FORM 8-K - Item 6(a) Exhibits - (27) Financial Data Schedule Item 6(b) Reports on Form 8-K - No reports on Form 8-K were required to be filed for the quarter for which this report is filed 11 SIGNATURE Pursuant to 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. Registrant PARAGON ACQUISITION COMPANY, INC. Date: 05/03/2000 /s/ Mitchell A. Kuflik --------------------------------- Mitchell A. Kuflik President Date: 05/03/2000 /s/ Peter A. Hochfelder --------------------------------- Peter A. Hochfelder Vice President and Treasurer 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 Exhibit (27) Paragon Acquisition Company, Inc. Financial Data Schedule For The Quarter Ended March 31, 2000 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS FOR THE QUARTER ENDED MARCH 31, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 4,079 0 0 0 0 9,279 0 0 9,279 324,533 0 0 0 34,141 (349,395) 9,279 0 0 0 22,196 0 0 4,240 (26,436) 0 0 0 0 0 (26,436) (0.01) (0.01)
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