-----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, RNOdiyrbvFLoG9HA42OpeLRS0S2sT28Hf09PZ0xGrW9C0DT1JOLxiXJdPfMyAkZr lq5JohHTPnSpw45926Bilg== 0001058217-99-000371.txt : 19991115 0001058217-99-000371.hdr.sgml : 19991115 ACCESSION NUMBER: 0001058217-99-000371 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 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: 99749746 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 September 30, 1999 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 September 30, 1999 ----- --------------------------------- 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, 1998 and September 30, 1999 .....................................................3 Statements of Operations - Three and nine months ended September 30, 1998 and 1999 and Period from June 19, 1996 (inception) to September 30, 1999.............................................................................4 Statement of Stockholders' Equity (Deficit) - Period from June 19, 1996 (inception) to September 30, 1999...............................................................5 Statements of Cash Flows - Nine months ended September 30, 1998 and 1999 and Period from June 19, 1996 (inception) to September 30, 1999............................................................................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
Page 2 PARAGON ACQUISITION COMPANY, INC. (a corporation in the development stage) BALANCE SHEETS
ASSETS December 31 September 30 1998 1999 ----- ---- Unaudited Current Assets Cash......................................................... $ 8,907 $ 4,690 Prepayments.................................................. 24,960 36,400 ------ ------ Total Current Assets ........................................... 33,057 41,090 Deferred registration costs..................................... 134,612 134,612 ------- ------- $ 167,669 $ 175,702 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accrued expenses.......................................... $1,800 $ 1,500 Loan due to Stockholder PAR Holding Co., LLC, plus accrued interest (Note 3)........................... 218,025 304,027 ------- ------- Total Current Liabilities...................................... 219,825 305,527 ------- ------- Commitment (Note 4) Stockholders" equity (Notes 2, 5 and 6): Preferred stock, $.01 par value shares - authorized 1,000,000; -0- -0- none issued Common stock, $.01 par value shares - authorized 20,000,000: 34,141 34,141 outstanding 3,414,191 and 3,414,191 Additional paid-in capital................................ 121,000 121,000 Deficit accumulated during the development stage.......... (207,297) (284,966) ---------- --------- Total stockholders' deficit............................... (52,156) (129,825) -------- --------- $ 167,669 $ 175,702 ========= =========
See accompanying notes to Financial Statements. Page 3 PARAGON ACQUISITION COMPANY, INC. (a corporation in the development stage) STATEMENTS OF OPERATIONS (UNAUDITED)
Period from Three Months Nine Months Three Months Nine Months June 19, 1996 ended ended ended ended (inception) to September 30, September 30, September 30, September 30, September 30, 1998 1998 1999 1999 1999 ------------- ------------- ------------- ------------- --------------- General and administrative $ 38,275 $101,937 $ 20,716 $ 66,667 $ 262,909 expenses Interest expense 2,784 6,376 4,124 11,002 22,057 ----- ----- ----- ------ ------ Net loss for the period $ 41,059 $108,313 $ 24,840 $ 77,669 $ 284,966 Net loss per common share, basic and diluted ($0.01) ($0.03) ($0.01) ($0.02) Weighted average common shares outstanding 3,414,191 3,414,191 3,414,191 3,414,191 ========= ========= ========= =========
See accompanying notes to Financial Statements. Page 4 PARAGON ACQUISITION COMPANY, INC. (a corporation in the development stage) STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) Period from June 19, 1996 (inception) to September 30, 1999
Deficit Accumulated Additional During the Total Common Stock Paid-in Development Stockholders' Shares Amount Capital Stage Equity(Deficit) ------ ------ ---------- ------------ --------------- Issuance of founders' shares..... 2,900,000 $29,000 $121,000 - $150,000 Net loss for the period June 19, 1996 (inception) to December 31, 1996` - - - $(7,560) (7,560) --------- -------- -------- -------- --------- Balance December 31, 1996........ 2,900,000 $29,000 $121,000 $(7,560) $142,440 Issuance of Shares to Investor... 514,191 $5,141 - - $5,141 Net loss for the year ended December 31, 1997................ - - - (72,696) (72,696) --------- -------- -------- --------- -------- Balance December 31, 1997........ 3,414,191 $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 nine-months ended September 30, 1999 (unaudited)... - - - (77,669) (77,669) --------- -------- -------- ---------- ---------- Balance, September 30, 1999 (unaudited)...................... 3,414,191 $34,141 $121,000 $(284,966) $(129,825) ========= ======= ======== ========== ==========
See accompanying notes to Financial Statements. Page 5 PARAGON ACQUISITION COMPANY, INC. (a corporation in the development stage) STATEMENTS OF CASH FLOWS (UNAUDITED)
Period from Nine Months Nine Months June 19, 1996 Ended Ended (inception to September 30, 1998 September 30, 1999 September 30, 1999 ------------------ ------------------ ------------------ Cash flows from operating activities Net loss....................... $(108,313) $(77,669) $(284,966) Adjustments to reconcile net loss to net cash used in operating activities (Increase) in prepayments...... (17,680) (11,440) (36,400) Increase (decrease) in accrued expenses and interest........ (13,074) (10,702) 23,557 -------- -------- ------ Net Cash uses in operating activities $(139,067) $(78,407) $(297,809) ---------- --------- ---------- Cash flows from financing activities: Proceeds from sale of common stock $ 0 $ 0 $155,141 Loan from PAR Holding Co., LLC 136,970 75,000 281,970 Deferred registration costs.... 0 0 (134,612) --------------- ------------- --------- Net cash provided by financing activities $ 136,970 $ 75,000 $302,499 ------------ ------------- -------- Net increase in cash........... (2,097) (3,407) 4,690 Cash, beginning of period........... 7,418 8,097 0 ----- ----- ----------- Cash, end of period................ $ 5,321 $ 4,690 $ 4,690 ========== ============ ============
See accompanying notes to Financial Statements. Page 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, 1998. 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 (AFAS 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 $285,000 available to reduce any future income taxes. The tax benefit of these losses, approximately $114,000, has been offset by a valuation allowance due to the uncertainty of its realization. DEFERRED REGISTRATION COSTS As of September 30, 1999, the Company has incurred deferred registration costs of $134,612 relating to expenses incurred in connection with the Proposed Distribution (see Note 2). Upon consummation of this Proposed Distribution, the deferred registration costs will be charged to equity. Should the Proposed Distribution prove to be unsuccessful, these deferred costs, as well as additional expenses to be incurred, will be charged to operations. Page 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 June 30, 1999, the Company had not yet commenced any formal business operations and all activity to date relates to the Company's formation, search for a Target Business and proposed fund raising. The Company's fiscal year end is December 31. PAR Holding Company, LLC ("PAR Holding") contributed $150,000 to Paragon initially in exchange for 2,900,000 shares of Common Stock (the "Shares"). Such funds were used for the costs of the organization of Paragon and the registration of the distribution of Shares and Subscription Rights described below. On March 6, 1997, The St. Lawrence Seaway Corporation purchased 514,191 Shares of Paragon for a price of $.01 per share. Such shares had attached subscription rights entitling 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. On March 21, 1997, the Securities and Exchange Commission declared effective the Registration Statement on Form S-1 filed by Paragon, registering the distribution of the 514,191 Shares and Subscription Rights (the "Distribution"). Page 8 Because Paragon does not yet have a specific operating business, the Distribution of Shares was conducted in accordance with Rule 419 promulgated under the Securities Act of 1933, as amended. As a result, the Shares and any Shares issuable upon exercise of subscription rights, are being held in escrow and are non-transferable until after the completion of a business combination. The subscription rights are also being held in escrow and are non-transferable by their terms. The subscription rights will not become exercisable until a Target Business is identified and a proposed business combination fully disclosed in a post-effective amendment to Paragon's Registration Statement. The net proceeds from the exercise of subscription rights will remain in an escrow account subject to release upon consummation of a Business Combination. There is no current public trading market for Paragon's shares and none is expected to develop, if at all, until after the consummation of a Business Combination and the release of shares from escrow. Because more than eighteen months have expired since Paragon's Registration Statement on Form S-1 was declared effective, the Company believes that the Registration Statement has expired and is no longer effective to permit distribution of the Shares and Subscription Rights or sale of the shares covered by the Subscription Rights without an amendment or an additional or new registration statement being filed and approved. 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, September, 1998 and May, 1999 further loans for the sums of $10,000, $26,970, $100,000, $10,000 and $75,000, 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. Page 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE PERIOD ENDED SEPTEMBER 30, 1999 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 September 30, 1999, 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 September 30, 1999, Paragon had a net working capital shortfall of $264,437 and an accumulated deficit, since inception of $284,966 which consists primarily of general and administrative expenses of $262,909 including professional fees incurred with respect to compliance with SEC reporting requirements and premiums incurred on directors and officers insurance policies. To date, PAR Holding Co., LLC, a principal Shareholder of Paragon has loaned Paragon a total of $281,970 to cover its working capital shortfall, consisting 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 $75,000 loan in May, 1999. 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 has no computer systems which could be affected by the Year 2000 problem. Paragon's transfer agent, Continental Stock Transfer and Trust Company, has reported that it conducted an extensive test in a Year 2000 environment in October, 1998, and confirmed that it is Year 2000 compliant; that is has been examined by the New York State Banking Department and been found to have made satisfactory progress on its Year 2000 plan; and that it has also made the appropriate filing with the SEC in accordance with Rule 17Ad-18. Page 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 Page 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. PARAGON ACQUISITION COMPANY, INC. Registrant /s/ Mitchell A. Kuflik Date: 11/12/99 --------------------------------- President /s/Peter A. Hochfelder Date: 11/ 12 /99 --------------------------------- Vice President and Treasurer Page 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 Exhibit (27) Paragon Acquisition Company, Inc. Financial Data Schedule For The Nine Months Ended September 30, 1999 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1999 SEP-30-1999 4,690 0 0 0 0 41,090 0 0 175,702 305,527 0 0 0 34,141 (163,966) 175,702 0 0 0 66,667 0 0 11,002 (77,669) 0 0 0 0 0 (77,669) (0.02) (0.02)
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