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, 1997 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, 1997
----- ---------------------------------
Common Stock, $.01 par value 3,414,191
PARAGON ACQUISITION COMPANY, INC.
FORM 10-Q INDEX
PART I. FINANCIAL INFORMATION (UNAUDITED) PAGE
- ------------------------------ ----
Balance Sheet - September 30, 1997 ....................................... 3
Statements of Operation - Three months and period
ended September 30,1996; Three months and
nine months ended September30, 1997; and Period
from June 19, 1996 (inception) to September 30, 1997...................... 4
Statement of Stockholders' Equity - Period from
June 19, 1996 (inception) to September 30, 1997........................... 5
Statements of Cash Flows - Period ended September 30,
1996; Nine months ended September 30, 1997 and Period
from June 19, 1996 (inception) to September 30, 1997...................... 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 SHEET (UNAUDITED)
SEPTEMBER 30, 1997
<TABLE>
<S> <C>
ASSETS
------
Current Assets
Cash ........................................................................ $ 3,811
Prepayments ................................................................. 45,500
---------
Total Current Assets ........................................................... 49,311
Deferred registration costs .................................................... 118,612
---------
$ 167,923
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities
Accrued expenses ........................................................... $ 701
Loan due to PAR Holding Co., LLC, plus accrued interest (Note 3) ........... 61,070
---------
Total Current Liabilities ...................................................... $ 61,771
=========
Commitment (Note 4)
Stockholders' equity (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 ................................................. $ 34,141
Additional paid-in capital ............................................... 121,000
Deficit accumulated during the development stage ......................... (48,989)
---------
Total stockholders' equity ............................................... 106,152
---------
$ 167,923
=========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
Page 3
PARAGON ACQUISITION COMPANY, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Period from Period from
Three Months June 19, 1996 Three Months Nine Months June 19, 1996
Ended (inception) to Ended Ended (inception) to
Sept. 30, 1996 Sept. 30, 1996 Sept. 30, 1997 Sept. 30, 1997 Sept. 30, 1997
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
General and administrative
expenses $ 1,142 $ 6,142 $ 22,802 $ 40,359 $ 47,919
Interest expense 0 0 1,070 1,070 1,070
----------- ----------- ----------- ----------- -----------
Net loss for the period $ 1,142 $ 6,142 $ 23,872 $ 41,429 $ 48,989
=========== =========== =========== =========== ===========
Net loss per common Share ($ 0.00) ($ 0.00) ($ 0.01) ($ 0.01)
----------- ----------- ----------- -----------
Weighted average
common shares outstanding 2,900,000 2,900,000 3,414,191 3,291,314
=========== =========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
Page 4
PARAGON ACQUISITION COMPANY, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF STOCKHOLDERS' EQUITY
PERIOD FROM JUNE 19, 1996 (INCEPTION) TO SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the Total
---------------- Paid-in Development Stockholders'
Shares Amount Capital Stage Equity
------ ------ ------- ----- ------
<S> <C> <C> <C> <C> <C>
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 ............................... 514,191 5,141 -- -- 5,141
Net loss for the nine months ended
September 30, 1997 (Unaudited) .................. -- -- -- ($ 41,429) ($ 41,429)
--------- --------- --------- --------- ---------
Balance September 30, 1997
(Unaudited) ..................................... 3,414,191 $ 34,141 $ 121,000 ($ 48,989) $ 106,152
========= ========= ========= ========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
Page 5
PARAGON ACQUISITION COMPANY, INC.
(a corporation in the development stage)
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Period from Period from
June 19, 1996 Nine Months June 19, 1996
(inception) to Ended (inception) too
Sept. 30, 1996 Sept. 30, 1997 Sept. 30, 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ............................................ $ (6,142) $ (41,429) $ (48,989)
--------- --------- ---------
Adjustments to reconcile net loss to net cash
used in operating activities
Increase in prepayments ............................. 0 (45,500) (45,500)
Increase in accrued expenses and interest ........... 0 1,771 1,771
--------- --------- ---------
Net Cash used in operating activities .................... $ (6,142) $ (85,158) $ (92,718)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from sale of common stock .................. $ 75,000 $ 5,141 $ 155,141
Loan from PAR Holding Co., LLC ...................... 0 60,000 60,000
Deferred registration costs ......................... (32,151) (54,939) (118,612)
--------- --------- ---------
Net cash provided by financing activities ................ $ 42,849 $ 10,202 $ 96,529
--------- --------- ---------
Net increase (decrease) in cash ..................... 36,707 (74,956) 3,811
--------- --------- ---------
Cash, beginning of period ................................ 0 78,767 $ 0
--------- --------- ---------
Cash, end of period ...................................... $ 36,707 $ 3,811 $ 3,811
========= ========= =========
</TABLE>
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, 1996.
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 $49,000 available to reduce any future
income taxes. The tax benefit of these losses, approximately $20,000, has been
offset by a valuation allowance due to the uncertainty of its realization.
Deferred Registration Costs
As of September 30, 1997, the Company has incurred deferred registration
costs of $118,612 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.
Net Loss Per Share
Net loss per common share is computed on the basis of the weighted average
number of common shares outstanding during the period.
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.
2. Organization and Business Operations. Paragon Acquisition Company, Inc.
(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 September 30, 1997, 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 will be 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.
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
loaned the Company $60,000. Such loan is evidenced by a Promissory Note dated
June 4, 1997, in the principal amount of $60,000. The Note bears interest at the
annual rate of 5.5%, compounded monthly, and is 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
Page 8
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
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operation.
RESULTS OF OPERATIONS
The Company 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. At September 30, 1997, the Company had
not yet commenced any formal business operations and all activities to date
relate to the Company's formation and proposed fund raising.
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
Date: 11/14/97 /s/ Mitchell A. Kuflik
--------------------------
Mitchell A. Kuflik
President
Date: 11/14/97 /s/ Peter A. Hochfelder
--------------------------
Peter A. Hochfelder,
Vice President and Treasurer
Page 12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE PERIOD ENDED SEPTEMBER 30, 1997, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 3,811
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 49,311
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 167,923
<CURRENT-LIABILITIES> 61,771
<BONDS> 0
0
0
<COMMON> 34,141
<OTHER-SE> 72,011
<TOTAL-LIABILITY-AND-EQUITY> 167,923
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 40,359
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,070
<INCOME-PRETAX> (41,429)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<CHANGES> 0
<EXTRAORDINARY> 0
<NET-INCOME> (41,429)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
