PARAGON TECHNOLOGIES, INC.
Quarterly Report
For the Period Ended March 31, 2019
4
4) Financial Statements (Continued)
The financial statements for the three months ended March 31, 2019 are incorporated by reference
and can be found at the end of this Quarterly Report. The financial statements as of and for the three
months ended March 31, 2019 include: (1) consolidated balance sheets, (2) consolidated statements
of operations, (3) consolidated statements of comprehensive income, (4) consolidated statements of
stockholders’ equity, (5) consolidated statements of cash flows, and (6) notes to consolidated financial
statements.
5) Issuer’s Business, Products and Services
A. Summary of the issuer’s business operations
Business
Paragon is a holding company owning subsidiaries that engage in diverse business activities
including material handling, distribution, real estate, and investments.
Automation
Our material handling operations are operated through our subsidiary, SI Systems, LLC (“SI
Systems”). SI Systems provides productivity enhancing material handling solutions, including
complete systems, subsystem technologies, products, software and services for automated
material handling and order processing applications. SI Systems’ capabilities include horizontal
conveyance, goods to man solutions, automated and semi-automated picking for order fulfillment,
and a modular suite of high-performance Warehouse Execution Systems (WES) and Warehouse
Management software. SI Systems supports both its install base and the broader industry install
base with support, upgrade services, and aftermarket parts, as well as rejuvenation and retrofit
engineering services.
We believe that SI Systems is known in the marketplace to have the most durable and maintenance
free Towline solutions as well as the world’s fastest automated order picking technologies. The
newest additions to our material handling solution portfolio are the Mobile-Matic™ XL picking robot,
a completely re-engineered Simon™ Automated Guided Vehicle, a solution set of Automated
Storage and Retrieval technologies, and related software enhancements to complement. The new
additions were added to support a broader customer demand for flexible automation solutions and
address market gaps in our existing offerings.
SI Systems’ automated material handling systems are currently used by manufacturing, assembly,
order fulfillment, and distribution operations customers located primarily in North America, including
the U.S. government. Our markets are diverse, and our customers and prospects represent leading
manufacturer brands and their supply chain partners in the logistics services space. We sell our
products directly and through integration partners.
SI Systems’ business is largely dependent upon a limited number of large contracts with a limited
number of customers. This dependence can cause unexpected fluctuations in sales volume.
Various external factors affect the customers’ decision-making process on expanding or upgrading
their current production or distribution sites. Customers’ timing and placement of new orders is
often affected by factors such as the current economy, current interest rates, and future
expectations. SI Systems believes that its business is not subject to seasonality, although the rate
of new orders can vary substantially from month to month. Since the Company recognizes sales
on a percentage of completion basis for its systems contracts, fluctuations in SI Systems’ sales and
earnings occur with increases or decreases in major installations.
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