UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
- - OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- - ACT OF 1934
For the transition period from _____________ to ____________
Commission file number 0-2040
THE ST. LAWRENCE SEAWAY CORPORATION
(Exact name of registrant as specified in its charter)
Indiana 35-1038443
(State or other jurisdiction (I.R.S. Employer
of corporation or organization) Identification Number)
320 N. Meridian St., Suite 818 46204
Indianapolis, Indiana (Zip Code)
(Address of principal executive offices)
(317) 639-5292
(Registrant's telephone number including area code)
Securities registered pursuant to Section 12(g) of the Act:
Name of Exchange on
Title of each class Which Registered
------------------- ----------------
Common Stock, par value $1.00 per share None
Securities registered pursuant to Section 12(b) of the Act: None
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 (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. Yes [x] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes [x] No [ ]
The aggregate market value of Common stock held by non-affiliates of the
registrant as of May 31, 1997 was approximately $845,772.
The number of shares of Common Stock of the registrant outstanding as of June
24, 1997 was 393,735.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement to be used in connection with the registrant's
1997 Annual Meeting of Shareholders are incorporated by reference into Part III
of this report.
1
The St. Lawrence Seaway Corporation
-----------------------------------
Part I
------
Item 1 - Business
- -----------------
Recent Developments
-------------------
On March 19, 1997, the Board of Directors of The St. Lawrence Seaway
Corporation (herein "St. Lawrence" or the "Company") declared a dividend
distribution (the "Distribution") of 514,191 shares of Common Stock, $.01 par
value (the "Shares") of Paragon Acquisition Company, Inc. ("Paragon"), and
514,191 non-transferable rights (the "Subscription Rights") to purchase two (2)
additional Shares of Paragon. Paragon is a newly-formed corporation which is
seeking to acquire or merge with an operating business, and thereafter operate
as a publicly-traded company. St. Lawrence purchased the Paragon Shares on March
6, 1997, for $5,141, or $.01 per Share, and is distributing one Paragon Share
and one Subscription Right for each Share of St. Lawrence Common Stock owned or
subject to exercisable options and warrants as of March 21, 1997 (the "Record
Date"). Neither St. Lawrence nor Paragon will receive any cash or other proceeds
from the Distribution, and St. Lawrence stockholders will not make any payment
for the Shares and Subscription Rights. The Distribution to St. Lawrence
stockholders is being made by St. Lawrence for the purpose of providing St.
Lawrence stockholders with an equity interest in Paragon without such
stockholders being required to contribute any cash or other capital in exchange
for such equity interest.
On March 21, 1997, the Securities and Exchange Commission declared
effective a Registration Statement on Form S-1 filed by Paragon, registering the
Distribution of Shares and Subscription Rights to St. Lawrence stockholders. The
cost of organizing Paragon and registering the Distribution have been borne by
the founders of Paragon.
Paragon is an independent publicly-owned corporation. However, because
Paragon does not yet have a specific operating business, the Distribution of the
Shares is being conducted in accordance with Rule 419 promulgated under the
Securities Act of 1933, as amended (the "Securities Act"). As a result, the
Shares, Subscription Rights, and any Shares issuable upon exercise of
Subscription Rights, are being held in escrow and are non-transferable by the
holder thereof until after the completion of a business combination with an
operating company. The Subscription Rights will become exercisable at a price to
be determined by Paragon's Board of Directors (not to exceed $2.00 per
Subscription Right) once a business combination is identified and described in a
post-effective amendment to Paragon's Registration Statement. While held in
escrow, the Shares may not be traded or transferred, and the net proceeds from
the exercise of Subscription Rights will remain in escrow subject to release
upon consummation of a business combination. There is no current public trading
market for the Shares and
2
none is expected to develop, if at all, until after the consummation of a
business combination and the release of Shares from escrow.
Company History
---------------
The Company is an Indiana corporation organized on March 31, 1959,
which, since such date has principally engaged in farming, timber harvesting and
other traditional agricultural activities. During the last six years, the
Company's only other operating activity has been the sale of certain farming
acreage, and investment of its remaining liquid assets, primarily in interest
bearing cash equivalent securities.
Description of Business
-----------------------
The Company is engaged in a search for other business opportunities
which may or may not be related to its present agricultural, cash management and
other investment activities.
(a) Agricultural Activities -- At March 31, 1997, St. Lawrence was the
owner of one parcel of agricultural real estate in Northern Indiana comprising
approximately 195 acres. This real estate, known as Schleman Farm, is primarily
devoted to farming activities under the cash lease method of operation. The cash
lease method of operation involves the leasing of the property to farmers who
are directly responsible for the operation of the Farm and who pay St. Lawrence
a rental fee covering a ten-month period for the use of the property for farming
and related activities. St. Lawrence generally receives these rental payments at
one time or in semi-annual installments. Real estate taxes and other minor
expenses, such as insurance, are the responsibility of St. Lawrence in some
instances.
St. Lawrence has engaged the services of a farm management company,
Halderman Farm Management Service, Inc., of Wabash, Indiana ("Halderman"). Under
the current contract, Halderman manages, and is responsible for the negotiation
of all leases, tenant contracts, and general operations and programs of the
Schleman Farm. Halderman is compensated on a quarterly per-acre fee basis. It
has managed the current and former farm properties of the Company for more than
ten years.
(b) Cash Management and Other Investments -- During the fiscal year
ended March 31, 1997, the Company continued its practice of maintaining its
other assets in relatively liquid interest/dividend bearing money market
investments. The Company is engaged in a search for other business opportunities
and, accordingly, such assets may be used for an acquisition or for a partial
payment of an acquisition or for the commencement of a new business.
3
Financing Arrangements
----------------------
The Company's real estate is unencumbered. Furthermore, the Company
currently has no debt for borrowed funds or similar obligations or
contingencies. The Company may incur debt of an undetermined amount to effect an
acquisition or commence a new business. St. Lawrence does not have a formal
arrangement with any bank or financial institution with respect to the
availability of financing in the future.
Licenses and Trademarks, etc.
-----------------------------
The business of St. Lawrence is not currently dependent upon any patent,
trademark, franchise or license.
Governmental Regulation
-----------------------
St. Lawrence believes it is in compliance with all federal, state and
local regulations including all applicable environmental matters.
Seasonality
-----------
Although farm operations are generally conducted during the summer
months, St. Lawrence receives the majority of its rental and other payments
based upon a definitive schedule and therefore seasonal or weather factors
generally do not have an effect on the revenues of the Company.
Employees
---------
The Company has only one full time salaried employee at this time.
Mr. Jack C. Brown, Secretary of St. Lawrence receives a monthly fee of
$500 for administrative services that he renders to the Company. Such fee is
paid pursuant to a month to month arrangement.
Item 2 - Properties
- -------------------
At March 31, 1997, the Company owned one parcel of agricultural real
estate in Porter County, Indiana comprising approximately 195 acres. Only a
portion of the property, known as Schleman Farm, is suitable for farming
purposes. The balance is wooded and from time-to-time is suitable to some extent
for timber harvesting operations. In the past, St. Lawrence has harvested excess
timber from its various properties. Such timber harvesting has
4
occurred at intermittent times and there can be no assurances that there will be
timber activities at Schleman Farm in the future.
Item 3 - Legal Proceedings
- --------------------------
St. Lawrence is not a party to nor is any of its property the subject of
any material legal proceedings.
Item 4 - Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
Not applicable.
5
Part II
-------
Item 5 - Market For the Company's Common Equity and Related Stockholder Matters.
- --------------------------------------------------------------------------------
Market information
------------------
The Company's common stock is not currently listed for trading on any
exchange. The following table sets forth the high and low bid price for each
quarterly period during the fiscal years 1997 and 1996, as reported by the
National Quotation Bureau, Inc. from the pink sheets and the OTC Bulletin Board.
Such price data reflects inter-dealer prices, without retail mark-up, mark-down
or commission and may not represent actual transactions.
Year Quarter High Low
---- ------- ---- ---
1997 First $2.50 $2.50
Second $2.75 $2.50
Third $2.75 $2.50
Fourth $2.50 $2.50
1996 First $1.88 $1.50
Second $2.13 $1.75
Third $2.25 $1.88
Fourth $2.50 $2.00
Dividends
---------
It is the present policy of the Board of Directors of St. Lawrence to
retain earnings, if any, to finance the future expansion of the Company. No cash
dividends are expected to be paid in the future. On March 19, 1997, the Board of
Directors of St. Lawrence declared a dividend distribution of shares of Common
Stock and Subscription Rights of Paragon Acquisition Company, Inc. See Part I,
Item 1.
6
Number of Stockholders
----------------------
As of June 24, 1997, there were approximately 1,348 holders of record of
the Company's Common Stock.
Item 6 - Selected Financial Data
- --------------------------------
Selected Financial Data
Years Ended March 31,
The following table sets forth selected financial information with
respect to the Company for the five fiscal years ended March 31, 1997. The
information set forth in the following table should be read in connection with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and in conjunction with the Company's audited Financial Statements
and Notes thereto appearing elsewhere in this Report.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
REVENUES:
- ---------
Interest & Dividends 54,545 59,858 55,311 34,855 33,085
Farm Rentals & Sales 9,120 9,120 9,804 21,913 34,725
Gain on Sale of Farm
Properties, net 0 0 0 80,779 80,183
Other 0 0 0 48 0
-------- -------- -------- -------- --------
Total 63,665 68,978 65,115 137,595 147,993
-------- -------- -------- -------- --------
COSTS & EXPENSES:
- -----------------
Farm Related 2,056 1,243 1,634 2,155 4,327
General and 111,220 147,748 154,053 111,306 105,365
Administrative
Other 1,568 1,438 588 0 0
-------- -------- -------- -------- --------
Total 114,844 150,429 156,275 113,461 109,692
7
Income (Loss) Before
Income Taxes (51,179) (81,451) (91,160) 24,134 38,301
Income Tax
Expense(Benefit) 965 735 (5,429) 8,048 10,289
----- ----- ------- ------ ------
Net Income(Loss) (52,144) (82,186) (85,731) $16,086 $28,012
Income (Loss) per
Common Share (0.13) (0.21) (0.22) $0.04 $ 0.07
------ ------ ------- ----- ------
Weighted Average Number
of Common Shares
Outstanding 393,735 393,735 393,735 395,005 406,740
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
BALANCE SHEET DATA:
Total Assets 1,293,467 1,370,874 1,414,825 1,507,513 1,499,482
Total Liabilities 41,972 62,094 23,859 30,817 35,835
Shareholders' Equity 1,251,495 1,308,780 1,390,966 1,476,696 1,463,647
</TABLE>
8
Item 7 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Year Ended March 31, 1997, as compared to Year Ended March 31, 1996.
Interest and dividend income decreased to $54,545 in the year ended
March 31, 1997, from $59,858 in the previous year. The increase is a result of
lower interest rates received on cash invested in the year ended March 31, 1997.
Farm rental revenues of $9,120 were comparable in the years ended March
31, 1997, and 1996.
General and administrative expenses decreased to $105,220 in the year
ended March 31, 1997 from $141,748 in the year ended March 31, 1996 principally
due to reduced legal and other professional expenses currently recognized in the
Company's Statement of Income as of March 31, 1997.
As a result of the above items, the Company had a loss of $51,179 before
taxes in the year ended March 31, 1997, as compared to a loss of $81,451 before
taxes in the year ended March 31, 1996.
The income tax paid in the current year was $965. An income tax of $735
was paid in the year ended March 31, 1996.
Year Ended March 31, 1996, as compared to Year Ended March 31, 1995.
Interest and dividend income increased to $59,858 in the year ended
March 31, 1996, from $55,311 in the previous year. The increase is a result of
higher interest rates received in cash invested in the year ended March 31,
1996.
Farm rental revenue decreased to $9,120 in the year ended March 31, 1996
from $9,804 in fiscal year 1995 because the lease for the Schleman Farm contains
a $5/acre rent concession given in consideration of the uncertainty of crop
yields due to abnormally inclement weather.
General and administrative expenses decreased to $141,748 in the year
ended March 31, 1996 from $148,053 on the year ended March 31, 1995 principally
due to reduced legal and other
9
professional expenses currently recognized in the Company's Statement of Income
as of March 31, 1995.
As a result of the above items, the Company had a loss of $81,451 before
taxes in the year ended March 31, 1996, as compared to a loss of $91,160 before
taxes in the year ended March 31, 1995.
The income tax paid in the current year was $735. An income tax benefit
of $5,429 was received in the year ended March 31, 1995 as a result of the loss
realized in that year.
Year Ended March 31, 1995, as compared to Year Ended March 31, 1994.
Interest and dividend income increased to $55,311 in the year ended
March 31, 1995, from $34,855 in the previous year. The increase is a result of
higher interest rates received in cash invested in the year ended March 31,
1995.
Farm rental revenue decreased in the year ended March 31, 1995 because
fiscal year 1995 was the first year that there were no carry-over rentals from
the sale of previously owned farm properties and because the new lease for the
Schleman Farm contains a $5/acre rent concession given in consideration of the
uncertainty of crop yields due to abnormally inclement weather.
A net increase of approximately $54,700 in general and administrative
expenses occurred in the year ended March 31, 1995 principally due to deferred
legal and other expenses currently recognized in the Company's Statement of
Income as of March 31, 1995. The Company's other actual expenses were comparable
in the year ended March 31, 1995 with prior years.
As a result of the above items, the Company had a loss of $91,160 before
taxes in the year ended March 31, 1995, as compared to a profit of $24,134
before taxes in the year ended March 31, 1994.
The income tax benefit in the current year was $5,429 as a result of the
loss realized in the year ended March 31, 1995. An income tax of $8,048 was paid
in the year ended March 31, 1994 as a result of profit realized in that year.
Liquidity and Capital Resources
At March 31, 1997, the Company had net working capital of $1,128,335,
the major portion of which was in cash and money market funds. St. Lawrence has
sufficient capital resources to continue its current business.
10
The Company may require the use of its assets for a purchase or partial
payment for an acquisition or in connection with another business opportunity.
In addition, St. Lawrence may incur debt of an undetermined amount to effect an
acquisition or in connection with another business opportunity. It may also
issue its securities in connection with an acquisition or other business
opportunity.
St. Lawrence does not have a formal arrangement with any bank or
financial institution with respect to the availability of financing in the
future.
Item 8 - Financial Statements and Supplementary Data
Annexed hereto starting on Page 17.
Item 9 - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
11
PART III
--------
Item 10 - Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
The information required by this Item 10 is hereby incorporated by
reference to a definitive proxy statement involving the election of directors
which is expected to be filed by the Company within 120 days after the close of
its fiscal year.
Item 11 - Executive Compensation
- --------------------------------
The information required by this Item 11 is hereby incorporated by
reference to a definitive proxy statement involving the election of directors
which is expected to be filed by the Company within 120 days after the close of
its fiscal year.
Item 12 - Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
The information required by this Item 12 is hereby incorporated by
reference to a definitive proxy statement involving the election of directors
which is expected to be filed by the Company within 120 days after the close of
its fiscal year.
Item 13 - Certain Relationships and Related Transactions
- --------------------------------------------------------
The information required by this Item 13 is hereby incorporated by
reference to a definitive proxy statement involving the election of directors
which is expected to be filed by the Company within 120 days after the close of
its fiscal year.
12
PART IV
Item 14 - Exhibits, Financial Statements, Schedules and Reports on Form 8-K
- ---------------------------------------------------------------------------
(a) Financial Statements: Page No.
Independent Auditor's Report 16
Balance Sheets 17
Statements of Income 18
Statement of Shareholders' Equity 19
Statements of Cash Flows 21
Notes to Financial Statements 22-26
Financial Schedules:
--------------------
X - Supplementary Income Statement 27
Information
Schedules other than those listed above are omitted for the reason that they are
not required or not appropriate or the required information is shown in the
financial statements or notes thereto.
(b) Reports on Form 8-K
No Reports on Form 8-K were filed by the Company during the
quarter ended March 31, 1997. However, subsequent thereto, but
prior to the date hereof, a report on Form 8-K was filed with
respect to the dividend distribution of Paragon Shares and
Subscription Rights described in Part I, Item 1 hereof.
(c) Exhibits
(3) (i) Articles of Incorporation of The St. Lawrence Seaway
Corporation, as amended. (Incorporated by reference to
Exhibit (C) (3) (i) to the Annual Report of The St.
Lawrence Seaway Corporation for the fiscal year ended
March 31, 1991.)
13
(ii) By-Laws of The St. Lawrence Seaway Corporation
(Incorporated by reference to Exhibit (C) (3) (ii) to the
Annual Report of The St. Lawrence Seaway Corporation on
Form 10-K for the fiscal year ended March 31, 1987.)
(10) (i) Stock Option Agreements, each dated September 21,
1987, between The St. Lawrence Seaway Corporation and each
of Jack C. Brown, Philip I. Berman, and Albert Friedman.
(Incorporated by reference to Exhibit (C) (10) (i) to the
Annual Report of The St. Lawrence Seaway Corporation on
Form 10K for the fiscal year ended March 31, 1988.)
(ii) Agreement, dated July 31, 1986 by and between The St.
Lawrence Seaway Corporation and Bernard Zimmerman &
Company, Inc. (Incorporated by reference to Exhibit 2 to
the 10-Q of The St. Lawrence Seaway Corporation for the 6
months ended June 30, 1986.)
(iii) St. Clair Farm Property Option and Sale Agreement,
dated March 31, 1992. (Incorporated by reference to the
Exhibit (C) (10) (iii) to the Annual Report of The St.
Lawrence Seaway Corporation on Form 10K for the fiscal
year ended March 31, 1992.)
(iv) Airport Farm Property Option and Sale Agreement,
dated March 25, 1993.
(v) Amendment No. I to Stock Option Agreement between The
St. Lawrence Seaway Corporation and Jack C. Brown dated
August 28, 1992.
(vi) Amendment No. 1 to Stock Option Agreement between The
St. Lawrence Seaway Corporation and Albert Friedman dated
August 28, 1992.
(vii) Amendment No. I to the Warrant issued to Bernard
Zimmerman & Co. Inc. dated August 28, 1992.
(viii) Stock Option Agreement, dated August 28, 1992
between The St. Lawrence Seaway Corporation and Wayne J.
Zimmerman.
(ix) Stock Sale Agreement, dated June 24, 1993 between
Bernard Zimmerman & Co., Inc. and Industrial Development
Partners. (Incorporated by reference to Exhibit 7(a) to
Current Report on Form 8-K dated September 30, 1993).
14
(x) Assignment and Assumption Agreement dated as of July
30, 1993. (Incorporated by reference to Exhibit 7(b) to
Current Report on Form 8-K dated September 30, 1993.)
(27) Financial Data Schedule -- Filed herewith.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons (who included a
majority of the Board of Directors) on behalf of the registrant and in the
capacities indicated on June 27, 1997.
Signatures Title Date
/s/ Daniel L. Nir President, Treasurer June 27, 1997
- -----------------------
Daniel L. Nir and Director
(Principal Financial
Officer)
/s/ Joel M. Greenblatt Chairman of the Board, June 27, 1997
- ----------------------
Joel M. Greenblatt and Director
(Principal Executive
Officer)
/s/ Jack C. Brown Secretary and Director June 27, 1997
- -----------------------
Jack C. Brown
/s/ Edward B. Grier III Director June 27, 1997
- -----------------------
Edward B. Grier III
15
SALLEE & COMPANY, INC.
CERTIFIED PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
MEMBER
AICPA
TAX DIVISION
DIVISION OF FIRMS:
SEC PRACTICE SECTION
INDIANA CPASOCIETY
Board of Directors
The St. Lawrence Seaway Corporation
INDIANAPOLIS, Indiana
REPORT OF INDEPENDENT AUDITORS
We have audited the accompanying balance sheets of THE ST. LAWRENCE SEAWAY
CORPORATION as of March 31, 1997 and 1996, and the related statements of income,
shareholders' equity, and cash flows for each of the three years in the period
ended March 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require, that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting, principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of THE ST. LAWRENCE SEAWAY
CORPORATION as of March 31, 1997 and 1996, and the results of its operations and
its cash flows for each of the three years in the period ended March 31, 1997 in
conformity with generally accepted accounting principles.
May 22, 1997
/s/ Sallee & Company
1509 J STREET, P.O. BOX 1148, BEDFORD, INDIANA 47421,
812-275-4444 (FAX) 812-275-3300
16
THE ST. LAWRENCE SEAWAY CORPORATION
BALANCE SHEETS
MARCH 31, 1997 AND MARCH 31, 1996
<TABLE>
<CAPTION>
1997 1996
====================================
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,165,962 1,232,478
Interest and other receivables 1,522 11,104
Prepaid items 809 549
Deferred income taxes 2,014 2,014
------------- ------------
Total Current Assets 1,170,307 1,246,145
Land 118,913 118,913
Property and equipment 4,247 5,816
-------------- ------------
Total Assets $ 1,293,467 1,370,874
====================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Payroll taxes withheld and accrued $ 1,644 454
Accounts payable & other 32,120 53,432
Deferred Income 8,208 8,208
------------- --------
Total Current Liabilities 41,972 62,094
Shareholders' equity:
Common stock, par value $1,
4,000,000 authorized, 393,735 issued
and outstanding at the respective dates 393,735 393,735
Additional paid-in capital 281,252 281,252
Retained earnings 576,508 633,793
-----------------------------------
Total Shareholders' Equity 1,251,495 1,308,780
-----------------------------------
Total Liabilities and Shareholders' Equity $ 1,293,467 1,370,874
===================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
THE ST. LAWRENCE SEAWAY CORPORATION
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
1997 1996 1996
---- ---- ----
<S> <C> <C> <C>
Revenues:
Farm rentals $ 9,120 9,120 9,804
Interest and dividends 54,545 59,858 55,311
Other 0 0 0
------------ ----------- ---------
Total revenues $63,665 68,978 65,115
Operating costs and expenses:
Farm related operating costs 2,056 1,243 1,634
Depreciation 1,568 1,438 588
Consulting Fees - Note 3 6,000 6,000 6,000
General and administrative 105,220 141,748 148,053
------------------------------------------
Total operating expenses 114,844 150,429 156,275
Income (Loss) before income taxes (51,179) (81,451) (91,160)
Income taxes/(tax benefit) 965 735 (5,429)
------------------------------------------
Net income (loss) (52,144) (82,186) (85,731)
==========================================
Per share data:
Weighted average number
of common shares outstanding 393,735 393,735 393,735
------------------------------------------
Primary earnings per share:
Income (Loss) per share $ ($0.13) ($0.21) ($0.22)
==========================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
THE ST. LAWRENCE SEAWAY CORPORATION
STATEMENT OF SHAREHOLDER EQUITY
<TABLE>
<CAPTION>
Common stock Additional
Number of Par Paid-in Retained
shares Value $1 Capital Earnings
-------------- --------- ---------- --------
<S> <C> <C> <C> <C>
Balance at March 31, 1994 393,735 393,735 281,252 801,710
Net loss for 1995 (85,731)
----------------------------------------------------------
Balance at March 31, 1995 393,735 393,735 281,252 715,979
Net loss for 1996 (82,186)
----------------------------------------------------------
Balance at March 31, 1996 393,735 393,735 281,252 633,793
Net loss for 1997 (52,144)
Distribution of Paragon Stock (5,141)
(Note 7)
Balance at March 31, 1996 393,735 393,735 281,252 576,508
========================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
19
THE ST. LAWRENCE SEAWAY CORPORATION
STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) (52,144) (82,186) (85,731)
Adjustments to reconcile net income to
net cash from operating activities
Depreciation 1,568 1,438 588
(Gain) Loss on asset sales 0 0 0
(Increase) in deferred items 0 0 70,000
(Increase) Decrease in current assets:
Interest receivable 0 0 (1,267)
Other receivables 9,582 8,179 (16,650)
Prepaid items (260) 7,904 (3,273)
Deferred income tax 0 0 0
(Decrease) Increase in current liabilities:
Payroll tax & other 1,190 (267) 25
Accounts payable (21,311) 38,502 (6,982)
-----------------------------------------
Net cash from operating activities (61,375) (26,430) (43,290)
Cash flows from investing activities:
Purchase of equipment 0 (1,962) (5,880)
Proceeds from asset sales- 0 0 0
------------------------------------------
Net cash from investing activities 0 (1,962) (5,880)
Cash flows from financing activities:
Purchase of Paragon Stock - Note 7 (5,141) 0 0
------------------------------------------
Net cash from financing activities (5,141) 0 0
Net increase in cash and cash equivalents (66,516) (28,392) (49,170)
Cash and cash equivalents, beginning 1,232,478 1,269,870 1,310,040
-------------------------------------------
Cash and cash equivalents, ending $1,165,962 1,232,478 1,260,870
-------------------------------------------
Supplemental disclosures of cash flow information:
Cash paid for income taxes 122 0 500
Cash paid for interest expenses 0 0 0
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
THE ST. LAWRENCE SEAWAY CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies
observed in the preparation of the financial statements for The St.
Lawrence Seaway Corporation (the "Company").
BASIS OF PRESENTATION:
The accounts are maintained on the accrual method of accounting in
accordance with generally accepted accounting principles for
financial statement purposes. Under this method, revenue is
recognized when earned and expenses are recognized when incurred.
The St. Lawrence Fund, an unincorporated Massachusetts business
trust, was established on or about December 31, 1995, to invest
certain funds of the parent company. All funds are held in cash
accounts and are included in the cash equivalents of the parent
company.
The March 31, 1996 financial statements include the assets and
revenues earned by the subsidiary unincorporated business trust,
The St. Lawrence Fund, and were originally presented on a
consolidated basis with the parent company. No intercompany
transactions other than the initial cash investment were made
between the parent company and subsidiary business trust. Because
the subsidiary was dissolved on May 31, 1996, and no material
transactions occurred between the parent company and subsidiary
business trust, the March 31, 1997 and 1996 financial statements
are not presented on a consolidated basis.
LAND:
Land was purchased in 1961 for agriculture related purposes and is
recorded at the original historical cost of $118,913.
EARNINGS PER SHARE:
Primary earnings per share and fully diluted earnings per share are
computed, when applicable, using the weighted average number of
shares of common stock and common stock equivalents outstanding
under the modified treasury stock method. Common stock equivalents
include all common stock options and warrants outstanding during
each of the periods presented.
21
THE ST. LAWRENCE SEAWAY CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
INCOME TAXES:
The provision for income taxes charged against earnings relates to
all items of revenue and expense recognized for financial
accounting purposes during each of the years presented. The actual
current tax liability may be different than the charge against
earnings due to the effect of cash rents received in advance
resulting in deferred income tax. These deferred tax benefits are
temporary in nature and will offset upon the expiration of all land
rental contracts. No material deferred tax benefits or liabilities
exist as of the dates of the balance sheets.
RECLASSIFICATION:
The 1996 and 1995 financial statements have been reclassified,
where necessary, to conform to the presentation of the 1997
financial statements.
CASH FLOWS:
For purposes of reporting cash flows, cash and cash equivalents
include all cash in banks and cash accumulation funds.
DEPRECIATION:
Property and equipment, consisting of small office equipment, is
stated at cost. Depreciation is computed using the straight-line
method over a five-year estimated useful life. Expenditures for
maintenance and repairs that do not extend useful lives are charged
to income as incurred. Total accumulated depreciation as of March
31, 1997 and 1996, was $4,470 and $2,026 respectively.
22
THE ST. LAWRENCE SEAWAY CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
NOTE 2. SHAREHOLDERS' EQUITY
The Company has a common stock warrant outstanding for the purchase
of 100,000 shares of common stock at $3.00 per share. The warrant
was originally issued in connection with the sale by the Company of
50,000 shares of common stock during 1986 to Bernard Zimmerman &
Co. Inc. The warrant and common stock were subsequently sold and
transferred to The Windward Group, L.L.C. (formerly Industrial
Development Partners), pursuant to an agreement dated September 30,
1993. The warrant expires on September 24, 1997.
The Company has a stock option plan originally adopted by the
shareholders on June 12, 1978, and revised and approved by the
shareholders on June 13, 1983, September 21, 1987, and August 28,
1992. The revised plan provides that 15,000 shares of the
Corporation's stock be set aside at an exercise price of $3.00 per
share for Mr. Jack C. Brown, a Director of the Company. Mr. Brown's
option is currently exercisable with respect to all 15,000 shares
and, if not exercised, will expire on September 21, 1997.
The Company has 4,000,000 authorized $1 par value common shares. As
of March 31, 1997 and 1996, there were 393,735 common shares issued
and outstanding.
NOTE 3. RELATED PARTIES
During the fiscal years ending March 31, 1997, 1996 and 1995, the
Company paid to Jack C. Brown, Secretary and a Director, an annual
administrative fee of $6,000, which was paid monthly in the amount
of $500.
23
THE ST. LAWRENCE SEAWAY CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
NOTE 4. INCOME TAXES
As of March 31, 1997, the company has loss carry forwards of
approximately $247,000 that may be used to offset future taxable
income. If not used, the carry forwards will expire in 2012.
Provisions for current and deferred federal and state tax
liabilities are immaterial to these financial statements.
NOTE 5. DEFERRED ITEMS
Certain legal and other expenses in the amount of $70,000 were
deferred in connection with the filing of a registration statement
with the Securities and Exchange Commission in 1994. Upon the
withdrawal of the registration statement, total related costs of
approximately $53,000 were recognized at March 31, 1995.
NOTE 6. SUBSIDIARY INVESTMENT
On December 31, 1995, the Company organized a wholly-owned
subsidiary under the name of The St. Lawrence Seaway Fund as a
Massachusetts business trust for the purpose of investing in
securities. The Company purchased 100,000 shares of beneficial
interest in the trust at $10 per share on January 3, 1996. The
Company intended to register the Subsidiary with the Securities and
Exchange Commission as a closed-end investment company. Subsequent
to the balance sheet date, the Company determined that because of
tax considerations, such steps would not be practical or in the
best interest of the Company's shareholders and, accordingly, as of
May 31, 1996, dissolved the Subsidiary.
24
THE ST. LAWRENCE SEAWAY CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
NOTE 7. STOCK PURCHASE AND DIVIDEND
On March 19, 1997, the Board of Directors of the Company declared a
dividend distribution of 514,191 shares of common stock, $.01 par
value (the "Shares") of Paragon Acquisition Company, Inc.
("Paragon"), and 513,191 non-transferable rights (the "Subscription
Right") to purchase two (2) additional Shares of Paragon. Paragon
is a newly-formed corporation which is seeking to acquire or merge
with an operating business, and thereafter operate as a
publicly-traded company. St. Lawrence purchased the Paragon shares
on March 6, 1997, for $5,141, or $.01 per share, and is
distributing one Paragon share and one subscription right for each
share of St. Lawrence Common Stock owned or subject to exercisable
options and warrants as of March 21, 1997 (the "Record Date").
Neither St. Lawrence nor Paragon will receive any cash or other
proceeds from the distribution, and St. Lawrence stockholders will
not make any payment for the share and subscription rights. The
distribution to St. Lawrence stockholders is being made by St.
Lawrence for the purpose of providing St. Lawrence stockholders
with an equity interest in Paragon without such stockholders being
required to contribute any cash or other capital in exchange for
such equity interest.
On March 21, 1997, the Securities and Exchange Commission declared
effective a Registration Statement on Form S-1 filed by Paragon,
registering the Distribution of Shares and Subscription Rights to
St. Lawrence stockholders. The cost of organizing Paragon and
registering the distribution have been borne by the founders of
Paragon.
Paragon is an independent publicly-owned corporation. However,
because Paragon does not yet have a specific operating business,
the distribution of the shares is being conducted in accordance
with Rule 419 promulgated under the Securities Act of 1933, as
amended (the "Securities Act"). As a result, the shares,
subscription rights, and any shares issuable upon exercise of
subscription rights, are being held in escrow and are
non-transferable by the holder thereof until after the completion
of a business combination with an operating company. The
subscription rights will become exercisable at a price to be
determined by Paragon's Board of Directors (not to exceed $2.00 per
subscription right) once a business combination is identified and
described in a post-effective amendment to Paragon's Registration
Statement. While held in escrow, the shares may not be
25
THE ST. LAWRENCE SEAWAY CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
NOTE 7. STOCK PURCHASE AND DIVIDEND (Continued)
traded or transferred, and the net proceeds from the exercise of
subscription rights will remain in escrow subject to release upon
consummation of a business combination. There is no current public
trading market for the shares and none is expected to develop, if
at all, until after the consummation of business combination and
the release of shares from escrow.
26
SCHEDULE X
THE ST. LAWRENCE SEAWAY CORPORATION
SUPPLEMENTARY INCOME STATEMENT INFORMATION
YEARS ENDED MARCH 31, 1997, 1996 AND 1995
COLUMN A COLUMN B
ITEM CHARGED TO COSTS AND EXPENSES
YEARS ENDED MARCH, 31
1997 1996 1995
---- ---- ----
Maintenance and repairs $1,113 $1,420 $ 903
Depreciation and amortization of
intangible assets, preoperating
costs and similar deferral $1,568 $1,438 $ 588
Taxes, other than payroll and
income taxes $1,844 $2,296 $2,007
Royalties NONE NONE NONE
Advertising costs NONE NONE NONE
27
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE PERIOD ENDED MARCH 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-Mos
<FISCAL-YEAR-END> Mar-31-1997
<PERIOD-END> Mar-31-1997
<CASH> 1,165,962
<SECURITIES> 0
<RECEIVABLES> 1,522
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,170,307
<PP&E> 123,160
<DEPRECIATION> 4,470
<TOTAL-ASSETS> 1,293,467
<CURRENT-LIABILITIES> 41,972
<BONDS> 0
0
0
<COMMON> 674,987
<OTHER-SE> 576,508
<TOTAL-LIABILITY-AND-EQUITY> 1,293,467
<SALES> 0
<TOTAL-REVENUES> 63,665
<CGS> 0
<TOTAL-COSTS> 114,844
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (51,179)
<INCOME-TAX> 965
<INCOME-CONTINUING> 0
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (52,144)
<EPS-PRIMARY> (0.13)
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