SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OF 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended Commission File No.
September 30, 1997 0-2040
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THE ST. LAWRENCE SEAWAY CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
INDIANA 35-1038443
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
818 Chamber of Commerce Building
320 N. Meridian Street
Indianapolis, Indiana 46204
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (317) 639-5292
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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
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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
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Common Stock, $1.00 par value 393,735
THE ST. LAWRENCE SEAWAY CORPORATION
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FORM 10-Q INDEX
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<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
- ------- --------------------- ----
<S> <C>
Balance Sheets - September 30, 1997 (UNAUDITED) and March 31, 1997 ............................3
Statements of Income - Three months ended September 30, 1997 and 1996
(UNAUDITED).................................................................................4
Statements of Income - Six months ended September 30, 1997 and 1996
(UNAUDITED).................................................................................5
Statements of Cash Flows - Six months ended September 30, 1997 and
1996 (UNAUDITED) ...........................................................................6
Notes to Financial Statements - September 30, 1997...........................................7-8
Management's Discussion and Analysis of Financial Condition and
Results of Operations ....................................................................9-10
PART II. OTHER INFORMATION.................................................................11-12
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Signatures....................................................................................13
Exhibits....................................................................................14-15
</TABLE>
Page 2
THE ST. LAWRENCE SEAWAY CORPORATION
BALANCE SHEETS
SEPTEMBER 30, 1997 (UNAUDITED) AND MARCH 31, 1997
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1997 1997
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ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $1,138,680 1,165,962
Interest and other receivables 1,723 1,522
Prepaid items 1,590 809
Deferred income taxes 3,739 2,014
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Total Current Assets 1,145,732 1,170,307
Land 118,913 118,913
Property and equipment 3,463 4,247
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Total Assets $1,268,108 1,293,467
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Payroll taxes withheld and accrued $ 772 1,644
Accounts payable & other 22,543 32,120
Deferred Income 2,736 8,208
Federal & state taxes payable 337 0
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Total Current Liabilities 26,388 41,972
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 566,733 576,508
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Total Shareholders' Equity 1,241,720 1,251,495
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Total Liabilities and Shareholders' Equity $1,268,108 1,293,467
========== ==========
</TABLE>
Page 3
THE ST. LAWRENCE SEAWAY CORPORATION
STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
---- ----
<S> <C> <C>
Revenues:
Farm rentals 2,736 2,736
Interest and dividends 14,577 14,863
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Total revenues 17,313 17,599
Operating costs and expenses:
Farm related operating costs 393 897
Depreciation 392 392
General and administrative 21,617 19,594
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Total operating expenses 22,402 20,883
Income (Loss) before tax provision (5,089) (3,284)
Provision for income taxes/
(tax benefit) (554) (392)
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Net income (loss) (4,535) (2,892)
======== ========
Per share data:
Weighted average number
of common shares outstanding 393,735 393,735
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Primary earnings per share:
Income (Loss) per share ($ 0.01) ($ 0.01)
======== ========
</TABLE>
Page 4
THE ST. LAWRENCE SEAWAY CORPORATION
STATEMENTS OF INCOME FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
---- ----
<S> <C> <C>
Revenues:
Farm rentals 5,472 5,472
Interest and dividends 28,799 26,487
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Total revenues 34,271 31,959
Operating costs and expenses:
Farm related operating costs 946 1,265
Depreciation 784 784
General and administrative 43,627 42,472
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Total operating expenses 45,357 44,521
Income (Loss) before tax provision (11,086) (12,562)
Provision for income taxes/
(tax benefit) (1,311) (981)
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Net income (loss) (9,775) (11,581)
========= ========
Per share data:
Weighted average number
of common shares outstanding 393,735 393,735
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Primary earnings per share:
Income (Loss) per share ($ 0.02) ($ 0.03)
========= ========
</TABLE>
Page 5
THE ST. LAWRENCE SEAWAY CORPORATION
STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (9,775) (11,581)
Adjustments to reconcile net income to
net cash from operating activities
Depreciation 784 784
(Increase) Decrease in current assets:
Interest receivable (201) 0
Other receivables 0 9,510
Prepaid items (781) (485)
Deferred income tax (1,725) (1,485)
(Decrease) Increase in current liabilities:
Payroll tax & other (872) 202
Accounts payable (15,049) (18,166)
Income taxes payable 337 411
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Net cash from operating activities (27,282) (20,810)
Cash flows from investing activities:
Purchase of equipment 0 0
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Net cash from investing activities 0 0
Cash flows from financing activities:
Net cash from financing activities 0 0
Net decrease in cash and cash equivalents (27,282) (20,810)
Cash and cash equivalents, beginning 1,165,962 1,232,478
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Cash and cash equivalents, ending $ 1,138,680 1,211,668
============ ===========
Supplemental disclosures of cash flow information:
Cash paid for income taxes 1,429 122
Cash paid for interest expense 0 0
</TABLE>
Page 6
THE ST. LAWRENCE SEAWAY CORPORATION
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1997
(UNAUDITED)
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and the instructions for Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
for generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three month period ending September 30, 1997, are not
necessarily indicative of the results that may be expected for the fiscal year
ending March 31, 1998. For further information, refer to the financial
statements and footnotes thereto included in the Company's annual report on Form
10-K for the fiscal year ended March 31, 1997.
NOTE B--RECLASSIFICATION
The 1996 financial statements have been reclassified, where necessary, to
conform to the presentation of the 1997 financial statements.
NOTE C--EARNINGS PER SHARE
Primary earnings per share are computed 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.
NOTE D--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
Page 7
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
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.
Page 8
THE ST. LAWRENCE SEAWAY CORPORATION
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations -- Three months ended September 30, 1997 as compared to
three months ended September 30, 1996.
Interest and dividend income decreased slightly to $14,577 in the three-months
ended September 30, 1997, from $14,863 in the previous year. The decrease is a
result of slightly lower interest rates received on the Company's available cash
investments.
Farm rental revenue remained unchanged in the three months ended September 30,
1997.
General and administrative expenses increased to $21,617 in the three months
ended September 30, 1997, from $19,594 on the three-months ended September 30,
1996. This increase reflects special legal fees paid on account of the Company's
dividend of Paragon Acquisition Inc. shares and subscription rights to St.
Lawrence shareholders.
As a result of the above items, the Company had a loss of $5,089 before taxes in
the three months ended September 30, 1997, as compared to a loss of $3,284
before taxes in the three month ended September 30, 1996.
Federal and state income tax benefits of $554 were applicable in the three
months ended September 30, 1997, as compared to federal and state income tax
benefits of $392 in the three months ended September 30, 1996.
Results of Operations - Six months ended September 30, 1997, compared to six
months ended September 30, 1996.
Interest and dividend income increased to $28,799 in the six months ended
September 30, 1997, from $26,487 in the same period ended September 30, 1996.
This increase is a result of higher rates of interest earned on available cash
investments.
Farm rental revenues remained unchanged in the six months ended September 30,
1997.
General and administrative expenses increased to $43,627 in the six months ended
September 30, 1997, from $42,472 in the six months ended September 30, 1996.
This increase reflects special legal fees paid on account of the Company's
dividend of Paragon Acquisition Inc. shares and subscription rights to St.
Lawrence shareholders.
Page 9
As a result of the above items the Company incurred a loss before provision for
income taxes of $11,086 in the six months ended September 30, 1997 as compared
to a loss before provision for income taxes of $12,562 in the comparable period
a year ago.
Federal and state income tax benefits of $1,311 were applicable in the six
months ended September 30, 1997 as compared to federal and state income benefits
of $981 that were applicable in the six months ended September 30, 1996.
Liquidity and Capital Resources
At September 30, 1997, the Company had net working capital of $1,119,344 the
major portion of which was in cash and money market funds. St. Lawrence has
sufficient capital resources to continue its current business.
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.
Page 10
THE ST. LAWRENCE SEAWAY CORPORATION
PART II. OTHER INFORMATION
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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
(a) The Company held its Annual Meeting of Stockholders on October
30, 1997.
(b) Not applicable.
(c) At the stockholders meeting, the Company's nominees for director
were elected by the following votes:
Nominee Votes in Favor Votes to Withhold
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Authority
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Joel M. Greenblatt 216,156 2,976
Daniel L. Nir 216,481 2,651
Jack C. Brown 215,882 3,250
Edward B. Grier III 216,156 2,976
Item 5.
Other Information - Not Applicable
Page 11
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 12
SIGNATURE
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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,
thereinto duly authorized.
THE ST. LAWRENCE SEAWAY
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CORPORATION
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Registrant
/s/ Daniel L. Nir
Date: 11/13/97 -------------------------
Daniel L. Nir
President and Treasurer
(Chief Financial Officer)
/s/ Jack C. Brown
Date: 11/13/97 -------------------------
Jack C. Brown
Secretary
Page 13
<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> 6-mos
<FISCAL-YEAR-END> Mar-31-1998
<PERIOD-END> Sep-30-1997
<CASH> 1,138,680
<SECURITIES> 0
<RECEIVABLES> 1,723
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,145,732
<PP&E> 3,463
<DEPRECIATION> 784
<TOTAL-ASSETS> 1,268,108
<CURRENT-LIABILITIES> 26,388
<BONDS> 0
0
0
<COMMON> 393,735
<OTHER-SE> 847,985
<TOTAL-LIABILITY-AND-EQUITY> 1,268,108
<SALES> 0
<TOTAL-REVENUES> 34,271
<CGS> 0
<TOTAL-COSTS> 45,357
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (11,086)
<INCOME-TAX> (1,311)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,775)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
