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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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QUARTERLY REPORT UNDER SECTION 13 OF 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended Commission File No.
September 30, 1998 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
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, 1998
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Common Stock, $1.00 par value 393,735
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<PAGE>
THE ST. LAWRENCE SEAWAY CORPORATION
FORM 10-Q INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
- ------------------------------ ----
<S> <C>
Balance Sheets - September 30, 1998 (UNAUDITED) and March 31, 1998 ................ 3
Statements of Income - Three months ended September 30, 1998 and 1997
(UNAUDITED) .................................................................... 4
Statements of Income - Six months ended September 30, 1998 and 1997
(UNAUDITED) .................................................................... 5
Statements of Cash Flows - Six months ended September 30, 1998 and
1997 (UNAUDITED) ............................................................... 6
Notes to Financial Statements - September 30, 1998 ................................ 7-8
Management's Discussion and Analysis of Financial Condition and
Results of Operations .......................................................... 9-10
PART II. OTHER INFORMATION ....................................................... 11-12
Signatures ........................................................................ 13
Exhibits .......................................................................... 14-15
</TABLE>
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<PAGE>
THE ST. LAWRENCE SEAWAY CORPORATION
BALANCE SHEETS
SEPTEMBER 30, 1998 (UNAUDITED) AND MARCH 31, 1998
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1998 1998
============= ==========
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $1,056,890 1,105,940
Interest and other receivables 1,745 1,644
Prepaid items 1,496 662
Deferred income taxes 4,991 2,014
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Total Current Assets 1,065,122 1,110,260
Land 118,913 118,913
Property and equipment 1,895 2,679
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Total Assets $1,185,930 1,231,852
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Payroll taxes withheld and accrued $ 0 772
Accounts payable & other 4,608 27,734
Deferred Income 2,736 8,208
Federal & state taxes payable 316 0
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Total Current Liabilities 7,661 36,714
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 377,252 377,252
Retained earnings 407,283 424,151
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Total Shareholders' Equity 1,178,269 1,195,138
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Total Liabilities and Shareholders' Equity $1,185,930 $1,231,852
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</TABLE>
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<PAGE>
THE ST. LAWRENCE SEAWAY CORPORATION
STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
============= =============
Revenues:
<S> <C> <C>
Farm rentals 2,736 2,736
Interest and dividends 13,416 14,577
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Total revenues 16,152 17,313
Operating costs and expenses:
Farm related operating costs 298 393
Depreciation 392 392
General and administrative 24,076 21,617
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Total operating expenses 24,766 22,402
Income (Loss) before tax provision (8,614) (5,089)
Provision for income taxes/
(tax benefit) (1,206) (554)
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Net income (loss) (7,408) (4,535)
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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) ($0.01)
======== ========
</TABLE>
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<PAGE>
THE ST. LAWRENCE SEAWAY CORPORATION
STATEMENTS OF INCOME FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
============= =============
Revenues:
<S> <C> <C>
Farm rentals 5,472 5,472
Interest and dividends 26,954 28,799
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Total revenues 32,426 34,271
Operating costs and expenses:
Farm related operating costs 737 946
Depreciation 784 784
General and administrative 50,433 43,627
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Total operating expenses 51,954 45,357
Income (Loss) before tax provision (19,528) (11,086)
Provision for income taxes/
(tax benefit) (2,660) (1,311)
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Net income (loss) (16,868) (9,775)
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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 ($0.04) ($0.02)
======== ========
</TABLE>
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<PAGE>
THE ST. LAWRENCE SEAWAY CORPORATION
STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
============= =============
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ (16,868) (9,775)
Adjustments to reconcile net income to
net cash from operating activities
Depreciation 784 784
(Increase) Decrease in current assets:
Interest receivable (101) (201)
Other receivables 0 0
Prepaid items (835) (781)
Deferred income tax (2,977) (1,725)
(Decrease) Increase in current liabilities:
Payroll tax & other (772) (872)
Accounts payable (28,599) (15,049)
Income taxes payable 316 337
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Net cash from operating activities (49,050) (27,282)
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
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Net decrease in cash and cash equivalents (49,050) (27,282)
Cash and cash equivalents, beginning 1,105,940 1,165,962
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Cash and cash equivalents, ending $ 1,056,890 1,138,680
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Supplemental disclosures of cash flow information:
Cash paid for income taxes 500 1,429
Cash paid for interest expense 0
</TABLE>
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<PAGE>
THE ST. LAWRENCE SEAWAY CORPORATION
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1998
(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, 1998, are not
necessarily indicative of the results that may be expected for the fiscal year
ending March 31, 1999. 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, 1998.
NOTE B--RECLASSIFICATION
The 1997 financial statements have been reclassified, where necessary, to
conform to the presentation of the 1998 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
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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.
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<PAGE>
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, 1998 AS COMPARED TO
THREE MONTHS ENDED SEPTEMBER 30, 1997.
Interest and dividend income decreased to $13,416 in the three-months ended
September 30, 1998, from $14,577 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,
1998.
General and administrative expenses increased to $24,766 in the three months
ended September 30, 1998, from $21,617 on the three-months ended September 30,
1996. This increase reflects a lump sum payment of accrued vacation to a
departing employee pursuant to applicable law, an annual increase in office rent
and increased professional fees for additional services.
As a result of the above items, the Company had a loss of $8,614 before taxes in
the three months ended September 30, 1998, as compared to a loss of $5,089
before taxes in the three month ended September 30, 1997.
Federal and state income tax benefits of $1,206 were applicable in the three
months ended September 30, 1998, as compared to federal and state income tax
benefits of $554 in the three months ended September 30, 1997.
RESULTS OF OPERATIONS - SIX MONTHS ENDED SEPTEMBER 30, 1998, COMPARED TO SIX
MONTHS ENDED SEPTEMBER 30, 1997.
Interest and dividend income decreased to $26,954 in the six months ended
September 30, 1998, from $28,799 in the same period ended September 30, 1997.
This decrease is a result of lower interest rates received on available cash
investments.
Farm rental revenues remained unchanged in the six months ended September 30,
1998.
General and administrative expenses increased to $50,433 in the six months ended
September 30, 1998, from $43,726 in the six months ended September 30, 1997.
This increase reflects a lump sum payment of accrued vacation to a departing
employee pursuant to applicable law, an annual increase in office rent and
increased professional fees for additional services.
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As a result of the above items the Company incurred a loss before provision for
income taxes of $19,528 in the six months ended September 30, 1998 as compared
to a loss before provision for income taxes of $11,086 in the comparable period
a year ago.
Federal and state income tax benefits of $2,660 were applicable in the six
months ended September 30, 1998 as compared to federal and state income benefits
of $1,311 that were applicable in the six months ended September 30, 1997.
Liquidity and Capital Resources
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At September 30, 1998, the Company had net working capital of $1,178,269 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.
Year 2000
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The Company has initiated a review of its management and information systems to
discover whether such systems are Year 2000 compliant. With respect to its
internal systems, the Company does not anticipate that significant compliance
efforts will be required as it does not rely heavily on computers in its
operations. Indeed, the Company's sole computer is used strictly for word
processing and spreadsheet preparation.
As part of its ongoing Year 2000 preparations, the Company has sent written
requests for Year 2000 information to its farm management company, independent
accountant and its transfer agent. In response to such requests for information,
the Company's transfer agent has reported that all of its hardware and software
is currently Year 2000 "ready"; that it will be conducting a full blown test in
a Year 2000 environment in October, 1998, after which it expects to be able to
confirm that it is Year 2000 compliant; that it 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. The Company's farm management company has
reported that it believes its computers are ready to handle the Year 2000
turnover and that it is awaiting confirmation from the bank where the farm
account is located as to the Bank's readiness. Finally, the
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Company's accountant has reported that it is presently reviewing the guidelines
and recommended policies established by the American Institute of Certified
Public Accountants and is addressing specific concerns through a firmwide
upgrade of computer systems and financial software which will be tested after
installation of the upgrades is completed in 1999. The Company intends to
request Year 2000 compliance updates from its service providers in 1999.
Outlook
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This Form 10-Q contains statements which are not historical facts, but are
forward- looking statements which are subject to risks, uncertainties and
unforseen factors that could affect the Company's ability to accomplish its
strategic objectives with respect to acquisitions and developing new business
opportunities, as well as its operations and actual results. All forward-looking
statements contained herein, including without limitation, those relating to
Year 2000 readiness, reflect Management's analysis only as of the date of the
filing of this Report. Except as may be required by law, the Company undertakes
no obligation to publicly revise these forward-looking statements to reflect
events or circumstances that arise after the date hereof. In addition to the
disclosures contained herein, readers should carefully review risks and
uncertainties contained in other documents which the Company files from time to
time with the Securities and Exchange Commission.
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THE ST. LAWRENCE SEAWAY CORPORATION
PART II. OTHER INFORMATION
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Item 1.
Legal Proceeding - Not Applicable
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Item 2.
Changes in Securities - Not Applicable
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Item 3.
Defaults upon Senior Securities - Not Applicable
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Item 4.
Submission of Matters to a Vote of Security Holders
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None
Item 5.
Other Information - Not Applicable
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Item 6.
Exhibits and Reports on form 8-K -
--------------------------------
Item 6(a) Exhibits -
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(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
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<PAGE>
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
Date: 11/12/98 /s/ Daniel L. Nir
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Daniel L. Nir
President and Treasurer
(Chief Financial Officer)
Date: 11/12/98 /s/ Jack C. Brown
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Jack C. Brown
Secretary
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE PERIOD ENDED SEPTEMBER 30, 1998, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,056,890
<SECURITIES> 0
<RECEIVABLES> 1,745
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,065,122
<PP&E> 1,895
<DEPRECIATION> 784
<TOTAL-ASSETS> 1,185,930
<CURRENT-LIABILITIES> 7,661
<BONDS> 0
0
0
<COMMON> 393,735
<OTHER-SE> 784,535
<TOTAL-LIABILITY-AND-EQUITY> 1,185,930
<SALES> 0
<TOTAL-REVENUES> 32,426
<CGS> 0
<TOTAL-COSTS> 51,954
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (19,528)
<INCOME-TAX> (2,660)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16,868)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
