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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.
December 31, 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
- ---------------------------------------- ----------
(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
---- ----
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 Febuary 2, 1999
----- ------------------------------
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 - December 31, 1998 (UNAUDITED) and March 31, 1998 ................. 3
Statements of Income - Three months ended December 31, 1998 and 1997
(UNAUDITED) .................................................................... 4
Statements of Income - Nine months ended December 31, 1998 and 1997
(UNAUDITED) .................................................................... 5
Statements of Cash Flows - Nine months ended December 31, 1998 and
1997 (UNAUDITED) ............................................................... 6
Notes to Financial Statements - December 31, 1998 ................................. 7-8
Management's Discussion and Analysis of Financial Condition and
Results of Operations .......................................................... 9-11
PART II. OTHER INFORMATION ....................................................... 12-13
Signatures ........................................................................ 14
Exhibit(27)........................................................................ 15
</TABLE>
Page 2
<PAGE>
THE ST. LAWRENCE SEAWAY CORPORATION
BALANCE SHEETS
DECEMBER 31, 1998 (UNAUDITED) AND MARCH 31, 1998
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1998 1998
============= ==========
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $1,039,426 $1,105,940
Interest and other receivables 0 1,644
Prepaid items 1,367 662
Deferred income taxes/tax benefits 7,858 2,014
---------- ----------
Total Current Assets 1,048,651 1,110,260
Land 118,913 118,913
Property and equipment 1,503 2,679
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Total Assets $1,169,067 1,231,852
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Payroll taxes withheld and accrued $ 0 772
Accounts payable & other 6,573 27,734
Deferred Income 0 8,208
Federal & state taxes payable 471 0
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Total Current Liabilities 7,044 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 391,036 424,151
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Total Shareholders' Equity 1,162,023 1,195,138
---------- ----------
Total Liabilities and Shareholders' Equity $1,169,067 $1,231,852
========== ==========
</TABLE>
Page 3
<PAGE>
THE ST. LAWRENCE SEAWAY CORPORATION
STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31,
1998 1997
============= =============
Revenues:
<S> <C> <C>
Farm rentals $ 2,736 $ 2,736
Interest and dividends 13,104 14,598
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Total revenues 15,840 17,334
Operating costs and expenses:
Farm related operating costs 408 394
Depreciation 392 392
General and administrative 34,000 41,336
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Total operating expenses 34,800 42,122
Income (Loss) before tax provision (18,960) (24,788)
Provision for income taxes/
(tax benefit) (2,713) (3,552)
--------- ---------
Net income (loss) (16,247) (21,236)
========= =========
Per share data:
Weighted average number
of common shares outstanding 393,735 393,735
--------- ---------
Primary earnings per share:
Income (Loss) per share ($0.04) ($0.05)
========= ========
</TABLE>
Page 4
<PAGE>
THE ST. LAWRENCE SEAWAY CORPORATION
STATEMENTS OF INCOME FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31,
1998 1997
============= =============
Revenues:
<S> <C> <C>
Farm rentals $ 8,208 $ 8,208
Interest and dividends 40,058 43,397
--------- ---------
Total revenues 48,266 51,605
Operating costs and expenses:
Farm related operating costs 1,216 1,340
Depreciation 1,176 1,176
General and administrative 84,363 84,963
--------- ---------
Total operating expenses 86,755 87,479
Income (Loss) before tax provision (38,489) (35,874)
Provision for income taxes/
(tax benefit) (5,373) (4,863)
--------- ---------
Net income (loss) (33,116) (31,011)
========= =========
Per share data:
Weighted average number
of common shares outstanding 393,735 393,735
--------- ---------
Basic earnings per share:
Income (Loss) per share ($0.08) ($0.08)
========= =========
</TABLE>
Page 5
<PAGE>
THE ST. LAWRENCE SEAWAY CORPORATION
STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED
DECEMBER 31, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31,
1998 1997
============= =============
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $(33,116) $(31,011)
Adjustments to reconcile net income to
net cash from operating activities
Depreciation 1,176 1,176
(Increase) Decrease in current assets:
Interest and Other receivables 1,644 1,522
Prepaid items (705) (371)
Deferred income tax (5,844) (5,472)
(Decrease) Increase in current liabilities:
Payroll tax & other (8,980) (8,605)
Accounts payable (21,160) (17,532)
Income taxes payable 471 532
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Net cash from operating activities (66,514) (59,761)
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 (66,514) (59,761)
Cash and cash equivalents, beginning 1,105,940 1,165,962
----------- -----------
Cash and cash equivalents, ending $1,039,426 $ 1,106,201
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid for income taxes 750 1,669
Cash paid for interest expense 0 0
</TABLE>
Page 6
<PAGE>
THE ST. LAWRENCE SEAWAY CORPORATION
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 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 nine month period ending December 31, 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
Basic earnings per share are computed using the weighted average number of
shares of common stock and common stock equivalents outstanding under the
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 514,191 non-transferable
rights (the "Subscription Right") to purchase two (2) additional Shares of
Paragon. Paragon's business purpose is to seek to acquire or merge with an
operating business, and thereafter to operate as a publicly-traded company. St.
Lawrence purchased the Paragon shares on March 6, 1997, for $5,141, or $.01 per
share, and distributed 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 received any cash or other proceeds from the distribution, and St.
Lawrence stockholders did not make any
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<PAGE>
payment for the share and subscription rights. The distribution to St. Lawrence
stockholders was 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
did not have a specific operating business at the time of the distribution, the
distribution of the shares was 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 a business combination and the release of shares from
escrow. In addition, because more than eighteen months have expired since
Paragon's Registration Statment on Form S-1 was declared effective, it is
possible that Rule 419 will prohibit the distributuion, or require an additional
or new registration statement to be filed and approved. The Company is not
involved in Paragon's operations or filings, and has provided the following
information solely based on information made know to it by representatives of
Paragon.
Page 8
<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 December 31, 1998 as compared to
three months ended December 31, 1997.
Interest and dividend income decreased to $13,104 in the three months ended
December 31, 1998, from $14,598 in the three months ended December 31, 1997.
This decrease is a result of slightly lower interest rates received on slightly
lower available cash investments.
Farm rental revenue remained unchanged in the three months ended December 31,
1998 from those in the three months ended December 31, 1997.
General and administrative expenses decreased to $34,000 in the three months
ended December 31, 1998 from $41,336 in the three-months ended December 31,
1997. This decrease reflects significant savings realized on travel, printing
and other costs associated with the annual meeting of shareholders and on
employee salaries and general office expenses.
As a result of the above items, the Company had a loss of $18,960 before taxes
in the three months ended December 31, 1998, as compared to a loss of $24,788
before taxes in the three months ended December 31, 1997.
Federal and state income tax benefits of $2,713 were applicable in the three
months ended December 31, 1998 as compared to federal and state income tax
benefits of $3,552 in the three months ended December 31, 1997.
RESULTS OF OPERATIONS - Nine months ended December 31, 1998, compared to nine
months ended December 31, 1997.
Interest and dividend income decreased to $40,058 in the nine months ended
December 31, 1998, from $43,397 in the same period ended December 31, 1997. The
decrease is a result of slightly lower interest rates received on slightly lower
available cash investments.
Farm rental revenues remained unchanged in the nine months ended December 31,
1998 from those in the nine months ended December 31, 1997.
General and administrative expenses were comparable in the nine months ended
December 31, 1998 and 1997, with such 1998 expenses being $84,363 and 1997
expenses being $84,963.
Page 9
<PAGE>
As a result of the above items the Company incurred a loss before provision for
income taxes of $38,489 in the nine months ended December 31, 1998 as compared
to a loss before provision for income taxes of $35,874 in the comparable period
a year ago.
Federal and state income tax benefits of $5,373 were applicable in the nine
months ended December 31, 1998 as compared to federal and state income benefits
of $4,863 that were applicable in the nine months ended December 31, 1997.
Liquidity and Capital Resources
- -------------------------------
At December 31, 1998, the Company had net working capital of $1,041,607 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 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 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 Company's accountant
has reported that it is presently reviewing the guidelines and recommended
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<PAGE>
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 March, 1999.
Outlook
- -------
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.
Page 11
<PAGE>
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
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(a) The Company held its Annual Meeting of Stockholders on November
12, 1998.
(b) Not applicable.
(c) At the stockholders meeting, the Company's nominees for director
were elected by the following votes:
<TABLE>
<CAPTION>
NOMINEE VOTES IN FAVOR VOTES TO WITHHOLD
------- -------------- AUTHORITY
-----------------
<S> <C> <C>
Joel M. Greenblatt 224,690 1,912
Daniel L. Nir 224,690 1,912
Jack C. Brown 224,291 2,311
Edward B. Grier III 224,690 1,912
</TABLE>
Item 5.
Other Information - Not Applicable
-----------------
Item 6.
Exhibits and Reports on form 8-K -
--------------------------------
Item 6(a) Exhibits -
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Page 12
<PAGE>
(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
---------
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
-----------------------
CORPORATION
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Registrant
Date: 2/12/99 /s/ Daniel L. Nir
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Daniel L. Nir
President and Treasurer
(Chief Financial Officer)
Date: 2/12/99 /s/ Jack C. Brown
---------------------------
Jack C. Brown
Secretary
Page 14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE NINE MONTH PERIOD ENDED DECEMBER 31, 1998, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> DEC-31-1998
<CASH> 1,039,426
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,048,651
<PP&E> 1,503
<DEPRECIATION> 1,176
<TOTAL-ASSETS> 1,169,067
<CURRENT-LIABILITIES> 7,044
<BONDS> 0
0
0
<COMMON> 393,735
<OTHER-SE> 768,288
<TOTAL-LIABILITY-AND-EQUITY> 1,169,067
<SALES> 0
<TOTAL-REVENUES> 48,266
<CGS> 0
<TOTAL-COSTS> 86,755
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (38,489)
<INCOME-TAX> (5,373)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (33,116)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
