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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, 1999 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, 1999
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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
PART I. FINANCIAL INFORMATION PAGE
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Balance Sheets - September 30, 1999 (UNAUDITED) and March 31, 1999............3
Statements of Income - Three months ended September 30, 1999 and 1998
(UNAUDITED)................................................................4
Statements of Income - Six months ended September 30, 1999 and 1998
(UNAUDITED)................................................................5
Statements of Cash Flows - Six months ended September 30, 1999 and
1998 (UNAUDITED)...........................................................6
Notes to Financial Statements - September 30, 1999...........................7-8
Management's Discussion and Analysis of Financial Condition and
Results of Operations....................................................9-11
PART II. OTHER INFORMATION...................................................12
Signatures....................................................................13
Exhibits......................................................................14
<PAGE>
THE ST. LAWRENCE SEAWAY CORPORATION
BALANCE SHEETS
SEPTEMBER 30, 1999 (UNAUDITED) AND MARCH 31, 1999
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1999 1999
============= ============
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $1,020,596 1,031,389
Interest and other receivables 1,827 10,731
Prepaid items 512 1,202
Deferred income taxes 3,965 2,014
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Total Current Assets 1,026,900 1,045,336
Land 118,913 118,913
Property and equipment 326 1,111
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Total Assets $1,146,139 1,165,360
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Payroll taxes withheld and accrued $ 0 0
Accounts payable & other 10,843 13,798
Deferred Income 2,736 8,208
Federal & state taxes payable 264 0
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Total Current Liabilities 13,843 22,006
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 361,309 372,367
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Total Shareholders' Equity 1,132,296 1,143,354
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Total Liabilities and Shareholders' Equity $ 1,146,139 1,165,360
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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, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
-------------------------------
<S> <C> <C>
Revenues:
Farm rentals 2,736 2,736
Interest and dividends 11,585 13,416
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Total revenues 14,321 16,152
Operating costs and expenses:
Farm related operating costs 368 298
Depreciation 392 392
General and administrative 22,325 24,076
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Total operating expenses 23,085 24,766
Income (Loss) before tax provision (8,764) (8,614)
Provision for income taxes/
(tax benefit) (1,262) (1,206)
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Net income (loss) (7,502) (7,408)
===========================
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) ($0.02)
===========================
</TABLE>
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<PAGE>
THE ST. LAWRENCE SEAWAY CORPORATION
STATEMENTS OF INCOME FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
Revenues:
Farm rentals 5,472 5,472
Interest and dividends 22,800 26,954
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Total revenues 28,272 32,426
Operating costs and expenses:
Farm related operating costs 767 737
Depreciation 784 784
General and administrative 39,466 50,433
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Total operating expenses 41,017 51,954
Income (Loss) before tax provision (12,745) (19,528)
Provision for income taxes/
(tax benefit) (1,687) (2,660)
--------------------------
Net income (loss) (11,058) (16,868)
==========================
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 ($0.03) ($0.04)
===========================
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<PAGE>
THE ST. LAWRENCE SEAWAY CORPORATION
STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
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<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (11,058) (16,868)
Adjustments to reconcile net income to
net cash from operating activities
Depreciation 784 784
(Increase) Decrease in current assets:
Interest and other receivables 8,904 (101)
Prepaid items 690 (835)
Deferred income tax (1,951) (2,977)
(Decrease) Increase in current liabilities:
Payroll tax & other 0 (772)
Deferred Income (5,472)
Accounts payable (2,954) (28,599)
Income taxes payable 264 316
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Net cash from operating activities (10,793) (49,050)
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:
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Net cash from financing activities 0 0
Net decrease in cash and cash equivalents (10,793) (49,050)
Cash and cash equivalents, beginning 1,031,389 1,105,940
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Cash and cash equivalents, ending $ 1,020,596 $ 1,056,890
================================
Supplemental disclosures of cash flow information:
Cash paid for income taxes 0 500
Cash paid for interest expense 0 0
</TABLE>
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<PAGE>
THE ST. LAWRENCE SEAWAY CORPORATION
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1999
(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 six month period ending September 30, 1998, are not
necessarily indicative of the results that may be expected for the fiscal year
ending March 31, 2000. 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, 1999.
NOTE B--RECLASSIFICATION
The 1998 financial statements have been reclassified, where necessary, to
conform to the presentation of the 1999 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 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 payment for the share and subscription
rights.
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<PAGE>
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. 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. Because more than eighteen months have
expired since Paragon's Registration Statement on Form S-1 was declared
effective, management of the Company believes that the Registration Statement
has expired and is no longer effective to permit distribution of the Shares and
Subscription Rights or sale of the shares covered by the Subscription Rights
without an amendment or an additional or new registration statement being 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.
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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, 1999 AS COMPARED TO
THREE MONTHS ENDED SEPTEMBER 30, 1998.
Interest and dividend income decreased to $11,585 in the three-months ended
September 30, 1999, from $13,416 in the previous year. The decrease is primarily
due to a combination of lower interest rates and a decrease in the cash balances
invested.
Farm rental revenue remained unchanged in the three months ended September 30,
1999.
General and administrative expenses decreased to $22,325 in the three months
ended September 30, 1999, from $24,076 on the three-months ended September 30,
1998.
As a result of the above items, the Company had a loss of $8,764 before taxes in
the three months ended September 30, 1999, as compared to a loss of $8,614
before taxes in the three month ended September 30, 1998.
Federal and state income tax benefits of $1,262 were applicable in the three
months ended September 30, 1999, as compared to federal and state income tax
benefits of $1,206 in the three months ended September 30, 1998.
RESULTS OF OPERATIONS - SIX MONTHS ENDED SEPTEMBER 30, 1999, COMPARED TO SIX
MONTHS ENDED SEPTEMBER 30, 1998.
Interest and dividend income decreased to $22,800 in the six months ended
September 30, 1999, from $26,954 in the same period ended September 30, 1998.
This decrease is primarily due to a combination of lower interest rates and a
decrease in the cash balances invested.
Farm rental revenues remained unchanged in the six months ended September 30,
1999.
General and administrative expenses decreased to $39,466 in the six months ended
September 30, 1999, from $50,433 in the six months ended September 30, 1998.
This decrease was principally due to decreases in professional fees paid to the
Company's accountants and legal counsel, and decreases in employment
compensation, taxes and related expenses, all as illustrated by the following
comparison table:
-9-
<PAGE>
SIX MONTH ENDED
SEPTEMBER 30
1999 1998
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Executive Compensation, Management Fees,
Salaries, and Employee Benefits $10,119 $16,574
Office Rent and Company Operations
(including Farm Operations) 9,336 10,308
Stock Services, Proxy, Annual Meeting, and
SEC Report Compliance 4,203 2,465
Professional Fees (accounting & legal) 15,454 19,772
Payroll, excise and other taxes 1,303 2,353
As a result of the above items the Company incurred a loss before provision for
income taxes of $12,745 in the six months ended September 30, 1999 as compared
to a loss before provision for income taxes of $19,528 in the comparable period
a year ago.
Federal and state income tax benefits of $1,687 were applicable in the six
months ended September 30, 1999 as compared to federal and state income benefits
of $2,660 that were applicable in the six months ended September 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1999, the Company had net working capital of $1,013,057 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 sell
its real property and/or 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
The Company has substantially completed review of the Year 2000 compliance of
its management and information systems. With respect to its internal systems,
the Company has found that no significant compliance efforts are required since
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.
-10-
<PAGE>
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 was
currently Year 2000 "ready"; that it would be conducting a full blown test in a
Year 2000 environment in October, 1998, after which it expected to be able to
confirm that it is Year 2000 compliant; that it had 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 had also made the appropriate filing with the
SEC in accordance with Rule 17Ad-18. The Company's farm management company
reported that it believed its computers were ready to handle the Year 2000
turnover and that the bank where the farm account is located had reported that
100% of all its internally developed, mission critical applications (including
checking, savings, CDs and loans) had been corrected, successfully tested and
put into use. Finally, the Company's accountant reported that it was reviewing
the guidelines and recommended policies established by the American Institute of
Certified Public Accountants and addressing specific concerns through a firmwide
upgrade of computer systems and financial software which would be tested after
installation of the upgrades was completed in 1999. The Company requested
compliance updates from its service providers in June, 1999, and has received
satisfactory responses to such requests.
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.
-11-
<PAGE>
THE ST. LAWRENCE SEAWAY CORPORATION
PART II. OTHER INFORMATION
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
None
Item 5. OTHER INFORMATION - Not Applicable
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
12
<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
Registrant
/s/ Daniel L. Nir
Date: 11/12/99 -----------------------------------
Daniel L. Nir
President and Treasurer
(Chief Financial Officer)
Date: 11/12/99 /s/ Jack C. Brown
-----------------------------------
Jack C. Brown
Secretary
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit (27)
Financial Data Schedule
For the Six Month Period Ended September 30, 1999
The St. Lawrence Seaway Corporation
(Unaudited)
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE SIX MONTH PERIOD ENDED SEPTEMBER 30, 1999, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,020,596
<SECURITIES> 0
<RECEIVABLES> 1,827
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,026,900
<PP&E> 326
<DEPRECIATION> 784
<TOTAL-ASSETS> 1,146,139
<CURRENT-LIABILITIES> 13,843
<BONDS> 0
0
0
<COMMON> 393,745
<OTHER-SE> 783,504
<TOTAL-LIABILITY-AND-EQUITY> 1,146,139
<SALES> 0
<TOTAL-REVENUES> 28,272
<CGS> 0
<TOTAL-COSTS> 41,017
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (12,745)
<INCOME-TAX> (1,687)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,058)
<EPS-BASIC> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
