=================================================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended Commission File Number June 30, 2005 000-02040 ------------- --------- THE ST. LAWRENCE SEAWAY CORPORATION ---------------------------------------------------------------- (Exact Name of Small Business Issuer as Specified in its Charter) INDIANA 35-1038443 ------- ---------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 55 South State Avenue Indianapolis, Indiana 46204 ---------------------------------------- (Address of principal executive offices) Issuer's telephone number, including area code (317) 639-5292 ------------------------------- Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 --------- --------- State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: Class Outstanding at August 12, 2005 Common Stock, $1.00 par value 393,735 Transitional Small Business Disclosure Format (check one): Yes No X ---------- --------- ===================================================================================================
THE ST. LAWRENCE SEAWAY CORPORATION FORM 10-QSB INDEX PART I. FINANCIAL INFORMATION PAGE ---- Item 1. Financial Statements Balance Sheets - June 30, 2004 (unaudited) and March 31, 2005................................3 Statements of Income - Three months ended June 30, 2005 and 2004 (unaudited).................4 Statements of Cash Flows - Three months ended June 30, 2005 and 2004 (unaudited).............5 Notes to Financial Statements - June 30, 2004................................................6 Item 2. Management's Discussion and Analysis or Plan of Operation.............................8-10 Item 3. Controls and Procedures.................................................................10 PART II. OTHER INFORMATION......................................................................11 SIGNATURE........................................................................................12 2
THE ST. LAWRENCE SEAWAY CORPORATION BALANCE SHEETS JUNE 30, 2005 (UNAUDITED) AND MARCH 31, 2005 At June 30, At March 31, 2005 2005 ------------ ----------- (unaudited) ASSETS Current assets: Cash and cash equivalents............................ $168,979 $176,873 Interest and other receivables....................... 144 81 ----------- ----------- Total current assets............................ 169,123 176,954 Other investments (Note E)............................... 750,000 750,000 ----------- ----------- Total assets.................................... $919,123 $926,954 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable & other............................. $ 21,531 $ 18,917 ----------- ----------- Total current liabilities....................... 21,531 18,917 ----------- ----------- Shareholders' equity: Common stock, $1.00 par value, 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.................................... 125,605 137,050 ----------- ----------- Total shareholders' equity........................... 897,592 908,037 ----------- ----------- Total liabilities and shareholders' equity...... $ 919,123 $926,954 =========== =========== 3
THE ST. LAWRENCE SEAWAY CORPORATION STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED JUNE 30, 2005 AND 2004 (UNAUDITED) For the Three Months Ended --------------------------------- June 30, June 30, 2005 2005 ------------ ----------- Revenues: Interest and dividends............................... $ 1,072 $ 267 ----------- ----------- Total revenues........................................... 1,072 267 Operating costs and expenses: General and administrative........................... 11,517 13,943 ----------- ----------- Total operating expenses................................. 11,517 13,943 Income (loss) before tax provision....................... (10,445) (13,676) Provision for income taxes........................... 0 0 ----------- ----------- Net income (loss)........................................ $ (10,445) $ (13,676) ============ ============ Per share data: Weighted average number of common shares outstanding. 393,735 393,735 ----------- ----------- Primary earnings per share: Income (loss) per share.............................. $ (0.03) $ (0.03) ============ ============ 4
THE ST. LAWRENCE SEAWAY CORPORATION STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED JUNE 30, 2005 AND 2004 (UNAUDITED) For the Three Months Ended --------------------------------- June 30, 2005 June 30, 2004 ------------- ------------- Cash flows from operating activities: Net income (loss) $(10,445) $(13,676) Adjustments to reconcile net income to net cash from operating activities (Increase) Decrease in current assets: Interest and other receivables (62) (8) (Decrease) Increase in current liabilities: Accounts payable 2,613 7,500 Income taxes payable 0 0 ----------- ----------- Net cash from operating activities (7,894) (6,184) Cash flows from investing activities: Net cash from investing activities 0 0 Cash flows from financing activities: Net cash from financing activities 0 0 Net (decrease) increase in cash and cash equivalents (7,894) (6,184) Cash and cash equivalents, beginning 176,873 246,271 ----------- ----------- Cash and cash equivalents, ending $168,979 $240,087 Supplemental disclosures of cash flow information: Cash paid for income taxes 0 0 Cash paid for interest expense 0 0 5
THE ST. LAWRENCE SEAWAY CORPORATION NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2005 (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-QSB. 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 June 30, 2005 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2006. 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, 2005. NOTE B--RECLASSIFICATION The 2004 financial statements have been reclassified, where necessary, to conform to the presentation of the 2005 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 treasury stock method. Common stock equivalents include all common stock options and warrants outstanding during each of the periods presented. NOTE D--RESEARCH INVESTMENT The Company entered into a Research Funding Agreement with New York University School of Medicine, New York, New York, under which the Company provided funding for the further development of certain NYU medical discoveries and technology, in return for which the Company is entitled to receive license fees from the future commercial uses of such discoveries. Such technology is subject to pending NYU patent applications and generally relates to treatment of certain prostate enlargements and prostate cancers. Under the Research Funding Agreement, the Company agreed to provide research funding of $25,000 for each of eight calendar quarters, in exchange for which the Company is entitled to receive 1.5% of future license revenues from the sale, license or other commercialization of the patents. The first payment was made in connection with the execution of the Research Funding Agreement in January 2002. The Company had the option to provide additional funds for up to three additional years of development, in exchange for which the Company's share of license revenue from the patents would increase to a maximum of 3.75%. The Company did not exercise this option. Development and commercialization of the patents are highly speculative and subject to numerous scientific, financial, practical and commercial uncertainties. There can be no assurances that the Company will receive any license revenues as a result of its investment. 6
NOTE E--T3 THERAPEUTICS INVESTMENT The Company entered into a joint venture agreement as of June 25, 2002 under which it has provided development funding to a newly-formed private limited liability company, T3 Therapeutics, LLC (the "Development Company") for specified drug treatment protocols for thyroid and cardiovascular disease, in exchange for an equity interest in the Development Company. Such treatments are in early stage development and involve the use of novel formulations of hormones, delivered in controlled release formulations. Funding provided by the Company is being used for the purpose of financing development of new formulations of such hormones, and to conduct animal and human clinical trials. Research has been initiated by the Development Company, which has been founded by physicians at a major metropolitan New York City area hospital. Under the agreement, the Company acquired, subject to adjustment, a 12.5% ownership stake in the Development Company, in exchange for providing development funding of $750,000, for use over an approximately two-year period. The agreement provides for a follow-on investment of an additional $750,000 if certain preliminary FDA testing approvals are secured, with a corresponding increase in the Company's ownership stake to 25% of the Development Company. The Company and the Development Company have mutually agreed to cancel the additional investment requirement of $750,000. If the product is licensed by Development Company to a pharmaceutical partner the Company is entitled to a portion of Development Company's resulting royalties and progress payments. The amount of ownership to be received by the Company is subject to adjustment, based upon (i) ownership and license arrangements that the Development Company makes with laboratories that provide research and formulation expertise and products, (ii) development or licensing transactions, or (iii) other sources of financing. The Company loaned the Development Company $40,000 in connection with entering the letter of intent relating to the joint venture agreement; the $40,000 note was cancelled and was credited toward the Company's initial $750,000 contribution. Development and commercialization of the treatment protocols is highly speculative and subject to numerous scientific, practical, financial and commercial uncertainties. 7
THE ST. LAWRENCE SEAWAY CORPORATION ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION RESEARCH FUNDING. Please see "Note E--T3 Therapeutics" in the Notes to the Financial Statements contained under Item 1 of this Form 10-QSB for a description of a joint venture agreement the Company entered into during 2002. In March 2003, the Development Company entered into a development and worldwide licensing agreement with West Pharmaceutical Services, Inc. for the development and commercialization of an oral sustained release formulation of liothyronine. Under the terms of the agreement, West will receive milestone payments for the successful completion of various development activities throughout the program. West will also receive royalty payments based on commercial sales if the product is granted regulatory approval. The Development Company will receive certain licenses necessary to develop and sell products incorporating West's sustained release delivery technology. The Development Company paid an up-front license fee of $150,000 in addition to the milestone and royalty payments that may become payable depending on the success of the project. The Development Company will pay all costs associated with the development program, which are currently estimated to total $600,000 over the life of the development program, which is expected to be at least two years. The initial formulation research conducted by West Pharmaceuticals for the Development Company has been completed and two prototype formulations have been developed. Initial prototype stability studies have been completed, but the prototypes exhibited some instability at high temperatures and high humidity. The large animal (swine) trials recently concluded by the Development Company designed to test the absorption characteristics of tri-iodothyronine ("T-3") exhibited very limited T-3 absorption and extremely erratic results. Consequently, the Development Company is further refining its T-3 drug preparations in anticipation of additional trials in the second half of 2005. The Development Company in March 2005 entered into a Development and Option Agreement with a domestic pharmaceutical company. This agreement is intended to further develop the Development Company's thyroid and cardiovascular protocols over the next several years and, if successful, eventually result in a New Drug Application being filed with the FDA. However, there can be no assurances that the protocols will be successfully developed or that a New Drug Application will be filed with or approved by the FDA. RESULTS OF OPERATIONS -- THREE MONTHS ENDED JUNE 30, 2005 AS COMPARED TO THREE MONTHS ENDED JUNE 30, 2004. Interest and dividend income increased to $1,072 for the three months ended June 30, 2005, from $267 for the three months ended June 30, 2004, an increase of $805. This increase is a result of higher interest rates on the Company's cash balances. General and administrative expenses decreased $2,426, or 17.4%, to $11,517 for the three months ended June 30, 2005 from $13,943 for the three months ended June 30, 2004. The decrease in general and administrative expenses is primarily due to lower professional fees and management fees. 8
The following table provides further detail on general and administrative expenses: THREE MONTHS ENDED JUNE 30, 2005 2004 ---- ---- Executive compensation, management fees, salaries and employee benefits.................................................. $ 1,827 $ 3,051 Office rent and company operations............................. 273 308 Stock transfer services, proxy, annual meeting and SEC report compliance................................................ 1,917 1,776 Professional fees (accounting & legal)......................... 7,500 8,808 ---------- ---------- Total........................................ $ 11,517 $ 13,943 ========== ========== As a result of the above items, the Company had a loss of $10,445 before provision of income taxes in the three months ended June 30, 2005, as compared to a loss of $13,676 before provision of income taxes in the three months ended June 30, 2004. No Indiana gross tax was provided for in the three month periods ended June 30, 2005 and 2004. No federal tax provision is applicable in the three month periods ended June 30, 2005 and 2004. LIQUIDITY AND CAPITAL RESOURCES At June 30, 2005, the Company had net working capital of $147,592, substantially all of which was in cash and money market funds. The Company believes it has sufficient capital resources to continue its current business for at least one year. 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, the Company 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. The Company does not have a formal arrangement with any bank or financial institution with respect to the availability of financing in the future. "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This Form 10-QSB contains statements which are not historical facts, but are forward-looking statements which are subject to risks, uncertainties and unforeseen 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 reflect Management's analysis only as of the date of the filing of this Form 10-QSB. 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, uncertainties and other factors contained in other documents which the Company files from time to time with the Securities and Exchange Commission. These factors include, but are not limited to: o the ability to successfully complete development and commercialization of products, including the cost, timing, scope and results of pre-clinical and clinical testing; 9
o the ability to successfully complete product research and further development, including animal, pre-clinical and clinical studies; o the ability of the developers to manage multiple late stage clinical trials for a variety of product candidates; o significant uncertainties and requirements to attain government testing and sales approvals and licenses; o the volume and profitability of product sales; o changes in existing and potential relationships with financing, corporate or laboratory collaborators; o the cost, delivery and quality of clinical and commercial grade materials supplied by contract manufacturers or laboratories; o the timing, cost and uncertainty of obtaining regulatory approvals; o the ability to obtain substantial additional funding or to enter into development or licensing arrangements with well-funded partners or licensees; o the ability to attract manufacturing, sales, distribution and marketing partners and other strategic alliances; o the ability to develop and commercialize products before competitors; and o the dependence on certain founders and key management members of the developer, or physicians with expertise in the field. ITEM 3. CONTROLS AND PROCEDURES. (a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Company's Chairman of the Board and President and Treasurer have evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this Quarterly Report (the "Evaluation Date"). Based upon such evaluation, such officers have concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to the Company required to be included in the Company's reports filed or submitted under the Exchange Act. (b) CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING. During the period covered by this Quarterly Report, there has not been any change in the Company's internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, such controls. 10
PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDING - Not Applicable ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS -Not Applicable ITEM 3. DEFAULTS UPON SENIOR SECURITIES - Not Applicable ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - Not Applicable ITEM 5. OTHER INFORMATION - Not Applicable ITEM 6. EXHIBITS - 31.1 - Certification by Principal Executive Officer Pursuant to Rule 13a-14(a). 31.2 - Certification by Principal Financial Officer Pursuant to Rule 13a-14(a). 32.1 - Certificate of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.* 32.2 - Certificate of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.* * Certification is not deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to liability under that Section. Such certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act except to the extent expressly and specifically incorporated by reference in any such filing. 11
SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE ST. LAWRENCE SEAWAY CORPORATION Registrant /s/ Daniel L. Nir -------------------------------------------- Date: August 15, 2005 Daniel L. Nir President and Treasurer (Chief Financial Officer) 12