UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT - --- OF 1934 FOR THE FISCAL YEAR ENDED MARCH 31, 1996 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE - --- ACT OF 1934 For the transition period from _______________ to _______________ Commission file number 0-2040 THE ST. LAWRENCE SEAWAY CORPORATION (Exact name of registrant as specified in its charter) Indiana 35-1038443 (State or other jurisdiction (I.R.S. Employer Identification of corporation or organization) Number) 320 N. Meridian St., Suite 818 46204 Indianapolis, Indiana (Zip Code) (Address of principal executive offices) (317) 639-5292 (Registrant's telephone number including area code) Securities registered pursuant to Section 12(g) of the Act: Name of Exchange on Title of each class Which Registered ------------------- ---------------- Common Stock, par value $1.00 per share None Securities registered pursuant to Section 12(b) of the Act: None 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 (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 [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes [x] No [ ] The aggregate market value of Common stock held by non-affiliates of the registrant as of May 31, 1996 was approximately $808,197. The number of shares of Common Stock of the registrant outstanding as of June 26, 1996 was 393,735. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy Statement to be used in connection with the registrant's 1996 Annual Meeting of Shareholders are incorporated by reference into Part III of this report. 1 The St. Lawrence Seaway Corporation Part I Item 1 - Business Recent Developments On December 31, 1995, The St. Lawrence Seaway Corporation (the "Company" or "St. Lawrence") organized a wholly-owned subsidiary as a Massachusetts business trust under the name "The St. Lawrence Fund" (the "Subsidiary") for the purpose of investing in securities. At such time, the Company intended to register the Subsidiary as a closed-end investment company and to distribute beneficial shares of the Subsidiary to the Company's shareholders. Subsequently, the Company determined that because of tax considerations, such steps would not be practical or in the best interest of the Company's shareholders and, accordingly, determined to dissolve the Subsidiary, effective as of May 31, 1996. A Certificate of Termination and Plan of Dissolution of the Subsidiary was filed with the Massachusetts Secretary of State on June 12, 1996, and the Company's original investment in the Subsidiary was distributed to it with interest in accordance with such Plan of Dissolution. Company History The Company is an Indiana corporation organized on March 31, 1959, which, since such date has principally engaged in farming, timber harvesting and other traditional agricultural activities. During the last six years, the Company's only other operating activity has been the sale of certain farming acreage, and investment of its remaining liquid assets, primarily in interest bearing cash equivalent securities. Description of Business The Company is engaged in a search for other business opportunities which may or may not be related to its present agricultural, cash management and other investment activities. (a) Agricultural Activities -- At March 31, 1996, St. Lawrence was the owner of one parcel of agricultural real estate in Northern Indiana comprising approximately 195 acres. This real estate, known as Schleman Farm, is primarily devoted to farming activities under the cash lease method of operation. The cash lease method of operation involves the leasing of the property to farmers who are directly responsible for the operation of the Farm and who pay St. Lawrence a rental fee covering a ten-month period for the use of the property for farming and related activities. St. Lawrence generally receives these rental payments at one time or in 2 semi-annual installments. Real estate taxes and other minor expenses, such as insurance, are the responsibility of St. Lawrence in some instances. St. Lawrence has engaged the services of a farm management company, Halderman Farm Management Service, Inc., of Wabash, Indiana ("Halderman"). Under the current contract, Halderman manages, and is responsible for the negotiation of all leases, tenant contracts, and general operations and programs of the Schleman Farm. Halderman is compensated on a quarterly per-acre fee basis. It has managed the current and former farm properties of the Company for more than ten years. (b) Cash Management and Other Investments -- During the fiscal year ended March 31, 1996, the Company continued its practice of maintaining its other assets in relatively liquid interest/dividend bearing money market investments. A portion of such assets were transferred to the Subsidiary and maintained by it in a similar money market account, until distributed to the Company pursuant to the Plan of Dissolution thereof. The Company is engaged in a search for other business opportunities and, accordingly, such assets may be used for an acquisition or for a partial payment of an acquisition or for the commencement of a new business. Financing Arrangements The Company's real estate is unencumbered. Furthermore, the Company currently has no debt for borrowed funds or similar obligations or contingencies. The Company may incur debt of an undetermined amount to effect an acquisition or commence a new business. St. Lawrence does not have a formal arrangement with any bank or financial institution with respect to the availability of financing in the future. Licenses and Trademarks, etc. The business of St. Lawrence is not currently dependent upon any patent, trademark, franchise or license. Governmental Regulation St. Lawrence believes it is in compliance with all federal, state and local regulations including all applicable environmental matters. Seasonality Although farm operations are generally conducted during the summer months, St. Lawrence receives the majority of its rental and other payments based upon a definitive 3 schedule and therefore seasonal or weather factors generally do not have an effect on the revenues of the Company. Employees The Company has only one full time salaried employee at this time. Mr. Jack C. Brown, Secretary of St. Lawrence receives a monthly fee of $500 for administrative services that he renders to the Company. Such fee is paid pursuant to a month to month arrangement. Item 2 - Properties At March 31, 1996, the Company owned one parcel of agricultural real estate in Porter County, Indiana comprising approximately 195 acres. Only a portion of the property, known as Schleman Farm, is suitable for farming purposes. The balance is wooded and from time-to-time is suitable to some extent for timber harvesting operations. In the past, St. Lawrence has harvested excess timber from its various properties. Such timber harvesting has occurred at intermittent times and there can be no assurances that there will be timber activities at Schleman Farm in the future. Item 3 - Legal Proceedings St. Lawrence is not a party to nor is any of its property the subject of any material legal proceedings. Item 4 - Submission of Matters to a Vote of Security Holders Not applicable. 4 Part II Item 5 - Market For the Company's Common Equity and Related Stockholder Matters. Market information The Company's common stock is not currently listed for trading on any exchange. The following table sets forth the high and low bid price for each quarterly period during the fiscal years 1996 and 1995, as reported by the National Quotation Bureau, Inc. from the pink sheets and the OTC Bulletin Board. Such price data reflects inter-dealer prices, without retail mark-up, markdown or commission and may not represent actual transactions. Year Quarter High Low - ---- ------- ---- --- 1996 First $1.88 $1.50 Second $2.13 $1.75 Third $2.25 $1.88 Fourth $2.50 $2.00 1995 First $1.63 $1.50 Second *Unpriced Third *Unpriced Fourth *Unpriced Dividends It is the present policy of the Board of Directors of St. Lawrence to retain earnings, if any, to finance the future expansion of the Company. No cash dividends are expected to be paid in the future. Number of Stockholders As of June 26, 1996, there were approximately 1,382 holders of record of the Company's Common Stock. 5 Item 6 - Selected Financial Data Selected Financial Data Years Ended March 31, The following table sets forth selected financial information with respect to the Company for the five fiscal years ended March 31, 1996. The information set forth in the following table should be read in connection with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in conjunction with the Company's audited Financial Statements and Notes thereto appearing elsewhere in this Report. 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- REVENUES: Interest & Dividends 59,858 55,311 34,855 33,085 50,913 Farm Rentals & Sales 9,120 9,804 21,913 34,725 34,665 Gain on Sale of Farm Properties, net 0 0 80,779 80,183 0 Other 0 0 48 0 216 ------ ------ ------ ------ ------ Total 68,978 65,115 137,595 147,993 85,794 ------ ------ ------- ------- ------ COSTS & EXPENSES: Farm Related 1,243 1,634 2,155 4,327 4,867 General and Administrative 147,748 154,053 111,306 105,365 103,649 Other 1,438 588 0 0 1,558 ------ ------ ------- ------- ------ Total 150,429 156,275 113,461 109,692 109,926 Income (Loss) Before Extraordinary Items And Income Taxes (81,451) (91,160) 24,134 38,301 (24,132) Income Tax Expense (Benefit) (735) (5,429) 8,048 10,289 (2,751) ----- ------- ------ ------ ------- Net Income (loss) (82,186) (85,731) $ 16,086 $ 28,012 $ (21,381) 6 Income (Loss) per Common Share (0.21) (0.22) $0.04 $0.07 $ (0.05) ----- ----- ----- ----- ------- Weighted Average Number of Common Shares Outstanding 393,735 393,735 395,005 406,740 409,036 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- BALANCE SHEET DATA: Total Assets 1,370,874 1,414,825 1,507,513 1,499,482 1,492,007 Total Liabilities 62,094 23,859 30,817 35,835 35,856 Shareholders' Equity 1,308,780 1,390,966 1,476,696 1,463,647 1,456,151 7 Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Year Ended March 31, 1996, as compared to Year Ended March 31, 1995. Interest and dividend income increased to $59,858 in the year ended March 31, 1996, from $55,311 in the previous year. The increase is a result of higher interest rates received in cash invested in the year ended March 31, 1996. Farm rental revenue decreased to $9,120 in the year ended March 31, 1996 from $9,804 in fiscal year 1995 because the lease for the Schleman Farm contains a $5/acre rent concession given in consideration of the uncertainty of crop yields due to abnormally inclement weather. General and administrative expenses decreased to $141,748 in the year ended March 31, 1996 from $148,053 on the year ended March 31, 1995 principally due to reduced legal and other professional expenses currently recognized in the Company's Statement of Income as of March 31, 1995. As a result of the above items, the Company had a loss of $81,451 before taxes in the year ended March 31, 1996, as compared to a loss of $91,160 before taxes in the year ended March 31, 1995. The income tax paid in the current year was $735. An income tax benefit of $5,429 was received in the year ended March 31, 1995 as a result of the loss realized in that year. Year Ended March 31, 1995, as compared to Year Ended March 31, 1994. Interest and dividend income increased to $55,311 in the year ended March 31, 1995, from $34,855 in the previous year. The increase is a result of higher interest rates received in cash invested in the year ended March 31, 1995. Farm rental revenue decreased in the year ended March 31, 1995 because fiscal year 1995 was the first year that there were no carry-over rentals from the sale of previously owned farm properties and because the new lease for the Schleman Farm contains a $5/acre rent concession given in consideration of the uncertainty of crop yields due to abnormally inclement weather. A net increase of approximately $54,700 in general and administrative expenses occurred in the year ended March 31, 1995 principally due to deferred legal and other expenses currently recognized in the Company's Statement of Income as of March 31, 1995. The Company's other actual expenses were comparable in the year ended March 31, 1995 with prior years. 8 As a result of the above items, the Company had a loss of $91,160 before taxes in the year ended March 31, 1995, as compared to a profit of $24,134 before taxes in the year ended March 31, 1994. The income tax benefit in the current year was $5,429 as a result of the loss realized in the year ended March 31, 1995. An income tax of $8,048 was paid in the year ended March 31, 1994 as a result of profit realized in that year. Year Ended March 31, 1994, as compared to Year Ended March 31, 1993. Interest and dividend income increased to $34,855 in the year ended March 31, 1994, from $33,085 in the previous year. The increase is a result of slightly higher interest rates received on cash invested in the year ended March 31, 1994. Farm rental revenue and farm related costs and expenses decreased in the year ended March 31, 1994, due to the sale on August 2, 1993, of the Company's Airport Farm property of approximately 205 acres. The Company continued to receive farm rental revenues from the Airport Farm through December 31, 1993. A net increase of approximately $6,000 in general and administrative expenses occurred in the year ended March 31, 1994, due to increased professional fees (including legal and accounting costs), salaries and annual meeting expenses of an aggregate of approximately $20,000 which were offset by decreases in certain other expenses. In the year ended March 31, 1994, the Company realized, after all costs and expenses, a gain on the sale of farm property of $80,779 before applicable income taxes. A sale by the Company of comparable farm property occurred in the year ended March 31, 1993, which provided a gain of $80,301 before applicable income taxes. As a result of the above items, the Company achieved a profit of $24,134 before taxes in the year ended March 31, 1994, as compared to a profit of $38,301 before taxes in the year ended March 3l, 1993. The income tax provision in the current year was $8,048 as a result of the profit realized in the year ended March 31, 1994. An income tax of $10,289 was paid in the year ended March 31, 1993, as a result of profit realized in that year. Liquidity and Capital Resources At March 31, 1996, the Company and Subsidiary had net working capital of $1,184,051, the major portion of which was in cash and money market funds. St. Lawrence has sufficient capital resources to continue its current business. 9 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. Item 8 - Financial Statements and Supplementary Data Annexed hereto starting on Page 16. Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable. 10 PART III Item 10 - Directors and Executive Officers of the Registrant The information required by this Item 10 is hereby incorporated by reference to a definitive proxy statement involving the election of directors which is expected to be filed by the Company will 120 days after the close of its fiscal year. Item 11 - Executive Compensation The information required by this Item 11 is hereby incorporated by reference to a definitive proxy statement involving the election of directors which is expected to be filed by the Company within 120 days after the close of its fiscal year. Item 12 - Security Ownership of Certain Beneficial Owners and Management The information required by this Item 12 is hereby incorporated by reference to a definitive proxy statement involving the election of directors which is expected to be filed by the Company within 120 days after the close of its fiscal year. Item 13 - Certain Relationships and Related Transactions The information required by this Item 13 is hereby incorporated by reference to a definitive proxy statement involving the election of directors which is expected to be filed by the Company within 120 days after the close of its fiscal year. 11 PART IV Item 14 - Exhibits, Financial Statements, Schedules and Reports on Form 8-K (a) Financial Statements: Page No. -------- Independent Auditor's Report 16 Consolidated Balance Sheets 17 Consolidated Statements of Income 18 Consolidated Statement of Shareholders' Equity 19 Consolidated Statements of Cash Flows 20 Notes to Financial Statements 21-25 Financial Schedules: X - Supplementary Income Statement 26 Information Schedules other than those listed above are omitted for the reason that they are not required or not appropriates or the required information is shown in the financial statements or notes thereto. (b) Reports on Form 8-K A report on Form 8-K was filed by the Company on January 19, 1996 in connection with the organization of the Subsidiary. This was the only report on Form 8-K filed by the Company during the quarter ended March 31, 1996. However, subsequent thereto, but prior to the date hereof, a report on Form 8-K was filed with respect the dissolution of the Subsidiary. (c) Exhibits (3) (i) Articles of Incorporation of The St. Lawrence Seaway Corporation, as amended. (Incorporated by reference to Exhibit (C) (3) (i) to the Annual Report of The St. Lawrence Seaway Corporation for the fiscal year ended March 31, 1991.) 12 (ii) By-Laws of The St. Lawrence Seaway Corporation (Incorporated by reference to Exhibit (C) (3) (ii) to the Annual Report of The St. Lawrence Seaway Corporation on Form 10-K for the fiscal year ended March 31, 1987.) (10) (i) Stock Option Agreements, each dated September 21, 1987, between The St. Lawrence Seaway Corporation and each of Jack C. Brown, Philip I. Berman, and Albert Friedman. (Incorporated by reference to Exhibit (C) (10) (i) to the Annual Report of The St. Lawrence Seaway Corporation on Form 10K for the fiscal year ended March 31, 1988.) (ii) Agreement, dated July 31, 1986 by and between The St. Lawrence Seaway Corporation and Bernard Zimmerman & Company, Inc. (Incorporated by reference to Exhibit 2 to the 10-Q of The St. Lawrence Seaway Corporation for the 6 months ended June 30, 1986.) (iii) St. Clair Farm Property Option and Sale Agreement, dated March 31, 1992. (Incorporated by reference to the Exhibit (C) (10) (iii) to the Annual Report of The St. Lawrence Seaway Corporation on Form 10K for the fiscal year ended March 31, 1992.) (iv) Airport Farm Property Option and Sale Agreement, dated March 25, 1993. (v) Amendment No. I to Stock Option Agreement between The St. Lawrence Seaway Corporation and Jack C. Brown dated August 28, 1992. (vi) Amendment No. 1 to Stock Option Agreement between The St. Lawrence Seaway Corporation and Albert Friedman dated August 28, 1992. (vii) Amendment No. I to the Warrant issued to Bernard Zimmerman & Co. Inc. dated August 28, 1992. (viii) Stock Option Agreement, dated August 28, 1992 between The St. Lawrence Seaway Corporation and Wayne J. Zimmerman. (ix) Stock Sale Agreement, dated June 24, 1993 between Bernard Zimmerman & Co., Inc. and Industrial Development Partners. (Incorporated by reference to Exhibit 7(a) to Current Report on Form 8-K dated September 30, 1993). 13 (x) Assignment and Assumption Agreement dated as of July 30, 1993. (Incorporated by reference to Exhibit 7(b) to Current Report on Form 8-K dated September 30, 1993.) (22) Subsidiaries of the Company -- Filed herewith. (27) Financial Data Schedule -- Filed herewith. 14 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons (who included a majority of the Board of Directors) on behalf of the registrant and in the capacities indicated on June 28, 1996. Signatures Title Date /s/ Daniel L. Nir President, Treasurer June 28, 1996 - ----------------------- and Director Daniel L. Nir (Principal Financial Officer) /s/ Joel M. Greenblatt Chairman of the Board, June 28, 1996 - ---------------------- and Director Joel M. Greenblatt (Principal Executive Officer) /s/ Jack C. Brown Secretary and Director June 28, 1996 - ----------------------- Jack C. Brown /s/ Edward B. Grier III Director June 28, 1996 - ----------------------- Edward B. Grier III 15 SALLEE & COMPANY, INC. CERTIFIED PUBLIC ACCOUNTANTS - -------------------------------------------------------------------------------- MEMBER AICPA TAX DIVISION DIVISION OF FIRMS: SEC PRACTICE SECTION INDIANA CPASOCIETY Board of Directors The St. Lawrence Seaway Corporation INDIANAPOLIS, Indiana REPORT OF INDEPENDENT AUDITORS We have audited the accompanying balance sheets of THE ST. LAWRENCE SEAWAY CORPORATION AND SUBSIDIARY as of March 31, 1996 and 1995, and the related statements of income, shareholders' equity, and cash flows for each of the three years in the period ended March 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require, that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting, principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of THE ST. LAWRENCE SEAWAY CORPORATION AND SUBSIDIARY as of March 31, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 1996 in conformity with generally accepted accounting principles. May 22, 1996 /s/ Sallee & Company 1509 J STREET, P.O. BOX 1148, BEDFORD, INDIANA 47421, 812-275-4444 (FAX) 812-275-3300 16 THE ST. LAWRENCE SEAWAY CORPORATION CONSOLIDATED BALANCE SHEETS MARCH 31, 1996 AND MARCH 31, 1995 1996 1995 ---- ---- Current assets: Cash and cash equivalents $ 1,232,478 1,260,870 Interest and other receivables 11,104 19,283 Prepaid items 549 8,453 Deferred tax benefits 2,014 2,014 ------------ --------- Total Current Assets 1,246,145 1,290,620 Property, plant and equipment: Land 118,913 118,913 Equipment, net 5,816 5,292 ------------ --------- Total Assets $ 1,370,874 1,414,825 ============ ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Payroll taxes withheld and accrued $ 454 721 Accounts payable & other 53,432 14,930 Deferred income 8,208 8,208 ------------ --------- Total Liabilities 62,094 23,859 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 633,793 715,979 ------------ --------- Total Shareholders' Equity 1,308,780 1,390,966 ------------ --------- Total Liabilities and Shareholders' Equity $ 1,370,874 1,414,825 ============ ========= The accompanying notes are an integral part of these financial statements. 17 THE ST. LAWRENCE SEAWAY CORPORATION CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED MARCH 31, --------------------- 1996 1995 1994 ---- ---- ---- Revenues: Farm rentals $ 9,120 9,804 21,913 Gain on asset sales 0 0 80,779 Interest and dividends 59,858 55,311 34,855 Other 0 0 48 -------- ------- ------ Total revenues 68,978 65,115 137,595 Operating costs and expenses: Farm related operating costs 1,243 1,634 2,155 Depreciation 1,438 588 0 Consulting fees-Note 4 6,000 6,000 18,000 General and administrative expenses 141,748 148,053 93,306 -------- ------- ------ Total operating expenses 150,429 156,275 113,461 Income (Loss) before income taxes (81,451) (91,160) 24,134 Income taxes /(Tax benefit) 735 (5,429) 8,048 -------- ------- ------ Net income (loss) $(82,186) (85,731) 16,086 ======== ======= ====== Per share data: Weighted average number of common shares outstanding 393,735 393,735 395,005 -------- ------- ------ Primary earnings per common and common equivalent shares $ (0.21) (0.22) 0.04 ======== ======= ====== The accompanying notes are an integral part of these financial statements. 18 THE ST. LAWRENCE SEAWAY CORPORATION CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY Common stock Additional Number of Par Paid-in Retained shares Value $1 Capital Earnings ------ -------- ------- -------- Balance at March 31, 1993 395,259 $395,259 $282,764 $785,624 Stock purchase (1,524) (1,524) (1,512) Net income for 1994 16,086 ------- -------- -------- -------- Balance at March 31, 1994 393,735 393,735 281,252 801,710 Net loss for 1995 (85,731) ------- -------- -------- -------- Balance at March 31, 1995 393,735 393,735 281,252 715,979 Net loss for 1996 (82,186) ------- -------- -------- -------- Balance at March 31, 1996 393,735 $393,735 $281,252 $633,793 ======= ======== ======== ======== The accompanying notes are an integral part of these financial statements. 19 THE ST. LAWRENCE SEAWAY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED MARCH 31, 1996, 1995 AND 1994 1996 1995 1994 ---- ---- ---- Cash flows from operating activities: Net Income (Loss) $ (82,186) (85,731) 16,086 Adjustments to reconcile net income to net cash from operating activities Depreciation 1,438 588 0 (Gain) Loss on asset sales 0 0 (80,779) (Increase) in deferred items 0 70,000 (70,000) (Increase) Decrease in current assets: Interest receivable 0 (1,267) (366) Other receivables 8,179 (16,650) 0 Prepaid items 7,904 (3,273) (4,921) Deferred income tax 0 0 2,266 (Decrease) Increase in current liabilities: Payroll tax & other (267) 25 167 Accounts payable 38,502 (6,982) (4,212) Income taxes payable 0 0 (974) ---------- --------- --------- Net cash from operating activities (26,430) (43,290) (142,733) Cash flows from investing activities: Purchase of equipment (1,962) (5,880) 0 Proceeds from asset sales 0 0 291,940 ---------- --------- --------- Net cash from investing activities (1,962) (5,880) 291,940 Cash flows from financing activities: Purchase and retirement of Company stock 0 0 (3,036) ---------- --------- --------- Net cash from financing activities 0 0 (3,036) Net increase in cash and cash equivalents (28,392) (49,170) 146,171 Cash and cash equivalents, beginning 1,260,870 1,310,040 1,163,869 ---------- --------- --------- Cash and cash equivalents, ending $1,232,478 1,260,870 1,310,040 ========== ========= ========= Supplemental disclosures of cash flow information: Cash paid for income taxes 0 500 11,463 Cash paid for interest expenses 0 0 0 The accompanying notes are an integral part of these financial statements. 20 THE ST. LAWRENCE SEAWAY CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following is a summary of the significant accounting policies observed in the preparation of the consolidated financial statements for The St. Lawrence Seaway Corporation (the "Company") and its subsidiary, The St. Lawrence Fund. BASIS OF PRESENTATION: The accounts are maintained on the accrual method of accounting in accordance with generally accepted accounting principles for financial statement purposes. Under this method, revenue is recognized when earned and expenses are recognized when incurred. The St. Lawrence Fund, an unincorporated Massachusetts business trust, was established on or about December 31, 1995, to invest certain funds of the parent company. All funds are held in cash accounts and are included in the cash equivalents of the parent company. PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the assets and revenues earned of the subsidiary unincorporated business trust, The St. Lawrence Fund. No intercompany transactions other than the initial investment were made between the parent company and subsidiary business trust. LAND: Land was purchased in 1961 for agriculture related purposes and is recorded at the original historical cost of $118,913. EARNINGS PER SHARE: Primary earnings per share and fully diluted earnings per share are computed, when applicable, 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. 21 THE ST. LAWRENCE SEAWAY CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS INCOME TAXES: The provision for income taxes charged against earnings relates to all items of revenue and expense recognized for financial accounting purposes during each of the years presented. The actual current tax liability may be different than the charge against earnings due to the effect of cash rents received in advance resulting in deferred income tax. These deferred tax benefits are temporary in nature and will offset upon the expiration of all land rental contracts. No material deferred tax benefits or liabilities exist as of the dates of the balance sheets. RECLASSIFICATION: The 1995 and 1994 financial statements have been reclassified, where necessary, to conform to the presentation of the 1996 financial statements. CASH FLOWS: For purposes of reporting cash flows, cash and cash equivalents include all cash in banks and cash accumulation funds including funds invested under provisions of the subsidiary trust. DEPRECIATION: Property and equipment, consisting of small office equipment, is stated at cost. Depreciation is computed using the straight-line method over a five-year estimated useful life. Expenditures for maintenance and repairs that do not extend useful lives are charged to income as incurred. Total accumulated depreciation as of March 31, 1996 and 1995, was $2,026 and $588 respectively. 22 THE ST. LAWRENCE SEAWAY CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 2. SHAREHOLDERS' EQUITY The Company has a common stock warrant outstanding for the purchase of 100,000 shares of common stock at $3.00 per share. The warrant was originally issued in connection with the sale by the Company of 50,000 shares of common stock during 1986 to Bernard Zimmerman & Co. Inc. The warrant and common stock were subsequently sold and transferred to The Windward Group, L.L.C. (formerly Industrial Development Partners), pursuant to an agreement dated September 30, 1993. The warrant expires on September 24, 1997. The Company has a stock option plan originally adopted by the shareholders on June 12, 1978, and revised and approved by the shareholders on June 13, 1983, September 21, 1987,and August 28, 1992. The revised plan provides that 15,000 shares of the Corporation's stock be set aside at an exercise price of $3.00 per share for Mr. Jack C. Brown, a Director of the Company. Mr. Brown's option is currently exercisable with respect to all 15,000 shares and, if not exercised, will expire on September 21, 1997. The Company has 4,000,000 authorized $1 par value common shares. As of March 31, 1996 and 1995, there were 393,735 common shares issued and outstanding. NOTE 3. STOCK PURCHASE On February 4, 1994, the Company purchased 1,524 of its common shares in the open market at a price of $1.99 per common share. The shares, as acquired, were immediately cancelled and returned to the status of authorized and unissued. 23 THE ST. LAWRENCE SEAWAY CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 4. RELATED PARTIES During the fiscal years ending March 31, 1996, 1995 and 1994, the Company paid to Jack C. Brown, Secretary and a Director, an annual administrative fee of $6,000, which was paid monthly in the amount of $500. During fiscal year 1994, the Company paid The Zimmerman Group, Inc., of which the former president of the Company is the Senior Vice President and a former director is President, a monthly fee of $2,000 for financial consulting services including the evaluation of acquisition and merger opportunities. The consulting arrangement with The Zimmerman Group expired on September 30, 1993 and was not renewed. NOTE 5. INCOME TAXES As of March 31, 1996, the company has loss carryforwards of approximately $195,000 that may be used to offset future taxable income. If not used, the carryforwards will expire in 2011. Provisions for current and deferred federal and state tax liabilities are immaterial to these financial statements. NOTE 6. DEFERRED ITEMS Certain legal and other expenses in the amount of $70,000 as of were deferred in connection with the filing of a registration statement with the Securities and Exchange Commission in 1994. Upon the withdrawal of the registration statement, which occurred during 1995, total related costs of approximately $53,000 were recognized. 24 THE ST. LAWRENCE SEAWAY CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 7. SUBSIDIARY INVESTMENT On December 31, 1995, the Company organized a wholly-owned subsidiary under the name of The St. Lawrence Seaway Fund as a Massachusetts business trust for the purpose of investing in securities. The Company purchased 100,000 shares of beneficial interest in the trust at $10 per share on January 3, 1996. The Company intended to register the Subsidiary with the Securities and Exchange Commission as a closed-end investment company. Subsequent to the balance sheet date, the Company determined that because of tax considerations, such steps would not be practical or in the best interest of the Company's shareholders and, accordingly, as of May 31, 1996, dissolved the Subsidiary. 25 SCHEDULE X THE ST. LAWRENCE SEAWAY CORPORATION SUPPLEMENTARY INCOME STATEMENT INFORMATION YEARS ENDED MARCH 31, 1996, 1995 AND 1994 - -------------------------------------------------------------------------------- COLUMN A COLUMN B - -------------------------------------------------------------------------------- ITEM CHARGED TO COSTS AND EXPENSES - -------------------------------------------------------------------------------- YEARS ENDED MARCH 31, 1996 1995 1994 ------------------------------ Maintenance and repairs .................... $1,420 $ 903 $1,078 Depreciation and amortization of intangible assets, preoperating costs and similar deferral .............. $1,438 $ 588 $ 0 Taxes, other than payroll and income taxes ............................ $2,286 $2,007 $ 714 Royalties .................................. NONE NONE NONE Advertising costs .......................... NONE NONE NONE 26