Item 1 - Business - -----------------
Recent Developments -------------------
On March 19, 1997, the Board of Directors of The St. Lawrence Seaway Corporation (herein "St. Lawrence" or the "Company") declared a dividend distribution (the "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 Rights") to purchase two (2) additional Shares of Paragon. Paragon is a newly-formed corporation which is seeking to acquire or merge with an operating business, and thereafter operate as a publicly-traded company. St. Lawrence purchased the Paragon Shares on March 6, 1997, for $5,141, or $.01 per Share, and is distributing one Paragon Share and one Subscription Right for each Share of St. Lawrence Common Stock owned or subject to exercisable options and warrants as of March 21, 1997 (the "Record Date"). Neither St. Lawrence nor Paragon will receive any cash or other proceeds from the Distribution, and St. Lawrence stockholders will not make any payment for the Shares and Subscription Rights. The Distribution to St. Lawrence stockholders is being made by St. Lawrence for the purpose of providing St. Lawrence stockholders with an equity interest in Paragon without such stockholders being required to contribute any cash or other capital in exchange for such equity interest.
On March 21, 1997, the Securities and Exchange Commission declared effective a Registration Statement on Form S-1 filed by Paragon, registering the Distribution of Shares and Subscription Rights to St. Lawrence stockholders. The cost of organizing Paragon and registering the Distribution have been borne by the founders of Paragon.
Paragon is an independent publicly-owned corporation. However, because Paragon does not yet have a specific operating business, the Distribution of the Shares is being conducted in accordance with Rule 419 promulgated under the Securities Act of 1933, as amended (the "Securities Act"). As a result, the Shares, Subscription Rights, and any Shares issuable upon exercise of Subscription Rights, are being held in escrow and are non-transferable by the holder thereof until after the completion of a business combination with an operating company. The Subscription Rights will become exercisable at a price to be determined by Paragon's Board of Directors (not to exceed $2.00 per Subscription Right) once a business combination is identified and described in a post-effective amendment to Paragon's Registration Statement. While held in escrow, the Shares may not be traded or transferred, and the net proceeds from the exercise of Subscription Rights will remain in escrow subject to release upon consummation of a business combination. There is no current public trading market for the Shares and
none is expected to develop, if at all, until after the consummation of a business combination and the release of Shares from escrow.
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, 1997, 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 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, 1997, the Company continued its practice of maintaining its other assets in relatively liquid interest/dividend bearing money market investments. 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 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
Item 2 - Properties - -------------------
At March 31, 1997, 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
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
Item 4 - Submission of Matters to a Vote of Security Holders - ------------------------------------------------------------
Not applicable.
Part II -------
Item 5
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 1997 and 1996, 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, mark-down or commission and may not represent actual transactions.
Year Quarter High Low ---- ------- ---- --- 1997 First $2.50 $2.50 Second $2.75 $2.50 Third $2.75 $2.50 Fourth $2.50 $2.50 1996 First $1.88 $1.50 Second $2.13 $1.75 Third $2.25 $1.88 Fourth $2.50 $2.00
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. On March 19, 1997, the Board of Directors of St. Lawrence declared a dividend distribution of shares of Common Stock and Subscription Rights of Paragon Acquisition Company, Inc. See Part I, Item 1.
Number of Stockholders ----------------------
As of June 24, 1997, there were approximately 1,348 holders of record of the Company's Common Stock.
Item 6
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, 1997. 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.
Item 7
Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
Year Ended March 31, 1997, as compared to Year Ended March 31, 1996.
Interest and dividend income decreased to $54,545 in the year ended March 31, 1997, from $59,858 in the previous year. The increase is a result of lower interest rates received on cash invested in the year ended March 31, 1997.
Farm rental revenues of $9,120 were comparable in the years ended March 31, 1997, and 1996.
General and administrative expenses decreased to $105,220 in the year ended March 31, 1997 from $141,748 in the year ended March 31, 1996 principally due to reduced legal and other professional expenses currently recognized in the Company's Statement of Income as of March 31, 1997.
As a result of the above items, the Company had a loss of $51,179 before taxes in the year ended March 31, 1997, as compared to a loss of $81,451 before taxes in the year ended March 31, 1996.
The income tax paid in the current year was $965. An income tax of $735 was paid in the year ended March 31, 1996.
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.
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.
Liquidity and Capital Resources
At March 31, 1997, the Company had net working capital of $1,128,335, 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.
Item 8
Item 8 - Financial Statements and Supplementary Data
Annexed hereto starting on Page 17.
Item 9
Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
PART III --------
Item 10
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 within 120 days after the close of its fiscal year.
Item 11
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
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
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.
PART IV
Item 14
Item 14 - Exhibits, Financial Statements, Schedules and Reports on Form 8-K - ---------------------------------------------------------------------------
(a) Financial Statements: Page No.
Independent Auditor's Report 16 Balance Sheets 17 Statements of Income 18 Statement of Shareholders' Equity 19 Statements of Cash Flows 21
Notes to Financial Statements 22-26
Financial Schedules: --------------------
X - Supplementary Income Statement 27 Information
Schedules other than those listed above are omitted for the reason that they are not required or not appropriate or the required information is shown in the financial statements or notes thereto.
(b) Reports on Form 8-K
No Reports on Form 8-K were filed by the Company during the quarter ended March 31, 1997. However, subsequent thereto, but prior to the date hereof, a report on Form 8-K was filed with respect to the dividend distribution of Paragon Shares and Subscription Rights described in Part I, Item 1 hereof.
(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.)
(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).
(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.)
(27) Financial Data Schedule -- Filed herewith.
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 27, 1997.
Signatures Title Date
/s/ Daniel L. Nir President, Treasurer June 27, 1997 - ----------------------- Daniel L. Nir and Director (Principal Financial Officer)
/s/ Joel M. Greenblatt Chairman of the Board, June 27, 1997 - ---------------------- Joel M. Greenblatt and Director (Principal Executive Officer)
/s/ Jack C. Brown Secretary and Director June 27, 1997 - ----------------------- Jack C. Brown
/s/ Edward B. Grier III Director June 27, 1997 - ----------------------- Edward B. Grier III
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 as of March 31, 1997 and 1996, and the related statements of income, shareholders' equity, and cash flows for each of the three years in the period ended March 31, 1997. 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 financial statements referred to above present fairly, in all material respects, the financial position of THE ST. LAWRENCE SEAWAY CORPORATION as of March 31, 1997 and 1996, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 1997 in conformity with generally accepted accounting principles.
May 22, 1997
/s/ Sallee & Company
1509 J STREET, P.O. BOX 1148, BEDFORD, INDIANA 47421, 812-275-4444 (FAX) 812-275-3300
THE ST. LAWRENCE SEAWAY CORPORATION BALANCE SHEETS
MARCH 31, 1997 AND MARCH 31, 1996
The accompanying notes are an integral part of these financial statements.
THE ST. LAWRENCE SEAWAY CORPORATION STATEMENTS OF INCOME
The accompanying notes are an integral part of these financial statements.
THE ST. LAWRENCE SEAWAY CORPORATION STATEMENT OF SHAREHOLDER EQUITY
The accompanying notes are an integral part of these financial statements.
THE ST. LAWRENCE SEAWAY CORPORATION STATEMENTS OF CASH FLOWS YEARS ENDED MARCH 31, 1997, 1996 AND 1995
The accompanying notes are an integral part of these financial statements.
THE ST. LAWRENCE SEAWAY CORPORATION
NOTES TO THE 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 financial statements for The St. Lawrence Seaway Corporation (the "Company").
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.
The March 31, 1996 financial statements include the assets and revenues earned by the subsidiary unincorporated business trust, The St. Lawrence Fund, and were originally presented on a consolidated basis with the parent company. No intercompany transactions other than the initial cash investment were made between the parent company and subsidiary business trust. Because the subsidiary was dissolved on May 31, 1996, and no material transactions occurred between the parent company and subsidiary business trust, the March 31, 1997 and 1996 financial statements are not presented on a consolidated basis.
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.
THE ST. LAWRENCE SEAWAY CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 1996 and 1995 financial statements have been reclassified, where necessary, to conform to the presentation of the 1997 financial statements.
CASH FLOWS:
For purposes of reporting cash flows, cash and cash equivalents include all cash in banks and cash accumulation funds.
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, 1997 and 1996, was $4,470 and $2,026 respectively.
THE ST. LAWRENCE SEAWAY CORPORATION
NOTES TO THE 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, 1997 and 1996, there were 393,735 common shares issued and outstanding.
NOTE 3. RELATED PARTIES
During the fiscal years ending March 31, 1997, 1996 and 1995, 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.
THE ST. LAWRENCE SEAWAY CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
NOTE 4. INCOME TAXES
As of March 31, 1997, the company has loss carry forwards of approximately $247,000 that may be used to offset future taxable income. If not used, the carry forwards will expire in 2012.
Provisions for current and deferred federal and state tax liabilities are immaterial to these financial statements.
NOTE 5. DEFERRED ITEMS
Certain legal and other expenses in the amount of $70,000 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, total related costs of approximately $53,000 were recognized at March 31, 1995.
NOTE 6. 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.
THE ST. LAWRENCE SEAWAY CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
NOTE 7. STOCK PURCHASE AND DIVIDEND
On March 19, 1997, the Board of Directors of the Company declared a dividend distribution of 514,191 shares of common stock, $.01 par value (the "Shares") of Paragon Acquisition Company, Inc. ("Paragon"), and 513,191 non-transferable rights (the "Subscription Right") to purchase two (2) additional Shares of Paragon. Paragon is a newly-formed corporation which is seeking to acquire or merge with an operating business, and thereafter operate as a publicly-traded company. St. Lawrence purchased the Paragon shares on March 6, 1997, for $5,141, or $.01 per share, and is distributing one Paragon share and one subscription right for each share of St. Lawrence Common Stock owned or subject to exercisable options and warrants as of March 21, 1997 (the "Record Date"). Neither St. Lawrence nor Paragon will receive any cash or other proceeds from the distribution, and St. Lawrence stockholders will not make any payment for the share and subscription rights. The distribution to St. Lawrence stockholders is being made by St. Lawrence for the purpose of providing St. Lawrence stockholders with an equity interest in Paragon without such stockholders being required to contribute any cash or other capital in exchange for such equity interest.
On March 21, 1997, the Securities and Exchange Commission declared effective a Registration Statement on Form S-1 filed by Paragon, registering the Distribution of Shares and Subscription Rights to St. Lawrence stockholders. The cost of organizing Paragon and registering the distribution have been borne by the founders of Paragon.
Paragon is an independent publicly-owned corporation. However, because Paragon does not yet have a specific operating business, the distribution of the shares is being conducted in accordance with Rule 419 promulgated under the Securities Act of 1933, as amended (the "Securities Act"). As a result, the shares, subscription rights, and any shares issuable upon exercise of subscription rights, are being held in escrow and are non-transferable by the holder thereof until after the completion of a business combination with an operating company. The subscription rights will become exercisable at a price to be determined by Paragon's Board of Directors (not to exceed $2.00 per subscription right) once a business combination is identified and described in a post-effective amendment to Paragon's Registration Statement. While held in escrow, the shares may not be
THE ST. LAWRENCE SEAWAY CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
NOTE 7. STOCK PURCHASE AND DIVIDEND (Continued)
traded or transferred, and the net proceeds from the exercise of subscription rights will remain in escrow subject to release upon consummation of a business combination. There is no current public trading market for the shares and none is expected to develop, if at all, until after the consummation of business combination and the release of shares from escrow.
SCHEDULE X
THE ST. LAWRENCE SEAWAY CORPORATION SUPPLEMENTARY INCOME STATEMENT INFORMATION YEARS ENDED MARCH 31, 1997, 1996 AND 1995
COLUMN A COLUMN B
ITEM CHARGED TO COSTS AND EXPENSES
YEARS ENDED MARCH, 31 1997 1996 1995 ---- ---- ----
Maintenance and repairs $1,113 $1,420 $ 903
Depreciation and amortization of intangible assets, preoperating costs and similar deferral $1,568 $1,438 $ 588
Taxes, other than payroll and income taxes $1,844 $2,296 $2,007
Royalties NONE NONE NONE
Advertising costs NONE NONE NONE