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EX-32.1 - EXHIBIT 32.1 - Carbon Energy Corpstls_10q123110ex321.htm
EX-31.1 - EXHIBIT 31.1 - Carbon Energy Corpstls_10q123110ex311.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549

FORM 10-Q
 
 [X]
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended December 31, 2010
   
 [   ]
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
for the transition period from ____________ to ____________
 
Commission File Number 000-02040

ST. LAWRENCE SEAWAY CORPORATION
(Exact Name of Small Business Issuer as Specified in its Charter)
 
 DELAWARE 26-0818050
(State or Other Jurisdiction of 
Incorporation or Organization)
(I.R.S. Employer Identification No.)
                                                                                                                                                                      
200 Connecticut Avenue
Fifth Floor
Norwalk, Connecticut  06854
 (Address of principal executive offices)

(203) 853-8700
(Issuer’s Telephone Number, Including Area Code)

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 [   ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [X]          No [   ]
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [   ]          No [   ]
 
State the number of shares outstanding of the issuer’s common stock.
 
Class Outstanding at January 28, 2011
Common Stock, $0.01 par value 518,736
 
Transitional Small Business Disclosure Format (check one):   Yes [   ]       No [X]
 
 

 
ST. LAWRENCE SEAWAY CORPORATION
FORM 10-Q INDEX

 
    PAGE
PART I.  RECENT DEVELOPMENTS AND FINANCIAL INFORMATION
   
       
Description of Business and Recent Developments    1-3
       
Item 1.  Financial Statements
   
       
  Balance Sheets – December 31, 2010 (unaudited) and March 31, 2010 (audited)   4
       
 
Statements of Operations – Three months ended December 31, 2010 (unaudited) and
three months ended December 31, 2009 (unaudited)
   5
       
 
Statements of Operations – Nine months ended December 31, 2010 (unaudited) and
nine months ended December 31, 2009 (unaudited)
  6
       
 
Statements of Cash Flows – Nine months ended December 31, 2010 (unaudited) and
nine months ended December 31, 2009 (unaudited)
   7
       
 
Statements of Changes in Stockholders’ Equity for the nine months ended
December 31, 2010 (unaudited)
   8
       
  Notes to Financial Statements – December 31, 2010 (unaudited)    9-14
       
Item 2.  Management’s Discussion and Analysis of Operations / Plan of Operation    14
       
FORWARD LOOKING STATEMENTS   15
       
Item 3.  Controls and Procedures    15-16
       
PART II.  OTHER INFORMATION   16
       
Exhibit Index    16
       
Signature Page    17
     
Exhibits    
 
 

 
PART-I
 
Description of Business and Recent Developments
 
St. Lawrence Seaway Corporation (the “Company”) was an Indiana corporation organized on March 31, 1959. Prior to 1998, the Company principally engaged in farming, timber, harvesting and other traditional agricultural activities. In 2002 the Company became engaged in investing in drug development programs and in evaluating other alternatives to its former business, including continuing its evaluation of operating companies for acquisition, merger, reverse merger, financial transactions or investments. Pending any such transaction, the Company will continue its practice of maintaining any cash assets in relatively liquid interest/dividend bearing money market investments. Eventually such assets may be used for an acquisition or for a partial payment of an acquisition or for the commencement of a new business.

RECENT DEVELOPMENTS

(A)  On January 31, 2011, Norwalk, Connecticut-based St. Lawrence Seaway Corporation, a Delaware corporation (OTCBB: STLS) (the “Company”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, St. Lawrence Merger Sub, Inc., a Delaware corporation and subsidiary of the Company (“Merger Co.”) and Denver, Colorado-based Nytis Exploration (USA) Inc., a Delaware corporation (“Nytis USA”). Pursuant to the Merger Agreement, Merger Co. will merge with and into Nytis USA and Nytis USA will remain as the surviving subsidiary of the Company (the “Merger”). The following summarizes the principal terms of the Merger Agreement. Reference is made to the full text of the Merger Agreement, including its schedules, which is filed as Exhibit 2.1 to this Current Report, for more detailed information.

Nytis USA, located in Denver, Colorado and Catlettsburg, Kentucky and through its various subsidiaries owns interests in
approximately 375 gross (156 net) producing natural gas wells on approximately 264,000 primarily undeveloped net acres in Illinois, Indiana, Kentucky, Ohio, Tennessee and West Virginia. Nytis USA conducts exploration and development drilling activities and acquires producing properties in the Appalachian and Illinois Basins.

The Merger will become effective after the fulfillment of certain conditions contained in the Merger Agreement, but no earlier than the tenth (10th) day following the filing of Schedule 14f-1 with the Securities and Exchange Commission and distribution thereof to the Company’s stockholders (the “Effective Date”).

Pursuant to the Merger Agreement, in consideration of all of the outstanding common stock of Nytis USA, the Company will issue to Nytis USA’s security holders approximately 47 million shares of currently authorized but unissued common stock of the Company which will represent approximately 99% of the aggregate voting power of the Company, prior to the exercise of 250,000 currently outstanding warrants of the Company.

The Effective Date, currently scheduled for February 14, 2011 or sooner as agreed among the parties, is subject to certain conditions set forth in the Merger Agreement including, among other things, the continued accuracy of each parties’ representations and warranties and compliance with certain covenants.

Pursuant to the Merger Agreement, the Company’s current Board of Directors will resign and will be replaced by five directors appointed by Nytis USA.
 
(B)  The Company entered into a Stock and Warrant Purchase Agreement (the “Purchase Agreement”) as of January 10, 2007, as amended on April 16, 2007 and April 18, 2007, with Bernard Zimmerman & Company, Inc., an investment and merchant banking organization (the “Investor”), pursuant to which the Investor agreed to purchase: (i) 75,000 shares of the Company’s common stock for a total purchase price of $75,000; and (ii) a ten year warrant for a total purchase price of $2,500 which permits the Investor to purchase up to 250,000 shares of the Company’s common stock at an exercise price of $1.00 per share   (the “Warrant”).  The Warrant is exercisable immediately.  The common stock and the Warrant were sold to the Investor pursuant to an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended.  The common stock that was sold to the Investor represented at the August 31, 2007 closing of this transaction, and continues to represent as of the date hereof, approximately 14.5% of the outstanding common stock of the Company, provided that no changes occur to the number of shares outstanding in subsequent periods.
 
1

 
On July 10, 2007, the shareholders of the Company approved the transaction outlined in the above paragraph.  An integral part of the transaction was the following items:
 
1.
The approval of a proposal to amend and restate, in its entirety, the Company’s by-laws.
     
2.
The approval of a proposal to reincorporate the Company in Delaware from Indiana.
     
3.
The approval of a proposal to amend and restate in its entirety the Company’s Restated Articles of Incorporation, as amended, to, among other things:
     
  (a)
approve the increase in the number of authorized shares of the Company from 4,000,000 shares, all of which are Common Stock, to 50,010,000 shares, consisting of 48,500,000 shares of Common Stock, 510,000 shares of a “tracking stock” known as Class A Common Stock and 1,000,000 shares of preferred stock, and to decrease the par value of the Common Stock from One Dollar ($1.00) to One Cent ($0.01);
     
  (b)
approve the authorization of 1,000,000 shares of a blank check preferred class of stock, par value $0.01; and
     
  (c)
approve the authorization of a non-transferable, non-tradeable, non-voting and non-certificated “tracking stock” class of securities known as the Class A Common Stock;
     
4.
The issuance of the “tracking stock” know as the Class A Common Stock to the Record Holders in connection with, and upon consummation of the transaction described above, which closed after the distribution of the Class A Common Stock to existing shareholders, and, as such, the Investor received no “tracking stock”.
 
Immediately prior to the August 31, 2007, closing under the Purchase Agreement, the Company reincorporated in Delaware via statutory merger and issued to all stockholders of record as of that date a tracking stock evidencing the Company’s medical investments.  The tracking stock, designated as Class A Common Stock, is non-voting, non-saleable, non-transferable, non-certificated and held in book-entry form only.  The Purchase Agreement contemplates no issuance of Class A Common Stock to the Investor in connection with the Investor’s acquisition of the Company’s common stock and the Warrant on August 31, 2007.  No person who acquires common stock of the Company after August 31, 2007 shall be issued or be entitled to the benefits of the tracking stock.  For additional terms and conditions of the Purchase Agreement (including the proposals to reincorporate in Delaware and to issue the tracking stock), please see the Company’s Form 8-K filed on January 10, 2007, the Company’s Form 8-K filed on April 19, 2007, and the Company’s proxy statement, filed on May 30, 2007 concerning the proposals that were voted upon and approved at the stockholders’ meeting held on July 10, 2007 and the Form 8-K filed on August 31, 2007.

In connection with the closing under the Purchase Agreement, and in accordance with the vote of a majority of shareholders of the Company, the incorporator of the surviving Company named Mssrs. Bernard Zimmerman (the principal of the Investor), Ronald A. Zlatniski, Duane L. Berlin and Edward B. Grier as members of the Company’s Board of Directors. Following the closing under the Purchase Agreement, Mr. Zimmerman was appointed by the Board of Directors as Chairman of the Board of Directors, President, Chief Financial Officer and Treasurer, and Mr. Berlin was appointed as Secretary.

(C)  On January 21, 2010 the Company entered into a Unit Purchase and Mutual Release Agreement with T-3 Therapeutics, LLC (T-3) for the sale of the Company’s entire membership interest in T-3 for $100,000 (the “Agreement”), payable in cash upon execution of the Agreement.  Reference is made to the full text of the Agreement, a copy of which is attached to the Company’s Form 8-K filed on January 21, 2010 with the Securities and Exchange Commission.

2

 
Disclosure of the Company’s establishment of its Class A Tracking Stock (representing the Company’s medical-related investments, which include its New York University Research Funding investment, which has been deemed of no value, and its T-3 investment), held in street name only and owned by those shareholders of record as of August 31, 2007 entitled to future proceeds from the sale of the Company’s medical investments, was set forth in the Company’s definitive Proxy Statement on Schedule 14A, filed with the Securities and Exchange Commission on May 30, 2007.  On August 31, 2007 and December 31, 2009, there were outstanding 443,736 shares of Class A Tracking Stock.

On January 21, 2010, the Company’s Board of Directors approved the redemption of all of the Company’s issued and outstanding Class A Tracking Stock for $0.19 per share, after deducting current and anticipated expenses.  The redemption was effectuated on March 12, 2010 to shareholders of record on August 31, 2007.  The Company will use the nominal balance of cash available after the redemption to pay costs and expenses associated therewith.  On March 31, 2010 and December 31, 2010 there were no shares of Class A Tracking Stock outstanding.


 
 
 

 
 
3

 
 
ST. LAWRENCE SEAWAY CORPORATION
BALANCE SHEETS

Item 1 – Financial Statements
 
ASSETS
 
  
December 31,
2010
(Unaudited)
   
March 31,
2010
(Audited)
 
                 
Current assets:
               
Cash and cash equivalents
 
$
      26,290
   
$
53,370
 
Total current assets
 
$
26,290
   
$
53,370
 
                 
                 
 LIABILITIES AND SHAREHOLDERS’ EQUITY                
                 
Current liabilities:
 
  
           
Accounts payable and accrued expenses
 
$
      8,500
   
$
7,000
 
Total current liabilities
   
8,500
     
7,000
 
                 
Commitments and contingencies
 
  
----
     
----
 
                 
Shareholders’ equity:
 
  
           
Preferred Stock, par value $0.01, 1,000,000 shares authorized, none issued and outstanding.
   
----
     
----
 
                 
Common stock, par value $0.01 per share; 48,500,000 authorized; 518,736 shares at 12/31/10 and 3/31/10 issued and outstanding
 
  
        5,188
     
5,188
 
                 
Additional paid-in capital
 
  
  1,390,492
     
1,390,492
 
Accumulated deficit
 
  
(1,377,890)
     
(1,349,310
)
Total shareholders’ equity
 
  $
       17,790
   
$
46,370
 
                 
Total liabilities and shareholders’ equity
 
  $
    26,290
   
$
53,370
 
 
See Notes to Financial Statements
 
4

 
ST. LAWRENCE SEAWAY CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)


    For the Three Months Ended  
   
December 31,
2010
   
December 31,
2009
 
             
Revenues:
           
Interest
  $ 100     $ 202  
Total revenues
    100       202  
                 
Operating costs and expenses:
               
General and administrative
    10,676       8,081  
Total operating expenses
    10,676       8,081  
(Loss) before tax provision
    (10,576 )     (7,879 )
Provision for income taxes
    ---       --  
Net loss
  $ (10,576 )   $ (7,879 )
                 
                 
Per share data:
               
Weighted average number of common shares
               
outstanding – basic and diluted
    518,736       518,736  
 
               
                 
Basic and diluted loss per share
  $ (0.02 )   $ (0.02 )

See Notes to the Financial Statements
 
5

 
ST. LAWRENCE SEAWAY CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)


   
For the Nine Months Ended
 
   
December 31,
2010
   
December 31,
2009
 
             
Revenues:
           
Interest
  $ 314     $ 742  
Total revenues
    314       742  
                 
Operating costs and expenses:
               
General and administrative
    28,644       24,886  
Total operating expenses
    28,644       24,886  
Loss before tax provision
    (28,330 )     (24,144 )
Provision for income taxes
    250       --  
Net loss
  $ (28,580 )   $ (24,144 )
                 
                 
Per share data:
               
Weighted average number of common shares
               
outstanding – basic and diluted
    518,736       518,736  
                 
                 
Basic and diluted loss per share
  $ (0.06 )   $ (0.05 )

See Notes to the Financial Statements
 
6

 
ST. LAWRENCE SEAWAY CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
   
For the Nine Months Ended
 
   
December 31, 2010
   
December 31, 2009
 
             
Cash flows from operating activities            
Net loss
  $ (28,580 )   $ (24,144 )
                 
Adjustments to reconcile net income to
Net cash from operating activities
               
Increase (Decrease) in current assets:
               
Interest and other receivables
               
                 
Increase (Decrease) in current liabilities:
               
Accounts payable
    1,500       (1,000 )
Net cash used in operating activities
  $ (27,080 )   $ (25,144 )
                 
Cash flows from investing activities:
               
Net cash from investing activities
    ---       ---  
                 
Cash flows from financing activities:
               
Net cash from financing activities
    ---       ---  
                 
Net change in cash and cash equivalents
    (27,080 )     (25,144 )
                 
Cash and cash equivalents, beginning
    53,370       83,916  
Cash and cash equivalents, ending
  $ 26,290     $ 58,772  
                 
Supplemental disclosures of cash flow information:                
     Cash paid for income taxes    $
250
     $  ---   
     Cash paid for interest expense    $
---
     $  ---   

See Notes to the Financial Statements
 
7

 
ST. LAWRENCE SEAWAY CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

   
Class A
   
Common Stock
   
 
Paid-In
   
 
Accumulated
   
Total
Stockholders’
 
    Shares     Shares      Amount      Capital     Deficit     Equity  
                                               
Balance March 31, 2007 (audited)
          427,069     $ 4,271     $ 866,718     $ (755,493 )   $ 115,496  
Issuance of Class A Shares
    443,736             $ 4,437     $ (4,437 )             -  
Sale of Warrants
            --       --     $ 2,500             $ 2,500  
Sale of Common Shares
            75,000     $ 750     $ 74,250             $ 75,000  
Exercise of Warrants
            16,667     $ 167     $ 49,834             $ 50,001  
Fair Value of Warrant Issuance
                          $ 492,500             $ 492,500  
Net (Loss) for the year ended March 31, 2008 (audited)
                                  $ (626,880 )   $ (626,880 )
Balance March 31, 2008 (audited)
    443,736       518,736     $ 9,625     $ 1,481,365     $ (1,382,373 )   $ 108,617  
Net (Loss) for the year ended March 31, 2009 (audited)
                                  $ (30,701 )   $ (30,701 )
Balance March 31, 2009 (audited)
    443,736       518,736     $ 9,625     $ 1,481,365     $ (1,413,074 )   $ 77,916  
Net Income for the year ended  - March 31, 2010 (audited)
                                  $ 63,764     $ 63,764  
Redemption of Class “A” Tracking Stock  (443,776 shares)
    (443,736 )     --     $ (4,437 )   $ (90,873 )     --     $ (95,310 )
Balance March 31, 2010 (audited)
    - 0 -       518,736     $ 5,188     $ 1,390,492     $ (1,349,310 )   $ 46,370  
Net Loss for the nine Months ended December 31, 2010
(unaudited)
    --       --       --       --     $ (28,580 )   $ (28,580 )
Balance December 31, 2010 (unaudited)
    - 0 -       518,736     $ 5,188     $ 1,390,492     $ (1,377,890 )   $ 17,790  

See Notes to Financial Statements
 
8

 
ST. LAWRENCE SEAWAY CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2010
(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. Accordingly, they do not include all of the information and footnotes required for generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine-month period ending December 31, 2010 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2011. 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, 2010 and all subsequent filings with the Securities and Exchange Commission.
 
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
 
The financial statements have been prepared assuming the Company will continue as a going concern.  Management believes that the Company has sufficient cash for the near term to continue its efforts to seek merger (including reverse merger) acquisition and business combination opportunities. The Company has no operations, and has experienced recurring quarterly and annual losses which have significantly weakened the Company’s financial condition and its ability to meet current operating expenses.  The appropriateness of using the going concern basis is dependent on, among other things, the Company’s ability to raise additional capital to fund operating losses, and to further reduce operating expenses.  The uncertainty of obtaining these goals raises substantial doubt about the Company’s ability to continue as a going concern through March 31, 2011.  The financial statements do not include any adjustments to the carrying value of the assets and liabilities that might be necessary as a consequence of these uncertainties.
 
NOTE B – SHAREHOLDERS’ EQUITY AND EARNINGS PER SHARE
 
All share amounts have been retrospectively restated to reflect the reduction in par value from $1.00 to $0.01 based   upon authorization by the Company’s shareholders (see Note C).  Basic and diluted 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.  Earnings per share information associated with the Class A shares has not been presented as there were no earnings or losses associated with these shares; accordingly, such per share amounts are zero.
 
NOTE C – PURCHASE AGREEMENT
 
The Company entered into a Stock and Warrant Purchase Agreement (the "Purchase Agreement") as of January 10, 2007, as amended on April 16, 2007 and April 18, 2007, with Bernard Zimmerman & Company, Inc., an investment and merchant banking organization (the "Investor"), pursuant to which the Investor agreed to purchase: (i) 75,000 shares of the Company's common stock for a total purchase price of $75,000; and (ii) a ten year warrant for a total purchase price of $2,500 which permits the Investor to purchase up to 250,000 shares of the Company's common stock at an exercise price of $1.00 per share (the "Warrant"). The Warrant is exercisable immediately.  The common stock and the Warrant were sold to the Investor pursuant to an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended. The common stock that was sold to the Investor represented at the August 31, 2007 closing of this transaction, and continues to represent as of the date hereof, approximately 14.5% of the outstanding common stock of the Company, provided that no changes occur to the number of shares outstanding in subsequent periods.
 
9

 
On July 10, 2007, the shareholders of the Company approved the transaction outlined in the above paragraph. Integral parts of the transaction were the following items:
 
1.
The approval of a proposal to amend and restate, in its entirety, the Company’s by-laws.
     
2.
The approval of a proposal to reincorporate the Company in Delaware from Indiana.
     
3.
The approval of a proposal to amend and restate in its entirety the Company’s Restated Articles of Incorporation, as amended, to, among other things:
     
  (a)
approve the increase in the number of authorized shares of the Company from 4,000,000 shares, all of which are Common Stock, to 50,010,000 shares, consisting of 48,500,000 shares of Common Stock, 510,000 shares of a “tracking stock” known as Class A Common Stock and 1,000,000 shares of preferred stock, and to decrease the par value of the Common Stock from One Dollar ($1.00) to One Cent ($0.01);
     
  (b)
approve the authorization of 1,000,000 shares of a blank check preferred class of stock, par value $0.01; and
     
  (c)
approve the authorization of a non-transferable, non-tradable, non-voting and non-certificated “tracking stock” class of securities known as the Class A Common Stock;
     
4.
The issuance of the “tracking stock” known as the Class A Common Stock to the Record Holders in connection with, and upon consummation of the transaction described above, which closed after the distribution of the Class A Common Stock to existing shareholders, and, as such, the Investor received no “tracking stock”.
 
Immediately prior to the August 31, 2007 closing under the Purchase Agreement, the Company reincorporated in Delaware via statutory merger and issued to all stockholders of record as of that date a tracking stock evidencing the Company's medical investments. The tracking stock, designated as Class A Common Stock, is non-voting, non-saleable, non-transferable, non-certificated and held in book-entry form only. The Purchase Agreement contemplates no issuance of Class A Common Stock to the Investor in connection with the Investor's acquisition of the Company's common stock and the Warrant on August 31, 2007.   No person who acquires common stock of the Company after August 31, 2007 shall be issued or be entitled to the benefits of the tracking stock.
 
In connection with the closing under the Purchase Agreement, and in accordance with the vote of a majority of shareholders of the Company, the incorporator of the surviving Company named Mr. Bernard Zimmerman (the principal of the Investor), Ronald. A. Zlatniski, Duane L. Berlin and Edward B. Grier as members of the Company’s Board of Directors. Following the closing under the Purchase Agreement, Mr. Zimmerman was appointed by the Board of Directors as Chairman of the Board of Directors, President, Chief Financial Officer and Treasurer, and Mr. Berlin was appointed as Secretary.
 
NOTE D -- MEDICAL INVESTMENTS
 
In periods prior to March 31, 2007, the Company made certain investments in two medical research organizations.  Reference is made to the Company’s 10-KSB for the fiscal year ending March 31, 2007 for a full description of the two medical investments.  The investment in New York University Research was written off the Company’s books in the fiscal year ended March 31, 2005 as having no value.  As a result of the Purchase Agreement (see Note C), the Company’s investment in T3 Therapeutics was written off in the nine months ended June 30, 2008.   In accordance with the Purchase Agreement, a Class “A” common stock (a tracking stock) was issued to all Company stockholders of record except the Investor on August 31, 2007, the closing date of that transaction.  All subsequent stockholders will not be entitled to receive any shares or benefits of the tracking stock, which is non-certificated, non-voting, non-transferable and non-saleable, and will be held only in book entry form in the records of the Company’s transfer agent.  Any funds or other remuneration received from this investment will inure only to those persons who were stockholders of record, with the exception of the Investor, on August 31, 2007.  Therefore, this investment is deemed to not have any current value and $83,400 was written off the Company’s financial statements as at the six months ended September 30, 2007.  However, the Class A common stock (the “Tracking Stock”) that was allocated to the shareholders of the Company on August 31, 2007 will continue to be maintained on the books of the Company at the office of the Company’s registrar and transfer agent until such time as the Medical Investment is liquidated, permanently impaired or deemed worthless.  At September 30, 2007, March 31, 2009, and December 31, 2009 there were 443,736 shares of Class A Common Stock issued and outstanding.
 
10

 
A reconciliation of the medical investment is as follows:
 
Balance March 31, 2005 (as restated)    $ 680,000  
Add: Follow-on investment, November 16, 2005    $  50,000  
Subtotal    $ 730,000  
Less:        
Impairment loss    $  (630,000 )
Equity in Loss of T3 Therapeutics    $    (16,600
Balance, March 31, 2007    $   83,400  
Write off at September 30, 2007    $   (83,400
Balance at March 31, 2009 and December 31, 2009
   $   -0-  
 
On January 21, 2010 the Company entered into a Unit Purchase and Mutual Release Agreement with T-3 Therapeutics, LLC (T-3) for the sale of the Company’s entire membership interest in T-3 for $100,000 (the “Agreement”), payable in cash upon execution of the Agreement.  Reference is made to the full text of the Agreement, a copy of which is attached to the Company’s Form 8-K filed on January 21, 2010 with the Securities and Exchange Commission.

Disclosure of the Company’s establishment of its Class A Tracking Stock (representing the Company’s medical-related investments, which include its New York University Research Funding investment, which has been deemed of no value, and its T-3 investment), held in street name only and owned by those shareholders of record as of August 31, 2007 entitled to future proceeds from the sale of the Company’s medical investments, was set forth in the Company’s definitive Proxy Statement on Schedule 14A, filed with the Securities and Exchange Commission on May 30, 2007.  On August 31, 2007 and December 31, 2009, there were outstanding 443,736 shares of Class A Tracking Stock.

On January 21, 2010, the Company’s Board of Directors approved the redemption of all of the Company’s issued and outstanding Class A Tracking Stock for $0.19 per share, after deducting current and anticipated expenses.  The redemption was effectuated on March 12, 2010 to shareholders of record on August 31, 2007.  The Company will use the nominal balance of cash available after the redemption to pay costs and expenses associated therewith.  On March 31, 2010 and December 31, 2010 there were no shares of Class A tracking stock outstanding.
 
As of August 31, 2007, the date of the closing of the transactions contemplated by the Purchase Agreement, and through the date of sale of T-3, Mr. Edward B. Grier, a current member of the Company’s board of directors, was a 2.5% owner of T-3 Therapeutics and had an option to purchase an additional ownership interest of approximately 2.5%, both of which he continues to own personally.
 
NOTE E -- RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In January 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2010-01, Accounting for Distributions to Shareholders with Components of Stock and Cash-a consensus of the FASB Emerging Issues Task Force,(Topic 505). This ASU clarifies that the stock portion of a distribution to shareholders that allows them to elect to receive cash or stock with a potential limitation on the total amount of cash that all shareholders can elect to receive in the aggregate is considered a share issuance that is reflected in EPS prospectively and is not a stock dividend for purposes of applying Topics 505 and 260 (Equity and Earning Per Share). The Company is currently evaluating the impact of ASU 2010-01 on the Company’s financial statements.

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In June 2009, the FASB issued ASU No. 2009-01, Topic 105 — Generally Accepted Accounting Principles — amendments based on Statement of Financial Accounting Standards No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles. This ASU reflected the issuance of FASB Statement No. 168. This ASU amends the FASB Accounting Standards Codification for the issuance of FASB Statement No. 168, The FASB Accounting Standards Codification ™ and the Hierarchy of Generally Accepted Accounting Principles. This ASU includes Statement 168 in its entirety, including the accounting standards update instructions contained in Appendix B of the Statement. The Codification does not change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all the authoritative literature related to a particular topic in one place. The Codification is effective for interim and annual periods ending after September 15, 2009, and as of the effective date, all existing accounting standard documents will be superseded. The Codification is effective for the Company in the second quarter of 2009, and accordingly, our Quarterly Report on Form 10-Q for the quarter ending September 30, 2009 and all subsequent public filings will reference the Codification as the sole source of authoritative literature.

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
 
NOTE F – CONCENTRATIONS OF CREDIT RISK:
 
The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents.
 
NOTE G – FAIR VALUE OF COMMON STOCK AND COMMON STOCK WARRANTS

The transaction entered into by the Company and the Investor on August 31, 2007 (see Note C) required the Company  to issue 250,000 Warrants to the Investor, exercisable immediately, with an exercise price of $1.00 per warrant.  The Warrants were sold to the Investor for $0.01 per warrant.

With regard to the sale and issuance of 75,000 common shares, the Company recorded such sale at fair value, which the Company believes to be $1.00 (the price paid by the Investor).

In accordance with FASB ASC 718 (formerly FASB 123(R)),  the Company calculated the estimated fair value of warrants utilizing a Black-Scholes model. The assumptions used in the Black-Scholes model are based on the date the warrants are granted.  The risk-free rate is based on US Treasury securities with a remaining term which approximates the estimated life assumed at the date of grant.  The expected life until exercise was based on management’s estimate and the warrants ten year life.  The following table includes the assumptions used in estimating fair values and the resulting weighted average fair value of warrants issued as part of the Purchase Agreement:
 
  Risk free rate 4.54%
  Warrant term 10 years
  Expected dividend rate none
  Expected volatility 150%
                       
Based on the Black-Scholes valuation method, the warrants were determined to have an estimated fair vale of $1.98 per warrant at issuance.  Accordingly, the Company recorded the difference between the estimated fair value of the warrant $495,000 and the cost of the warrant $2,500 as compensation expense and a corresponding increase to accumulated  paid-in capital.
 
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NOTE H - FAIR VALUE OF FINANCIAL INSTRUMENTS:

The company has adopted FASB ASC 825 (formerly SFAS No. 107), “Fair Value of Financial Instruments”, which requires disclosure of the fair value of financial instruments for which the determination of fair value is practicable. The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties. The carrying amounts of the Company’s financial instruments (cash and cash equivalents) approximate their fair value because of the short maturity of these instruments.

NOTE I - STOCK BASED COMPENSATION:

The company adopted “Share-Based Payment” FASB ASC 718 (formerly, FASB 123(R)), ASC 718 requires expense for all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values.   Pro forma disclosure is no longer an alternative. For the Company, this statement was effective as of April 1, 2006. The Company adopted the modified prospective method, under which compensation cost is recognized beginning with the effective date. The modified prospective method recognizes compensation cost based on the requirements of ASC 718 for all share-based payments granted after the effective date and, for all awards granted to employees prior to the effective date that remain unvested on the effective date. The Company was not required to record any expenses under ASC 718 for share based awards currently outstanding. However, the amount of expense recorded under ASC 718 will depend upon the number of share based awards granted in the future and their valuation.

NOTE J – SHAREHOLDERS’ EQUITY

All share amounts have been retrospectively restated to reflect the reduction in par value from $1.00 to $0.01 based upon authorization by the Company’s shareholders (see Note C).  Basic and diluted 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.  Earnings per share information associated with the Class A shares has not been presented as there were no earnings or losses associated with these shares; accordingly, such per share amounts are nil.

NOTE K – SUBSEQUENT EVENTS

On January 31, 2011, Norwalk, Connecticut-based St. Lawrence Seaway Corporation, a Delaware corporation (OTCBB: STLS) (the “Company”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, St. Lawrence Merger Sub, Inc., a Delaware corporation and subsidiary of the Company (“Merger Co.”) and Denver, Colorado-based Nytis Exploration (USA) Inc., a Delaware corporation (“Nytis USA”). Pursuant to the Merger Agreement, Merger Co. will merge with and into Nytis USA and Nytis USA will remain as the surviving subsidiary of the Company (the “Merger”). The following summarizes the principal terms of the Merger Agreement. Reference is made to the full text of the Merger Agreement, including its schedules, which is filed as Exhibit 2.1 to this Current Report, for more detailed information.

Nytis USA, located in Denver, Colorado and Catlettsburg, Kentucky and through its various subsidiaries owns interests in
approximately 375 gross (156 net) producing natural gas wells on approximately 264,000 primarily undeveloped net acres in Illinois, Indiana, Kentucky, Ohio, Tennessee and West Virginia. Nytis USA conducts exploration and development drilling activities and acquires producing properties in the Appalachian and Illinois Basins.

The Merger will become effective after the fulfillment of certain conditions contained in the Merger Agreement, but no earlier than the tenth (10th) day following the filing of Schedule 14f-1 with the Securities and Exchange Commission and distribution thereof to the Company’s stockholders (the “Effective Date”).

Pursuant to the Merger Agreement, in consideration of all of the outstanding common stock of Nytis USA, the Company will issue to Nytis USA’s security holders approximately 47 million shares of currently authorized but unissued common stock of the Company which will represent approximately 99% of the aggregate voting power of the Company, prior to the exercise of 250,000 currently outstanding warrants of the Company.

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The Effective Date, currently scheduled for February 14, 2011 or sooner as agreed among the parties, is subject to certain conditions set forth in the Merger Agreement including, among other things, the continued accuracy of each parties’ representations and warranties and compliance with certain covenants.

Pursuant to the Merger Agreement, the Company’s current Board of Directors will resign and will be replaced by five directors appointed by Nytis USA.

The Company has evaluated events that occurred subsequent to December 31, 2010 other than as indicated above through the financial statement issue date of February 11, 2011 and determined that all recordable or subsequent events have been indicated.

Item 2.  Management's Discussion and Analysis of Operations / Plan of Operation
 
Please see "Note D -- Medical Investment" in the Notes to the Financial Statements contained under Footnote D of this Form 10-Q for a description of the medical investments the Company made during 2002 and subsequent additional investments and the write-off of such investments in the year ended March 31, 2008 and the sale of such investments in January 2010.
 
Results of Operations for the nine months ended December 31, 2010 as compared to nine  months ended December 31, 2009.
 
Interest income decreased to $ 314 for the nine months ended December 31, 2010, from $742 for the nine months ended December 31, 2009, a decrease of $528.  This decrease is a result of lower cash balances during 2010 as compared to 2009 as well as lesser interest rates received.
 
General and administrative expenses increased to $ 28,644 for the nine months ended December 31, 2010 from $24,886 for the nine months ended December 31, 2009.  The increase in general and administrative expenses is primarily due to an increase in professional fees and some administrative items and stockholder expenses.   The amounts for general and administrative expenses were also higher in the quarters ended December 31, 2010 than in 2009.  The loss incurred in the nine months ended December 31, 2010 was ($28,850) as compared to a loss of ($24,144) in the nine months ended December 31, 2009.
 
Liquidity and Capital Resources
 
Please see “Recent Developments”, pp. 1-2, and "Note C and D" to the Financial Statements contained under Item 1 of this Form 10-Q for a description of the Purchase Agreement described therein and the sale of the medical investments in January 2010.
 
At December 31, 2010 cash and cash equivalents was $26,290 compared to $58,772 at December 31, 2009.  The cash decrease was partially due to the loss incurred in the nine months ended December 31, 2010 and payment of accrued expenses.   Most significantly, cash increased from June 30, 2007 to September 30, 2009 in connection with the equity purchases made on August 31, 2007, which were made pursuant to the Purchase Agreement and in connection with the exercise of warrants to purchase 16,667 shares of the Company’s common stock at $3.00 per share made by Mr. Joel Greenblatt, the former Chairman of the Board, offset by expenses in connection with the transaction described herein as well as cash losses sustained in the Company’s operations in the  nine months ended December 31, 2010 and years ended March 31, 2009 and 2008 offset by net income in the year ended March 31, 2010.  The Company does not have a formal arrangement with any bank or financial institution with respect to the availability of financing in the future.
 
PLAN OF OPERATION
 
The Company made a payment of a cash distribution of $95,310 covering the redemption of the Class A Tracking Stock in the year ended March 31, 2010.  See Recent Developments – Page 2 and Footnote D to the Financial Statements.
 
The Company currently has limited operations.  The Company plans to continue as a public entity and continues to seek merger, reverse merger, acquisition and business combination opportunities with operating businesses or other appropriate financial transactions. Until such an acquisition or business combination is effectuated, the Company does not expect to have significant operations.  Accordingly, during such period, the Company may not achieve sufficient income to offset its operating expenses, which would cause operating losses that may require the Company to use and thereby reduce its cash on hand.
 
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FORWARD LOOKING STATEMENTS
 
Certain statements in this Report are “forward-looking statements” within the meaning of the Private Securities Litigation Reform act of 1995.  When used in this Report, words such as “may,” “should,” “seek,” “believe,” “expect,” “anticipate,” “estimate,” “project,” “plan,” “goal,” “intend,” “strategy,” and similar expressions are intended to identify the Company’s future plans, operations ,business strategies, operating results, and financial position.  Forward-looking statements are subject to a number of known and unknown risks and uncertainties that could cause the Company’s actual results, performance or achievements to differ materially from those described or implied in the forward-looking statement and cause its goals and strategies to not be achieved.
 
These risks and uncertainties many of which are not within our control, include, but are not limited to:
 
·     
general economic and business conditions;
 
·     
the Company’s ability to find a candidate for, enter into an agreement with respect to, and consummate, a merger, reverse merger, acquisition or business combination or other financial transaction that is acceptable, both as to a candidate and as to transaction terms and conditions;
 
·     
competition for transactions of the nature the Company is seeking;
 
·     
potential future regulatory restrictions that could limit or pose restrictions on, or make less advantageous to potential candidates, transactions of the nature the Company is seeking; and
 
·     
the availability of additional financing on satisfactory terms if a delay is encountered in consummating a transaction that the Company is seeking.
 
You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this Report.  We do not undertake any responsibility to publicly update or revise any forward-looking statement or report.
 
Item 3.  Controls and Procedures.
 
Report of Management on Internal Controls Over Financial Reporting.
The Company’s management is responsible for establishing and maintaining adequate internal controls over financial reporting, as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934.  Our internal controls over financial reporting is a process designed by, or under the supervision of, the Company’s Chief Executive Officer, who is also the Company’s Chief Financial Officer, to provide reasonable assurance to the Company’s Board of Directors regarding the reliability of financial reporting and the preparation and fair presentation of published financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”).  Internal controls over financial reporting including those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the Company’s transactions and dispositions of the Company’s assets; (2) provide reasonable assurances that the Company’s transactions are recorded as necessary to permit preparation of the Company’s financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the Company’s financial statements.

The Company’s management assessed the effectiveness of the Company’s internal controls over financial reporting as of December 31, 2010 and concluded that such internal controls are effective.  In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission in Internal Controls – Integrated Framework.

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This report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal controls over financial reporting pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this report.

During the Company’s  fiscal quarter ended December 31, 2010 and during the fiscal year ended March 31, 2010, there were no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II.  OTHER INFORMATION
 
Item 1. Legal Proceeding - Not Applicable.
 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 
Pursuant to the Purchase Agreement with the Investor, on August 31, 2007, the Company sold 75,000 unregistered shares of common stock, par value $0.01 (the “Common Stock”), for $1.00 per share (for a total of $75,000) and 250,000 warrants to purchase 250,000 shares of Common Stock for $0.01 per warrant (for a total of $2,500), as described in Form 8-K, filed by the Company on September 6, 2007.  The warrants are exercisable immediately with an exercise price of $1.00 per share.   See Footnote C included in the December 31, 2010 financial statements.
 
On August 31, 2007, Mr. Joel Greenblatt, the former Chairman of the board of directors of the Company, exercised warrants to purchase 16,667 shares of Common Stock at $3.00 per share (for a total of $50,001).
 
All outstanding options and warrants expired on September 21, 2007 (with the exception of the Warrants issued on August 31, 2007 to the Investor in connection with the transaction described under Recent Developments, pp. 1-2).
 
Item 3. Defaults upon Senior Securities - Not Applicable
 
Item 4. Submission of Matters to a Vote of Security HoldersSee Form 8-K, filed by the Company on September 6, 2007, for a description of the transaction outlined on pp. 1-2 of this Form 10-Q  Also please refer to the notice of annual meeting and the proxy statement mailed to all shareholders on May 30, 2007 on Form DEF-14A for a description of all proposals submitted to the shareholders for a vote at the Annual Meeting of Shareholders held on July 10, 2007.  All proposals were approved by a majority vote of the shareholders.
 
Item 5. Other Information – Not Applicable.
 
Item 6. Exhibits
 
 31.1 - Certification by Principal Executive Officer and Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
 32.1 - Certificate of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 

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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.
 
 
ST. LAWRENCE SEAWAY CORPORATION
Registrant
   
   
graphic
Dated:  February 11, 2011
Bernard Zimmerman
Chairman, President, Principal Executive Officer
and Principal Financial Officer
 
 
 
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