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, 1997

                                       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 
   of corporation or organization)                 Identification 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, 1997 was approximately $845,772.

The number of shares of Common Stock of the  registrant  outstanding  as of June
24, 1997 was 393,735.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement to be used in connection  with the  registrant's
1997 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 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


                                        2




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.


                                        3




        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 - 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


                                        4




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.


                                        5



                                     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 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.


                                        6




        Number of Stockholders
        ----------------------

        As of June 24, 1997, there were approximately 1,348 holders of record of
the Company's Common Stock.

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.

<TABLE>
<CAPTION>
                                    1997          1996          1995          1994        1993
                                    ----          ----          ----          ----        ----
<S>                                <C>           <C>           <C>           <C>         <C> 
REVENUES:
---------
Interest & Dividends               54,545        59,858        55,311        34,855      33,085
Farm Rentals & Sales                9,120         9,120         9,804        21,913      34,725
Gain on Sale of Farm
   Properties, net                      0             0             0        80,779      80,183

   Other                                0             0             0            48           0
                                 --------      --------      --------      --------    --------
   Total                           63,665        68,978        65,115       137,595     147,993
                                 --------      --------      --------      --------    --------

COSTS & EXPENSES:
-----------------

   Farm Related                     2,056         1,243         1,634         2,155       4,327
   General and                    111,220       147,748       154,053       111,306     105,365
     Administrative
   Other                            1,568         1,438           588             0           0
                                 --------      --------      --------      --------    --------
     Total                        114,844       150,429       156,275       113,461     109,692




                                                          7









Income (Loss) Before
     Income Taxes              (51,179)      (81,451)        (91,160)       24,134        38,301

      Income Tax
         Expense(Benefit)          965           735          (5,429)        8,048        10,289
                                  -----         -----         -------       ------        ------
      Net Income(Loss)         (52,144)      (82,186)        (85,731)      $16,086       $28,012


      Income (Loss) per
         Common Share            (0.13)        (0.21)          (0.22)        $0.04        $ 0.07
                                 ------        ------         -------        -----        ------

Weighted Average Number
   of Common Shares
   Outstanding                 393,735       393,735         393,735       395,005       406,740


                                1997          1996            1995          1994          1993
                                ----          ----            ----          ----          ----
BALANCE SHEET DATA:

Total Assets                 1,293,467     1,370,874       1,414,825     1,507,513     1,499,482

Total Liabilities               41,972        62,094          23,859        30,817        35,835

Shareholders' Equity         1,251,495     1,308,780       1,390,966     1,476,696     1,463,647
</TABLE>




                                        8












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




                                        9











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.




                                       10











        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 17.

Item 9 - Changes  in  and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure

        Not applicable.





                                       11










                                    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  within 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.





                                       12











                                     PART IV


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.)




                                       13











                      (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).



                                       14











                      (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






                                       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 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




                                       16











                       THE ST. LAWRENCE SEAWAY CORPORATION
                                 BALANCE SHEETS

                        MARCH 31, 1997 AND MARCH 31, 1996

<TABLE>
<CAPTION>

                                                                         1997                  1996
                                                                  ====================================
<S>                                                                      <C>                   <C>  

                                     ASSETS

Current assets:
     Cash and cash equivalents                                       $ 1,165,962             1,232,478
     Interest and other receivables                                        1,522                11,104
     Prepaid items                                                           809                   549
     Deferred income taxes                                                 2,014                 2,014
                                                                   -------------          ------------
Total Current Assets                                                   1,170,307             1,246,145

Land                                                                     118,913               118,913
Property and equipment                                                     4,247                 5,816
                                                                  --------------          ------------
Total Assets                                                         $ 1,293,467             1,370,874
                                                                  ====================================

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
     Payroll taxes withheld and accrued                                $   1,644                   454
     Accounts payable & other                                             32,120                53,432
     Deferred Income                                                       8,208                 8,208
                                                                   -------------              --------
     Total Current Liabilities                                            41,972                62,094

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                                                   576,508               633,793
                                                                   -----------------------------------
Total Shareholders' Equity                                             1,251,495             1,308,780
                                                                   -----------------------------------
Total Liabilities and Shareholders' Equity                           $ 1,293,467             1,370,874
                                                                   ===================================
</TABLE>


  The accompanying notes are an integral part of these financial statements.



                                       17










                       THE ST. LAWRENCE SEAWAY CORPORATION
                              STATEMENTS OF INCOME
<TABLE>
<CAPTION>


                                                                       YEARS ENDED MARCH 31,
                                                               1997           1996           1996
                                                               ----           ----           ----
<S>                                                            <C>            <C>             <C> 
Revenues:
     Farm rentals                                             $ 9,120           9,120         9,804
     Interest and dividends                                    54,545          59,858        55,311
     Other                                                         0                0             0
                                                         ------------     -----------     ---------
Total revenues                                                $63,665          68,978        65,115


Operating costs and expenses:
     Farm related operating costs                               2,056           1,243         1,634
     Depreciation                                               1,568           1,438           588
     Consulting Fees - Note 3                                   6,000           6,000         6,000
     General and administrative                               105,220         141,748       148,053
                                                         ------------------------------------------
Total operating expenses                                      114,844         150,429       156,275


Income (Loss) before income taxes                             (51,179)        (81,451)      (91,160)

Income taxes/(tax benefit)                                        965             735        (5,429)
                                                         ------------------------------------------
Net income (loss)                                             (52,144)        (82,186)      (85,731)
                                                         ==========================================


Per share data:
     Weighted average number
       of common shares outstanding                           393,735         393,735       393,735
                                                         ------------------------------------------


Primary earnings per share:
  Income (Loss) per share                                  $   ($0.13)         ($0.21)       ($0.22)
                                                         ==========================================
</TABLE>


  The accompanying notes are an integral part of these financial statements.




                                       18











                       THE ST. LAWRENCE SEAWAY CORPORATION
                         STATEMENT OF SHAREHOLDER EQUITY
<TABLE>
<CAPTION>

                                            Common stock                Additional
                                             Number of       Par          Paid-in           Retained
                                               shares      Value $1       Capital           Earnings
                                          --------------  ---------     ----------          --------

<S>                                            <C>           <C>           <C>                <C>    
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

     Net loss for 1997                                                                       (52,144)
     Distribution of Paragon Stock                                                            (5,141)
       (Note 7)

Balance at March 31, 1996                     393,735       393,735       281,252            576,508
                                            ========================================================
</TABLE>






  The accompanying notes are an integral part of these financial statements.




                                       19











                       THE ST. LAWRENCE SEAWAY CORPORATION
                            STATEMENTS OF CASH FLOWS
                    YEARS ENDED MARCH 31, 1997, 1996 AND 1995

<TABLE>
<CAPTION>

                                                           1997            1996             1995
                                                           ----            ----             ----
<S>                                                        <C>              <C>              <C>
Cash flows from operating activities:
Net income (loss)                                       (52,144)          (82,186)         (85,731)
Adjustments to reconcile net income to
  net cash from operating activities
  Depreciation                                             1,568            1,438              588
(Gain) Loss on asset sales                                     0                0                0
(Increase) in deferred items                                   0                0           70,000
(Increase) Decrease in current assets:
  Interest receivable                                          0                0           (1,267)
  Other receivables                                        9,582            8,179          (16,650)
  Prepaid items                                             (260)           7,904           (3,273)
  Deferred income tax                                          0                0                0
(Decrease) Increase in current liabilities:
  Payroll tax & other                                      1,190             (267)              25
  Accounts payable                                       (21,311)          38,502           (6,982)
                                                         -----------------------------------------
    Net cash from operating activities                   (61,375)         (26,430)         (43,290)

Cash flows from investing activities:
    Purchase of equipment                                      0           (1,962)          (5,880)
    Proceeds from asset sales-                                 0                0                0
                                                        ------------------------------------------
    Net cash from investing activities                         0           (1,962)          (5,880)

Cash flows from financing activities:
     Purchase of Paragon Stock - Note 7                   (5,141)               0                0
                                                        ------------------------------------------
     Net cash from financing activities                   (5,141)               0                0

Net increase in cash and cash equivalents                (66,516)         (28,392)         (49,170)

Cash and cash equivalents, beginning                   1,232,478        1,269,870        1,310,040
                                                       -------------------------------------------
  Cash and cash equivalents, ending                   $1,165,962        1,232,478        1,260,870
                                                       -------------------------------------------

Supplemental disclosures of cash flow information:
     Cash paid for income taxes                              122                0              500
     Cash paid for interest expenses                           0                0                0
</TABLE>


The accompanying notes are an integral part of these financial statements.



                                       20










                       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.





                                       21










                       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.




                                       22











                       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.




                                       23










                       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.



                                       24











                       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



                                       25










                       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.




                                       26










                                                                      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




                                       27