================================================================================

                                  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, 1998

                                       OR

    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
--- ACT OF 1934

For the transition period from _____________ to ____________


                         Commission file number 0-2040
                         -----------------------------


                       THE ST. LAWRENCE SEAWAY CORPORATION
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)


          Indiana                                       35-1038443
          -------                                       ----------
 (State or other jurisdiction            (I.R.S. Employer Identification Number)
of corporation or organization)                                 


    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, 1998 was approximately $930,267.25.

The number of shares of Common Stock of the  registrant  outstanding  as of June
24, 1998 was 393,735.

================================================================================

<PAGE>




                       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 was incorporated by its founders under the
laws of  Delaware  on June 19,  1996,  for the  purpose of seeking to acquire or
merge with an operating business, and thereafter to operate as a publicly-traded
company.  Paragon  offered to sell Shares for par value of $.01 per Share to St.
Lawrence, and in turn, have such Shares distributed to St. Lawrence Shareholders
to broaden its shareholder  base. St.  Lawrence  purchased the Paragon Shares on
March 6, 1997, for total  consideration of $5,141,  using readily available cash
assets of the Company.

St. Lawrence has undertaken the Paragon  transaction  with the goal of providing
St. Lawrence  shareholders  with an additional  opportunity to participate in an
acquisition  or merger of  businesses  through  Paragon,  without  requiring any
additional  investment  by  such  shareholders.  The  Company  believes  that by
acquiring for St. Lawrence  stockholders an equity interest in Paragon,  and the
right to acquire  additional  ownership on the same terms as Paragon's  majority
shareholder,  St.  Lawrence  shareholders  will  thereby  have an  interest in a
greater  number of vehicles  available to effect a merger,  acquisition or other
business  combination,  and therefore,  an increased opportunity to benefit from
such transactions.

The cash payment of $5,141 by St.  Lawrence in exchange  for the Paragon  Shares
and  Subscription  Rights to be distributed to St.  Lawrence  stockholders,  was
determined  by St.  Lawrence to represent a nominal  investment  in light of the
potential  benefits to St. Lawrence  shareholders which may be available through
their ownership of the Shares,  the possible exercise of Subscription  Rights to
purchase  additional  Shares  and  the  fact  that  PAR  Holding,  the  majority
shareholder of Paragon,  agreed to purchase a significant  number of Shares at a
price substantially higher than the price paid by St. Lawrence.

Because Paragon did not yet have a specific operating business, the Distribution
of the Shares was 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

                                       2

<PAGE>


consummation  of a  business  combination.  There is no current  public  trading
market for the Shares and none is expected to  develop,  if at all,  until after
the  consummation  of a business  combination  and the  release  of Shares  from
escrow.

The  purchase  of  Shares  and  Subscription  Rights  by St.  Lawrence,  and the
Distribution,  was made by St.  Lawrence for the purpose of  distributing to St.
Lawrence  stockholders an equity  interest in Paragon without such  stockholders
being required, either individually or directly, to contribute any cash or other
capital in exchange for such equity interest.

At the time of the  Distribution on or about March 21, 1997, St. Lawrence mailed
to each of its Shareholders a copy of Paragon's  Prospectus.  Significant points
explained in the Prospectus (and noted to St.  Lawrence  shareholders in a cover
letter accompanying the Prospectus) include:

               --St. Lawrence shareholders were not required to make any payment
               to receive the Paragon shares. Payment will only be required from
               St.  Lawrence  shareholders  if they  decide  to  exercise  their
               Subscription Rights to purchase additional Paragon Shares;

               --The costs of organizing  and operating  Paragon have been borne
               by  the  founders  of  Paragon.  Neither  St.  Lawrence  nor  its
               shareholders have any future obligations to Paragon, financial or
               otherwise.

               --There  is no  change  in  ownership  of St.  Lawrence,  and St.
               Lawrence  shareholders  remain  free  to  purchase  or  sell  St.
               Lawrence common stock at all times. Restrictions on transfer only
               apply to the  Paragon  shares.  St.  Lawrence  common  stock  and
               Paragon common stock are entirely separate in all respects.

               --Paragon  and  St.  Lawrence  are  independent  companies,  with
               separate   management,   and  will  be  operated  as  independent
               companies in the future.

None of the officers and  directors of Paragon are officers and directors of St.
Lawrence, and Paragon and St. Lawrence have arrangements, fiduciary obligations,
understandings   or  intentions  to  allocate   acquisition  or  other  business
opportunities  between them. Any opportunities  identified by the managements of
the  respective  companies  are expected to be examined and pursued,  if at all,
independently of each other. With each of Paragon and St. Lawrence independently
available for business  combinations and other  acquisition  opportunities,  St.
Lawrence  management  believes  that the  potential  to benefit  St.  Lawrence's
shareholders has been enhanced.

        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.


                                       3

<PAGE>


        (a)  Agricultural  Activities -- At March 31, 1998, 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, 1998,  the Company  continued  its practice of  maintaining  its
other  assets  in  relatively  liquid  interest/dividend  bearing  money  market
investments. The Company is engaged in a search for other business opportunities
and,  accordingly,  such assets may be used for an  acquisition or for a partial
payment of an acquisition or for the commencement of a new business.

        Financing Arrangements
        ----------------------

        The  Company's  real estate is  unencumbered.  Furthermore,  the Company
currently   has  no  debt  for  borrowed   funds  or  similar   obligations   or
contingencies. The Company may incur debt of an undetermined amount to effect an
acquisition  or commence a new  business.  St.  Lawrence  does not have a formal
arrangement  with  any  bank  or  financial  institution  with  respect  to  the
availability of financing in the future.

        Licenses And Trademarks, Etc.
        -----------------------------

        The business of St. Lawrence is not currently dependent upon any patent,
trademark, franchise or license.

        Governmental Regulation
        -----------------------

        St. Lawrence  believes it is in compliance  with all federal,  state and
local regulations including all applicable environmental matters.


                                       4

<PAGE>


        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  salaried  employee at this time.  In addition,
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, 1998,  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  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

<PAGE>



                                     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 1998 and 1997,  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.

<TABLE>
<CAPTION>

        FISCAL YEAR                     QUARTER                       HIGH                          LOW
        -----------                     -------                       ----                          ---

     ------------------------------------------------------------------------------------------------------------
<S>                                   <C>                          <C>                          <C>  
            1998                         First                        $2.50                        $2.25
     ------------------------------------------------------------------------------------------------------------
                                        Second                        $2.25                        $2.25
     ------------------------------------------------------------------------------------------------------------
                                         Third                        $2.75                        $2.25
     ------------------------------------------------------------------------------------------------------------
                                        Fourth                       $3.125                        $2.75
     ------------------------------------------------------------------------------------------------------------
            1997                         First                        $2.50                        $2.50
     ------------------------------------------------------------------------------------------------------------
                                        Second                        $2.75                        $2.50
     ------------------------------------------------------------------------------------------------------------
                                         Third                        $2.75                        $2.50
     ------------------------------------------------------------------------------------------------------------
                                        Fourth                        $2.50                        $2.50
     ------------------------------------------------------------------------------------------------------------

</TABLE>

        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  were paid this year and no cash  dividends are expected to be paid in
the future.


                                       6

<PAGE>

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

        As of June 15, 1998, there were approximately 1,312 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, 1998. Certain  information
with respect to the fiscal years ended March 31, 1996,  March 31, 1995 and March
31, 1994 has been restated.  All  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>
                                            1998           1997             1996            1995            1994
                                            ----           ----             ----            ----            ----
REVENUES:
---------
<S>                                     <C>            <C>               <C>            <C>             <C>   
Interest & Dividends                        56,704         54,545            59,858         55,311          34,855
Farm Rentals & Sales                         9,120          9,120             9,120          9,804          21,913
Gain on Sale of Farm
      Properties, net                            0              0                 0              0          80,779


Other                                            0              0                 0              0              48
                                        ----------    -----------       -----------    -----------     -----------
Total                                       65,824         63,665            68,978         65,115         137,595
                                        ==========    ===========       ===========    ===========     ===========

COSTS & EXPENSES:
-----------------
Farm Related                                 1,734          2,056             1,243          1,634           2,155
General and                                
  Administrative                           112,092        105,220           141,748        148,053          83,306
Consulting                                   6,000          6,000            44,400         44,400          37,200 
Depreciation                                 1,568          1,568             1,438            588               0
                                        ----------    -----------       -----------    -----------     -----------
Total                                      121,394        114,844           188,829        194,675         132,661


</TABLE>

                                       7

<PAGE>


<TABLE>
<CAPTION>

<S>                                   <C>             <C>               <C>            <C>              <C>   
Income (Loss) Before
     Income Taxes                         (55,570)        (51,179)         (119,851)      (129,560)          4,934

Income Tax
     Expense (Benefit)                       (787)           (965)             (735)        (5,429)         (8,048)
                                        ----------    -----------       -----------    -----------     -----------
     Net Income (Loss)                    (56,357)        (52,144)         (120,586)      (124,131)        $12,982

  Income (Loss) per
       Common Share                         (0.14)          (0.13)            (0.31)         (0.32)      $    0.03
                                        ----------    -----------       -----------    -----------     -----------

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

</TABLE>

<TABLE>
<CAPTION>

                                            1998           1997             1996            1995            1994
                                            ----           ----             ----            ----            ----
BALANCE SHEET DATA:
-------------------
<S>                                     <C>            <C>               <C>            <C>              <C>      
Total Assets                            1,231,852      1,293,467         1,370,874      1,453,225        1,584,313

Total Liabilities                          36,714         41,972            62,094         23,859           30,817

Shareholders' Equity                    1,195,138      1,251,495         1,308,780      1,429,386        1,553,498

</TABLE>


                                       8

<PAGE>


ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

RESULTS OF OPERATIONS

      Year Ended March 31, 1998, as compared to Year Ended March 31, 1997.
      --------------------------------------------------------------------

        Interest  and  dividend  income  increased  to $56,704 in the year ended
March 31, 1998,  from $54,545 in the previous  year  primarily  due to stable or
slightly increased interest rates.

        Farm rental  revenues of $9,120 were comparable in the years ended March
31, 1998,  and 1997. The Company has discussed with local real estate agents the
possibility of instituting a rent increase at Schleman Farm. Based on the market
rents  currently  being  obtained in Northern  Indiana,  a rent  increase is not
feasible at this time.

        General and  administrative  expenses  increased to $112,092 in the year
ended March 31, 1998 from $105,220 in the year ended March 31, 1997  principally
due to an increase in office rent, an increase in  professional  fees associated
with the Company's recent response to certain  shareholder and SEC informational
inquiries regarding the Company's 10-K for the fiscal year ended March 31, 1997,
and an increase in personnel  costs  associated with a small salary increase and
partial  reimbursement of health insurance for the Company's sole employee,  all
as illustrated by the following comparison table;

<TABLE>
<CAPTION>
                                                            YEAR ENDED MARCH 31,

                                                         1998                1997
                                                         ----                ----
<S>                                                    <C>                 <C>    
Executive  Compensation, Salaries and
  Employee Benefits                                    $33,128             $31,478
Office Rent and Operations                              14,281              11,382
Stock Services, Proxy, Annual Meeting and
  SEC Report Compliance                                 18,114              19,595
Professional Fees (accounting & legal)                  49,496              44,362
Payroll, excise and other taxes                          2,654               3,711
</TABLE>

        The Company had a loss of $55,570  before  taxes in the year ended March
31, 1998, as compared to a loss of $51,179  before taxes in the year ended March
31, 1997.

        The income tax paid in the current year was $787.  An income tax of $965
was paid in the year ended March 31, 1997.

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 decrease is a result of
lower interest rates received on cash invested in the year ended March 31, 1997.

        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.  The  following  table
summarizes  the  significant  components  of  these  expenses,  and  presents  a
comparison of such  components  for the years ended March 31, 1997 and March 31,
1996:

                                       9
<PAGE>

<TABLE>
<CAPTION>
                                                                YEAR ENDED MARCH 31,
     
                                                             1997                  1996
                                                             ----                  ----
<S>                                                         <C>                  <C>    
Executive Compensation, Salaries and
   Employee Benefits                                        $31,478              $29,855
Office Rent and Operations                                   11,382               11,491
Stock Services, Proxy, Annual Meeting and
    SEC Report Compliance                                    19,595               16,908
Professional Fees (accounting & legal)                       44,362               85,166
Amortization and Depreciation                                 1,568                1,438
Payroll, excise and other taxes                               3,711                3,380
</TABLE>

     The  higher  professional  fees for the year  ended  March  31,  1996,  are
attributable  to the formation and subsequent  dissolution  of the St.  Lawrence
Fund, a wholly-owned  subsidiary of the Company,  which was intended to register
under the Investment Company Act of 1940 and to invest in securities.  Reference
is made to the Company's Forms 8-K filed January 19, 1996, and June 3, 1996, for
further information regarding the St. Lawrence Fund.

      Year Ended March 31, 1996, as compared to Year Ended March 31, 1995.
      --------------------------------------------------------------------

        Interest  and  dividend  income  increased  to $59,858 in the year ended
March 31, 1996,  from $55,311 in the previous  year. The increase is a result of
higher  interest  rates  received  in cash  invested in the year ended March 31,
1996.

        Farm rental revenue decreased to $9,120 in the year ended March 31, 1996
from $9,804 in fiscal year 1995 because the lease for the Schleman Farm contains
a $5/acre rent  concession  given in  consideration  of the  uncertainty of crop
yields due to abnormally inclement weather.

        General and  administrative  expenses  decreased to $141,748 in the year
ended March 31, 1996 from $148,053 on the year ended March 31, 1995  principally
due to reduced legal and other professional expenses currently recognized in the
Company's Statement of Income as of March 31, 1995.

        As a result of the above items, the Company had a loss of $81,451 before
taxes in the year ended March 31, 1996, as compared to a loss of $91,160  before
taxes in the year ended March 31, 1995.

        The income tax paid in the current year was $735.  An income tax benefit
of $5,429 was  received in the year ended March 31, 1995 as a result of the loss
realized in that year.



                                       10

<PAGE>


        Liquidity and Capital Resources
        -------------------------------

        At March 31, 1998,  the Company had net working  capital of  $1,069,226,
the major portion of which was in cash and money market funds.  St. Lawrence has
sufficient capital resources to continue its current business.

        The  Company may require the use of its assets for a purchase or partial
payment for an acquisition or in connection with another  business  opportunity.
In addition,  St. Lawrence may incur debt of an undetermined amount to effect an
acquisition  or in connection  with another  business  opportunity.  It may also
issue  its  securities  in  connection  with an  acquisition  or other  business
opportunity.

        St.  Lawrence  does  not  have a  formal  arrangement  with  any bank or
financial  institution  with  respect to the  availability  of  financing in the
future.

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Annexed hereto starting on Page 21.

ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
         FINANCIAL DISCLOSURE

Not applicable.


                                       11

<PAGE>

                                    PART III
                                    --------

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

        Set forth in the  following  table are the names and ages of all persons
who were members of the Board of Directors of the Company at March 31, 1998, all
positions  and offices with the Company  held by such  persons,  their  business
experience,  the period during which they have served as members of the board of
directors and other directorships held by them.

<TABLE>
<CAPTION>
                                                        BUSINESS
                                                        EXPERIENCE
DIRECTORS/POSITION                         DIRECTOR     DURING LAST                        OTHER
IN COMPANY                  AGE            SINCE        FIVE YEARS                         DIRECTORSHIPS
----------                  ---            -----        ----------                         -------------

<S>                         <C>             <C>         <C>                                <C>                                     
Jack C. Brown               79              1959        Attorney at Law                    None
Secretary                                               Indianapolis,
                                                        Indiana
                                                        since 1945.

Joel M. Greenblatt          40              1993        Managing Partner                   Director since August
Chairman of the                                         of Gotham                          1994 of Alliant
Board                                                   Capital III L.P                    Techsystems, Inc., a
                                                        ("Gotham") and its                 Delaware corporation
                                                        predecessors since 1985            which supplies
                                                        Gotham is a private                weapons systems
                                                        investment partnership             to the military and
                                                        which owns securities,             its allies.
                                                        equity interests, distressed
                                                        debt, trade claims and
                                                        bonds, derivatives, and
                                                        options and warrants of
                                                        issuers engaged in a variety
                                                        of businesses.

Daniel L. Nir               37              1993        Manager of Sargeant                Director since August
President and                                           Capital Ventures, LLC              1994 of Alliant
Treasurer                                               since December, 1997;              Techsystems, Inc., a
                                                        Managing Partner of                Delaware corporation
                                                        Gotham Capital III, L.P.,          which supplies weapons
                                                        prior thereto.                     systems to the United
                                                                                           States military and its
                                                                                           allies.
</TABLE>



                                       12

<PAGE>

<TABLE>
<CAPTION>

<S>                         <C>             <C>                                              <C>    
Edward B. Grier             40              1993        Vice President of                    None
Vice President                                          Gotham since 1991
                                                        and a limited partner
                                                        of Gotham since January
                                                        1, 1995.  Mr. Grier was
                                                        vice president of Smith
                                                        New Court, a merger
                                                        and restructuring advisory
                                                        firm from 1990-91, a
                                                        research associate with
                                                        Paine Webber, Inc. from
                                                        1987-90, and a senior
                                                        financial analyst with
                                                        Transworld Corporation
                                                        from 1985-87.

</TABLE>

        Directors of the Company are elected by a plurality of the votes cast at
the Annual Meeting of Shareholders.  Each Director's current term of office will
expire at the next annual  meeting of  Shareholders  or when a successor is duly
elected and qualified.  Executive  officers of the Company are elected  annually
for a term of office  expiring  at the Board of  Directors  meeting  immediately
following the next  succeeding  Annual Meeting of  Shareholders,  or until their
successors are duly elected and qualified.

        Compliance with Section 16(a) of the Exchange Act
        -------------------------------------------------
        Based  solely  on a  review  of  Forms 3 and 4 and  amendments  thereto,
furnished to the Company during the fiscal year ended March 31, 1998 and Forms 5
and amendments  thereto furnished to the Company with respect to the fiscal year
ended March 31, 1998, no director,  officer or beneficial owner of more than 10%
of the  Company's  equity  securities  failed to file on a timely basis  reports
required  by Section  16(a) of the  Exchange  Act during the fiscal  years ended
March 31, 1998 and March 31, 1997.

ITEM 11 - EXECUTIVE COMPENSATION

        Except as noted below, neither the Company's Chief Executive Officer nor
any  other  executive   officers  of  the  Company   (collectively   the  "Named
Executives")  received salary,  bonus or other annual compensation for rendering
services to the Company during the fiscal years ended March 31, 1998,  March 31,
1997 and March 31, 1996.

        During  the  fiscal  years  ended  March 31,  1995 and  March 31,  1996,
pursuant to a  Consulting  Agreement  dated as of  September  30,  1993  between
Bernard Zimmerman & Co., Inc. and the Windward Group, L.L.C.,



                                       13

<PAGE>



a principal  stockholder  of the  Company,  Bernard  Zimmerman & Co. was paid an
aggregate  $36,000  for  consulting  services  provided  for the  benefit of the
Company.  All such payments were made by the Windward Group, L.L.C. on behalf of
the Company.  They were recognized as an expense by the Company and treated as a
contribution  of capital by Windward to the Company.  No such payments were made
during the fiscal year ended March 31, 1997 or March 31, 1998.

        During each of the three fiscal  years ended March 31,  1996,  March 31,
1997 and March 31,  1998,  the Company  paid to Jack C. Brown,  Secretary  and a
Director,  a monthly fee of $500 for administrative  services that he renders to
the Company. Such fee is on a month to month arrangement.

        Summary Compensation Table
        --------------------------
        
        As permitted  by Item 402 of  Regulation  S-K, the Summary  Compensation
Table has been  intentionally  omitted as there was no compensation  awarded to,
earned by or paid to the Named  Executives  which is  required to be reported in
such Table for any fiscal year covered  thereby.  In addition,  no  transactions
between  the  Company  and a  third  party  where  the  primary  purpose  of the
transaction  was to furnish  compensation to a Named Executive were entered into
for any fiscal year covered thereby.

        Option/SAR Grants in Fiscal Year Ended March 31, 1998
        -----------------------------------------------------

        No options or Stock appreciation  rights were granted in the fiscal year
ended March 31, 1998.

        Aggregated Option/SAR Exercises in Fiscal Year Ended March 31, 1998 and 
        Fiscal Year-End Option/SAR Values
        ------------------------------------------------------------------------

        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 Company currently has
one outstanding  Stock Option  Agreement  entered into pursuant to the Plan. The
options  granted  thereunder  expires on September 21, 2002. The following table
summarizes  options  exercised during fiscal year 1998 and presents the value of
unexercised  options held by the Named  Executives at fiscal year end. There are
currently no outstanding stock appreciation rights.


                                       14

<PAGE>


<TABLE>
<CAPTION>
                          VALUE OF UNEXERCISED         NUMBER OF UNEXERCISED               IN-THE-MONEY
                          SHARES                          OPTIONS/SAR'S                    OPTIONS/SAR'S
                         ACQUIRED        VALUE          AT FISCAL YEAR-END             AT FISCAL YEAR-END(D)
                        ON EXERCISE     REALIZED       (#)              (#)            ($)            ($)
     NAME                    #            ($)      EXERCISABLE      UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
     ----               -----------     --------   -----------      -------------   -----------   --------------

<S>                       <C>           <C>          <C>              <C>            <C>            <C>
Joel M. Greenblatt           0             0            0                0              0              0

Daniel L. Nir                0             0            0                0              0              0

Edward B. Grier, III         0             0            0                0              0              0

Jack C. Brown                0             0          15,000             0            45,000           0

</TABLE>

Long-Term Incentive Plans - Awards in Fiscal Year Ended March 31, 1998
----------------------------------------------------------------------

Not applicable.

Compensation of Directors
-------------------------

The By-laws of the Company  provide for  Directors  to receive a fee of $100 for
each meeting of the Board of Directors which they attend plus  reimbursement for
reasonable travel expense. The Company paid $100 to Jack Brown for attendance at
the annual  meeting of  Stockholders.  No other fees were paid to Directors  for
meetings in fiscal year 1998.

As discussed  above,  during the fiscal year ended March 31,  1998,  the Company
paid  Jack C.  Brown,  Secretary  and a  Director,  a  monthly  fee of $500  for
administrative services that he renders to the Company.

Compensation Committee Interlock and Insider Participation
----------------------------------------------------------

The  Board  of  Directors  does  not  have any  standing  audit,  nominating  or
compensation  committees or any other committees  performing  similar functions.
Therefore,  there are no relationships or transactions  involving members of the
Compensation  Committee  during the fiscal year ended March 31, 1998 required to
be reported pursuant to Item 402(j) of Regulation S-K.



                                       15


<PAGE>

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  following  table  sets  forth as of June  15,  1998  the  beneficial  share
ownership of all  beneficial  owners of 5% or more of the Company's  securities,
all directors and executive  officers of the Company owning  securities,  and of
all officers and directors as a group.

<TABLE>
<CAPTION>

                                              AMOUNT AND
                                              NATURE OF
BENEFICIAL                                    BENEFICIAL                                      PERCENT
OWNER                                         OWNERSHIP                                       OF CLASS
----------                                    ----------                                      --------

<S>                                             <C>                                           <C>  
The Windward Group, L.L.C.                      150,000 1                                      29.5%
100 Jericho Quadrangle
Suite 212
Jericho, NY 11753

Joel M. Greenblatt                              150,000 2                                      29.5%
100 Jericho Quadrangle
Suite 212
Jericho, NY 11753

Daniel L. Nir                                   150,000 2                                      29.5%
100 Jericho Quadrangle
Suite 212
Jericho, NY 11753

</TABLE>

-----------------------

        1 Includes  100,000  Shares  subject to a  currently  exercisable  Stock
Warrant  issued to the  Windward  Group L.L.C.  pursuant to a Warrant  Agreement
dated  September  24,  1986,  and  amended on July 6, 1992,  August 28, 1992 and
September 15, 1997.

        2 Includes  100,000  Shares  subject to a  currently  exercisable  Stock
Warrant  issued to the  Windward  Group L.L.C.  pursuant to a Warrant  Agreement
dated  September  24,  1986,  and  amended on July 6, 1992,  August 28, 1992 and
September  15, 1997.  Ownership of Mr. Nir and Mr.  Greenblatt  is indirect as a
result of their  membership  interest in The Windward Group,  L.L.C. Mr. Nir and
Mr. Greenblatt disclaim individual  beneficial  ownership of any common stock of
the Company.


                                       16

<PAGE>


<TABLE>
<CAPTION>

<S>                                             <C>                                            <C>  
Jack C. Brown                                   20,456 3                                        4.02%
320 N.Meridian St.                             
Suite 818
Indianapolis, IN 46204

Edward B. Grier III                                0                                             *
100 Jericho Quadrangle
Suite 212
Jericho, NY 11753

All directors and
 officers as a group                           170,456                                          33.5%
(4 persons)

</TABLE>

-----------------------
*Less than 1%


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Not applicable.





-----------------------
        3 Includes 15,000 shares subject to currently  exercisable stock options
granted on June 11, 1983, as amended, and expiring on September 21, 2002, with a
per share exercise price of $3.00.

No other person or group has reported  that it is the  beneficial  owner of more
than 5% of the outstanding Common Stock of the Company.


                                       17

<PAGE>

                                     PART IV
                                     -------

ITEM 14 - EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K

<TABLE>
<CAPTION>

(a) FINANCIAL STATEMENTS:                                                     PAGE NO.
    ---------------------                                                     --------
<S>                                                                           <C>
    Independent Auditor's Report                                                 21
    Balance Sheets                                                               22
    Statements of Income                                                         23
    Statement of Shareholders' Equity                                            24
    Statements of Cash Flow                                                      25

    Notes to Financial Statements                                                26

    FINANCIAL SCHEDULES:
    --------------------
    X -       Supplementary Income Statement                                     30

              Information
</TABLE>

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, 1998.  However,  subsequent  thereto,  but
              prior to the date  hereof,  a report  on Form 8-K was  filed  with
              respect  to  the  dividend  distribution  of  Paragon  Shares  and
              Subscription Rights described in Part I, Item 1 hereof.

(c) Exhibits

              (3)     (i) Articles of  Incorporation  of The St. Lawrence Seaway
                      Corporation,  as amended.  (Incorporated  by  reference to
                      Exhibit  (C)  (3)  (i) to the  Annual  Report  of The  St.
                      Lawrence  Seaway  Corporation  for the  fiscal  year ended
                      March 31, 1991.)

                      (ii)  By-Laws  of  The  St.  Lawrence  Seaway  Corporation
                      (Incorporated  by reference to Exhibit (C) (3) (ii) to the
                      Annual Report of The St.  Lawrence  Seaway  Corporation on
                      Form 10-K for the fiscal year ended March 31, 1987.)

              (10)    (i) Stock  Option  Agreements,  each dated  September  21,
                      1987, between The St. Lawrence Seaway Corporation and each
                      of Jack C. Brown,  Philip I. Berman,  and Albert Friedman.
                      (Incorporated  by reference to Exhibit (C) (10) (i) to the
                      Annual Report of The St.  Lawrence  Seaway  Corporation on
                      Form 10K for the fiscal year ended March 31, 1988.)


                                       18
<PAGE>
                         (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.  (Incorporated  by  reference to
                         Form 10-K for the  Fiscal  Year  ended  March 31,  1993
                         ("the 1993 10-K")).

                         (v) Amendment No. 1 to Stock Option  Agreement  between
                         The St. Lawrence  Seaway  Corporation and Jack C. Brown
                         dated  August 28, 1992.  (Incorporated  by reference to
                         the 1993 10-K.)

                              (v)(a)  Amendment to Stock Option  Agreement dated
                              September 15, 1997 -- Filed Herewith.

                         (vi) Amendment No. 1 to Stock Option Agreement  between
                         The St. Lawrence Seaway Corporation and Albert Friedman
                         dated  August 28, 1992.  (Incorporated  by reference to
                         the 1993 10-K.)

                         (vii)  Amendment No. 1 to the Warrant issued to Bernard
                         Zimmerman   &  Co.   Inc.   dated   August  28,   1992.
                         (Incorporated by reference to the 1993 10-K).

                              (vii)(a)  Amendment No. 2 to Common Stock Purchase
                              Warrant,   dated   September  15,  1997  --  Filed
                              Herewith.

                         (viii)  Stock Option  Agreement,  dated August 28, 1992
                         between The St. Lawrence  Seaway  Corporation and Wayne
                         J.  Zimmerman.  (Incorporated  by reference to the 1993
                         10-K.)

                         (ix) Stock Sale Agreement,  dated June 24, 1993 between
                         Bernard   Zimmerman   &  Co.,   Inc.   and   Industrial
                         Development  Partners.  (Incorporated  by  reference to
                         Exhibit  7(a)  to  Current  Report  on Form  8-K  dated
                         September 30, 1993).

                         (x)  Assignment and  Assumption  Agreement  dated as of
                         July 30,  1993.  (Incorporated  by reference to Exhibit
                         7(b) to Current Report on Form 8-K dated  September 30,
                         1993.)

                 (27)    Financial Data Schedule -- Filed herewith.
<PAGE>
        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 26, 1998.


        Signatures                      Title                          Date
        ----------                      -----                          ----

/s/ Daniel L. Nir                  President, Treasurer            June 26, 1998
------------------------           and Director
Daniel L. Nir                      
(Principal Financial
Officer)



/s/ Joel M. Greenblatt             Chairman of the Board,          June 26, 1998
-----------------------            and Director
Joel M. Greenblatt                 
(Principal Executive
Officer)


/s/ Jack C. Brown                  Secretary and Director          June 26, 1998
------------------------
Jack C. Brown



/s/ Edward B. Grier III            Director                        June 26, 1998
------------------------
Edward B. Grier III

                                       20
<PAGE>

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, 1998 and 1997, and the related statements of income,
shareholders  equity,  and cash flows for each of the three  years in the period
ended March 31, 1998. These financial  statements are the  responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the financial  position of THE ST. LAWRENCE
SEAWAY  CORPORATION  as of March  31,  1998 and  1997,  and the  results  of its
operations  and its case flows for each of the three  years in the period  ended
March 31, 1998 in conformity with generally accepted accounting principles.

May 19, 1998
                                                     /s/ Sallee & Company, Inc.
                                                     --------------------------


              1509 J STREET, P.O. BOX 1148, BEDFORD, INDIANA 47421,
                        812-275-4444 (FAX) 812-275-3300


                                       21

<PAGE>


                       THE ST. LAWRENCE SEAWAY CORPORATION
                                 BALANCE SHEETS
                             MARCH 31, 1998 AND 1997

<TABLE>
<CAPTION>

ASSETS                                                                    1998                       1997
------                                                                    ----                       ----

Current Assets:
<S>                                                              <C>                          <C>       
         Cash and cash equivalents                               $    1,105,940               $    1,165,962
         Interest and other receivables                                   1,644                        1,522
         Prepaid items                                                      662                          809
         Deferred tax benefits                                            2,014                        2,014
                                                                 --------------               --------------
                  Total Current Assets                           $    1,110,260               $    1,170,307

Property and fixed assets:
         Land                                                    $      118,913               $      118,913
         Property & equipment, net                                        2,679                        4,247
                                                                 ---------------              --------------
                  Total Assets                                   $    1,231,852               $    1,293,467
                                                                 ==============               ==============


LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------

Current Liabilities:
         Payroll taxes withheld and accrued                      $          772               $        1,644
         Accounts payable & other                                        27,734                       32,120
         Deferred income                                                  8,208                        8,208
                                                                 --------------               --------------
                  Total Liabilities                              $       36,714               $       41,972
                                                                 ==============               ==============

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                                     377,252                      377,252
         Retained earnings                                              424,151                      480,508
                                                                 --------------                -------------
                  Total Shareholders' Equity                     $    1,195,138                $   1,251,495
                                                                 --------------                -------------
         Total Liabilities and Shareholders' Equity              $    1,231,852                $   1,293,467
                                                                 ==============                =============

</TABLE>

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



                                       22

<PAGE>


                       THE ST. LAWRENCE SEAWAY CORPORATION
                              STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                         YEARS ENDED MARCH 31,

                                                              1998              1997             1996
                                                              ----              ----             ----
Revenues:
<S>                                                        <C>               <C>              <C>       
         Farm rentals                                      $    9,120        $    9,120       $    9,120
         Interest and dividends                                56,704            54,545           59,858
                                                           ----------        ----------       ----------
         Total Revenues                                    $   65,824        $   63,665       $   68,978


Operating Costs and Expenses:
         Farm related operating costs                      $    1,734        $    2,056       $    1,243
         Depreciation                                           1,568             1,568            1,438
         Consulting fees-Note 3                                 6,000             6,000           44,400
         General and administrative expenses                  112,092           105,220          141,748
                                                           ----------        ----------       ----------
Total Operating Expenses                                   $  121,394        $  114,844       $  188,829



Income (Loss) before income taxes                             (55,570)          (51,179)        (119,851)

Income Taxes/(Tax Benefit)                                        787               965              735
                                                           ----------        ----------       ----------
Net Income (Loss)                                          $  (56,357)          (52,144)        (120,586)


Per Share Data:
         Weighted average number of
         common shares outstanding                         $  393,735        $  393,735       $  393,735
                                                           ----------        ----------       ----------

Basic earnings per common
and common equivalent shares                               $    (0.14)            (0.13)           (0.31)
                                                           ==========        ==========       ==========
</TABLE>


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


                                       23

<PAGE>


                       THE ST. LAWRENCE SEAWAY CORPORATION
                        STATEMENT OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                 COMMON STOCK                      ADDITIONAL
                                                 NUMBER OF         PAR             PAID-IN        RETAINED
                                                 SHARES           VALUE $1         CAPITAL        EARNINGS
                                                 ---------        --------         -------        --------

<S>               <C>                            <C>              <C>              <C>            <C>     
Balances at April 1, 1995                        $393,735         $393,735         $377,252       $658,379

   Net loss for 1996                                                                              (120,586)
                                                 ----------------------------------------------------------
Balances at March 31, 1996                       $393,735         $393,735         $377,252       $537,793

   Net loss for 1997                                                                               (52,144)
   Distribution of Paragon Stock                                                                    (5,141)
                                                 ----------------------------------------------------------
Balances at March 31, 1997                       $393,735         $393,735         $377,252       $480,508

   Net loss for 1998                                                                               (56,357)
                                                 ----------------------------------------------------------
Balance at March 31, 1998                        $393,735         $393,735         $377,252       $424,151
                                                 ========         ========         ========       ========

</TABLE>




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


                                       24

<PAGE>


                       THE ST. LAWRENCE SEAWAY CORPORATION
                             STATEMENTS OF CASH FLOW
                    YEARS ENDED MARCH 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>

                                                                  1998             1997           1996
                                                                  ----             ----           ----

Cash Flows From Operating Activities:
<S>                                                           <C>               <C>               <C>       
         Net Income (Loss)                                    $  (56,357)       $  (52,144)       $(120,586)
         Adjustments to reconcile net income to
            net cash from operating activities
            Depreciation                                           1,568             1,568            1,438
(Increase) Decrease in Current Assets:
         Other receivables                                          (122)            9,582            8,179
         Prepaid items                                               147              (260)          46,304
(Decrease) Increase in Current Liabilities:
         Payroll tax & other                                        (872)            1,190             (267)
         Accounts payable                                         (4,386)          (21,311)          38,502
                                                              ----------        ----------        --------- 
Net Cash From Operating Activities                               (60,022)          (61,375)         (26,430)

Cash Flows From Investing Activities:
         Purchase of equipment                                         0                 0           (1,962)
         Proceeds from asset sales                                     0                 0                0
                                                              ----------        ----------        --------- 
 Net Cash from Investing Activities                                    0                 0           (1,962)


Cash Flows From Financing Activities:
         Purchase of Paragon Stock                                     0            (5,141)               0
                                                              ----------        ----------        --------- 
Net Cash From Financing Activities                                     0            (5,141)               0


Net Increase in Cash and Cash Equivalents                        (60,022)          (66,516)         (28,392)


Cash and Cash Equivalents, beginning                          $1,165,962        $1,232,478       $1,260,870
                                                              ----------        ----------        --------- 
Cash and Cash Equivalents, ending                             $1,105,940        $1,165,962       $1,232,478
                                                              ==========        ==========       ==========

Supplemental Disclosures of Cash Flow Information:
         Cash paid for income taxes                                  960               122                0
         Cash paid for interest expenses                               0                 0                0

</TABLE>


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


                                       25

<PAGE>

                       THE ST. LAWRENCE SEAWAY CORPORATION



NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of the significant  accompanying policies observed in
the  preparation  of  the  financial  statement  for  The  St.  Lawrence  Seaway
Corporation (the "Company").

BASIS OF PRESENTATION:

The accounts are  maintained  on the accrual  method or 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. As of March 31, 1996, all funds were held in cash accounts and included
in the cash  equivalents of the parent company.  On May 31, 1996, the subsidiary
business trust was dissolved and all accounts transferred to 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.  Since the subsidiary
was dissolved on May 31, 1996, and no material transactions occurred between the
parent company and subsidiary  business trust, the 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:

In 1997, the Financial  Accounting Standards Board (the "FASB") issued Statement
No. 128,  "Earnings Per Share"  ("SFAS  128"),  which is effective for financial
statements  issued for periods after  December 15, 1997. In accordance  with the
provisions for this statement, basic earnings per share is computed based on the
weighted  average  number of common  shares  outstanding  during  the period and
excludes any potential  dilution.  Diluted earnings per share reflects potential
dilution from the exercise of options or warrants into common shares. Due to the
antidilutive nature of the Company's current stock option and warrant issued, no
diluted  earnings  per share is  presented in these  financial  statements.  The
adoption of this  statement  had no effect on previously  reported  earnings per
share data.


                                       26


<PAGE>


                       THE ST. LAWRENCE SEAWAY CORPORATION



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 1997 and 1996 financial statements have been reclassified,  where necessary,
to conform to the presentation of the 1998 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.

USE OF ESTIMATES:

The preparation of financial  statements in accordance  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.

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 21, 2002.

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



                                       27

<PAGE>

                       THE ST. LAWRENCE SEAWAY CORPORATION



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, 2002.

The Company has 4,000,000 authorized $1 par value common shares. As of March 31,
1998 and 1997, there were 393,735 common shares issued and outstanding.

NOTE 3. RELATED PARTIES

During the fiscal years ending March 31, 1998,  1997 and 1996,  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.  Additional expenses were
recognized in 1996 and 1995 for the payment of consulting fees in 1993 on behalf
of the Company by the Windward Group, LLC the beneficial owner of 150,000 shares
of the  Company.  The  payment on behalf of the  Company  was  recognized  as an
expense and treated as a contribution of capital by Windward to the Company.

NOTE 4. INCOME TAXES

As of March 31,  1998,  the  Company  has loss  carryforwards  of  approximately
$285,000  that may be used to offset future  taxable  income.  If not used,  the
carryforwards will begin to expire in 2012.  Provisions for current and deferred
federal and state tax liabilities are immaterial to these financial statements.

NOTE 5. 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.  the
parent company purchased  100,000 shares of beneficial  interest in the trust at
$10 per share on January 3, 1996.  The purpose of the trust was to register with
the  Securities  and Exchange  Commission  as a closed-end  investment  company.
Subsequent to the  transaction  and 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.

NOTE 6. 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 514,191  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 to 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 to 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



                                       28

<PAGE>

                       THE ST. LAWRENCE SEAWAY CORPORATION


proceeds from the distribution,  and St. Lawrence stockholders will not make any
payment for the shares and subscription rights. The distribution to St. Lawrence
stockholders  is being made by St.  Lawrence  for the purpose of  providing  St.
Lawrence   stockholders   with  an  equity  interest  in  Paragon  without  such
stockholders  being required to contribute any cash or other capital in exchange
for such equity interest.

On March 21, 1997, the Securities and Exchange  Commission  declared effective a
Registration   Statement  on  Form  S-1  filed  by  Paragon,   registering   the
Distribution of Shares and Subscription Rights to St. Lawrence stockholders. The
cost of organizing  Paragon and registering the distribution  have been borne by
the founders of Paragon.

Paragon is an independent publicly-owned  corporation.  However, because Paragon
does not yet have a specific operating business,  the distribution of the shares
is being conducted in accordance with Rule 419 promulgated  under the Securities
Act of 1933,  as  amended  (the  "Securities  Act").  As a result,  the  shares,
subscription  rights,  and any shares  issuable  upon  exercise of  subscription
rights, are being held in escrow and are  non-transferable by the holder thereof
until after the completion of a business  combination with an operating company.
The subscription  rights will become  exercisable at a price to be determined by
Paragon's Board of Directors (not to exceed $2.00 per subscription right) once a
business  combination is identified and described in a post-effective  amendment
to Paragon's Registration Statement. While held in escrow, the shares may not be
traded or  transferred,  and the net proceeds from the exercise of  subscription
rights will remain in escrow subject to release upon  consummation of a business
combination.  There is no current  public trading market for the shares and none
is expected to develop,  if at all, until after the  consummation  of a business
combination and the release of shares from escrow.

NOTE 7. PRIOR PERIOD ADJUSTMENT

The Company recorded a prior period adjustment for the period beginning April 1,
1994. On September 30, 1993, in connection with its acquisition of a significant
equity interest in the Company from Bernard  Zimmerman,  an officer and director
of the Company, the Windward Group, LLC ("Windward" f/k/a Industrial Development
Company,  LLC) entered into a consulting  contract with Bernard Zimmerman & Co.,
Inc., (the "Consultant").  The terms of such contract resulted in the payment of
$96,000 by Windward to the  Consultant  for  services to Windward in  connection
with the location, and evaluation of potential acquisition,  merger and property
sale possibilities for St. Lawrence.  The payment of the $96,000 by Windward has
been  reflected as a  contribution  of capital to the Company and the consulting
fees treated as an  administrative  expense for the years ending March 31, 1994,
1995 and 1996.  The effect on income for the respective  years upon  recognizing
the payment as an expense was $19,200, $38,400 and $38,400 respectively.


                                       29

<PAGE>

                       THE ST. LAWRENCE SEAWAY CORPORATION

                                   SCHEDULE X

                       THE ST. LAWRENCE SEAWAY CORPORATION
                   SUPPLEMENTARY INCOME STATEMENT INFORMATION
                    YEARS ENDED MARCH 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
             COLUMN A                                           COLUMN B
             --------                                           --------

              ITEM                                    CHARGED TO COSTS AND EXPENSES

                                                           YEARS ENDED MARCH, 31

                                                 1998            1997             1996
                                                 ----            ----             ----
<S>                                              <C>             <C>              <C>   
Maintenance and repairs                          $1,378          $1,113           $1,420

Depreciation and amortization of
 intangible assets, preoperating
 costs and similar deferral                      $1,568          $1,568           $1,438

Taxes, other than payroll and
 income taxes                                    $ 787           $1,844           $2,296

Royalties                                        NONE            NONE             NONE
Advertising costs                                NONE            NONE             NONE

</TABLE>
                                       30