<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-K/A

                       AMENDMENT TO APPLICATION OR REPORT
                  Filed pursuant to Section 12, 13 or 15(d) of
                       THE SECURITIES EXCHANGE ACT OF 1934

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

                                 AMENDMENT NO. 2

     The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Annual Report on Form 10-K for the
Fiscal Year ended March 31, 1997, as set forth in the pages attached hereto:

Item 1:
          Business

Item 7:   
          Management's Discussion and Analysis of Financial Condition and
          Results of Operations

Item 10:
          Directors and Executive Officers of the Registrant

Item 12:
          Security Ownership of Certain Beneficial Owners and Management

Item 14:
          Financial Statements


     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                       THE ST. LAWRENCE SEAWAY CORPORATION
                                                  (Registrant)


Dated: March 17, 1998                  By: /s/ Daniel L. Nir
                                           ------------------------------------
                                           Daniel L. Nir
                                           Treasurer
                                           (Principal Financial Officer)





<PAGE>   2


                        AMENDED ITEMS 1, 7, 10, 12 AND 14
                                     OF THE
                          ANNUAL REPORT ON FORM 10-K OF
               THE ST. LAWRENCE SEAWAY CORPORATION (the "Company")
                    FOR ITS FISCAL YEAR ENDED MARCH 31, 1997



     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



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<PAGE>   3


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.

     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 no 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.

    COMPANY HISTORY

     The Company is an Indiana corporation organized on March 31, 1959, which,
since such date has principally engaged in farming activities involving the
lease of property to farmers who are directly 




                                       3
<PAGE>   4

responsible for the operation of the farm and who pay St. Lawrence an annual
rental fee. From time to time, St. Lawrence also has harvested excess timber
from its farm property. 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.

     ITEM 7.--MANAGEMENT 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 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:


<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.

     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


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<PAGE>   5


expenses currently recognized in the Company's Statement of Income as of March
31, 1995. The following table summarizes the significant components of these
expenses, and presents a comparison of such components for the years ended March
31, 1996 and March 31, 1995:

<TABLE>
<CAPTION>
                                                       YEAR ENDED MARCH 31,
                                                       1996           1995
                                                       ----            ---
  <S>                                                 <C>           <C>    
  Executive Compensation, Salaries and
     Employee Benefits                                $29,855        $28,797
  Office Rent and Operations                           11,491         10,629
  Stock Services, Proxy, Annual Meeting and
      SEC Report Compliance                            16,908         17,711
  Professional Fees (accounting & legal)               85,166         94,445
  Amortization and Depreciation                         1,438            588
  Payroll, excise and other taxes                       3,380          3,659

</TABLE>

Depreciation increased significantly for the year ended March 31, 1996 compared
to the year ended March 31, 1995, due to depreciation and amortization of the
computer system purchased by the Company during the fiscal year ended March 31,
1996 for a total price of $1,961.48. The higher professional fees for the year
ended March 31, 1995, are attributable to the recognition in that year of
approximately $53,000 of deferred expenses in connection with a proposed
offering and sale of senior debentures of the Company, which offering was
terminated in 1994 before the Registration Statement for such offering became
effective. Such offering was terminated based upon uncertainty in the Company's
ability to offer or achieve broad distribution and sale of such debentures.
Actual professional fees exceeded the total amount paid, however, the Company
was successful in negotiating a reduction in such fees due to the offering being
terminated early.

     TRENDS AND UNCERTAINTIES

While the Company has for several years regularly incurred high general and
administrative expenses in relation to its revenues, this trend is explained in
part by the fact that the current management has been not been able to locate
economically beneficial replacements for certain revenue generating assets which
were sold by prior management, the fact that there are significant fixed
expenses associated with being a publicly-held company, and by regulatory
restraints on the permissible investment of assets by the Company. In the two
most recently completed fiscal years, management has reduced general and
administrative expenses by an aggregate $42,833, and believes that it has
identified certain costs associated with its annual report and annual meeting of
stockholders which can be reduced in the current fiscal year. Directors of the
Company have waived most of the Directors fees payable to them under the
Company's charter. Management has no specific plans to decrease other expenses,
but will continue to examine costs on a monthly basis.

Over the past several years, St. Lawrence's Board of Directors has searched for
new business opportunities, including spin-offs, acquisitions, and
restructuring, to increase the Company's value. Despite these efforts, the Board
has been unable to find a situation which would serve the stockholders best
interest. In March, 1997, St. Lawrence completed the Paragon transaction (with
an aggregate investment of $5,141) with the goal of providing its stockholders
with an additional opportunity to 




                                        5


<PAGE>   6

participate in the acquisition or merger of businesses. Although no prediction
can be made as to whether St. Lawrence or Paragon will be successful in their
respective searches for new business opportunities, Management expects to
continue its efforts through the fiscal year ended March 31, 1999, and at such
time to re-evaluate its strategy and the use of its assets. During its search
for acquisitions, the Company has maintained its assets in highly liquid, safe,
but low-yielding cash equivalent instruments and bank accounts. Unless
investments in higher-yielding investments are made, subject to applicable
regulatory restrictions, a continued, prolonged search may incur expenses which
exceed revenues.

          YEAR 2000

The Company has initiated a review of its management and information systems to
discover whether such systems are Year 2000 compliant. Although the Company has
not completed its review, the Company does not anticipate that significant
compliance efforts will be required as it does not rely heavily on computers in
its operations.

          OUTLOOK

This Form 10-K contains statements which are not historical facts, but are
forward-looking statements which are subject to risks, uncertainties and
unforseen factors that could affect the Company's ability to accomplish its
strategic objectives with respect to acquisitions and developing new business
opportunities, as well as its operations and actual results. All forward-looking
statements contained herein reflect Management's analysis only as of the date of
the filing of this Report. Except as may be required by law, the Company
undertakes no obligation to publicly revise these forward-looking statements to
reflect events or circumstances that arise after the date hereof. In addition to
the disclosures contained herein, readers should carefully review risks and
uncertainties contained in other documents which the Company files from time to
time with the Securities and Exchange Commission.

ITEM 10.--DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

          DIRECTORS' POSITIONS WITH THE COMPANY

In addition to being a Director of the Company, Edward B. Grier holds the
position of Vice President.

          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.

ITEM 12.-- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth as of July 25, 1997 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.




                                        6


<PAGE>   7

<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

  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%

  (1)  Includes 100,000 Shares subject to a currently exercisable Stock
       Warrant issued to the Windward Group L.L.C.
  (2)  Includes 100,000 Shares subject to a currently exercisable Stock
       Warrant issued to the Windward Group L.L.C. 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.
  (3)  Includes 15,000 shares subject to currently exercisable stock options
       granted on June 11, 1983, as amended, and expiring on September 21,
       1997, 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.




                                       7
<PAGE>   8

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



     (a) Financial Statements:                                         Page No.
         --------------------                                          -------

     Balance Sheets                                                         9
     Statements of Income                                                  10
     Statement of Shareholders' Equity                                     11
     Statements of Cash Flows                                              12

     Notes to Financial Statements                                      13-18

    (b) Exhibits
        --------

        Exhibit 27--Financial Data Schedule                             19-20





                                        8


<PAGE>   9

                       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                                         377,252          377,252
   Retained earnings                                                  480,508          537,793
                                                                   ---------------------------
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.




                                        9


<PAGE>   10


                       THE ST. LAWRENCE SEAWAY CORPORATION
                              STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                    YEARS ENDED MARCH 31,
                                           1997             1996             1995
                                         --------         --------         -------- 
<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           44,400           44,400
   General and administrative             105,220          141,748          148,053
                                         ------------------------------------------                                      
Total operating expenses                  114,844          188,829          194,675


Income (Loss) before income taxes         (51,179)        (119,851)        (129,560)

Income taxes/(tax benefit)                    965              735           (5,429)
                                         --------         ------------------------- 
Net income (loss)                         (52,144)        (120,586)        (124,131)
                                         ==========================================
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)        $  (0.31)        $  (0.32)
                                         ==========================================

</TABLE>


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



                                       10


<PAGE>   11


                       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
   Prior Period adjustment                                              96,000         (19,200)
                                           ---------------------------------------------------
Balances restated as of 4/1/94             393,735       393,735       377,252         782,510

   Net loss for 1995                                                                  (124,131)
                                           ---------------------------------------------------
Balance at March 31, 1995                  393,735       393,735       377,252         658,379
715,979

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

   Net loss for 1997                                                                   (52,144)
   Distribution of Paragon Stock                                                        (5,141)
     (Note 7)                              ---------------------------------------------------
Balance at March 31, 1996                  393,735       393,735       377,252         480,508
                                           ===================================================

</TABLE>










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



                                       11


<PAGE>   12


                       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)          (120,586)          (124,131)
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)            46,304             35,127
  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.




                                       12
<PAGE>   13
                       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.





                                       13


<PAGE>   14


                       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.

USE OF ESTIMATES

     The preparation of financial statements in accordance with generally
     accepted accounting principles requires management to make estimates and
     assumptions




                                       14
<PAGE>   15


                       THE ST. LAWRENCE SEAWAY CORPORATION

                        NOTES TO THE FINANCIAL STATEMENTS



     that affect the reported amounts of assets and liabilities and disclosure
     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
     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. 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



                                       15
<PAGE>   16

                       THE ST. LAWRENCE SEAWAY CORPORATION

                        NOTES TO THE FINANCIAL STATEMENTS



NOTE 3. RELATED PARTIES (Continued)

     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, 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.





                                       16
<PAGE>   17
                       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




                                       17


<PAGE>   18


                       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.

NOTE 8. 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 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 such $96,000 by Windward which is a principal
     shareholder of the Company has been reflected as an expense of the Company
     and treated as a contribution of capital by Windward to the Company in
     accordance with SAB 5:T.





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