<PAGE>   1
DATE FILED:  NOVEMBER 3, 1998

                           SECURITIES AND EXCHANGE COMMISSION
                                  WASHINGTON, DC 20549
                                      ------------

                                       FORM 10-K


         (Mark One)

[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 _______________________________________

                         Commission file number 0-24944

                       THE TRACKER CORPORATION OF AMERICA, INC. 
             (Exact Name of Registrant as Specified in its Charter)
   
             DELAWARE                                86-0767918
 (State or Other Jurisdiction of                 (I.R.S. Employer  
  Incorporation or Organization)                Identification No.)

180 DUNDAS STREET WEST, SUITE 1505, TORONTO, ONTARIO, CANADA          M5G 1Z8  
         (Address and Zip Code of Principal Executive Offices)      (Zip Code)

                                     (416) 593-2604
                  (Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act
of 1934: NONE

Securities registered pursuant to Section 12(g) of the Securities Exchange Act
of 1934: 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 [ ] No [X]

         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. [ ]
<PAGE>   2
         As of September 30, 1998, there were issued and outstanding 22,340,628
shares of the Registrant's capital stock, consisting of 22,340,628 shares of the
Registrant's common stock, par value $0.001 per share (the "Common Stock").
8,529,038 shares of the Registrant's capital stock is held by non-affiliates.
The aggregate market value of the shares of the Registrant's Common Stock held
by non-affiliates at such date was $639,678 (calculated on the basis of $0.0750
per share which was the average of the high bid and low asked quotations for the
Registrant's Common Stock on the OTC Bulletin Board on September 29, 1998).

DOCUMENTS INCORPORATED BY REFERENCE

         List hereunder the following documents if incorporated by reference and
the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document
is incorporated: (1) any annual report to security holders; (2) any proxy or
information statement; (3) any prospectus filed pursuant to Rule 424(b) or (c)
under the Securities Act of 1933, as amended ("Securities Act"). The listed
documents should be clearly described for identification purposes (e.g., annual
report to security holders for fiscal year ended December 24, 1980).

         Registration Statement on Form S-8, filed with the Securities and
         Exchange Commission on October 16, 1996, Registration Number 333-14229

          Registration Statement on Form S-8 filed with the Securities and
         Exchange Commission on October 23, 1996, Registration No. 333-14685.


                                       ii
<PAGE>   3
                                   TABLE OF CONTENTS

PART I

<TABLE>
<S>                                                                                                            <C>
1.       Business                                                                                                1
2.       Properties                                                                                             10
3.       Legal Proceedings                                                                                      10
4.       Submission of Matters to a Vote of Security Holders                                                    11

PART II

5.       Market for Registrant's Common Equity and Related Stockholder Matters                                  11
6.       Selected Consolidated Financial Data                                                                   12
7.       Management's Discussion and Analysis of Financial Condition
         and Results of Operation                                                                               13
7A.      Quantitative and Qualitative Disclosures About Market Risk                                             20
8.       Financial Statements and Supplementary Data                                                            20
9.       Changes in and Disagreements with Accountants on Accounting
         And Financial Disclosure                                                                               20

PART III

10.      Directors and Executive Officers of Registrant                                                         20
11.      Executive Compensation                                                                                 23
12.      Security Ownership of Certain Beneficial Owners and Management                                         33
13.      Certain Relationships and Related Transactions                                                         34

PART IV

14.      Exhibits, Financial Statement Schedules and Reports on Form 8-K                                        38
15.      Signatures                                                                                             43

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                                    F-1
</TABLE>

                                      iii
<PAGE>   4





                                         PART I

                                    ITEM 1. BUSINESS

CORPORATE HISTORY

         The Tracker Corporation of America, Inc. (sometimes "Tracker U.S." or
the "Company") developed, markets and sells and operates a personal property
marking and monitoring system (the "Tracker(TM) System"). The Tracker(TM) System
utilizes advanced bar code and laser scanning technology to create an
identification device which interfaces with a computer database and scanning
network (the "Technology"). The Company's Website is located at www.tracker.com.

         The current business of the Company originated in July 1994 through a
reorganization (the "Reorganization") in which the Company acquired all of the
issued and outstanding voting shares of The Tracker Corporation, an Ontario,
Canada corporation ("Tracker Canada"), in exchange for approximately 90% of the
total voting shares of the Company as of that date. See "CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS - Reorganization." The Company's predecessor was
incorporated as a Utah corporation in 1986, and changed its state of
incorporation to Nevada in 1992 and Delaware in 1994 through change in domicile
mergers. Concurrent with the effective date of the reorganization, the Company
changed its fiscal year-end from December 31 to March 31.

BACKGROUND

         Tracker Canada, which originated the Company's present line of
business, was incorporated in May 1993 and, until February 1998, was an
operating subsidiary of Tracker U.S. Tracker Canada supported the development,
marketing and sale of the Tracker(TM) System. The subsidiary's functions
included personnel recruitment and management, advanced bar code and laser
scanning technology research and development (including proprietary software
development), key supplier relationships, business and marketing planning, and
Canadian and U.S. patent and trademark protection.

         Until 1995, the operations of Tracker Canada generated the Company's
sole source of revenue. During the fiscal year ended March 31, 1996, the
Company, through Tracker U.S., introduced a credit card registration service
marketed by independent telemarketing firms as an additional line of business.
Subsequently, cash sales increased from $382,632 for the 1995-96 fiscal year to
$7,977,881 for the fiscal year ended March 31, 1997. The increase in cash sales
(and the corresponding increase in recorded revenues) for the 1996-97 fiscal
year was due primarily to the increase in sales from the Company's credit card
registration service.

         FTC LAWSUIT; BOARD OF DIRECTORS AND OFFICER RESIGNATIONS

         In September 1997, the U.S. Federal Trade Commission (the "FTC") filed
a lawsuit against the Company in the U.S. District Court, Northern District of
Georgia, Atlanta Division. The complaint alleged that the Company's credit card
registration service had violated Section 5 
<PAGE>   5
of the Federal Trade Commission Act and the FTC Trade Regulator Telemarketing
Sales Rule in telemarketing credit card protection services in the United
States. The FTC obtained a temporary restraining order ("TRO") halting the
further sale of credit card registration services and an injunction freezing the
Company's assets. Upon completing an internal investigation, the Company elected
to discontinue credit card registration service operations.

         Following commencement of the lawsuit, four members of the Company's
five-member Board of Directors, including all of its non-employee outside
directors, tendered their resignations. Subsequently, the Company's Chief
Financial Officer resigned as an executive officer, leaving Bruce I. Lewis, the
Company's Chief Executive Officer, as the Company's sole Director and executive
officer.

         The Company settled the FTC lawsuit on July 28, 1998. Pursuant to the
settlement, the U.S. District Court entered a Stipulated Final Judgment and
Order for Injunction that, among other things, permanently barred the Company
and Mr. Lewis from engaging directly or indirectly, in the business of credit
card registration or promotion.

         TRACKER CANADA BANKRUPTCY; CESSATION OF OPERATIONS

         The FTC lawsuit and the cessation of the credit card registration
service had a negative effect on the financial condition of the Company and
Tracker Canada. On January 27, 1998, Tracker Canada filed a notice with the
Ontario Courts declaring its insolvency and seeking the appointment of a
bankruptcy trustee to liquidate its assets and dissolve the corporation. The
liquidation and dissolution occurred in February 1998.

         GLOBAL TRACKER

         On February 10, 1998, the Global Tracker Corporation ("Global
Tracker"), a newly formed Ontario, Canada corporation, acquired substantially
all of Tracker Canada's assets at arm's length in a bankruptcy proceeding.
Shortly thereafter, Global Tracker entered into an agreement in principle with
the Company which permitted the Company to use personnel retained by Global
Tracker and assets formerly owned or leased by Tracker Canada to continue the
business formerly conducted by Tracker Canada. As a result of this arrangement,
Tracker U.S. continued on a limited basis the business formerly operated by
Tracker Canada without a complete cessation of operations.

         Since February 26, 1998, Global Tracker has expended approximately
$400,000 to support the Company's business operations. Bruce I. Lewis, the
Company's Chief Executive Operator, has personally loaned Global Tracker
approximately $300,000 in operating capital. Jay S. Stulberg, Global Tracker's
sole shareholder, officer and director, has been nominated to join the Company
as its Chief Financial Officer and Director. See "CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS - Global Tracker."

         On July 30, 1998, the Company entered into a License Agreement with
Global Tracker. The License Agreement grants the Company an exclusive worldwide
license to commercially exploit the technology formerly owned by, and benefit
from any copyrights or patents and 

                                       2
<PAGE>   6
applications therefor formerly held by, Tracker Canada. The license is for a
renewable seven-year term and provides for payment of a 12% royalty on gross
revenues commencing in the second year of the license.

         Contemporaneously, Global Tracker agreed in principle to enter into a
General Consulting Agreement and an Equipment Rental Agreement with TCA
Management, Inc. ("TCA"), a wholly-owned subsidiary of the Company. Under the
proposed General Consulting Agreement, TCA provides management services,
research and development and customer support. Under the proposed Equipment
Rental Agreement, TCA rents office equipment, including computers, local area
network, telephone system, copier, fax and furniture which it makes available to
the Company.

THE PRODUCT

         THE TRACKER(TM) SYSTEM

         The Tracker(TM) System consists of an identification device and a
relational database that, depending upon the application of the product, works
in tandem with a scanning network and a recovery system.

         Identification Device

         The identification device consists of a label displaying a serial
number that is resistant to partial destruction or defacement. The label, which
attaches to an article by adhesive, thermal transfer (onto metal, plastic or
nylon textile) or laser etching, contains specially encoded insignia in advanced
two dimensional redundant bar code form (PDF 417 symbology). The PDF 417
symbology permits multiple repetitions of the alphanumeric number within the
advanced bar code. Partial destruction or defacement of the insignia does not
impair the ability of the laser scanners utilized by the Company to read the
label and communicate the information to the Company's database.

         Relational Database

         The relational database is a depository maintained by the Company that
indexes correlating identification information and other data entries to codes
identified with the corresponding identification device. Although the Company
makes substantial efforts to protect data, avoid human error and ensure system
security, privacy and integrity, no system is foolproof. Any material loss of
information or security breach could damage the credibility of the Company and
have an adverse effect on the Company's business, operating results and
financial condition.

         Scanning Network

         The Company is developing a network consisting of a series of PDF
417-capable scanners. The laser scanner reads the serial number displayed on the
identification device and transmits that information to the Company's relational
database. The Company intends to locate 

                                       3
<PAGE>   7
the scanners located at key points of recovery in major North American
metropolitan areas such as police stations. Scanners are also utilized with the
Company's inventory control and asset management systems.

         As of June 30, 1998, the Company had placed scanners in 39 police
stations and other sites in Canada and 25 sites in the United States, as
compared to 39 placements in Canada and 29 in the United States as of June 30,
1997. Previously, the Company entered into letters of intent that have since
expired which would have permitted it to install scanners linked to the
Company's network in more than 125 police and sheriff locations throughout the
United States.

         Recovery System

         The recovery system is the method, after the scanner reads the
identification device and transfers the data via modem to the central database,
by which the Company notifies a user of an item's location and arranges for its
retrieval.

         As of September 30, 1998, utilization of The Tracker(TM) System had
resulted in over 400 successful recoveries. While these recoveries demonstrate
the effectiveness of the system, to date the system has not generated sufficient
sales volume.

STRATEGIC FOCUS

         The Company introduced The Tracker(TM) System to a limited test market
in Toronto, Canada in October 1994 and began expanding service throughout
Canada. The Company also began testing potential markets for The Tracker(TM)
System in the United States and offering the service through diverse marketing
channels such as joint promotional partners, selected retailers, telemarketers
and network referral marketers.

         MARKETS

         Prior to Tracker Canada's bankruptcy, the Company's marketing efforts
focused primarily on the consumer market for personal property identification
and recovery. Although the Company believes the system has significant
commercial potential, the marketing efforts undertaken by the Company to date
have failed, have not been fully realized, or have met with only limited market
acceptance.

         Initially, the Company developed a personal property security kit that
it currently markets directly through its WebSite. The personal property
recovery kit includes 24 possession labels, eight clothing labels and ten
assorted shoe, key, luggage, and pet tags. The initial purchase is packaged as a
membership service term, typically between one to three years. In addition to
the personal property kit, the Company also markets the system indirectly as a
value-added service offered by third parties.

         While management has conceived of many other potential applications for
The Tracker(TM) System, the Company's past experience and present financial
circumstances dictate a more narrowly focused strategy directed at the business
market, rather than the consumer market. For

                                       4
<PAGE>   8
the business market, the Company has developed applications for inventory
control, fixed asset management and point of manufacture.

         Applications

         Inventory Control. The Company believes that The Tracker(TM) System
provides an efficient method for tracking inventory and accessing related
information. On July 1, 1998, the Company signed a two-year agreement with
Warrantech Additive, Inc. ("Warrantech"), a wholly-owned subsidiary of
Warrantech Automotive, Inc., to provide personal property identification labels
and global recovery services to automobile dealers participating in Warrantech's
vehicle service contract business. Through the labels, the Company will provide
immediate access to vehicle service information contained in the Company's
relational database.

         Fixed Asset Management. The Company also believes that The Tracker(TM)
System can provide an efficient method for tracking and managing fixed assets.
Currently, the Company is negotiating with Sony Corporation ("Sony") to provide
fixed asset management services by linking labels affixed to certain of Sony's
physical assets to information contained in the Company's relational database
and recovery network to the Company's worldwide 24 hour recovery network.
Although the Company would promote utilization of The Tracker(TM) System for
fixed asset management by reference to the agreement it hopes to complete with
Sony, the Company can provide no assurances that it will successfully conclude
such an agreement.

         Point of Manufacture. Manufacturers of products, such as computer
chips, bicycles, power tools, electronic equipment, cameras and auto parts, can
use The Tracker(TM) System by laser etching or otherwise applying a serial
number containing specially coded insignia directly onto or into products during
the manufacturing process. The Company believes that the coded insignia adds
value to a product by increasing the likelihood of recovery in the event of loss
or theft and provides an additional tool for combating retail and warranty
fraud. The Company anticipates that if such contracts are procured, the
manufacturers will absorb the cost of laser etching either directly or
indirectly (i.e. in the unit price charged to the manufacturers by the Company).
Currently, however, the Company does not have a contract with any manufacturer
to laser etch or otherwise apply coded insignia at the point of manufacture.

         Niches

         The Company's long-term strategy is to introduce applications of The
Tracker(TM) System in select market niches and establish the system as a
dominant brand-name therein. Currently, management is identifying market niches
it believes will prove most responsive to the Company's initiatives. Among the
niches the Company is considering are an international pet registry lost and
found, a key return service and a bike registration program. In addition, the
Company intends to market The Tracker(TM) System as an inventory control and
fixed asset management program to Fortune 1000 companies.

                                       5
<PAGE>   9
         MARKETING AND DISTRIBUTION

         The Company is approaching the marketing and distribution of The
Tracker(TM) System in several ways.

         Alliances, Sponsorships and Promotional Programs

         The Company hopes to establish credibility and confidence in the
marketplace by, among other things, affiliations, alliances, sponsorships, and
promotional programs with well recognized, stable and reputable organizations.
For example, through a license agreement with the International Association of
Chiefs of Police (the "IACP"), a nonprofit organization of approximately 14,000
members from the world's law enforcement community, the Company obtained IACP's
endorsement of The Tracker(TM) System. Under the license agreement, the Company
agreed to pay the IACP the greater of $100,000 per year or a fee of $0.20 to
$0.075 per member based on the total number of members enrolled in the Company's
consumer personal property management service. On October 30, 1998, the Company
and IACP agreed to terminate the license agreement as a result of the Company's
failure to pay the license fee. The Company hopes to reduce its financial
liability to IACP, but no such settlement has yet been reached. The failure to
achieve a settlement reducing the Company's financial liability to IACP could
have a material adverse effect on the Company's propects.

         Second, the Company is beginning to establish promotional programs with
manufacturers of consumer specialty products that have a high potential for
loss. In May 1997, the Company entered into an agreement with Schwinn Cycling &
Fitness Inc. ("Schwinn"), a United States manufacturer of quality bicycles and
accessories. In July 1998, Schwinn placed an additional order for 35,000 Tracker
labels to be combined with bicycle locks Schwinn is manufacturing in Taiwan.

         Third, the Company intends to approach affinity groups, such as
charities and police benevolent societies, to market Tracker labels as
promotional incentives.

         Fourth, the Company intends to explore the feasibility to establishing
an international pet registry marketed through veterinarians, animal shelters
and humane societies.

         Previously the Company also entered into agreements with Samsonite
Canada, Inc. to affix Tracker tags to its merchandise at the Company's expense
as a promotion, and with Sony of Canada, Inc. to resell the Company's tags
through retail stores in Canada. To date, neither program has been successful.
While the Company is in current discussions with Samsonite, the Sony of Canada
agreement has been terminated.

         The Company also entered into agreements with Liberty Health, a
division of Liberty Insurance Company, to provide its travel insurance customers
with the added protection of The Tracker (TM) System, and with Merchant Partners
Limited Partnership to introduce The Tracker(TM) System with certain retailers,
including Montgomery Ward and ValuVision. To date, the Company has yielded no
material benefit from either agreements.

                                       6
<PAGE>   10
         Direct Marketing

         The Company also intends to build on its success in procuring contracts
with Warrantech and Sony Corporation through direct marketing of The Tracker(TM)
System as an inventory and asset management program for Fortune 1000 companies.
Recently, the Company retained a marketing executive as a full-time employee to
spearhead this initiative.

         Material Backlogs; Commissions

         The Company has no material backlog of orders because the Company fills
orders as received out of existing inventory.

         The Company has granted, and may grant in the future, commissions and
other payments in connection with the distribution of its products. Although
such arrangements generally call for commissions or other payments only out of
sales actually made, certain arrangements call for certain guaranteed payments.

INTERNATIONAL OPERATIONS

         The Company has operations in Canada and the United States.
International operations are subject to inherent risks, including unexpected
changes in regulatory requirements, currency exchange rates, tariffs and other
barriers, difficulties in staffing and managing foreign operations, and
potentially adverse tax consequences. There can be no assurance that these
factors will not have a material impact on the Company's or its exclusive
agent's ability to market its products and services on an international basis.

         In 1997, the Company signed an exclusive license agreement with
Executive Trading Ltd. for the sale of the Company's products in Germany,
Switzerland and Austria. To date, the Company has realized no revenue as a
result of this Agreement and has not received the license fee required for the
licensee to maintain its exclusivity for the territory.

         The Company does not engage in any hedging contracts because it
receives the majority of its cash flows in United States dollars.

KEY SUPPLIERS

         The Company's ability to market and sell The Tracker(TM) System depends
in part on its ability to procure necessary equipment, supplies and services.
These agreements or understandings tend to be informal, may be difficult to
enforce, and may be subject to termination. Accordingly, there can be no
assurance that equipment, supplies or services will be available when needed by
the Company or on terms favorable to the Company. Any unavailability of such
equipment, supplies or services on terms favorable to the Company could prevent
or delay the development, marketing, sale, operation and effectiveness of the
Company's products and could have a material adverse effect on the Company's
business, operating results and financial condition.

                                       7
<PAGE>   11
         The Company procures scanning equipment from Symbol Technologies, Inc.
("Symbol"). Symbol's PDF 417 is an advanced two-dimensional stacked symbology.
In 1992, Symbol introduced the PDF 1000 laser scanner, the first laser scanner
to read two-dimensional bar code. The PDF 1000 laser scanner scans 30 times
faster than conventional scanners, decodes in a rastering pattern across and
down the PDF 417 symbol, reads both PDF 417 (two-dimensional codes) and linear
bar codes (one-dimensional codes), and is able to read poorly printed or damaged
codes that have been defaced up to 60%. The Company has a preliminary
understanding with Symbol whereby, subject to certain minimum annual purchase
requirements, the Company was granted the exclusive right to use, for personal
property identification and recovery purposes, Symbol's PDF 1000 laser scanners
in Canada, the United States and Europe. Pursuant to its original understanding
with Symbol, the Company was required to purchase specified numbers and dollar
amounts of laser scanners during each of calendar years 1994 through 1997 in
order to maintain its exclusive right. The Company did not meet its minimum
commitment level for any of these years. If the Company is unable to continue
its relationship with Symbol, the Company believes that comparable scanning
equipment will be available from other sources. However, there can be no
assurance that the Company will be able to procure scanning equipment form
Symbol or another manufacturer after such time.

COMPETITION

         Although the Company believes that The Tracker(TM) System differs
significantly from those offered by other firms, the Company faces competition
from alternative personal property identification methods, such as tracking by
serial number or by the personal property owner's imprinted name and address or
from conventional forms of insurance that reimburse consumers for lost items.
Most of these firms have substantially greater financial, technical, marketing
and management resources than the Company. The Company does not believe that any
single company commands significant market share. The successful introduction of
such services by this or any other competitors, or the introduction by
competitors of ineffective systems that damage the credibility of the Company's
industry as a whole, may have a material adverse effect on the Company's
business, operating results and financial condition. Moreover, the entry of new
competitors could have a material adverse effect on the Company's business,
operating results and financial condition. There can be no assurance that the
Company will be able to compete successfully with existing or new competitors in
the personal property identification and recovery business. There can be no
assurance that the Company will be able to compete successfully.

INTELLECTUAL PROPERTY PROTECTION AND INFRINGEMENT

         The Company's success will depend, in part, on its ability to obtain
patents, maintain trade secret protection and operate without infringing on the
proprietary rights of third parties. The Company will rely on a combination of
trade secret laws, nondisclosure and other contractual agreements, and technical
measures to protect the confidential information, know-how and proprietary
rights relating to its personal property identification and recovery system.

                                       8
<PAGE>   12
         The Company has filed an international patent application pursuant to
the Patent Cooperation Treaty for The Tracker(TM) System. There can be no
assurance, however, that this will mature into an issued patent or that any
patent obtained or licensed by the Company will be held valid and enforceable if
asserted by the Company against another party. In addition, the above
protections may not preclude competitors from developing a personal property
identification and recovery system that is competitive with the Company's
system.

         The Company does not believe that its products and other confidential
and proprietary rights infringe upon the proprietary rights of third parties.
One patent infringement claim has been filed against the Company, however. See
"Item 3. Legal Proceedings." In addition, there can be no assurance that third
parties will not assert infringement claims against the Company in the future.
The successful assertion of such claims would have a material adverse effect on
the Company's business, operating results and financial condition.

         The Company has no registered trademarks or service marks, nor any
active trademark or service mark applications pending with the U.S. Patent and
Trademark Office or with other regulatory authorities.

CAPITAL REQUIREMENTS

                  The Company anticipates that it will require additional
capital in order to implement its business plan. In addition, the Company will
require additional capital to satisfy the claims of its major creditors. If the
Company is unable to settle these claims for substantially less than what its
major creditors demand, the Company will consider filing for bankruptcy
protection under U.S. bankruptcy laws.

         During the upcoming 12 months, the Company plans to seek additional
equity financing to conduct such activities, as it is anticipated cash flows
from revenues will not be sufficient to fund the business plan until January
2001. In addition, there can be no assurance that cash flows from revenues will
be sufficient to fund the business plan in the timeframe anticipated by the
Company, if at all. Although no assurance can be given that the necessary
funding will be available to the Company when needed, in sufficient amounts, on
acceptable terms, or at all, management believes it is likely that the Company
will be able to obtain sufficient funding to support its operations. For a
complete discussion on capital requirements, see "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Capital
Requirements."

EMPLOYEES

         As of September 30, 1998, the Company, through contractual arrangements
with Global Tracker, employed a total of 12 persons, including one in
management, four in administration and accounting, three in operations (one of
whom is part-time), three in sales and marketing and one in information systems.
The Company's future success will depend in large part on its ability to
attract, train and retain highly skilled and qualified personnel. There can be
no assurance that the Company will be successful in attracting, training and
retaining such personnel.

                                       9
<PAGE>   13
         None of the Company's employees is represented by a labor union. The
Company has experienced no work stoppages, and the Company believes that its
relations with its employees are excellent.

GOVERNMENTAL REGULATIONS

         Except as described in the next paragraph, the Company is not subject
to any governmental regulations other than those applicable to businesses
generally. Although the Company believes it is in compliance with all currently
applicable regulations, additional regulations could be enacted in the future
that could have an adverse effect on the Company's business, operating results
and financial condition.

         The Company believes that compliance with federal, state or provincial,
and local provisions which have been enacted regulating the discharge of
materials into the environment, or otherwise relating to the protection of the
environment, will not have any material effect upon the Company's capital
expenditures, earnings and competitive position. The Company does not believe
that it will incur any material capital expenditures for environmental control
facilities for the remainder of its current fiscal year and the next fiscal
year.


                               ITEM 2. PROPERTIES

         The Company currently subleases from Global Tracker approximately 1,400
square feet of office premises in Toronto on a month to month basis at a rate of
$1,870 per month. Under the sublease, the Company may withhold rent payments to
Global Tracker for the lesser of up to six (6) consecutive months, or such
earlier date as the parties may terminate the sublease. Lease payments due and
unpaid accrue interest at the rate of ten percent (10%) per annum.

         On or about December 1, 1998, the Company will vacate its existing
premises and occupy approximately 5,000 square feet of office premises in
Toronto leased by Global Tracker for the Company on the same terms and
conditions at a rate of $3,000 per month. The Company does not anticipate any
difficulty in securing adequate new space in the event Global Tracker terminates
the sublease. The Company believes that suitable additional space will be
available as needed if future expansion is required.


                            ITEM 3. LEGAL PROCEEDINGS

         The Company, along with Symbol Technologies, Inc. ("Symbol"), filed by
Datastrip (IOM) Limited ("Datastrip") is the subject of a lawsuit filed in the
United States District Court for the District of Delaware. Datastrip alleges
that the Company is infringing on Datastrip's U.S. Patent No. 4,782,221,
relating to certain data-encoding technology allegedly developed by Datastrip
and that Symbol is inducing infringement of the patent. The complaint seeks
injunctive relief and unspecified damages. The Company and Symbol believe, based
on advice of Symbol's counsel, that they have no liability to Datastrip and that
the claim is frivolous and 

                                       10
<PAGE>   14
without merit. Symbol, the supplier of automated card readers to the Company,
has agreed to vigorously defend itself and the Company against Datastrip's
claim. Symbol, however, has not agreed to indemnify the Company from any losses
that may result from this claim.

         In August 1998, the Company received a letter from the Securities and
Exchange Commission (the "Commission") to advise the Company that it reserves
the right to bring an enforcement action against the Company for failure to
fulfill its reporting obligations under the Securities Exchange Act of 1934. The
Company has advised the Commission that the Company is making every effort to
bring current its required periodic and current reports in a timely manner.

         The Company is not a party to any other material litigation and is not
aware of any pending or threatened litigation that would have a material adverse
effect upon the Company's business, operating results or financial condition.
The Securities and Exchange Commission is investigating trading in the Company's
securities. The Company has no reason to believe that any activity of the
Company will result in any liability of the Company under the federal securities
laws.


           ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS

         During the fourth quarter of the fiscal year ended March 31, 1998, no
matters were submitted to a vote of the security holders of the Company.



                                     PART II

  ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The Company's Common Stock is traded in the over-the-counter market, is
quoted on the OTC Bulletin Board and is quoted in the "pink sheets" under the
symbol "TRKR". Quotations for the Company's common stock were first listed on
the OTC Bulletin Board on May 5, 1993. The market for the Company's Common Stock
must be characterized as extremely limited due to the low trading volume and the
small number of brokerage firms acting as market makers. Additionally, stocks
traded on the OTC Bulletin Board generally have limited brokerage and news
coverage. Thus, the market price of the Common Stock may not reflect the value
of the Company. As a result, an investor may find it difficult to dispose of, or
to obtain accurate quotations as to the value of, the Common Stock. No assurance
can be given that the over-the-counter market for the Company's securities will
continue, that a more active market will develop or that the prices in any such
market will be maintained at their current levels or increased.

         The following table sets forth, for the periods indicated, the high and
low bid quotations for the Company's Common Stock as reported by the National
Quotation Bureau, Inc. or 

                                       11
<PAGE>   15
Bloomberg L.P. These quotations reflect inter-dealer prices, without adjustments
for retail markups, markdowns or commissions, and do not represent actual
transactions.

<TABLE>
<CAPTION>

Quarter Ended                          High                       Low
-------------                          ----                       ---
<S>                                  <C>                         <C>
June 30, 1996                        $0.8750                     $0.0625
September 30, 1996                   $0.2200                     $0.0625
December 31, 1996                    $0.2200                     $0.0625
March 31, 1997                       $0.2500                     $0.0625
June 30, 1997                        $0.1415                     $0.0625
September 30, 1997                   $0.3700                     $0.1300
December 31, 1997                    $0.2100                     $0.0450
March 31, 1998                       $0.0725                     $0.0130
June 30, 1998                        $0.1150                     $0.0150

</TABLE>

         On September 29, 1998, the high and low bid quotations for the
Company's Common Stock on the OTC Bulletin Board were $0.0750 and $0.0750,
respectively. As of September 30, 1998, there were 22,340,628 shares of Common
Stock outstanding held by approximately 450 holders of record, including
broker-dealers and clearing corporations holding common shares on behalf of
their customers.

         The Company has never paid any cash dividends on its Common Stock and
does not intend to pay any cash dividends in the foreseeable future. Future
earnings, if any, will be retained to fund the development and growth of the
Company's business.



                      ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA


         The selected consolidated financial data for the Company presented
below should be read in conjunction with the detailed information and financial
statements appearing elsewhere in this Report. The selected consolidated
financial data at March 31, 1994, 1995, 1996 and 1997 and for the years ended
March 31, 1995, 1996 and 1997 and the period from inception at May 6, 1993
through March 31, 1994 have been derived from the audited consolidated financial
statements of the Company which have been audited by PricewaterhouseCoopers LLP,
independent accountants, after giving effect to reclassifications made to
reflect discontinued operations occurring in fiscal 1998. The selected
consolidated financial data at March 31, 1998 and for the year ended March 31,
1998 have been derived from the audited consolidated financial statements of the
Company which have been audited by Hirsch, Silberstein & Subelsky, P.C.,
independent accountants.

         For accounting and financial reporting purposes, the Reorganization
with Tracker Canada is being treated as an issuance of shares by Tracker Canada.
Thus, pro forma information is not presented as the Reorganization was not a
business combination. The historical consolidated financial statements prior to
July 12, 1994 are those of Tracker Canada. Tracker Canada was organized on May
6, 1993. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - Reorganization"
and Note 1 of Notes to Consolidated Financial Statements.

                                       12
<PAGE>   16

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF OPERATIONS    Inception        Fiscal Year      Fiscal Year         Fiscal Year       Fiscal Year   
                                       (5/6/93) to          Ended            Ended               Ended             Ended      
                                      March 31, 1994   March 31, 1995    March 31, 1996     March 31, 1997(1)   March 31, 1998
<S>                                   <C>                <C>                <C>                <C>                <C>        
Revenues                              $        --        $    10,187        $   106,522        $   138,462        $    51,551
Loss from continuing operations        (2,043,425)        (5,068,583)        (6,090,730)          (163,483)          (152,517)
Gain (loss) from discontinuing                                                                                               
operations                                     --                 --                 --         (3,544,595)            62,050
Net Income (Loss) per share of                                                                                               
common stock                                 0.38               0.71               0.57               0.22              0.004


<CAPTION>
CONSOLIDATED BALANCE SHEET DATA      March 31, 1994     March 31, 1995     March 31, 1996     March 31, 1997     March 31, 1998
<S>                                   <C>                <C>                <C>                <C>                <C>        
Total assets                          $ 2,675,527        $ 1,669,452        $ 1,193,742        $ 4,238,345        $ 1,476,814
Total current liabilities                 275,527          1,446,543          2,393,631          6,026,589          3,275,560(2)
Long-term debt                                 --                 --                 --            613,131            412,846
Stockholders' equity (deficit)          2,399,867            222,909         (1,378,742)        (2,401,375)        (2,211,591)
Working capital                         2,195,349           (444,686)        (1,728,529)        (2,583,835)        (2,087,861)
</TABLE>

(1)  After giving effect to certain reclassifications made to reflect
     discontinued operations that occurred in 1998.

(2)  Included in total current liabilities for March 31, 1998 are $475,790 of
     convertible subordinated debentures and $1,798,727 of current deferred
     revenues (as compared with $590,746 of convertible subordinated debentures
     and $4,509,401 of current deferred revenues for March 31, 1997, $1,460,000
     of convertible subordinated debentures and $115,241 of current deferred
     revenues for March 31, 1996 and $0 of convertible subordinated debentures
     and $10,998 of deferred revenues for March 31, 1995).

         As of March 31, 1998, the Company is in default in the payment of
interest to its convertible subordinated debentureholders in the aggregate
amount of $475,790. The Company has contacted all convertible subordinated
debentureholders by written correspondence and asked that they forebear from any
collection action.


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

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

         The Company believes that the information contained in this Report
which does not constitute historical facts constitutes "forward-looking
statements" within the meaning of Section 27A of the Securities Act, and Section
21E of the Securities Exchange Act of 1934, as amended, and is subject to the
safe harbors created thereby. Such forward-looking statements involve important
risks and uncertainties, including but not limited to: the risk that the Company
may not be able to successfully market, sell and operate its personal property
identification and recovery system; the risk that the Company may be unable to
obtain additional financing or raise additional capital when needed and in
amounts and on terms favorable to the Company; the risk that the Company will
not be able to continue to implement operational, financial and accounting
systems, to attract and retain highly qualified personnel to manage the future
growth of the Company, and to expand, train and manage its employee base; the
risk that the Company may not be able to procure the necessary scanning
equipment, labels, courier services and scanning locations when needed and on
terms favorable to the Company; the risk that the Company's intellectual
property protection may not preclude competitors from developing a personal
property identification and recovery system that is competitive with the
Company's system; the risk of an adverse result in a patent infringement case
pending against the Company and the risk that third parties may assert
infringement claims against the Company in the future; the risk that 

                                       13
<PAGE>   17
the Company may not be able to compete with existing or new competitors; the
risks inherent in international operations; and other risks detailed in this
Report and in the Company's other filings with the Securities and Exchange
Commission.

         There can be no assurance that the forward-looking information
contained in this Report will prove to be accurate. The risks and uncertainties
discussed above increase the uncertainty inherent in such forward-looking
information. Accordingly, there may be differences between the actual results or
plans and the predicted results or plans. Actual results or plans may be
materially different than those indicated in the forward-looking information
contained in this Report.

OVERVIEW

         Prior to the Reorganization effective July 12, 1994, Tracker U.S. (then
Ultra Capital Corp.) had been inactive for the preceding several years and had
conducted no significant operations or activities. Tracker Canada, which
originated the present line of business, The Tracker(TM) System, had its
inception on May 6, 1993. During the period from inception to September 30,
1994, the Company was engaged in organizational efforts, including the hiring of
technical and management personnel. During that time, the Company focused on the
research and development of advanced bar code and laser scanning technology,
entered into agreements or understandings with key suppliers, prepared the
business and marketing plan, programmed the software and filed for patent and
trademark protection in certain jurisdictions. The Company has been in the
development stage since its formation.

         The Company launched The Tracker(TM) System in a limited test market in
Toronto, Canada in October 1994 and began expanding service throughout Canada.
The Company also began to test potential markets for The Tracker(TM) System in
the United States and to offer the service through diverse marketing channels
such as joint promotional partners, selected retailers, telemarketers and
network referral marketers. Through the fiscal year ended March 31, 1998, these
efforts were in the incipient stage, had failed or met with only limited market
acceptance.

         In September 1997, the U.S. Federal Trade Commission filed a lawsuit
against the Company in federal district court. The complaint alleged that the
Company's credit card registration service had violated Section 5 of the Federal
Trade Commission Act and the FTC Trade Regulator Telemarketing Sales Rule in
telemarketing credit card protection services in the United States. The FTC
obtained a temporary restraining order halting the further sale of credit card
registration services and an injunction freezing the Company's assets. Although
the federal district court lifted the TRO, permitting the credit card
registration service to resume, upon completing an internal investigation, the
Company elected to discontinue credit card registration service operations.

         The Company settled the FTC lawsuit on July 28, 1998. Pursuant to the
settlement, the U.S. District Court entered a Stipulated Final Judgment and
Order for Injunction that, among other things, permanently barred the Company
and its chief executive officer, Bruce I. Lewis, from engaging directly or
indirectly, in the business of credit card registration or promotion.

                                       14
<PAGE>   18
         The FTC lawsuit and the cessation of the credit card registration
service had a negative effect on the financial condition of the Company and
Tracker Canada. On February 5, 1998, Tracker Canada filed a notice with the
Ontario Courts declaring its insolvency and seeking the appointment of a
bankruptcy trustee to liquidate its assets and dissolve the corporation. The
liquidation and dissolution occurred in February 1998.

         On February 26, 1998, the Global Tracker Corporation ("Global
Tracker"), a newly formed Ontario, Canada corporation acquired substantially all
of Tracker Canada's assets at arm's length in a bankruptcy proceeding. Shortly
thereafter, Global Tracker entered into an agreement in principle with the
Company which permitted the Company to use personnel retained by Global Tracker
and assets formerly owned or leased by Tracker Canada to continue the business
formerly conducted by Tracker Canada. As a result of this arrangement, Tracker
U.S. has continued on a limited basis the business formerly operated by Tracker
Canada without a complete cessation of operations.

         The Company continues to believe that The Tracker(TM) System has
significant commercial potential. However, there can be no assurance that sales
made by the Company will be at volumes and prices sufficient for the Company to
achieve profitable operations.

         The Company has been unprofitable since inception. During the fiscal
year ended March 31, 1998, the Company incurred a net loss of $90,467 from
continuing operations (net of a $62,050 gain from discontinued operations) and,
at the end of such period, had an accumulated deficit of $17,001,283. The
Company expects to continue to incur losses through at least the 4th quarter of
fiscal 2000. From the date of inception (May 6, 1993) through March 31, 1998,
the Company had realized revenues of $11,107,615 (including discontinued
operations of $10,800,893). The Company will require additional capital in order
to implement its business plan in the manner contemplated. See "Capital
Requirements" below. There can be no assurance that the Company will be able to
obtain such financing on terms acceptable to the Company, or at all, or that the
Company will be able to achieve profitable operations. If the Company is unable
to obtain such financing or achieve profitable operations, it may be forced to
cease or significantly limit its operations.

         Historical financial information prior to the Reorganization effective
July 12, 1994 is that of Tracker Canada. Revenue for Company services is
recognized on a straight-line basis over the term of service offered. Amounts
received for which service has not yet been provided are recorded as deferred
revenue. As of March 31, 1998, the amount of deferred revenue (current and long
term) was $412,846 compared with $613,131 as of March 31, 1997.

RESULTS OF OPERATIONS

FISCAL YEAR ENDED MARCH 31, 1998 COMPARED TO FISCAL YEAR ENDED MARCH 31, 1997

         Cash sales for the fiscal year ended March 31, 1998 decreased to
$5,731,777 ($5,680,226 from discontinued operations) as compared to $7,977,881
($7,671,160 from discontinued operations) for the fiscal year ended March 31,
1997. Because the Company recognized these cash sales on a straight-line basis
over the term of service offered, recorded revenues for the 

                                       15
<PAGE>   19
fiscal year ended March 31, 1998 increased to $8,642,737 as compared to
$2,348,169 for the fiscal year ended March 31, 1997. The increase in revenues
during the year was due primarily to the Company's emphasis on its now
discontinued credit card registration service and a reduction in resources
applied to its core business.

                           MARCH 31, 1998               MARCH 31, 1997
                           --------------               --------------

                     Continuing   Discontinued       Continuing  Discontinued
                     operations     operations       operations    operations

Cash Sales              $51,551     $5,680,226         $138,462    $7,839,419
Revenue                 $51,551     $8,591,186         $138,462    $2,209,707
Net Income (loss)    ($152,517)        $62,050       ($163,483)  ($3,544,595)

         During the fiscal year ended March 31, 1998, the Company incurred a net
loss of $152,517 as compared to a net loss of $163,483 for the fiscal year ended
March 31, 1997. These losses included total development costs in the amount of
$183,408 for the fiscal year ended March 31, 1998 as compared to $266,570 for
the fiscal year ended March 31, 1997.

         The Company is continuing in its efforts to minimize its operating cash
"burn" rate from continuing operations and has reduced its expenditures by an
additional 31% when comparing the fiscal year ended March 31, 1998 to the fiscal
year ended March 31, 1997 The largest reduction in expenditures when comparing
the fiscal year ended March 31, 1998 to the fiscal year ended March 31, 1997 can
be noted in the General and Administrative category of Development Costs as the
Company primarily focused on reducing expenditures in the rent and public
relations areas.

FISCAL YEAR ENDED MARCH 31, 1997 COMPARED TO FISCAL YEAR ENDED MARCH 31, 1996

         Cash sales for the fiscal year ended March 31, 1997 increased to
$7,977,881 as compared to $382,632 for the fiscal year ended March 31, 1996.
Because the Company recognizes these cash sales on a straight-line basis over
the term of service offered, recorded revenues for the fiscal year ended March
31, 1997 increased to $2,348,169 as compared to $106,522 for the fiscal year
ended March 31, 1996. The increase in revenues during the year was due primarily
to the increase in sales of the Company's card registration service.

         During the fiscal year ended March 31, 1997, the Company incurred a net
loss of $3,708,078 as compared to a net loss of $6,090,730 for the fiscal year
ended March 31, 1996. These losses included total development costs in the
amount of $4,442,825 for the fiscal year ended March 31, 1997 as compared to
$6,157,022 for the fiscal year ended March 31, 1996.

         Included in the net loss for the year ended March 31, 1997 are
non-operating expenditures in the amount of (1) $222,791 in interest expense
incurred as a result of raising capital through convertible debentures; (2)
$199,336 relating to legal, audit and printing fees for the filing of the
Registration Statement on Form S-1 and amendments thereto, for which the Company
received no proceeds; (3) $472,956 reflecting non-cash outlays which included
(a) $454,326 associated with the development of the Company's direct selling
commercial through 

                                       16
<PAGE>   20
its contract with The L.L. Knickerbocker Company ("Knickerbocker") and the costs
associated with fees to cover its celebrity spokesperson, Angie Dickinson, and
(b) $18,630 associated with the services provided under the Amerasia contract;
(4) $221,190 for a writedown provision on the Company's short-term investment;
and (5) $137,842 associated with the non-cash outlay relating to the issuance of
541,822 shares of Common Stock to outside consultants as payment in lieu of
fees.

LIQUIDITY AND CAPITAL RESOURCES

         From inception at May 6, 1993 through March 31, 1998, the Company has
received approximately $10,209,923 in net cash from financing activities, net of
discontinued operations, some of which are noted below.

         During the year ended March 31, 1998, the Company's net cash used in
operations was $505,244 as compared to $465,828 for the year ended March 31,
1997. The cash used in operations was devoted primarily to funding the
development of identification and recovery systems and software, labels,
packaging, marketing and advertising.

                  As of March 31, 1998, the Company had total current assets of
$1,187,699 as compared to $3,442,754 at March 31, 1997. Current assets consisted
of cash in the amount of $NIL as of March 31, 1998 as compared to $105,213 at
March 31, 1997, accounts receivable in the amount of $NIL as compared to
$133,613 at March 31, 1997, prepaid expenses and deposits in the amount of $NIL
as compared to $359,526 at March 31, 1997, inventories in the amount of $NIL as
compared to $24,338 at March 31, 1997, and current deferred charges in the
amount of $1,187,699 as compared to $2,820,064 at March 31, 1997. The decrease
in current assets resulted from the liquidation of Tracker Canada's assets in
February 1998. See "Overview" above.

         As of March 31, 1998, the Company had amount due from stockholders in
the amount of $14,072 as compared to $61,487 at March 31, 1997, long-term
deferred charges totaling $275,043 as compared to $315,837 at March 31, 1997,
and net property and equipment totaling $NIL as compared to $418,267 at March
31, 1997. The decrease in net property and equipment also resulted from the
Tracker Canada liquidation since Tracker Canada held those assets.

         As of March 31, 1998, the Company had liabilities net of discontinued
operations of $3,275,560 as compared to $6,026,589 at March 31, 1997. Such
liabilities consisted of accounts payable in the amount of $440,835 at March 31,
1998 as compared to $468,764 at March 31, 1997, accrued liabilities in the
amount of $528,399 as compared to $373,687 at March 31, 1997, deferred revenues
in the amount of $1,798,727 as compared to $4,509,401 at March 31, 1997,
debentures in the amount of $31,809 as compared to $83,991 at March 31, 1997,
and convertible subordinated debentures in the amount of $475,790 as compared to
$590,746 at March 31, 1997. The Company had long-term deferred revenues in the
amount of $412,846 at March 31, 1998 as compared to $613,131 at March 31, 1997.

         As of March 31, 1998 and March 31, 1997, respectively, the Company had
accumulated deficits of $17,001,283 and $16,910,816. To date, the Company has
financed its research and 

                                       17
<PAGE>   21
development activities and operations primarily through the sales of its
now-discontinued card registration program and the private placement of First
Series Convertible Debentures aggregating $1,000,000 from July to October 1995,
the private placement of Second Series Convertible Debentures aggregating
$1,189,529 through March 1996, the sale of a total of 1,810,000 shares of Common
Stock in private placements, and the sale by Tracker U.S. pursuant to Regulation
S under the Securities Act of 1,050 shares of Preferred Stock for $1,050,000
during April, May and August 1996.

         The sales of the 1,810,000 shares of Common Stock are described in the
remainder of this paragraph. On September 16, 1994, Tracker U.S. issued,
pursuant to Regulation S under the Securities Act, 785,000 shares of Common
Stock (200,000 shares of which were returned to the Company) for total gross
proceeds to Tracker U.S. of $2,351,700, $955,000 of which was received by
Tracker U.S. in the form of cash and the remainder of which was in the form of
payments by the buyer of the shares of Common Stock to third parties in
cancellation of indebtedness owed by the Company to such third parties. On
February 9, 1995, Tracker U.S. issued to two separate overseas buyers, pursuant
to Regulation S, 275,000 shares of Common Stock for total proceeds to the
Company of $550,000. On March 15, 1995, Tracker U.S. issued 500,000 units, each
unit consisting of one share of Common Stock and one warrant to purchase Common
Stock, for total gross proceeds to the Company of $350,000. On May 1, 1995,
Tracker U.S. issued 250,000 units, each unit consisting of one share of Common
Stock and one warrant to purchase Common Stock, for total gross proceeds to the
Company of $250,000. Tracker U.S. also issued 200,000 shares of Common Stock to
a buyer for $200,000, of which only $83,000 has been paid to Tracker U.S. by the
buyer. The Company has filed suit against the investor to attempt to collect the
remaining $117,000 and the suit is still pending. There can be no assurance,
however, that the Company will be successful in the lawsuit or will be able to
collect such amount.

         In addition to the above described private placements, the Company
raised $619,166 during the year ended March 31, 1996 through the issuance of
849,803 of Tracker Canada's Exchangeable Preference Shares pursuant to
outstanding warrants to purchase such Exchangeable Preference Shares. Further,
the Company has issued shares to employees and third parties in lieu of
compensation to such employees or payments to such third parties for products or
services provided to the Company.

         The Company decided to writedown its short-term investment, recorded at
the Company's original cost of $221,190 (CDN$1.04 per share), in 288,462 shares
of Stratcomm Media Ltd. ("Stratcomm") to $0 in 1997 as the shares have been
delisted from the Vancouver Stock Exchange.

CAPITAL REQUIREMENTS

         The Company anticipates that it will require additional capital in
order to implement its business plan in the manner contemplated. In addition,
the Company will require additional capital to satisfy the claims of its major
creditors. If the Company is unable to settle these claims for substantially
less than that demanded by its major creditors, the Company will consider filing
for bankruptcy protection under U.S. bankruptcy laws.

                                       18
<PAGE>   22
         During the upcoming twelve months, the Company plans to seek additional
equity financing to conduct such activities as it is anticipated that additional
capital will be needed to enhance current cash flows. Management is attempting
to obtain additional equity funding. Although no assurance can be given that the
necessary funding will be available to the Company when needed, in sufficient
amounts, on acceptable terms, or at all, management believes it is likely that
the Company will be able to obtain sufficient funding to support its operations
and its planned marketing and advertising campaign during the next twelve
months. However, if the Company does not receive sufficient funding on
acceptable terms, this could have a material adverse effect on the Company's
business, operating results and financial condition. Moreover, the report of
independent accountants covering the Company's financial statements expressed
doubt about its ability to continue as a going concern because it is a
development stage company and has not yet been able to attract significant
outside financing or generate significant revenues. Failure to obtain sufficient
funding on acceptable terms could affect the Company's ability to continue as a
going concern.

         A critical element in management's plan to overcome the Company's
present financial condition is to mitigate the need for additional outside
funding. Management plans to do this in two ways. First, to minimize the
Company's cash requirements, the Company has: (i) reduced staff to minimal safe
operating levels; (ii) when required, compensated certain members of senior
management in stock rather than cash; and (iii) sought to control expenses.
Second, and particularly critical to the long-term viability of the Company, the
Company must decrease the need for additional outside funding by generating cash
internally, i.e., through sales. Although no assurance can be given that any
sales made by the Company will be at volumes and prices sufficient for the
Company to achieve significant revenues, eliminate or decrease the need for
additional outside financing, and achieve profitable operations, management
believes it is likely that its marketing and sales efforts will, in the
long-term, result in sufficient sales to decrease the need for additional
outside financing and achieve profitable operations.

INFLATION; SEASONABLITY

         While inflation has not had a material impact on operating results and
management does not expect inflation to have a material impact on operating
results, there can be no assurance that the business of the Company, on a
consolidated basis, will not be affected by inflation in the future. While the
Company's business to date has not been seasonal and management does not expect
that its business will be seasonal in the future, there can be no assurance that
the business of the Company, on a consolidated basis, will not be seasonal in
the future.

YEAR 2000 COMPLIANCE REQUIREMENTS

         The Company uses PC hardware equipment and both packaged and
proprietary software in the operations of its business. The Company has
performed an initial evaluation to assess the impact of year 2000 issues on all
software and hardware. It has determined that all existing hardware equipment is
year 2000 compliant, except for certain equipment scheduled to be retired. The
Company uses various packaged software applications as tools in running the
Company's accounting operations, database management and general business
functions. It uses certain proprietary software programs as tools to run The
Tracker(TM) System. Management plans to implement any necessary software vender
upgrades and modifications to ensure that its accounting operations, database
management and general business systems remain functional with the year 2000.
The Company's proprietary software programs were developed on year 2000
compliant platforms; however, some user screens and sub-routines utilized in its
proprietary software programs are non-year 2000 compliant. The Company is not
dependent upon computer systems of any significant customers, vendor or other
third parties in the course of normal business. At present, management does not
expect that the software upgrade, replacement or development costs it expects to
incur to assure year 2000 compliance will exceed $20,000 (U.S.) in the
aggregate. The Company has not yet established a contingency plan, but intends
to formulate one to address unavoidable risks by July 1999.


                                       19
<PAGE>   23
       ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


         Pursuant to Item 305(e) of Regulation S-K, this Item is not applicable
to the Company.



                  ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


         The Company's consolidated financial statements for the year ended
March 31, 1998 are included beginning at page 45.



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


         On June 15, 1998, PricewaterhouseCoopers LLP, the Company's independent
accountant, declined to stand for re-election as the Company's independent
accountant for the fiscal year ended March 31, 1998. During the past two years,
there were no financial statements of the Company issued by
PricewaterhouseCoopers LLP that contained an adverse opinion or a disclaimer of
opinion, or was qualified or modified as to uncertainty, audit scope, or
accounting principles, except that their reports on the financial statements as
of and for each of the years ended March 31, 1997 and 1996 included an
explanatory paragraph expressing doubt as to the Company's ability to continue
as a going concern. The decision to change accountants was not recommended or
approved by any committee of the Board of Directors, or by the Board of
Directors. Additionally, there were no disagreements with PricewaterhouseCoopers
LLP on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure.

         On August 18, 1998, the company retained Hirsch, Silberstein &
Subelsky, P.C. as the Company's independent accountants to audit its financial
statements at, and for the year ended, March 31, 1998.



                                        PART III


                ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT


         The following table sets forth certain information with respect to the
Company's executive officers and directors as of September 30, 1998:

                                       20
<PAGE>   24
NAME                      AGE                    POSITION
------------------------- ---- -------------------------------------------------

Bruce I. Lewis            58   Chief Executive Officer, President and Chairman 
                               of the Board of Directors

Jay S. Stulberg*          48   Chief Financial Officer and Director

Dr. H. Joseph Greenberg*  76   Director

Carl J. Corcoran*         61   Director

David G.R. Butler*        62   Director

------------------------
*Nominee.

         BRUCE I. LEWIS has been the Chairman of the Board of Directors and
Chief Executive Officer of Tracker U.S. since June 30, 1994, as President of
Tracker U.S. since August 12, 1995. For the period from 1980 through May 1990,
Mr. Lewis was President and a Director of Albert Berg Limited and its
subsidiaries. Albert Berg was petitioned into bankruptcy by its creditors in May
1990. From June 1988 to August 1990, he served as the Chief Executive Officer of
Cape Breton Chemical Corporation, a start-up PVC flexible stretch wrap
manufacturer. From May 1990 through May 1993, Mr. Lewis was also a consultant to
various companies in the areas of management and acquisition financing. From May
1993 until its dissolution in February 1998, Mr. Lewis served as the Chief
Executive Officer and Chairman of the Board of Directors of Tracker Canada. From
November 1997 to date, Mr. Lewis has served as interim Chief Financial Officer.

         JAY S. STULBERG has been nominated to serve as Chief Financial Officer
of the Company and as a Director of the Company for the term expiring at the
2001 annual meeting of stockholders. Since February 1998, Mr. Stulberg has been
the sole shareholder, director and officer of Global Tracker Corp., an Ontario,
Canada corporation. Since approximately 1984, Mr. Stulberg has served on the
Board of Directors of two privately held family holding companies. From 1992 to
1994, Mr. Stulberg served as the Public Controller (i.e., the Canadian
equivalent of Chief Financial Officer) of Enershare Technology Corp. From 1994
to mid-1996, Mr. Stulberg served as the Group Controller of Algorithmics, Inc.

         H. JOSEPH GREENBERG has been nominated to serve as a Director of the
Company for a term expiring at the 1999 annual meeting of stockholders. Dr.
Greenberg has engaged in the practice of medicine since his graduation from
medical school in 1952. He has been a director of Genevest, Inc. since 1993.

         CARL J. CORCORAN has been nominated to serve as a Director of the
Company for a term expiring at the 2000 annual meeting of stockholders. Mr.
Corcoran was employed by IBM Corporation in various capacities from 1951 to
1988, including General Manager of Operations of IBM Japan and President of IBM
Canada. Mr. Corcoran is currently an officer and director of several family-held
businesses, including Corcair Farms, Ltd., CorProperties, Inc., Cor Source Water
Corporation, Corcorvest Corporation and CJC Bottling, Ltd. He is also a director
of the Accessible Software Corporation, a publicly traded corporation, and
A.A.B. Building Systems, Inc., a private company.


                                       21
<PAGE>   25
         DAVID G. R. BUTLER has been nominated to serve as Director for a term
expiring at the 2001 annual meeting of stockholders. Mr. Butler is the chief
executive officer and sole shareholder of Holiday Breaks International, Inc.,
which offers stay-free hotel accommodations to companies as sales and marketing
incentives; MF Incentives, Inc., which offers travel coupons as sales incentives
for manufacturers' products; and Newfound Communications, Inc., which offers
premium incentive promotions. From 1978 until its sale in 1994, Mr. Butler was
the sole shareholder and chief executive officer of Marshall Fenn Limited, a
public relations and advertising agency. At Marshall Fenn, Mr. Butler
established several affiliated enterprises referred to as the Marshall Fenn
Group of Companies, including Holiday Breaks International, Inc., MF Incentives,
Inc., and Newfound Communications, Inc.

CLASSIFICATION OF BOARD OF DIRECTORS

         Tracker U.S.'s Certificate of Incorporation and Bylaws provide that the
Board of Directors is divided into three classes of directors, with the classes
to be as nearly equal in number as possible. The Certificate of Incorporation
and Bylaws provide that approximately one-third of the directors of Tracker U.S.
will continue to serve until the 1999 annual meeting of stockholders,
approximately one-third will continue to serve until the 2000 annual meeting of
stockholders, and approximately one-third will continue to serve until the 2001
annual meeting of stockholders.

         The classification of the Board of Directors would make it more
difficult for stockholders to change the composition of the Board of Directors
and could discourage a third party from attempting to obtain control of Tracker
U.S.

COMMITTEES OF THE BOARD OF DIRECTORS

         The Executive Committee will be comprised of Messrs. Lewis and
Stulberg. The Audit Committee, which will be comprised of Messrs. Butler and
Stulberg, is responsible for: (i) reviewing and recommending the engagement each
year of the Company's independent auditors; (ii) consulting with the independent
auditors on the adequacy of the Company's internal controls; (iii) reviewing,
with the independent auditors, the auditors' reports on the Company's financial
statements; and (iv) taking such other steps as the Audit Committee deems
necessary to carry out the normal functions of an audit committee. The Ethics
Committee will be comprised of Mr. Corcoran (Chairman) and Dr. Greenberg. The
Compensation Committee, which will be comprised of Messrs. Butler (Chairman) and
Corcoran, is responsible for: (i) determining the compensation of the Company's
senior officers; (ii) reviewing recommendations by management as to the
compensation of other officers and key personnel; and (iii) reviewing
management's succession program. Further, the Compensation Committee administers
the Company's 1994 Stock Incentive Plan (the "1994 Plan").

SECTION 16A BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         The Company does not have a class of equity securities registered
pursuant to Section 12 of the Exchange Act. Accordingly, its directors, officers
and 10% beneficial owners are not required to file reports pursuant to Section
16(a) of the Exchange Act.

                                       22
<PAGE>   26
                            ITEM 11. EXECUTIVE COMPENSATION


COMPENSATION OF DIRECTORS

         Non-employee directors are paid $500 for attendance at each meeting of
the Board of Directors or a committee meeting and an annual retainer of $10,000.
In addition, non-employee directors are eligible to receive options to purchase
shares of the Company's Common Stock. See "EXECUTIVE COMPENSATION - 1994 Stock
Incentive Plan Stock Options for Non-employee Directors."

COMPENSATION OF NAMED EXECUTIVE OFFICERS

         The following table provides certain information concerning the
compensation earned by the Company's Chief Executive Officer and to the other
then-executive officer who received compensation in excess of $100,000 for
services rendered in all capacities to the Company for fiscal 1998 (the "Named
Executive Officers").

                               SUMMARY COMPENSATION TABLE


<TABLE>
<CAPTION>
                                                                          Long-Term Compensation
                                                                  -------------------------------------- 
                                         Annual Compensation               Awards            Payouts
                                 -------------------------------- --------------------------------------
                                                        Other      Restricted   Securities       
                                                        Annual       Stock     Under-Lying      LTIP      All Other  
    Name and then-                Salary    Bonus    Compensation   Award(s)   Options/SARs    Payouts   Compensation
  Principal Position      Year      ($)       ($)         ($)           ($)         (#)          ($)          ($)     
------------------------- ------ --------- --------- ------------- ---------- -------------- ----------- -------------
<S>                       <C>    <C>                               <C>
BRUCE I. LEWIS, CEO &      1998   175,000
President(1)
------------------------- ------ --------- --------- ------------- ---------- -------------- ----------- -------------
                           1997   175,000
------------------------- ------ --------- --------- ------------- ---------- -------------- ----------- -------------
                           1996   175,000
------------------------- ------ --------- --------- ------------- ---------- -------------- ----------- -------------
MARK J. GERTZBEIN, CFO     1998   175,000
& Exec. Vice
President(2)
------------------------- ------ --------- --------- ------------- ---------- -------------- ----------- -------------
                           1997    80,200
------------------------- ------ --------- --------- ------------- ---------- -------------- ----------- -------------
                           1996   175,000                           413,437
------------------------- ------ --------- --------- ------------- ---------- -------------- ----------- -------------
</TABLE>

(1)  Other annual compensation for Mr. Lewis for fiscal year 1998 was $NIL in
     medical insurance premiums and $10,000 in automobile allowance; other
     annual compensation for fiscal year 1997 was $NIL in medical insurance
     premiums and $10,000 in automobile allowance; and other annual compensation
     for fiscal year 1996 was $NIL in medical insurance premiums and $10,000 in
     automobile allowance.


(2)  Mr. Gertzbein served as Chief Financial Officer and Executive Vice
     President from 1994 to November 1997 when he resigned his positions. Other
     annual compensation for Mr. Gertzbein for fiscal year 1998 was $NIL in
     medical insurance premiums and $10,000 in automobile allowance; other
     annual compensation for fiscal year 1997 was $NIL in medical insurance
     premiums and $10,000 in automobile allowance; and other annual compensation
     for fiscal year 1996 was $NIL in medical insurance premiums and $10,000 in
     automobile allowance.

EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL

         On September 24, 1996, the Company entered into an employment agreement
with Mr. Lewis, pursuant to which Mr. Lewis serves as President, Chief Executive
Officer and Chief Operating Officer of the Company. The agreement provides for
an annual base salary of $175,000, with increases of $37,500 each year based
upon certain performance criteria beginning 

                                       23
<PAGE>   27
April 1, 1997, a maximum automobile allowance of $10,000 and eligibility for
discretionary bonuses.

         The agreement for Mr. Lewis has an initial term of three years with one
year renewal terms thereafter, and provides for the payment of a relocation
allowance equal to the lesser of the actual relocation expenses or $25,000 per
each occurrence. The agreement provides that Mr. Lewis is entitled to
participate in any stock option, stock purchase, annual bonus, pension, profit
sharing, life insurance and medical benefit plans and such other fringe benefits
that may be applicable to the Company's senior executive employees.

         If Mr. Lewis' employment is terminated by the Company for cause (as
defined in the employment agreement) or by Mr. Lewis for any reason (other than
for good reason (also as defined)), Mr. Lewis will be entitled to his
compensation through the date of termination. If, prior to a change of control
of the Company (as defined), employment is terminated due to Mr. Lewis' death or
disability, by the Company other than for cause or by Mr. Lewis for good reason,
Mr. Lewis would be entitled to receive all compensation through the date of
termination, plus the continuation of base salary for the greater of one year or
the remainder of the term of the agreement. In addition, the Company will
maintain for Mr. Lewis for 12 months, or, if earlier, through the date he
obtains alternative employment, his participation in the employee benefit plans
of the Company in which he was eligible to participate immediately before
termination, to the extent permissible under such plans. Mr. Lewis (or his legal
representative) also will have the right to exercise all vested stock options
outstanding at the termination date in accordance with the plans governing those
options. The Company will use its best efforts to remove the restrictions from
any restricted stock held by Mr. Lewis at termination. If Mr. Lewis' employment
is terminated after a change of control, either by the executive for good reason
or by the Company without cause, he will receive all the benefits he would have
received for such a termination prior to a change of control, and all unvested
stock options held by him shall become immediately fully vested. Payments made
in conjunction with a change of control are limited to an amount that will not
result in either a loss of the income tax deduction of the Company under
Internal Revenue Code Section 280G or an excise tax under Code Section 4999.

         The Company entered into a Consulting Agreement with its former
President, Gregg C. Johnson, which took effect upon his resignation as President
of the Company on August 12, 1995. The Consulting Agreement provides for: (a) a
monthly fee of $10,000 until March 31, 1996; (b) a commission of 10% on funds
raised for the Company; (c) a commission of 5% of net sales, if any, generated
by the Company from certain marketing arrangements up to July 12, 1997, to a
maximum of $500,000; (d) a commission of up to 8% of net sales generated from
any other sales arrangement introduced and negotiated (subject to Company prior
approval) by Mr. Johnson, up to July 12, 1998; (e) release by the Company from
his $56,786 (as of August 31, 1995) indebtedness to the Company upon his
returning to the Company 2,986 shares of the Company's Common Stock; and (f)
reimbursement of preapproved business related expenses. To date, the Company has
not paid any compensation to Mr. Johnson under the Consulting Agreement and Mr.
Johnson has not returned the 2,986 shares to the Company.

                                       24
<PAGE>   28
1994 STOCK INCENTIVE PLAN

         GENERAL. On June 30, 1994, the stockholders approved the 1994 Stock
Incentive Plan and on November 1, 1995 and August 22, 1997, the stockholders
approved certain amendments to the 1994 Stock Incentive Plan (collectively, the
"1994 Plan"). The 1994 Plan is intended to enable Tracker U.S. to attract,
retain and motivate officers, other key employees and non-employee directors of
and consultants to Tracker U.S. and to provide such persons with incentives and
rewards for superior performance more directly linked to profitability of the
Company's business and increases in stockholder value. Individuals are selected
for participation in the 1994 Plan by a Compensation Committee of the Board of
Directors (the "Committee"). An aggregate of 6,250,000 shares of Common Stock
have been reserved for issuance under the 1994 Plan, subject to adjustment in
the event of a stock split, stock dividend or other change in the Common Stock
or the capital structure of Tracker U.S. The total number of persons who may
receive grants under the 1994 Plan is estimated by Tracker U.S. to be
approximately twenty-one (21). The total number of non-employee directors who
may receive grants under the 1994 Plan is estimated to be approximately four
(4). In no event shall the aggregate number of shares covered by grants and
awards to any one individual participating in the 1994 Plan exceed 315,000
shares per year or 315,000 shares over the term of the 1994 Plan. Options that
expire unexercised may again be issued under the 1994 Plan subject to the
foregoing limitations. The 1994 Plan is administered by the Committee, which has
the exclusive power to determine whether to grant, and the terms and conditions
of any grant of, stock options, stock appreciation rights, performance shares,
performance units, restricted shares or deferred shares to participants and to
resolve all questions relating to the administration of the 1994 Plan. Members
of the Committee are not eligible to receive grants or awards under the 1994
Plan other than the automatic grants to non-employee directors. See "EXECUTIVE
COMPENSATION - 1994 Stock Incentive Plan - - Stock Options for Non-Employee
Directors."

         STOCK OPTIONS. Under the 1994 Plan, the Committee may grant options to
purchase shares of Common Stock, including options qualifying as "incentive
stock options" under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), to employees as additional compensation for their services
to Tracker U.S. Options may be granted prior to termination of the 1994 Plan,
which will occur on the earlier of June 29, 2004 or the date on which all awards
available for issuance in the last year of the 1994 Plan will have been issued
or canceled. Options granted are subject to adjustment in the event of a stock
split, stock dividend or other change in the Common Stock or the capital
structure of Tracker U.S.

         Options are exercisable over such period as determined by the
Committee, but no incentive stock option may be exercised after ten years from
the date of grant. However, the option term of incentive stock options which are
granted to holders of ten percent or more of Tracker U.S.'s combined voting
power shall not exceed five years from the date of grant. Options may be
exercisable in installments as determined by the Committee and are evidenced by
option agreements. No option may be transferred other than by will or by the
laws of descent and distribution. Options generally cannot be exercised after
the termination of service, except under certain circumstances where such
termination of service is with the consent of the Committee or due to
retirement, disability or death, in which event the Committee (subject in any
case to the foregoing limitation on the maximum term of incentive stock options)
may take 

                                       25
<PAGE>   29
any action it deems equitable or in the best interests of Tracker U.S. The
purchase price of Common Stock subject to an incentive stock option cannot be
less than 100% of the fair market value of such Common Stock on the date of
grant. The purchase price of Common Stock subject to a nonqualified option may
be less than, equal to or greater than the fair market value of such Common
Stock on the date of grant. However, if any individual to whom an incentive
stock option is granted is the owner of stock (as determined under Section
424(d) of the Code) possessing 10% or more of the total combined voting power of
all classes of Stock of Tracker U.S. or any subsidiary of Tracker U.S., then the
purchase price per share shall not be less than 110% of the fair market value of
such Common Stock on the date of grant. The option price may be due upon
exercise of the option and may be paid in cash, check, shares of Common Stock or
other consideration acceptable to the Committee (including restricted stock), or
may be deferred through a sale and remittance procedure with a
Company-designated brokerage firm. Grants may also provide for reload option
rights upon the exercise of options, provided that the term of any such reload
option will not extend beyond the term of the option originally exercised.
During the fiscal year ended March 31, 1998, options for 50,000 shares, vesting
over a three-year period, were granted at fair market value. The options
terminated in full upon resignation of the employee prior to the first
anniversary of the option agreement.

         APPRECIATION RIGHTS. The Committee may also grant appreciation rights
in tandem with an option or freestanding and unrelated to an option. An
appreciation right entitles the participant to receive from Tracker U.S. an
amount payable in cash, shares of Common Stock or a combination of cash and
Common Stock equal to the positive difference between the fair market value of a
share of Common Stock on the date of exercise and the appreciation right grant
price, subject to any ceiling that may be imposed by the Committee. The
Committee may specify that a grant of an appreciation right: (i) is subject to a
waiting period before becoming exercisable; (ii) may be exercised within
specified periods of time; or (iii) may be exercised only upon the occurrence of
certain events, including a Change of Control (as defined below) or a Corporate
Transaction (as defined below). Additionally, with respect to a tandem
appreciation right, the Committee may provide that such right may be exercised
only when the related option, or similar right, is exercisable and the per share
market value of Tracker U.S.'s Common Stock on the date of exercise of the
appreciation right exceeds the exercise price of the related option. In no event
shall the aggregate appreciation rights granted to any one individual
participating in the 1994 Plan exceed 315,000 per year or 315,000 over the term
of the 1994 Plan.

         PERFORMANCE SHARES AND PERFORMANCE UNITS. Performance shares and
performance units entitle the participant to receive cash or shares of Common
Stock, or a combination thereof, based upon the degree of achievement of
pre-established management objectives over a pre-established performance period
determined by the Committee in its discretion. The Committee may adjust the
management objectives, and the related minimum acceptable level of achievement,
after the date of grant to avoid distortion that would otherwise result from
events not related to the performance of the participants occurring after the
date of grant. Management objectives are fixed by the Committee in its
discretion on the basis of such criteria and to accomplish such objectives as
the Committee may select. The Committee has sole discretion to determine the
participants eligible for performance shares or performance units, the duration
of each performance period, the value of each performance unit and the number of
shares or units earned on the basis of Tracker U.S.'s performance relative to
the established objectives. At the 

                                       26
<PAGE>   30
end of the performance period, the Committee will determine the number of
performance shares and the number of performance units which have been earned on
the basis of Tracker U.S.'s performance in relation to the performance
objectives. Generally, a participant must be an employee at the end of the
performance period to receive the performance shares or units; provided,
however, that if the participant dies, retires, becomes disabled or ceases to be
an employee prior to the end of the period with the Committee's consent, and in
certain other circumstances, the Committee may take any action it deems
equitable or in the best interests of Tracker U.S. The number of performance
units that are granted under the 1994 Plan shall not exceed 750,000 in the
aggregate over the term of the 1994 Plan.

         RESTRICTED STOCK. A grant of restricted stock consists of a specified
number of shares of Common Stock that is contingently awarded in amounts
determined by the Committee and is subject to forfeiture to Tracker U.S. under
such conditions and at such times as the Committee may determine. An employee
who has been awarded restricted shares may vote and receive dividends, if any,
on restricted shares, but may not sell, assign, transfer, pledge or otherwise
encumber restricted shares during the restricted period. If a participant's
employment ceases prior to the end of the restricted period either with the
consent of Tracker U.S. or upon the occurrence of his death, disability or
retirement, the restrictions may lapse with respect to some portion or all of
the restricted stock as determined by the Committee. If a participant's
employment terminates prior to the end of the restricted period for any other
reason, all of the participant's restricted shares and restricted units are
forfeited. Grants may be without additional consideration or in consideration of
a payment by the participant that is less than the fair market value of the
restricted stock on the grant date. In 1995, Tracker U.S. granted 315,000 shares
of restricted Common Stock to each of Gregg C. Johnson and Mark J. Gertzbein
pursuant to the 1994 Plan. In 1996, Tracker U.S. granted 413,437 shares of
restricted Common Stock to Mr. Gertzbein.

         DEFERRED SHARES. The Committee may grant deferred shares to
participants under the 1994 Plan. Each grant or sale of deferred shares will be
subject to the fulfillment of conditions and a deferral period specified by the
Committee. During the deferral period, the participant will have no right to
transfer the award, no right of ownership in the deferred shares, and no right
to vote the deferred shares. The Committee, however, may authorize payment of
dividend equivalents on the deferred shares in cash or shares of Common Stock of
Tracker U.S. on a current, deferred or contingent basis. Grants may be made
without additional consideration or in consideration of a payment by the
participant that is less than the fair market value on the grant date.

         STOCK OPTIONS FOR NON-EMPLOYEE DIRECTORS. Under the 1994 Plan as
originally adopted, each non-employee director elected or appointed on or after
the effective date of the 1994 Plan was, upon election, automatically granted an
option to purchase 10,000 shares of Common Stock. The price per share to be paid
at the time such option is exercised by a non-employee director equals 100% of
the fair market value of the Common Stock on the date of the grant of the
option. The 1994 Plan provides that options granted to non-employee directors
have a maximum term of ten years and are exercisable ratably in annual
installments over three years. The option price is due upon exercise of the
option and may be paid in cash, check, shares of Common Stock or other
consideration acceptable to the Committee or may be deferred through a 

                                       27
<PAGE>   31
sale and remittance procedure with a Company-designated brokerage firm. All
options granted to a non-employee director who dies or becomes disabled while
serving as a director will become immediately and fully exercisable at the time
of such termination of service as a director, and all of his options may be
exercised within twelve months after such cessation of service. If a former
non-employee director should die within six months after cessation of Board
service, the personal representative of such former director's estate may
exercise those options in which the former director was vested at the time of
death for a twelve month period following the death of the former director. If a
non-employee director's service terminates for any reason other than those
stated above, options which are not then exercisable will be canceled and
options which are then exercisable may be exercised at any time within six
months after the date of such termination (but not later than the expiration
date of the respective options). All options granted to non-employee directors
vest immediately upon a "Change of Control" of Tracker U.S. (as defined below).
The portion of the 1994 Plan applicable to non-employee directors is designed to
be self-executing. Effective July 12, 1994, four such grants with an exercise
price of $7.95 per share were made to the four initial non-employee directors.
As a result of one directors' resignation after serving one year on the Board of
Directors, he holds vested options to purchase 3,333 shares; the balance of the
options were cancelled. Effective September 8, 1995 a grant of options to
purchase 10,000 shares at an exercise price of $1.81 per share was made to a
newly appointed director. As a result of one directors' resignation after
serving three years on the Board of Directors, he holds vested options to
purchase 10,000 shares.

         The amendments to the 1994 Plan approved by the stockholders on
November 1, 1995 provide for automatic stock option grants for 10,000 shares
each year to Eligible Directors (defined below). This Automatic Option Grant
Program would be limited to those persons who serve as non-employee members of
the Board and who do not beneficially own, directly or indirectly, or represent
any stockholder that beneficially owns, directly or indirectly, more than 5% of
the Company's Common Stock outstanding from time to time ("Eligible Directors").
Each individual who first becomes an Eligible Director after the date of
approval of the amendment to the 1994 Plan by the stockholders would
automatically be granted a nonqualified option to purchase 10,000 shares of
Common Stock. On every anniversary (after December 31, 1995) of his initial
election or appointment, each person who is at that time serving as an Eligible
Director would automatically be granted a nonqualified option to purchase 10,000
shares of Common Stock. There would be no limit on the number of automatic
option grants that any one Eligible Director may receive. In addition to the
amendment to the automatic grant provisions, the amendments to the 1994 Plan
provide that the exercise price of options granted pursuant to such automatic
grants would be reduced to a price 25% below the average trading price of the
Company's Common Stock for the 30 days immediately prior to the grant date.

         CHANGE OF CONTROL; CORPORATE TRANSACTIONS. The Committee has the
discretion to accelerate benefits under the 1994 Plan in the event of a Change
of Control or a Corporate Transaction.

         Under the 1994 Plan, "Change of Control" is a change in ownership or
control of Tracker U.S. effected through either of the following transactions:

                                       28
<PAGE>   32
         a.       the direct or indirect acquisition by any person or related
                  group of persons (other than Tracker U.S. or a person that
                  directly or indirectly controls, is controlled by, or is under
                  common control with, Tracker U.S.) of beneficial ownership
                  (within the meaning of Rule 13d-3 of the Exchange Act) of
                  securities possessing more than 50% of the total combined
                  voting power of the outstanding securities of Tracker U.S.
                  pursuant to a tender or exchange offer made directly to
                  Tracker U.S.'s stockholders or other transaction, in each case
                  which the Board does not recommend that Tracker U.S.'s
                  stockholders accept; or

         b.       a change in the composition of the Board over a period of 36
                  consecutive months or less such that a majority of the Board
                  members (rounded up to the next whole number) ceases, by
                  reason of one or more contested elections for Board
                  membership, to be comprised of individuals who either (i) have
                  been Board members continuously since the beginning of such
                  period or (ii) have been elected or nominated for election as
                  Board members during such period by at least a majority of the
                  Board members described in clause (i) who were still in office
                  at the time such election or nomination was approved by the
                  Board.

         Under the 1994 Plan, "Corporate Transaction" means any of the following
stockholder-approved transactions to which Tracker U.S. is a party:

         a.       a merger or consolidation in which Tracker U.S. is not the
                  surviving entity, except for a transaction the principal
                  purpose of which is to change the state in which Tracker U.S.
                  is incorporated;

         b.       the sale, transfer or other disposition of all or
                  substantially all of the assets of Tracker U.S. in complete
                  liquidation or dissolution of Tracker U.S.; or

         c.       any reverse merger in which Tracker U.S. is the surviving
                  entity but in which securities possessing more than 50% of the
                  total combined voting power of the outstanding securities of
                  Tracker U.S. are transferred to a person or persons different
                  from the persons holding those securities immediately prior to
                  such merger.

         TERMINATION, AMENDMENT AND ACCELERATION. The Board of Directors of
Tracker U.S. may amend, suspend or terminate the 1994 Plan at any time, but no
such action may in any way impair the rights of recipients under any options or
shares of restricted stock previously granted or any agreement executed under
the 1994 Plan. Further, no amendment may increase the total number of shares,
appreciation rights or performance units (or shares) which may be issued under
the 1994 Plan, reduce the minimum purchase price for shares subject to options,
extend the maximum period during which options may be exercised or change the
employees eligible to participate in the plan without the approval of the
holders of a majority of the shares of Tracker U.S. Common Stock present or
represented at a meeting duly called and held for such purpose; provided,
however, that such shareholder approval is required only to the extent that Rule
16b-3, as promulgated by the Securities and Exchange Commission under the
Exchange Act, requires 

                                       29
<PAGE>   33
the approval of the stockholders of a company of any material amendment to any
employee benefit plan of such company.

         LOAN PROGRAM. The Committee may, in its discretion, permit Tracker U.S.
to finance the exercise of Company options and the payment of related taxes by
means of loans to the participants. The Committee may also allow participants to
pay the exercise price or purchase price in installments or may authorize the
payment of a cash bonus to allow participants to exercise options and rights
under the 1994 Plan. Each loan will be evidenced by a promissory note to be
entered into by the participant in favor of Tracker U.S. Each loan, including
extensions, will be on such terms as the Committee determines. Loans or
installment payments may be authorized with or without security or collateral.
The maximum credit available will be the exercise or purchase price of the
acquired shares (less the par value of the shares) plus any related federal,
state and local income and employment tax liability, subject to any applicable
margin borrowing limitation. The Committee also has the authority to forgive all
or a portion of the borrower's indebtedness in circumstances it deems
appropriate; provided, however, that the Committee may not forgive that portion
of a loan owed to cover par value.

         RESTRICTIONS ON GRANTS OF OPTIONS. The Company will not grant options
in excess of 20% of the outstanding shares to directors, officers or employees
unless ratified or approved by a majority of the shareholders, excluding
directors, officers, employees and their spouses. Further, the Company will not
grant options to directors, officers or employees with an exercise price less
than 85% of fair market value on the date of grant unless ratified or approved
by a majority of the shareholders, excluding directors, officers, employees and
their spouses.

         REGISTRATION. Tracker U.S. plans to file a registration statement to
register the shares of Common Stock reserved for issuance under the 1994 Plan.
Shares issued upon exercise of outstanding stock options and sold after the
effective date of any such registration statement generally will be available
for resale in the public market.

         As of September 30, 1998, no grants had been made under the 1994 Plan,
other than the automatic option grants to the non-employee directors and the
grants to Messrs. Johnson and Gertzbein totalling 1,043,437 shares of restricted
stock discussed above.

CASH BONUS ARRANGEMENT

         Tracker U.S.'s Discretionary Cash Bonus Arrangement (the "Cash Bonus
Arrangement") is designed to provide a mechanism to allow specified employees to
share in the profits of Tracker U.S. Employees of Tracker U.S. who customarily
work at least 35 hours per week and have been employed for at least 12
consecutive months, and have been designated for participation by the
Compensation Committee are eligible to receive cash bonuses under the Cash Bonus
Arrangement. Tracker U.S. estimates that approximately three employees are
eligible to participate in the Cash Bonus Arrangement. Bonuses may be based on
merit, production or other individualized criteria, or may be paid based on each
Eligible Employee's (as defined in the 1994 Plan) assigned portion of a bonus
pool established in the discretion of the Compensation Committee. If bonuses are
to be paid based on a bonus pool, the Compensation Committee will determine the
criteria upon which the amount of each year's bonus pool will be 

                                       30
<PAGE>   34
based prior to the beginning of any such year. The Committee may also divide
Eligible Employees into classes and may designate the portion of any bonus pool
to be assigned to each such class. Any bonuses will be paid not later than 45
days after the end of the fiscal year for which the bonus is awarded. No bonuses
have been paid yet under the Cash Bonus Arrangement.

1995 STOCK WAGE AND FEE PAYMENT PLAN

         The Company's Board of Directors adopted a 1995 Stock Wage and Fee
Payment Agreement (the "1995 Wage Plan") on September 28, 1995. The purpose of
the 1995 Wage Plan was to retain and motivate participants in the 1995 Wage Plan
and to provide them with incentives and rewards more directly linked to the
profitability of the Company's business and increases in stockholder value.

         Six employees and one director of the Company were eligible to, and
elected to, participate in the 1995 Wage Plan. Under the 1995 Wage Plan, the
participants agreed to receive an aggregate of 770,000 shares of the Company's
Common Stock in lieu of certain wage payments or fees that the participants had
earned before October 1, 1995 but had not yet been paid and in lieu of all of
their respective wage payments or fees for the period from October 1, 1995
through September 30, 1996. The number of shares granted to the participants was
based upon a price per share of Common Stock of $1.00.

         No fees, commissions or other charges will be paid by the participants
in connection with the grants of shares to such persons under the 1995 Wage
Plan. The 1995 Wage Plan may not be altered, amended or modified except by
written agreement signed by the participants and Tracker U.S. As the 1995 Wage
Plan is a contract among the participants and Tracker U.S. relating to a
designated issuance of shares in lieu of wages or fees and is not an ongoing
employee benefits program pursuant to which grants or awards can be made on an
ongoing basis or pursuant to which plan funds are invested for the benefit of
participants, there is no separate administration of the 1995 Wage Plan. The
Company registered the shares issued under the 1995 Wage Plan under the
Securities Act.

1996 STOCK WAGE AND FEE PAYMENT PLAN

         The Board of Directors adopted a 1996 Stock Wage and Fee Payment Plan
(the "1996 Wage Plan") for the period October 1, 1996 through January 31, 1997.
The purpose of the 1996 Wage Plan was to reduce the Company's need for cash and
to retain and motivate participants and provide them with incentives and rewards
more directly linked to the profitability of the Company's business and
increases in stockholder value. Under the 1996 Wage Plan, the Company could
designate certain months during the period October 1, 1996 through January 31,
1997 as months in which it may compensate certain full-time employees and
non-employee (outside) directors in the form of stock, in lieu of cash, in whole
or in part (the "Designated Months"). Each full-time employee of the Company and
non-employee (outside) director of the Company may elect to receive his or her
compensation for the Designated Months in any combination of the following three
Options: (a) cash ("Option (a)"), (b) 50% discounted 

                                       31
<PAGE>   35
Common Stock ("Option (b)"), or (c) Common Stock at market value, with a
guaranteed three times future value ("Option (c)").

         Before the beginning of each calendar month in the period October 1996
through January 1997, the Company had notified each full-time employee or
non-employee (outside) director who had elected Option (b) or Option (c) whether
the month will be a Designated Month. If it was, then the affected employee or
director received his or her compensation for the Designated Month in the
previously elected form.

         An employee or director who elected Option (b) received on the first
business day of each Designated Month (or shortly thereafter) a number of shares
equal to his or her compensation for the month, divided by one-half of the
"Month's Original Price." The "Month's Original Price" means the average quoted
closing bid price for the last five business days of the previous month. The
employee or director agreed that if he terminated service before the end of the
Designated Month, he would return to the Company the portion of shares (or their
then-cash value) that corresponds to the remainder of the Designated Month.
However, in the case of an employee who was laid off or otherwise terminated by
the Company (other than for cause) before the end of the Designated Month, he
would not be obligated to return any such shares or cash value.

         An employee or director who elected Option (c), would receive on the
first business day of each Designated Month (or shortly thereafter) the number
of shares equal to his or her compensation for the month, divided by the Month's
Original Price. The employee or director agreed that if he terminated service
before the end of the Designated Month, he would return to the Company the
proportion of shares (or their cash value) that correspond to the remainder of
the Designated Month. However, in the case of an employee who was laid off or
otherwise terminated by the Company (other than for cause) before the end of the
Designated Month, he would not be obligated to return any such shares or cash
value.

         If an employee or director did not dispose of any Option (c) shares for
30 months after the shares were allocated and remains an employee or director of
Tracker for such period, then the Company will make a payment to the employee or
director equal to the excess, if any, of (1) three times the amount of cash
compensation that the employee or director elected to receive in the form of
Option (c) shares for all the Designated Months (the "Guaranty Price") minus (2)
the product of (A) the average quoted bid price for the five business days
before the conclusion of the 30 month period (the "30 Month Price") and (B) the
number of Option (c) shares. In the case of an employee, the condition that he
still be an employee at the end of the 30-month period does not apply if the
employee is laid off or otherwise terminated by Tracker (other than for cause)
before the end of the period. The Company has the option to pay the excess in
the form of cash, additional stock, or both, or to purchase Option (c) shares
for the Guaranty Price.

         The Company registered 1,400,000 shares for the 1996 Wage Plan under
the Securities Act. No fees, commissions or other charges will be paid by
participants in connection with the grants of shares to such persons under the
1996 Wage Plan. The 1996 Wage Plan may not be altered, amended or modified
except by written agreement signed by the participants and Tracker U.S. As the
1996 Wage Plan is a contract among the participants and Tracker U.S. relating to
a 

                                       32
<PAGE>   36
designated issuance of shares in lieu of compensation and is not an ongoing
employee benefits program pursuant to which grants or awards can be made on an
ongoing basis or pursuant to which plan funds are invested for the benefit of
participants, there is no separate administration of the 1996 Wage Plan.



     ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


         The following table sets forth certain information regarding the
beneficial ownership of the Common Stock as of September 30, 1998 by (i) each
person known to the Company to own beneficially more than 5% of the total voting
stock of the Company, (ii) the Chief Executive Officer and the other executive
officers of the Company named in the Summary Compensation Table, (iii) each of
the Company's directors, and (iv) all directors and officers of the Company as a
group. Except as otherwise indicated below, to the knowledge of the Company, all
persons listed below have sole voting and investment power with respect to their
shares of Common Stock, except to the extent that authority is shared by spouses
under applicable law. The Common Stock is the only outstanding class of equity
securities of Tracker U.S. As of September 30, 1998, there were approximately
450 record holders of Common Stock.


<TABLE>
<CAPTION>
                                                  Number of
                                                  Shares of               Total Number            Percentage
      Beneficial Owner                          Common Stock             Of Shares (1)            of Total Number
--------------------------------------        -----------------         -----------------         -------------
<S>                                            <C>                      <C>                       <C>   
      Bruce I. Lewis (2)                          2,939,246                2,939,246                 11.80%
      180 Dundas Street W., Suite
      1505
      Toronto, Ontario
      Canada M5G 1Z8

      Saturn Investments, Inc. (3)                1,052,564                1,052,564                 4.23%
      c/o Anthony Bonanno, Esq.
      Gibson, Dunn & Crutcher
      1050 Connecticut Ave. N.W.
      Washington, D.C. 20036-5306

      Ismail A. Abudawood (4)                     1,281,136                1,281,136                 5.15%
      P.O. Box 227
      Jeddah, 21411
      Kingdom of Saudi Arabia

      Ayman I. Abudawood (4)                      1,073,264                1,073,264                 4.31%
      P.O. Box 227
      Jeddah, 21411
      Kingdom of Saudi Arabia

      Osama I. Abudawood(4)                       1,115,564                1,115,564                 4.48%
      P.O. Box 227
      Jeddah, 21411
      Kingdom of Saudi Arabia

      Anas I. Abudawood(4)                        1,067,264                1,067,264                 4.29%
      P.O. Box 227
      Jeddah, 21411
      Kingdom of Saudi Arabia

      Executive Officers and                      2,939,436                2,939,436                 11.8%
      Directors as a group,
      including those named
      above (one person)

</TABLE>


                                       33
<PAGE>   37

(1)      Percentage of ownership is based upon 24,898,394 shares of Common Stock
         beneficially owned on September 30, 1998, including 22,340,628 shares
         of Common Stock, currently exercisable warrants to purchase 750,000
         shares of Common Stock, currently exercisable options to purchase
         40,000 shares of Common Stock, 667,766 shares reserved for issuance
         under the Company's currently convertible Convertible Debentures,
         200,000 shares reserved for issuance under the Toda Option and 900,000
         shares reserved for issuance under the Merchant Partners Option.

(2)      Includes Common Stock over which Mr. Lewis has voting power pursuant to
         agreements with Mr. Jonathan Lewis, Mr. Lewis' son.

(3)      Saturn has a contractual right, which to date it has not exercised, to
         have one representative on the Company's Board of Directors, which
         representative may be removed only with the written consent of Saturn.
         Saturn also has the right to attend Board meetings and to receive
         certain information regarding the Company.

(4)      Includes Convertible Debentures which are currently convertible into
         228,572 shares of Common Stock and which are held by Wafr Holdings N.V.
         ("Wafr"). Ismail A. Abudawood beneficially owns Wafr. Accordingly, he
         may be deemed to be a beneficial owner of the shares issuable pursuant
         to the Convertible Debentures.




             ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


TRANSACTIONS WITH MANAGEMENT

         The Company has entered into employment agreements containing severance
arrangements with certain of its executive officers, which provide for payment
under certain circumstances to each officer of compensation through the
remainder of the terms of the agreements. See "EXECUTIVE COMPENSATION -
Employment Contracts, Termination of Employment and Change of Control." The
Company's Certificate of Incorporation and By-laws provide for indemnification
of all Directors and officers. In addition, each Director nominee of the
Company, when elected, will enter into a separate indemnification agreement with
the Company.

         The Company has agreed with certain state regulatory authorities that
so long as the Company's securities are registered in such states, the Company
will not make loans to its officers, directors, employees, or principal
stockholders, except for loans made in the ordinary course of business, such as
travel advances, expense account advances, relocation advances, or reasonable
salary advances.

         Further, all future transactions between the Company and its executive
officers, Directors, employees, 5% stockholders and affiliates (including for
example future loans and any forgiveness of loans, none of which is
contemplated) will be subject to the approval of a majority of the independent,
disinterested members of the Board of Directors. In addition, such future
transactions will be for bona fide business purposes and will be on terms that
are no less favorable to the Company than those that could be negotiated with
unaffiliated parties.

GLOBAL TRACKER

         In February 1998, Global Tracker Corporation, a newly organized
Ontario, Canada corporation, acquired substantially all of the assets of Tracker
Canada in a bankruptcy proceeding. Jay S. Stulberg, the Company's Chief
Financial Officer and Director nominee, is the 

                                       34
<PAGE>   38
sole shareholder, officer and Director of Global Tracker. Following the
bankruptcy proceeding, Global Tracker made available to the Company the assets
formerly owned by Tracker Canada to permit the Company to carry on Tracker
Canada's business. Since February 1998, Global Tracker has expended
approximately $400,000 to support Tracker U.S.'s business operations. Bruce I.
Lewis, the Company's Chief Executive Officer, has provided Global Tracker with
approximately $300,000 with which to purchase Tracker Canada's assets and
operate Global Tracker. Under a license agreement with Global Tracker, the
Company will pay Global Tracker a 12% gross royalty on its sales. It is
anticipated that Mr. Stulberg will enter into an employment agreement with the
Company and acquire equity in the Company through the exercise of stock options
he will receive as a condition of his employment or otherwise. See "BUSINESS -
Background - Global Tracker," and "DIRECTORS AND EXECUTIVE OFFICERS OF
REGISTRANT."

REORGANIZATION

         On July 12, 1994, Tracker U.S. (then Ultra Capital Corp., a Nevada
corporation) and Tracker Canada completed the Reorganization contemplated by the
Reorganization Agreement, dated as of May 26, 1994, by and among Tracker U.S.,
Jeff W. Holmes, R. Kirk Blosch and Tracker Canada, as amended (the
"Reorganization Agreement"). The Reorganization resulted in a change in control
of Tracker U.S. Pursuant to the Reorganization Agreement, Tracker U.S. acquired
all the issued and outstanding voting shares of Tracker Canada in exchange for
shares of Tracker U.S.'s capital stock representing, at the time, approximately
90% of the total voting shares of Tracker U.S. As part of the Reorganization,
Tracker U.S. (then Ultra Capital Corp.) changed its domicile from Nevada to
Delaware and changed its corporate name to "The Tracker Corporation of America,
Inc."

INVESTMENT BY SATURN INVESTMENTS, INC.

         In March 1994, prior to the Reorganization, Tracker Canada received an
investment of CDN $3,350,000 from Stalia Holdings B.V. ("Stalia") for units
consisting of common shares of Tracker Canada and warrants to purchase common
shares of Tracker Canada. In connection with that investment by Stalia, Tracker
Canada on March 14, 1994 entered into a Stock Option Agreement with Stalia (the
"Stalia Option Agreement") and Tracker Canada and certain of its stockholders
entered into a Right of First Refusal, Co-Sale and Voting Agreement with Stalia
(the "Stalia Agreement"). As described below, Stalia has transferred its shares
and its rights under the Stalia Option Agreement and the Stalia Agreement to
Saturn Investments, Inc. ("Saturn"). On May 27, 1997, Tracker Canada and Saturn
entered into a Modification agreement ("Modification Agreement") which
immediately terminated the Stalia Option Agreement. On May 27, 1997, Tracker
Canada and Saturn entered into a Modification Agreement which immediately
terminated the rights of co-sale set forth in Article III of the Stalia
Agreement.

         In the Stalia Agreement, Tracker Canada granted to Stalia a right of
first refusal to purchase its pro rata share of all New Securities which Tracker
Canada may from time to time propose to issue and sell. The Stalia Agreement
defines "New Securities" to mean any capital stock, rights to purchase capital
stock, and securities of any type convertible into capital stock; provided,
however, that "New Securities" does not include: (i) securities issued pursuant
to a 

                                       35
<PAGE>   39
stock dividend, stock split, combination or other reclassification; (ii)
securities covered by a registration statement declared effective by the
Commission or a final prospectus for which a receipt has been issued by the
relevant securities regulatory authority in each of the Provinces of Canada
where the securities are issued and sold; (iii) certain shares issued pursuant
to the exercise of warrants; and (iv) certain shares issued for a specified
price pursuant to a private placement underwritten by an investment banker. This
right of first refusal could make it more difficult for the Company to raise
additional equity financing under terms satisfactory to the Company. On May 27,
1997, Tracker Canada and Saturn entered into a Modification Agreement which
amended the definition of New Securities so as to exclude securities covered by
a registration statement which has been declared effective under the 1933 Act or
securities issued pursuant to an employee stock option, stock purchase, stock
wage or other similar plan or securities issued after May 27, 1997, relating to
Convertible Securities that were outstanding as of the date of the Modification
Agreement or securities issued to any person not party to the Modification
Agreement for the consideration other than cash.

         The Stalia Agreement also provides Stalia with the right (which to date
has not been exercised) to have one representative on Tracker Canada's Board of
Directors, which representative may be removed only with the written consent of
Stalia. Certain controlling shareholders agreed to vote their shares in favor of
the election of Stalia's representative to the Board of Directors. Stalia's
representative may be removed from the Board of Directors only with the written
consent of Stalia. Upon any resignation or removal of Stalia's representative,
certain controlling stockholders of the Company must exercise their best efforts
to replace such director as soon as possible with another nominee of Stalia. In
addition, by Modification Agreement, the Company confirmed that the Company and
Tracker Canada agrees to (a) allow Stalia or a nominee to attend Board meetings;
(b) provide Stalia, or its designee with copies of all communications regularly
made to the directors; (c) use best efforts to elect a nominee of Stalia to the
Company's Board; (d) provide monthly updates on the Company's business and
affairs; and (e) provide Stalia's counsel with all documentation relating to
issues which may affect Stalia.

         The Stalia Agreement, as amended by the Modification Agreement, further
provides, as a protective provision in favor of Stalia, that, without first
obtaining the written consent of Saturn, certain controlling shareholders,
subject to their fiduciary duties under Delaware law, shall not vote for, and
shall exercise their best efforts as significant shareholders of the Company to
ensure that the Board does not approve: (a) the liquidation of dissolution of
the Company; (b) the declaration or payment of any dividends (excluding
dividends declared in connection with any class of the Company's Preferred
Stock) or the making of any distribution out of the ordinary course of the
Company's business, whether in cash or any other property, to the holders of the
Common Stock of the Company; or (c) any material alteration in the rights,
preferences, privileges and restrictions of the Common Shares."

         The Stalia Agreement terminates upon the earlier of (a) the date on
which a registration statement of the Company registering any equity securities
of the Company for sale to the general public in a primary offering under the
1933 Act is declared effective or (b) March 14, 1999.


                                       36
<PAGE>   40
         Although the Stalia Option Agreement and the Stalia Agreement
originally were between Tracker Canada and Stalia, Stalia's consent to the
Reorganization was necessary pursuant to the terms of the Stalia Agreement.
Thus, at or about the time of the Reorganization, in connection with obtaining
Stalia's consent to the Reorganization, Tracker U.S., Tracker Canada and certain
controlling shareholders agreed that all obligations under the Stalia Agreement
applicable to Tracker Canada also apply to Tracker U.S., that references to
Tracker Canada in the Stalia Agreement shall be deemed to be references to
Tracker U.S. as well, and that references in the Stalia Agreement to common
shares of Tracker Canada shall be deemed to be references to the common stock of
Tracker Canada as well as the Common Stock of Tracker U.S. In addition, Tracker
Canada confirmed to Stalia that none of Stalia's rights under the Stalia Option
Agreement or the Stalia Agreement would be adversely affected by the
Reorganization. Accordingly, all the provisions discussed above apply to Tracker
U.S. as well as Tracker Canada notwithstanding that the original Stalia Option
Agreement and Stalia Agreement were between Stalia and Tracker Canada.

         As of January 31, 1996, Stalia transferred to Saturn, an affiliate of
Stalia, all of Stalia's rights under the Stalia Option Agreement and the Stalia
Agreement. Thus, references above to Stalia's rights shall be deemed to be
references to Saturn's rights.

CORPORATE RELATIONS GROUP

         The Company had obtained investor relations services from the Corporate
Relations Group ("CRG"), a stockholder of the Company. Pursuant to its
arrangements with CRG, the Company has paid, or caused to be paid, to CRG
$1,316,780 in cash and stock for investor relations services through June 25,
1996. On November 20, 1995, the Company entered into an agreement pursuant to
which CRG agreed to provide services to the Company for a period of one year and
the Company agreed to pay to CRG $570,000 or 326,000 freely tradable shares of
Common Stock upon execution of the agreement and to issue options to CRG to
purchase shares of Common Stock as follows: 100,000 shares at $2.00 per share
one year from the date of the agreement, 100,000 shares at $2.40 per share two
years from the date of the agreement, 100,000 shares at $2.60 per share three
years from the date of the agreement, 100,000 shares at $2.80 per share five
years from the date of the agreement, and 100,000 shares at $3.00 per share five
years from the date of the agreement.

         On November 4, 1996, the Company exercised an option within the
agreement and terminated the services of CRG. CRG had not provided any services
under the agreement and the Company had not made any payment to CRG.


                                       37
<PAGE>   41
                                     PART IV


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


a.       THE FOLLOWING FINANCIAL STATEMENTS ARE INCLUDED IMMEDIATELY FOLLOWING
         THIS REPORT:

         1.  Financial Statements
                                                                        Page No.
                                                                        --------
         Independent Auditor's Report                                     F-1
         Report of Independent Accountants                                F-2
         Consolidated Balance Sheet                                       F-3
         Consolidated Statement of Operations                             F-4
         Consolidated Statement of Cash Flows                             F-5
         Consolidated Statement of Shareholders' Equity (Deficit)         F-6
         Notes to Financial Statements                                    F-10

         2.  Financial Statement Schedules

                                        - None -

   3.  See (c) for exhibits filed as part of this report


b.  REPORTS ON FORM 8-K

         During the period from January 1, 1998 through October 8, 1998, the
Company filed Current Reports on Form 8-K with the Securities and Exchange
Commission on February 4, 1998, September 14, 1998, September 24, 1998 and
October 8, 1998.


C.  EXHIBITS

NUMBER              DESCRIPTION


 2.1++++          Reorganization Agreement Among Ultra Capital Corp. (the
                  predecessor of the Registrant), Jeff W. Holmes, R. Kirk Blosch
                  and the Tracker Corporation dated May 26, 1994, as amended by
                  Amendment Number One dated June 16, 1994, Amendment Number Two
                  dated June 24, 1994, and Amendment Number Three dated June 30,
                  1994, Extension of Closing dated June 23, 1994, and July 11,
                  1994 letter agreement.

 2.2++++          Agreement and Plan of Merger dated July 1, 1994 between Ultra
                  Capital Corp. (the predecessor of the Registrant) and the
                  Registrant

                                       38
<PAGE>   42
 3.1++++          Certificate of Incorporation, as corrected by Certificate of
                  Correction of Certificate of Incorporation dated March 27,
                  1995, and as amended by Certificate of Amendment to the
                  Certificate of Incorporation dated November 1, 1995, and
                  Certificate of Designation of Rights, Preferences and
                  Privileges of $1,000.00 6% Cumulative Convertible Preferred
                  Stock of the Registrant dated April 19, 1996

 3.2++++          Bylaws

 4.1++++          Specimen Common Stock Certificate

 9.1++++          Agreement dated December 21, 1993 among 1046523 Ontario
                  Limited, Gregg C. Johnson and Bruce Lewis

9.2++++           Right of First Refusal, Co-Sale and Voting Agreement dated
                  March 14, 1994 between The Tracker Corporation, Stalia
                  Holdings B.V., I. Bruce Lewis, MJG Management Accounting
                  Services Ltd., Spire Consulting Group, Inc., 1046523 Ontario
                  Limited, Mark J. Gertzbein, Gregg C. Johnson and Jonathan B.
                  Lewis, as confirmed by letter dated June 22, 1994 and
                  Agreement dated July 1994

 10.1++++         1994 Stock Incentive Plan of the Registrant, as amended by
                  Amendment No. 1 to the 1994 Stock Incentive Plan

 10.2++++         Discretionary Cash Bonus Arrangement of the Registrant

 10.3++++         Form of Indemnification Agreement entered into between the
                  Registrant and each of its Directors

 10.4++++         Employment Agreement dated June 30, 1994 between the
                  Registrant and I. Bruce Lewis, as amended by Amendment to
                  Employment Agreement dated July 12, 1995

 10.5++++         Employment Agreement dated June 30, 1994 between the
                  Registrant and Mark J. Gertzbein, as amended by Amendment to
                  Employment Agreement dated July 12, 1995

 10.6++           Marketing Agreement between the Registrant and The L.L.
                  Knickerbocker Company, Inc. dated March 15, 1995

 10.7++++         Lease dated October 18, 1993 between The Dundas/Edward Centre
                  Inc. and The Tracker Corporation

 10.8++++         Corporate Relations Agreement dated February 24, 1994 between
                  Corporate Relations Group, Inc. and The Tracker Corporation,
                  as amended by letter agreement dated January 16, 1995 and by
                  Amendment to Corporate Relations and Marketing Agreement dated
                  June 22, 1995

                                       39
<PAGE>   43
 10.9++++         Consulting arrangement with Gregg C. Johnson effective August
                  12, 1995

 10.10++++        Right of First Refusal, Co-Sale and Voting Agreement dated
                  March 14, 1994 between The Tracker Corporation, Stalia
                  Holdings B.V., I. Bruce Lewis, MJG Management Accounting
                  Services Ltd., Spire Consulting Group, Inc., 1046523 Ontario
                  Limited, Mark J. Gertzbein, Gregg C. Johnson and Jonathan B.
                  Lewis, as confirmed by letter dated June 22, 1994 and
                  Agreement dated July 1994 (contained in Exhibit 9.2)

 10.11++++        Stock Option Agreement dated March 14, 1994 between The
                  Tracker Corporation and Stalia Holdings B.V., as confirmed by
                  letter dated June 22, 1994

 10.12++++        Letter from DHL International Express Ltd to The Tracker
                  Corporation dated March 8, 1994

 10.13++++        Agreement dated September 1994 between The Tracker Corporation
                  and Purolator Courier Ltd.

 10.14++++        National Account Agreement dated September 15, 1994 between
                  Mail Boxes Etc. USA, Inc. and the Registrant, as amended by
                  Amendment to National Account Agreement dated September 14,
                  1994

 10.15++++        Letter agreement dated March 15, 1995 between The Tracker
                  Corporation and Black Photo Corporation, as amended by
                  facsimile amendment dated March 4, 1995

 10.16++++        Letter agreement dated September 14, 1995 between The Tracker
                  Corporation and Amerasia International Holdings Limited

 10.17++++        Letter Agreement dated August 31, 1995 between The Tracker
                  Corporation and Tokai Boeki Co. Ltd.

 10.18++++        Letter agreement dated October 5, 1993 between The Tracker
                  Corporation and Symbol Technologies, Inc., as amended by
                  letter from The Tracker Corporation to Symbol Technologies
                  Canada, Inc. dated November 23, 1995, and letter from Symbol
                  Technologies Canada, Inc. to The Tracker Corporation dated
                  November 27, 1995

 10.19++++        Assignment World-Wide dated May 12, 1994 from I. Bruce Lewis
                  to the Tracker Corporation

 10.20++++        Exchange Agency and Trust Agreement dated July 12, 1994 among
                  Ultra Capital Corp. (the predecessor of the Registrant), The
                  Tracker Corporation and Montreal Trust Company of Canada

                                       40
<PAGE>   44
10.21++++         Guarantee Agreement dated July 12, 1994 between Ultra Capital
                  Corp. (the predecessor of the Registrant) and The Tracker
                  Corporation

 10.22++++        1995 Stock Wage and Fee Payment Agreement

 10.23++++        Agreement dated August 10, 1995 between The L.L. Knickerbocker
                  Company, Inc. and the Registrant

 10.24+++         Share Purchase Agreement dated July 29, 1994 among The Tracker
                  Corporation, Page-Direct Ltd., Marc Bombenon, Marc Bombenon
                  Enterprises Ltd. and 614593 Alberta Ltd.

 10.25++++        General Release dated June 15, 1995 among The Tracker
                  Corporation, 614593 Alberta Ltd., 1069232 Ontario Inc.,
                  Gowling, Strathy & Henderson, Page-Direct Ltd., Marc Bombenon
                  Enterprises Ltd. and Mark Bombenon.

 10.26+++++       Agreement Between The International Association of Chiefs of
                  Police and The Tracker Corporation dated February 13, 1996

 10.27+++++       Letter agreement dated January 26, 1996 between The Tracker
                  Corporation and Consumers Distributing Inc.

 10.28+++++       The Tracker Corp./Tracker Referral Network, Int'l Marketing
                  Agreement dated April 8, 1996 between The Tracker Corporation
                  and Tracker Referral Network, Int'l

 10.29+++++       Letter agreement dated March 7, 1996 between The Tracker
                  Corporation and Samsonite Canada Inc.

 10.30+++++       Letter agreement dated March 22, 1996 between The Tracker
                  Corporation and Sony of Canada Ltd.

 10.31+++++       Lead Generation/Corporate Relations Agreement dated November
                  20, 1995 between The Tracker Corporation and Corporate
                  Relations Group, Inc., as amended by Amendment to the
                  Marketing Agreement between the Registrant and Corporate
                  Relations Group, Inc. dated December 5, 1995

 10.32+++++       Independent Contractor Agreement between The Tracker
                  Corporation and Datatrack Inc. dated January 12, 1996

 10.33+++++       Services Agreement and Registration Rights Agreement and
                  Options Agreement dated July 10, 1996 between the Registrant
                  and Merchant Partners, L.P.

                                       41
<PAGE>   45
 10.34++++++      Exclusive Agent License Agreement dated April 4, 1997 between
                  The Tracker Corporation of America and Executive Trading Ltd.

 10.35++++++      Agreement dated May 15, 1997 between The Tracker Corporation
                  and Liberty Health.

 10.36++++++      Agreement dated May 22, 1997 between The Tracker Corporation
                  of America and Schwinn Cycling & Fitness Inc.

 10.37++++++      Modification Agreement dated May 27, 1997 between The Tracker
                  Corporation of America, Saturn Investments, Inc., The Tracker
                  Corporation, I. Bruce Lewis, Mark J. Gertzbein, and Jonathan
                  B. Lewis.

 10.38            Agreement dated July 1, 1998 between The Global Tracker
                  Corporation and Warrantech Additive, Inc.

 10.39            License Agreement dated as of July 30, 1998 between The Global
                  Tracker Corporation and the Tracker Corporation of America,
                  Inc.

 10.40            Employment Agreement dated September 24, 1996 between I. Bruce
                  Lewis and The Tracker Corporation of America, Inc.

 21.1++++         List of subsidiaries of the Registrant

 23               Consent of Independent Accountants

 27.1             Financial Data Schedule, Fiscal Year Ended March 31, 1998

 27.2             Financial Data Schedule, Fiscal Year Ended March 31, 1997 --
                  Restated
--------------------

+                 Incorporated by reference from the Registrant's Current
                  Report on Form 8-K dated July 12, 1994.

++                Incorporated by reference from the Registrant's Current
                  Report on Form 8-KA dated February 28, 1995 (filed March 15,
                  1995).

+++               Incorporated by reference from the Registrant's Current
                  Report on Form 8-K dated July 29, 1994 (filed August 12,
                  1994).

++++              Incorporated by reference from the Registrant's Registration
                  Statement on Form S-1 (No. 33-99686).

+++++             Incorporated by reference from the Registrant's Annual
                  Report on Form 10-K dated March 31, 1996 (filed July 15,
                  1996).

++++++            Incorporated by reference from the Registrant's Annual
                  Report on Form 10-K dated March 31, 1997 (filed July 3,
                  1997).



                                       42
<PAGE>   46
ITEM 15. SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.


THE TRACKER CORPORATION OF AMERICA,
a Delaware corporation



By:       /s/ Bruce I. Lewis
    --------------------------------------------------------------
    Bruce I. Lewis, Chairman of the Board, President, Chief
    Executive Officer, Chief Financial Officer (Principal Executive Officer and
    Principal Financial Officer and Principal Accounting Officer)

Dated: November 3, 1998

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.



    Dated: November 3, 1998                          By:    /s/ Bruce I. Lewis  
                                                         -----------------------
                                                           Bruce I. Lewis
                                                           Chairman of the
                                                           Board, President,
                                                           Chief Executive
                                                           Officer, Chief
                                                           Financial Officer
                                                           (Principal Executive
                                                           Officer, Principal
                                                           Financial Officer and
                                                           Principal Accounting
                                                           Officer)

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT

         The Registrant has not sent out proxy materials to security-holders for
the fiscal year ended March 31, 1998. A copy of this Report and proxy materials
will be sent out to security-holders subsequent to the filing of this Report.
The Registrant is not providing any annual report (other than this Report) to
security-holders. The Registrant will furnish the proxy materials to the
Commission when they are sent out to the security-holders. Such materials shall
not be deemed to be "filed" with the Commission or otherwise subject to the
liabilities of Section 18 of the Act.



                                       43
<PAGE>   47
                             THE TRACKER CORPORATION
                                   OF AMERICA
                          (A DEVELOPMENT STAGE COMPANY)


                                  CONSOLIDATED
                              FINANCIAL STATEMENTS
                             MARCH 31, 1998 and 1997
<PAGE>   48
                          INDEPENDENT AUDITOR'S REPORT


To the Board of Directors and Stockholders of
The Tracker Corporation of America, Inc.


We have audited the accompanying consolidated balance sheet of The Tracker
Corporation of America, Inc. and Subsidiary as of March 31, 1998, and the
related consolidated statements of operations, stockholders' deficit, and cash
flows for the year then ended. 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 audit. The financial statements of The
Tracker Corporation of America, Inc. and Subsidiary as of March 31, 1997 and
1996 and for the years then ended and from inception at May 6, 1993 through the
year ended March 31, 1997 were audited by other auditors whose reports dated
June 24, 1997 and May 28, 1996 included an explanatory paragraph that described
the going concern uncertainties discussed in Note 2 to the consolidated
financial statements.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of The
Tracker Corporation of America, Inc. and Subsidiary as of March 31, 1998, and
the consolidated results of their operations and their cash flows for the year
then ended in conformity with generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Notes 1 and 2
to the consolidated financial statements, the Company is in the development
stage and has suffered significant losses since inception. Additionally, the
Company discontinued its telemarketing program for its credit card registration
business. The Company is relying upon affiliated parties to fund its cash flow
deficiencies through debt and equity infusions. Those conditions raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Notes 1 and
2. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.


/s/
-----------------------------------
Hirsch Silberstein & Subelsky, P.C.

Farmington Hills, Michigan

September 18, 1998


                                       
                                      F-1
<PAGE>   49
                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
The Tracker Corporation of America, Inc.

In our opinion, the accompanying consolidated balance sheet and the related 
statements of operations, of cash flows and of stockholders' equity (deficit) 
present fairly, in all material respects, the financial position of The Tracker 
Corporation of America, Inc. and its subsidiary at March 31, 1997 and the 
results of their operations and their cash flows for the two year period ended 
March 31, 1997 and for the period from inception at May 6, 1993 through March 
31, 1997 in conformity with generally accepted accounting principles. 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 of these statements in accordance with 
generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates 
made by management, and evaluating the overall financial statement 
presentation. We believe that our audits provide a reasonable basis for the 
opinion expressed above.

The accompanying financial statements have been prepared assuming that the 
Company will continue as a going concern. As discussed in Note 2 to the 
consolidated financial statements, the Company is a development stage company 
and had not yet been able to obtain significant outside financing. As a result, 
there is a substantial doubt about its ability to continue as a going concern. 
Management's plans in regard to these matters are also described in Note 2. The 
financial statements do not include any adjustments that might result from the 
outcome of this uncertainty.

PricewaterhouseCoopers LLP

Phoenix, Arizona
June 24, 1997



                                      F-2
<PAGE>   50
                    THE TRACKER CORPORATION OF AMERICA, INC.
                         ( A DEVELOPMENT STAGE COMPANY)

                           CONSOLIDATED BALANCE SHEET

                                     ASSETS

<TABLE>
<CAPTION>
                                                                               MARCH 31,        MARCH 31,
                                                                                 1998             1997
                                                                              ------------    ------------
<S>                                                                           <C>             <C>
Current assets
  Cash and cash equivalents                                                   $       --      $    105,213
  Short-term investment                                                               --              --
  Accounts receivable                                                                 --           133,613
  Prepaid expenses and deposits                                                       --           359,526
  Inventory                                                                           --            24,338
  Deferred charges                                                               1,187,699       2,820,064
                                                                              ------------    ------------
       Total current assets                                                      1,187,699       3,442,754

Due from Stockholders                                                               14,072          61,487
Deferred charges                                                                   275,043         315,837
Property and equipment (net)                                                          --           418,267
                                                                              ------------    ------------

       Total assets                                                           $  1,476,814    $  4,238,345
                                                                              ============    ============


                                        LIABILITIES & STOCKHOLDERS' DEFICIT

Current liabilities
  Accounts payable                                                            $    440,835    $    468,764
  Accrued liabilities                                                              528,399         373,687
  Deferred revenue                                                               1,798,727       4,509,401
  Debenture payable                                                                 31,809          83,991
  Convertible debentures                                                           475,790         590,746
                                                                              ------------    ------------
       Total current liabilities                                                 3,275,560       6,026,589


Deferred revenue                                                                   412,846         613,131

Commitments (Note 10)                                                                 --              --

Stockholders' deficiency
  $1000 6% Convertible preferred stock, $.001 par value, 500,000 shares
    authorized, Nil (Nil - March 31, 1997) shares issued and outstanding              --              --

   Common stock, $.001par value, 30,000,000 shares authorized,
     22,340,628 (15,925,505 - March 31, 1997) shares issued and outstanding         19,718          15,925



  Class B voting common stock, $0.00000007 par value, 20,000,000 shares
    authorized, 2,622,484 (4,862,537 - March 31, 1997) issued
    and outstanding, (Nil - March 31, 1998) shares issued and outstanding               --              --

  Paid-in capital                                                               15,371,641      15,207,895
  Other capital                                                                   (356,002)       (394,333)
  Deficit accumulated during the development stage                             (17,001,283)    (16,910,816)
  Cumulative translation adjustment                                               (245,665)       (320,046)
                                                                              ------------    ------------

    Total stockholders' deficit                                                 (2,211,591)     (2,401,375)
                                                                              ------------    ------------


    Total liabilities and stockholders' deficit                               $  1,476,814    $  4,238,345
                                                                              ============    ============
</TABLE>


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.


                                        
                                      F-3
<PAGE>   51
                    THE TRACKER CORPORATION OF AMERICA, INC.

                      CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
                                              FROM INCEPTION
                                               (MAY 6, 1993)                        YEAR ENDED
                                             through March 31,                       March 31,
                                             -----------------      --------------------------------------------

                                                   1998                  1998            1997           1996
                                               ------------         ------------    ------------    ------------
<S>                                          <C>                    <C>             <C>             <C>
REVENUE                                        $    306,721         $     51,551    $    138,462    $    106,522

Cost of sales                                       100,294               20,660          35,375          40,230
                                               ------------         ------------    ------------    ------------

Gross profit                                        206,428               30,891         103,087          66,292
                                               ------------         ------------    ------------    ------------

Development costs
  Operational                                     1,521,860               53,647          38,392         592,880
  Information systems                               930,032               26,613          17,373         262,942
  Sales and marketing                             3,437,044                7,928          54,366       1,031,041
  General and administrative                      7,836,231               95,221         156,439       4,270,159
                                               ------------         ------------    ------------    ------------

Total development costs                          13,725,166         $    183,408    $    266,570       6,157,022
                                                                                                    

Loss from continuing operations                 (13,518,739)            (152,517)       (163,483)     (6,090,730)

Gain (loss) from discontinued operation          (3,482,545)              62,050      (3,544,595)           --
                                               ------------         ------------    ------------    ------------

Net loss applicable to common stock            $(17,001,283)        $    (90,467)   $(3,708,078)    $ (6,090,730)
                                               ============         ============    ============    ============



EARNINGS (LOSS) PER SHARE OF COMMON STOCK

Loss from continuing operations                $    (1.4164)            (0.0071)   $     (0.2159)   $    (0.5726)

Loss from discontinued operation                    (0.2901)              0.0029         (0.2064)           --
                                               ------------         ------------    ------------    ------------

NET LOSS                                       $    (1.7065)        $    (0.0042)   $    (0.4222)   $    (0.5726)
                                               ============         ============    ============    ============

WEIGHTED AVERAGE NUMBER OF SHARES
   OUTSTANDING                                   12,003,255           21,480,767      17,177,476      10,637,237
                                               ============         ============    ============    ============
</TABLE>


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.


                                       

                                      F-4
<PAGE>   52
                    THE TRACKER CORPORATION OF AMERICA, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                      CONSOLIDATED STATEMENT OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                            FROM INCEPTION
                                                                             (May 6, 1993)    Year Ended      Year Ended
                                                                           through March 31    March 31        March 31
                                                                                 1998            1998            1997
                                                                           ----------------  ------------    ------------
<S>                                                                        <C>               <C>             <C>
Cash flows from (used in) operating activities:
  Net loss                                                                   $(17,001,283)   $    (90,467)   $ (3,708,078)
  Adjustments to reconcile net loss to net cash from
  operating activities:
    Depreciation                                                                  380,019          12,893         131,780
    Loss on sale of long-term investment                                           13,414            --            13,414
    Rent, consulting and marketing services, employee
     compensation settled via the issuance of company
     shares                                                                     5,284,144         165,870       1,245,473
    Changes in assets and liabilities:
        Prepaid expenses and deposits                                             (17,273)        359,526        (191,181)
        Accounts receivable                                                          --           133,613        (126,252)
        Short-term investment                                                        --              --           221,190
        Inventory                                                                    --            24,338          91,274
        Deferred charges                                                       (1,462,742)      1,673,159      (2,995,917)
        Deferred revenue                                                        2,211,573      (2,910,959)      4,828,408
        Accounts payable and accrued liabilities                                  983,879         126,783          24,061
                                                                             ------------    ------------    ------------

  Net cash used in operating activities                                        (9,608,269)       (505,244)       (465,828)
                                                                             ------------    ------------    ------------

Cash flows from (used in) investing activities:
  Acquisition of fixed assets                                                       6,028         790,661         (13,006)
  Loan to stockholders                                                           (370,484)         47,415          (8,911)
  Repayment of loans to stockholders                                              356,412            --           142,611
  Note receivable                                                                (200,317)           --              --
  Repayment of note receivable                                                    200,317            --           178,350
  Long-term investment                                                         (2,301,372)           --           (10,929)
  Unwind of long-term investment                                                2,287,958            --              --
                                                                             ------------    ------------    ------------

  Net cash from (used in) investing activities                                    (21,458)        838,076         288,115
                                                                             ------------    ------------    ------------

Cash flows from (used in) financing activities:
  Issuance of common shares                                                     8,952,530          30,000            --
  Issuance of preferred shares                                                  1,050,000            --         1,050,000
  Issuance of convertible subordinated debentures                               2,189,529            --              --
  Repayment of debentures and convertible subordinated debentures                (297,401)       (167,138)       (130,263)
  Share issue costs                                                            (1,684,735)           --          (224,741)
                                                                             ------------    ------------    ------------
  Net cash from (used in) financing activities                                 10,209,923        (137,138)        694,996
                                                                             ------------    ------------    ------------

Effect of exchange rate changes                                                  (580,196)       (300,907)       (490,914)
                                                                             ------------    ------------    ------------

Increase (decrease) in cash and cash equivalents during                                 0        (105,213)         26,369
  the period

Cash and cash equivalents, beginning of period                                       --           105,213          78,844
                                                                             ------------    ------------    ------------

Cash and cash equivalents, end of period                                                0               0    $    105,213
                                                                             ============    ============    ============

Supplemental schedule of noncash financing activities
  The Company issued certain shares of its Class B voting common stock for
  service and for nominal values
  See Consolidated Statement of Stockholders' Equity (Deficit)
</TABLE>


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


                                       

                                      F-5
<PAGE>   53
                    THE TRACKER CORPORATION OF AMERICA, INC.
                          (A DEVELOPMENT STAGE COMPANY)

             CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)


<TABLE>
<CAPTION>
                                                                     SHARES                                AMOUNTS
                                                      -------------------------------------    --------------------------------

                                                                                                                      Paid-in
                                                                                    Class B                          Capital in
                                                      Preferred      Common          Common    Preferred    Common     Excess
                                                        Stock         Stock          Stock       Stock       Stock     of Par
                                                        -----         -----          -----       -----       -----     ------
<S>                                                   <C>           <C>            <C>         <C>         <C>       <C>
Shares issued to officers at inception
  (Cash - $Nil)                                                                    5,089,286   $   -       $    -    $       -

Shares issued for cash (Cash - $4,714,188)                                           884,729                          4,714,188

Shares issued in lieu of rent  (note 9-x)
  (Cash - $Nil)                                                                       60,871                            324,344

Share issue costs                                                                                                      (466,142)

Translation adjustment

Net loss

Balance at March 31, 1994                                                          6,034,886       -            -     4,572,390

Shares issued for cash (Cash - $1,175,797)                                           234,517                          1,175,797

Shares issued in lieu of rent  (note 9-x)
  (Cash - $Nil)                                                                        5,777                             30,121

Reverse merger with The Tracker Corporation
on July 12, 1994 (Cash - $100)                                        739,219                                 739          (639)

Shares issued from Regulation S offering
  (including 79,658 shares at $7 per share
  for consulting services and 3,571 shares
  at $5.50 per share for the purchase of
  fixed assets) (Cash -$1,505,000)                                    860,000                                 860     2,900,840

Share proceeds to be received subsequent
  to March 31, 1995                                                                                                    (819,459)

Shares issued for consulting and marketing
  services (Cash-$Nil)                                                825,000         78,005                  825     2,204,153
Less: consulting and marketing services not
  yet received                                                       (814,583)                               (815)

Shares proceeds received from private placement
  on March 15, 1995 (Cash - $350,000)                                 500,000                                 500       349,500

Shares issued to employees for employment
  services (note 9-x) (Cash-$Nil)                                                     25,063                             74,409

Share issue costs                                                                                                      (779,495)

Translation adjustment

Net loss

Balance at March 31, 1995                                   -       2,109,636      6,378,248       -        2,109     9,707,617

</TABLE>

<TABLE>
<CAPTION>
                                                                              AMOUNTS
                                                        ------------------------------------------------------
                                                                                      Deficit
                                                                                    Accumulated
                                                                      Cumulative       During
                                                         Other       Translation    Development
                                                         Capital      Adjustment       Stage          Total
                                                         -------      ----------       -----          -----
<S>                                                     <C>          <C>            <C>            <C>
Shares issued to officers at inception
  (Cash - $Nil)                                         $       -     $      -      $        -     $       -

Shares issued for cash (Cash - $4,714,188)                                                           4,714,188

Shares issued in lieu of rent  (note 9-x)
  (Cash - $Nil)                                                                                        324,344

Share issue costs                                                                                     (466,142)

Translation adjustment                                                  (129,098)                     (129,098)

Net loss                                                                             (2,043,425)    (2,043,425)

Balance at March 31, 1994                                       -       (129,098)    (2,043,425)     2,399,867

Shares issued for cash (Cash - $1,175,797)                                                           1,175,797

Shares issued in lieu of rent  (note 9-x)
  (Cash - $Nil)                                                                                         30,121

Reverse merger with The Tracker Corporation
on July 12, 1994 (Cash - $100)                                                                             100

Shares issued from Regulation S offering
  (including 79,658 shares at $7 per share
  for consulting services and 3,571 shares
  at $5.50 per share for the purchase of
  fixed assets) (Cash -$1,505,000)                                                                   2,901,700
Share proceeds to be received subsequent
  to March 31, 1995                                                                                   (819,459)

Shares issued for consulting and marketing
  services (Cash-$Nil)                                                                               2,204,978
Less: consulting and marketing services not
  yet received                                           (2,086,685)                                (2,087,500)

Shares proceeds received from private placement
  on March 15, 1995 (Cash - $350,000)                                                                  350,000

Shares issued to employees for employment
  services (note 9-x) (Cash-$Nil)                                                                       74,409

Share issue costs                                                                                     (779,495)

Translation adjustment                                                  (159,026)                     (159,026)

Net loss                                                                             (5,068,583)    (5,068,583)

Balance at March 31, 1995                                (2,086,685)    (288,124)    (7,112,008)       222,909

</TABLE>


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


                                      F-6
<PAGE>   54
                    THE TRACKER CORPORATION OF AMERICA, INC.
                          (A DEVELOPMENT STAGE COMPANY)

            CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)




<TABLE>
<CAPTION>
                                                                     SHARES                               AMOUNTS
                                                     -------------------------------------   -----------------------------------

                                                                                                                     Paid in
                                                                                   Class B                          Capital in
                                                     Preferred      Common          Common   Preferred   Common       Excess
                                                       Stock         Stock          Stock      Stock      Stock       of Par
                                                     -------------------------------------   -----------------------------------
<S>                                                  <C>          <C>           <C>          <C>         <C>       <C>
Share proceeds received re Regulation S offering
   made before March 31, 1995 (Cash - $225,280)                                               $     -    $     -   $    819,459

Consulting services received re shares issued
   before March 31, 1995  (note 9-x) (Cash - $ Nil)                  14,582                                   14

Marketing services received re shares issued
    to LL Knickerbocker Co.  (Cash - $ Nil)                         266,664                                  265

Shares issued to Directors as compensation
  (note 9-x) (Cash - $Nil)                                           98,858                                   99         86,402

Shares issued to Amerasia for marketing services
  (note 9-x) (Cash - $Nil)                                                          30,000                               44,496
Less: services not yet received                                                    (12,500) 

Shares cancelled (Cash - $Nil)                                         (171)                                   1             (1)

Shares issued pursuant to S-8 for employees,
  consultants and a director  (Cash - $Nil)                         770,000                                  770        769,230

Less: employment and consulting services not yet
  received                                                         (340,939)                                (341)

Shares issued to R. Zuk (Cash - $83,000)                            200,000                                  200        199,800
Less: shares proceeds to be received                                                                                   (117,000)

Share proceeds received from private placement
  (Cash - $250,000)                                                 250,000                                  250        249,750

Shares issued upon exercise of warrants at
  Canadian $1 per share (Cash - $619,166)                                          849,803                              619,166


Shares issued to officers (note 9-iiii(a))
  (Cash - $Nil)                                                     630,000                                  630        826,245

Shares issued to a consultant (note 9-x)
  (Cash - $Nil)                                                       7,500                                    8          9,836

Shares issued for investor relation services
  (note 9-v) (Cash - $Nil)                                          200,000                                  200        262,300
Less: services not yet received                                    (200,000)                                (200)

Shares issued to employees for employment
  services (note 9-x) (Cash - $Nil)                                                 14,176                               22,716


Shares exchanged as per exchange agreement
  (Cash - $Nil)                                                   1,133,365     (1,133,365)                1,134         (1,134)

Shares issued for conversion from debenture
  holders (Cash -$Nil)                                              991,434                                  992        728,537

Share issue cost from April 1, 1995 to March
  31, 1996                                                                                                             (214,357)

Translation adjustment

Net loss from April 1, 1995 to March 31, 1996

Balance as at March 31, 1996                               -      6,130,929      6,126,362    $     -    $ 6,131   $ 14,013,062

</TABLE>


<TABLE>
<CAPTION>
                                                                              AMOUNTS
                                                     ----------------------------------------------------------
                                                                                      Deficit
                                                                                    Accumulated
                                                                       Cumulative     During
                                                         Other        Translation   Development
                                                        Capital        Adjustment      Stage          Total
                                                     ----------------------------------------------------------
<S>                                                   <C>             <C>           <C>            <C>
Share proceeds received re Regulation S offering
   made before March 31, 1995 (Cash - $225,280)       $        -       $    -       $       -      $    819,459

Consulting services received re shares issued
   before March 31, 1995  (note 9-x) (Cash - $ Nil)         87,486                                       87,500

Marketing services received re shares issued
    to LL Knickerbocker Co.  (Cash - $ Nil)                666,400                                      666,665

Shares issued to Directors as compensation
  (note 9-x) (Cash - $Nil)                                                                               86,501

Shares issued to Amerasia for marketing services
  (note 9-x) (Cash - $Nil)                                                                               44,496
Less: services not yet received                            (18,630)                                     (18,630)

Shares cancelled (Cash - $Nil)                                                                                -

Shares issued pursuant to S-8 for employees,
  consultants and a director  (Cash - $Nil)                                                             770,000

Less: employment and consulting services not yet
  received                                                (340,598)                                    (340,939)

Shares issued to R. Zuk (Cash - $83,000)                                                                200,000
Less: shares proceeds to be received                                                                   (117,000)

Share proceeds received from private placement
  (Cash - $250,000)                                                                                     250,000

Shares issued upon exercise of warrants at
  Canadian $1 per share (Cash - $619,166)                                                               619,166


Shares issued to officers (note 9-iiii(a))
  (Cash - $Nil)                                                                                         826,875

Shares issued to a consultant (note 9-x)
  (Cash - $Nil)                                                                                           9,844

Shares issued for investor relation services
  (note 9-v) (Cash - $Nil)                                                                              262,500
Less: services not yet received                           (262,300)                                    (262,500)

Shares issued to employees for employment
  services (note 9-x) (Cash - $Nil)                                                                      22,716


Shares exchanged as per exchange agreement
  (Cash - $Nil)                                                                                               -

Shares issued for conversion from debenture
  holders (Cash -$Nil)                                                                                  729,529

Share issue cost from April 1, 1995 to March
  31, 1996                                                                                             (214,357)

Translation adjustment                                                     47,224                        47,224

Net loss from April 1, 1995 to March 31, 1996                                         (6,090,730)    (6,090,730)

Balance as at March 31, 1996                          $ (1,954,327)    $ (240,900)  $(13,202,738)  $ (1,378,772)

</TABLE>


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


                                      F-7
<PAGE>   55
                       THE TRACKER CORPORATION OF AMERICA, INC.
                          (A DEVELOPMENT STAGE COMPANY)

            CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)


<TABLE>
<CAPTION>
                                                                     SHARES                                  AMOUNTS
                                                     ------------------------------------     ------------------------------------

                                                                                                                       Paid in
                                                                                  Class B                             Capital in
                                                     Preferred      Common         Common     Preferred   Common        Excess
                                                       Stock         Stock         Stock        Stock      Stock        of Par
                                                     ------------------------------------     ------------------------------------
<S>                                                  <C>          <C>            <C>           <C>       <C>         <C>
Marketing services received re shares issued
    to LL Knickerbocker Co.  (Cash - $ Nil)                          133,336                   $    -    $    135    $   (999,600)

Shares issued to Directors as compensation
  (note 9-x) (Cash - $Nil)                                            34,445                                   34          15,466

Marketing services received from Amerasia
  (note 9-x) (Cash - $Nil)                                                            5,000                               (11,124)

Employment and consulting services and
  Directors' fees received re S-8 (CASH - $NIL)                    1,740,938                                1,741         316,054

Shares issued for conversion from debenture
  holders (note 9-ix) (Cash -$Nil)                                 1,433,443                                1,434         653,566

Preferred shares issued from private placement
  (Cash - $1,050,000)                                   1,050                                       1                   1,049,999

Common shares issued for conversion from
  preferred stockholder (Cash - $Nil)                  (1,050)     4,365,136                       (1)      4,364          (4,363)


Shares exchanged as per exchange agreement
  (Cash - $Nil)                                                    1,268,825     (1,268,825)                1,269          (1,269)

Shares issued to employees for employment
  services (note 9-x) (Cash-$Nil)                                     26,000                                   26          12,474

Shares issued for consulting services
  (note 9-x) (Cash-$Nil)                                             208,250                                  208          49,634

Shares issued in lieu of finder fee for
  debenture holders (note 9-x) (Cash -$Nil)                           52,906                                   53          52,853

Shares issued in lieu of finder fee for
  preferred stockholders (note 9-x) (Cash -$Nil)                     112,500                                  113          44,887

Shares issued pursuant to W.Marches S-8 stock
  payment plan (note 9-xii)                                          333,272                                  332          87,668

Shares issued for office rental expense
  ( Cash $ Nil)                                                      615,780                                  616         153,329
Less: rental expense not yet amortized                              (530,255)                                (531)

Share issue cost from April 1, 1996 to March
  31, 1997                                                                                                               (224,741)

Translation adjustment

Net loss from April 1, 1996 to March 31, 1997

Balance as at March 31, 1997                               -      15,925,505      4,862,537    $    -    $ 15,925    $ 15,207,895

</TABLE>


<TABLE>
<CAPTION>
                                                                              AMOUNTS
                                                       -------------------------------------------------------
                                                                                     Deficit
                                                                                   Accumulated
                                                                      Cumulative     During
                                                          Other      Translation   Development
                                                         Capital      Adjustment      Stage          Total
                                                       -------------------------------------------------------
<S>                                                    <C>            <C>          <C>            <C>
Marketing services received re shares issued
    to LL Knickerbocker Co.  (Cash - $ Nil)            $ 1,332,800    $   -        $     -        $    333,335

Shares issued to Directors as compensation
  (note 9-x) (Cash - $Nil)                                                                              15,500

Marketing services received from Amerasia
  (note 9-x) (Cash - $Nil)                                  18,630                                       7,506

Employment and consulting services and
  Directors' fees received re S-8 (CASH - $NIL)            340,598                                     658,393

Shares issued for conversion from debenture
  holders (note 9-ix) (Cash -$Nil)                                                                     655,000

Preferred shares issued from private placement
  (Cash - $1,050,000)                                                                                1,050,000

Common shares issued for conversion from
  preferred stockholder (Cash - $Nil)                                                                        -


Shares exchanged as per exchange agreement
  (Cash - $Nil)                                                                                              -

Shares issued to employees for employment
  services (note 9-x) (Cash-$Nil)                                                                       12,500

Shares issued for consulting services
  (note 9-x) (Cash-$Nil)                                                                                49,842

Shares issued in lieu of finder fee for
  debenture holders (note 9-x) (Cash -$Nil)                                                             52,906

Shares issued in lieu of finder fee for
  preferred stockholders (note 9-x) (Cash -$Nil)                                                        45,000

Shares issued pursuant to W.Marches S-8 stock
  payment plan (note 9-xii)                                                                             88,000

Shares issued for office rental expense
  ( Cash $ Nil)                                                                                        153,945
Less: rental expense not yet amortized                    (132,034)                                   (132,565)

Share issue cost from April 1, 1996 to March
  31, 1997                                                                                            (224,741)

Translation adjustment                                                   (79,146)                      (79,146)

Net loss from April 1, 1996 to March 31, 1997                                        (3,708,078)    (3,708,078)

Balance as at March 31, 1997                           $  (394,333)   $ (320,046)  $(16,910,816)  $ (2,401,375)

</TABLE>



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

                                      F-8


<PAGE>   56
                    THE TRACKER CORPORATION OF AMERICA, INC.
                          (A DEVELOPMENT STAGE COMPANY)

            CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)


<TABLE>
<CAPTION>
                                                                     SHARES                                AMOUNTS
                                                      -------------------------------------    --------------------------------

                                                                                                                   Paid-in
                                                                                    Class B                        Capital in
                                                      Preferred   Common         Common     Preferred    Common    Excess
                                                        Stock     Stock          Stock       Stock       Stock     of Par
                                                        -----     -----          -----       -----       -----     ------
<S>                                                   <C>          <C>            <C>        <C>       <C>         <C>
Shares issued pursuant to W.Marches S-8 stock
  payment plan (note 9-xii)                                        339,755                             $    341    $     69,659

Shares issued for office rental expense
  (note 9-x) (Cash $ Nil)                                          153,945                             $    153

Shares exchanged as per exchange agreement
  (Cash - $Nil)                                                  2,240,053     (2,240,053)             $  2,240    $     (2,240)

Shares issued to employee for employment services                   19,303                             $     19    $      2,617

Shares issued for consulting services                              539,583                             $    540    $     64,210

Share proceeds received from private placement
  (Cash - $30,000)                                                 500,000                             $    500    $     29,500

Translation adjustment

Net Profit (loss) from April 1, 1997 to March
  31, 1998

Balance as at March 31, 1998                           -        19,718,144      2,622,484   $   -      $ 19,718    $ 15,371,641

</TABLE>


<TABLE>
<S>                                                      <C>            <C>            <C>            <C>
Shares issued pursuant to W.Marches S-8 stock
  payment plan (note 9-xii)                                                                           $     70,000

Shares issued for office rental expense
  (note 9-x) (Cash $ Nil)                                $   38,331                                   $     38,484

Shares exchanged as per exchange agreement
  (Cash - $Nil)                                                                                       $          0

Shares issued to employee for employment services                                                     $      2,636

Shares issued for consulting services                                                                 $     64,750

Share proceeds received from private placement
  (Cash - $30,000)                                                                                    $     30,000

Translation adjustment                                                  $   74,381                    $     74,381

Net Profit (loss) from April 1, 1997 to March
  31, 1998                                                                             $    (90,467)  $    (90,467)

Balance as at March 31, 1998                             $ (356,002)    $ (245,665)    $(17,001,283)  $ (2,211,591)

</TABLE>


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

                                      F-9

<PAGE>   57
                    THE TRACKER CORPORATION OF AMERICA, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------


NOTE 1 - DESCRIPTION OF DEVELOPMENT STAGE ACTIVITIES AND CORPORATE HISTORY:

      The Tracker Corporation of America, Inc. (sometimes "Tracker U.S." or the
"Company") has been in the development stage since its formation. It developed
and markets, sells and operates a personal property marking and monitoring
system (the "Tracker(TM) System") that utilizes advanced bar code and laser
scanning technology to create an identification device which interfaces with a
computer database and scanning network (the "Technology").

The current business of the Company originated in July 1994 through a
reorganization (the "Reorganization") in which the Company acquired all of the
issued and outstanding voting shares of The Tracker Corporation, an Ontario,
Canada corporation ("Tracker Canada"), in exchange for approximately 90% of the
total voting shares of the Company as of that date. The Company's predecessor
was incorporated as a Utah corporation in 1986, and changed its state of
incorporation to Nevada in 1992 and Delaware in 1994 through change in domicile
mergers. Concurrent with the effective date of the reorganization, the Company
changed its year-end from December 31 to March 31.

In conjunction with the reorganization, the common stock of Tracker Canada was
reclassified as exchangeable preference stock which was (i) exchangeable at the
option of the holder, beginning July 12, 1995 through July 12, 2002, on a
one-for-one basis for shares of the common stock of the Company; or (ii) upon
liquidation at the option of the Company, exchangeable at an "exchange rate" for
shares of the common stock of the Company, or upon payment by the Company to the
holder of a "basic liquidation amount."

For accounting purposes, the merger was treated as a reverse merger/acquisition
because, among other factors, the assets and operations of Tracker Canada
significantly exceeded those of the Company and the shareholders of Tracker
Canada controlled the Company after the merger. The merger was treated for
accounting and financial reporting purposes as an issuance of shares by Tracker
Canada and, accordingly, pro forma information is not presented, as the merger
is not a business combination. The historical consolidated financial statements
prior to July 12, 1994 are those of Tracker Canada. The merger was recorded at
the value of the Company's net tangible assets as of the effective date. The
accumulated deficit of Tracker Canada was carried forward and the common stock
and paid-in capital of Tracker Canada prior to the merger were retroactively
restated for the equivalent number of shares received in the merger and carried
forward.

The Company launched The Tracker(TM) System in a limited test market in Toronto,
Canada in October 1994 and began expanding service throughout Canada. The
Company also began to test potential markets for The Tracker(TM) System in the
United States and to offer the service through diverse marketing channels such
as joint promotional partners, selected retailers, telemarketers and network
referral marketers. Prior to the bankruptcy of Tracker Canada as further
described below, these efforts were in the incipient stage, had failed or met
with only limited market acceptance.

In September 1997, the U.S. Federal Trade Commission (the "FTC") filed a lawsuit
against the Company in the U.S. District Court, Northern District of Georgia,
Atlanta Division. The complaint alleged that the Company's credit card
registration service had violated Section 5 of the Federal Trade Commission Act
and the FTC Trade Regulator Telemarketing Sales Rule in telemarketing


                                      F-10

<PAGE>   58
                    THE TRACKER CORPORATION OF AMERICA, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------



credit card protection services in the United States. The FTC obtained a
temporary restraining order ("TRO") halting the further sale of credit card
registration services and an injunction freezing the Company's assets. Although
the U.S. District Court subsequently lifted the TRO, permitting the credit card
registration service to resume, upon completing an internal investigation, the
Company elected to discontinue credit card registration service operations.
Shortly following initiation of the lawsuit, four of the Company's five Board
members and its Chief Financial Officer resigned.

The Company settled the FTC lawsuit on July 28, 1998. Pursuant to the
settlement, the U.S. District Court entered a Stipulated Final Judgment and
Order for Injunction that, among other things, permanently barred the Company,
and its Chief Executive Officer, Bruce Lewis, from engaging directly or
indirectly, in the business of credit card registration or promotion.

The FTC lawsuit and the cessation of the credit card registration service had a
negative effect on the financial condition of the Company and Tracker Canada. On
January 27, 1998, Tracker Canada filed a notice with the Ontario Courts
declaring its insolvency and seeking the appointment of a bankruptcy trustee to
liquidate its assets and dissolve the corporation. The liquidation and
dissolution occurred in February 1998.

In conjunction with the liquidation and dissolution, the Company has (i)
cancelled the issued and outstanding shares of the Company's Class B voting
common stock which have been held in trust for exchangeable preference share
stockholders in accordance with the terms thereof, and (ii) exchanged at a
specified "exchange rate" shares of its common stock for the exchangeable
preference shares of Tracker Canada.

On February 10, 1998, the Global Tracker Corporation ("Global Tracker"), a newly
formed Ontario, Canada corporation, acquired substantially all of Tracker
Canada's assets at arm's length in a bankruptcy proceeding. Shortly thereafter,
Global Tracker entered into an agreement in principle with the Company which
permitted the Company to use personnel retained by Global Tracker and assets
formerly owned or leased by Tracker Canada to continue the business formerly
conducted by Tracker Canada. As a result of this arrangement, Tracker U.S. has
continued on a limited basis the business formerly operated by Tracker Canada
without a complete cessation of operations.

On July 30, 1998, the Company entered into a License Agreement with Global
Tracker. The License Agreement grants the Company an exclusive worldwide license
to commercially exploit the technology formerly owned by, and benefit from any
copyrights or patents and applications therefor formerly held by, Tracker
Canada. The license is for a renewable seven-year term and provides for payment
of a 12% royalty on gross revenues commencing in the second year of the license.
Contemporaneously, Global Tracker entered into a proposed General Consulting
Agreement and a proposed Equipment Rental Agreement with TCA Management, Inc.
("TCA"), a wholly-owned subsidiary of the Company. Under the proposed General
Consulting Agreement, TCA provides management services, research and development
and customer support. Under the proposed Equipment Rental Agreement, TCA rents
office equipment, including computers, local area network, telephone system,
copier and fax, and furniture which it makes available to the Company.

Although the Company continues to believe that The Tracker(TM) System has
significant commercial potential, the Company's present financial circumstances
and past experience require a more narrowly focused and less costly marketing
strategy. The Company is currently examining


                                      F-11

<PAGE>   59
                    THE TRACKER CORPORATION OF AMERICA, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------


strategies for applying most advantageously the limited resources the Company
anticipates it will have at its disposal if the private placement described in
Note 2 below is successful. The Company is in the process of identifying markets
it believes will prove most responsive to the Company's initiatives.


NOTE 2 - GOING CONCERN:

The Company has been in a development stage since its inception on May 6, 1993.
The likelihood that the Company will attain profitability depends on many
factors, including its ability to obtain adequate financing and generate
sufficient revenues. Management is currently working to secure adequate capital
through the private placement of securities. The accompanying consolidated
financial statements have been prepared assuming that the Company will continue
as a going concern, although the reports of its former independent accountant as
of and for each of the years ended March 31, 1997 and 1996, and its current
independent accountant as of and for the year ended March 31, 1998, express
doubt as to the Company's ability to continue as a going concern. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.


NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES:

PRINCIPLES OF CONSOLIDATION

The accompanying financial statements include the accounts of the Company and
its former wholly owned subsidiary, Tracker Canada. All significant intercompany
accounts and transactions have been eliminated.

CASH AND CASH EQUIVALENTS

The Company considers liquid investments with an original maturity of three
months or less to be cash equivalents.

DEVELOPMENT COSTS

Development costs are expensed as incurred.

INVENTORY

The inventory is stated at the lower of cost or market value with cost being
determined by the average cost method. Inventory predominantly consists of raw
materials as the Company fulfills its sales orders on a just in time basis, when
received. No significant work-in-progress or finished goods were held by the
Company at year or period end.


                                      F-12

<PAGE>   60
                    THE TRACKER CORPORATION OF AMERICA, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------



DEFERRED CHARGES

Deferred charges relate primarily to unamortized commissions, net of a 30%
cancellation reserve, and other costs of sales which are amortized on a
straight-line basis over the term of the related agreement.

REVENUE RECOGNITION AND DEFERRED REVENUE

Revenue for Company services is recognized on a straight-line basis over the
term of the services offered and is shown net of sales discounts and allowances.
Amounts received for which service has not yet been provided, are recorded as
deferred revenue. The average length of the services agreement varies from
monthly to a five-year period.

FIXED ASSETS

Fixed assets are stated at cost less accumulated depreciation. Depreciation is
determined using the straight-line method over the estimated useful lives of the
related assets as follows:

<TABLE>
<S>                                                         <C>
      Scanning equipment and computer hardware              5 years
      Computer software                                     1 year
      Office furniture and equipment                        5 years
      Leasehold improvements                                term of the lease
      Kiosk equipment                                       5 years
</TABLE>

FOREIGN CURRENCY TRANSLATION

The assets and liabilities of Tracker Canada are translated at the fiscal year
or period end exchange rate while revenues, expenses and cash flows are
translated at average rates in effect for the period.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial instruments are carried in the accompanying consolidated financial
statements at amounts that approximate fair value unless separately disclosed.

EARNINGS PER SHARE

Primary earnings per share are calculated based on net profit (loss) divided by
the weighted average number of shares of common stock and Class B voting common
stock outstanding.

USE OF ESTIMATES

The preparation of financial statements in conformity 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
revenues and expenses during the period reported. Actual results could differ
from those estimates. Estimates are used when accounting for inventory
obsolescence, depreciation and amortization, taxes, and contingencies.


                                      F-13

<PAGE>   61
                    THE TRACKER CORPORATION OF AMERICA, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------


NEW ACCOUNTING PRONOUNCEMENTS

Other pronouncements issued by the Financial Accounting Standards Board adopted
during the year are not material to the consolidated financial statements of the
Company. Further, pronouncements with future effective dates are either not
applicable or not material to the consolidated financial statements of the
Company.



NOTE 4 - PREPAID EXPENSES AND DEPOSITS:

Prepaid expenses and deposits comprise the following:

<TABLE>
<CAPTION>
                                                    March 31,           March 31,
                                                      1998               1997
                                                      ----               ----
<S>                                              <C>                  <C>
Security deposit for merchant facility           $      -             $ 300,000
Other                                                   -                59,526
                                                 -----------------    ---------

                                                 $      -             $359,526
                                                 =================    =========
</TABLE>

NOTE 5 - DUE FROM SHAREHOLDERS:

Promissory notes held on loans made to shareholders bear interest at 5% per
annum and are due on demand.



NOTE 6- DEFERRED CHARGES:

Deferred charges consist of the following:

<TABLE>
<CAPTION>
                                                                 March 31,         March 31,
                                                                   1998              1997
                                                                ----------        ----------
<S>                                                             <C>               <C>
Current:
Deferred sales commission (net of cancellation reserve)         $  776,055        $2,658,446
Other                                                              411,644           161,618
                                                                ----------        ----------
                                                                $1,187,699        $2,820,064
                                                                ----------        ----------
Long term:
Deferred sales' commission (net of cancellation reserve)        $  183,041        $  281,163
Other                                                               92,002            34,674
                                                                ----------        ----------
                                                                $  275,043        $  315,837
                                                                ==========        ==========
</TABLE>


                                      F-14

<PAGE>   62
                    THE TRACKER CORPORATION OF AMERICA, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------


NOTE 7 - PROPERTY AND EQUIPMENT:

Property and equipment consist of the following:

<TABLE>
<CAPTION>
                                      March 31,       March 31,
                                        1998            1997
                                      --------        --------
<S>                                   <C>             <C>
Scanning equipment                    $   --          $120,737

Computer equipment                        --           310,047

Computer software                         --            32,501

Office furniture and equipment            --           163,979

Leasehold improvements                    --            99,608

Kiosk equipment                           --            63,789
                                      --------        --------

        Total original cost               --           790,661

Less: Accumulated depreciation            --           372,394

                                      --------        --------
                                          --          $418,267
                                      ========        ========
</TABLE>

Depreciation expense for the year ended March 31, 1998 was $ 12,893 and was
$131,780 for the year ended March 31, 1997.


NOTE 8 - ACCRUED LIABILITIES:

Accrued liabilities comprise the following:

<TABLE>
<CAPTION>
                                                   March 31,       March 31,
                                                     1998            1997
                                                   --------        --------
<S>                                                <C>             <C>
Directors fees                                     $ 24,432        $ 27,399
Interest expense for convertible debentures          58,785            --
Others                                              445,182         346,288
                                                   --------        --------
                                                   $528,399        $373,687
                                                   ========        ========
</TABLE>

NOTE 9 - CAPITAL STOCK:

(i) The common stock and Class B voting common stock shared ratably as to
dividends. Until the insolvency and winding up of Tracker Canada, the Class B
voting common stock was held in trust pursuant to the terms of an exchange
agency and voting trust agreement with holders of exchangeable preference shares
in the Canadian subsidiary. The agreement permitted the persons holding the
exchangeable shares to direct the voting of the Class B common shares and
provided a mechanism for the exchange of exchangeable shares for a like number
of common shares.

(ii) At March 31, 1997, all outstanding warrants to acquire exchangeable
preference shares of the Canadian subsidiary at Canadian $14 per share had
expired.

(iii) On March 15, 1995, the Company entered into an agreement and sold, for net
proceeds of $350,000, 500,000 units comprised of 500,000 restricted common
shares and 500,000 warrants to purchase 500,000 restricted common shares to
Kuplen Group Investment ("KGI"). The warrants were exercisable during the
one-year period commencing July 12, 1995 to July 12, 1996 at a price


                                      F-15

<PAGE>   63
                    THE TRACKER CORPORATION OF AMERICA, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------


of $5.00 per share. Since the common stock underlying the warrants could not be
purchased legally on margin at a marginable price, the exercise period has been
extended until the first day that the common stock becomes marginable. In order
to secure registration rights of the restricted shares, KGI must exercise the
warrants on a 1:1 basis with the common shares.

(iv) (a) During the year ended March 31, 1995, the Company adopted a plan that
allows for the granting of options, appreciation rights, restricted stock and
certain other stock-based performance incentives to certain officers as
determined at the discretion of the compensation committee of the board of
directors.

(iv) (b) The Company issued the following options and warrants:

<TABLE>
<CAPTION>
                                                      FOR YEAR                          FOR YEAR
                                                       ENDED                             ENDED
                                                       MARCH           EXERCISE          MARCH            EXERCISE
                                                      31, 1998          PRICE           31, 1997           PRICE
                                                      --------        ----------        ---------        ---------
<S>                                                  <C>              <C>               <C>              <C>
       OPTIONS:
            Opening (*)                                 40,000                             40,000        $    7.95
              Granted during the period (*)             50,000        $     0.13                0
              Granted during the period (**)           300,000        $     0.50                0
              Granted during the period (**)         2,400,000        $     0.75                0
              Expired/cancelled during period          900,000                                  0
                                                    ==========                          =========
            Closing                                  1,890,000                             40,000
                                                    ==========                          =========
</TABLE>

(*)   40,000 options were issued in July 1994 ;10,000 options were issued in
      September 1995 and 50,000 options were issued in July 1997 to non-employee
      directors and vest proportionately over a period of three years.
(**) 2,700,000 options were issued in August 1997 to management at various terms
from 4 to 7 years

<TABLE>
<CAPTION>
                                                      FOR YEAR                          FOR YEAR
                                                       ENDED                             ENDED
                                                       MARCH           EXERCISE          MARCH            EXERCISE
                                                      31, 1998          PRICE           31, 1997           PRICE
                                                      --------        ----------        ---------        ---------
<S>                                                  <C>              <C>               <C>              <C>
            WARRANTS (COMMON STOCK
            AND CLASS B):
              Opening                                 750,000             n/a           767,348                n/a
                Issued during the period                    0
                Exercised during the period                 0
                Expired during the period                   0                           (17,348)         Cdn$14.00
                                                      -------                          --------
              Closing                                 750,000                           750,000
                                                      =======                          ========
</TABLE>

(v) On May 1, 1995, the Company entered into an agreement and sold, for net
proceeds of $250,000, 250,000 units comprised of 250,000 restricted common
shares and 250,000 warrants to purchase 250,000 restricted common shares to
Reynold Kern. The warrants were exercisable during the one-year period
commencing July 12, 1995 to July 12, 1996 at a price of $5.00 per share. Since
the common stock underlying the warrants could not be purchased legally on
margin at a marginable price, the exercise period has been extended until the
first day that the common stock becomes marginable.


                                      F-16

<PAGE>   64
                    THE TRACKER CORPORATION OF AMERICA, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------


(vi) In June 1995, the Company issued 200,000 shares of common stock, restricted
as to transferability for a period of two years from date of issuance, to Robert
Zuk for certain investor relations services for the Company.

(vii) In October 1995, the Company issued 770,000 shares of common stock
pursuant to the registration statement on S-8 to six key employees and one
director as payment in lieu of prior accrued salaries and fees and as an advance
of their salaries and fees up to September 30, 1996. The shares issued were all
valued at $1.00 per share.

(viii) On November 1, 1995, at its annual general meeting, the shareholders
approved the increase of the authorized number of common shares from 20,000,000
to 30,000,000 shares.

(ix) Other capital

As at March 31, 1998, 627,625 common shares have been subscribed for but remain
unissued as the service for which these shares were subscribed for have yet to
be received.

<TABLE>
<CAPTION>
                                                         YEAR ENDED                 FROM INCEPTION
                                                          MARCH 31,                  (MAY 6, 1993)
                                              -------------------------------       THROUGH MAR 31,
                                                  1998                1997               1998
                                              -----------         -----------         -----------
<S>                                           <C>                 <C>                 <C>
OPENING,
   Marketing services not yet received        $         0         $ 1,332,800         $         0
   Deferred compensation costs                          0             340,599                   0
   Deferred consulting costs                      262,500             280,928                   0
   Rent                                            93,502                   0                   0
                                              -----------         -----------         -----------
                                                   356,00           1,954,327                   0

SHARES SUBSCRIBED BUT NOT ISSUED,
   Marketing services not yet received                  0            (999,600)            999,600
   Deferred compensation costs                          0             441,734           2,222,174
   Deferred consulting costs                            0             116,201           1,809,224
   Rent                                                 0             153,329             507,794
                                              -----------         -----------         -----------
                                                        0            (288,336)          5,538,792

CHARGED TO EXPENSE AS SERVICES ARE
RECEIVED,
   Marketing services not yet received                  0             333,200             999,600
   Deferred compensation costs                          0             782,333           2,222,174
   Deferred consulting costs                            0             134,629           1,546,724
   Rent                                                 0              21,496             410,515
                                              -----------         -----------         -----------
                                                        0           1,271,658           5,182,790

CLOSING,
   Marketing services not yet received                  0                   0                   0
   Deferred compensation costs                          0                   0                   0
   Deferred consulting costs                      262,500             262,500             262,500
   Rent                                            93,502             131,833              93,502
                                              -----------         -----------         -----------
                                              $   356,002         $   394,333         $   356,002
                                              ===========         ===========         ===========
</TABLE>


                                      F-17
<PAGE>   65
                    THE TRACKER CORPORATION OF AMERICA, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------


(x) For the year ended March 31, 1998, no common shares were issued pursuant to
the conversion of convertible subordinated debentures. For the year ended March
31, 1997, 1,433,433 common shares were issued pursuant to the conversion of
convertible subordinated debentures totaling $655,000. In November 1996, all
holders of the convertible subordinated debentures were requested to extend the
maturity date from December 1, 1996 to June 1, 1997 on same terms and
conditions. No additional requests for extension have been made thereby placing
the Company in default under the terms of the convertible subordinated debenture
agreement. As of March 31, 1998 there remains outstanding $475,790 ($590,746 at
March 31, 1997) in convertible subordinated debentures with a maturity date of
June 1, 1997. The remaining balance of $ 31,809 ($Nil at March 31, 1996) has
been reclassified as debentures which had a repayment maturity term of December
1997 at a 4.75% interest rate.

(xi) The Company has, from inception to present, issued shares in exchange for:
(a) employment services, (b) consulting and marketing services, and (c)
consideration in lieu of rental payments.

(xii) During the year ended March 31, 1997, the Company issued 1,050 shares of
$1,000 6% Cumulative Convertible Preferred Stock (the "Convertible Preferred
Stock"). As at March 31, 1997, 4,365,136 common shares were issued due to the
conversion of 1,050 shares of convertible preferred stock totaling $1,050,000.
As at March 31, 1997, no convertible preferred stock remains outstanding.

For the year ended March 31, 1997, the Company paid $136,500 to a third party as
finders fees in connection with the Company's private equity placement of the
convertible preferred stock and the amount are included as a reduction in
paid-in capital.

(xiii) On October 21, 1996, the Company's Prospectus on Amendment No. 4 of the
Registration Statement on Form S-1 was declared effective by Securities and
Exchange Commission.

(xiv) During the year ended March 31, 1997, the Company issued 1,740,000 shares
of common stock amounting to $658,393 pursuant to the registration statement on
S-8 to five key employees and five outside (non-employee) directors as payment
in lieu of salaries and consulting fees.

(xv) In October 1996, the Company entered into a one-year consulting agreement
(the "Consulting Agreement") with a Consultant who was retained to provide
advice to the Company concerning the Company's growth strategy, financial public
relations obligations and future capital structure. Under the terms of the
Consulting Agreement, the Company has agreed to pay the Consultant one hundred
thousand (100,000) shares of the Company's common stock. As additional
consideration, the Company has granted to the Consultant certain options to
purchase up to a total of 900,000 shares of the Company's Common Stock (the
"Options") for the price of the par value of the Common stock, $.001 per share.
In addition, the Company has agreed to pay the Consultant $10,000 per month, for
administrative expenses. The Company shall reimburse the Consultant for all
other pre-approved expenses. In 1998 The Company issued 339,755 shares of common
stock (1997 - 333,272 shares) pursuant to the registration statement on S-8 to
Consultant as payment for consulting fees. The shares were carried an aggregate
value of $ 70,000 (1997 - $ 88,000).



                                      F-18
<PAGE>   66
                    THE TRACKER CORPORATION OF AMERICA, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------



NOTE 10 - COMMITMENTS:


LEASES

The Company leased space in Smyrna, Georgia to house its now discontinued
fulfillment, processing telemarketing and verification center for a three (3)
year term commencing May 15, 1997. On November 1 , 1997, the Company
discontinued occupancy of the leased premises, defaulting under the terms of the
lease. The lease requires payment of an annual base rent of $41,772.

Rental expense for the year ended March 31, 1998 amounted to $ 120,196 and
$214,470 for the year ended March 31, 1997.




EXCLUSIVE DISTRIBUTION RIGHTS

The Company amended its arrangement with Symbol Technologies Inc. for the
exclusive right to use its PDF bar code scanner technology within the property
identification and recovery industry in Canada, the United States and Europe.
The commitment under this arrangement is as follows:

<TABLE>
<CAPTION>
                                       Units            Amount
                                 ----------------   ----------------

<S>                              <C>                <C>
      1998                             500                 $450,000
</TABLE>

MARKETING AGREEMENT

On March 15, 1995, the Company entered into an agreement with The L.L.
Knickerbocker Company, Inc., of California ("Knickerbocker"), which provides for
a television and radio marketing campaign to be initially launched in the
California marketplace. As part of the compensation for services to be performed
by Knickerbocker, the Company paid Knickerbocker a fee of $212,975 and issued
800,000 restricted common shares, valued at $2.50 per share based on the trading
price of the Company's shares on the date of the agreement. These common shares
bear a legend restricting Knickerbocker from selling them for two years from
March 15, 1995, without the prior written consent of the Company.

On December 11, 1996, the Company entered into an agreement to end its
relationship with Knickerbocker. The Company received 400,000 of the 800,000
restricted common shares back from Knickerbocker. These shares were immediately
cancelled in treasury.


                                      F-19
<PAGE>   67
                    THE TRACKER CORPORATION OF AMERICA, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------



THE IACP ENDORSEMENT

Previously, the Company secured the endorsement of the International Association
of Chiefs of Police ("IACP"), a nonprofit organization of approximately 14,000
members from the world's law enforcement community. Under the agreement, the
Company has agreed to pay IACP, on a quarterly basis in arrears, the greater of
$100,000 per year or a fee based on the total number of subscribers of the
Company calculated as follows:

<TABLE>
<CAPTION>
            Number of Subscribers               Per Capita Amount
            ---------------------               -----------------
<S>                                             <C>
                0 - 1,000,000                      $0.20
               1,000,001 - 5,000,000               $0.10
               More than 5,000,000                 $0.075
</TABLE>

At March 31, 1998, the Company had defaulted in its payment obligations under
the agreement. The Company has terminated the agreement and is negotiating with
IACP regarding amounts due thereunder.




NOTE 11 - RELATED PARTY TRANSACTIONS:

Prior to the date of incorporation (May 6, 1993), the founder and other key
members of management agreed to receive 5,089,286 exchangeable preference shares
in consideration for the assignment of international patents covering the
Tracker Canada system and as inducements to join the Company, respectively. No
value has been assigned to these shares.

The Company currently retains certain key management personnel under contract.
Included in expenses are consulting and management fees paid under the
aforementioned contracts totaling, in the aggregate, $ 185,000 for the year
ended March 31, 1998 and $648,231 for the year ended March 31, 1997.

Finders fees amounting to Nil for year ended March 31, 1998 and $25,870 for the
year ended March 31, 1997 paid to related parties in connection with the
Company's private equity placement are included as a reduction in paid-in
capital.


NOTE 12 - INCOME TAXES:

The estimated deferred tax asset of $3,724,000 and $4,127,000, representing
benefit for the income tax effects of the accumulated losses for the period from
inception (May 6, 1993) to March 31, 1998 and March 31, 1997 respectively, has
not been recognized due to the uncertainty of future realization of such
benefits. Estimated net operating losses aggregating $10,641,000 ($11,800,000


                                      F-20
<PAGE>   68
                    THE TRACKER CORPORATION OF AMERICA, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------


at March 31,1997) expire starting in 2001; the benefit of these losses has not
been reflected in these consolidated financial statements.

<TABLE>
<CAPTION>
                                   March 31,           March 31,
                                     1998                1997
                                  -----------         -----------
<S>                               <C>                 <C>
Deferred tax liabilities          $         0         $         0
Deferred tax assets
      Net operating losses          3,724,000           4,127,000
                                  -----------         -----------
                                    3,724,000           4,127,000
Valuation allowance                (3,724,000)         (4,127,000)
                                  -----------         -----------
                                  $         0         $         0
                                  ===========         ===========
</TABLE>

The valuation allowance decreased by $403,000 during the year.



NOTE 13 - CONVERTIBLE SUBORDINATED DEBENTURES:

The Company has outstanding at March 31, 1998 convertible subordinated
debentures in the amount of $475,790 ($ 590,746 as at March 31, 1997) bearing
interest at 15% annually, which are repayable within one year. The interest
payments are payable monthly in advance. The principal amount may be converted,
at the holder's option, into shares of the Company's common stock, in whole or
in part, at a conversion price as shown below. The debentures are subordinated
to all other indebtedness incurred by the Company. The following lists the
conversion rates:

<TABLE>
<CAPTION>
                                                             No. of shares
      Principal       Conversion rate                        on conversion
      ---------       ---------------                        -------------
<S>                   <C>                                    <C>
      $150,000        $0.4375 per share of common stock         342,858
       145,790        $0.9375 per share of common stock         155,509
        75,000        $1.00 per share of common stock            75,000
        30,000        $1.06 per share of common stock            28,302
        20,000        $1.0625 per share of common stock          18,824
        30,000        $1.10 per share of common stock            27,273
        25,000        $1.25 per share of common stock            20,000
      --------                                                 --------
      $475,790                                                  667,766
      ========                                                 ========
</TABLE>

Total interest incurred and included in general and administrative expenses is $
53,590 and $222,791 for year ended March 31, 1998 and 1997 respectively.



NOTE 14 - RECLASSIFICATIONS:

Certain amounts as originally reported in the March 31, 1997 financial
statements were reclassified to conform to the March 31, 1998 presentation. The
changes related primarily to the discontinuance of the credit card registration
operation and did not have any effect on the previously reported net income of 
the Company.

                          




                                      F-21

<PAGE>   69
                    THE TRACKER CORPORATION OF AMERICA, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------


NOTE 15 - SUBSEQUENT EVENTS:

See Note 1 regarding the initiation and settlement of the FTC lawsuit,
resignation of directors and chief financial officer, insolvency and liquidation
of Tracker Canada, the purchase of Tracker Canada's assets by Global Tracker,
the relationship between Global Tracker and the Company, the status of Tracker
Canada's exchangeable preference shares, and the cancellation of the Class B
voting common stock.



                                      F-22